<PAGE>
As filed with the Securities and Exchange Commission on August 25, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
WCB HOLDING CORP.
(Exact name of Registrant as specified in its charter)
Delaware 4911 65-1027739
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
incorporation or organizatin) Classification Code Number) Identification No.)
---------------
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
DENNIS P. COYLE, ESQ. MICHAEL G. THOMPSON, ESQ.
General Counsel and Secretary Senior Vice President, General Counsel
FPL Group, Inc. and Secretary
700 Universe Boulevard Entergy Corporation
Juno Beach, Florida 33408 639 Loyola Avenue
(561) 694-4000 New Orleans, Louisiana 70113
(504) 576-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies To:
GEORGE W. BILICIC, JR., ESQ. SHELDON S. ADLER, ESQ.
Cravath, Swaine & Moore Skadden, Arps, Slate, Meagher & Flom LLP
Worldwide Plaza, 825 Eighth Avenue Four Times Square
New York, New York 10019 New York, New York 10036
(212) 474-1000 (212) 735-3000
---------------
Approximate date of commencement of proposed sale of the securities to the
public: Upon consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price per unit aggregate offering Amount of
securities to be registered registered (1) (2) price (2) registration fee (3)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 319,000,000 $54.1563 for FPL Group $17,265,307,891 $4,558,042
$31.7813 for Entergy
</TABLE>
(1) The maximum number of shares of common stock of WCB Holding Corp., a
Delaware corporation ("Holdco"), issuable upon consummation of the merger
of a subsidiary of Holdco with and into FPL Group, Inc., a Florida
corporation ("FPL Group"), and the merger of a subsidiary of Holdco with
and into Entergy Corporation, a Delaware corporation ("Entergy"), based on
the exchange ratios of one share of FPL Group common stock, par value $.01
per share, to be exchanged for one share of common stock of Holdco, par
value $.01 per share, and one share of Entergy common stock, par value
$.01 per share, to be exchanged for 0.585 of a share of common stock of
Holdco.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant
to Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1)
under the Securities Act, the proposed maximum aggregate offering price
of Holdco common stock was calculated in accordance with Rule 457(c)
under the Securities Act as the sum of (a) (i) $54.1563, the average of
the high and low prices per share of FPL Group common stock as reported
on the New York Stock Exchange on August 24, 2000, multiplied by (ii)
179,752,216, the aggregate number of shares of FPL Group common stock
to be exchanged for Holdco common stock in the merger or issuable
pursuant to outstanding options prior to the date the merger is
expected to be completed and (b) (i) $31.7813, the average of the high
and low prices per share of Entergy common stock as reported on the New
York Stock Exchange on August 18, 2000, multiplied by (ii) 236,950,438,
the aggregate number of shares of Entergy common stock to be converted
into Holdco common stock in the merger or issuable pursuant to
outstanding options prior to the date the merger is expected to be
completed.
(3) Calculated by multiplying the proposed maximum aggregate offering price
for all securities to be registered by .000264.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
[FPL Group Logo] [Entergy Logo]
MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT
Dear Shareholders:
The Boards of Directors of FPL Group, Inc., a Florida corporation ("FPL
Group"), and Entergy Corporation, a Delaware corporation ("Entergy"), have
approved a merger that creates a new Delaware holding company ("Holdco"),
that will hold what today are their independent businesses upon consummation
of the merger. Holdco is currently named WCB Holding Corp., but will be
renamed by FPL Group and Entergy prior to the closing of the merger.
The new company will be the largest electric utility in the nation with
6.3 million customers and more than 48,000 megawatts of generating capacity. The
new company also will include a sizable unregulated energy group with leadership
positions in electricity generation and energy marketing and trading. The Boards
of both companies believe that the combined entity will have the scope, scale
and resources that will be critical to achieving success in the changing energy
marketplace as well as enhanced shareholder value.
If the merger is completed, FPL Group shareholders will receive one share
of Holdco common stock for each share of FPL Group common stock and Entergy
shareholders will receive 0.585 of a share of Holdco common stock for each share
of Entergy common stock. Upon completion of the merger, FPL Group and Entergy
will become wholly owned subsidiaries of Holdco.
FPL Group and Entergy will each hold a special meeting of its shareholders
to consider and vote on this proposal. Whether or not you plan to attend your
company's special meeting, please take the time to vote by following the
instructions on your proxy card.
The places, dates and times of the special meetings are as follows:
For FPL Group shareholders: For Entergy shareholders:
[700 Universe Boulevard [639 Loyola Avenue
Juno Beach, Florida 33408 New Orleans, Louisiana 70113
[Time] [Time]
[Date]] [Date]]
We enthusiastically support this combination of our companies and join
with our Boards in recommending that you vote FOR the approval and adoption of
the merger agreement.
Sincerely, Sincerely,
James L. Broadhead J. Wayne Leonard
Chairman and Chief Executive Officer Chief Executive Officer
FPL Group, Inc. Entergy Corporation
For a discussion of risk factors which you should consider in evaluating
the merger, see "Risk Factors Relating to the Merger" beginning on page 11.
We expect that approximately 319 million shares of Holdco common stock,
par value $0.01 per share, will be issued in connection with the merger and
that the Holdco common stock will be listed on the New York Stock Exchange.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the merger and other transactions
described in this joint proxy statement/prospectus or the Holdco common stock to
be issued in connection with the merger, or determined if this joint proxy
statement/prospectus is accurate or adequate. Any representation to the contrary
is a criminal offense.
This joint proxy statement/prospectus is dated [ ], 2000,
and is first being mailed to shareholders on or about [ ], 2000.
<PAGE>
[FPL Group LOGO]
FPL GROUP, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ], 2000
To the Shareholders of FPL Group, Inc.:
We will hold a special meeting of the shareholders of FPL Group, Inc., a
Florida corporation ("FPL Group"), on [ ], local time, at [FPL Group, Inc.,
700 Universe Boulevard, Juno Beach, FL 33408], to consider and vote upon a
proposal to approve the Agreement and Plan of Merger dated as of July 30, 2000,
among FPL Group, Entergy Corporation, a Delaware corporation ("Entergy"), WCB
Holding Corp., a Delaware corporation ("Holdco"), Ranger Acquisition Corp., a
Florida corporation and a wholly owned subsidiary of Holdco that will merge into
FPL Group, and Ring Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Holdco that will merge into Entergy.
We will transact no other business at the special meeting, except for
business properly brought before the special meeting or any adjournment or
postponement of it by the FPL Group Board of Directors.
Only holders of record of shares of FPL Group common stock at the close of
business on [ ], the record date for the special meeting, are entitled to
notice of, and to vote at, the special meeting and any adjournments or
postponements of it.
We cannot complete the merger described above unless holders of a majority
of all shares of FPL Group common stock outstanding that are entitled to vote at
the FPL Group special meeting vote to approve the merger agreement.
For more information about the merger described above and the other
transactions contemplated by the merger agreement, please review the
accompanying joint proxy statement/prospectus and the merger agreement attached
to it as Annex A.
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy and return it promptly in the enclosed
postage-paid envelope. We are also offering you the opportunity to cast your
vote by telephone by following the instructions on your proxy card.
Please do not send any share certificates at this time. After the merger
is consummated, we will notify you of the procedures for exchanging FPL Group
share certificates for share certificates of Holdco.
By Order of the Board of Directors,
________________________________________
Name: Dennis P. Coyle, Esq.
Title: General Counsel and Secretary
Juno Beach, Florida
[ ], 2000
<PAGE>
[Entergy Logo]
ENTERGY CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ], 2000
To the Shareholders of Entergy Corporation:
We will hold a special meeting of the shareholders of Entergy Corporation,
a Delaware corporation ("Entergy"), on [ ], local time, at [ ], New Orleans,
LA 70113, to consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger dated as of July 30, 2000, among FPL Group, Inc., a
Florida corporation ("FPL Group"), Entergy, WCB Holding Corp., a Delaware
corporation ("Holdco"), Ranger Acquisition Corp., a Florida corporation and a
wholly owned subsidiary of Holdco that will merge into FPL Group, and Ring
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Holdco that will merge into Entergy.
We will transact no other business at the special meeting, except for
business properly brought before the special meeting or any adjournment or
postponement of it by the Entergy Board of Directors.
Only holders of record of shares of Entergy common stock at the close of
business on [ ], the record date for the special meeting, are entitled to
notice of, and to vote at, the special meeting and any adjournments or
postponements of it.
We cannot complete the merger described above unless holders of a majority
of all shares of Entergy common stock outstanding and entitled to vote at the
Entergy special meeting vote to approve and adopt the merger agreement.
For more information about the merger described above and the other
transactions contemplated by the merger agreement, please review the
accompanying joint proxy statement/prospectus and the merger agreement attached
to it as Annex A.
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy and return it promptly in the enclosed
postage-paid envelope. We are also offering you the opportunity to cast your
vote by telephone by following the instructions on your proxy card.
Please do not send any share certificates at this time. After the merger
is consummated, we will notify you of the procedures for exchanging Entergy
share certificates for share certificates of Holdco.
By Order of the Board of Directors,
___________________________________________
Name : Michael G. Thompson, Esq.
Title: Senior Vice President, General
Counsel and Secretary
New Orleans, Louisiana
[ ], 2000
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about FPL Group and Entergy from other documents that are
not included in or delivered with this joint proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain those documents incorporated by reference in this joint
proxy statement/prospectus by requesting them in writing or by telephone from
the appropriate company at the following addresses:
FPL GROUP, INC. ENTERGY CORPORATION
700 Universe Boulevard 639 Loyola Avenue
Juno Beach, Florida 33408 New Orleans, Louisiana 70113
(561) 694-4694 (504) 576-4212
Attention: Dinah Washam Attention: Christopher T. Screen
Associate Analyst Assistant Secretary
If you would like to request documents, please do so by [ ], 2000 in
order to receive them before your special meeting.
See "Where You Can Find More Information" on page 97.
<PAGE>
TABLE OF CONTENTS
Page
----
Questions and Answers About the Merger .................................... 1
Summary ................................................................... 4
General ................................................................ 4
The Merger ............................................................. 6
The Companies .......................................................... 10
Risk Factors Relating to the Merger ....................................... 11
Selected Historical Financial Data ........................................ 13
Selected Historical Consolidated Financial Data of FPL Group ........... 13
Selected Historical Consolidated Financial Data of Entergy ............. 13
Selected Unaudited Pro Forma Combined Condensed Consolidated Financial Data 14
Unaudited Comparative Per Share Data ...................................... 15
Special Note Regarding Forward-Looking Statements ......................... 16
The FPL Group Special Meeting ............................................. 18
Date, Time and Place ................................................... 18
Purpose of FPL Group Special Meeting ................................... 18
FPL Group Record Date; Shares Entitled to Vote; Quorum ................. 18
Vote Required .......................................................... 18
Voting by FPL Group Directors and Executive Officers ................... 18
Voting of Proxies ...................................................... 18
Revocability of Proxies ................................................ 19
Solicitation of Proxies ................................................ 19
The Entergy Special Meeting ............................................... 20
Date, Time and Place ................................................... 20
Purpose of Entergy Special Meeting ..................................... 20
Entergy Record Date; Shares Entitled to Vote; Quorum ................... 20
Vote Required .......................................................... 20
Voting by Entergy Directors and Executive Officers ..................... 20
Voting of Proxies ...................................................... 20
Revocability of Proxies ................................................ 21
Solicitation of Proxies ................................................ 21
The Merger ................................................................ 22
General Description of the Merger ...................................... 22
Background to the Merger ............................................... 22
FPL Group's Reasons for the Merger ..................................... 24
Recommendation of FPL Group's Board of Directors ....................... 26
Opinion of FPL Group's Financial Advisor ............................... 28
Entergy's Reasons for the Merger ....................................... 37
Recommendation of Entergy's Board of Directors ......................... 39
Opinions of Entergy's Financial Advisors ............................... 41
Continuing Board and Management Positions .............................. 49
Interests of FPL Group's Directors and Executive Officers in the Merger 49
Interests of Entergy's Directors and Executive Officers in the Merger .. 51
Indemnification and Insurance .......................................... 53
Listing of Holdco Capital Stock ........................................ 53
Dividends .............................................................. 53
Material U.S. Federal Income Tax Consequences of the Merger ............ 54
i
<PAGE>
Page
----
Accounting Treatment ................................................... 56
Dissenters' or Appraisal Rights ........................................ 56
Workforce and Employee Benefit Matters ................................. 56
Effect on Awards Outstanding Under Stock Plans ......................... 57
Resale of Holdco Common Stock .......................................... 57
Legal Proceedings Related to the Merger ................................ 58
Security Ownership of Certain Beneficial Owners, Directors and
Executive Officers ........................................................ 59
Security Ownership of Certain Beneficial Owners and
Management of FPL Group ................................................ 59
Security Ownership of Certain Beneficial Owners of Entergy ............. 60
Security Ownership of Management of Entergy ............................ 61
Regulatory Matters ........................................................ 62
Hart-Scott-Rodino Act................................................... 62
Federal Power Act ...................................................... 62
Nuclear Regulatory Commission .......................................... 62
State and Local Regulatory Approvals ................................... 63
Securities and Exchange Commission Approval Pursuant to PUHCA .......... 63
The Merger Agreement ...................................................... 65
The Merger ............................................................. 65
Timing of Closing ...................................................... 65
Merger Consideration ................................................... 65
Procedures for Exchange of Share Certificates; Fractional Shares ....... 65
Conditions to the Completion of the Merger ............................. 66
No Solicitation ........................................................ 68
Termination of the Merger Agreement .................................... 70
Termination Fees; Reimbursement of Expenses ............................ 72
Other Expenses ......................................................... 73
Interim Operations of FPL Group and Entergy ............................ 74
Common Stock Repurchases ............................................... 77
Amendment; Extension and Waiver ........................................ 77
Representations and Warranties ......................................... 78
Comparative Stock Prices and Dividends .................................... 79
Unaudited Pro Forma Combined Condensed Consolidated Financial Statements .. 80
Description of Holdco Capital Stock ....................................... 86
General ................................................................ 86
Common Stock ........................................................... 86
Preferred Stock ........................................................ 86
Comparison of Shareholder Rights .......................................... 87
Authorized Capital Stock; Shareholder Rights Plan ...................... 87
Number of Directors .................................................... 87
Vacancies on the Board ................................................. 88
Removal of Directors ................................................... 88
Required Shareholder Vote for Certain Shareholder Actions .............. 89
Interested Shareholder Transactions .................................... 89
Shareholder Action by Written Consent .................................. 91
Control Shares ......................................................... 91
Constituencies Provision ............................................... 91
Special Meetings of Shareholders ....................................... 91
Amendments to Governing Documents ...................................... 92
ii
<PAGE>
Page
----
Indemnification of Directors and Officers .............................. 93
Limitation on Director Liability ....................................... 94
Dissenters' or Appraisal Rights ........................................ 95
Legal Matters ............................................................. 96
Experts ................................................................... 96
Shareholder Proposals ..................................................... 97
FPL Group .............................................................. 97
Entergy ................................................................ 97
Other Matters ............................................................. 97
Where You Can Find More Information ....................................... 97
Independent Auditors' Report .............................................. F-1
WCB Holding Corp. Balance Sheet ........................................... F-2
ANNEXES
Annex A Agreement and Plan of Merger
Exhibit A-Form of Certificate of Incorporation of the Company as of
the Effective Time
Exhibit B-Form of By-laws of the Company as of the Effective Time
Exhibit C-Corporate Governance of the Company Following the Effective
Time
Exhibit D-Form of Affiliate Letter
Annex B Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
Annex C Opinion of Morgan Stanley & Co. Incorporated
Annex D Opinion of J.P. Morgan Securities Inc.
Part II--Information Not Required in the Prospectus ....................... II-1
Item 20. Indemnification of Directors and Officers ..................... II-1
Item 21. Exhibits and Financial Statement Schedules .................... II-2
Item 22. Undertakings .................................................. II-2
Signatures ................................................................ II-4
Power of Attorney ......................................................... II-4
Exhibit Index ............................................................. II-5
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: When and where are the shareholders meetings?
A: The FPL Group shareholders meeting will take place at [ ], local time on
[ ], 2000, in [Juno Beach, Florida]. The Entergy shareholders meeting
will take place at [ ], local time on [ ], 2000, in [New Orleans,
Louisiana]. The addresses of the meetings are listed on pages [ ] and
[ ], respectively.
Q: What will happen in the proposed transaction?
A: Prior to entering into the merger agreement, FPL Group and Entergy formed
a holding company, WCB Holding Corp. ("Holdco"), which in turn formed two
merger subsidiaries, Ranger Acquisition Corp. and Ring Acquisition Corp.
Ranger Acquisition Corp. will merge with and into FPL Group, and Ring
Acquisition Corp. will merge with and into Entergy. As a result of this
merger, FPL Group and Entergy will become wholly owned subsidiaries of
Holdco. The merger of Ranger Acquisition Corp. with and into FPL Group and
the merger of Ring Acquisition Corp. with and into Entergy are referred to
as the "merger".
Q: Why are FPL Group and Entergy going to merge?
A: We believe that the merger will provide substantial strategic and
financial benefits to the shareholders, employees and customers of FPL
Group and Entergy, including:
o expanding our generation capacity,
o enhancing our energy marketing and trading and fiber-optics
businesses,
o broadening our electric distribution platform,
o improving customer service, financial strength and system
reliability, and
o providing a foundation for growth of our unregulated businesses, and
enhancing our revenue growth and cost savings opportunities.
To review the reasons for the merger in greater detail, see pages 24-26
and 37-39.
Q: Is "WCB Holding Corp." the name the new merged company will use going
forward?
A: No. FPL Group and Entergy will select a new name for the holding company
prior to the closing of the merger.
Q: What will I receive for my shares?
A: As a result of the merger, each FPL Group shareholder will receive one
share of Holdco common stock for each share of FPL Group common stock that
he or she owns.
Each Entergy shareholder will receive 0.585 of a share of Holdco common
stock for each share of Entergy common stock that he or she owns.
Q: What happens to my future dividends?
A: FPL Group and Entergy do not anticipate making any changes to their
dividend policies prior to the consummation of the merger; however, the
FPL Group and Entergy Boards will continue to evaluate their respective
dividend policies in light of business, financial and regulatory
considerations. The most recent quarterly dividend declared by FPL Group
was $0.54 per share of common stock payable on September 15, 2000. The
most recent quarterly dividend declared by Entergy was $0.30 per share of
common stock payable on September 1, 2000.
<PAGE>
It is expected that, after the merger, Holdco will continue the
dividend policy of FPL Group in effect at the time of the merger. The
payment of dividends by Holdco, however, will be subject to the
approval and declaration by the Holdco Board of Directors and will
depend on a variety of factors, including business, financial and
regulatory considerations.
Q: What are my U.S. federal tax consequences as a result of the merger?
A: We expect that the merger will generally be tax-free. We have structured
the merger so that, in general, holders of FPL Group common stock and
Entergy common stock will not recognize gain or loss for U.S. federal
income tax purposes, except with respect to any cash received instead of
fractional shares of Holdco common stock. The closing of the merger is
conditioned upon the delivery at the closing by each of Cravath, Swaine &
Moore, counsel to FPL Group, and Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to Entergy, of its opinion that the merger will generally
constitute a tax-free transaction for U.S. federal income tax purposes. We
describe the material U.S. federal income tax consequences of the merger
in more detail on page 54. The tax consequences to you will depend on the
facts of your own situation. Please consult your tax advisor for a full
understanding of the tax consequences to you of the merger.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in this
joint proxy statement/prospectus, please complete and sign your proxy and
return it in the enclosed postage-paid envelope as soon as possible so
that your shares may be represented at your special meeting. You may also
cast your vote by telephone by following the instructions on your
proxy card.
If you sign, date and send your proxy and do not indicate how you want to
vote, we will count your proxy as a vote for the approval of the merger.
Q: What do I do if I want to change my vote?
A: Send a later-dated, signed proxy card to your company's Secretary prior to
the date of your special meeting or attend your company's meeting in
person and vote. You may also revoke your proxy card by sending a notice
of revocation to your company's Secretary at the address under
"Summary--The Companies" on page 10. You may also change your vote by
telephone. You may change your vote by using any one of these methods
regardless of the procedure used to cast your previous vote.
Q: If my broker holds my shares in "street name", will my broker vote my
shares?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on
the merger proposal. You should therefore be sure to provide your broker
with instructions on how to vote your shares. Shareholders should check
the voting form used by their brokers to see if they offer telephone or
computer voting.
If you do not give voting instructions to your broker, you will not be
counted as voting for purposes of the merger vote unless you appear and
vote in person at your special meeting. If your broker holds your shares
and you attend the meeting, please bring a letter from your broker
identifying you as the beneficial owner of the shares and authorizing you
to vote.
Q: What will happen if I abstain from voting or fail to vote?
A: An abstention or failure to vote will have the same effect as a vote
against the merger.
Q: Should I send in my share certificates now?
A: No. If the merger is completed, we will send shareholders of both FPL
Group and Entergy written instructions for exchanging their share
certificates.
2
<PAGE>
Q: What vote is required to approve the merger?
A: For both FPL Group and Entergy, the affirmative vote of a majority of the
shares outstanding and entitled to vote as of the respective record dates
is required to approve and adopt the merger agreement.
Q: Who else must approve the merger?
A: In addition to the approval of the FPL Group and Entergy shareholders, the
merger agreement requires that the parties obtain the consent, support or
approval of certain local, state and federal regulatory agencies before
the merger can be completed. See "Regulatory Matters" on page 62.
Q: When do you expect to complete the merger?
A: We are working as quickly as possible and expect to complete the merger by
late 2001.
Q: Do I have dissenters' or appraisal rights?
A: No. Neither the holders of FPL Group common stock nor the holders of
Entergy common stock will have dissenters' or appraisal rights under
Florida or Delaware law as a result of the merger.
Q: Who can help answer my questions?
A: If you have any questions about the merger or if you need additional
copies of this joint proxy statement/prospectus or the enclosed proxy
card, you should contact:
FPL Group Shareholders: Entergy Shareholders:
FPL Group, Inc. Entergy Corporation
P.O. Box 14000 639 Loyola Avenue
700 Universe Boulevard New Orleans, Louisiana 70113
Juno Beach, Florida 33408-0420 (504) 576-4212
(561) 694-4694 Attention: Christopher T. Screen
Attention: Dinah Washam Assistant Secretary
Associate Analyst
Q: Where can I find more information about the companies?
A: You can find more information about FPL Group and Entergy from various
sources described under "Where You Can Find More Information" on page 97
of this joint proxy statement/prospectus.
Q: How important is my vote?
A: Since the merger agreement cannot be consummated without the affirmative
vote of the holders of a majority of each of the FPL Group and Entergy
common stock, every shareholder vote is important. An abstention or
failure to vote will have the same effect as a vote against the merger.
3
<PAGE>
--------------------------------------------------------------------------------
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire joint proxy statement/prospectus and the other documents to which we have
referred you. See "Where You Can Find More Information" on page 97. We have
included page references parenthetically to direct you to a more complete
description of the topics presented in this summary.
General
What You Will Receive in the Merger
FPL Group Shareholders (page 65)
In the merger, each share of FPL Group common stock will automatically be
converted into one share of Holdco common stock.
Entergy Shareholders (page 65)
In the merger, each share of Entergy common stock will automatically be
converted into 0.585 of a share of Holdco common stock.
Recommendations by the Boards
FPL Group (page 26)
At its meeting on July 30, 2000, after due consideration, the FPL Group
Board of Directors:
o determined that the merger and the other transactions contemplated
by the merger agreement are consistent with, and in furtherance of,
the best interests of FPL Group and its shareholders,
o adopted the merger agreement, the merger and the other transactions
contemplated by the merger agreement, and
o recommended that FPL Group shareholders vote for the approval of the
merger agreement.
Entergy (page 39)
At its meeting on July 29, 2000, after due consideration, the Entergy
Board of Directors:
o determined that the merger and the other transactions contemplated
by the merger agreement are consistent with, and in furtherance of,
the best interests of Entergy and its shareholders,
o approved and adopted the merger agreement, the merger and the other
transactions contemplated by the merger agreement, and
o recommended that Entergy shareholders vote for the approval and
adoption of the merger agreement.
To review the background and reasons for the merger in greater detail, as well
as certain risks related to the merger, see pages 11-12, 22-26, and 37-39.
--------------------------------------------------------------------------------
4
<PAGE>
--------------------------------------------------------------------------------
Fairness Opinions of Financial Advisors
FPL Group (page 28)
In deciding to adopt the merger, the FPL Group Board of Directors
considered the opinion, dated July 30, 2000, of its financial advisor,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as to the fairness, from
a financial point of view, as of that date, to the holders of FPL Group
common stock of the exchange ratio of one share of Holdco common stock for
each share of FPL Group common stock in the merger. In its analysis of this
exchange ratio, Merrill Lynch took into account the exchange ratio of 0.585
of a share of Holdco common stock for each share of Entergy common stock in
the merger agreement. The written opinion of Merrill Lynch is attached as
Annex B to this joint proxy statement/prospectus. We encourage FPL Group
shareholders to read this opinion carefully and in its entirety.
Entergy (page 41)
In deciding to approve the merger, the Entergy Board of Directors
considered the opinion, dated July 28, 2000, of its financial advisor, Morgan
Stanley & Co. Incorporated and the oral opinion which was reduced to writing
on July 30, 2000, of J.P. Morgan Securities Inc., each as to the fairness,
from a financial point of view, as of that date, to the holders of Entergy
common stock of the exchange ratio of 0.585 of a share of Holdco common stock
for each share of Entergy common stock in the merger agreement. The written
opinions of Morgan Stanley and J.P. Morgan are attached as Annexes C and D to
this joint proxy statement/prospectus. We encourage Entergy shareholders to
read these opinions carefully and in their entirety.
Interests of FPL Group's Directors and Management in the Merger (page 49)
Shareholders should note that some FPL Group directors and officers have
interests in the merger as directors or officers that are different from, or in
addition to, the interests of other FPL Group shareholders. As provided in the
merger agreement, at the completion of the merger, Holdco's Board of Directors
will include eight FPL Group designees and seven Entergy designees. The merger
agreement also provides that certain officers of FPL Group will be officers of
Holdco. James L. Broadhead, the Chairman and Chief Executive Officer of FPL
Group, will become Chairman of Holdco.
Certain executive officers of FPL Group have previously entered into
change in control employment agreements with FPL Group that become effective
upon approval of the merger by FPL Group's shareholders. These agreements and
plans will provide these officers with severance and other benefits if their
employment with Holdco is terminated under circumstances set forth in the
employment agreements after the merger and other rights in connection with
the merger. In addition, certain of FPL Group's benefit plans and agreements
provide for accelerated vesting or payment of benefits upon the approval of
the merger by FPL Group's shareholders.
Interests of Entergy's Directors and Management in the Merger (page 51)
Shareholders should note that some Entergy directors and officers have
interests in the merger that are different from, or in addition to, the
interests of other Entergy shareholders. As provided in the merger agreement, at
the completion of the merger, Holdco's Board of Directors will include seven
Entergy designees and eight FPL Group designees. The merger agreement also
provides that certain officers of Entergy will be officers of Holdco. J. Wayne
Leonard, the Chief Executive Officer of Entergy, will become Chief Executive
Officer and President of Holdco.
In addition, certain executive officers of Entergy have rights under
benefit and compensation plans and agreements maintained by Entergy. These
plans and agreements will provide these executive officers with severance and
other benefits if their employment with Holdco is terminated under
circumstances set forth in the plans and agreements after the merger and
other rights in connection with the merger.
--------------------------------------------------------------------------------
5
<PAGE>
--------------------------------------------------------------------------------
The Merger
The merger agreement is attached as Annex A to this joint proxy
statement/prospectus. We encourage you to read the merger agreement. It is the
principal document governing the merger.
Conditions to the Completion of the Merger (page 66)
The completion of the merger depends upon meeting a number of conditions,
including the following:
o approval and adoption of the merger agreement by the FPL Group and
Entergy shareholders, and
o absence of any legal prohibition on consummation of the merger.
In addition, FPL Group's obligation to complete the merger is subject to,
among other things:
o the accuracy, as of closing, of the representations and warranties
made by Entergy and performance of obligations by Entergy, to the
extent set forth in the merger agreement,
o the receipt of an opinion of counsel that the merger will generally
qualify as a tax-free exchange,
o all applicable regulatory approvals being obtained on terms that,
individually or in the aggregate, could not reasonably be expected
to have a material adverse effect on Holdco and its prospective
subsidiaries, taken as a whole, or Entergy and its subsidiaries,
taken as a whole, and
o the absence of a material adverse change with respect to Entergy.
In addition, Entergy's obligation to complete the merger is subject to,
among other things:
o the accuracy, as of closing, of the representations and warranties
made by FPL Group and performance of obligations by FPL Group, to
the extent set forth in the merger agreement,
o the receipt of an opinion of counsel that the merger will generally
qualify as a tax-free exchange,
o all applicable regulatory approvals being obtained on terms that,
individually or in the aggregate, could not reasonably be expected
to have a material adverse effect on Holdco and its prospective
subsidiaries, taken as a whole, or FPL Group and its subsidiaries,
taken as a whole, and
o the absence of a material adverse change with respect to FPL Group.
Termination of the Merger Agreement (page 70)
The merger agreement may be terminated at any time prior to the completion
of the merger:
(1) by mutual written consent of FPL Group and Entergy,
(2) by either FPL Group or Entergy if:
(a) the merger has not been consummated by April 30, 2002;
however, that date is extended to October 31, 2002, if the
closing of the merger is delayed only because regulatory
approvals have not been received,
(b) FPL Group or Entergy shareholders do not approve and adopt the
merger agreement,
--------------------------------------------------------------------------------
6
<PAGE>
--------------------------------------------------------------------------------
(c) there is a permanent legal prohibition to the merger,
(d) any condition to the obligations of FPL Group or Entergy to
consummate the merger becomes incapable of satisfaction prior
to the termination date, provided that the failure of any such
condition to be capable of satisfaction is not the result of a
material breach of the merger agreement by the party seeking
to terminate the merger agreement,
(e) the other party breaches or fails to perform its obligations
under the merger agreement in any material respect and the
breach or failure to perform would result in the failure of a
closing condition relating to representations or warranties or
the performance of obligations and is not or cannot be cured
within 30 days of being notified by the terminating party, or
(f) the other party or any of such other party's directors or
officers participate in discussions or negotiations with a
third party that are in breach of the non-solicitation
provisions of the merger agreement,
(3) by FPL Group, if prior to obtaining its shareholder approval of the
merger agreement, the FPL Group Board determines in good faith that
failure to terminate the merger agreement in response to an
unsolicited takeover proposal would be reasonably likely to result
in a breach of its fiduciary duties and FPL Group gives notice to
Entergy of the existence of a superior proposal and pays the
termination fee described below,
(4) by Entergy, if prior to obtaining its shareholder approval of the
merger agreement, the Entergy Board determines in good faith that
failure to terminate the merger agreement in response to an
unsolicited takeover proposal would be reasonably likely to result
in a breach of its fiduciary duties and Entergy gives notice to FPL
Group of the existence of a superior proposal and pays the
termination fee described below,
(5) by FPL Group, if the Entergy Board of Directors does any of the
following:
o withdraws or modifies, or proposes publicly to withdraw or
modify, the Board approval or recommendation of the merger
agreement or the merger,
o fails at any time when a proposal to take over Entergy has
been made and not rejected to reaffirm its approval or
recommendation of the merger agreement or the merger within 10
business days of receipt of FPL Group's written request to so
reaffirm its approval or recommendation, or
o approves or recommends, or proposes to approve or recommend, a
proposal to take over Entergy, or
(6) by Entergy, if the FPL Group Board of Directors does any of the
following:
o withdraws or modifies, or proposes publicly to withdraw or
modify, the Board approval or recommendation of the merger
agreement or the merger,
o fails at any time when a proposal to take over FPL Group has
been made and not rejected to reaffirm its approval or
recommendation of the merger agreement or the merger within 10
business days of receipt of Entergy's written request to so
reaffirm its approval or recommendation, or
o approves or recommends, or proposes to approve or recommend, a
proposal to take over FPL Group.
--------------------------------------------------------------------------------
7
<PAGE>
--------------------------------------------------------------------------------
Termination Fees; Reimbursement of Expenses
FPL Group (page 72)
FPL Group must pay to Entergy a termination fee of $215 million if any of
the following occurs:
(1) following the approval of the merger agreement by the shareholders
of FPL Group, a proposal to take over FPL Group is made and
thereafter, for the reason described in paragraph 2(a) above under
"--Termination of the Merger Agreement", the merger agreement is
terminated and, within 12 months of the termination, FPL Group
enters into a definitive agreement to consummate or consummates a
proposal to take over FPL Group with the person who originally made
the proposal to take over FPL Group,
(2) a proposal to take over FPL Group is publicly disclosed prior to or
during the FPL Group shareholders meeting and either Entergy or FPL
Group terminates the merger agreement because the FPL Group
shareholder approval is not obtained at the FPL Group shareholders
meeting and, within 24 months of the termination, FPL Group enters
into a definitive agreement to consummate or consummates a proposal
to take over FPL Group,
(3) FPL Group terminates the merger agreement for the reason described
in paragraph (3) above under "--Termination of the Merger
Agreement", or
(4) Entergy terminates the merger agreement because FPL Group's Board of
Directors has withdrawn or modified, or proposed publicly to
withdraw or modify, its approval or recommendation of the merger
agreement or the merger or has approved or recommended, or proposed
to approve or recommend, a proposal to take over FPL Group.
FPL Group must reimburse Entergy for fees and expenses incurred by, or
paid by or on behalf of, Entergy in connection with the merger agreement and the
transactions contemplated by the merger agreement up to a maximum of $25
million, if any of the following occurs:
o FPL Group or Entergy terminates the merger agreement for the reason
described in paragraph (2)(a) above under "--Termination of the
Merger Agreement" (after a proposal to take over FPL Group is made
known to FPL Group or is made directly to FPL Group's shareholders
or any person publicly announces an intention to make a proposal to
take over FPL Group),
o FPL Group or Entergy terminates the merger agreement for the reason
described in paragraph (2)(b) above under "--Termination of the
Merger Agreement" (after the public disclosure of a proposal to take
over FPL Group or the announcement by any person of an intention to
make a proposal to take over FPL Group),
o FPL Group terminates the merger agreement for the reason described
in paragraph (3) above under "--Termination of the Merger
Agreement", or
o Entergy terminates the merger agreement for the reason described in
the first or third bullet point set forth in paragraph (6) above
under "--Termination of the Merger Agreement".
Entergy (page 72)
Entergy must pay to FPL Group a termination fee of $215 million if any of
the following occurs:
(1) following the approval and adoption of the merger agreement by the
shareholders of Entergy, a proposal to take over Entergy is made and
thereafter, for the reason described in paragraph 2(a) above under
"--Termination of the Merger Agreement", the merger agreement is
terminated and, within 12 months of the termination, Entergy enters
into a definitive agreement to
--------------------------------------------------------------------------------
8
<PAGE>
--------------------------------------------------------------------------------
consummate or consummates a proposal to take over Entergy with the
person who originally made the proposal to take over Entergy,
(2) a proposal to take over Entergy is publicly disclosed prior to or
during the Entergy shareholders meeting and either FPL Group or
Entergy terminates the merger agreement because the Entergy
shareholder approval is not obtained at the Entergy shareholders
meeting and, within 24 months of the termination, Entergy enters
into a definitive agreement to consummate or consummates a proposal
to take over Entergy,
(3) Entergy terminates the merger agreement, for the reason described in
paragraph (4) above under "--Termination of the Merger Agreement",
or
(4) FPL Group terminates the merger agreement because Entergy's Board of
Directors has withdrawn or modified, or proposed publicly to
withdraw or modify, its approval or recommendation of the merger
agreement or the merger or has approved or recommended, or proposed
to approve or recommend, a proposal to take over Entergy.
Entergy must reimburse FPL Group for fees and expenses incurred by, or
paid by or on behalf of, FPL Group in connection with the merger agreement and
the transactions contemplated by the merger agreement up to a maximum of $25
million, if any of the following occurs:
o Entergy or FPL Group terminates the merger agreement for the reason
described in paragraph (2)(a) above under "--Termination of the
Merger Agreement" (after a proposal to take over Entergy is made
known to Entergy or is made directly to Entergy's shareholders or
any person publicly announces an intention to make a proposal to
take over Entergy),
o Entergy or FPL Group terminates the merger agreement for the reason
described in paragraph (2)(b) above under "--Termination of the
Merger Agreement" (after the public disclosure of a proposal to take
over Entergy or the announcement by any person of an intention to
make a proposal to take over Entergy),
o Entergy terminates the merger agreement for the reason described in
paragraph (4) above under "--Termination of the Merger Agreement",
or
o FPL Group terminates the merger agreement for the reason described
in the first or third bullet point set forth in paragraph (5) above
under "--Termination of the Merger Agreement".
Regulatory Approvals (page 62)
Certain federal, state and local regulatory requirements must be complied
with before the merger can be completed, including:
o the approval of the Federal Energy Regulatory Commission,
o the approval of the Securities and Exchange Commission pursuant to
the Public Utility Holding Company Act of 1935 ("PUHCA"),
o the approval of the Nuclear Regulatory Commission, and
o the support or approval of the regulatory agencies in the
municipalities and states in which certain FPL Group and Entergy
subsidiaries operate.
In addition, prior to completing the merger, the applicable waiting period
under a federal antitrust law, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, must expire or terminate.
--------------------------------------------------------------------------------
9
<PAGE>
--------------------------------------------------------------------------------
The Companies
FPL Group, Inc.
700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000
FPL Group is a public utility holding company, as defined in PUHCA. It was
incorporated in 1984 under the laws of Florida. FPL Group's principal
subsidiary, Florida Power & Light Company, is engaged in the generation,
transmission, distribution and sale of electric energy. FPL Group Capital Inc,
a wholly-owned subsidiary of FPL Group, holds the capital stock and provides
funding for the operating subsidiaries other than Florida Power & Light Company.
The business activities of these operating subsidiaries primarily consist of
independent power projects. In 2000, FPL Group Capital Inc formed a new
subsidiary to sell wholesale fiber-optic network capacity.
Entergy Corporation
639 Loyola Avenue
New Orleans, LA 70113
(504) 576-4000
Entergy is a Delaware corporation which, through its subsidiaries, engages
principally in the following businesses: domestic utility operations, power
marketing and trading, global power development and domestic non-utility nuclear
operations. It has no significant assets other than the stock of its
subsidiaries. Entergy is a registered public utility holding company under
PUHCA. As such, Entergy and its subsidiaries generally are subject to the broad
regulatory provisions of PUHCA.
Market Price and Dividend Information (page 82)
Shares of FPL Group common stock and Entergy common stock are listed on
the New York Stock Exchange. The following table presents the last reported sale
price per share of FPL Group common stock and Entergy common stock, as reported
on the New York Stock Exchange Composite Transaction reporting system on July
28, 2000, the last full trading day prior to the public announcement of the
merger, and on [ ], 2000, the last trading day for which this information
could be calculated prior to the date of this joint proxy statement/prospectus.
FPL Group Entergy
Common Common
Date Stock Stock
---- ----- -----
July 28, 2000............................ $52.8125 $30.3125
[ ], 2000.............................. [ ] [ ]
FPL Group and Entergy do not anticipate making any changes to their
dividend policies prior to the consummation of the merger; however, the FPL
Group and Entergy Boards will continue to evaluate their respective dividend
policies in light of business, financial and regulatory considerations. The most
recent quarterly dividend declared by FPL Group was $0.54 per share payable on
September 15, 2000. FPL Group's current dividend is $2.16 per share of common
stock on an annual basis. The most recent quarterly dividend declared by Entergy
was $0.30 per share payable on September 1, 2000. Entergy's current dividend is
$1.20 per share on an annual basis.
It is expected that, after the merger, Holdco will continue the
dividend policy of FPL Group in effect at the time of the merger. The payment
of dividends by Holdco, however, will be subject to the approval and
declaration by the Holdco Board of Directors and will depend on a variety of
factors, including business, financial and regulatory considerations.
--------------------------------------------------------------------------------
10
<PAGE>
RISK FACTORS RELATING TO THE MERGER
In addition to the other information included and incorporated by
reference in this joint proxy statement/prospectus, FPL Group and Entergy
shareholders should consider carefully the matters described below in
determining whether to approve and adopt the merger agreement.
o The consideration to be received by shareholders in the merger is
fixed and will not be adjusted in the event of any change in the
stock prices of FPL Group or Entergy prior to the merger. Upon
completion of the merger, each share of FPL Group common stock will
be exchanged for one share of Holdco common stock, and each share of
Entergy common stock will be exchanged for 0.585 of a share of
Holdco common stock.
o The prices of FPL Group common stock and Entergy common stock on the
dates of the special meetings may not be indicative of their prices
immediately prior to completion of the merger and the price of
Holdco common stock after the merger is completed. There may be a
significant amount of time between the dates when the shareholders
of each of FPL Group and Entergy vote on the merger agreement at the
special meeting of each company and the date when the merger is
completed. The relative prices of shares of FPL Group common stock
and Entergy common stock may vary significantly between the date of
this joint proxy statement/prospectus, the dates of the special
meetings and the completion of the merger. These variations may be
caused by changes in the businesses, operations, results and
prospects of our companies, market expectations of the likelihood
that the merger will be completed and the timing of completion, the
prospects of post-merger operations, the effect of any conditions or
restrictions imposed on or proposed with respect to the combined
company by regulators, general market and economic conditions and
other factors. In addition, it is impossible to predict accurately
the market price of Holdco common stock to be received by FPL Group
and Entergy shareholders after the completion of the merger. We urge
you to obtain current market quotations for your company's common
stock at the time you are making your decision as to how to vote.
o The integration of FPL Group and Entergy following the merger will
present significant challenges that may result in a failure to
achieve the anticipated potential benefits of the merger. There
are related and additional uncertainties surrounding certain
joint ventures involving Entergy. FPL Group and Entergy will face
significant challenges in consolidating functions, integrating
their organizations, procedures and operations in a timely and
efficient manner as well as retaining key FPL Group and Entergy
personnel. The integration of FPL Group and Entergy will be
complex and time-consuming, and the managements of FPL Group
and Entergy will have to dedicate substantial effort to it.
Such efforts could divert management's focus and resources from
other strategic opportunities during the integration process.
Combining the energy marketing and trading business of FPL Group
with that of Entergy's joint venture with Koch Industries, Inc. (the
"Entergy-Koch L.P. venture") may affect the combined company's
ability to operate as effectively as expected or may result in a
failure to achieve the anticipated potential benefits of the merger.
The Entergy-Koch L.P. venture is in its formative stage and has not
yet begun to operate, and there are no assurances that it will
operate and achieve the results anticipated. In addition, the
proposed venture between Entergy and the Shaw Group, Inc. (the
"Entergy-Shaw venture") is in its negotiation stage, and there are
no assurances that it will be consummated.
o The merger is subject to the receipt of consent or approval from
certain government entities that could delay completion of the
merger or impose conditions that could have a material adverse
effect on the combined company or cause abandonment of the merger.
Completion of the merger is conditioned upon the expiration or
termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act and the receipt of
consents, orders, approvals or clearances, as required, from the
Securities and Exchange Commission, the Federal Energy Regulatory
Commission, the Nuclear Regulatory Commission, and the public
utility commissions or similar entities with jurisdiction in
Arkansas, Florida, Louisiana, Mississippi, New Orleans, Texas
and, due to FPL
11
<PAGE>
Group's ownership of independent power producers in certain
jurisdictions, New Jersey, Pennsylvania and Virginia. A substantial
delay in obtaining satisfactory approvals or the imposition of
unfavorable terms or conditions in the approvals could have a
material adverse effect on the business, financial condition or
results of operations of FPL Group or Entergy or may cause the
abandonment of the merger by FPL Group or Entergy.
o Our unregulated businesses are riskier than our traditional utility
businesses. We expect that the combined company's unregulated
businesses will contribute a greater proportion of the combined
company's expected future earnings than either FPL Group's or
Entergy's unregulated businesses currently contribute to their
earnings. As a result, we expect that our ongoing operating
results will exhibit more variability than in the past. Moreover,
Entergy is engaged in power marketing and trading operations on a
greater scale than FPL Group. The risks associated with this
business are different from the risks of the traditional utility
business. This business could also contribute to overall
increased variability in our operating results.
o The merger will combine two companies that are currently affected by
recent developments in the electric and gas utility industries,
including restructuring, deregulation and increased competition.
Because FPL Group and Entergy and their subsidiaries are regulated
at the federal level and in a number of states and municipalities,
the two companies (and Holdco after the merger) have been and will
continue to be impacted by legislative and regulatory developments.
After the merger, Holdco will continue to be subject to extensive
federal regulation as well as state and local regulation in each of
the following jurisdictions: Arkansas, Florida, Louisiana,
Mississippi, Texas and New Orleans. Each of these jurisdictions has
implemented, is in the process of implementing or possibly will
implement changes to the regulatory and legislative framework
applicable to the electric and gas utilities industry. The
continuing effects of changes that have been implemented, the
possible effects of changes under consideration and the possible
effects of changes that may occur in the future could have a
material adverse effect on FPL Group, Entergy or Holdco. Moreover,
increased competition resulting from potential legislative changes,
regulatory changes or otherwise may create greater risks to the
stability of utility earnings generally. In a deregulated
environment, formerly regulated utility companies that are not
responsive to a competitive energy marketplace could suffer erosion
in market share, revenues and profits as competitors gain access to
their service territories.
12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
FPL Group and Entergy are providing the following financial information to
aid you in your analysis of the financial aspects of the merger. This
information is only a summary and you should read it in conjunction with the
historical consolidated financial statements of FPL Group and Entergy and the
related notes contained in the annual reports and other information that each of
FPL Group and Entergy has previously filed with the Securities and Exchange
Commission. See "Where You Can Find More Information" on page 97.
Selected Historical Consolidated Financial Data of FPL Group
<TABLE>
<CAPTION>
At or for the Six
Months Ended At or for the Year
June 30, Ended December 31,
----------------- ---------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
(millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues ...................... $3,138 $3,026 $6,438 $6,661 $6,369 $6,037 $5,592
Net income .............................. 325 286 697 664 618 579 553
Earnings per share of common stock, basic
and assuming dilution ................. 1.91 1.67(a) 4.07(b) 3.85 3.57 3.33 3.16
Dividends declared per share of common
stock ................................. 1.08 1.04 2.08 2.00 1.92 1.84 1.76
Book value per share .................... 32.32 30.14 31.47 29.76 28.03 26.46 25.12
Total assets ............................ 14,196 13,306 13,441 12,029 12,449 12,219 12,459
Long-term obligations(c) ................ 3,621 2,630 3,635 2,493 3,135 3,368 3,606
</TABLE>
--------------
(a) Includes effects of gain on sale of Adelphia Communications Corporation
stock and impairment loss on Maine assets. Excluding the foregoing items,
earnings per share of common stock was $1.72.
(b) Includes effects of gain on sale of Adelphia Communications Corporation
stock, impairment loss on Maine assets, settlement of litigation between
Florida Power & Light Company and the Florida Municipal Power Agency and
the gain on redemption of a one-third ownership interest in a cable
television limited partnership. Excluding the foregoing items, earnings
per share of common stock was $3.98.
(c) Includes non-current portions of long-term debt, preferred stock with
sinking fund requirements and obligations under capital leases.
Selected Historical Consolidated Financial Data of Entergy
<TABLE>
<CAPTION>
At or for the Six
Months Ended At or for the Year
June 30, Ended December 31,
----------------- ---------------------------------------------------
2000 1999 1999 1998(a) 1997(b) 1996(c) 1995
---- ---- ---- ---- ---- ---- ----
(millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues .................. $3,949 $3,956 $8,773 $11,495 $9,539 $7,164 $6,273
Consolidated net income ............. 354 283 595 786 301 491 563(d)
Earnings per share, basic and diluted 1.45 1.06 2.25 3.00 1.03 1.83 2.13(d)
Dividends declared per share ........ 0.60 0.60 1.20 1.50 1.80 1.80 1.80
Book value per share ................ 31.02 29.27 29.78 28.82 27.23 28.51 28.41
Total assets ........................ 24,324 23,084 22,985 22,837 27,001 22,956 22,266
Long-term obligations(e) ............ 7,841 7,167 7,253 7,349 10,154 8,335 7,484
</TABLE>
--------------
(a) Includes the effects of the sale of London Electricity and CitiPower in
December 1998.
(b) Includes the effects of the London Electricity acquisition in February
1997.
(c) Includes the effects of the CitiPower acquisition in January 1996.
(d) Represents income before cumulative effect of accounting changes.
(e) Includes long-term debt (excluding currently maturing debt), preferred
stock with sinking fund, preference stock, preferred securities of
subsidiary trusts and partnerships, and non-current capital lease
obligations.
13
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED
CONDENSED CONSOLIDATED FINANCIAL DATA
The following selected unaudited pro forma combined condensed consolidated
financial data gives effect to the merger. The pro forma adjustments are based
upon available information and assumptions that each company's management
believes are reasonable. The selected unaudited pro forma combined condensed
consolidated financial data are presented for illustrative purposes only. The
companies may have performed differently had they always been combined. You
should not rely on this information as being indicative of the historical
results that would have been achieved had the companies always been combined or
the future results that the combined company will experience after the merger.
The selected unaudited pro forma combined condensed consolidated financial data
(i) have been derived from and should be read in conjunction with the "Unaudited
Pro Forma Combined Condensed Financial Statements" and the related notes
included elsewhere in this joint proxy statement/prospectus and (ii) should be
read in conjunction with the consolidated financial statements of FPL Group and
Entergy incorporated by reference in this joint proxy statement/prospectus.
<TABLE>
<CAPTION>
At or for the Six
For the Year Ended Months Ended
December 31, 1999 June 30, 2000
----------------- -------------
(millions, except per share amounts)
<S> <C> <C>
Income Statement Data
Operating revenues ................................... $15,211 $7,087
Net income ........................................... 1,256 664
Earnings per share of common stock, basic and assuming
dilution ........................................... 3.99 2.17
Dividends declared per share of common stock (a) ..... 2.08 1.08
Balance Sheet Data
Total assets ......................................... $38,387
Long-term obligations ................................ 11,461
</TABLE>
--------------
(a) Represents FPL Group's current dividend rate.
14
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The December 31, 1999 selected comparative per share information of FPL
Group and Entergy, set forth below, was derived from audited financial
statements. The June 30, 2000 selected comparative per share information of FPL
Group and Entergy set forth below was derived from unaudited financial
statements and, in the opinion of the management of FPL Group and Entergy,
includes all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation for such periods. Due to the effect of seasonal
fluctuations and other factors on the operations of FPL Group and Entergy,
financial results for the six-month period ended June 30, 2000, are not
necessarily indicative of results for the year ending December 31, 2000.
You should read the information in this section along with FPL Group's and
Entergy's historical consolidated financial statements and accompanying notes
for the periods referred to above included in the documents described under
"Where You Can Find More Information" on page 97. You should also read the
unaudited pro forma combined condensed financial statements and accompanying
discussion and notes included in this joint proxy statement/prospectus starting
on page 80.
<TABLE>
<CAPTION>
At or for At or for the
the Year Ended Six Months Ended
December 31, 1999 June 30, 2000
----------------- -------------
<S> <C> <C>
FPL Group-Historical
Earnings per share of common stock, basic and assuming dilution $4.07 (a) $1.91
Dividends declared per share of common stock .................. 2.08 1.08
Book value per share of common stock .......................... 31.47 32.32
Entergy-Historical
Earnings per share of common stock, basic and assuming dilution $2.25 $1.45
Dividends declared per share of common stock .................. 1.20 0.60
Book value per share of common stock .......................... 29.78 31.02
</TABLE>
--------------
(a) Includes effects of gain on sale of Adelphia Communications Corporation
stock, impairment loss on Maine assets, settlement of litigation between
Florida Power & Light Company and the Florida Municipal Power Agency and
the gain on redemption of a one-third ownership interest in a cable
television limited partnership. Excluding the foregoing items, earnings
per share of common stock was $3.98.
<TABLE>
<CAPTION>
At or for At or for the
the Year Ended Six Months Ended
December 31, 1999 June 30, 2000
----------------- -------------
<S> <C> <C>
Holdco Unaudited Pro Forma Combined
Earnings per share of common stock, basic and assuming dilution $ 3.99 $ 2.17
Dividends declared per share of common stock................... 2.08 1.08
Book value per share of common stock........................... 38.67 40.33
Entergy Per Share Equivalent Based on Combination of
FPL Group and Entergy
Earnings per share of common stock, basic and assuming dilution $ 2.33 $ 1.27
Dividends declared per share of common stock................... 1.22 0.63
Book value per share of common stock........................... 22.62 23.59
</TABLE>
15
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents that are
incorporated herein by reference include various forward-looking statements
about FPL Group, Entergy and Holdco that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future financial
performance, business strategy, projected plans and objectives of FPL Group,
Entergy and Holdco set forth under:
o "Questions and Answers About the Merger",
o "Summary",
o "Selected Unaudited Pro Forma Combined Condensed Consolidated
Financial Data",
o "Unaudited Comparative Per Share Data",
o "The Merger", and
o "Unaudited Pro Forma Combined Condensed Consolidated Financial
Statements".
Statements preceded by, followed by or that otherwise include the words
"believes", "expects", "anticipates", "intends ", "estimates", "plans" or
similar expressions are generally forward-looking in nature and not historical
facts.
In addition to the risk factors described under "Risk Factors Relating to
the Merger", the following important factors could cause actual future results
for FPL Group, Entergy and Holdco to differ materially from those expressed in
the forward-looking statements:
o changes in laws or regulations,
o changing governmental policies and regulatory actions with respect
to allowed rates of return, including but not limited to return on
equity and equity ratio limits,
o industry and rate structure,
o operation of nuclear power facilities,
o trading and marketing of energy,
o futures, options and derivatives transactions,
o acquisition, disposal, depreciation and amortization of assets and
facilities,
o operation and construction of plant facilities,
o recovery of fuel and purchased power costs,
o decommissioning costs,
o present or prospective wholesale and retail competition (included
but not limited to retail wheeling and transmission costs),
o political and economic risks,
o changes in and compliance with environmental and safety laws and
policies,
o weather conditions (including natural disasters such as hurricanes),
o population growth rates and demographic patterns,
o competition for retail and wholesale customers,
16
<PAGE>
o availability, pricing and transportation of fuel and other energy
commodities,
o market demand for energy from plants or facilities,
o changes in tax rates or policies or in rates of inflation or in
accounting standards,
o unanticipated delays or changes in costs for capital projects,
o unanticipated changes in operating expenses and capital
expenditures,
o capital market conditions,
o competition for new energy development opportunities,
o legal and administrative proceedings (whether civil, such as
environmental, or criminal) and settlements, and
o other factors.
Most of these factors are difficult to predict accurately and are
generally beyond the control of FPL Group and Entergy.
The areas of risk described above should be considered in connection with
any written or oral forward-looking statements that may be made after the date
of this joint proxy statement/prospectus by Holdco, FPL Group or Entergy or
anyone acting for any or all of them. Except for their ongoing obligations to
disclose material information under the federal securities laws, neither Holdco,
FPL Group nor Entergy undertakes any obligation to release publicly any
revisions to any forward-looking statements, to report events or circumstances
after the date of this joint proxy statement/prospectus or to report the
occurrence of unanticipated events.
17
<PAGE>
THE FPL GROUP SPECIAL MEETING
We are furnishing this joint proxy statement/prospectus to shareholders of
FPL Group as part of the solicitation of proxies by the FPL Group Board of
Directors for use at the FPL Group special meeting.
Date, Time and Place
FPL Group will hold its special meeting on [ ], [ ], 2000, at [ ],
local time, at [FPL Group, Inc., 700 Universe Boulevard, Juno Beach, FL 33408].
Purpose of FPL Group Special Meeting
At the FPL Group special meeting, we are asking holders of record of FPL
Group common stock to consider and vote on a proposal to approve the merger
agreement. See "The Merger" and "The Merger Agreement".
The FPL Group Board of Directors has adopted the merger agreement, the
merger and the other transactions contemplated by the merger agreement and has
determined that the merger and the other transactions contemplated by the merger
agreement are consistent with, and in furtherance of, the best interests of FPL
Group and its shareholders.
The FPL Group Board of Directors recommends that FPL Group shareholders
vote FOR the approval of the merger agreement.
FPL Group Record Date; Shares Entitled to Vote; Quorum
Only holders of record of FPL Group common stock at the close of business
on [ ], 2000, the FPL Group record date, are entitled to notice of and to vote
at the FPL Group special meeting. On [ ], 2000, approximately [ ] shares of
FPL Group common stock were issued and outstanding and held by approximately
[ ] holders of record. A quorum will be present at the FPL Group special
meeting if the holders of a majority of the votes of shares entitled to vote on
the FPL Group record date are represented in person or by proxy. If a quorum is
not present at the FPL Group special meeting, we expect that the FPL Group
special meeting will be adjourned or postponed to solicit additional proxies.
Holders of record of FPL Group common stock on the FPL Group record date are
entitled to one vote per share at the FPL Group special meeting on the proposal
to approve the merger agreement.
Vote Required
The approval of the merger agreement by FPL Group shareholders requires
the affirmative vote of a majority of the shares outstanding and entitled to
vote at a special meeting of the shareholders as of the FPL Group record date,
either in person or by proxy, voting as a single class.
Voting by FPL Group Directors and Executive Officers
At the close of business on July 31, 2000, directors and executive
officers of FPL Group owned and were entitled to vote less than 1% of the FPL
Group common stock outstanding on that date. Each FPL Group director and
executive officer has indicated his or her present intention to vote, or cause
to be voted, the FPL Group common stock owned by him or her for the approval of
the merger agreement.
Voting of Proxies
All shares represented by properly executed proxies received in time for
the FPL Group special meeting will be voted at the FPL Group special meeting in
the manner specified by the shareholders giving those proxies. Properly executed
proxies that do not contain voting instructions will be voted for the approval
of the merger agreement.
18
<PAGE>
In addition to manually executing and returning a proxy by mail, FPL
Group shareholders may vote by telephone. If voting by telephone, the
shareholder should dial the toll-free number indicated in the shareholder's
proxy. The shareholders will then be prompted to enter the control number
printed on his or her proxy and to follow the subsequent instructions.
FPL Group common stock represented at the FPL Group special meeting but
not voting, including FPL Group common stock for which proxies have been
received but for which holders of shares have abstained, will be treated as
present at the FPL Group special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all business.
Only shares affirmatively voted for the approval of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as favorable votes for the proposal. An abstention or failure to
vote will have the same effect as a vote against approval of the merger
agreement. Also, under New York Stock Exchange rules, brokers who hold shares of
FPL Group common stock in "street name" for customers who are the beneficial
owners of those shares may not give a proxy to vote those shares without
specific instructions from those customers. If an FPL Group shareholder owns
shares through a broker and attends the special meeting, the shareholder should
bring a letter from his or her broker identifying him or her as the beneficial
owner of the shares and authorizing the shareholder to vote.
The persons named as proxies by an FPL Group shareholder may propose and
vote for one or more adjournments of the FPL Group special meeting, including
adjournments to permit further solicitations of proxies. No proxy voted against
the proposal to approve the merger agreement will be voted in favor of any
adjournment or postponement.
FPL Group does not expect that any matter other than the proposal to
approve the merger agreement will be brought before the FPL Group special
meeting. If, however, other matters are properly presented to the meeting, the
persons named as proxies will vote in accordance with the recommendation of the
Board of Directors.
Revocability of Proxies
Voting by use of a proxy on the enclosed form or by telephone does not
preclude an FPL Group shareholder from voting in person at the FPL Group
special meeting. An FPL Group shareholder may change a proxy at any time
prior to its exercise by filing with FPL Group a duly executed revocation of
proxy or by submitting a duly executed proxy or telephone vote to FPL Group
with a later date or by appearing at the FPL Group special meeting and voting
in person. FPL Group shareholders may change a vote by any of these methods,
regardless of the method used to cast his or her earlier vote. Attendance at
the FPL Group special meeting without voting will not itself revoke a proxy.
Solicitation of Proxies
FPL Group will bear the cost of the solicitation of proxies from its
shareholders. In addition to solicitation by mail, the directors, officers and
employees of FPL Group and its subsidiaries may solicit proxies from FPL Group
shareholders by telephone or other electronic means or in person. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of shares held of record by these persons, and FPL Group will reimburse
them for their reasonable out-of-pocket expenses.
FPL Group will mail a copy of this joint proxy statement/prospectus to
each holder of record of FPL Group common stock on the FPL Group record date.
FPL Group has retained Innisfree M&A to assist in the solicitation of
proxies from banks, brokerage firms, nominees, institutional holders and
individual investors for a fee of $50,000 plus reimbursement for expenses. To
date, none of such fee has been paid.
19
<PAGE>
THE ENTERGY SPECIAL MEETING
We are furnishing this joint proxy statement/prospectus to shareholders of
Entergy as part of the solicitation of proxies by the Entergy Board of Directors
for use at the Entergy special meeting.
Date, Time and Place
Entergy will hold its special meeting on [ ], [ ], 2000, at [ ],
local time, at [639 Loyola Avenue, New Orleans, Louisiana 70113].
Purpose of Entergy Special Meeting
At the Entergy special meeting, we are asking holders of record of Entergy
common stock to consider and vote on a proposal to approve and adopt the merger
agreement. See "The Merger" and "The Merger Agreement".
The Entergy Board of Directors has approved and adopted the merger
agreement, the merger and the other transactions contemplated by the merger
agreement and has determined that the merger and the other transactions
contemplated by the merger agreement are consistent with, and in furtherance of,
the best interests of Entergy and its shareholders.
The Entergy Board of Directors recommends that Entergy shareholders vote
FOR the approval and adoption of the merger agreement.
Entergy Record Date; Shares Entitled to Vote; Quorum
Only holders of record of Entergy common stock at the close of business on
[ ], 2000, the Entergy record date, are entitled to notice of and to vote at
the Entergy special meeting. On [ ], 2000, approximately [ ] shares of
Entergy common stock were issued and outstanding and held by approximately [ ]
holders of record. A quorum will be present at the Entergy special meeting if a
majority of the Entergy common stock issued and outstanding and entitled to vote
on the Entergy record date are represented in person or by proxy. If a quorum is
not present at the Entergy special meeting, we expect that the Entergy special
meeting will be adjourned or postponed to solicit additional proxies. Holders of
record of Entergy common stock on the Entergy record date are entitled to one
vote per share at the Entergy special meeting on the proposal to approve and
adopt the merger agreement.
Vote Required
The approval and adoption of the merger agreement requires the affirmative
vote of the holders of a majority of the shares outstanding and entitled to vote
at a special meeting of the shareholders as of the Entergy record date, either
in person or by proxy, voting as a single class.
Voting by Entergy Directors and Executive Officers
At the close of business on July 31, 2000, directors and executive
officers of Entergy owned and were entitled to vote less than 1% of the Entergy
common stock outstanding on that date. Each Entergy director and executive
officer has indicated his or her present intention to vote, or cause to be
voted, the Entergy common stock owned by him or her for the approval and
adoption of the merger agreement.
Voting of Proxies
All shares represented by properly executed proxies received in time for
the Entergy special meeting will be voted at the Entergy special meeting in the
manner specified by the shareholders giving those proxies. Properly executed
proxies that do not contain voting instructions will be voted for the approval
and adoption of the merger agreement.
20
<PAGE>
In addition to manually executing and returning a proxy by mail, Entergy
shareholders may vote by telephone. If voting by telephone, the shareholder
should dial the toll-free number indicated in the shareholder's proxy. The
shareholders will then be prompted to enter the control number printed on his or
her proxy and to follow the subsequent instructions.
Entergy common stock represented at the Entergy special meeting but not
voting, including Entergy common stock for which proxies have been received but
for which holders of shares have abstained, will be treated as present at the
Entergy special meeting for purposes of determining the presence or absence of a
quorum for the transaction of all business.
Only shares affirmatively voted for the approval and adoption of the
merger agreement, including properly executed proxies that do not contain voting
instructions, will be counted as favorable votes for the proposals. An
abstention or failure to vote will have the same effect as a vote against
approval and adoption of the merger agreement. Also, under New York Stock
Exchange rules, brokers who hold Entergy common stock in "street name" for
customers who are the beneficial owners of those shares may not give a proxy to
vote those shares without specific instructions from those customers. If an
Entergy shareholder owns shares through a broker and attends the special
meeting, the shareholder should bring a letter from his or her broker
identifying him or her as the beneficial owner of the shares and authorizing the
shareholder to vote.
The persons named as proxies by an Entergy shareholder may propose and
vote for one or more adjournments of the Entergy special meeting, including
adjournments to permit further solicitations of proxies. No proxy voted against
the proposal to approve and adopt the merger agreement will be voted in favor of
any adjournment or postponement.
Entergy does not expect that any matter other than the proposal to approve
and adopt the merger agreement will be brought before the Entergy special
meeting. If, however, other matters are properly presented to the meeting, the
persons named as proxies will vote in accordance with the recommendation of the
Board of Directors.
Revocability of Proxies
Voting by use of a proxy on the enclosed form or by telephone does not
preclude an Entergy shareholder from voting in person at the Entergy special
meeting. An Entergy shareholder may change a proxy at any time prior to its
exercise by filing with Entergy a duly executed revocation of proxy or by
submitting a duly executed proxy or telephone vote to Entergy with a later date
or by appearing at the Entergy special meeting and voting in person. Entergy
shareholders may change a vote by any of these methods, regardless of the
method used to cast his or her previous vote. Attendance at the Entergy special
meeting without voting will not itself revoke a proxy.
Solicitation of Proxies
Entergy will bear the cost of the solicitation of proxies from its
shareholders. In addition to solicitation by mail, the directors, officers and
employees of Entergy and its subsidiaries may solicit proxies from Entergy
shareholders by telephone or other electronic means or in person. Arrangements
will also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of shares held of record by these persons, and Entergy will reimburse
them for their reasonable out-of-pocket expenses.
Entergy will mail a copy of this joint proxy statement/prospectus to each
holder of record of Entergy common stock on the Entergy record date.
Entergy has retained Morrow & Co., Inc. to assist in the solicitation of
proxies from banks, brokerage firms, nominees, institutional holders and
individual investors for a fee of $45,000 plus reimbursement for expenses.
To date, none of such fee has been paid.
21
<PAGE>
THE MERGER
The discussion in this joint proxy statement/prospectus of the merger and
the principal terms of the merger agreement dated as of July 30, 2000, among FPL
Group, Entergy, Holdco, Ranger Acquisition Corp. and Ring Acquisition Corp. is
subject to, and is qualified in its entirety by reference to, such merger
agreement, a copy of which is attached to this joint proxy statement/prospectus
as Annex A and is incorporated herein by reference.
General Description of the Merger
Under the merger agreement, Ranger Acquisition Corp., a Florida
corporation, will merge into FPL Group with FPL Group being the surviving
corporation and Ring Acquisition Corp., a Delaware corporation, will merge
into Entergy with Entergy being the surviving corporation. Upon completion of
the merger, the holders of FPL Group common stock and Entergy common stock
will together own all the outstanding shares of common stock of Holdco and
Holdco will, in turn, own all of the outstanding shares of common stock of
the surviving corporation in the merger of FPL Group and Ranger Acquisition
Corp. and all of the outstanding shares of common stock of the surviving
corporation in the merger of Entergy and Ring Acquisition Corp.
Background to the Merger
As a result of legislative and regulatory initiatives aimed at
restructuring the electric utility industry, the industry has undergone rapid
change in recent years. Among other things, competition has increased,
particularly with respect to energy supply and retail energy services. Many
states, including states in which Entergy currently operates, have either passed
or proposed legislation or other initiatives that provides for retail electric
competition and deregulation of the price of energy supply. In addition, the
wholesale electric energy market has significantly expanded and geographic
boundaries are becoming less important. Mergers are continuing in the industry.
At the same time, other companies are focusing on specific portions of the
energy industry by disaggregating their generation, transmission, distribution
and retail operations, spinning off non-core assets and acquiring assets in
accordance with their strategic focus.
FPL Group believes that the consolidation and transformation of the
electric utility industry will result in the emergence of a limited number of
substantial competitors. Over the past few years, members of FPL Group's senior
management have regularly analyzed and reviewed various potential strategic
options and opportunities available to FPL Group to assess which options and
opportunities would be in the best interests of FPL Group and its shareholders
in light of the changes in the industry. The analysis and review of strategic
options led to discussions with a number of potential transaction partners
during this period. Entergy similarly believes that consolidation in the
industry will result in the emergence of a few significant companies and has
also evaluated comparable alternatives, including combinations with other
companies and different types of transactions.
During the latter part of 1998 and in 1999, on several occasions while
attending electric utility industry meetings, James L. Broadhead, Chairman and
Chief Executive Officer of FPL Group, informally discussed with the chief
executive officers of other companies the changes taking place in the industry
as a result of deregulation, the trend toward consolidation and the likelihood
that size and scope would be important to future success. J. Wayne Leonard, the
Chief Executive Officer of Entergy, was one of these people and, in the course
of their conversations, Messrs. Broadhead and Leonard came to appreciate that
FPL Group and Entergy were pursuing similar strategies and that they shared
similar ideas about what was required to be successful in implementing the
strategies. In January 2000, Mr. Leonard visited Mr. Broadhead and suggested
they consider a merger of FPL Group and Entergy. However, at that time, no
further discussions ensued, although at FPL Group's regularly scheduled Board of
Directors' meeting on February 14, 2000, the possibility of a strategic
transaction with Entergy was discussed.
During the period from February 2000 to April 2000, FPL Group continued to
explore various strategic alternatives and entered into extensive negotiations
with a third party interested in pursuing a business combination. These
discussions did not, however, lead to an agreement to complete a transaction.
22
<PAGE>
In early May 2000, Lewis Hay, III, the Vice President Finance and Chief
Financial Officer of FPL Group and the President of FPL Energy, and one of
Entergy's financial advisors had several discussions about the possibility of a
transaction between FPL Group and Entergy. The financial advisor reported on
those discussions to C. John Wilder, Executive Vice President and Chief
Financial Officer of Entergy.
On May 15, 2000, at a regularly scheduled FPL Group Board of Directors
meeting, the possibility of a merger of equals with Entergy was again
discussed, and the Board concluded that it would be desirable to initiate
direct discussions with Entergy. On May 31, 2000, Mr. Broadhead called Mr.
Leonard to express FPL Group's interest in exploring a merger between the
companies.
On June 6, 2000, Messrs. Broadhead and Hay met with Messrs. Leonard and
Wilder in New Orleans, Louisiana and discussed factors that would make a merger
of the two companies attractive, the basic features of such a merger, the
feasibility of completing the transaction and the next steps to be taken. On
June 8, 2000, a confidentiality agreement was entered into by FPL Group and
Entergy.
At a regularly scheduled meeting on June 12, 2000, FPL Group's Board of
Directors reviewed Entergy's financial performance, business and strategy and
the strategic rationale for the combination of the two companies. The following
day, the principal financial and legal officers of FPL Group and Entergy,
together with their respective financial and legal advisors, met in New York,
New York and established the basis for exchanging information and proceeding
toward reaching a definitive merger agreement.
On June 15, 2000, Messrs. Broadhead and Mr. Leonard met in Juno Beach,
Florida to discuss the general parameters of a transaction. The next day,
Messrs. Broadhead and Leonard continued their discussion by phone.
At a special meeting of the Executive Committee of the Entergy Board of
Directors (to which all members of the Board were invited) on June 16, 2000, the
status of the discussions with FPL Group was reviewed and management was
authorized to continue these discussions.
On June 22, 2000, one of FPL Group's outside attorneys and two of
Entergy's outside attorneys met to discuss various issues relating to the
potential transaction.
On June 26, 2000, Messrs. Hay and Wilder met in Juno Beach, Florida to
discuss issues relating to the potential transaction, including with respect to
the integration of the businesses. Messrs. Hay and Wilder continued their
discussions by phone throughout the week.
On July 7, 17 and 24, 2000, the FPL Group Board of Directors held meetings
by telephone at which Mr. Broadhead apprised the Board of the status of the
discussions with Entergy.
On July 7, 2000, Mr. Broadhead phoned Mr. Leonard to discuss various
issues relating to the transaction. From July 8, 2000 through July 10, 2000,
there were numerous discussions between Messrs. Hay and Wilder concerning
material terms of the potential transaction.
From July 12, 2000 through July 30, 2000, there were numerous meetings
involving the officers and financial and legal advisors of both companies to
review the information provided by each company and to negotiate the terms of
the merger agreement.
On July 21, 2000, the Entergy Board of Directors held a special meeting to
discuss the potential transaction. Management discussed with the Board members
the strategy and fit of the proposed combination; the key terms and conditions
of the discussions to that date; potential stand-alone outcomes; the potential
financial benefits of the proposed merger; other combination alternatives; the
key merger integration issues; the status of due diligence; and regulatory
approvals that would be required. In addition, Entergy's financial advisors
discussed the financial implications of the proposed merger and possible market
reaction to the proposed merger and Entergy's outside attorneys updated the
Board on the status of the negotiations of the merger agreement.
23
<PAGE>
On July 25, 2000, Mr. Broadhead and Paul R. Tregurtha, a non-employee
Director of FPL Group, met with Robert v.d. Luft, the non-employee Chairman of
the Board of Entergy, and Paul W. Murrill, another non-employee Director of
Entergy, to discuss various aspects of the proposed merger, including the
ability to operate the companies effectively during the transition period. Mr.
Tregurtha and Mr. Leonard met later in the day to further discuss those aspects
of the potential transaction.
The FPL Group Board of Directors held a special meeting on July 28, 2000,
to review matters relating to the possible transaction, including the terms of
the merger agreement, the results of FPL Group's due diligence investigation of
Entergy, the impact of the merger on employment agreements between FPL Group and
its employees and the effect of the proposed transaction on FPL Group, its
shareholders and other constituencies. Also, at this meeting, representatives
from Merrill Lynch, FPL Group's financial advisor, made detailed presentations
to the FPL Group Board of Directors concerning the transaction and delivered an
oral opinion to the FPL Group Board of Directors to the effect that, as of such
date, the exchange ratio applicable to each share of FPL Group common stock in
the merger, taking into account the exchange ratio applicable to each share of
Entergy common stock, was fair from a financial point of view to the holders of
FPL Group common stock. The members of the Board considered and discussed the
various presentations made at the meeting and at prior meetings.
A regularly scheduled meeting of the Entergy Board of Directors was
held on July 28, 2000, during which the proposed transaction was again
reviewed and discussed. Management presented reports to the Board members
supplementing the reports made at the special meeting of July 21, 2000, and
reviewed with the Board the status of due diligence, compensation issues
relating to the proposed transaction with respect to the employees of both
Entergy and FPL Group, and regulatory approvals required for the proposed
transaction. Entergy's outside attorneys discussed the current status of the
merger agreement negotiations and reviewed the material provisions of the
proposed agreement with the Board members. In addition, Entergy's financial
advisors, Morgan Stanley and J. P. Morgan, discussed the proposed merger and
rendered opinions to the effect that, as of such date, the exchange ratio
applicable to each share of Entergy common stock in the merger agreement was
fair from a financial point of view to Entergy's shareholders. The Board
members considered and discussed the various presentations made at the
meeting and at prior meetings.
On July 29, 2000, the Entergy Board of Directors held a special meeting
during which the proposed transaction was again reviewed, taking into
consideration prior presentations made to the Board, the Board's prior
discussions and deliberations relating to the transaction and the financial
fairness opinions previously received by the Board from its financial
advisors, Morgan Stanley and J. P. Morgan. After considering these matters,
the Entergy Board of Directors unanimously approved the merger and the
related transactions and approved and adopted the merger agreement.
On July 30, 2000, the FPL Group Board of Directors held another special
meeting. A representative of Merrill Lynch confirmed to the FPL Group Board of
Directors its opinion to the effect that, as of such date, the exchange ratio
applicable to each share of FPL Group common stock in the merger, taking into
account the exchange ratio applicable to each share of Entergy common stock, was
fair from a financial point of view to the holders of FPL Group common stock.
After considering the fairness opinion and the other matters discussed at prior
meetings, the FPL Group Board of Directors unanimously approved the merger and
the related transactions and adopted the merger agreement.
The parties executed the merger agreement during the afternoon of July 30,
2000, and, the next day, publicly announced the signing of the agreement.
FPL Group's Reasons for the Merger
The FPL Group Board of Directors believes that the common vision of FPL
Group and Entergy and their complementary strategies, in combination with their
management, personnel, technical expertise and financial strength, will create a
company with capabilities and resources better positioned to succeed and grow in
the new competitive energy marketplace.
24
<PAGE>
FPL Group believes the merger joins two well-managed companies, providing
substantial strategic and financial benefits to FPL Group shareholders,
employees and customers. The benefits are expected to include:
o Expanded Scope and Scale to Succeed in the Changing Marketplace. FPL
Group believes that the combination of FPL Group and Entergy will
provide the scope, scale and resources necessary for achieving
competitive investor returns and growth in the rapidly changing
electric utility industry.
Each of FPL Group and Entergy have been rapidly growing their
wholesale generation businesses, which will provide the combined
company with nearly 10,000 megawatts of unregulated generating
capacity. The merged entity will be a leading independent power
producer with assets in key regions across the country and will have
proven development and operating skills needed to further expand
that business. The addition of the Entergy-Koch L.P. venture to FPL'
Group's unregulated trading operation will result in one of the
largest U.S. marketers of both electric power and natural gas.
The combined company will also have generating capacity of more than
48,000 megawatts and approximately 6.3 million electric customers in
a high growth region of the country. This base will provide the
merged entity with a strong platform from which to expand its power
marketing and trading business as well as fiber-optic
telecommunications services.
o Strategic Fit and Compatibility. FPL Group believes that the common
vision and complementary strategies of FPL Group and Entergy will
result in a combined company that is well positioned to succeed and
grow. By combining each company's best practices and operating
capabilities, FPL Group believes the merged entity can achieve
meaningful synergies. For example, the consummation of the proposed
Entergy-Shaw venture is expected to shorten construction schedules
and reduce costs. FPL Group believes that the combined electric
generation fleet of the companies will be an environmental leader,
with emission rates among the lowest of all U.S. generating
companies, and will be one of the most efficient, with operating
costs among the lowest in the industry. The combined company will
operate the second largest nuclear fleet in the country, and FPL
Group believes that it will have world class operating skills and
cost performance to succeed in both regulated and competitive
markets. The combined company will also benefit from each company's
commitment to customer service.
o Retain and Attract Key Personnel. The combined company will provide
more and broader career opportunities which FPL Group believes will
help Holdco to retain and attract key personnel.
o Strong Financial Position. FPL Group expects that the combined
company will have a strong balance sheet and increased cash flows
due to anticipated synergies that will enable it to pursue more
aggressively profitable growth opportunities.
o Gross cost savings. Gross cost savings from merged operations are
expected to grow to $375 million over the initial three year
period. These savings result primarily from reduced costs for
corporate and administrative functions, procurement savings,
revenue enhancements, greater efficiencies in operations and
business processes, lower capital costs and the combination of
two workforces.
o Net synergy savings. Net synergy savings in the early years are
expected to be lower than savings in later years, due to the
costs associated with consummating the transaction and
integrating the operations.
o Initial Savings. During the initial three years of merged
operations, the regulated businesses are expected to achieve gross
cost savings in the range of $110 to $150 million per year. (The
estimated cost savings do not account for any sharing of cost
savings with customers that may be necessitated as part of the
regulatory approval process relating to the merger.)
o Unregulated Businesses. The unregulated businesses are expected
to benefit from improved margin from consolidation of energy
marketing and trading activities, revenue enhancements, reduced
costs for unregulated generation development spending, and
reduced capital costs for new generation projects. During the
initial three years of merged operations, the total gross impact
of margin benefits and cost savings for unregulated businesses is
expected to rise from approximately $40 million per year to over
$125 million per year. In addition, reduced generation project
capital costs of $50 to $100 million per year are expected as a
result of combined operations.
25
<PAGE>
Estimates of cost savings and cost saving components are inherently uncertain,
and there can be no assurance as to the accuracy of any of the foregoing
estimates. The cost savings estimates are based on a number of assumptions,
including that Holdco will be able to implement necessary cost savings
mechanisms such as headcount reductions, consolidation of geographically
proximate facilities and elimination of duplicative administrative programs
within a defined period. In addition, the cost savings estimates assume that
Holdco will be able to realize merger efficiencies such as procurement economies
resulting from the increased size of the combined company.
Recommendation of FPL Group's Board of Directors
At its meeting on July 30, 2000, after due consideration, the FPL Group
Board of Directors:
o determined that the merger and the other transactions contemplated
by the merger agreement are consistent with, and in furtherance of,
the best interests of FPL Group and its shareholders,
o adopted the merger agreement and approved the merger and the other
transactions contemplated by the merger agreement, and
o recommended that FPL Group shareholders vote for the approval of the
merger agreement.
In approving the merger, adopting the merger agreement and making these
determinations and recommendations, the FPL Group Board of Directors consulted
with FPL Group management as well as its outside legal counsel and financial
advisors, and considered a number of factors, including the following:
o the benefits of the merger described above,
o the review and analysis of each of FPL Group's and Entergy's
business, financial condition, earnings, risks and prospects,
o historical market prices and trading information with respect to the
shares of FPL Group common stock and Entergy common stock,
o comparisons of historical financial measures for FPL Group and
Entergy, including earnings, return on capital and cash flow as well
as comparisons of historical operational measures for FPL Group and
Entergy,
o that the merger was structured as a merger of equals,
o the expectation that the merger would be immediately accretive to
FPL Group shareholders based on consensus security analyst earnings
estimates,
o the effect of the merger on the capital structure and financial
ratios of FPL Group and Florida Power & Light Company,
o the possibility that the merger could result in a lower investment
grade credit rating for FPL Group, Florida Power & Light Company and
Holdco,
o current industry, economic and market conditions and the prospects
of further restructuring and consolidation in the electric and gas
utility industries,
o past analysis and review of several strategic options and subsequent
discussions with several potential strategic partners,
o the risks of Entergy's nuclear generating facilities,
26
<PAGE>
o the risks inherent in Entergy's five retail regulatory
jurisdictions,
o the ability to complete the merger as a generally tax-free
transaction for U.S. federal income tax purposes and to have the
conversion of FPL Group common stock be generally tax-free to
shareholders,
o the expectation of synergies from the transaction resulting in some
cost savings and other benefits over time,
o the terms and conditions of the merger agreement, one of which
provides the Board of Directors of FPL Group the right to
terminate the merger agreement prior to its approval by FPL Group
shareholders in the exercise of its fiduciary duties in
connection with a superior proposal and the potential termination
and expense reimbursement fees payable by FPL Group,
o the proposed composition of the senior management and the Board of
Directors of Holdco, including that James L. Broadhead, FPL Group's
current Chairman and Chief Executive Officer would be the Chairman
of the Board of Directors of Holdco,
o the provisions included in Holdco's organizational documents that
ensure that certain aspects of the corporate governance of Holdco,
such as the apportionment of the membership of the Board of
Directors of Holdco between FPL Group-designated members and
Entergy-designated members, the number of board members and the
chairman and chief executive officer positions, cannot be changed
for a certain period of time without a supermajority vote of the
Board of Directors of Holdco,
o the analyses, presentations and opinion of Merrill Lynch to the
effect that, as of July 30, 2000, and based upon and subject to the
various assumptions and limitations set forth therein, the exchange
ratio applicable to each share of FPL Group common stock in the
merger, taking into account the exchange ratio applicable to each
share of Entergy common stock, was fair from a financial point of
view to the holders of FPL Group common stock (the written opinion
of Merrill Lynch is attached as Annex B to this joint proxy
statement/prospectus),
o the benefits to FPL Group's shareholders, customers and employees
resulting from the fact that Holdco's corporate headquarters will be
located in Juno Beach, Florida, that Holdco's utility headquarters
will be located in New Orleans, Louisiana, and that FPL Group's
utility subsidiary, as well as Entergy's utility subsidiaries, will
maintain headquarters in their respective current locations,
o the potential benefits to FPL Group's employees from the expanded
opportunities available as part of a larger organization,
o that while the merger is likely to be completed, there are risks
associated with obtaining the necessary regulatory approvals, and as
a result of this and other conditions to the completion of the
merger, it is possible that the merger may not be completed even if
approved by the shareholders of FPL Group and Entergy,
o that the residents of the states and municipalities served by FPL
will benefit from the shared commitment of FPL Group and Entergy to
clean energy and other environmental concerns and maintaining
charitable contributions,
o the impact of regulations under various state and federal laws,
including the additional regulatory oversight that would result from
the addition of public utility operations in
27
<PAGE>
Arkansas, Louisiana, Mississippi, New Orleans and Texas and the
issues involved in the regulation of Holdco and Entergy as
registered holding companies under PUHCA,
o restrictions on the conduct of business of FPL Group during the
period before completion of the merger,
o the problems inherent in merging the operations of two large
companies, including unforeseen difficulties in integrating
operations and systems, problems assimilating and retaining
employees and potential adverse short-term effects on operating
results of the combined company, and
o the interests that certain executive officers and directors of FPL
Group may have with respect to the merger in addition to their
interests as shareholders of FPL Group.
The FPL Group Board of Directors believed that, overall, the potential
benefits of the merger to FPL Group and its shareholders outweighed the risks.
This discussion of the information and factors considered by the FPL Group
Board of Directors in making its decision is not intended to be exhaustive but
is believed to include all material factors considered by the FPL Group Board of
Directors. In view of the wide variety of factors considered in connection with
its evaluation of the merger and the complexity of these matters, the FPL Group
Board of Directors did not find it useful to and did not attempt to quantify,
rank or otherwise assign relative weights to these factors. The FPL Group Board
of Directors relied on the experience and expertise of Merrill Lynch, its
financial advisor, for quantitative analysis of the financial terms of the
merger. In addition, the FPL Group Board of Directors did not undertake to make
any specific determination as to whether any particular factor, or any aspect of
any particular factor, was favorable or unfavorable to its ultimate
determination, but rather the FPL Group Board of Directors conducted an overall
analysis of the factors described above, including through discussions with and
questioning of FPL Group's management and legal, financial and accounting
advisors. In addition, individual members of the FPL Group Board of Directors
may have given different weight to different factors.
THE BOARD OF DIRECTORS OF FPL GROUP RECOMMENDS THAT HOLDERS OF FPL GROUP
COMMON STOCK VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
Opinion of FPL Group's Financial Advisor
On July 30, 2000, Merrill Lynch delivered its oral opinion, which opinion
was subsequently confirmed in writing, to the FPL Group Board of Directors to
the effect that, as of that date, and based upon the assumptions made, matters
considered and limits of review set forth in its opinion, the exchange ratio
under the merger agreement applicable to each share of FPL Group common stock,
taking into account the exchange ratio under the merger agreement applicable to
each share of Entergy common stock, was fair from a financial point of view to
the holders of FPL Group common stock.
The Merrill Lynch opinion attached as Annex B to this joint proxy
statement/prospectus describes the assumptions made, matters considered and
certain limitations on the scope of review undertaken by Merrill Lynch. Each
holder of FPL Group common stock is urged to read this opinion in its entirety.
Merrill Lynch's opinion was intended for the use and benefit of the FPL Group
Board of Directors, was directed only to the fairness of the exchange ratio
applicable to each share of FPL Group common stock from a financial point of
view to the holders of FPL Group common stock, did not address the merits of the
underlying decision by FPL Group to engage in the merger and does not constitute
a recommendation to any shareholder as to how that shareholder should vote on
the proposed merger or any related matter. The exchange ratio applicable to each
share of FPL Group common stock was determined on the basis of negotiations
between FPL Group and Entergy and was approved by the FPL Group Board of
Directors. FPL Group did not provide specific instructions to, or place any
limitations on, Merrill Lynch with respect to the procedures to be followed or
factors to be considered by it in performing its analysis or delivering its
opinion. This summary of Merrill Lynch's opinion is qualified in its entirety by
reference to the full text of the opinion attached as Annex B to this joint
proxy statement/prospectus.
28
<PAGE>
In arriving at its opinion, Merrill Lynch:
o reviewed certain publicly available business and financial
information relating to FPL Group and Entergy that Merrill Lynch
deemed to be relevant,
o reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities
and prospects of FPL Group and Entergy, as well as the amount and
timing of the cost savings and related expenses and synergies
expected to result from the merger furnished to Merrill Lynch by FPL
Group and Entergy,
o conducted discussions with members of senior management and
representatives of FPL Group and Entergy concerning the matters
described in the previous two bullet points, as well as their
respective businesses and prospects before and after giving effect
to the merger and the expected synergies,
o reviewed the market prices and valuation multiples for FPL Group
common stock and Entergy common stock and compared them with those
of certain publicly-traded companies that Merrill Lynch deemed to be
relevant,
o reviewed the results of operations of FPL Group and Entergy and
compared them with those of certain publicly-traded companies that
Merrill Lynch deemed to be relevant,
o participated in certain discussions and negotiations among
representatives of FPL Group and Entergy and their financial and
legal advisors,
o reviewed the potential pro forma impact of the merger,
o reviewed a draft dated July 29, 2000, of the merger agreement, and
o reviewed other financial studies and analyses and took into account
other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or made
publicly available, and Merrill Lynch did not assume any responsibility for
independently verifying that information or for undertaking an independent
evaluation or appraisal of any of the assets or liabilities of FPL Group or
Entergy and was not furnished with any such evaluation or appraisal. In
addition, Merrill Lynch did not assume any obligation to conduct any physical
inspection of the properties or facilities of FPL Group or Entergy. With respect
to the financial forecast information and the expected synergies furnished to or
discussed with Merrill Lynch by FPL Group or Entergy, Merrill Lynch assumed that
they were reasonably prepared and reflected the best currently available
estimates and judgment of FPL Group's or Entergy's management as to the expected
future financial performance of FPL Group or Entergy, as the case may be, and
the expected synergies. Merrill Lynch further assumed that the merger would
constitute a transaction governed by Section 351 of the Internal Revenue Code of
1986, as amended (the "Code"). Merrill Lynch also assumed that the final form of
the merger agreement would be substantially similar to the last draft reviewed
by Merrill Lynch.
Merrill Lynch's opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, the date of its opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals, contractual or otherwise, for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, would be imposed that would materially affect the projected
results of operations of the pro forma combined company as furnished to Merrill
Lynch by FPL Group.
29
<PAGE>
In addition, Merrill Lynch expressed no opinion as to the prices at which
shares of FPL Group common stock or Holdco common stock would trade following
the announcement or consummation of the merger, as the case may be.
The following is a summary of the material portions of the financial and
comparative analyses performed by Merrill Lynch and reviewed with the FPL Group
Board of Directors on July 28, 2000 and July 30, 2000, in connection with the
delivery by Merrill Lynch of its opinion dated July 30, 2000. The financial
analyses summarized below include information presented in tabular format. In
order to understand fully Merrill Lynch's financial analyses, the tables must be
read together with the text of each summary. The tables alone do not constitute
a complete description of the financial analyses. Considering the data described
below without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of Merrill Lynch's financial
analyses.
Entergy Analysis
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow, or DCF, analysis for Entergy on a consolidated basis and separate DCFs for
each of Entergy's business segments, in each case using projections provided by
Entergy's management, which is referred to as the management case, and also
using those projections as adjusted by FPL Group's management to reflect more
conservative growth rate assumptions for Entergy's unregulated business
segments, which is referred to as the adjusted case.
The DCF for Entergy on a consolidated basis was calculated assuming
discount rates ranging from 8.0% to 9.0% and was comprised of the sum of the
present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 earnings before interest, taxes, depreciation and amortization,
which is referred to as EBITDA, from 6.5x to 7.0x.
The DCF segment analysis for Entergy valued Entergy as the sum of the DCF
values of its unregulated wholesale energy business segment, its unregulated
nuclear business segment, its unregulated retail and other business segment and
its domestic regulated utility business segment, plus the estimated value of the
Entergy-Koch L.P. venture as described below.
The DCF for the unregulated wholesale energy business segment was
calculated assuming discount rates ranging from 12.0% to 14.0% and was comprised
of the sum of the present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA from 12.0x to 14.0x.
The DCF for the unregulated nuclear business segment was calculated
assuming discount rates ranging from 14.0% to 16.0% and was comprised of the sum
of the present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA from 6.0x to 7.0x.
The DCF for the unregulated retail and other business segment was
calculated assuming discount rates ranging from 10.0% to 12.0% and was comprised
of the sum of the present values of:
o the projected cash flows for the years 2000 through 2004, and
30
<PAGE>
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA from 5.0x to 6.0x.
The DCF for the regulated domestic utility business segment was calculated
assuming discount rates ranging from 7.0% to 8.0% and was comprised of the sum
of the present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA from 5.5x to 6.0x.
The estimated value for the Entergy-Koch L.P. venture was calculated based
on 50% of 2001 estimated net income at a range of multiples from 10.0x to 15.0x.
These analyses resulted in the following ranges of implied equity value
per share of Entergy common stock:
Entergy Implied Equity Value Per Share
DCF Method Low High
---------- --- ----
Consolidated Analysis (Management case).. $35.75 $43.75
Consolidated Analysis (Adjusted case).... $33.50 $40.50
Segment Analysis (Management case)....... $32.50 $44.75
Segment Analysis (Adjusted case)......... $31.75 $42.50
Comparable Public Company Analysis. Using publicly available information,
Merrill Lynch compared selected historical stock, financial and operating data
and ratios for Entergy with corresponding data and ratios of similar publicly
traded companies. These companies were selected by Merrill Lynch based upon
Merrill Lynch's views as to the comparability of the financial and operating
characteristics of these companies to Entergy.
The companies included in the Entergy comparable company analysis were:
o Duke Energy Corporation,
o American Electric Power Company, Inc.,
o Reliant Energy, Incorporated,
o Peco Energy Company,
o The Southern Company,
o CP&L Energy, Inc. (formerly Carolina Power & Light Company),
o Edison International, and
o TXU Corp. (formerly Texas Utilities Company).
The companies selected for the comparable company analysis also included
the following independent power producers, or IPP companies:
o Calpine Corporation,
o The AES Corporation,
31
<PAGE>
o Dynegy Inc., and
o NRG Energy, Inc.
Merrill Lynch derived an estimated valuation range for Entergy by
comparing estimated P/E multiples for 2000 and 2001. Merrill Lynch also compared
market capitalization as a multiple of EBITDA for the previous 12-month period,
or LTM, and market value as a multiple of book value for the latest fiscal
quarter, or LFQ. The earnings estimates were obtained from First Call as of July
26, 2000. The results of these analyses were as follows:
Comparable Utility Companies
Low High Mean Entergy
--- ---- ---- -------
2000E EPS multiple........................ 9.1x 15.5x 11.9x 10.7x
2001E EPS multiple........................ 8.4x 14.2x 10.6x 9.1x
LTM EBITDA multiple....................... 6.4x 11.1x 8.1x 7.7x
LFQ Book Value multiple................... 1.03x 1.80x 1.45x 0.99x
Comparable IPP Companies
Low High Mean Entergy
--- ---- ---- -------
2000E EPS multiple........................ 25.9x 59.8x 36.7x 10.7x
2001E EPS multiple........................ 19.7x 48.0x 29.4x 9.1x
LTM EBITDA multiple....................... 13.3x 34.6x 24.6x 7.7x
LFQ Book Value multiple................... 4.49x 9.25x 6.52x 0.99x
Using these analyses, Merrill Lynch estimated the following ranges of per
share values of Entergy common stock, based on approximately 223.5 million
fully-diluted shares of Entergy common stock outstanding, $803.2 million of
cash, option proceeds and securities, $616.2 million of preferred equity and
$8,966.8 million of debt as of December 31, 2000:
Entergy Implied Equity Value Per Share
Low High
--- ----
2000E EPS (Consolidated Analysis)..... $30.75 $36.25
LTM EBITDA (Consolidated Analysis).... $28.75 $33.25
2001E Net Income (Segment Analysis)... $29.00 $36.00
2000E EBITDA (Segment Analysis)....... $27.75 $35.50
The estimated results described in the table above for 2000E EBITDA
(Segment Analysis) were based upon the LTM EBITDA multiples for the
comparable utility and comparable IPP companies that were selected to account
for the projected growth and profitability of Entergy's unregulated
businesses, and the estimated results for 2001E Net Income (Segment Analysis)
were based upon the 2001E EPS multiples for the comparable utility and
comparable IPP companies.
32
<PAGE>
FPL Group Analysis
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow, or DCF, analysis for FPL Group on a consolidated basis and separate DCFs
for each of FPL Group's business segments, in each case using projections
provided by FPL Group's management.
The DCF for FPL Group on a consolidated basis was calculated assuming
discount rates ranging from 8.0% to 9.0% and was comprised of the sum of the
present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA, from 6.5x to 7.0x.
The DCF segment analysis for FPL Group valued FPL Group as the sum of the
DCF values of its unregulated energy business segment (FPL Energy, LLC), its
fiber-optic network business segment (FPL FiberNet, LLC) and its regulated
utility (Florida Power & Light Company).
The DCF for FPL Energy was calculated assuming discount rates ranging from
12.0% to 14.0% and was comprised of the sum of the present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA from 10.0x to 12.0x.
The DCF for FPL FiberNet was calculated assuming discount rates ranging
from 15.0% to 20.0% and was comprised of the sum of the present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA from 8.0x to 10.0x.
The DCF for the Florida Power & Light Company was calculated assuming
discount rates ranging from 7.0% to 8.0% and was comprised of the sum of
present values of:
o the projected cash flows for the years 2000 through 2004, and
o the 2004 terminal value based upon a range of multiples of estimated
2004 EBITDA from 5.5x to 6.0x.
These analyses resulted in the following ranges of implied equity value
per share of FPL Group common stock:
FPL Group Implied Equity Value Per Share
DCF Method Low High
---------- --- ----
Segment Analysis ........................... $54.75 $69.08
Consolidated Analysis....................... $58.48 $68.51
Comparable Public Company Analysis. Using publicly available information,
Merrill Lynch compared selected historical stock, financial and operating data
and ratios for FPL Group with corresponding data and ratios of similar publicly
traded companies. These companies were selected by Merrill Lynch based upon
Merrill Lynch's views as to the comparability of the financial and operating
characteristics of these companies to FPL Group.
33
<PAGE>
The companies selected for the comparable company analysis included the
following:
o Duke Energy Corporation,
o American Electric Power Company, Inc.,
o Reliant Energy, Incorporated,
o Peco Energy Company,
o The Southern Company,
o CP&L Energy, Inc. (formerly Carolina Power & Light Company), and
o TXU Corp. (formerly Texas Utilities Company).
The companies selected for the comparable company analysis also included
the IPP companies listed above under "--Entergy Analysis--Comparable Public
Company Analysis".
Merrill Lynch derived an estimated valuation range for FPL Group by
comparing estimated P/E multiples for 2000 and 2001. Merrill Lynch also compared
market capitalization as a multiple of LTM EBITDA, and market value as a
multiple of LFQ book value. The earnings estimates were obtained from First Call
as of July 26, 2000. The results of these analyses were as follows:
Comparable Utility Companies
FPL
Low High Mean Group
--- ---- ---- -----
2000E EPS multiple............................. 9.1x 15.5x 12.2x 12.1x
2001E EPS multiple............................. 8.4x 14.2x 10.9x 11.3x
LTM EBITDA multiple............................ 6.5x 11.1x 8.4x 6.5x
LFQ Book Value multiple........................ 1.03x 1.80x 1.48x 1.75x
Comparable IPP Companies
FPL
Low High Mean Group
--- ---- ---- -----
2000E EPS multiple............................ 25.9x 59.8x 36.7x 12.1x
2001E EPS multiple............................ 19.7x 48.0x 29.4x 11.3x
LTM EBITDA multiple........................... 13.3x 34.6x 24.6x 6.5x
LFQ Book Value multiple....................... 4.49x 9.25x 6.52x 1.75x
Using these analyses, Merrill Lynch estimated the following ranges of per
share values of the FPL Group common stock, based on approximately 171.8 million
fully-diluted shares of FPL Group common stock outstanding, $127.2 million of
cash, option proceeds and securities, $226.3 million of preferred equity and
$4,870.6 million of debt as of December 31, 2000:
FPL Group Implied Equity Value Per Share
Low High
--- ----
2000E EPS (Consolidated Analysis)........... $49.00 $57.75
LTM Adjusted EBITDA (Consolidated Analysis). $55.75 $61.75
LFQ Book Value (Consolidated Analysis)...... $48.75 $58.00
2000E EBITDA (Segment Analysis)............. $49.50 $57.50
2001E Net Income (Segment Analysis)......... $48.75 $59.25
34
<PAGE>
The estimated results described in the table above for LTM Adjusted
EBITDA (Segment Analysis) excluded $134 million of accelerated amortization.
The estimated results described in the table above for 2000E EBITDA (Segment
Analysis) were based upon the LTM EBITDA multiples for the comparable utility
and comparable IPP companies that were selected to account for the projected
growth and profitability of FPL Group's unregulated businesses. The estimated
results for 2001E Net Income (Segment Analysis) were based upon the 2001E EPS
multiples for the comparable utility and comparable IPP companies.
Implied Exchange Ratio Analysis:
Discounted Cash Flow Analysis. Based upon the implied per share equity
values of FPL Group common stock and the Entergy common stock that were
estimated on a consolidated basis using the DCF methodologies described above,
Merrill Lynch calculated a range of implied exchange ratios of a share of
Entergy common stock to a share of FPL Group common stock. The analysis yielded
the following implied exchange ratios (rounded to the nearest thousandth), in
each case compared to the proposed exchange ratio applicable for each share of
Entergy common stock of 0.585:
<TABLE>
<CAPTION>
Implied Exchange
Comparison Ratio
---------- ------------
<S> <C>
Highest estimated valuation of FPL Group common stock to lowest
estimated valuation of Entergy common stock ......................... 0.521x
Middle estimated valuation of FPL Group common stock to middle
estimated valuation of Entergy common stock ......................... 0.626x
Lowest estimated valuation of FPL Group common stock to highest
estimated valuation of Entergy common stock ......................... 0.750x
</TABLE>
Based upon the implied per share equity values of FPL Group common stock
and the Entergy common stock that were estimated using the methodology described
above, Merrill Lynch also calculated a range of implied exchange ratios of a
share of Entergy common stock to a share of FPL Group common stock using the
adjusted case projections for Entergy described above under "--Entergy
Analysis--Discounted Cash Flow Analysis". The analysis yielded the following
implied exchange ratios (rounded to the nearest thousandth), in each case
compared to the proposed exchange ratio applicable to each share of Entergy
common stock of 0.585:
<TABLE>
<CAPTION>
Implied Exchange
Comparison Ratio
---------- ------------
<S> <C>
Highest estimated valuation of FPL Group common stock to lowest
estimated valuation of Entergy common stock ......................... 0.489x
Middle estimated valuation of FPL Group common stock to middle
estimated valuation of Entergy common stock ......................... 0.582x
Lowest estimated valuation of FPL Group common stock to highest
estimated valuation of Entergy common stock ......................... 0.692x
</TABLE>
Contribution Analysis. Merrill Lynch estimated the contribution of each of
FPL Group and Entergy to the pro forma combined company with respect to
projected EBITDA and net income for fiscal years 2000, 2001 and 2002. The
analysis resulted in the following implied exchange ratios for the periods
indicated (rounded to the nearest thousandth), compared to the proposed exchange
ratio applicable to each share of Entergy common stock of 0.585:
FY 2000E FY 2001E FY 2002E
-------- -------- --------
EBITDA
Implied exchange ratio........... 0.477x 0.645x 0.739x
Net Income
Implied exchange ratio........... 0.601x 0.662x 0.756x
35
<PAGE>
The implied exchange ratios with respect to projected EBITDA described above
were estimated based upon Entergy's projected EBITDA for the periods indicated
adjusted to reflect the higher debt-to-equity ratio of Entergy as compared to
FPL Group.
Historical Exchange Ratio Analysis. Merrill Lynch reviewed the per share
daily closing market price movements of FPL Group common stock and Entergy
common stock for the one-year period ending on July 26, 2000, and calculated the
historical exchange ratios during this period implied by dividing the daily
closing prices per share of FPL Group common stock by those of Entergy common
stock. Merrill Lynch calculated a range of implied exchange ratios of between
0.507x and 0.639x for the one-year period, excluding the period from March 16,
2000 to April 17, 2000. During this period, Merrill Lynch noted that the market
price of Entergy common stock fell relative to its peer group following the
announcement by another company with generating assets in the United Kingdom
that such company would fail to meet projected earnings as a result of lower
power prices than anticipated in the United Kingdom. Merrill Lynch also noted
that the market price of FPL Group common stock rose relative to its peer group
during this period following media reports that FPL Group was in discussions
with a third party concerning a possible business combination. Merrill Lynch
also calculated the averages of those historical trading ratios for the
one-week, two-week, three-week, four-week, two-month, three-month, six-month,
nine-month and one-year periods ending July 26, 2000, excluding the period from
March 16, 2000 to April 17, 2000, as applicable. The analysis resulted in the
following average historical trading ratios for the periods indicated (rounded
to the nearest thousandth), compared to the proposed exchange ratio applicable
for each share of Entergy common stock of 0.585:
Period ending July 26, 2000 Implied Exchange Ratio
--------------------------- ----------------------
July 26, 2000 ........................................... 0.566x
Last 1 Week ............................................. 0.572x
Last 2 Weeks ............................................ 0.564x
Last 3 Weeks ............................................ 0.558x
Last 4 Weeks ............................................ 0.561x
Last 2 Months ........................................... 0.582x
Last 3 Months ........................................... 0.576x
Last 6 Months ........................................... 0.570x
Last 1 Year ............................................. 0.574x
The summary of analyses performed by Merrill Lynch set forth above does
not purport to be a complete description of the analyses performed by Merrill
Lynch in arriving at its opinion. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial or summary
description. Accordingly, Merrill Lynch believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by Merrill Lynch, without considering all analyses and
factors, could create an incomplete view of the processes underlying the Merrill
Lynch opinion. Merrill Lynch did not assign relative weights to any of its
analyses in preparing its opinion. The matters considered by Merrill Lynch in
its analyses were based on numerous macroeconomic, operating and financial
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond FPL Group's and Merrill
Lynch's control and involve the application of complex methodologies and
educated judgment. Any estimates contained in the Merrill Lynch analyses are not
necessarily indicative of actual past or future results or values, which may be
significantly more or less favorable than the estimates. Estimated values do not
purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future, and the estimates are
inherently subject to uncertainty.
No company utilized as a comparison in the analyses described above is
identical to FPL Group or Entergy. In addition, various analyses performed by
Merrill Lynch incorporate projections prepared by research analysts using only
publicly available information. These estimates may or may not prove to be
accurate. An analysis of publicly traded comparable companies is not
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the comparable
companies and other factors that could affect the public trading value of the
comparable companies to which they are being compared.
36
<PAGE>
The FPL Group board selected Merrill Lynch to act as its financial advisor
because of Merrill Lynch's reputation as an internationally recognized
investment banking firm with substantial experience in transactions similar to
the merger and because Merrill Lynch is familiar with FPL Group and its
business. As part of Merrill Lynch's investment banking businesses, Merrill
Lynch is continually engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities and
private placements.
Under the terms of a letter agreement between FPL Group and Merrill Lynch
dated June 13, 2000, FPL Group agreed to pay Merrill Lynch a fee in the amount
of $20 million. This fee is payable in three installments as follows:
o $5 million was paid upon execution of the merger agreement,
o $5 million is payable upon the vote of FPL Group shareholders
approving the merger, and
o the balance of the fee is payable upon the closing of the merger.
FPL Group has agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses incurred in connection with its engagement, including the
fees and disbursements of legal counsel, and to indemnify Merrill Lynch and
related parties from and against specified liabilities, including liabilities
under the federal securities laws, arising out of its engagement.
Merrill Lynch has, in the past, provided financial advisory and financing
services to FPL Group and Entergy and/or their respective affiliates and may
continue to do so and has received, and may receive, additional fees for the
rendering of those services. In addition, in the ordinary course of Merrill
Lynch's business, Merrill Lynch and its affiliates may actively trade the FPL
Group common stock and other securities of FPL Group, as well as the Entergy
common stock and other securities of Entergy, for their own accounts and for the
accounts of customers. Accordingly, Merrill Lynch and its affiliates may at any
time hold a long or short position in such securities.
Entergy's Reasons for the Merger
The Entergy Board of Directors believes that the merger will join two
well-managed companies with complementary operations as well as a shared vision
of the future of the energy markets in the Southeast region of the U.S. Based on
the prospects of utility deregulation and the increasing competitive pressure
faced by electric and gas utility companies, the Entergy Board of Directors
believes that, in order to succeed in such a market, Entergy must have a larger
customer base with increased economies of scale to be an efficient, low cost
supplier of energy and related services. The Entergy Board of Directors has
concluded that a merger with a partner like FPL Group is superior to remaining
an independent company and growing solely through acquisitions. In addition, the
Entergy Board of Directors believes that the merger will result in the creation
of significant value to its shareholders as well as to employees and customers
of Entergy and its subsidiaries, while creating the size and scale necessary to
be successful in a restructured energy market. The Entergy Board of Directors
believes that benefits resulting from the merger include:
o Scale and Scope. The merger will create one of the leading electric
transmission and distribution companies in the country and provide a
strong regional foundation with the expanded scale and scope
necessary to be an effective participant in the emerging and
increasingly competitive energy markets. The combined company will
be:
o the nation's largest utility with over 6.3 million electric
customers,
o the nation's largest power producer with a generating capacity
of more than 48,000 megawatts, and
o one of the nation's largest independent power producers with
almost 10,000 megawatts of unregulated generating capacity.
37
<PAGE>
For the combined business, the increased scale and scope of each
business segment will provide necessary size, resources, skill sets
and opportunities necessary for success in those businesses. Across
power development, marketing and trading, utilities, retail and
telecommunications, the increased capabilities of the combined
entity will provide a more strongly positioned company than either
company on a stand alone basis.
o Expanded Marketing and Trading Opportunities. The combination of
Entergy's marketing and trading capabilities (in conjunction with
Koch Industries, Inc. through the Entergy-Koch L.P. venture) with
the asset base of both Entergy and FPL Group power development
businesses will provide more opportunities to optimize fuel supply,
power off-take and risk mitigation strategies.
o Expanded Nuclear Operations and Skill Sets. The combined company
will be the second largest operator of nuclear generation in the
United States. Additionally, both Entergy and FPL have proven to be
superior operators of nuclear power generation. The combination of
the assets and skill sets of these two organizations will allow for
both cost structure improvement as well as the sharing of best
practices across the organizations.
o Improved Financial Strength. The combination will create an entity
that builds on Entergy's strong financial position by adding FPL
Group's excellent balance sheet and financial performance. The
strong credit, cash and earnings performance of the combined company
will provide the combined company with increased flexibility and
resilience, and improve its capacity to pursue growth opportunities
in both regulated and unregulated businesses.
o Stability and Growth in Utility Business. The addition of Florida
Power & Light Company's high growth utility operations produces a
larger and more stable utility business with improved
opportunities for efficiency and growth. Utility cost and
productivity benefits are expected as the best practices of each
company are implemented. Utility earnings and cash flow should be
more stable with the improved diversity of customers and
operating regions. As the utility operations transition to
competitive markets and un-bundle into regulated "wires"
businesses and unregulated generation and retail businesses, both
regulated and unregulated business functions will have improved
scale and growth opportunities.
o Customer base risk mitigation. Florida Power & Light Company's
energy sales are weighted heavily toward residential and commercial
customers. The combined customer base reflects less dependence
upon sales to industrial customers, and thus reduces potential
risks associated with revenue losses from cogeneration or from
customer switching when markets are opened to retail competition.
o Additional Products and Services. The combined company's larger
asset position, customer base and distribution channels will allow
it to offer additional products and services. For example, the
Entergy-Koch L.P. venture will benefit from the additional resources
and physical positions associated with the businesses of FPL Group.
In addition, the combined company expects to benefit from the
proposed Entergy-Shaw venture. Entergy's fiber optic business may
enjoy economies of scale and better growth opportunities as a result
of being combined with FPL FiberNet, LLC.
o Overall Economies of Scale/Cost Savings. The merger will result in
improved scale and scope, with the corresponding opportunities for
both revenue enhancement and cost savings. FPL Group and Entergy
anticipate merger benefits from labor and cost savings arising from
merged operations, improved operating margins from certain
unregulated business activities, and reduced capital expenditures
for competitive businesses. These savings will be shared by
unregulated and regulated business units based upon their share of
the business activities that drive these costs. The allocation of
costs between regulated and unregulated businesses will change over
time with the growth in unregulated business activity and with the
possible de-regulation of currently regulated utility operations.
38
<PAGE>
o Gross cost savings. Gross cost savings from merged operations are
expected to grow to $375 million over the initial three year
period. These savings result primarily from reduced costs for
corporate and administration functions, procurement savings,
revenue enchancements, greater efficiencies in operations and
business processes, lower capital costs and the combination of
two workforces.
o Net synergy savings. Net synergy savings in the early years are
expected to be lower than savings in later years, due to the
costs associated with consummating the transaction and
integrating the operations.
o Initial Savings. During the initial three years of merged
operations, the regulated businesses are expected to achieve gross
cost savings in the range of $110 to $150 million per year. (The
estimated cost savings do not account for any sharing of cost
savings with customers that may be necessitated as part of the
regulatory approval process relating to the merger.)
o Unregulated Businesses. The unregulated businesses are expected
to benefit from improved margin from consolidation of energy
marketing and trading activities, revenue enhancements, reduced
costs for unregulated generation development spending, and
reduced capital costs for new generation projects. During the
initial three years of merged operations, the total gross impact
of margin benefits and cost savings for unregulated businesses is
expected to rise from approximately $40 million per year to over
$125 million per year. In addition, reduced generation project
capital costs of $50 to $100 million per year are expected as a
result of combined operations.
Estimates of cost savings and cost saving components are inherently
uncertain and there can be no assurances as to the accuracy of any of the
foregoing. The cost savings estimates are based on a number of assumptions,
including that Holdco will be able to implement necessary cost savings
mechanisms such as headcount reductions and reduction of duplicative
administrative programs within a defined period. In addition, cost savings
estimates assume that Holdco will be able to realize merger efficiencies such
as procurement economies resulting from the increased size of the company.
Recommendation of Entergy's Board of Directors
At its meeting on July 29, 2000, after due consideration, the Entergy
Board of Directors:
o determined that the merger and the other transactions contemplated
by the merger agreement are consistent with, and in furtherance of,
the best interests of Entergy and its shareholders,
o approved and adopted the merger agreement, the merger and the other
transactions contemplated by the merger agreement, and
o recommended that Entergy shareholders vote for the approval and
adoption of the merger agreement.
In approving the merger, the Entergy Board of Directors consulted with
Entergy management as well as its outside legal counsel and financial advisors,
and considered a number of factors, including the following factors:
o the benefits of the merger described above,
o the risks associated with continuing to execute Entergy's strategic
plan as an independent entity and the potential benefits associated
with the merger. These risks include, among others, the risks
associated with remaining independent amidst industry-wide
restructuring and consolidation, and the rewards include, among
others, the ability of existing Entergy shareholders to participate
in the potential future growth and profitability of Holdco,
o comparison to alternative transactions both with regard to other
companies and the nature of proposed transaction.
o the review and analysis of each of FPL Group's and Entergy's
business, financial condition, earnings, risks and prospects,
39
<PAGE>
o historical market prices and trading information with respect to the
shares of FPL Group and Entergy common stock,
o comparisons of historical financial measures for Entergy and FPL
Group, including earnings, return on capital and cash flow and
comparisons of historical operational measures for Entergy and FPL
Group,
o that the merger was structured as a merger of equals
o the expectation that the merger would be immediately accretive to
Entergy shareholders based on consensus security analyst earnings
estimates,
o the effect of the merger on the credit ratings for Entergy,
Entergy's utility subsidiaries and Holdco,
o current industry, economic and market conditions and the prospects
of further restructuring and consolidation in the electric and gas
utility industries,
o the ability to complete the merger as a generally tax-free
transaction for U.S. federal income tax purposes and to have the
conversion of Entergy common stock be generally tax-free to
shareholders,
o the expectation of synergies from the transaction resulting in some
cost savings and other benefits over time,
o the terms and conditions of the merger agreement, one of which
provides the Entergy Board of Directors the right to terminate the
merger agreement prior to its approval by Entergy shareholders in
the exercise of its fiduciary duties in connection with a superior
proposal, and the potential termination and expense reimbursement
fees payable by Entergy,
o the proposed composition of senior management and the Board of
Directors of Holdco, including that J. Wayne Leonard, Entergy's
current chief executive officer, would be the President and Chief
Executive Officer of Holdco,
o the provisions included in Holdco's organizational documents that
ensure that certain aspects of the corporate governance of Holdco,
such as the apportionment of the membership of the Board of
Directors between FPL Group-designated members and
Entergy-designated members, the number of board members and the
chairman and chief executive officer positions, can not be changed
for a certain period of time without a supermajority vote of the
Board of Directors of Holdco,
o the analyses, presentations and the written opinion of Morgan
Stanley dated July 28, 2000, and the oral opinion of J.P. Morgan,
reduced to writing on July 30, 2000 to the effect that, as of
the dates of such opinions, and based upon and subject to the
various assumptions and limitations set forth in their
respective opinions, the exchange ratio applicable to each share
of Entergy common stock in the merger agreement is fair, from a
financial point of view, to the Entergy shareholders (the
written opinions of Morgan Stanley and J.P. Morgan are attached
as Annexes C and D to this joint proxy statement/prospectus),
o the benefits to Entergy's shareholders, customers and employees
resulting from the fact that Holdco's corporate headquarters will be
located in Juno Beach, Florida, that Holdco's utility headquarters
will be located in New Orleans, Louisiana, and that FPL Group's
utility subsidiary, as well as Entergy's utility subsidiaries, will
maintain headquarters in their respective current locations,
o the potential benefit to Entergy's employees from the expanded
opportunities available as part of a much larger organization,
40
<PAGE>
o that while the merger is likely to be completed, there are risks
associated with obtaining the necessary regulatory approvals, and as
a result of other conditions to the completion of the merger, it is
possible that the merger may not be completed even if approved by
the shareholders of each of FPL Group and Entergy,
o that the residents of the states and municipalities served by
Entergy's utility subsidiaries should benefit from the shared
commitment of FPL Group and Entergy to clean energy and other
environmental concerns and maintaining charitable donations,
o the impact of regulations under various local, state and federal
laws, including the additional regulatory oversight that would
result from the addition of public utility operations in Florida and
the issues involved in the registration of Holdco as a holding
company under PUHCA,
o restrictions on the conduct of business by Entergy during the period
before the completion of the merger,
o the problems inherent in merging the operations of two large
companies, unforeseen difficulties in integrating operations and
systems, problems assimilating and retaining employees and potential
adverse short-term effects on operating results of the combined
company, and
o the interests that certain executive officers and directors of
Entergy have with respect to the merger in addition to their
interests as shareholders of Entergy.
The Entergy Board of Directors believed that, overall, the potential
benefits of the merger to Entergy and its shareholders outweighed the risks.
This discussion of the information and factors considered by the
Entergy Board of Directors in making its decision is not intended to be
exhaustive but is believed to include all material factors considered by the
Entergy Board of Directors. In view of the wide variety of factors considered
in connection with its evaluation of the merger and the complexity of these
matters, the Entergy Board of Directors did not find it useful to and did not
attempt to quantify, rank or otherwise assign relative weights to these
factors. In addition, the Entergy Board of Directors did not undertake to
make any specific determination as to whether any particular factor, or any
aspect of any particular factor, was favorable or unfavorable to its ultimate
determination, but rather the Entergy Board of Directors conducted an overall
analysis of the factors described above, including through discussions with
and questioning of Entergy's management and legal, financial and accounting
advisors. In addition, individual members of the Entergy Board of Directors
may have given different weight to different factors.
THE BOARD OF DIRECTORS OF ENTERGY RECOMMENDS THAT HOLDERS OF ENTERGY
COMMON STOCK VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Opinions of Entergy's Financial Advisors
Pursuant to letter agreements each dated June 13, 2000, Entergy
retained Morgan Stanley and J.P. Morgan to act as its financial advisors in
connection with the merger. On July 28, 2000, Morgan Stanley rendered to the
Entergy Board of Directors its written opinion and J.P. Morgan rendered its
oral opinion, subsequently confirmed in writing on July 30, 2000, that, as of
such date and based upon and subject to the factors and assumptions set forth
in their opinions, the exchange ratio under the merger agreement applicable
to each share of Entergy common stock was fair from a financial point of view
to the holders of shares of Entergy common stock.
41
<PAGE>
The full texts of each of the fairness opinions, which set forth the
assumptions made, matters considered, and qualifications and limitations of the
reviews undertaken by Morgan Stanley and J.P. Morgan, are attached as Annexes C
and D to this joint proxy statement/prospectus and are incorporated into this
joint proxy statement/prospectus by reference. The summary of the fairness
opinions set forth in this joint proxy statement/prospectus is qualified in its
entirety by reference to the full texts of these opinions. Holders of Entergy
common stock should read these opinions carefully and in their entirety. The
fairness opinions were provided to the Entergy Board of Directors for its
information and are directed only to the fairness from a financial point of view
of the Entergy exchange ratio pursuant to the merger agreement to the holders of
Entergy common stock. The fairness opinions do not constitute recommendations to
any Entergy shareholder as to how such shareholder should vote on the proposed
merger or any related matter. Morgan Stanley and J.P. Morgan have provided these
services independently of one another and have not relied upon the other's
analysis in rendering their opinions.
Opinion of Morgan Stanley
In connection with rendering its opinion, Morgan Stanley, among other
things:
o reviewed certain publicly available financial statements and other
information of FPL Group and Entergy,
o reviewed certain internal financial statements and other financial
and operating data concerning FPL Group prepared by the management
of FPL Group,
o reviewed certain financial projections prepared by the management of
FPL Group,
o discussed the past and current operations and financial condition
and the prospects of FPL Group, including information relating to
certain strategic, financial and operational benefits anticipated
from the merger, with senior executives of FPL Group,
o reviewed certain internal financial statements and other financial
and operating data concerning Entergy prepared by the management of
Entergy,
o reviewed certain financial projections prepared by the management of
Entergy,
o discussed the past and current operations and financial condition
and the prospects of Entergy, including information relating to
certain strategic, financial and operational benefits anticipated
from the merger, with senior executives of Entergy,
o reviewed the pro forma impact of the merger on the combined entity's
earnings per share, consolidated capitalization and financial
ratios,
o reviewed the reported prices and trading activity for FPL Group
common stock and Entergy common stock,
o compared the financial performance of FPL Group and the prices and
trading activity of FPL Group common stock with that of certain
other comparable publicly-traded companies and their securities,
o compared the financial performance of Entergy and the prices and
trading activity of Entergy common stock with that of certain other
comparable publicly-traded companies and their securities,
o reviewed the financial and other terms, to the extent publicly
available, of certain comparable merger transactions,
42
<PAGE>
o discussed with the managements of Entergy and FPL Group the
strategic rationale for the merger,
o participated in discussions and negotiations among representatives
of Entergy and FPL Group and their financial and legal advisors,
o reviewed the merger agreement and certain related documents, and
o performed such other analyses and considered such other factors as
Morgan Stanley deemed appropriate.
Morgan Stanley assumed and relied upon without independent verification
the accuracy and completeness of the information reviewed by it for the purposes
of its opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the merger, Morgan Stanley assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
future financial performance of FPL Group and Entergy. In addition, Morgan
Stanley assumed that the merger will be consummated in accordance with the terms
set forth in the merger agreement, including among other things, that the merger
will constitute a transaction governed by Section 351 of the Code. Morgan
Stanley did not make any independent valuation or appraisal of the assets or
liabilities of FPL Group and Entergy, nor was it furnished with any such
appraisals. Morgan Stanley's opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to Morgan Stanley as of, the date of its opinion. Morgan Stanley noted
that it is not a legal or regulatory expert and has relied upon, without
independent verification, the assessment of Entergy's legal and regulatory
advisors with respect to the legal and regulatory matters related to the merger.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any third party with respect to a business
combination or other extraordinary transaction involving Entergy.
Opinion of J.P. Morgan
In arriving at its opinion, J.P. Morgan reviewed, among other things:
o the merger agreement and certain related documents,
o certain publicly available information concerning the respective
businesses of Entergy and FPL Group and of certain other companies
engaged in businesses comparable to those of Entergy and FPL Group,
and the reported market prices for certain other companies'
securities deemed comparable,
o publicly available terms of certain comparable merger transactions,
o current and historical market prices of and trading activity in
Entergy common stock and FPL Group common stock, respectively,
o the audited financial statements of each of Entergy and FPL Group
for the fiscal year ended December 31, 1999, and the unaudited
financial statements of each of Entergy and FPL Group for the period
ended March 31, 2000,
o certain internal financial statements, analyses and forecasts
prepared by Entergy and FPL Group and their respective managements,
and
o the terms of other business combinations that it deemed relevant.
J.P. Morgan held discussions with certain members of the management of
Entergy and FPL Group with respect to certain aspects of the merger, the past
and current business operations of Entergy and FPL
43
<PAGE>
Group, the financial condition and future prospects and operations of Entergy
and FPL Group, the effects of the merger on the financial condition and future
prospects of Entergy and FPL Group (including information relating to certain
strategic, financial and operational benefits anticipated from the merger), and
certain other matters it believed necessary or appropriate to its inquiry. J.P.
Morgan reviewed such other financial studies and analyses and considered such
other information as it deemed appropriate for the purposes of its opinion.
In giving its opinion, J.P. Morgan relied upon and assumed, without
independent verification, the accuracy and completeness of all information
that was publicly available or was furnished to J.P. Morgan by Entergy and
FPL Group or otherwise reviewed by it, and J.P. Morgan did not assume any
responsibility or liability therefor. J.P. Morgan did not conduct any
valuation or appraisal of any assets or liabilities, nor have any such
valuations or appraisals been provided to it. In relying on financial
analyses and forecasts provided to it (including information relating to
certain strategic, financial and operational benefits anticipated from the
merger), J.P. Morgan assumed that they were reasonably prepared based on
assumptions reflecting the best currently available estimates and judgments
by management as to the expected future results of operations and financial
condition of Entergy and FPL Group to which such analyses or forecasts
relate. In addition, J.P. Morgan assumed that the merger will be consummated
in accordance with the terms set forth in the merger agreement, including
among other things, that the merger will constitute a transaction governed by
Section 351 of the Code. J.P. Morgan is not a legal or regulatory expert and
has relied upon, without independent verification, the assessment of
Entergy's legal and regulatory advisors with respect to the legal and
regulatory matters related to the merger.
J.P. Morgan's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to them as of,
the date hereof. It should be understood that subsequent developments may affect
its opinion and that J.P. Morgan does not have any obligation to update, revise,
or reaffirm its opinion. J.P. Morgan has expressed no opinion as to the price at
which Holdco's common stock will trade at any future time.
In arriving at its opinion, J.P. Morgan was not authorized to solicit, and
did not solicit, any expressions of interest from any other parties with respect
to a business combination or other extraordinary transaction involving Entergy.
Presentation to the Entergy Board of Directors
Some of the analyses include information presented in tabular format. In
order to understand fully the financial analyses used by Entergy's financial
advisors, the tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the financial analyses.
Comparable Public Companies Analysis. Entergy's financial advisors
reviewed and compared certain public and internal Entergy and FPL Group
financial information, ratios and available public market multiples relating to
Entergy and FPL Group to corresponding financial data for comparable publicly
traded utility companies. The financial advisors selected companies that shared
characteristics with Entergy and FPL Group.
The companies included in the Entergy comparable companies analysis were:
o Allegheny Energy, Inc.,
o American Electric Power Company, Inc.,(a)
o Constellation Energy Group, Inc.,
o PECO Energy Company,(b)
o PG&E Corporation,
o PPL Corporation,
44
<PAGE>
o Public Service Enterprise Group Incorporated,
o Southern Company,
o TXU Corporation, and
o Unicom Corporation.(b)
The companies included in the FPL Group comparable companies analysis
were:
o CP&L Energy, Inc.,(c)
o Constellation Energy Group, Inc.,
o Dominion Resources, Inc.,(d)
o Duke Energy Corporation,
o PECO Energy Company,(b)
o Pinnacle West Capital Corporation,
o Reliant Energy, Incorporated,
o Southern Company, and
o TECO Energy, Inc.
-----------------
(a) Reflects pro forma estimates for American Electric Power Company which
includes its merger with Central and South West which closed on June 15,
2000.
(b) Reflects stand-alone estimates for PECO and Unicom, which are currently in
the process of merging with each other.
(c) Reflects stand-alone estimates for CP&L Energy, which is currently in the
process of acquiring Florida Progress Corporation.
(d) Reflects pro forma estimates for Dominion Resources which includes its
acquisition of Consolidated Natural Gas Company on January 28, 2000.
The financial advisors then reviewed both public and internal Entergy and
FPL Group financial information to compare financial information and multiples
of market value of these companies to Entergy's and FPL Group's public and
internal financial information:
o stock price to 2000 estimated earnings per share,
o stock price to 2001 estimated earnings per share,
o stock price to 2002 estimated earnings per share,
o stock price to the March 31, 2000 book value of equity per share,
and
o firm value (defined as equity value plus non-convertible debt,
minority interest, capital lease obligations and preferred stock
less cash and cash equivalents as of March 31, 2000) to the LTM
EBITDA.
45
<PAGE>
The following table reflects the results of the analysis, as compared to
the multiples for Entergy and FPL:
<TABLE>
<CAPTION>
Firm Value
Price to to LTM
Price to EPS Book Value EBITDA
------------------------------------- ---------- ------
2000E 2001E 2002E
----- ----- ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Range derived from Entergy
comparables 10.0 - 13.0x 9.5 - 11.5x 9.0 - 10.5x 1.0 - 1.8x 5.5 - 7.0x
Range derived from FPL
comparables............... 12.0 - 14.0 10.5 - 12.5 10.0 - 12.0 1.5 - 2.0 6.0 - 8.0
Entergy................... 11.7 10.4 8.9 1.0 5.7
FPL....................... 12.1 11.4 10.7 1.7 6.0
</TABLE>
Applying a range of multiples derived from the comparable public companies
analysis, the financial advisors calculated a range of implied equity values per
share of Entergy with respect to Entergy's:
o stock price to 2000 estimated earnings per share,
o stock price to 2001 estimated earnings per share,
o stock price to 2002 estimated earnings per share,
o stock price to the March 31, 2000 book value of equity per share,
and
o firm value to LTM EBITDA.
Based on this analysis, J.P. Morgan derived a range of implied equity
values per share of Entergy of $27.00 to $36.00. Morgan Stanley derived a range
of implied equity values per share of Entergy of $28.00 to $34.00.
Applying a range of multiples derived from the comparable public companies
analysis, the financial advisors then calculated a range of implied equity
values per share of FPL Group with respect to FPL Group's:
o stock price to 2000 estimated earnings per share,
o stock price to 2001 estimated earnings per share,
o stock price to 2002 estimated earnings per share,
o stock price to the March 31, 2000 book value of equity per share,
and
o firm value to LTM EBITDA.
Based on this analysis, J.P. Morgan derived a range of implied equity
values per share of FPL Group of $47.00 to $59.00. Morgan Stanley derived a
range of implied equity values per share of FPL Group of $48.25 to $59.50.
Based on the valuations derived for Entergy and FPL Group, Morgan Stanley
calculated a range of implied exchange ratios from the midpoint of implied
equity values for Entergy common stock to FPL Group common stock of 0.553x to
0.591x. J.P. Morgan calculated a range of implied exchange ratios from the
midpoint of implied equity values for Entergy common stock to FPL Group common
stock of 0.565x to 0.610x. For comparative purposes, Morgan Stanley and J.P.
Morgan noted that, based on a closing price of Entergy common stock of $30.3125
and FPL Group common stock of $52.875 on July 27, 2000 (the last business day
before their joint presentation to the Entergy Board of Directors), the exchange
46
<PAGE>
ratio implied by the closing prices was 0.573x compared to the exchange ratio
under the merger agreement of 0.585x.
No company utilized in the comparable public companies analysis is
identical to Entergy or FPL Group. Accordingly, an analysis of the results of
the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of Entergy and
FPL Group and other factors that could affect the public trading value of the
companies to which they are being compared. In evaluating the comparable
companies, the financial advisors made judgments and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Entergy or
FPL Group, such as the impact of competition on Entergy or FPL Group and the
industry generally, industry growth and the absence of any adverse material
change in the financial conditions and prospects of Entergy or FPL Group or the
industry or in the financial markets in general. Mathematical analysis, such as
determining the mean, median or average, is not in itself a meaningful method of
using comparable company data.
Discounted Cash Flow Analyses. The financial advisors performed discounted
cash flow analyses on Entergy and FPL Group using financial projections provided
by the companies' respective managements for the period from December 31, 2000
through December 31, 2004.
For the Entergy discounted cash flow analysis, Morgan Stanley calculated
terminal values by applying a range of terminal multiples of projected price to
earnings per share in 2004 of 8.0x to 11.0x, which implies a range of terminal
multiples of projected EBITDA of 5.0x to 5.8x. The cash flow streams and
terminal values were discounted to present values using a discount rate of 8.0%
to 9.0%, based on the weighted average cost of capital. From this analysis,
Morgan Stanley calculated a range of implied estimated equity value per share of
Entergy as of June 30, 2000, of $29.25 to $41.00.
Morgan Stanley performed separate discounted cash flow analyses for FPL
Group. For the FPL Group discounted cash flow analysis, Morgan Stanley
calculated terminal values by applying a range of terminal multiples of
estimated price to earnings per share in 2004 of 11.1x to 13.5x, which implies a
range of terminal multiples of projected EBITDA of 5.3x to 6.0x. The cash flow
streams and terminal values were discounted to present values using a discount
rate of 7.0% to 8.0%, based on the weighted average cost of capital. From these
analyses, Morgan Stanley calculated ranges of implied equity value per share of
FPL Group as of June 30, 2000, of $53.50 to $67.00.
J.P. Morgan conducted a discounted cash flow analysis for the purpose of
determining the equity value for both Entergy and FPL Group's common stock. For
the Entergy discounted cash flow analysis, J.P. Morgan performed discounted cash
flow analysis on Entergy's separate business units. J.P. Morgan calculated a
range of terminal values of Entergy at the end of the projection period by
applying a multiple of projected price to Entergy's 2004 earnings. The price to
earnings multiple ranges were 9.5x to 12.0x for the utility business, 11.0x to
18.0x for the wholesale energy business, 6.0x to 8.0x for the unregulated
nuclear business and 9.5x to 12.0x for all other businesses. The free cash flows
and range of terminal values were then discounted to present values using a
range of discount rates which were chosen by J.P. Morgan based upon analysis of
market discount rates applicable to comparable companies in the electric utility
sector. The discount rate ranges were 6.5% to 7.5% for the utility business,
8.5% to 9.5% for the wholesale energy business, 10.0% to 12.0% for the
unregulated nuclear business and 6.5% to 7.5% for all other businesses. From
this analysis, J.P. Morgan calculated a range of implied estimated equity value
per share of Entergy as of June 30, 2000, of $30.50 to $43.00.
For the FPL Group discounted cash flow analysis, J.P. Morgan performed
discounted cash flow analysis on FPL Group's separate business units. J.P.
Morgan calculated a range of terminal values of FPL Group at the end of the
projection period by applying a multiple of projected price to FPL Group's 2004
earnings. The price to earnings multiple ranges were 12.0x to 13.5x for the
utility business, 11.0x to 18.0x for the unregulated generation business and
25.0x to 30.0x for the telecom business. The free cash flows and range of
terminal values were then discounted to present values using a range of discount
rates which were chosen by J.P. Morgan based upon analysis of market discount
rates applicable to comparable companies in the electric utility sector. The
discount rate ranges were 6.5% to 7.5% for the utility business, 8.5% to 9.5%
for the unregulated generation business and 15.0% to 18.0% for the telecom
47
<PAGE>
business. From this analysis, J.P. Morgan calculated a range of implied
estimated equity value per share of FPL Group as of June 30, 2000, of $56.00 to
$71.00.
Based on the ranges of values calculated in the discounted cash flow
analysis, Morgan Stanley and J.P. Morgan calculated an implied exchange ratio of
Entergy common stock to FPL Group common stock of 0.583x and 0.579x,
respectively, based on the midpoints of the ranges of implied equity values from
the discounted cash flow analyses for Entergy and FPL Group.
Historical Trading Ratio Analysis. The financial advisors reviewed the
ratio of daily closing share prices of Entergy common stock to FPL Group common
stock for the three-year, one-year, forty-day, thirty-day, twenty-day, ten-day
and one-day periods ended July 27, 2000.
The following table reflects the results of the analysis:
Historical Period Ending July 27, 2000 Average Ratio of Closing Prices
--------------------------------------- -------------------------------
Three-years prior............................... 0.515x
One-year prior.................................. 0.560x
Forty trading days prior........................ 0.582x
Thirty trading days prior....................... 0.574x
Twenty trading days prior....................... 0.559x
Ten trading days prior.......................... 0.564x
July 27, 2000................................... 0.573x
The financial advisors noted that the exchange ratio under the merger
agreement applicable to Entergy is 0.585x.
Pro Forma Transaction Analysis. Using financial projections provided by
Entergy's and FPL Group's managements and publicly available mean earnings
estimates and taking into account certain management estimates of cost synergies
but not potential revenue enhancements or other strategic, financial or
operational benefits provided to the financial advisors by managements of
Entergy and FPL Group, the financial advisors reviewed the pro forma impact of
the merger on Entergy's and FPL Group's earnings per share on a stand-alone and
combined basis for the years 2002, 2003 and 2004.
The pro forma impact on earnings per share were found to be accretive to
earnings from 2002 to 2004 to both Entergy and FPL Group when publicly available
mean earnings estimates were used as the basis of comparison for both companies.
When management projections were used in the pro forma analysis, the transaction
was slightly dilutive for Entergy when compared to their management earnings
estimates from 2002 to 2004 and accretive for FPL Group when compared to their
management earnings estimates in the same years. Assuming that the pro forma
company traded in the marketplace at a market weighted average price to earnings
ratio based on the closing stock prices of the two companies on July 27, 2000,
when compared to their respective management earnings estimates, the Entergy and
FPL Group management projections analysis indicated a positive change in
shareholder value when compared to the current prices of their common stock for
both companies from 2002 through 2004.
In connection with the review of the merger by the Entergy Board of
Directors, Morgan Stanley and J.P. Morgan performed a variety of financial and
comparative analyses for purposes of their opinions given in connection
therewith. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at their opinions, each of Morgan Stanley and J.P. Morgan considered the results
of all of its analyses as a whole and did not attribute any particular weight to
any analysis or factor considered by it. Furthermore, each of Morgan Stanley and
J.P. Morgan believes that selecting any portion of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion. In addition, Morgan Stanley and J.P. Morgan may have
given various analyses and factors more or less weight than other analyses and
factors and may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan Stanley's or J.P.
Morgan's view of the actual value of Entergy or FPL Group.
48
<PAGE>
In performing their analyses, the financial advisors made numerous
assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control
of Entergy or FPL Group. Any estimates contained in the financial advisors'
analyses are not necessarily indicative of future results or actual values,
which may be significantly more or less favorable than those suggested by the
estimates. The analyses performed were performed solely as part of the
financial advisors' analysis of the fairness from a financial point of view
of the Entergy exchange ratio pursuant to the merger agreement and were
conducted in connection with the delivery of the financial advisors' opinions
to the Entergy Board of Directors. The analyses do not purport to be
appraisals or to reflect the prices at which Entergy common stock or FPL
Group common stock might actually trade. The exchange ratio applicable to
each share of Entergy common stock under the merger agreement and other terms
of the merger agreement were determined through arm's length negotiations
between Entergy and FPL Group and approved by the Entergy Board of Directors.
The written opinion of Morgan Stanley dated July 28, 2000, and the oral
opinion of J.P. Morgan, reduced to writing on July 30, 2000, were two of a
number of factors taken into consideration by Entergy's Board of Directors in
making its decision to approve the merger agreement and the transactions
contemplated by the merger agreement. Consequently, the financial advisors'
analyses described above should not be viewed as determinative of the opinion
of the Entergy Board of Directors with respect to the value of Entergy or FPL
Group. See "The Merger--Recommendation of Entergy's Board of Directors" on
page 39.
Morgan Stanley and J.P. Morgan, as part of their investment banking
businesses, are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. Entergy selected the financial advisors based upon their
qualifications, experience and expertise and because they are internationally
recognized investment banking firms that have substantial experience in
transactions similar to the merger. In the ordinary course of their trading and
brokerage activities, Morgan Stanley, J.P. Morgan or their affiliates may at any
time hold long or short positions, trade or otherwise effect transactions, for
their own accounts or for the accounts of customers, in the equity or debt
securities or senior loans of Entergy or FPL Group.
Pursuant to the terms of its engagement, Entergy agreed to pay Morgan
Stanley a transaction fee equal to approximately $14.1 million. The fee, which
is payable in three installments, is based on the equity value of Entergy and
the installment payments are due in thirds at the following times: upon the
signing of the merger agreement, upon approval of the merger agreement by
Entergy shareholders and upon completion of the merger. In the past, Morgan
Stanley & Co. Incorporated and its affiliates have provided financial advisory
and financing services for Entergy and FPL Group and have received fees for the
rendering of these services.
Pursuant to the terms of its engagement, Entergy agreed to pay J.P. Morgan
a transaction fee equal to approximately $14.1 million. The fee, which is
payable in three installments, is based on the equity value of Entergy and the
installment payments are due in thirds at the following times: upon the signing
of the merger agreement, upon approval of the merger agreement by Entergy
shareholders and upon completion of the merger. In the past, J.P. Morgan and its
affiliates have provided financial advisory and financing services for Entergy
and FPL Group and have received fees for the rendering of these services.
Entergy has also agreed to reimburse Morgan Stanley and J.P. Morgan for
certain expenses incurred by them, including fees of outside legal counsel, and
to indemnify Morgan Stanley and J.P. Morgan and their affiliates, their
respective directors, officers and each person, if any, controlling the
financial advisors or any of their affiliates against certain liabilities,
including liabilities under federal securities laws, arising out of their
engagement.
Continuing Board and Management Positions
As provided in the merger agreement, following the closing of the
merger until the 12-month anniversary of the closing of the merger, the
Holdco Board of Directors will consist of eight directors designated by FPL
Group and seven directors designated by Entergy.
Following the closing of the merger, the Holdco Board of Directors
will initially have six standing committees: the Executive Committee, the Audit
Committee, the Finance Committee, the Nominating Committee, the Compensation
Committee and the Nuclear Committee. Chairpersons of each of the six committees
will comprise the membership of the Executive Committee. Each other standing
committee shall be comprised of an equal number of designees from FPL Group and
Entergy.
From and after the closing of the merger and until the the 12-month
anniversary of the completion of the merger, James L. Broadhead will become the
Chairman of the Nominating Committee and J. Wayne Leonard will become the
Chairman of the Executive Committee.
After the closing of the merger and until the 12-month anniversary
thereof, Mr. Broadhead shall hold the position of Chairman of the Holdco Board
of Directors in an executive capacity and shall be responsible for
implementation of the integration of the businesses of FPL Group and Entergy. He
will continue to be a Chairman of the Holdco Board of Directors, but in a
non-executive capacity, until the third annual Holdco shareholders meeting
following the calendar year of the closing of the merger.
Mr. Leonard shall hold the positions of President and Chief Executive
Officer after the closing of the merger until the third annual Holdco
shareholders meeting following the calendar year of the merger.
Each of Robert v.d. Luft and a designee of FPL Group shall be appointed
to the position of Vice Chairman of the Holdco Board of Directors after the
completion of the merger.
Interests of FPL Group's Directors and Executive Officers in the Merger
Eight of FPL Group's executive officers, namely James L. Broadhead,
Paul J. Evanson, Lewis Hay, III, Lawrence J. Kelleher, Thomas F. Plunkett,
Antonio Rodriguez, Armando J. Olivera and Dennis P. Coyle are parties to
change in control employments agreements that becomes effective upon approval
of the merger by FPL Group's shareholders (the "FPL Group Employment
Agreements"). The term of the
49
<PAGE>
agreement is five years for Mr. Broadhead, four years for Messrs. Evanson,
Hay, Kelleher, Plunkett and Coyle and three years for Messrs. Rodriguez and
Olivera. If any such executive's employment is involuntarily terminated
without "cause" or if the executive terminates for "good reason" (as such
terms are defined in the FPL Group Employment Agreements), the covered
executive will be entitled to (i) a specified multiple (the greater of (a)
two times and (b) the number of years remaining in the employment period) of
the sum of annual base salary plus the greater of (x) the highest annual
bonus paid with respect to the three fiscal years preceding the effective
date of the FPL Group Employment Contracts and (y) the highest annual bonus
paid after the effective date, (ii) an amount equal to the maximum amount
payable for any then-outstanding grants under FPL Group's long-term incentive
plans, (iii) continuation of employee welfare and pension benefits (including
supplemental benefits) and (iv) any excise taxes that such executive might
incur. If the merger were completed on the date hereof and the employment of
each of FPL Group's executive officers was immediately terminated (which is
not anticipated), the aggregate value of the cash severance payments due
under the FPL Group Employment Agreements as in effect on the date hereof to
such individuals, not including amounts payable for outstanding grants under
FPL Group's 1994 Long-Term Incentive Plan upon shareholder approval of the
merger, as described later in this section, distribution of vested benefits
under any benefit plan or agreement or any payments that may be made with
respect to any excise tax, would be approximately $41,500,000.
Holdco has entered into an employment agreement with Mr. Broadhead
pursuant to which Mr. Broadhead will serve as Chairman of the Board of Holdco
upon consummation of the merger. The employment agreement provides that Mr.
Broadhead will serve as Chairman of the Board of Holdco in an executive
capacity until the first anniversary of the consummation of the merger, and
thereafter shall serve as Chairman of the Board in a nonexecutive capacity
until the third annual shareholder meeting of Holdco which occurs following
the end of the calendar year in which the merger is consummated. Pursuant to
Holdco's by-laws, during a specified period following the consummation of the
merger (until the earlier of (i) a vacancy on Holdco's board with respect to
a director designated by FPL Group which follows the first anniversary of the
consummation of the merger and (ii) the third annual shareholder meeting of
Holdco which occurs following the calendar year in which the merger is
consummated), Mr. Broadhead may be removed or replaced from his positions
with Holdco (and any person other than Mr. Broadhead may be elected to such
positions) only upon the affirmative vote of at least two-thirds of Holdco's
entire board of directors. The employment agreement with Holdco provides for
continuation of all of the terms and conditions of Mr. Broadhead's employment
agreements with FPL Group dated, respectively, as of December 13, 1993 and
May 10, 1999, except that any severance payments as to which Mr. Broadhead
becomes eligible following the consummation of the merger will be offset by
the amount payable to Mr. Broadhead immediately upon consummation of the
merger, as described below. Upon completion of the merger, Mr. Broadhead will
become entitled to terminate his employment for "good reason" under his
employment agreement dated as of May 10, 1999, because of the change in his
titles and authority with Holdco as compared to FPL Group, and to receive the
severance benefits provided under his employment agreement. In order to
retain Mr. Broadhead's services following the merger, FPL Group has agreed to
pay Mr. Broadhead, upon completion of the merger, the severance benefits to
which he would then be entitled if his employment were to be terminated. The
amount of such benefits, assuming that the merger is consummated in late 2001
and excluding distribution of vested retirement benefits, is estimated to be
$10,420,000.
Upon approval of the merger by FPL Group's shareholders, all
performance criteria of performance-based awards, restricted stock and other
stock-based awards held by executive officers (a total of eight individuals)
under FPL Group's 1994 Long-Term Incentive Plan will be deemed fully achieved
and all such awards shall be fully earned and vested, all options and other
exercisable rights shall become exercisable and vested, the restrictions,
deferral limitations and forfeiture conditions applicable to any other award
shall lapse and such awards shall be fully vested and, in general, all
outstanding awards will be canceled and the holder thereof paid in cash
therefor on the basis of the highest trading price of the FPL Group common
stock during the 60-day period preceding the date that the FPL Group
shareholders approve the merger. Based on the closing price of FPL Group
common stock on [ ], 2000 (the last day for which prices were available
prior to the mailing of this joint proxy statement/prospectus), the aggregate
amount of the cash payment in connection with such awards would be $[ ].
The actual amount of such cash payments may be higher or lower depending on
the market price of FPL Group common stock during the 60-day period
preceding the date of shareholder approval of the merger. All amounts
deferred by the executive officers of FPL Group under FPL Group's Deferred
Compensation Plan become payable in a single sum on the first day of the
month following the participant's termination of employment subsequent to
approval of the merger by FPL Group's shareholders. Under FPL Group's
Supplemental Executive Retirement Plan (the "FPL Group SERP"), all accrued
benefits will vest upon approval of the merger by FPL Group's shareholders,
and payment of such benefits will be made either in a lump sum within three
months following the participant's termination of employment subsequent to
such shareholder approval or in accordance with the form of distribution
selected by the executive under FPL Group's tax-qualified pension plan, as
determined by each executive. In addition, certain FPL Group executives have
individual FPL Group SERP agreements that have special provisions that become
effective upon approval of the merger by FPL Group's shareholders, as
follows. Mr. Broadhead's SERP agreement provides that the restrictions on
restricted stock awarded to him in support of his FPL Group SERP benefit
lapse and the full retirement benefit becomes vested and payable. Under Mr.
Coyle's agreement, benefits become fully vested and will be paid in a lump
sum or in quarterly installments over a period of 10 or less years commencing
within three months following termination of employment subsequent to the
shareholder approval, as selected by Mr. Coyle. Under Mr. Evanson's SERP
agreement, benefits become fully vested and will be paid in accordance with
the FPL Group SERP payment provisions following Mr. Evanson's termination of
employment subsequent to shareholder approval of the merger.
50
<PAGE>
FPL Group has reserved the right, prior to the completion of the merger,
to take the following actions with respect to benefits provided to executive
officers and other management employees:
o modify certain compensation and benefit programs with key FPL Group
executives, including its executive officers, if deemed necessary to
equitably adjust compensation or benefits as may be deemed
appropriate to address retention or competitive issues.
o establish a retention program for approximately 175 individuals,
providing for retention periods extending up to one year following
completion of the merger. Executive officers of FPL Group are not
expected to be eligible to participate in this program. The cost of
the program is estimated to be $40 million.
o grant new equity-based awards to replace those awards that will be
cashed out upon approval of the merger by FPL Group's shareholders.
The individuals who will be granted such awards, the number of such
awards and the number of shares of FPL Group common stock subject to
such awards has not been determined at this time.
o continue funding, to the extent not already so funded, all existing
deferred compensation and FPL Group SERP benefits accrued as of the
date immediately prior to the completion of the merger. It is
estimated that the amount of such deferred compensation and FPL
Group SERP benefits not already funded is approximately $18 million.
FPL Group has made no determination as of the date hereof as to the
necessity or desirability of such actions.
Interests of Entergy's Directors and Executive Officers in the Merger
Entergy's executive officers (J. Wayne Leonard, Donald C. Hintz, C.
John Wilder, Frank F. Gallaher, C. Gary Clary, Michael G. Thompson, Jerry D.
Jackson, Jerry W. Yelverton and Geoffrey D. Roberts, Jr.), are participants
in Entergy's System Executive Continuity Plan (the "Continuity Plan") which
provides severance pay and benefits under specified circumstances following a
change in control. In the event that any such participant's employment is
involuntarily terminated without "cause" or if the participant terminates for
"good reason" (as such terms are defined, respectively, in the Continuity
Plan), the participant will be entitled to (i) a specified multiple of one to
three (executive officers each have a multiple of three) times his or her
Base Annual Salary and Target Award (as such terms are defined, respectively,
in the Continuity Plan) payable over a one-to-three year continuation period,
as specified in the Continuity Plan, (ii) continued medical and dental
insurance coverage for the one-to-three year continuation period (subject to
offset for any similar coverage provided by the participant's new employer),
(iii) immediate payment of performance awards, based upon an assumed
achievement of applicable performance targets, and (iv) payment of a
"gross-up" payment in respect of any excise taxes they might incur.
Participants in the Continuity Plan are subject to post-employment
restrictive covenants, including noncompetition provisions, which run for one
or two years, but provisions extend to three years for executive officers if
permissible under applicable law. If the merger were completed on the date
hereof and the employment of each of Entergy's executive officers was
immediately terminated (which is not anticipated), the aggregate value of the
cash severance payments due under the Continuity Plan as in effect on the
date hereof to such individuals, not including any payments that may be made
with respect to any excise tax, would be approximately $19.7 million.
51
<PAGE>
Upon completion of the merger, equity awards granted to Entergy's
executive officers under Entergy's 1998 Equity Ownership Plan will vest and
become exercisable to the extent not then already vested and exercisable. As of
July 24, 2000, Entergy's executive officers held an aggregate of 1,525,453
unvested options, with a weighted average exercise price of $26.10. As of the
same date, Entergy's executive officers held an aggregate of 286,661 unvested
stock units, each of which has a value equal to one share of Entergy stock.
In addition, upon completion of the merger: (i) benefits already accrued
under Entergy's System Executive Retirement Plan, Post-Retirement Plan,
Supplemental Retirement Plan and Pension Equalization Plan will be funded in a
rabbi trust and become fully vested if the participant is involuntarily
terminated without "cause" or terminates employment for "good reason" (as such
terms are, respectively, defined in such plans), and (ii) all amounts credited
to participants' accounts under Entergy's Deferred Compensation Plan will be
funded in a rabbi trust.
Upon completion of the merger, the benefits of those Entergy outside
directors who are or were participants in Entergy's Service Recognition
Program for Non-Employee Outside Directors will be funded in a rabbi trust
and become fully vested if the participant is involuntarily terminated or
loses his or her status without "cause" (as such term is defined in the
plan). As of July 24, 2000, Entergy's outside directors held an aggregate of
3,200 stock units pursuant to the Service Recognition Program, each of which
has a value equal to one share of Entergy common stock.
Holdco has entered into an employment agreement with Mr. Leonard
pursuant to which Mr. Leonard will serve as Chief Executive Officer and
President of Holdco. Pursuant to Holdco's By-laws, during a specified period
following the consummation of the merger (until the earlier of (i) a vacancy
on Holdco's Board of Directors with respect to a director designated by FPL
Group which follows the first anniversary of the consummation of the merger
and (ii) the third annual shareholder meeting of Holdco which occurs
following the calendar year in which the merger is consummated), Mr. Leonard
may be removed or replaced from his positions with Holdco (and any person
other than Mr. Leonard may be elected to such positions) only upon the
affirmative vote of at least two-thirds of Holdco's entire Board of
Directors. The agreement is for an initial three-year term commencing upon
consummation of the merger, with opportunity for extension. During the first
year following the merger, Mr. Leonard's compensation will be determined by
the compensation committee of the Board based on competitive practices for
the chief executive officer of companies of comparable size and standing, but
in no event shall Mr. Leonard's base salary, annual incentive compensation,
long-term incentives, fringe benefits, and eligibility to participate in all
savings and retirement plans, practices, policies and programs be less
favorable than that of Mr. Broadhead. Thereafter, Mr. Leonard's base salary
and additional compensation will be reviewed by the compensation committee of
Holdco for possible increase at least annually during the term of his
employment. Mr. Leonard shall participate in supplemental executive plans,
agreements and arrangements such that the aggregate value of retirement
benefits available to Mr. Leonard and his beneficiaries at the end of his
employment with Holdco will not be less than that to which he would have been
entitled had he remained in Entergy's employ for the same period of time
under his current arrangements with Entergy. If Mr. Leonard's employment is
involuntarily terminated without "cause" or if he terminates for "good
reason" (as such terms are defined in his employment agreement), Mr. Leonard
will be entitled to receive, in lieu of benefits under the Continuity Plan, a
cash severance payment equal to three times the sum of his Annual Base Salary
and Highest Bonus (as such terms are defined in the agreement), continued
benefits for three additional years, certain additional benefits and a
"gross-up" payment in respect of any excise taxes he might incur.
Entergy has reserved the right, prior to completion of the merger, to take
the following action with respect to benefits provided to officers and other
management employees:
o implement certain benefit enhancements to its employee benefit plans
to improve plan value and relative position compared to similar
companies,
o implement retention programs, including both cash and equity-based
awards, for such employees as Entergy determines to be critical to
its operations or to the completion of the merger, subject to an
aggregate potential cost not in excess of the cost of FPL Group's
retention program,
o modify the severance multiplier under the Continuity Plan to address
retention or competitive issues and/or enter into new severance
agreements with up to 10 officers to provide severance benefits
equivalent to those potential benefits that may be provided to
similarly situated FPL Group officers,
52
<PAGE>
o further modify the Continuity Plan in certain respects to prohibit
amendments during the pendency of a Potential Change in Control (as
defined in the plan) and for two years following completion of the
merger and to replicate features in FPL Group's change in control
employment agreements,
o amend the Equity Ownership Plan to provide for full vesting of all
outstanding awards upon completion of the merger,
o amend the Service Recognition Plan for Non-Employees Directors to
provide for full vesting of all accrued benefits immediately upon
completion of the merger,
o amend the supplemental retirement plans (System Executive Retirement
Plan, Pension Equalization Plan, Post-Retirement Plan, and Defined
Contribution Restoration Plan) to provide full vesting of all
accrued benefits immediately upon completion of the merger and to
base eligibility on the highest bonus eligibility during the three
years preceding retirement,
o amend the Executive Deferred Compensation Plan to preclude any
amendment that adversely affects benefits accrued at the time of
such amendment, and
o amend the Trust for Deferred Payments to require funding immediately
prior to completion of the merger in an amount sufficient to pay
benefits (other than potential benefits under the Continuity Plan)
to which participants in the executive plans would be entitled if
they terminated employment immediately following completion of the
merger.
Entergy has made no determination as of the date hereof as to the
necessity or desirability of such actions.
Indemnification and Insurance
Under the merger agreement, Holdco has agreed to assume the same
obligations with respect to indemnification of current and former directors,
officers, employees or benefit plan fiduciaries of FPL Group or Entergy as were
contained in the governing documents of FPL Group or Entergy at the date of
signing the merger agreement. In addition, after the completion of the merger,
the directors, officers, employees or benefit plan fiduciaries of FPL Group or
Entergy or their respective subsidiaries who become directors, officers,
employees or benefit plan fiduciaries of Holdco will be entitled to the
indemnity rights and protections afforded to directors, officers, employees and
benefit plan fiduciaries of Holdco. Finally, Holdco will maintain the directors'
and officers' liability (and fiduciary) insurance policies currently maintained
by FPL Group or Entergy, or substantially comparable policies as in effect upon
the completion of the merger, for a period of six years following the completion
of the merger.
Listing of Holdco Capital Stock
It is a condition to the completion of the merger that the Holdco common
stock issuable to FPL Group and Entergy shareholders pursuant to the merger
agreement be approved for listing on the New York Stock Exchange, subject to
official notice of issuance.
Dividends
FPL Group and Entergy do not anticipate making any changes to their
dividend policies prior to the consummation of the merger; however, the FPL
Group and Entergy Boards will continue to evaluate their respective dividend
policies in light of business, financial and regulatory considerations. The most
recent quarterly dividend declared by FPL Group was $0.54 per share payable on
September 15, 2000. FPL Group's current dividend is $2.16 per share of common
stock on an annual basis. The most recent quarterly dividend declared by Entergy
was $0.30 per share payable on September 1, 2000. Entergy's current dividend is
$1.20 per share of common stock on an annual basis.
53
<PAGE>
It is expected that, after the merger, Holdco will pay dividends in an
amount equal to the annual dividends of FPL Group in effect immediately prior
to the consummation of the merger. The payment of dividends by Holdco,
however, will be subject to approval and declaration by the Holdco Board of
Directors and will depend on a variety of factors, including business,
financial and regulatory considerations.
Material U.S. Federal Income Tax Consequences of the Merger
The following summary discusses the material U.S. federal income tax
consequences of the merger to holders of FPL Group common stock and Entergy
common stock. This summary applies only to holders of FPL Group common stock or
Entergy common stock that are U.S. Holders.
For purposes of this discussion, a U.S. Holder means:
o a citizen or resident of the U.S.,
o a corporation or other entity taxable as a corporation created or
organized under the laws of the U.S. or any of its political
subdivisions,
o a trust, if a U.S. court is able to exercise primary supervision
over the administration of the trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions
of the trust, or
o an estate that is subject to U.S. federal income tax on its income
regardless of its source.
This discussion is based upon the Code, Treasury regulations,
administrative rulings and judicial decisions currently in effect, all of which
are subject to change, possibly with retroactive effect. The discussion applies
only to FPL Group shareholders that hold their FPL Group common stock and
Entergy shareholders that hold their Entergy common stock as a capital asset
within the meaning of Section 1221 of the Code. Further, the discussion does not
address all aspects of U.S. federal income taxation that may be relevant to a
particular shareholder in light of his, her or its personal investment
circumstances or to shareholders subject to special treatment under the U.S.
federal income tax laws, including:
o insurance companies,
o tax-exempt organizations,
o dealers in securities or foreign currency,
o banks or trusts,
o persons that hold their FPL Group common stock or Entergy common
stock as part of a straddle, a hedge against currency risk or a
conversion transaction,
o persons that have a functional currency other than the U.S. dollar,
o investors in pass-through entities,
o shareholders who acquired their FPL Group common stock or Entergy
common stock through the exercise of options, or otherwise as
compensation or through a tax-qualified retirement plan, or
o holders of options granted under any FPL Group or Entergy benefit
plan.
Furthermore, this discussion does not consider the potential
effects of any state, local or foreign tax laws.
54
<PAGE>
None of FPL Group, Entergy or Holdco has requested a ruling from the
Internal Revenue Service with respect to any of the U.S. federal income tax
consequences of the merger and, as a result, there can be no assurance that the
Internal Revenue Service will not disagree with or challenge any of the
conclusions described below.
At the closing of the merger, Cravath, Swaine & Moore, counsel to FPL
Group, will deliver its opinion to FPL Group and Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to Entergy, will deliver its opinion to Entergy,
each to the effect that, on the basis of the facts, representations and
assumption set forth in such opinion, the merger of Ranger Acquisition Corp.
with and into FPL Group and the merger of Ring Acquisition Corp. with and
into Entergy will generally constitute a tax-free transaction governed by
Section 351 of the Code. In that event:
o no gain or loss will be recognized by FPL Group, Entergy or Holdco
as a result of the merger,
o no gain or loss will be recognized by holders of FPL Group common
stock or Entergy common stock on the exchange of such common stock
for Holdco common stock, except with respect to cash received by
holders of FPL Group common stock or Entergy common stock, as the
case may be, in lieu of fractional shares of Holdco common stock,
o the aggregate adjusted basis of the Holdco common stock received in
the transaction by holders of FPL Group common stock or Entergy
common stock will be equal to the aggregate adjusted basis of such
holder's FPL Group common stock or Entergy common stock, as the case
may be, exchanged for the Holdco common stock reduced by any amount
allocable to the fractional share interests in Holdco common stock
for which cash is received, and
o the holding period of the Holdco common stock received in the merger
or Holdco fractional share interests deemed received in the merger
by a holder of FPL Group common stock or Entergy common stock will
include the holding period of such holder's FPL Group common stock
or Entergy common stock, as the case may be, exchanged for that
Holdco common stock.
Cash Instead of Fractional Shares. The receipt of cash instead of a
fractional share of Holdco common stock by a holder of FPL Group common stock or
of Entergy common stock will result in taxable gain or loss to such holder for
U.S. federal income tax purposes equal to the difference between the amount of
cash received by such holder and the holder's adjusted tax basis of its FPL
Group common stock or Entergy common stock, as the case may be, allocable to the
fractional share. The gain or loss will generally constitute capital gain or
loss and will constitute long-term capital gain or loss if the holder's holding
period is greater than 12 months as of the date of the merger. For non-corporate
holders, this long-term capital gain generally will be taxed at a maximum U.S.
federal income tax rate of 20%. The deductibility of capital losses is subject
to limitation.
Backup Withholding. Certain non-corporate holders of FPL Group common
stock and Entergy common stock, as the case may be, may be subject to backup
withholding at a 31% rate on cash payments received instead of fractional shares
of Holdco common stock. Backup withholding will not apply, however, to holders
of FPL Group common stock and Entergy common stock, as the case may be, that:
o furnish a correct taxpayer identification number and certify that
he, she or it is not subject to backup withholding on the substitute
Form W-9 or successor form included in the letter of transmittal to
be delivered to Entergy shareholders following the date of
completion of the merger,
o provide a certification of foreign status on Form W-8 or successor
form, or
o are otherwise exempt from backup withholding.
55
<PAGE>
Reporting Requirements. A holder of FPL Group common stock or Entergy
common stock receiving Holdco common stock as a result of the merger may be
required to retain records related to such holder's FPL Group common stock or
Entergy common stock, as the case may be, and file with its federal income tax
return, a statement setting forth facts relating to the merger.
This summary does not address any non-income tax or any state, local
or foreign tax consequences of the merger. The summary does not address the tax
consequences of any transaction other than the merger. Accordingly, each FPL
Group and Entergy shareholder is strongly urged to consult with a tax advisor to
determine the particular federal, state, local or foreign income or other tax
consequences of the merger to the holder.
Accounting Treatment
The merger will be accounted for as an acquisition of Entergy by FPL
Group, and will therefore be recorded using the purchase method of accounting.
Under the purchase method of accounting, FPL Group will add Entergy's
assets and liabilities to its own at their fair market value, and any premium
paid over and above the fair market value of Entergy's net assets will be
reflected as goodwill on Holdco's balance sheet and must be written off against
Holdco's future earnings.
Dissenters' or Appraisal Rights
FPL Group
Under the Florida Business Corporation Act ("FBCA"), because the FPL Group
common stock is listed on the New York Stock Exchange, FPL Group shareholders
will not have any appraisal or dissenters' rights as a result of the merger.
Entergy
Under the Delaware General Corporation Law ("DGCL"), because the Entergy
common stock is listed on the New York Stock Exchange, Entergy shareholders will
not have any appraisal or dissenters' rights as a result of the merger.
Workforce and Employee Benefit Matters
Continuation of Agreements
After the completion of the merger, Holdco and its subsidiaries will honor
all obligations of the employer under any employment contracts, agreements,
collective bargaining agreements, plans and commitments of FPL Group and Entergy
and their respective subsidiaries existing as of the date of the merger
agreement, provided that Holdco will not be prevented from enforcing such
contracts, agreements, collective bargaining agreements, plans or commitments in
accordance with their terms.
Workforce Reductions
Subject to obligations under applicable law and applicable collective
bargaining agreements, it will be Holdco's intention that:
o any reductions in the employee work force of Holdco and its
subsidiaries will be made on a fair and equitable basis, in light of
the circumstances and the objectives to be achieved. Holdco will
give consideration to previous work history, job experience and
qualifications, without regard to whether employment prior to the
completion of the merger was with FPL Group and its subsidiaries or
with Entergy and its subsidiaries, and
56
<PAGE>
o employees will be able to participate in all job training, career
development and educational programs of Holdco and its subsidiaries
for which they are eligible. Such employees also will be entitled to
fair and equitable consideration in connection with any job
opportunities with Holdco and its subsidiaries. In neither case will
it matter whether the employment of such employees prior to the
completion of the merger was with FPL Group and its subsidiaries or
with Entergy and its subsidiaries.
Employee Benefit Plans
Subject to applicable law and applicable collective bargaining agreements,
Holdco and its subsidiaries will give credit under all employee benefit plans,
programs and arrangements to employees for all service prior to the merger with
FPL Group or Entergy or their respective subsidiaries, or any predecessor
employer (to the extent that such credit was given by Entergy or FPL Group or
any of their respective subsidiaries) for all purposes for which such service
was taken into account or recognized by FPL Group or Entergy or their respective
subsidiaries, but not to the extent crediting such service would result in
duplication of benefits (including for benefit accrual purposes under defined
benefit pension plans).
Effect on Awards Outstanding Under Stock Plans
FPL Group
Under the merger agreement, upon completion of the merger, Holdco will
assume each FPL Group employee stock option plan and each outstanding FPL
Group employee stock option. Under the merger agreement, prior to the
consummation of the merger, FPL Group will adjust the terms of all
outstanding employee stock options to provide that the options will
constitute options to acquire shares of Holdco common stock, on the same
terms and conditions as apply to the FPL Group employee stock options (other
than stock options held by executive officers of FPL Group, which, upon
approval of the merger by FPL's shareholders, will be canceled in exchange
for a cash payment if the highest trading price of FPL Group common
stock during the 60-day period preceeding the date that the FPL Group
shareholders approve the merger is in excess of the exercise price of such
options). As of July 31, 2000, employee stock options covering 1,460,470
shares of FPL Group common stock were outstanding.
Entergy
Under the merger agreement, upon completion of the merger, Holdco will
assume each Entergy employee stock option plan and each outstanding Entergy
employee stock option. Under the merger agreement, prior to consummation of the
merger, Entergy will adjust the terms of all outstanding employee stock options
to provide that the options will constitute options to acquire, on the same
terms and condition as apply to the Entergy employee stock options, the same
number of shares of Holdco common stock (rounded down to the nearest whole
share) as the holder of the option would have received in the merger had the
holder exercised the option in full immediately prior to the merger. The amount
of the exercise price per share of Holdco common stock (rounded up to the
nearest cent) under any option will be equal to the aggregate exercise price for
the shares of common stock subject to the Entergy option divided by the total
number of shares of Holdco common stock to be subject to the option. As of July
31, 2000, employee stock options covering 12,477,109 shares of Entergy common
stock were outstanding.
Resale of Holdco Common Stock
Holdco common stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any FPL Group or Entergy shareholder who is, or is expected to
be, an "affiliate" of FPL Group or Entergy, as applicable, for purposes of Rule
145 under the Securities Act. It is expected that these shareholders will agree
not to transfer any Holdco common stock received in the merger except pursuant
to an effective registration statement under the Securities Act or in a
transaction not required to be registered under the Securities Act. The merger
agreement requires each of FPL Group and Entergy to use reasonable efforts to
cause its shareholders who are, or are expected to be, affiliates to enter into
these agreements. This joint proxy statement/prospectus
57
<PAGE>
does not cover resales of Holdco common stock received by any person upon
completion of the merger, and no person is authorized to make any use of this
joint proxy statement/prospectus in connection with any resale.
Legal Proceedings Related to the Merger
None.
58
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS
AND EXECUTIVE OFFICERS
Security Ownership of Certain Beneficial Owners and Management of FPL Group
As of July 31, 2000, FPL Group's directors, its executive officers and
the Trustee under the Florida Power & Light Company Master Thrift Plans Trust
beneficially own shares of FPL Group common stock as follows:
<TABLE>
<CAPTION>
Shares of Common Stock Percent of
Name of Beneficial Owner Beneficially Owned (a) Class
------------------------ ---------------------- ---------
<S> <C> <C>
H. Jesse Arnelle 9,820 (b)(c)(e) *
Sherry S. Barrat 4,186 (b)(e) *
Robert M. Beall, II 7,583 (c)(e) *
James L. Broadhead 271,982 (d)(e) *
J. Hyatt Brown 15,545 (c)(e)(g) *
Armando M. Codina 11,747 (b)(c)(e) *
Dennis P. Coyle 69,963 (d)(e)(f) *
Marshall M. Criser 11,463 (b)(c)(e)(g) *
Willard D. Dover 7,734 (c)(e) *
Alexander W. Dreyfoos, Jr. 9,248 (b)(e) *
Paul J. Evanson 107,454 (b)(d)(e)(f) *
Lawrence J. Kelleher 74,267 (b)(d)(e)(f) *
Drew Lewis 11,976 (c)(e) *
Frederic V. Malek 6,526 (c)(e) *
Thomas F. Plunkett 59,273 (b)(d)(e)(f) *
Paul R. Tregurtha 8,792 (b)(c)(e) *
All directors and executive officers as a group 832,351 (b)(c)(d)(e)(f) *
Fidelity Management Trust Company
872 Devonshire Street
Boston, Massachusetts 02109 16,830,909 (h) 9.5
</TABLE>
----------
* Denotes less than 1% of FPL Group common stock outstanding.
(a) Information is as of July 31, 2000, except for holdings under the
Supplemental Executive Retirement Plan, which are as of December 31, 1999.
Unless otherwise indicated, each person has sole voting and sole
investment power.
(b) Includes 36,697; 15,709; 8,842; 2,573; 6,160; 1,609; 3,548; 197 and
1,886 share units for Messrs. Evanson, Kelleher, Plunkett, Arnelle,
Codina, Criser, Dreyfoos, Tregurtha, and Mrs. Barrat, respectively, and a
total of 96,004 share units for all directors and officers as a group,
under deferred compensation plans. Such units have no voting rights.
(c) Includes 4,947; 2,963; 4,095; 2,487; 6,154; 5,734; 5,244; 4,426 and 4,495
share units for Messrs. Arnelle, Beall, Brown, Codina, Criser, Dover,
Lewis, Malek, and Tregurtha, respectively, and a total of 40,545 share
units for all directors and officers as a group, granted in connection
with the termination of the FPL Group, Inc. Non-Employee Director
Retirement Plan. Such units have no voting rights and are subject to
forfeiture upon retirement from the Board before age 65.
59
<PAGE>
(d) Includes 15,625; 3,876; 4,335; 1,292 and 549 share units for Messrs.
Broadhead, Coyle, Evanson, Kelleher and Plunkett, respectively,
and a total of 26,411 share units for all directors and officers as
a group, credited to a Supplemental Matching Contribution Account
under the Supplemental Executive Retirement Plan.
(e) Includes 146,800; 15,000; 18,750; 25,000 and 18,750 shares of
restricted stock held by Messrs. Broadhead, Coyle, Evanson, Kelleher and
Plunkett, respectively, 1,100 shares of restricted stock held by each
of Messrs. Arnelle, Beall, Brown, Codina, Criser, Dover, Lewis, Malek
and Tregurtha and 1,300 shares of restricted stock held by each of Mrs.
Barrat and Mr. Dreyfoos, and a total of 279,800 shares of restricted
stock for all directors and officers as a group, as to which each
person has voting power but not investment power.
(f) Includes options held by Messrs. Coyle, Evanson, Kelleher and Plunkett to
purchase 25,000; 37,500; 25,000 and 25,000 shares, respectively, and
options to purchase a total of 175,000 shares for all directors and
officers as a group.
(g) Includes 350 and 2,300 shares as to which Messrs. Brown and Criser,
respectively, disclaim beneficial ownership.
(h) Held as Trustee under the Florida Power & Light Company Master Thrift
Plans Trust. The Trustee disclaims beneficial ownership of such
securities.
Security Ownership of Certain Beneficial Owners of Entergy
The following table provides, as of December 31, 1999, information with
respect to persons who are known to Entergy to beneficially own more than five
percent of the common stock of Entergy:
<TABLE>
<CAPTION>
Shares of Common Stock
Name and Address of Beneficial Owner Beneficially Owned Percent of Class
------------------------------------ ------------------- -----------------
<S> <C> <C>
Barrow, Hanley, Mewhinney & Strauss, Inc. ("BHM&S")
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, Texas 75204-2429............................. 28,711,268 (a) 11.6%
FMR Corp ("FMR")
82 Devonshire Street
Boston, Massachusetts 02109......................... 17,468,364 (b) 7.1%
Franklin Resources, Inc. ("FRI")
777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, California 94403-7777.................... 17,262,204 (c) 7.1%
Putnam Investments, Inc.
One Post Office Square
Boston, Massachusetts 02109......................... 15,485,026 (d) 6.4%
</TABLE>
------------
(a) Barrow, Hanley, Mewhinney & Strauss, Inc. has indicated that it has sole
voting power over all 28,711,268 shares, sole investment power over
6,676,668 shares and shared voting power over 22,034,600 shares. Barrow,
Hanley also advised Entergy that it is a registered investment advisor and
these shares are held on behalf of various clients. These shares include
19,980,400 shares (8.28%) held on behalf of the Vanguard Windsor
Funds-Vanguard Windsor II Fund, the Vanguard Group, 455 Devon Park Drive,
Wayne, Pennsylvania 19087-1815.
(b) FMR may not vote or transfer this Entergy common stock. The shares are
beneficially owned by two wholly owned subsidiaries of FMR each of which
may vote and transfer the shares beneficially owned by it. Fidelity
Management and Research Company beneficially owns and has shared
investment power over 15,709,900 shares and Fidelity Management Trust
Company beneficially owns and has shared investment power over 1,753,864
shares. The remaining 4,600 shares are beneficially owned and may be voted
and transferred by Fidelity International Limited, a Bermudan joint stock
company and former majority-owned subsidiary of Fidelity Management and
Research Company.
(c) FRI may not vote or transfer this Entergy common stock. These shares are
beneficially owned by one or more investment companies or other managed
accounts, which are advised by investment advisory subsidiaries of FRI.
Those subsidiaries, Franklin Advisors, Inc., Templeton Global Advisors,
Limited, Templeton/Franklin Investment Services, Inc., Templeton
Investment Management Limited, and Franklin Advisory Services, LLC., may
vote and transfer 5,330,300, 10,883,049, 13,855, 35,000 and 1,000,000
shares, respectively.
60
<PAGE>
(d) Putnam Investments, Inc., a wholly owned subsidiary of Marsh & McLennan
Companies, Inc., wholly owns two registered investment advisers: Putnam
Investment Management, Inc. and The Putnam Advisory Company, Inc. which
beneficially own and have shared investment power over 14,933,086 and
551,940 shares, respectively. Putnam Investments, Inc. has shared voting
power as to 456,936 shares.
Security Ownership of Management of Entergy
The table below shows how much Entergy common stock was beneficially owned
by certain current directors, nominees and executive officers of Entergy, as of
July 31, 2000 as well as how much they and the other executive officers
beneficially owned as a group. This information has been furnished by each
individual. Each individual has sole voting and investment power, unless
otherwise indicated. The amount of Entergy common stock owned by all directors,
nominees and executive officers as a group totals less than 1% of the
outstanding Entergy common stock.
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially
Name of Beneficial Owner Owned Percent of Class
------------------------ --------- ----------------
<S> <C> <C>
Maureen S. Bateman....................................... -- *
W. Frank Blount.......................................... 6,534 *
VADM. George W. Davis.................................... 1,200 *
Dr. Norman C. Francis.................................... 2,400 *
Frank F. Gallaher........................................ 65,676 (a) *
Donald C. Hintz.......................................... 122,535 (a) *
Jerry D. Jackson......................................... 106,033 (a) *
J. Wayne Leonard......................................... 98,065 (a) *
Robert v.d. Luft......................................... 99,972 (a) *
Thomas F. McLarty, III................................... 600 *
Kathleen A. Murphy....................................... 1,000 *
Dr. Paul W. Murrill...................................... 2,982 *
James R. Nichols......................................... 400 *
William A. Percy, III.................................... 400 *
Dennis H. Reilley........................................ 600 *
Wm. Clifford Smith....................................... 8,820 *
Bismark A. Steinhagen.................................... 8,966 *
C. John Wilder........................................... 26,511 (a) *
All directors, nominees and executive officers........... 652,037 (a) *
</TABLE>
--------------
* Denotes less than 1% of Entergy common stock outstanding.
(a) Includes Entergy common stock in the form of stock options currently
exercisable and beneficially owned: Mr. Gallaher, 58,166 shares; Mr.
Hintz, 119,000 shares; Mr. Jackson, 83,244 shares; Mr. Luft, 85,000
shares; Mr. Wilder, 17,500 shares; and Mr. Leonard, 85,000 shares, and
all directors, nominees and executive officers, 504,084 shares.
61
<PAGE>
REGULATORY MATTERS
Certain local, state and federal regulatory requirements must be complied
with before the merger is consummated. FPL Group and Entergy are not aware of
any material governmental consents or approvals that are required prior to the
parties' consummation of the merger other than those described below. It
presently is contemplated that if any such additional governmental consents and
approvals are required, such consents and approvals will be sought. While there
can be no assurance that the consents or approvals described below or any such
additional consents or approvals will be obtained, the directors of FPL Group
and Entergy will seek to consummate the merger by late 2001.
Hart-Scott-Rodino Act
The merger is subject to the requirements of the HSR Act and the rules and
regulations promulgated thereunder, which provide that certain acquisition
transactions may not be consummated until certain information has been furnished
to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and until certain
waiting periods have been terminated or have expired. The expiration or earlier
termination of the HSR Act waiting period would not preclude the Antitrust
Division or the FTC from challenging the merger on antitrust grounds. Neither
FPL Group nor Entergy believes that the merger will violate federal antitrust
laws. If the merger is not consummated within 12 months after the expiration or
earlier termination of the initial HSR Act waiting period, FPL Group and Entergy
would be required to submit new information to the Antitrust Division and the
FTC, and a new HSR Act waiting period would have to expire or be earlier
terminated before the merger could be consummated. FPL Group and Entergy intend
to file their premerger notifications in late 2000 or early 2001 or early 2001.
Federal Power Act
Section 203 of the Federal Power Act provides that no public utility
may sell or otherwise dispose of its jurisdictional facilities, directly or
indirectly merge or consolidate its jurisdictional facilities with those of
any other person, or acquire any security of any other public utility without
first having obtained authorization from the Federal Energy Regulatory
Commission (the "FERC"). Because FPL Group and Entergy own "jurisdictional
facilities" under the Federal Power Act, the approval of the FERC under Section
203 is required before FPL Group and Entergy may consummate the merger.
Section 203 provides that the FERC is required to grant its approval if the
merger is found to be "consistent with the public interest".
The FERC stated in its 1996 Merger Policy Statement that, in analyzing a
merger under Section 203, it will evaluate the following criteria:
o the effect of the merger on competition in electric power markets,
o the effect of the merger on the applicant's wholesale rates, and
o the effect of the merger on state and federal regulation of the
applicants.
The FERC will review these factors to determine whether the merger is
consistent with the public interest. If the FERC finds that the merger would
adversely affect competition, wholesale rates, or regulation, it may, pursuant
to the Federal Power Act, deny approval of the merger or impose remedial
conditions intended to mitigate such effects (FPL Group and Entergy could review
whether to accept such remedial conditions). Based on recent FERC precedent, FPL
Group and Entergy believe that their merger should satisfy the FERC's merger
guidelines and that any mitigation conditions imposed by the FERC would not have
a material adverse effect on the anticipated benefits of the transactions. The
companies and their public utility subsidiaries will file their application
under Section 203 in late 2000.
Nuclear Regulatory Commission
Since subsidiaries of both FPL Group and Entergy hold licenses issued by
the Nuclear Regulatory Commission (the "NRC") in connection with those
subsidiaries' interests in various nuclear power plants,
62
<PAGE>
the merger requires NRC approval under the Atomic Energy Act of 1954. FPL Group
and Entergy will file an application with the NRC requesting its approval in
early 2001.
State and Local Regulatory Approvals
FPL Group and Entergy will file for approval of the merger with state
and certain municipal utility regulators in Arkansas, Louisiana (including
the City of New Orleans), Mississippi, and Texas. Florida law does not
require approval of the merger by the Florida Public Service Commission (the
"FPSC"). In Arkansas, the state commission must approve the merger unless it
finds that one or more of five specific adverse circumstances would result
from the merger. These circumstances include an adverse effect on the public
utility's ability to render the same level of quality service, a reduction of
competition for the provision of utility service in the state, and an adverse
impact on the financial condition of the public utility. In Louisiana, the
state commission will consider eighteen specific factors in determining
whether to approve the merger. These factors generally focus on the public
interest and the effect of the merger on rates, competition, the public
health and safety, employment, the financial condition of the public utility
and the continued ability of the public utility to provide safe and reliable
service. In Texas, the state commission is required to determine whether the
merger is consistent with the public interest, taking into consideration
factors such as the reasonable value of the property, facilities and
securities to be acquired, transferred or merged, and whether the merger will
adversely affect the health and safety of customers or employees, result in
the transfer of jobs of Texas citizens to workers outside of Texas, or result
in the decline of service. The standards governing approval of the merger by
the New Orleans City Council and the Mississippi state commission are not
expressly stated, but it is likely that those regulators would consider some
or all of the above described factors considered by the other state
regulators. It is anticipated that the FPSC, although it does not have the
authority to approve or disapprove the merger, will open a docket to examine
the potential impact of the merger on retail rates, service quality, capital
structure and other matters. In addition, regulatory proceedings may be
opened by regulators in other states that have jurisdiction over independent
power projects owned by unregulated subsidiaries of FPL Group or Entergy,
including regulators in Virginia, Pennsylvania and New Jersey.
FPL Group's subsidiary, FPL FiberNet, LLC, holds an authorization from
the FPSC to operate as a regulated telecommunications service provider. That
license authorizes FPL Group to operate as an alternative access vendor and
provide dedicated private line point-to-point or point-to-multipoint
telecommunications services. Since the merger will entail a transfer of
control of the entity that holds such authority, FPL FiberNet, LLC will need
to seek FPSC approval of the transfer of control resulting from the merger.
The FPSC will assess whether the transfer of control of the licensed entity
will serve the public interest. In addition, FPL FiberNet, LLC also holds
franchises from various municipalities for authority to use rights-of-way to
install telecommunications facilities. Depending on the terms of each
franchise, the subsidiary may be required to seek approval from certain
municipalities for the transfer of control. Where required, applications for
approval or notifications will be filed with the municipalities in accordance
with the terms of each franchise.
Securities and Exchange Commission Approval Pursuant to PUHCA
FPL Group and Entergy believe that Holdco will not qualify for an
exemption from registration under PUHCA and thus will be required to register as
a public utility holding company with the SEC under Section 5 of PUHCA at the
effective time of the merger. Section 9(a)(1) of PUHCA makes it unlawful,
63
<PAGE>
without prior SEC approval under Section 10, for any registered holding company
to acquire, directly or indirectly, any securities or utility assets or any
other interest in any business. Accordingly, the SEC must approve the merger
under Section 10 of PUHCA before it takes place.
Under the applicable standards of PUHCA, the SEC is directed to approve a
proposed acquisition unless it finds that:
o the acquisition would tend towards detrimental interlocking
relations or a detrimental concentration of control,
o the consideration to be paid in connection with the acquisition is
not reasonable,
o the acquisition would unduly complicate the capital structure of the
applicant's holding company system or would be detrimental to the
proper functioning of that system, or
o the acquisition would violate applicable state law.
In order to approve a proposed acquisition, the SEC also must find that the
acquisition would tend towards the development of an integrated public utility
system and that the resulting utility system otherwise would conform to PUHCA's
integration and corporate simplification standards. FPL Group and Entergy will
file their application with the SEC requesting its approval by early 2001.
As a registered holding company, Holdco will become subject to the
restrictions that PUHCA imposes on registered holding company systems. These
restrictions include requirements that the SEC approve issuances of certain
securities, sales and acquisitions of utility assets or securities of public
utility companies, and acquisitions of interests in any other business. PUHCA
also limits the ability of registered holding companies to engage in non-utility
ventures and regulates any holding company system service company and the
rendering of services by holding company affiliates to the system's public
utility companies. PUHCA restrictions are not expected to have a material
adverse impact on Holdco, as Entergy is currently a registered holding company
and FPL Group expects that its current and planned utility operations and
non-utility investments and transactions will be permitted under the statute.
Although the SEC may, under PUHCA, require Holdco, as a condition to approval of
the merger, to divest any business that is not functionally related to its
utility operations, FPL Group and Entergy believe that after completion of the
merger all of their non-utility activities will satisfy the requirements for
retention by a registered holding company. In conjunction with the registration
of Holdco under Section 5 of PUHCA, the SEC may review the question of whether
the system can retain both gas and electric utility operations. Based on recent
orders issued by the SEC under PUHCA, FPL Group and Entergy believe they will be
permitted to retain all of their utility operations.
64
<PAGE>
THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is incorporated by reference
and attached as Annex A.
The Merger
Under the merger agreement, Ranger Acquisition Corp. will merge with
and into FPL Group and Ring Acquisition Corp. will merge with and into
Entergy. Upon completion of the merger, the holders of FPL Group common stock
and Entergy common stock will together own all of the outstanding shares of
common stock of Holdco, and Holdco will own all of the outstanding shares of
FPL Group and Entergy common stock.
Timing of Closing
The closing will occur within two business days after the day on which
the last of the conditions set forth in the merger agreement has been
satisfied or waived, unless FPL Group and Entergy agree to a different date
or time. Articles of merger will be filed with the Secretary of State of the
State of Florida and a certificate of merger will be filed with the
Department of State of the State of Delaware immediately upon the closing, at
which time the merger will be effective.
Merger Consideration
The merger agreement provides that each share of FPL Group common stock
outstanding immediately prior to the closing of the merger will, at closing, be
converted into one share of Holdco common stock. Any shares of FPL Group common
stock held by FPL Group as treasury shares or owned by Entergy or Holdco will be
canceled without any payment for those shares. The merger agreement provides
that each share of Entergy common stock outstanding immediately prior to the
closing of the merger will, at closing, be converted into 0.585 of a share of
Holdco common stock. Any shares of Entergy common stock held by Entergy as
treasury shares or owned by FPL Group or Holdco will be canceled without any
payment for those shares.
Procedures for Exchange of Share Certificates; Fractional Shares
FPL Group and Entergy shareholders should not return share certificates
with the enclosed proxy card.
As soon as reasonably practicable after the completion of the merger, the
exchange agent will mail the following materials to each holder of record of FPL
Group and Entergy common stock whose shares were converted into the right to
receive shares of Holdco common stock:
o a letter of transmittal for use in submitting their shares to the
exchange agent for exchange, and
o instructions explaining what the holders must do to effect the
surrender of FPL Group and Entergy share certificates in exchange
for the consideration to be issued in the merger.
FPL Group and Entergy holders should complete and sign the letter of
transmittal and return it to the exchange agent together with his or her
certificates in accordance with the instructions.
After the merger, each certificate that previously represented FPL Group
or Entergy common stock will represent only the right to receive the merger
consideration, including cash for any fractional shares of Holdco common stock.
No fractional shares of Holdco common stock will be issued upon the
conversion of FPL Group or Entergy common stock.
As promptly as practicable after the completion of the merger, the
exchange agent will sell on the New York Stock Exchange the excess of the number
of whole shares of Holdco common stock delivered to the exchange agent by Holdco
for exchanges by Holdco in connection with the merger over the aggregate number
of whole shares of Holdco common stock to be distributed to former FPL Group and
Entergy shareholders. The exchange agent will pay to each former FPL Group and
Entergy shareholder a portion
65
<PAGE>
of the sale proceeds based upon the ratio of each shareholder's fractional share
interest to the aggregate amount of fractional share interests to which all
former FPL Group and Entergy shareholders are entitled. Notwithstanding the
foregoing, Holdco may, in the alternative, at its option, elect to pay to each
former FPL Group and Entergy shareholder an amount in cash equal to the product
of each shareholder's fractional share interest and the closing price for a
share of FPL Group common stock as reported in The Wall Street Journal on the
closing date of the merger.
Holders of certificates previously representing FPL Group or Entergy
common stock will not be paid dividends or distributions on the Holdco common
stock into which their shares have been converted with a record date after the
merger, and will not be paid cash for any fractional shares of Holdco common
stock, until their certificates are surrendered to the exchange agent for
exchange. When their certificates are surrendered, any unpaid dividends and any
cash instead of fractional shares will be paid without interest.
In the event of a transfer of ownership of FPL Group or Entergy common
stock that is not registered in the transfer records of FPL Group or Entergy, as
the case may be, a certificate representing the proper number of shares of
Holdco common stock may be issued to a person other than the person in whose
name the surrendered certificate is registered if:
o the certificate is properly endorsed or otherwise is in proper form
for transfer, and
o the person requesting issuance either pays any transfer or other
taxes resulting from the issuance of shares of Holdco common stock
to a person other than the registered holder of the certificate, or
establishes to the satisfaction of Holdco that any taxes have been
paid or are not applicable.
All shares of Holdco common stock issued upon surrender of certificates
representing shares of FPL Group and Entergy common stock, including any cash
paid instead of any fractional shares of Holdco common stock, will be deemed to
have been issued in full satisfaction of all rights relating to those shares of
FPL Group or Entergy common stock, as the case may be. Each of FPL Group and
Entergy will remain obligated, however, to pay any dividends or make any other
distributions declared or made by FPL Group or Entergy, as the case may be, on
FPL Group or Entergy common stock with a record date before the completion of
the merger and that remain unpaid at the completion of the merger. If FPL Group
or Entergy certificates are presented to Holdco, FPL Group, Entergy or the
exchange agent after the completion of the merger, they will be canceled and
exchanged as described above.
Conditions to the Completion of the Merger
Mutual Closing Conditions. Each party's obligation to complete the merger
is subject to the satisfaction or waiver of the following conditions:
o approval by the FPL Group and Entergy shareholders,
o absence of legal prohibitions on consummation of the merger,
o Holdco's registration statement on Form S-4, which includes this
joint proxy statement/ prospectus, not being subject to any stop
order or proceeding seeking a stop order, and
o approval for listing on the New York Stock Exchange of the shares of
Holdco common stock to be issued in the merger, subject to official
notice of issuance.
66
<PAGE>
Additional Closing Conditions for FPL Group's Benefit. FPL Group's
obligation to complete the merger is subject to the following additional
conditions:
o accuracy as of closing of the representations and warranties made by
Entergy to the extent set forth in the merger agreement,
o performance in all material respects by Entergy of the obligations
required to be performed by it at or prior to closing,
o receipt of an opinion of counsel that the merger will qualify as a
transaction described in Section 351 of the Internal Revenue Code,
o all applicable regulatory approvals for the merger being obtained at
or prior to closing on terms that, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect
on Holdco and its prospective subsidiaries, taken as a whole, or
Entergy and its subsidiaries, taken as a whole,
o absence of any change, event or development that, individually or in
the aggregate, has had or could reasonably be expected to have a
material adverse effect on Entergy during the period from and after
December 31, 1999, until closing, and
o receipt of a certificate of an executive officer of Entergy as to
the satisfaction of closing conditions.
Additional Closing Conditions for Entergy's Benefit. Entergy's obligation
to complete the merger is subject to the following additional conditions:
o accuracy as of closing of the representations and warranties made by
FPL Group to the extent set forth in the merger agreement,
o performance in all material respects by FPL Group of the obligations
required to be performed by it at or prior to closing,
o receipt of an opinion of counsel that the merger will qualify as a
transaction described in Section 351 of the Internal Revenue Code,
o all applicable regulatory approvals for the merger being obtained at
or prior to closing on terms that, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect
on Holdco and its prospective subsidiaries, taken as a whole, or FPL
Group and its subsidiaries, taken as a whole,
o absence of any material change, event or development that,
individually or in the aggregate, has had or could reasonably be
expected to have a material adverse effect on FPL Group during the
period from and after December 31, 1999, until closing, and
o receipt of a certificate of an executive officer of FPL Group as to
the satisfaction of closing conditions.
The merger agreement provides that a "material adverse change" or
"material adverse effect" means, when used in respect of FPL Group, Entergy or
Holdco, any change, effect, event, occurrence or state of facts:
o that is materially adverse to the business, assets, properties,
financial condition or results of operations of that person and its
subsidiaries, taken as a whole, or
o that prevents that person from performing its material obligations
under the merger agreement or prevents consummation of the
transactions contemplated by the merger agreement.
67
<PAGE>
No Solicitation
Each of FPL Group and Entergy has agreed that it and its subsidiaries,
directors, officers and employees will not, and each will use its reasonable
best efforts to cause its advisors and other representatives not to, directly or
indirectly:
o solicit, initiate or knowingly encourage (including by way of
furnishing information), or knowingly take any other action designed
to facilitate, any inquiries or the making of any takeover proposal
involving it, as described below, or
o participate in any negotiations or substantive discussions regarding
any takeover proposal involving it.
The merger agreement provides that the term "takeover proposal" means:
o with respect to FPL Group
o any inquiry, proposal or offer relating to any acquisition or
purchase of a business that constitutes 20% or more of the net
revenues, net income or assets of FPL Group and its
subsidiaries, taken as a whole, or 20% or more of any class of
voting securities of FPL Group or any of its subsidiaries
owning, operating or controlling a material FPL Group
business,
o any tender offer or exchange offer that would result in any
person owning 20% or more of any class of voting securities of
FPL Group or any of its subsidiaries owning, operating or
controlling a material FPL Group business, or
o any merger, consolidation, business combination,
recapitalization, liquidation or dissolution involving FPL
Group or any of its subsidiaries owning, operating or
controlling a material FPL Group business,
in each case other than transactions contemplated by the merger agreement,
and
o with respect to Entergy
o any inquiry, proposal or offer relating to any acquisition or
purchase of a business that constitutes 20% or more of the net
revenues, net income or assets of Entergy and its
subsidiaries, taken as a whole, or 20% or more of any class of
voting securities of Entergy or any of its subsidiaries
owning, operating or controlling a material Entergy business,
o any tender offer or exchange offer that would result in any
person owning 20% or more of any class of voting securities of
Entergy or any of its subsidiaries owning, operating or
controlling a material Entergy business, or
o any merger, consolidation, business combination,
recapitalization, liquidation or dissolution involving Entergy
or any of its subsidiaries owning, operating or controlling a
material Entergy business,
in each case other than transactions contemplated by the merger agreement.
Notwithstanding the foregoing, each of FPL Group or Entergy may, prior to
its receiving the approval of its shareholders of the merger agreement, subject
to providing written notice to the other party, furnish information with respect
to itself and its subsidiaries to the person making the takeover proposal
pursuant to a confidentiality agreement no less favorable to itself than the
confidentiality agreement
68
<PAGE>
between FPL Group and Entergy in connection with the merger and participate in
discussions or negotiations regarding the proposal, provided that:
o the takeover proposal was not solicited by FPL Group or Entergy, as
the case may be, or otherwise in breach of the terms of this
covenant, and
o it is determined in good faith by FPL Group's or Entergy's Board of
Directors, as the case may be, after consultation with its legal and
financial advisors, that the takeover proposal is or is reasonably
likely to result in a superior proposal to take over FPL Group or
Entergy, as the case may be.
Except as expressly permitted by the merger agreement, none of the Board
of Directors of FPL Group or Entergy nor any committee thereof will:
o withdraw or modify in a manner adverse to the other party, or
propose publicly to withdraw or modify in a manner adverse to the
other party, its approval or recommendation of the merger or the
merger agreement,
o approve or recommend, or propose publicly to approve or recommend,
any takeover proposal, or
o enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement related to any takeover
proposal.
However, the merger agreement provides that, in the event that, prior to
FPL Group or Entergy, as the case may be, receiving the approval of its
shareholders of the merger agreement, the Board of Directors of FPL Group or
Entergy, as the case may be, determines in good faith, after consulting with
outside counsel, that the failure to take an action described above would be
reasonably likely to result in a breach of its fiduciary duties, the Board of
Directors of FPL Group or Entergy, as the case may be, may:
o withdraw or modify, or propose publicly to withdraw or modify, its
approval or recommendation of the merger and the merger agreement,
o approve or recommend, or propose publicly to approve or recommend,
any superior proposal, but only if the Board of Directors of FPL
Group or Entergy, as the case may be, first determines that such
proposal constitutes a superior proposal, or
o terminate the merger agreement, but only if the Board of Directors
of the recipient of the proposal first determines that such proposal
constitutes a superior proposal and if the recipient of the proposal
first notifies the other party of such determination and, seven
business days following receipt by the other party of such
determination, determines that such proposal remains a superior
proposal.
The merger agreement provides that the term "superior proposal" means:
o with respect to FPL Group, any inquiry, proposal or offer relating
to any acquisition or purchase of a business that constitutes 50% or
more of the net revenues, net income or assets of FPL Group, 50% or
more of any class of voting securities of FPL Group, any tender
offer or exchange offer that would result in any person owning 50%
or more of any class of voting securities of FPL Group, or any
merger, consolidation, business combination, recapitalization,
liquidation or dissolution involving FPL Group, in each case other
than the transactions contemplated by the merger agreement and that,
in the good faith judgment of FPL Group's Board of Directors, is
more favorable (taking into account financial and strategic
considerations, the identity of the third party making the proposal
and the conditions and prospects for completing the proposal) than
the transactions contemplated by the merger agreement (taking into
account changes to the merger agreement and the transactions
contemplated by the merger agreement proposed by Entergy), and
69
<PAGE>
o with respect to Entergy, any inquiry, proposal or offer relating to
any acquisition or purchase of a business that constitutes 50% or
more of the net revenues, net income or assets of Entergy, 50% or
more of any class of voting securities of Entergy, any tender offer
or exchange offer that would result in any person owning 50% or more
of any class of voting securities of Entergy, or any merger,
consolidation, business combination, recapitalization, liquidation
or dissolution involving Entergy, in each case other than the
transactions contemplated by the merger agreement and that, in the
good faith judgment of Entergy's Board of Directors, is more
favorable (taking into account financial and strategic
considerations, the identity of the third party making the proposal
and the conditions and prospects for completing the proposal) than
the transactions contemplated by the merger agreement (taking into
account changes to the merger agreement and the transactions
contemplated by the merger agreement proposed by FPL Group).
The merger agreement also provides that each party will immediately advise
the other of the receipt of any request for information or of any takeover
proposal, the material terms and conditions of the request or takeover proposal
and the identity of the person making the request or takeover proposal. Under
the merger agreement, each party is required to keep the other reasonably
informed of the status and details of any such request or takeover proposal.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the completion
of the merger:
(1) by mutual written consent of FPL Group and Entergy,
(2) by either FPL Group or Entergy if:
(a) the merger has not been consummated by April 30, 2002, unless
the failure of the merger to be so consummated is the result
of a breach by the party seeking to terminate; however, that
date is extended to October 31, 2002 if the closing of the
merger is delayed only because regulatory approvals have not
been received,
(b) FPL Group or Entergy shareholders do not approve the merger
agreement,
(c) there is a permanent legal prohibition to the merger, provided
that the party seeking to terminate has used its reasonable
best efforts to prevent the entry of and to remove the
prohibition,
(d) any condition to the obligation of FPL Group or Entergy to
consummate the merger becomes incapable of satisfaction prior
to the termination date, provided that the failure of any such
condition is not the result of a material breach of the merger
agreement by the party seeking to terminate the merger
agreement,
(e) the other party breaches or fails to perform the merger
agreement in any material respect and the breach or failure to
perform would result in the failure of a closing condition
relating to representations or warranties or the performance
of obligations and is not or cannot be cured within 30 days of
being notified by the other party, or
(f) the other party or any of such other party's directors or
officers participate in discussions or negotiations with a
third party that are in breach of the provisions described in
"--No Solicitation",
(3) by FPL Group, if prior to obtaining its shareholder approval of the
merger agreement:
o FPL Group receives an unsolicited takeover proposal satisfying
the conditions described in "--No Solicitation",
70
<PAGE>
o the Board of Directors of FPL Group determines in good faith,
after consulting with outside counsel, that failure to
terminate the merger agreement would be reasonably likely to
result in a breach of its fiduciary duties,
o FPL Group has complied with its other covenants described in
"--No Solicitation", including providing required notices to
Entergy, and
o FPL Group has paid the required termination and expense
reimbursement fees described in "--Termination Fees;
Reimbursement of Expenses" below,
(4) by Entergy, if prior to obtaining its shareholder approval of the
merger agreement:
o Entergy received an unsolicited takeover proposal satisfying
the conditions described in "--No Solicitation",
o the Board of Directors of Entergy determines in good faith,
after consulting with outside counsel, that failure to
terminate the merger agreement would be reasonably likely to
result in a breach of its fiduciary duties,
o Entergy has complied with its other covenants described in
"--No Solicitation", including providing required notices to
FPL Group, and
o Entergy has paid the required termination and expense
reimbursement fees described in "--Termination Fees;
Reimbursement of Expenses" below,
(5) by FPL Group, if the Entergy Board of Directors does any of the
following:
o withdraws or modifies, or proposes publicly to withdraw or
modify, the Board approval or recommendation of the merger
agreement or the merger,
o fails at any time when a takeover proposal to take over
Entergy has been made and not rejected to reaffirm its
approval or recommendation of the merger agreement or the
merger within 10 business days of receipt of FPL Group's
written request to so reaffirm its approval or recommendation,
or
o approves or recommends, or proposes to approve or recommend, a
takeover proposal, or
(6) by Entergy, if the FPL Group Board of Directors does any of the
following:
o withdraws or modifies, or proposes publicly to withdraw or
modify, the Board approval or recommendation of the merger
agreement or the merger,
o fails at any time when a takeover proposal to take over FPL
Group has been made and not rejected to reaffirm its approval
or recommendation of the merger agreement or the merger within
10 business days of receipt of Entergy's written request to so
reaffirm its approval or recommendation, or
o approves or recommends, or proposes to approve or recommend, a
takeover proposal.
The provisions of the merger agreement relating to termination fees will
continue in effect notwithstanding the termination of the merger agreement.
However, if the merger agreement is validly terminated, the agreement will
become void without any liability on the part of any party, unless such party is
in willful breach of the merger agreement.
71
<PAGE>
Termination Fees; Reimbursement of Expenses
FPL Group
FPL Group must pay to Entergy a termination fee of $215 million, if any of
the following occurs:
(1) following the approval of the merger agreement by the shareholders
of FPL Group, a takeover proposal for FPL Group is made and
thereafter, for the reason described in paragraph (2)(a) above under
"--Termination of the Merger Agreement", the merger agreement is
terminated and within 12 months of the termination FPL Group enters
into a definitive agreement to consummate or consummates a takeover
proposal with the person who originally made the takeover proposal
for FPL Group,
(2) a takeover proposal for FPL Group is publicly disclosed prior to or
during the FPL Group shareholders meeting and either Entergy or FPL
Group terminates the merger agreement because the FPL Group
shareholder approval is not obtained at the FPL Group shareholders
meeting and, within 24 months of the termination, FPL Group enters
into a definitive agreement to consummate or consummates a takeover
proposal for FPL Group,
(3) FPL Group terminates the merger agreement for the reason described
in paragraph (3) above under "--Termination of the Merger
Agreement", or
(4) Entergy terminates the merger agreement because FPL Group's Board of
Directors has:
o withdrawn or modified, or proposed publicly to withdraw or
modify, its approval or recommendation of the merger agreement
or the merger, or
o approved or recommended, or proposed to approve or recommend,
a takeover proposal for FPL Group.
FPL Group must reimburse Entergy for fees and expenses incurred by, or
paid by or on behalf of, Entergy in connection with the merger agreement and the
transactions contemplated by the merger agreement up to a maximum of $25
million, if any of the following occurs:
o FPL Group or Entergy terminates the merger agreement for the reason
described in paragraph (2)(a) under "--Termination of the Merger
Agreement" (after a takeover proposal for FPL Group is made known to
FPL Group or is made directly to FPL Group's shareholders or any
person publicly announces an intention to make a takeover proposal
for FPL Group),
o FPL Group or Entergy terminates the merger agreement for the reason
described in paragraph (2)(b) above under "--Termination of the
Merger Agreement" (after the public disclosure of a takeover
proposal for FPL Group or the announcement by any person of an
intention to make a takeover proposal for FPL Group),
o Entergy terminates the merger agreement for the reason described in
the first or third bullet point set forth in paragraph (6) above
under "--Termination of the Merger Agreement", or
o FPL Group terminates the merger agreement for the reason described
in paragraph (3) above under "--Termination of the Merger
Agreement".
Entergy
Entergy must pay to FPL Group a termination fee of $215 million, if any of
the following occurs:
(1) following the approval and adoption of the merger agreement by the
shareholders of Entergy, a takeover proposal for Entergy is made and
thereafter, for the reason described in paragraph 2(a) above under
"--Termination of the Merger Agreement", the merger agreement
72
<PAGE>
is terminated and within 12 months of the termination Entergy enters
into a definitive agreement to consummate or consummates a takeover
proposal with the person who originally made the takeover proposal
for Entergy,
(2) a takeover proposal for Entergy is publicly disclosed prior to or
during the Entergy shareholders meeting and either FPL Group or
Entergy terminates the merger agreement because the Entergy
shareholder approval is not obtained at the Entergy shareholders
meeting and, within 24 months of the termination, Entergy enters
into a definitive agreement to consummate or consummates a takeover
proposal for Entergy,
(3) Entergy terminates the merger agreement for the reason described in
paragraph (4) above under "--Termination of the Merger Agreement",
or
(4) FPL Group terminates the merger agreement because Entergy's Board of
Directors has:
o withdrawn or modified, or proposed publicly to withdraw or
modify, its approval or recommendation of the merger agreement
or the merger, or
o approved or recommended, or proposed to approve or recommend,
a takeover proposal for Entergy.
Entergy must reimburse FPL Group for fees and expenses incurred by, or
paid by or on behalf of, FPL Group in connection with the merger agreement and
the transactions contemplated by the merger agreement up to a maximum of $25
million, if any of the following occurs:
o Entergy or FPL Group terminates the merger agreement for the reason
described in paragraph (2)(a) above under "--Termination of the
Merger Agreement" (after a takeover proposal for Entergy is made
known to Entergy or is made directly to Entergy's shareholders or
any person publicly announces an intention to make a takeover
proposal for Entergy),
o Entergy or FPL Group terminates the merger agreement for the reason
described in paragraph (2)(b) above under "--Termination of the
Merger Agreement" (after the public disclosure of a takeover
proposal for Entergy or the announcement by any person of an
intention to make a takeover proposal for Entergy),
o FPL Group terminates the merger agreement for the reason described
in the first or third bullet point set forth in paragraph (5) above
under "--Termination of the Merger Agreement", or
o Entergy terminates the merger agreement for the reason described in
paragraph (4) above under "--Termination of the Merger Agreement".
Other Expenses
Except as described above and subject to exceptions for expenses related
to this joint proxy statement/prospectus and certain government filings (to be
paid one-half each by FPL Group and Entergy) and to the payment of transfer
taxes (to be paid by Holdco), all costs and expenses incurred in connection with
the merger agreement and the related transactions will be paid by the party
incurring such costs or expenses.
73
<PAGE>
Interim Operations of FPL Group and Entergy
Subject to certain exceptions, FPL Group and Entergy have agreed that,
prior to the completion of the merger, each will, and will cause its respective
subsidiaries to do, or to refrain from doing, the following in respect of the
interim operations of each:
(1) Ordinary Course
o FPL Group and its subsidiaries and Entergy and its
subsidiaries will conduct their businesses in all material
respects in the ordinary course of business consistent with
past practice. They will use commercially reasonable efforts
to preserve intact in all material respects their current
business organizations, maintain existing permits, keep
available the services of their key officers and employees
(subject to prudent management of workforce and business
needs), maintain their assets and properties in good working
order and condition, maintain adequate insurance, preserve
their relationships with governmental entities, customers and
suppliers and comply with applicable laws, orders and permits.
(2) Charter Documents
o Neither FPL Group nor Entergy will amend or propose to
amend its or, other than in a manner that would not
materially restrict the operation of its respective
businesses, its subsidiaries' certificates of
incorporation, by-laws or other comparable governing
documents.
(3) Dividends
FPL Group
o FPL Group will not declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its
capital stock or share capital, other than to declare and
pay:
o a regular quarterly cash dividend of not more than $0.54
per share in accordance with past dividend practice,
provided that (1) dividends payable in respect of
periods after July 31, 2000, may exceed by up to 5% per
share the dividend payable during the prior 12-month
period in respect of the comparable time period, and (2)
if the closing of the merger does not occur between a
record date and payment date of a regular quarterly
dividend, a special dividend may be declared and paid in
the quarter in which the closing of the merger occurs.
Such special dividend may not exceed an amount equal to
the product of a fraction (x) the numerator of which is
equal to the number of days between the last payment
date of a regular quarterly dividend and the record date
of such special dividend (excluding the last payment
date but including the record date of the special
dividend) and (y) the denominator of which is equal to
the number of days between the last payment date of a
regular quarterly dividend and the same calendar day in
the third month after the month in which the last
payment date occurred (excluding the last payment date
but including the same calendar day), multiplied by the
then permitted quarterly dividend per share,
o dividends by a wholly owned FPL Group subsidiary to its
parent or by a partially owned FPL Group subsidiary (if
the FPL Group entity partially owning such subsidiary
receives a proportionate share of the dividend), and
o regular cash dividends with respect to outstanding
preferred stock.
o FPL Group will not split, combine or reclassify or take
similar action with respect to any of its capital stock or
share capital or issue or authorize the issuance of any other
securities in respect of or in substitution of any of its
74
<PAGE>
adopt a plan of liquidation or other reorganization or acquire
any of its capital stock or options to acquire such capital
stock, subject to limited exceptions specified in the merger
agreement.
Entergy
o Entergy will not declare, set aside or pay any dividends on, or make
any other distributions in respect of, any, of its capital stock or
share capital, other than to declare and pay:
o a regular quarterly cash dividend of not more than $0.30 per
share in accordance with past dividend practice, provided that
(1) dividends payable in respect of periods after July 31,
2000, may exceed by up to 5% per share the dividend payable
during the prior 12-month period in respect of the comparable
time period, and (2) if the closing of the merger does not
occur between a record date and payment date of a regular
quarterly dividend, a special dividend may be declared and
paid in the quarter in which the closing of the merger occurs.
Such special dividend may not exceed an amount equal to the
product of a fraction (x) the numerator of which is equal to
the number of days between the last payment date of a regular
quarterly dividend and the record date of such special
dividend (excluding the last payment date but including the
record date of the special dividend) and (y) the denominator
of which is equal to the number of days between the last
payment date of a regular quarterly dividend and the same
calendar day in the third month after the month in which the
last payment date occurred (excluding the last payment date
but including the same calendar day), multiplied by the then
permitted quarterly dividend per share,
o dividends by a wholly owned Entergy subsidiary to its parent
or by a partially owned Entergy subsidiary (if the Entergy
entity partially owning such subsidiary receives a
proportionate share of the dividend), and
o regular cash dividends with respect to outstanding preferred
stock.
o Entergy will not split, combine or reclassify or take similar action
with respect to any of its any capital stock or share capital or
issue or authorize the issuance of any other securities in respect
of or in substitution of any capital stock or comprised in its share
capital, adopt a plan of liquidation or other reorganization or
acquire any of its capital stock or options to acquire such capital
stock, subject to limited exceptions specified in the merger
agreement.
(4) Share Issuances
o Neither FPL Group nor Entergy will issue, deliver or sell
any shares of its capital stock or options with respect to
such capital stock, subject to limited exceptions specified
in the merger agreement. Neither FPL Group nor Entergy will
modify any right of any holder of outstanding shares of its
capital stock.
(5) Acquisitions; Capital Expenditures
o Other than in accordance with their existing capital plans,
neither FPL Group nor Entergy will make any capital
expenditures or acquire or agree to acquire by merging or
consolidating with or by purchasing any person or assets if
the amount to be so expended for such person or assets
exceeds, in the aggregate, $350 million during the first year
following the date of the merger agreement and $350 million
plus any amount that remains unspent during the first year, in
the aggregate, during the second year. Amounts are in addition
to the amounts set forth in the capital plans of each of FPL
Group and Entergy.
75
<PAGE>
(6) Dispositions
o Neither FPL Group nor Entergy will sell, lease, grant any
security interest in or otherwise dispose of or encumber any
of their properties or assets other than dispositions of
obsolete assets or equipment, dispositions by Florida Power &
Light Company or any Entergy utility subsidiary that are
mandated or approved by applicable local or state regulatory
agencies and dispositions having an aggregate value of less
than $100 million.
(7) Indebtedness
o Neither FPL Group nor Entergy will, subject to limited
exceptions specified in the merger agreement, incur or
guarantee any indebtedness or enter into any "keep well"
agreement or other agreement to maintain any financial
condition of another person or enter into any arrangement
having the economic effect of any of the foregoing (including
capital leases, "synthetic" leases or conditional sales or
other title retention agreements) other than
o short-term borrowings incurred in the ordinary course of
business,
o letters of credit obtained in the ordinary course of
business,
o borrowings made in connection with the refunding of
existing indebtedness or refinancing capital stock,
o borrowings to finance capital expenditures or
acquisitions permitted by the merger agreement,
o other borrowings in an aggregate principal amount not to
exceed $250 million,
o borrowings to finance common stock repurchases,
o the continuation of guarantees existing as of the date
of the merger agreement, or
o FPL Group and Entergy will not make any loan or advances to
any other person, other than in the ordinary course of
business consistent with past practice.
(8) Marketing of Energy; Trading
o Neither FPL Group nor Entergy will make any material change
in its policies governing or otherwise relating to the
trading or marketing of energy other than as a result of
acquisitions or capital expenditures made by either party
that are permitted by the merger agreement, subject to
limited exceptions specified in the merger agreement.
Entergy will use all reasonable efforts to promptly
establish for the Entergy-Koch L.P. venture and its
subsidiaries' policies governing or otherwise relating to
the trading of energy that are comparable to the policies
of other companies engaged in similar businesses to the
Entergy-Koch L.P. venture. In addition, neither FPL Group
nor Entergy will, and Entergy will use its reasonable
efforts to cause the Entergy-Koch L.P. venture not to,
enter into any physical commodity transactions,
exchange-traded futures and options transactions,
over-the-counter transactions, derivatives transactions or
similar transactions, except as permitted by the trading
guidelines of FPL Group or Entergy or the trading
guidelines to be established for the Entergy-Koch L.P.
venture, as the case may be.
(9) Employee Benefits
o Neither FPL Group nor Entergy will, except as required by
law or the terms of any collective bargaining agreement and
subject to limited exceptions specified in the merger
agreement, enter into, adopt, amend or terminate any of its
employee benefit plans or similar instruments. Except for
normal increases and subject to limited exceptions
specified in the merger agreement, neither FPL Group nor
Entergy will increase in any
76
<PAGE>
manner the compensation or fringe benefits of any director,
executive officer or other employee. However, each party has
reserved the right to make certain specified modifications to
its benefit plans, including, in the case of FPL Group, the right
to renew an existing severance program and to adopt a new
severance program for non-executive officers.
(10) Regulatory Status
o Neither FPL Group nor Entergy will agree or consent to any
material agreements or material modifications of existing
agreements or course of dealings with any governmental entity
in respect of the operations of its businesses, subject to
limited exceptions specified in the merger agreement.
(11) Accounting
o Neither FPL Group nor Entergy will make any material change in
accounting methods, except as required by a change in law or
generally accepted accounting principles.
(12) Transmission Reorganization
o Neither Florida Power & Light Company nor any of Entergy's
utility subsidiaries will be restricted from transferring
ownership or control of its transmission and related assets to
an entity jointly owned by FPL Group or Entergy, as the case
may be, and another person, transferring control of such
assets to an independent system operator or otherwise
transferring ownership or control of such assets for fair
value, in each case as part of an arrangement commonly
understood to be a "transco" or the formation of a regional
transmission organization under the rules and regulations of
the FERC.
(13) Insurance
o FPL Group and Entergy will maintain adequate insurance
protection.
Common Stock Repurchases
Pursuant to the merger agreement, FPL Group has agreed to use commercially
reasonable efforts to repurchase up to $570 million of its common stock and
Entergy has agreed to use commercially reasonable efforts to repurchase up to
$430 million of its common stock. Such amounts include remaining authorizations
from the companies' existing share repurchase programs. However, neither FPL
Group nor Entergy shall be required to make any such repurchases to the extent
that FPL Group or Entergy, as the case may be, determines, after considering
certain factors, that it would be imprudent to make such repurchases. In
addition, neither FPL Group nor Entergy shall make any repurchases if it is
reasonably likely that any such repurchases would result in a failure of the
conditions to the closing of the merger.
Amendment; Extension and Waiver
The merger agreement provides that:
o FPL Group and Entergy may mutually amend the merger agreement by
written instrument at any time, except that after the merger
agreement has been approved by FPL Group shareholders or Entergy
shareholders, such shareholders must approve any later amendments to
the extent required by law, and
o prior to the completion of the merger, a party may, in writing,
extend the time for performance of the obligations of any other
party, waive inaccuracies in the representations and warranties of
any other party and, except as provided in the previous bullet
point, waive compliance by any other party with any agreements or
conditions in the merger agreement.
To the extent required by law, FPL Group and Entergy would resolicit
shareholder votes in the event of a material amendment to the merger agreement
prior to shareholder approval or in the event that a material condition to the
merger was waived prior to or after shareholder approval.
77
<PAGE>
Representations and Warranties
The merger agreement contains substantially reciprocal customary
representations and warranties made by FPL Group and Entergy to each other. Some
of the most significant of these relate to:
o corporate organization,
o capital structure,
o corporate authorization to enter into the merger agreement
transactions,
o absence of any breach of organizational documents, law or material
agreements as a result of the contemplated transaction,
o government approvals required in connection with the merger
agreement transactions,
o governmental filings and financial statements,
o absence of changes or events that have had or could reasonably be
expected to have a material adverse effect,
o absence of material undisclosed liabilities,
o absence of litigation,
o possession of requisite permits and compliance with laws,
o proper filing of tax returns and other tax matters,
o employee benefit matters,
o labor and employee relations,
o compliance with environmental laws and other environmental matters,
o operations of nuclear power plants,
o maintenance of adequate insurance, and
o establishment of and compliance with policies with respect to energy
trading.
78
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
FPL Group common stock is listed for trading on the New York Stock
Exchange under the symbol "FPL" and Entergy common stock is listed for trading
on the New York Stock Exchange under the symbol "ETR." The following table sets
forth, for the periods indicated, dividends and the high and low sales prices
per share of FPL Group common stock and Entergy common stock on the New York
Stock Exchange composite transaction reporting system. For current price
information, you should consult publicly available sources.
<TABLE>
<CAPTION>
FPL Group Common Stock Entergy Common Stock
------------------------- -----------------------------
Dividends Dividends
Calendar Period High Low Paid High Low Paid
--------------- ---- --- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter............................... $46 3/4 $43 5/8 $0.48 $28 3/8 $24 $0.45
Second Quarter.............................. 48 1/8 42 5/8 0.48 27 1/2 22 3/8 0.45
Third Quarter............................... 51 9/16 45 1/2 0.48 28 24 1/16 0.45
Fourth Quarter.............................. 60 49 1/2 0.48 30 1/4 23 0.45
1998
First Quarter............................... 65 3/16 56 1/16 0.50 30 1/8 27 5/16 0.45
Second Quarter.............................. 65 5/8 58 11/16 0.50 29 5/8 23 1/4 0.45
Third Quarter............................... 70 59 11/16 0.50 30 13/16 26 3/16 0.30
Fourth Quarter.............................. 72 9/16 60 1/2 0.50 32 7/16 28 1/16 0.30
1999
First Quarter............................... 61 15/16 50 1/8 0.52 31 7/16 27 1/2 0.30
Second Quarter.............................. 60 1/2 52 7/8 0.52 33 1/2 27 5/16 0.30
Third Quarter............................... 56 11/16 49 1/8 0.52 31 3/4 28 0.30
Fourth Quarter.............................. 52 1/2 41 1/8 0.52 30 3/16 23 11/16 0.30
2000
First Quarter............................... 48 1/4 36 3/8 0.54 26 3/4 15 15/16 0.30
Second Quarter.............................. 50 13/16 41 13/16 0.54 31 1/4 19 15/16 0.30
Third Quarter (through August 23, 2000)..... 54 3/4 53 7/8 0.00 32 3/16 31 11/16 0.00
</TABLE>
The following table sets forth the high and low sales prices per share
of FPL Group common stock and Entergy common stock on the New York Stock
Exchange Composite Transaction reporting system on July 28, 2000, the last
full trading day prior to the public announcement of the merger, and on
[ ], 2000, the last trading day for which this information could be
calculated prior to the date of this joint proxy statement/prospectus:
FPL Group Entergy
--------- -------
Common Stock Common Stock
------------ ------------
High Low High Low
---- --- ---- ---
July 28, 2000......................... $52 7/8 $52 1/2 $30 5/8 $30 1/8
[ ], 2000........................... [ ] [ ] [ ] [ ]
79
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following selected unaudited pro forma combined condensed consolidated
financial statements (pro forma financial statements) have been prepared to
reflect the merger of FPL Group and Entergy in a transaction accounted for as an
acquisition of Entergy by FPL Group under the purchase method of accounting. The
pro forma adjustments are reflected in the unaudited combined condensed
consolidated pro forma balance sheets (pro forma balance sheets) as if the
merger occurred on June 30, 2000. The unaudited combined condensed consolidated
pro forma statements of income (pro forma income statements) for the six months
ended June 30, 2000 and the year ended December 31, 1999, assume that the merger
was completed January 1, 1999. These pro forma financial statements are for
illustrative purposes only. They are not necessarily indicative of the financial
position or operating results that would have occurred had these transactions
been completed on the dates assumed above; nor is the information necessarily
indicative of future financial position or operating results. Results of
operations and financial position in the first year after the consummation of
the merger could differ significantly from the pro forma financial statements,
which are based on past operations.
The following pro forma financial statements should be read in conjunction
with the consolidated historical financial statements and related notes of FPL
Group and Entergy, which are included in their respective Annual Reports on Form
10-K for the year ended December 31, 1999 and subsequent Quarterly Reports on
Form 10-Q. FPL Group has provided all the information set forth herein regarding
FPL Group and its subsidiaries. Entergy has provided all the information set
forth herein regarding Entergy and its subsidiaries. Neither Entergy nor FPL
Group assumes any responsibility for the accuracy or completeness of the
information provided by the other party.
You should read the financial information in this section along with FPL
Group's and Entergy's historical consolidated financial statements and
accompanying notes incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page 97.
80
<PAGE>
Unaudited Pro Forma Combined Condensed Consolidated Statements of Income
Six Months ended June 30, 2000
(millions, except per share amounts)
<TABLE>
<CAPTION>
FPL Group, Entergy
Inc. Corporation Pro Forma Pro Forma
(as reported) (as reported) Adjustments Combined
------------- ------------- ----------- --------
<S> <C> <C> <C> <C>
Operating Revenues ............................. $3,138 $3,949 $7,087
------ ------ ------
Operating Expenses:
Fuel, purchased power and interchange ....... 1,146 1,834 2,980
Other operations and maintenance ............ 593 843 1,436
Depreciation and amortization ............... 525 389 $ (8) (a) 909
(4) (b)
7 (b)
Taxes other than income taxes ............... 291 163 454
------ ------ ------ ------
Total operating expenses ................. 2,555 3,229 (5) 5,779
------ ------ ------ ------
Operating Income ............................... 583 720 5 1,308
------ ------ ------ ------
Other Income (Deductions):
Interest charges ............................ (126) (264) (390)
Preferred stock dividends ................... (7) (27) (34)
Other - net ................................. 34 140 174
------ ------ ------
Total other income (deductions) - net .... (99) (151) (250)
------ ------ ------
Income Before Income Taxes ..................... 484 569 5 1,058
Income Taxes ................................... 159 233 2 (c) 394
------ ------ ------ ------
Net Income ..................................... $ 325 $ 336 $ 3 $ 664
====== ====== ====== ======
Earnings per share
(basic and assuming dilution) ............... $ 1.91 $ 1.45 $ 2.17
Average number of shares outstanding ........... 170 232 306 (d)
</TABLE>
81
<PAGE>
Unaudited Pro Forma Combined Condensed Consolidated Statements of Income
Year Ended December 31, 1999
(millions, except per share amounts)
<TABLE>
<CAPTION>
FPL Group, Entergy
Inc. Corporation Pro Forma Pro Forma
(as reported) (as reported) Adjustments Combined
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Operating Revenues.......................... $ 6,438 $ 8,773 $ 15,211
------------ ----------- ---------
Operating Expenses:
Fuel, purchased power and interchange.... 2,365 4,526 6,891
Other operations and maintenance......... 1,322 1,789 3,111
Depreciation and amortization........... 1,040 867 $ (16) (a) 1,897
(8) (b)
14 (b)
Impairment loss on Maine assets.......... 176 -- 176
Taxes other than income taxes............ 615 339 954
------------ ----------- --------- ----------
Total operating expenses........... 5,518 7,521 (10) 13,029
------------ ----------- --------- ---------
Operating Income............................ 920 1,252 10 2,182
------------ ----------- --------- ---------
Other Income (Deductions):
Interest charges......................... (222) (536) (758)
Preferred stock dividends................ (15) (62) (77)
Divestiture of cable investments......... 257 -- 257
Other - net.............................. 80 255 335
------------ ----------- ----------
Total other income (deductions)-net 100 (343) (243)
------------ ----------- ----------
Income Before Income Taxes.................. 1,020 909 10 1,939
Income Taxes................................ 323 357 3 (c) 683
------------ ----------- -------- ----------
Net Income.................................. $ 697 $ 552 $ 7 $ 1,256
============ =========== ======== ==========
Earnings per share
(basic and assuming dilution)............ $ 4.07 $ 2.25 $ 3.99
Average number of shares outstanding........ 171 245 315 (d)
</TABLE>
82
<PAGE>
Unaudited Pro Forma Combined Condensed Consolidated Balance Sheets
June 30, 2000
(millions)
<TABLE>
<CAPTION>
FPL Group, Entergy
Inc. Corporation Pro Forma Pro Forma
(as reported) (as reported) Adjustments Combined
------------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
Property, Plant and Equipment:
Electric utility plant in service and other
property, including nuclear fuel and
construction work in progress......... $ 20,220 $ 27,442 $ (399) (a) $ 47,113
(150) (b)
Less accumulated depreciation and
amortization....................... (10,764) (11,248) (22,012)
----------- ----------- --------- ------------
Total property, plant and equipment - net 9,456 16,194 (549) 25,101
----------- ----------- --------- ------------
Current Assets:
Cash and cash equivalents................ 234 1,797 2,031
Customer receivables, net of allowances.. 578 1,022 1,600
Materials, supplies and fossil fuel inventory 320 481 801
Deferred clause expenses................. 259 395 654
Other - net.............................. 219 186 405
----------- ----------- ------------
Total current assets.................. 1,610 3,881 5,491
----------- ----------- ------------
Other Assets:
Special use funds........................ 1,449 1,284 2,733
Other investments........................ 782 264 1,046
Other.................................... 899 2,701 416 (b) 4,016
----------- ----------- --------- ------------
Total other assets.................... 3,130 4,249 416 7,795
----------- ----------- --------- ------------
Total Assets................................ $ 14,196 $ 24,324 $ (133) $ 38,387
=========== =========== ========== ============
Capitalization:
Common shareholders' equity.............. $ 5,499 $ 6,934 $ (6,903) (e) $ 12,134
6,650 (e)
(46) (f)
Preferred stock without sinking fund
requirements.......................... 226 336 562
Preferred stock with sinking fund
requirements.......................... - 69 69
Long-term debt........................... 3,479 7,593 11,072
----------- ----------- --------- ------------
Total capitalization.................. 9,204 14,932 (299) 23,837
----------- ----------- --------- ------------
Current Liabilities:
Debt due within one year................. 823 630 1,453
Accounts payable......................... 547 797 1,344
Deferred clause revenues................. 74 - 74
Accrued interest, taxes and other........ 984 1,380 253 (f) 2,617
----------- ----------- --------- ------------
Total current liabilities............. 2,428 2,807 253 5,488
----------- ----------- --------- ------------
Other Liabilities and Deferred Credits:
Accumulated deferred income taxes........ 1,176 3,224 (58) (c) 4,313
(29) (c)
Unamortized regulatory and investment tax
credits............................... 289 506 795
Other.................................... 1,099 2,855 3,954
----------- ----------- --------- ------------
Total other liabilities and deferred credits 2,564 6,585 (87) 9,062
----------- ----------- --------- ------------
Commitments and Contingencies
Total Capitalization and Liabilities........ $ 14,196 $ 24,324 $ (133) $ 38,387
=========== ========== ========== ============
</TABLE>
83
<PAGE>
Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial
Statements
The pro forma financial statements have been prepared using preliminary
assessments of the fair values of the assets and liabilities acquired and,
accordingly, may change significantly as the valuations are completed. The pro
forma adjustments may also change to reflect changes in circumstances during the
period of time required to obtain the necessary approvals for the merger. The
pro forma financial statements do not reflect the anticipated recurring cost
savings resulting from the merger or the effect of FPL Group and Entergy's
announced share repurchase programs. Certain amounts in Entergy's financial
statements have been reclassified to conform to FPL Group's presentation.
a. A plant acquisition adjustment (goodwill) resulting from a prior
acquisition by Entergy and the related amortization expense have been
eliminated.
b. Based on preliminary estimates of the fair values of certain unregulated
assets, net reductions in book value of approximately $150 million are
reflected in the pro forma balance sheets to record those assets at their
fair values. Depreciation expense has been reduced in the pro forma income
statement on a straight-line basis over the average remaining useful life
of 20 years. The assets and liabilities of Entergy's regulated operations
have not been revalued in the pro forma financial statements because they
are subject to cost-based regulation.
Complete valuations of Entergy's operating assets and related contracts
and the pension and postretirement accounts have not been performed. As a
result, the purchase price in excess of the amounts assigned to
identifiable assets and liabilities of $416 million has been recorded as
goodwill for purposes of these pro forma financial statements. The
estimated lives associated with the assets to which this excess might
ultimately be allocated are expected to range from 20 to 40 years.
Therefore, for pro forma purposes, an amortization period of 30 years has
been used.
Actual goodwill, if any, recorded upon consummation of the merger will
consider the fair value of Entergy's assets and liabilities at that future
date and may differ significantly from the amount recorded in these pro
forma financial statements.
c. Deferred income taxes have been recorded on the pro forma balance sheets
to reflect the tax effect of differences between the book and tax bases of
assets and liabilities acquired. An adjustment has been made to the pro
forma income statements to reflect the tax effect of the pro forma
adjustments using FPL Group's statutory tax rate of 38.575%. Goodwill
created by the acquisition is nondeductible for tax purposes.
d. The number of shares used in the calculation of the pro forma per share
data is based on the weighted average number of shares outstanding during
the period, adjusted to give effect to the exchange ratios described in
Note (e) below.
e. Under the terms of the merger agreement, each holder of FPL Group common
stock will receive one share of Holdco common stock for each share of FPL
Group common stock so held, and each holder of Entergy common stock will
receive 0.585 of a share of Holdco common stock for each share of Entergy
common stock so held, in a generally tax-free, stock-for-stock exchange. A
value of $51 per share has been assumed in determining the purchase price,
based on the closing prices of FPL Group's common stock two trading days
prior and two trading days following the announcement of the merger.
Below is a reconciliation of the pro forma adjustment to Entergy's common
shareholders' equity (millions):
<TABLE>
<S> <C>
Entergy's common shareholders' equity, June 30, 2000 (as reported) $6,934
Non-recurring merger costs to be expensed by Entergy, net of tax (see Note (f)) (31)
------
Net pro forma adjustment $6,903
======
</TABLE>
84
<PAGE>
f. Adjustments totaling $253 million have been made and are reflected in
accrued interest, taxes and other on the pro forma balance sheets to
accrue for transaction costs associated with the acquisition and amounts
due under certain employment contracts and employee benefit
plans resulting from a change in control. Of this amount, $178 million
represents direct costs of the transaction and is reflected in the
purchase price allocation. The remaining $75 million represents
merger-related costs which are required to be expensed. Because these
costs are non-recurring, they have not been reflected in the pro forma
income statements, but are reflected in common shareholders' equity on the
pro forma balance sheets ($46 million after taxes). FPL Group's and
Entergy's portions of these merger costs to be expensed are $15 million
and $31 million after taxes, respectively.
85
<PAGE>
DESCRIPTION OF HOLDCO CAPITAL STOCK
The following summary of the capital stock of Holdco is subject in all
respects to the applicable provisions of Delaware General Corporation Law and
the Holdco certificate of incorporation to be in effect on the effective date of
the merger. See "Comparison of Shareholder Rights" on page 87 and "Where You Can
Find More Information" on page 97.
General
The total number of authorized shares of capital stock of Holdco consists
of [ ] million shares of common stock, par value $.01 per share, and [ ]
million shares of preferred stock, $.01 par value.
Common Stock
Subject to the rights of any holders of preferred stock of Holdco, if any,
each holder of common stock will be entitled to cast one vote for each share
held of record on all matters submitted to a vote of the shareholders. Holders
of common stock will be entitled to receive dividends or other distributions as
declared by the Holdco Board of Directors at its own discretion. The right of
the Holdco Board of Directors to declare dividends, however, will be subject to
the rights of any holders of preferred stock, if any, of Holdco and certain
requirements of Delaware law.
Preferred Stock
The Holdco Board of Directors has the full authority permitted by
law to issue preferred stock in one or more classes or series and, with
respect to each class or series, to determine the voting powers, if any, and
the preferences and relative, participating, optional or other special
rights, if any, and any qualifications, limitations or restrictions thereof,
of the shares of any class or series of preferred stock. The powers,
preferences and relative, participating, optional and other special rights of
each class or series of preferred stock and the qualifications, limitations
or restrictions, if any, thereof may differ from those of any other classes
or series at any time outstanding. Except as otherwise required by law, as
provided in the certificate of incorporation or as determined by the Holdco
Board of Directors, holders of preferred stock will not have any voting
rights and will not be entitled to any notice of shareholder meetings.
86
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS
Upon completion of the merger, FPL Group and Entergy shareholders will
receive shares of common stock of Holdco in exchange for their shares of FPL
Group common stock and shares of Entergy common stock, respectively. The
following is a summary of the material differences with respect to the rights
of holders of shares of FPL Group common stock, shares of Entergy common
stock and shares of Holdco common stock. The rights of FPL Group shareholders
are governed by the Florida Business Corporations Act ("FBCA"), FPL Group's
Restated Articles of Incorporation and its By-laws. The rights of Entergy
shareholders are governed by the Delaware General Corporation Law (the
"DGCL"), Entergy's Certificate of Incorporation and its By-laws. After the
Effective Time, the rights of FPL Group shareholders and Entergy shareholders
will be governed by the DGCL, the Certificate of Incorporation of Holdco and
the Holdco By-laws.
This summary is qualified in its entirety by reference to applicable
provisions of the FBCA and the DGCL and to the FPL Group Articles of
Incorporation, the FPL Group By-laws, the Entergy Certificate of Incorporation,
the Entergy By-laws, the Holdco Certificate of Incorporation and the Holdco
By-laws. The identification of specific differences is not intended to indicate
that other equal or more significant differences do not exist.
Authorized Capital Stock
FPL Group: The authorized capital stock of FPL Group consists of 300
million shares of common stock, par value $.01 per share, and 100 million shares
of preferred stock, par value $.01 per share. FPL Group also has in place a
shareholder rights plans containing customary terms and conditions.
Entergy: The authorized capital stock of Entergy consists of 500 million
shares of common stock, par value $.01 per share.
Holdco: The authorized capital stock of Holdco consists of [ ] shares
of common stock, par value $.01 per share and [ ] shares of preferred
stock, par value $.01 per share. Holdco does not expect to adopt a stockolder
rights plan as of the closing of the merger.
Number of Directors
FPL Group: The FBCA provides that a corporation's board of directors
must consist of one or more individuals, with the number specified in or
fixed in accordance with the articles of incorporation or by-laws. The FPL
Group Articles of Incorporation provides that the number of directors shall
be set forth in the by-laws. The FPL Group By-laws provide that the number of
directors may not be less than three nor more than 16, the exact number to be
determined from time to time by the affirmative vote of a majority of the
total directors on the Board of Directors. FPL Group's Board of Directors is
not classified into more than one class. FPL Group currently has 13
directors. Directors are elected at each annual meeting to serve until the
next annual meeting.
Entergy: The DGCL provides that a corporation's board of directors must
consist of one or more individuals, with the number fixed by, or in the
manner provided in, the by-laws, unless the certificate of incorporation
fixes the number, in which case a change in the number of directors shall be
made only by amendment of the certificate. The Entergy Certificate of
Incorporation provides that there may not be less than 9 nor more than 19
directors, the exact number to be determined by resolution of the Board.
Entergy's Board of Directors is not classified into more than one class.
Entergy currently has 14 directors. Directors are elected at each annual
meeting to serve until the next annual meeting.
Holdco: The provisions of the DGCL with respect to number of directors,
as described above, apply to Holdco. The Holdco Certificate of Incorporation
provides that, subject to Section 2.11 (the Holdco Board of Directors) of the
Holdco By-laws and the rights of any holder of preferred stock, the Board of
Directors will consist of 15 directors or such other number as may be
determined by a resolution adopted by a majority of the Board of Directors.
Holdco's Board of Directors is not classified into more than one class. As
provided in the merger agreement and Holdco By-Laws, until the 12-month
anniversary of the closing of the merger, the Board of Directors of Holdco
will consist of eight directors designated by FPL Group and seven directors
designated by Entergy. The first vacancy on the Board of Directors that
occurs with respect to a director that is a designee of FPL Group following
the 12-month anniversary of the closing of the merger and prior to the third
annual shareholders' meeting of Holdco that occurs following the end of the
calendar year in which the closing of the merger occurs will not be filled
and, instead, the number of directors will be reduced by one. Any increase or
decrease in the size
87
<PAGE>
of the Board of Directors prior to the earlier of the first such vacancy on
the Holdco Board of Directors and such shareholders meeting or change to the
above-mentioned mechanism prior to such time would require the affirmative
vote of at least two-thirds of the entire Board of Directors.
Vacancies on the Board
FPL Group: The FBCA provides that, whenever a vacancy exists on a
corporation's board of directors, including a vacancy resulting from an
increase in the number of directors comprising the board, such vacancy may be
filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum, or by the shareholders, unless the articles of
incorporation provide otherwise. The FPL Group Articles of Incorporation do
not provide otherwise. The FPL Group By-laws provide that any vacancies on
the Board of Directors, including any vacancy created by reason of an
increase in the number of directors, will be filled by the majority vote of
the remaining directors in office. Directors so chosen shall hold office for
a term expiring at the next annual meeting of shareholders.
Entergy: The DGCL provides that, unless otherwise provided in the
certificate of incorporation or by-laws, vancancies and newly created
directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office,
although less than a quorum, or by the shareholders, unless the articles of
incorporation provide otherwise. The Entergy Certificate of Incorporation and
By-laws do not provide otherwise.
Holdco: The provisions of the DGCL with respect to vacancies on the
board as described above govern Holdco. The Holdco Certificate of
Incorporation provides that, subject to Section 2.11 (representation on the
Holdco Board of Directors) of the Holdco By-laws, vacancies on the Board of
Directors and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors
then in office (even if less than a quorum). Any director elected to fill a
vacancy shall hold office until the next annual meeting of shareholders and
until his or her successor is duly elected and qualified or his earlier
death, incapacity, resignation or removal from office. Following the closing
of the merger, (i) a subcommittee consisting of the remaining members of the
Board of Directors appointed by FPL Group will recommend replacements for a
Board of Directors vacancy of a member designated by FPL Group, and (ii) a
subcommittee consisting of the remaining members of the Board of Directors
appointed by Entergy will recommend replacements for a Board vacancy of a
member designated by Entergy. The Board of Directors is required to honor the
subcommittee's recommendations to fill vacancies during such period. Any
changes to this procedure will require the affirmative vote of at least
two-thirds of the entire Board of Directors. The provision relating to
recommendations by subcommittees will no longer be applicable following the
earlier of (a) the time at which the size of the Board of Directors is
reduced by one and (b) the third annual shareholders' meeting of Holdco that
occurs following the end of the calendar year in which the closing of the
merger occurs.
Removal of Directors
FPL Group: The FBCA provides that shareholders may remove one or more
directors with or without cause unless the articles of incorporation provide
that directors may be removed only for cause. The FBCA also provides that if
a director is to be removed by the shareholders at a meeting of the
shareholders, the notice of the meeting must state that the purpose or one of
the purposes of the meeting is the removal of the director.
The FPL Group Articles of Incorporation provide that a director may be
removed from office by a majority vote of the entire Board of Directors. A
director may also be removed by the shareholders, but only for cause and only by
an affirmative vote of the holders of at least three-quarters of the voting
power of the then outstanding shares of voting stock, voting together as a
single class. Except as othewise provided by law, cause for removal will be
construed to exist only if the director whose removal is proposed has been
convicted of a felony by a court of competent jurisdiction and such conviction
is no longer subject to direct appeal or has been adjudged by a court of
competent jurisdiction to be liable for negligence or misconduct in the
performance of his or her duties to FPL Group in a matter of substantial
importance to FPL Group and such adjudication is no longer subject to direct
appeal.
Entergy: Under the DGCL, other than for certain exceptions not
applicable to Entergy, any director or the entire board may be removed, with
or without cause, by the holders of a majority of the shares entitled to vote
at an election of the directors.
Holdco: The provisions of the DGCL with respect to removal of directors
described above govern Holdco, and exceptions to such provisions of the DGCL
are not applicable to Holdco. The Holdco Certificate of Incorporation
provides that a director may be removed from office with or without cause;
provided, however, that subject to applicable law, any director elected by
the holders of any class or series of preferred stock may be removed without
cause only by holders of a majority of the shares of such series of preferred
stock.
88
<PAGE>
Required Shareholder Vote for Certain Shareholder Actions
FPL Group: Subject to certain exceptions, the FCBA provides that the
affirmative vote of the holders of a majority of a corporation's outstanding
shares entitled to vote thereon is required to authorize a merger or
consolidation. The FBCA also provides that a sale, lease, exchange or
disposition of all or substantially all of a corporation's assets or its
voluntary dissolution of a Florida corporation requires shareholder approval
by a majority of the corporation's outstanding votes entitled to vote
thereon, subject to certain exceptions.
The FPL Group By-laws provide that action on a matter (including the
election of directors) shall be approved if the matter receives the
affirmative vote of a majority of the total number of shares represented at
the meeting at which a quorum is present and entitled to vote on such matter,
unless the matter is one upon which a different vote is required by the FBCA,
the FPL Group Articles of Incorporation, the FPL Group By-laws or from time
to time permitted by action of the Board of Directors.
Other than with respect to business combinations with interested
shareholders (described below under "--Interested Shareholder Transactions"),
the FPL Group Articles of Incorporation and the FPL Group By-laws are silent as
to the shareholder vote required to authorize any merger or consolidation.
Entergy: The DGCL provides that directors of a corporation are elected
by a plurality of the votes of the shares present in person or represented by
proxy at a shareholders meeting and entitled to vote in the election. Except
as otherwise required by the DGCL or by the certificate of incorporation or
by-laws, under the DGCL, all matters brought before a shareholders meeting
require the affirmative vote of the majority of the shares present in person
or represented by proxy at a shareholder meeting and entitled to vote at that
meeting.
The Entergy Certificate of Incorporation and Entergy By-laws are silent
on the vote required for business combinations. The DCGL requires that a
majority of the outstanding stock of a corporation entitled to vote thereon
is required to authorize a merger or consolidation, or a sale, lease or
exchange of all or substantially all of a corporation's assets. Therefore,
according to the DGCL, a merger or consolidation or sale of all or
substantially all of the assets of a corporation requires authorization by a
resolution adopted by the holders of a majority of the outstanding stock of
the corporation entitled to vote.
Holdco: The provisions of the DGCL with respect to the required
shareholder vote for certain shareholder actions, as described above, apply
to Holdco. The Holdco By-laws provide that all questions shall be decided by
the vote of a majority in voting power of the shareholders present in person
or by proxy and entitled to vote at such meeting at which a quorum is
present, unless the question is one upon which by express provision of the
DGCL, the rules or regulations of any stock exchange, the Holdco Certificate
of Incorporation or the Holdco By-laws, a different vote is required. The
Holdco Certificate of Incorporation and Holdco By-laws do not contain any
such provision. Accordingly, since the Holdco Certificate of Incorporation
and Holdco By-laws are silent with respect to the vote required for business
combinations. The provisions of the DGCL with respect to business
combinations, as described above, apply to Holdco.
Interested Shareholder Transactions
FPL Group: The FBCA provides that, unless a specified exception is met, an
interested shareholder (i.e, a person holding 10% or more of a corporation's
outstanding voting stock) may not engage in an affiliated transaction (including
a merger or other significant corporate transactions) with a Florida corporation
unless such transaction is approved by two-thirds of the voting shares of the
corporation excluding the shares beneficially held by the interested
shareholder.
89
<PAGE>
This provision is not applicable when:
o a majority of the disinterested directors approve the transaction,
o the corporation has not had more than 300 shareholders of record at
any time during the three years prior to the date on which the
affiliated transaction was announced,
o the interested shareholder has beneficially owned at least 80% of
the outstanding voting shares of the corporation for at least five
years prior to the date on which the affiliated transaction was
announced,
o the interested shareholder is the beneficial owner of at least 90%
of the outstanding voting shares of the corporation exclusive of
shares acquired directly from the corporation in a transaction not
approved by a majority of the disinterested directors,
o the corporation is an investment company registered under the
Investment Company Act of 1940, or
o in the affiliated transaction, consideration shall be paid to the
holders of each class or series of voting shares and certain other
conditions are met.
In addition to any affirmative vote required by law, the FPL Group
Articles of Incorporation require that, unless a specified exception dealing
with fair price provisions is met:
o any merger or consolidation of FPL Group or any subsidiary with (a)
any Interested Shareholder (as defined below) or (b) any other
corporation (whether or not itself an Interested Shareholder) which
is, or after such merger or consolidation would be, an affiliate of
an Interested Shareholder,
o 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 any Interested
Shareholder of assets of FPL Group or any subsidiary having an
aggregate fair market value of $10 million or more,
o the issuance or transfer by FPL Group or any 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 million or more,
o 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 any affiliate of any Interested Shareholder, or
o 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 subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding
shares of any class of equity or convertible securities of FPL Group
or any subsidiary which is directly or indirectly owned by an
Interested Shareholder or any affiliate of any Interested
Shareholder.
shall be approved by the affirmative vote of the holders of at least 75% of the
voting power of the then outstanding shares of voting stock, voting together as
a single class. Such affirmative vote will be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or in any agreement with any national securities exchange or otherwise.
90
<PAGE>
The FPL Group Articles of Incorporation provide that an "Interested
Shareholder" is any person (other than FPL Group or any subsidiary) who is:
o the beneficial owner of more than 10% of the voting power of the
outstanding voting stock,
o an affiliate of FPL Group and at any two year period immediately
prior to the date in question was the beneficial owner of 10% or
more of the then outstanding voting stock, or
o an assignee of or has otherwise succeeded to any shares of voting
stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested
Shareholder, if such assignment has occurred in the course of a
transaction or series of transactions not involving a public
offering.
Entergy: The DGCL provides that a Delaware corporation is prohibited from
engaging in mergers, dispositions of 10% or more of its assets and issuances of
stock and other transactions ("business combinations") with a person or group
that owns 15% or more of the voting stock of the corporation (an "interested
shareholder"), for a period of three years after the interested shareholder
crosses the 15% threshold. These restrictions do not apply in certain
circumstances, including when:
o prior to the person or group becoming an interested shareholder, the
board of directors approves the business combination in question or
the transaction that resulted in the person or group becoming an
interested shareholder,
o the interested shareholder acquired at least 85% of the voting stock
of the corporation (other than stock owned by inside directors and
certain employee stock plans) in the transaction in which the
interested shareholder crossed the 15% threshold, or
o at the time or after the person or group became an interested
shareholder, the board of directors and at least 66 2/3% of the
voting stock other than stock owned by the interested shareholder
approved the business combination.
Holdco: The provisions of the DGCL with respect to business
combinations, as described above, apply to Holdco.
Control Shares
FPL Group: Under the FBCA, unless opted out of this provision in the
articles of incorporation or by-laws, "control shares" (shares that would
otherwise have voting power for the election of directors in certain ranges of
ownership over 20%) acquired in a control-share acquisition have the same voting
rights as were accorded to the shares before such acquisition only to the extent
granted by a resolution approved by the majority of all the votes entitled to be
cast by the class or series of the shareholders of the issuing corporation. The
FPL Group has not opted out of this provision under the FBCA.
Entergy: The DGCL does not have a similar provision.
Holdco: The DGCL does not have a similar provision.
Constituencies Provision
FPL Group: Under the FBCA, in discharging his or her duties, a
director may consider such factors as the director deems relevant, including the
long-term prospects and interests of the corporation and its shareholders, and
the social, economic, legal or other effects of any action on the employees,
suppliers, customers of the corporation and its subsidiaries, the communities
and society in which the corporation or its subsiaries operate and the
economy of the state and the nation.
Entergy: The DGCL does not have a similar provision.
Holdco: The DGCL does not have a similar provision.
Shareholder Action by Written Consent
FPL Group: The FPL Group Articles of Incorporation provide that any action
required or permitted to be taken by the shareholders of the corporation must be
effected at a duly called annual or special meeting and may not be effected by
any consent in writing by such shareholders.
Entergy: The Entergy Certificate of Incorporation provides that
shareholders may act by written consent, but only if the action is taken upon
the signing of a consent in writing by the holders of not less than the greater
of (a) a majority of the outstanding stock of the corporation entitled to vote
thereon and (b) that number of shares of stock of the corporation that would be
required to take such action at a special meeting or annual meeting of
shareholders where holders of all outstanding stock of the corporation were
present, setting forth the action to be taken.
Holdco: The Holdco Certificate of Incorporation provides that any action
required or permitted to be taken by the shareholders of Holdco must be effected
at a duly called annual or special meeting of shareholders of Holdco and may not
be effected by any consent in writing by such shareholders.
Special Meetings of Shareholders
FPL Group: The FBCA provides that a special meeting of shareholders
shall be held on call of the board of directors, persons authorized to do so
by the articles of incorporation or by-laws, if holders of not less than 10%
(or a higher percentage less than 50% required by the articles of
incorporation) sign, date and deliver a written demand for such a meeting.
Only business within the purpose(s) described in the notice of the special
meeting may be conducted at such a meeting. The FPL Group By-laws provide
that special meetings of the shareholders may only be called by the Chairman
of the Board, the President or the Secretary of FPL Group or upon the written
request of a majority of all of FPL Group's outstanding stock entitled to
vote on the matters to be presented at the meeting.
91
<PAGE>
Entergy: The DGCL provides that special meetings of the stockholders
may be called by the board of directors or by such person(s) as may be
authorized by the certificate of incorporation or by the by-laws. The Entergy
Certificate of Incorporation and the Entergy By-laws provide that a special
meeting of shareholders may be called by the entire Board of Directors, the
Chairman of the Board, a majority of the members of the Executive Committee,
the Chief Executive Officer or a majority of the holders of the outstanding
shares of stock entitled to vote at the meeting.
Holdco: The provisions of the DGCL with respect to special meetings of
Shareholders, as described above, apply to Holdco. The Holdco Certificate of
Incorporation provides that, subject to the rights of holders of preferred
stock, special meetings of shareholders may be called only by the Chairman of
the Board of Directors or by the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors. The right of holders
of Holdco common stock to call a special meeting is specifically denied.
Amendments to Governing Documents
FPL Group: The FBCA provides that unless a corporation's articles of
incorporation provide otherwise, a board of directors may amend certain items
of the corporation's articles of incorporation without shareholder approval.
Certain amendments required to have shareholder approval must be recommended
by the board of directors and submitted to a vote at a meeting of
shareholders, where such amendments must be adopted by a majority of the
votes entitled to be cast on the amendment. The FBCA also provides, unless
provided otherwise in the articles of incorporation or other provisions of
the FBCA, or as expressly provided by shareholders, that a board of directors
may amend or repeal the corporation's by-laws.
The FPL Group Articles of Incorporation provide that FPL Group reserves
the right to amend, alter, change or repeal any provision contained in the FPL
Group Articles of Incorporation, in the manner prescribed by statute, and all
rights conferred on shareholders therein are granted subject to this
reservation. Notwithstanding the foregoing, the FPL Group Articles of
Incorporation contain a supermajority voting requirement that requires a 75%
vote of the shareholders in respect of any attempted alteration, amendment or
repeal of:
o Article VII of the Articles of Incorporation (provisions relating to
amending the FPL Group Articles of Incorporation and the FPL Group
By-laws),
o the provisions of the first sentence of Section 3 of Article III of
the Articles of Incorporation (which contains the voting rights of
common stock),
o Article IV of the Articles of Incorporation (relating to the Board
of Directors),
o Article V of the Articles of Incorporation (relating to shareholder
voting), and
o Article VI of the Articles of Incorporation (relating to business
combinations).
The FPL Group By-laws provide that the power to adopt, alter, amend or
repeal the FPL Group By-laws is vested in the Board of Directors. By-laws
adopted by the Board of Directors may be repealed or changed, and new by-laws
may be adopted, by shareholders only if such repeal, change or adoption is
approved by the affirmative vote of the holders of at least 75% of the then
outstanding voting shares of stock, voting together as a single class.
Entergy: The DGCL provides that a corporation's certificate of
incorporation may be amended upon the vote of its board of directors and the
affirmative vote of a majority of the outstanding stock entitled to vote thereon
and a majority of the outstanding stock of each class entitled to vote thereon
as a separate class.
The Entergy Certificate of Incorporation provides that such certificate
will be amended in accordance with the DGCL. The Entergy By-laws provide
that, subject to the provisions of applicable law and the Entergy Certificate
of Incorporation, the Entergy By-laws may be altered, amended or repealed
either:
o at any annual or special meeting of the shareholders at which a
quorum is present or represented, provided that notice of the
proposed amendment was included in the notice of the meeting, or
o by the Board of Directors at any regular or special meeting at which
a quorum is present, provided that notice of the proposed amendment
is given.
92
<PAGE>
Any repeal, alteration or amendment must be approved by either the
majority of the outstanding shares of stock entitled to vote thereon or by a
majority of the entire Board of Directors. Any repeal of Article X of the
Entergy By-laws (indemnification) must be approved by either two-thirds of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
Holdco: The provisions of the DGCL with respect to amendments as
described above govern Holdco. The Holdco Certificate of Incorporation
provides that Holdco may supplement, amend or repeal any provision contained
in the Holdco Certificate of Incorporation in the manner prescribed by
Delaware law and such certificate, and all rights conferred on shareholders,
directors and officers therein, if any, are granted subject to this
reservation.
The Holdco By-Laws provide that except as expressly provided in the Holdco
Certificate of Incorporation or Section 2.11 of the Holdco By-Laws (membership
of the Board of Directors) and Section 3.03 of the Holdco By-laws (employment
agreements), the Holdco By-laws may from time to time be supplemented, amended
or repealed by a majority of the Board of Directors at any regular or special
meeting.
The Holdco Certificate of Incorporation and Holdco By-Laws provide that,
prior to the earlier of
o the time at which the size of the Board of Directors is reduced by
one in accordance with Section 2.11 of the Holdco By-Laws (as
described above under "--Vacancies on the Board--Holdco"), and
o the third annual shareholders meeting of Holdco that occurs
following the end of the calendar year in which the closing of the
merger occurs,
any modification or amendment of Sections 2.11 (representation on the Holdco
Board of Directors) and 3.03 (employment agreements) of the Holdco By-laws or
Article Fifth (board of directors), Article Eighth (action of Stockholders)
or subsection (b) of Article Seventh (amendment of the Holdco Articles of
Incorporation) requires at least a two-thirds vote of the Board of Directors.
Indemnification of Directors and Officers
FPL Group: Subject to certain limitations, the FBCA provides that a
corporation may indemnify any person who is or was a director, officer, employee
or agent of the corporation against liability incurred in any proceeding, if
such person acted in good faith and reasonably believed that such actions were
in the best interest of the corporation or, with respect to any criminal
proceeding, if such person had no reasonable cause to believe such action was
unlawful.
The FPL Group By-laws provides that each director and officer who is made
a party or is threatened to be made a party to or was or is called as a witness
or was or is otherwise involved in any proceeding in connection with his or her
status as a director or officer will be indemnified and held harmless by FPL
Group to the fullest extent permitted under the FBCA.
Entergy: The DGCL provides that a corporation may indemnify its officers,
directors, employees and agents against liabilities and expenses incurred in
proceedings if the person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action, had no reasonable cause to
believe that the person's conduct was unlawful. In the case of derivative
actions, indemnification is limited to expenses and no indemnification may be
made in respect of any claim as to which the person is adjudged liable to the
corporation except as otherwise authorized by a court.
93
<PAGE>
The Entergy Certificate of Incorporation provides that Entergy will
indemnify its directors and officers to the fullest extent authorized or
permitted by the DGCL as this statute exists or may hereafter be amended, and
such right to indemnification will continue as to a person who has ceased to be
a director or officer of Entergy and will inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except for
proceedings to enforce rights to indemnification, Entergy will not be obligated
to indemnify any director or officer (or his or her heirs, executors or
administrators) in connection with a proceeding (or part thereof) initiated by
such person unless such proceedings (or part thereof) was authorized by the
Board of Directors of Entergy.
Holdco: The provisions of the DGCL with respect to indemnification of
directors and officers, as described above, apply to Holdco. The Holdco
Certificate of Incorporation provides that to the fullest extent permitted by
applicable law, no director shall be personally liable to Holdco or its
stockholders for monetary damages for any breach of fiduciary duty. The
Holdco By-laws provide that Holdco will indemnify, to the fullest extent
allowed under the DGCL (as described above), any director or officer involved
in any manner by reason of the fact that such person was or is a director or
officer of Holdco. However, Holdco will not indemnify a director or officer
who commences any proceeding, unless the commencement of that proceeding is
approved by a majority vote of the disinterested directors.
Limitation on Director Liability
FPL Group: The FBCA provides that a director is not personally liable for
monetary damages to a corporation or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy by a
director, unless:
o the director breached or failed to perform his or her duties as a
director, and
o the director's breach of, or failure to perform, those duties
constitutes:
o a violation of the criminal law, unless the director had
reasonable cause to believe his or her conduct was lawful or
had no reasonable cause to believe his or her conduct was
unlawful. A judgment or other final adjudication against a
director in any criminal proceeding for a violation of the
criminal law estops that director from contesting the fact
that his or her breach, or failure to perform, constitutes a
violation of the criminal law; but does not estop the director
from establishing that he or she had reasonable cause to
believe that his or her conduct was lawful or had to
reasonable cause to believe that his or her conduct was
unlawful,
o a transaction from which the director derived an improper
personal benefit, either directly or indirectly,
o a circumstance under which the liability provisions of Section
607.0834 of the FBCA are applicable,
o in a proceeding by or in the right of the corporation to
procure a judgement in its favor or by or in the right of a
shareholder, conscious disregard for the best interest of the
corporation, or willful misconduct, or
o in a proceeding by or in the right of someone other than the
corporation or a shareholder, recklessness or an act or
omission which was committed in bad faith or with malicious
purpose or in a manner exhibiting wanton and willful disregard
of human rights, safety, or property.
Entergy: The DGCL provides that a corporation may include in its
certificate of incorporation a provision eliminating the liability of a director
to the corporation or its shareholders for monetary damages for a breach of the
director's fiduciary duties, except liability for any breach of the director's
duty of loyalty to the corporation's shareholders, for acts or omissions not in
good faith or that involve intentional misconduct or knowing violation of law,
under Section 174 of the DGCL (which deals generally with unlawful payments of
dividends, stock repurchases and redemptions), and for any transaction from
which the director derived an improper personal benefit.
94
<PAGE>
The Entergy Certificate of Incorporation provides that, except to the
extent elimination or limitation of liability is not permitted by applicable
law, no Entergy director will be personally liable to Entergy or its
shareholders for monetary damages for any breach of fiduciary duty in such
capacity.
Holdco: The provisions of the DGCL with respect to limitation on
director liability, as described above, apply to Holdco. The Holdco
Certificate of Incorporation provides that, except with respect to the
elimination or limitation of liability that is not permitted by the
provisions of the DGCL (as described above) or other applicable law, no
director of Entergy will be personally liable to Entergy or its shareholders
for monetary damages for any breach of fiduciary duty in such capacity.
Dissenters' or Appraisal Rights
FPL Group: Under the FBCA, any shareholder entitled to vote thereon may
dissent from and obtain payment for the fair value of his or her shares in the
event of:
o consummation of a plan of merger to which the corporation is a
party,
o consummation of a sale or exchange of all, or substantially all, of
the property of the corporation,
o approval of a control-share acquisition,
o consummation of a plan of share exchange to which a corporation is a
party whose shares will be acquired,
o amendment of the articles of incorporation if such amendment
adversely affects the shareholder by altering or abolishing any
preemptive or voting rights with respect to such shares, or
o any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is
entitled to dissent and obtain payment for shares.
Unless the articles of incorporation otherwise provide, shareholders do
not have such dissenters' rights, however, with respect to a plan of merger or
share exchange or a proposed sale or exchange of property if, on the record date
fixed to determine the shareholders entitled to vote at the meeting of
shareholders at which such action is to be acted upon or to consent to any such
action without a meeting, the shares were either registered on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc., or held of record by not fewer than 2,000 shareholders.
Entergy: The DGCL provides that a shareholder may dissent from, and
receive payment in cash for, the fair value of his or her shares in the event
of, certain merger and consolidations. However, under the DGCL and subject to
the following paragraph, appraisal rights are generally not available:
o for shares listed on a national securities exchange,
o for shares designated as a national market system security on an
interdealer quotation system by the NASD,
o for shares which are held of record by more than 2,000 shareholders,
or
o to shareholders of the surviving corporation if the merger did not
require the vote of the shareholders of the surviving corporation.
Notwithstanding the foregoing, appraisal rights are available if
shareholders are required by the terms of the merger agreement to accept for
their shares anything other than:
o shares of stock of the surviving corporation,
95
<PAGE>
o shares of stock of another corporation that are listed on a national
securities exchange, designated as a national market system security
as described above, or held of record by more than 2,000
shareholders,
o cash instead of fractional shares of stock, or
o any combination of the above.
Appraisal rights are also available under the DGCL in certain other
circumstances including:
o in certain parent-subsidiary corporation mergers, and
o in certain circumstances where the certificate of incorporation so
provides.
Holdco: The provisions of the DGCL with respect to appraisal rights, as
described above, also govern Holdco.
LEGAL MATTERS
The validity of the Holdco common stock offered by this joint proxy
statement/prospectus will be passed upon for Holdco by Cravath, Swaine & Moore.
The material U.S. federal income tax consequences of the merger will be
passed upon for FPL Group by Cravath, Swaine & Moore and for Entergy by Skadden,
Arps, Slate, Meagher & Flom LLP.
EXPERTS
The consolidated financial statements incorporated in this joint proxy
statement/prospectus by reference from FPL Group's Annual Report on Form 10-K
for the year ended December 31, 1999 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
The balance sheet of Holdco as of July 31, 2000, included in this joint
proxy statement/prospectus has been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and is
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated balance sheets of Entergy as of December 31, 1999, and
December 31, 1998, and the related consolidated statements of income, of
retained earnings, of comprehensive income and paid-in capital and of cash flows
for each of the three years in the period ended December 31, 1999 incorporated
in this joint proxy statement/prospectus by reference to Entergy's Annual Report
on Form 10-K, dated March 14, 2000, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
Representatives of Deloitte & Touche LLP are expected to be present at the
FPL Group special meeting, and representatives of PricewaterhouseCoopers LLP,
are expected to be present at the Entergy special meeting. The representatives
of the principal accountants will have the opportunity to make a statement
regarding the proposed merger if they desire to do so, and they are expected to
be available to respond to appropriate questions from the shareholders at their
respective meetings.
96
<PAGE>
SHAREHOLDER PROPOSALS
FPL Group
Proposals on matters appropriate for shareholder consideration consistent
with the regulations of the Securities and Exchange Commission submitted by
shareholders for inclusion in the proxy statement and form of proxy for the 2001
Annual Meeting of Shareholders must be received at FPL Group's principal
executive offices on or before December 1, 2000. After February 14, 2001, notice
to FPL Group of a shareholder proposal submitted for consideration at the 2001
Annual Meeting of Shareholders, which is not submitted for inclusion in FPL
Group's proxy statement and form of proxy, will be considered untimely and the
persons named in the proxies solicited by FPL Group's Board of Directors for the
2001 Annual Meeting of Shareholders may exercise discretionary voting power with
respect to any such proposal. Shareholder proposals may be mailed to Dennis P.
Coyle, FPL Group, Inc., Post Office Box 14000, 700 Universe Boulevard, Juno
Beach, Florida 33408-0420.
Entergy
For a shareholder proposal to be included in the proxy statement for the
December 31, 2001 annual meeting, including a proposal for the election of a
director, the proposal must be received by the Corporation at its principal
offices no later than December 1, 2000. Also, under the By-laws of Entergy,
shareholders must give advance notice of nominations for director or other
business to be addressed at the meeting not later than the close of business on
March 13, 2001 and not earlier than February 16, 2001.
OTHER MATTERS
As of the date of this joint proxy statement/prospectus, neither the FPL
Group Board of Directors nor the Entergy Board of Directors knows of any matter
that will be presented for consideration at the FPL Group special meeting or the
Entergy special meeting other than as described in this joint proxy statement/
prospectus.
WHERE YOU CAN FIND MORE INFORMATION
Holdco filed a registration statement on Form S-4 on August 25, 2000, to
register with the Securities and Exchange Commission the Holdco common stock to
be issued to FPL Group and Entergy shareholders in the merger. This joint proxy
statement/prospectus is a part of that registration statement and constitutes a
prospectus of Holdco in addition to being a joint proxy statement/prospectus of
FPL Group and Entergy. As allowed by Securities and Exchange Commission rules,
this joint proxy statement/ prospectus does not contain all the information you
can find in Holdco's registration statement or the exhibits to the registration
statement. FPL Group and Entergy file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
that FPL Group and Entergy file with the Securities and Exchange Commission at
the Securities and Exchange Commission's public reference rooms at the following
locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet worldwide web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov." Reports, proxy
statements and other information concerning FPL Group and Entergy may also be
inspected at the offices of the New York Stock Exchange, which is located at 20
Broad Street, New York, New York 10005.
97
<PAGE>
The Securities and Exchange Commission allows FPL Group, Entergy and
Holdco to "incorporate by reference" information into this joint proxy
statement/prospectus, which means that the companies can disclose important
information to you by referring you to other documents filed separately with the
Securities and Exchange Commission. The information incorporated by reference is
considered part of this joint proxy statement/prospectus, except for any
information superseded by information contained directly in this joint proxy
statement/prospectus or in later filed documents incorporated by reference in
this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the
documents set forth below that FPL Group and Entergy have previously filed with
the Securities and Exchange Commission. These documents contain important
business and financial information about FPL Group and Entergy that is not
included in or delivered with this joint proxy statement/prospectus.
<TABLE>
FPL Group Filings (File No. 1-8841) Period
----------------------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and June 30, 2000
Proxy Statement Filed March 30, 2000
Current Reports on Form 8-K Filed July 31, 2000 and August 3, 2000
Current Report on Form 8-K Filed June 18, 1996
(description of the FPL Group rights to acquire
FPL Group common stock)
Registration Statement on Form 8-A/A Filed August 1, 2000
(description of the amendment of such rights)
<CAPTION>
Entergy Filings (File No. 1-11299) Period
---------------------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and June 30, 2000
Current Reports on Form 8-K Filed March 31, 2000, May 31, 2000, July 28, 2000,
July 31, 2000, August 3, 2000 and August 18, 2000
Proxy Statement Filed March 29, 2000
</TABLE>
This joint proxy statement/prospectus also incorporates by reference all
additional documents that may be filed by FPL Group and Entergy with the
Securities and Exchange Commission under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act between the date of this joint proxy statement/prospectus and
the date of the FPL Group special meeting and the date of the Entergy special
meeting, as applicable. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
FPL Group has supplied all information relating to FPL, Entergy has
supplied all information relating to Entergy and FPL Group and Entergy have
jointly supplied all information contained or incorporated by reference in this
joint proxy statement/prospectus relating to Holdco.
If you are a FPL Group shareholder or a Entergy shareholder, we may have
sent you some of the documents incorporated by reference, but you can also
obtain any of them through the companies, the Securities and Exchange Commission
or the Securities and Exchange Commission's Internet worldwide web site as
described above. Documents incorporated by reference are available from the
companies without charge, excluding all exhibits, except that if the companies
have specifically incorporated by
98
<PAGE>
reference an exhibit in this joint proxy statement/prospectus, the exhibit will
also be provided without charge. You may obtain documents incorporated by
reference in this joint proxy statement/prospectus by requesting them in writing
or by telephone from the appropriate company at the following addresses:
FPL Group, Inc. Entergy Corporation
700 Universe Boulevard 639 Loyola Avenue
Juno Beach, FL 33408 New Orleans, LA 70113
(561) 694-4694 (504) 576-4212
Attention: Dinah Washam Attention: Christopher T. Screen
Associate Analyst Assistant Secretary
If you would like to request documents, please do so by [ ], 2000, in
order to receive them before your special meeting.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus. We have not authorized
anyone to provide you with information that is different from what is contained
in this joint proxy statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. This joint proxy statement/ prospectus is dated
[ ], 2000. You should not assume that the information contained in this
joint proxy statement/prospectus is accurate as of any date other than that
date. Neither the mailing of this joint proxy statement/prospectus to FPL Group
and Entergy shareholders nor the issuance of Holdco common stock in the merger
creates any implication to the contrary.
99
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
WCB Holding Corp.
Juno Beach, Florida
We have audited the accompanying balance sheet of WCB Holding Corp. (the
"Company") as of July 31, 2000. This financial statement is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance sheet
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit of the balance sheet provides a
reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of the Company at July 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
August 24, 2000
F-1
<PAGE>
WCB HOLDING CORP.
BALANCE SHEET
July 31, 2000
Assets................................................. $ -
====
Common Shareholders' Equity:
Common Stock Subscribed.............................. $ 10
Additional Paid-In Capital........................... 90
Common Stock Subscriptions Receivable................ (100)
----
Total Common Shareholders' Equity............. $ -
====
NOTES TO BALANCE SHEET
1. ORGANIZATION AND PURPOSE
WCB Holding Corp. ("Holdco") was incorporated in the state of Delaware
on July 25, 2000 to become the holding company in connection with the merger
of what today are the independent businesses of FPL Group, Inc. ("FPL Group")
and Entergy Corporation ("Entergy").
2. COMMON SHAREHOLDERS' EQUITY
Holdco is authorized to issue 1,000 shares of common stock, par value
$.01 per share. As of July 31, 2000, each of FPL Group and Entergy had
subscribed for 500 shares at $.10 per share.
F-2
<PAGE>
ANNEX A
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
FPL GROUP, INC.,
ENTERGY CORPORATION,
WCB HOLDING CORP.,
RANGER ACQUISITION CORP.
and
RING ACQUISITION CORP.
Dated as of July 30, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGERS
SECTION 1.01. The Mergers.....................................................2
SECTION 1.02. Closing.........................................................3
SECTION 1.03. Effective Time of the Mergers...................................3
SECTION 1.04. Effects of the Mergers..........................................3
SECTION 1.05. Directors and Officers of FPL
and Entergy....................................4
SECTION 1.06. Board of Directors; Officers....................................5
SECTION 1.07. Post-Merger Operations..........................................5
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock.........................................6
SECTION 2.02. Exchange of Certificates........................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of
FPL...........................................13
SECTION 3.02. Representations and Warranties of
Entergy.......................................31
ARTICLE IV
COVENANTS
SECTION 4.01. Covenants of FPL...............................................46
SECTION 4.02. Covenants of Entergy...........................................53
SECTION 4.03. No Solicitation by FPL.........................................59
SECTION 4.04. No Solicitation by Entergy.....................................62
SECTION 4.05. Other Actions..................................................65
SECTION 4.06. Coordination of Dividends......................................65
i
<PAGE>
PAGE
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of the Form S-4 and the Joint
Proxy Statement; Shareholders
Meetings................................................65
SECTION 5.02. Letters of FPL's Accountants...................................67
SECTION 5.03. Letters of Entergy's Accountants...............................67
SECTION 5.04. Access to Information; Confidentiality.........................67
SECTION 5.05. Regulatory Matters; Reasonable Best
Efforts.................................................68
SECTION 5.06. Stock Options; Restricted Stock and Equity
Awards; Stock Plans.....................................70
SECTION 5.07. Employee Matters; Stock Plans..................................73
SECTION 5.08. Indemnification, Exculpation and
Insurance...............................................74
SECTION 5.09. Fees and Expenses..............................................75
SECTION 5.10. Public Announcements...........................................79
SECTION 5.11. Affiliates.....................................................79
SECTION 5.12. NYSE Listing...................................................79
SECTION 5.13. Shareholder Litigation.........................................79
SECTION 5.14. Tax Treatment..................................................79
SECTION 5.15. Common Stock Repurchases.......................................80
SECTION 5.16. Standstill Agreements; Confidentiality
Agreements..............................................80
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Mergers......................................81
SECTION 6.02. Conditions to Obligations of FPL...............................81
SECTION 6.03. Conditions to Obligations of Entergy...........................83
SECTION 6.04. Frustration of Closing Conditions..............................84
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination....................................................85
SECTION 7.02. Effect of Termination..........................................87
SECTION 7.03. Amendment......................................................88
SECTION 7.04. Extension; Waiver..............................................88
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver.....................................88
ii
<PAGE>
PAGE
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and
Warranties..............................................89
SECTION 8.02. Notices........................................................89
SECTION 8.03. Definitions....................................................90
SECTION 8.04. Interpretation.................................................91
SECTION 8.05. Counterparts...................................................91
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries...........................................91
SECTION 8.07. Governing Law..................................................92
SECTION 8.08. Assignment.....................................................92
SECTION 8.09. Enforcement....................................................92
SECTION 8.10. Severability...................................................93
SECTION 8.11. Waiver of Jury Trial...........................................93
Exhibit A Form of Articles of Incorporation of the
Company as of the Effective Time
Exhibit B Form of By-laws of the Company as of the
Effective Time
Exhibit C Corporate Governance of the Company Following
the Effective Time
Exhibit D Form of Affiliate Letter
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of July 30,
2000 (this "AGREEMENT"), by and among FPL GROUP, INC., a
Florida corporation ("FPL"), ENTERGY CORPORATION, a Delaware
corporation ("ENTERGY"), WCB HOLDING CORP., a Delaware
corporation, 50% of whose outstanding capital stock is owned
by FPL and 50% of whose outstanding capital stock is owned by
Entergy (the "COMPANY"), RANGER ACQUISITION CORP., a Florida
corporation and a wholly-owned subsidiary of the Company
("MERGER SUB A"), and RING ACQUISITION CORP., a Delaware
corporation and a wholly-owned subsidiary of the Company
("MERGER SUB B").
WHEREAS the respective Boards of Directors of FPL, Entergy,
the Company, Merger Sub A and Merger Sub B have approved the consummation of the
business combination provided for in this Agreement, pursuant to which Merger
Sub A and Merger Sub B will merge with and into FPL and Entergy, respectively,
whereby, subject to the terms of Article II, each share of common stock, par
value $.01 per share, of FPL (including, except as the context otherwise
requires, the associated FPL Rights as defined in Section 3.01(b), the "FPL
COMMON STOCK") and each share of common stock, par value $.01 per share, of
Entergy (the "ENTERGY COMMON STOCK") will be converted into the right to receive
the Merger Consideration (as defined in Section 2.02) (such transactions are
referred to herein individually as the "FPL MERGER" and the "ENTERGY MERGER",
respectively, and collectively as the "MERGERS"), as a result of which the
holders of FPL Common Stock and Entergy Common Stock will together own all of
the outstanding shares of common stock, par value $.01 per share, of the Company
(the "COMPANY COMMON STOCK") (and the Company will, in turn, own all of the
outstanding shares of common stock, par value $.01 per share, of the surviving
corporation in the FPL Merger (the "SURVIVING FPL COMMON STOCK") and all of the
outstanding shares of common stock, par value $.01 per share, of the surviving
corporation in the Entergy Merger (the "SURVIVING ENTERGY COMMON STOCK"));
WHEREAS the respective Boards of Directors of FPL and Entergy
have each determined that the Mergers and the other transactions contemplated
hereby are consistent with, and in furtherance of, the best interests of their
respective corporations and shareholders and each of FPL's and Entergy's
respective business strategies and goals;
WHEREAS FPL and Entergy desire to make certain
representations, warranties, covenants and agreements in
<PAGE>
2
connection with the Mergers and also to prescribe various conditions to the
Mergers; and
WHEREAS, for Federal income tax purposes, it is intended that
each of the Mergers will constitute a tax-free transaction governed by Section
351 of the Internal Revenue Code of 1986, as amended (the "CODE"), and that the
shareholders of FPL and Entergy will recognize no gain or loss for Federal
income tax purposes as a result of the consummation of the Mergers.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I
THE MERGERS
SECTION 1.01. THE MERGERS. Upon the terms and subject to the
conditions set forth in this Agreement:
(a) At the FPL Effective Time (as defined in Section 1.03),
Merger Sub A shall be merged with and into FPL in accordance with the
Florida Business Corporation Act (the "FBCA"). FPL shall be the
surviving corporation in the FPL Merger and shall continue its
corporate existence under the laws of the State of Florida and shall
succeed to and assume all of the rights and obligations of FPL and
Merger Sub A in accordance with the FBCA. As a result of the FPL
Merger, FPL shall become a wholly-owned subsidiary of the Company. The
effects and the consequences of the FPL Merger shall be as set forth in
Section 1.04(a).
(b) At the Entergy Effective Time (as defined in Section
1.03), Merger Sub B shall be merged with and into Entergy in accordance
with the Delaware General Corporation Law (the "DGCL"). Entergy shall
be the surviving corporation in the Entergy Merger and shall continue
its corporate existence under the laws of the State of Delaware and
shall succeed to and assume all of the rights and obligations of
Entergy and Merger Sub B in accordance with the DGCL. As a result of
the Entergy Merger, Entergy shall become a wholly-owned subsidiary of
the Company. The effects and the consequences of the Entergy Merger
shall be as set forth in Section 1.04(a).
<PAGE>
3
SECTION 1.02. CLOSING. The closing of the Mergers (the
"CLOSING") will take place at 10:00 a.m., local time, on a date to be specified
by the parties (the "CLOSING DATE"), which shall be no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VI, unless another time or date is agreed to by the parties hereto. The Closing
shall be held at such location in The City of New York as is agreed to by the
parties hereto.
SECTION 1.03. EFFECTIVE TIME OF THE MERGERS. Subject to the
provisions of this Agreement, as soon as practicable on or after the Closing
Date, (i) with respect to the FPL Merger, the parties thereto shall deliver
articles of merger (the "FPL CERTIFICATE OF MERGER") executed in accordance
with, and containing such information as is required by, Section 607.1105 of the
FBCA to the Department of State of the State of Florida and shall make all other
filings or recordings required under the FBCA, and (ii) with respect to the
Entergy Merger, the parties thereto shall file a certificate of merger (the
"ENTERGY CERTIFICATE OF MERGER") executed in accordance with, and containing
such information as is required by, the relevant provisions of Section 251 of
the DGCL with the Secretary of State of the State of Delaware and shall make all
other filings or recordings required under the DGCL. The FPL Merger shall become
effective at such time as the FPL Certificate of Merger is duly filed by the
Department of State of the State of Florida (the time the FPL Merger becomes
effective being hereinafter referred to as the "FPL EFFECTIVE TIME") and the
Entergy Merger shall become effective at such time as the Entergy Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware (the
time the Entergy Merger becomes effective being hereinafter referred to as the
"ENTERGY EFFECTIVE TIME"). The FPL Effective Time shall be the same date and
time as the Entergy Effective Time (such date and time referred to herein as the
"EFFECTIVE TIME").
SECTION 1.04. EFFECTS OF THE MERGERS. (a) The FPL Merger and
the Entergy Merger shall generally have the effects set forth in the applicable
provisions of the FBCA and the DGCL, respectively. In addition, the Mergers
shall have the following effects:
(i) At the Effective Time, (A) the articles of
incorporation of FPL, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of FPL
as the surviving corporation in the FPL Merger until
thereafter changed or amended as provided therein or by
<PAGE>
4
applicable law and (B) the by-laws of FPL, as in effect
immediately prior to the FPL Effective Time, shall be the
by-laws of FPL as the surviving corporation in the FPL Merger,
until thereafter changed or amended as provided therein, in
the articles of incorporation of FPL or by applicable law.
(ii) At the Effective Time, (A) the certificate of
incorporation of Entergy, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation
of Entergy as the surviving corporation in the Entergy Merger
until thereafter changed or amended as provided therein or by
applicable law and (B) the by-laws of Entergy, as in effect
immediately prior to the Entergy Effective Time, shall be the
by-laws of Entergy as the surviving corporation in the Entergy
Merger, until thereafter changed or amended as provided
therein, in the certificate of incorporation of Entergy or by
applicable law.
(b) The parties shall take all appropriate action so that, at
the Effective Time, (i) the articles of incorporation of the Company shall be in
the form attached as Exhibit A hereto and (ii) the by-laws of the Company shall
be in the form attached as Exhibit B hereto. Each of FPL and Entergy shall take
all actions necessary to cause the Company, Merger Sub A and Merger Sub B to
take any actions necessary in order to consummate the Mergers and the other
transactions contemplated hereby.
SECTION 1.05. DIRECTORS AND OFFICERS OF FPL AND ENTERGY. (a)
The directors of Merger Sub A at the Effective Time shall, from and after the
Effective Time, be the directors of FPL as the surviving corporation in the FPL
Merger until their successors have been duly elected or appointed and qualified.
(b) Subject to Section 1.06, the officers of FPL at the
Effective Time shall, from and after the Effective Time, continue to be the
officers of FPL as the surviving corporation in the FPL Merger until their
successors have been duly elected or appointed and qualified.
(c) The directors of Merger Sub B at the Effective Time shall,
from and after the Effective Time, be the directors of Entergy as the surviving
corporation in the Entergy Merger until their successors have been duly elected
or appointed and qualified.
<PAGE>
5
(d) Subject to Section 1.06, the officers of Entergy at the
Effective Time shall, from and after the Effective Time, continue to be the
officers of Entergy as the surviving corporation in the Entergy Merger until
their successors have been duly elected or appointed and qualified.
SECTION 1.06. BOARD OF DIRECTORS; OFFICERS. From and after the
Effective Time, the Board of Directors of the Company, the committees of the
Board of Directors of the Company and the chairpersons thereof shall be as set
forth in Exhibit C hereto and the senior officers of the Company shall be as
disclosed in Section 1.06 of the FPL Disclosure Letter (as defined in Section
3.01(a)).
SECTION 1.07. POST-MERGER OPERATIONS. Following the Effective
Time, the Company shall conduct its operations in accordance with the following:
(a) NAME. At the Effective Time, the Company's name shall be a
new name agreed upon between the Board of Directors of FPL and the
Board of Directors of Entergy prior to the Effective Time.
(b) PRINCIPAL CORPORATE OFFICES. The Company shall maintain
its headquarters and principal corporate offices in Juno Beach, Florida
and shall maintain the headquarters of its utility operations in New
Orleans, Louisiana. Each of Florida Power & Light Company, Entergy
Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc.,
Entergy Mississippi, Inc., Entergy New Orleans, Inc. and System Energy
Resources, Inc. shall maintain its utility headquarters in its present
location.
(c) CHARITIES. The parties agree that provision of charitable
contributions and community support in their respective service areas
serves a number of their important corporate goals. During the two-year
period immediately following the Effective Time, the Company and its
subsidiaries taken as a whole intend to continue to provide charitable
contributions and community support within the service areas of the
parties and each of their respective subsidiaries at levels
substantially comparable to the levels of charitable contributions and
community support provided, directly or indirectly, by FPL and Entergy
within their service areas during the two-year period immediately prior
to the Effective Time.
<PAGE>
6
(d) TRANSITION COMMITTEE. The parties shall create a special
transition committee (the "TRANSITION COMMITTEE") that shall be headed
by the Chief Executive Officer of FPL and shall be composed of an equal
number of designees of FPL and Entergy. The Transition Committee shall
examine various alternatives regarding the manner in which to best
organize and manage the business of the Company after the Effective
Time, subject to applicable law.
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. (a) At the FPL
Effective Time, by virtue of the FPL Merger and without any action on the part
of the holder of any shares of FPL Common Stock or any capital stock of Merger
Sub A:
(i) CANCELATION OF CERTAIN FPL COMMON STOCK. Each
share of FPL Common Stock that is owned by FPL, Entergy or the
Company shall automatically be canceled and retired and shall
cease to exist, and no consideration shall be delivered in
exchange therefor.
(ii) CONVERSION OF FPL COMMON STOCK. Subject to
Section 2.02(e), each issued and outstanding share of FPL
Common Stock (other than shares to be canceled in accordance
with Section 2.01(a)(i)) shall be converted into the right to
receive 1 (the "FPL RATIO") fully paid and nonassessable share
of Company Common Stock. As of the FPL Effective Time, all
such shares of FPL Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing
any such shares of FPL Common Stock shall cease to have any
rights with respect thereto, except the right to receive the
shares of Company Common Stock (and cash in lieu of fractional
shares of Company Common Stock) to be issued or paid in
consideration therefor upon the surrender of such certificate
in accordance with Section 2.02, without interest.
(iii) CONVERSION OF MERGER SUB A COMMON STOCK. The
aggregate of all shares of the capital stock of Merger Sub A
issued and outstanding immediately
<PAGE>
7
prior to the FPL Effective Time (of which, as of the date of
this Agreement, 1,000 shares of common stock, par value $.01
per share, are issued and outstanding, each entitling the
holder thereof to vote on the approval of this Agreement)
shall be converted into the right to receive 1,000 shares of
Surviving FPL Common Stock.
(b) At the Entergy Effective Time, by virtue of the Entergy
Merger and without any action on the part of any holder of Entergy Common Stock
or any capital stock of Merger Sub B:
(i) CANCELATION OF CERTAIN ENTERGY COMMON STOCK. Each
share of Entergy Common Stock that is owned by Entergy, FPL or
the Company shall automatically be canceled and retired and
shall cease to exist, and no consideration shall be delivered
in exchange therefor.
(ii) CONVERSION OF ENTERGY COMMON STOCK. Subject to
Section 2.02(e), each issued and outstanding share of Entergy
Common Stock (other than shares to be canceled in accordance
with Section 2.01(b)(i)) shall be converted into the right to
receive 0.585 (the "ENTERGY RATIO", and together with the FPL
Ratio, the "EXCHANGE RATIOS") of a fully paid and
nonassessable share of Company Common Stock. As of the Entergy
Effective Time, all such shares of Entergy Common Stock shall
no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Entergy Common
Stock shall cease to have any rights with respect thereto,
except the right to receive the shares of Company Common Stock
(and cash in lieu of fractional shares of Company Common
Stock) to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.02,
without interest.
(iii) CONVERSION OF MERGER SUB B COMMON STOCK. The
aggregate of all shares of the capital stock of Merger Sub B
issued and outstanding immediately prior to the Entergy
Effective Time (of which, as of the date of this Agreement,
1,000 shares of common stock, without par value, are issued
and outstanding, each entitling the holder thereof to vote on
the approval of this Agreement) shall be
<PAGE>
8
converted into the right to receive 1,000 shares of Surviving
Entergy Common Stock.
(c) At the Effective Time, by virtue of the Mergers and
without any action on the part of any holder of any capital stock of FPL,
Entergy or the Company, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be canceled, and no
consideration shall be delivered in exchange therefor.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As
of the Effective Time, the Company shall enter into an agreement with such bank
or trust company as may be mutually agreed by FPL and Entergy (the "EXCHANGE
AGENT"), which agreement shall provide that the Company shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the holders of
shares of FPL Common Stock and Entergy Common Stock, for exchange in accordance
with this Article II, through the Exchange Agent, certificates representing the
shares of Company Common Stock (such shares of Company Common Stock, together
with any dividends or distributions with respect thereto with a record date
after the Effective Time, being hereinafter referred to as the "EXCHANGE FUND")
issuable pursuant to Section 2.01 in exchange for outstanding shares of FPL
Common Stock and Entergy Common Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of FPL Common Stock or Entergy Common Stock (the
"CERTIFICATES") whose shares were converted into the right to receive shares of
Company Common Stock pursuant to Section 2.01 (the "MERGER CONSIDERATION"), (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in such form and have such
other provisions as FPL and Entergy may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancelation to the Exchange
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Company Common Stock that such
holder has the right to receive pursuant to the provisions of this Article II,
certain dividends or other distributions in
<PAGE>
9
accordance with Section 2.02(c) and cash in lieu of any fractional share of
Company Common Stock in accordance with Section 2.02(e), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of FPL Common Stock or Entergy Common Stock that is not registered in the
transfer records of FPL or Entergy, as the case may be, a certificate
representing the proper number of shares of Company Common Stock may be issued
to a person other than the person in whose name the Certificate so surrendered
is registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such issuance shall pay any
transfer or other taxes required by reason of the issuance of shares of Company
Common Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Company that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration, which
the holder thereof has the right to receive in respect of such Certificate
pursuant to the provisions of this Article II, certain dividends or other
distributions in accordance with Section 2.02(c) and cash in lieu of any
fractional share of FPL Common Stock or Entergy Common Stock, as the case may
be, in accordance with Section 2.02(e). No interest shall be paid or will accrue
on the Merger Consideration or any cash payable to holders of Certificates
pursuant to the provisions of this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Company Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Company Common Stock
issuable hereunder in respect thereof and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.02(e), and all
such dividends, other distributions and cash in lieu of fractional shares of
Company Common Stock shall be paid by the Company to the Exchange Agent and
shall be included in the Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable escheat or similar laws, following surrender of any such Certificate
there shall be paid to the holder of the certificate representing whole shares
of Company Common Stock issued in exchange therefor, without interest, (i) at
the time of such surrender, the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
<PAGE>
10
whole shares of Company Common Stock and the amount of any cash payable in lieu
of a fractional share of Company Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but prior to such surrender and with a payment date subsequent to such surrender
payable with respect to such whole shares of Company Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN FPL COMMON STOCK OR ENTERGY
COMMON STOCK. All shares of Company Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to this Article II) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of FPL Common Stock or Entergy Common Stock, as the case may be,
theretofore represented by such Certificates, SUBJECT, HOWEVER, to FPL's and
Entergy's respective obligations to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been
declared or made by FPL or Entergy, as the case may be, on such shares of FPL
Common Stock or Entergy Common Stock that remain unpaid at the Effective Time,
and there shall be no further registration of transfers on the stock transfer
books of FPL or Entergy of the shares of FPL Common Stock and Entergy Common
Stock, respectively, that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Company,
FPL, Entergy or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article II, except as otherwise provided by law.
(e) NO FRACTIONAL SHARES. (i) No certificates or scrip
representing fractional shares of Company Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution of the
Company shall relate to such fractional share interests and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
shareholder of the Company.
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (A) the number of whole shares
of Company Common Stock delivered to the Exchange Agent by the Company pursuant
to Section 2.02(a) over (B) the aggregate number of whole shares of Company
Common Stock to be distributed to former holders of FPL Common Stock and Entergy
Common Stock pursuant to Section 2.02(b) (such excess being herein called the
"EXCESS SHARES"). Following the Effective Time, the
<PAGE>
11
Exchange Agent shall, on behalf of former shareholders of FPL and Entergy, sell
the Excess Shares at then-prevailing prices on the New York Stock Exchange, Inc.
("NYSE"), all in the manner provided in Section 2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. The Exchange Agent
shall use reasonable efforts to complete the sale of the Excess Shares as
promptly following the Effective Time as, in the Exchange Agent's sole judgment,
is practicable consistent with obtaining the best execution of such sales in
light of prevailing market conditions. Until the net proceeds of such sale or
sales have been distributed to the holders of Certificates formerly representing
FPL Common Stock or Entergy Common Stock, as the case may be, the Exchange Agent
shall hold such proceeds in trust for such holders (the "COMMON SHARES TRUST").
The Company shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange Agent
incurred in connection with such sale of the Excess Shares. The Exchange Agent
shall determine the portion of the Common Shares Trust to which each former
holder of FPL Common Stock or Entergy Common Stock is entitled, if any, by
multiplying the amount of the aggregate net proceeds composing the Common Shares
Trust by a fraction, the numerator of which is the amount of the fractional
share interest to which such former holder of FPL Common Stock or Entergy Common
Stock is entitled (after taking into account all shares of FPL Common Stock or
Entergy Common Stock held at the Effective Time by such holder) and the
denominator of which is the aggregate amount of fractional share interests to
which all former holders of FPL Common Stock and Entergy Common Stock are
entitled.
(iv) Notwithstanding the provisions of Section 2.02(e)(ii) and
(iii), the Company may elect at its option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares and the making of the
payments herein above contemplated, to pay each former holder of FPL Common
Stock or Entergy Common Stock an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such former holder (after
taking into account all shares of FPL Common Stock or Entergy Common Stock held
at the Effective Time by such holder) would otherwise be entitled by (B) the
closing price for a share of FPL Common Stock as reported on the NYSE Composite
Transaction Tape (as reported in THE WALL STREET JOURNAL, or, if not reported
thereby, any other authoritative source) on the Closing Date, and, in such
<PAGE>
12
case, all references herein to the cash proceeds of the sale of the Excess
Shares and similar references shall be deemed to mean and refer to the payments
calculated as set forth in this Section 2.02(e)(iv).
(v) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates formerly
representing FPL Common Stock or Entergy Common Stock, as the case may be, with
respect to any fractional share interests, the Exchange Agent shall make
available such amounts to such holders of Certificates formerly representing FPL
Common Stock or Entergy Common Stock, as the case may be, subject to and in
accordance with the terms of Section 2.02(c).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund that remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to the Company, upon demand,
and any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to the Company for payment of their claim
for Merger Consideration, any dividends or distributions with respect to Company
Common Stock, and any cash in lieu of fractional shares of Company Common Stock.
(g) NO LIABILITY. None of the Company, FPL, Entergy or the
Exchange Agent shall be liable to any person in respect of any shares of Company
Common Stock, any dividends or distributions with respect thereto, any cash in
lieu of fractional shares of Company Common Stock or any cash from the Exchange
Fund, in each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificate shall not have
been surrendered prior to two years after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration, any dividends or
distributions payable to the holder of such Certificate or any cash payable to
the holder of such Certificate formerly representing FPL Common Stock or Entergy
Common Stock, as the case may be, pursuant to this Article II, would otherwise
escheat to or become the property of any Governmental Authority (as defined in
Section 3.01(d)), any such Merger Consideration, dividends or distributions in
respect of such Certificate or such cash shall, to the extent permitted by
applicable law, become the property of the Company, free and clear of all claims
or interest of any person previously entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund,
<PAGE>
13
as directed by the Company, on a daily basis. Any interest and other income
resulting from such investments shall be paid to the Company.
(i) LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Company, the posting by such person of a bond in such reasonable
amount as the Company may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration and, if applicable, any unpaid dividends and distributions on
shares of Company Common Stock deliverable in respect thereof and any cash in
lieu of fractional shares, in each case pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF FPL. FPL
represents and warrants to Entergy as follows:
(a) ORGANIZATION AND QUALIFICATION. (i) Each of FPL and its
subsidiaries is duly organized, validly existing and in good standing (with
respect to jurisdictions that recognize the concept of good standing) under the
laws of its jurisdiction of incorporation and has full corporate power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties, except for such failures to be so
organized, existing and in good standing (with respect to jurisdictions that
recognize the concept of good standing) or to have such power and authority
that, individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect (as defined in Section 8.03) on FPL.
Each of FPL and its subsidiaries is duly qualified, licensed or admitted to do
business and is in good standing (with respect to jurisdictions that recognize
the concept of good standing) in each jurisdiction in which the ownership, use
or leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good standing
(with respect to jurisdictions that recognize the concept of good standing)
that, individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on FPL. Section 3.01(a) of the letter
dated
<PAGE>
14
the date of this Agreement and delivered to Entergy by FPL concurrently with the
execution and delivery of this Agreement (the "FPL DISCLOSURE LETTER") sets
forth as of the date of this Agreement the name and jurisdiction of organization
of each subsidiary of FPL.
(ii) Section 3.01(a) of the FPL Disclosure Letter sets forth a
description as of the date of this Agreement, of all FPL Joint Ventures,
including (x) the name of each such entity and (y) a brief description of the
principal line or lines of business conducted by each such entity.
For purposes of this Agreement:
(A) "JOINT VENTURE" of a person or entity shall mean any
person that is not a subsidiary of such first person, in which such
first person or one or more of its subsidiaries owns directly or
indirectly an equity interest, other than equity interests held for
passive investment purposes that are less than 5% of each class of the
outstanding voting securities or equity interests;
(B) "FPL JOINT VENTURE" shall mean any Joint Venture of FPL or
any of its subsidiaries in which the fair market value of FPL's or its
subsidiaries' interest exceeds $60,000,000, as reasonably determined by
FPL; and
(C) "ENTERGY JOINT VENTURE" shall mean the joint venture (the
"KOCH JV") between Entergy and Koch Energy, Inc. and any Joint Venture
of Entergy or any of its subsidiaries in which the fair market value of
Entergy's or its subsidiaries' interest exceeds $60,000,000, as
reasonably determined by Entergy.
(iii) Except for interests in the subsidiaries of FPL, the FPL
Joint Ventures and interests acquired after the date of this Agreement without
violating any covenant, and except as disclosed in the FPL SEC Reports (as
defined in Section 3.01(e)) filed prior to the date of this Agreement or Section
3.01(a) of the FPL Disclosure Letter, FPL does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any person,
which interest individually has a fair market value as of the date of this
Agreement in excess of $60,000,000, as reasonably determined by FPL.
<PAGE>
15
(b) CAPITAL STOCK. (i) The authorized capital stock of FPL
consists of:
(A) 300,000,000 shares of FPL Common Stock, of which
177,752,585 shares were issued and outstanding as of July 30, 2000; and
(B) 100,000,000 shares of preferred stock, par value $.01 per
share, none of which were issued and outstanding as of the date of this
Agreement (the "FPL PREFERRED STOCK").
As of July 30, 2000, no shares of FPL Common Stock were held
in the treasury of FPL. As of the date of this Agreement, (x) 3,000,000 shares
of FPL Preferred Stock are designated Series A Junior Participating Preferred
Stock (the "FPL SERIES A PREFERRED STOCK") and are reserved for issuance in
accordance with the Rights Agreement dated as of July 1, 1996, as amended, by
and between FPL and The First National Bank of Boston, as Rights Agent (the "FPL
RIGHTS AGREEMENT"), pursuant to which FPL has issued rights (the "FPL RIGHTS")
to purchase such shares of FPL Series A Preferred Stock and (y) 1,460,470 shares
of FPL Common Stock were subject to outstanding FPL Employee Stock Options (as
defined in Section 5.06) and 1,032,145 additional shares of FPL Common Stock
were reserved for issuance pursuant to the 1994 Long-Term Incentive Plan (the
"FPL OPTION PLANS"). All of the issued and outstanding shares of FPL Common
Stock are, and all shares reserved for issuance will be, upon issuance in
accordance with the terms specified in the instruments or agreements pursuant to
which they are issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to the FPL Rights Agreement, and except as
disclosed in this Section 3.01(b) or in Section 3.01(b) of the FPL Disclosure
Letter, as of the date of this Agreement there are no outstanding subscriptions,
options, warrants, rights (including stock appreciation rights), preemptive
rights or other contracts, commitments, understandings or arrangements,
including any right of conversion or exchange under any outstanding security,
instrument or agreement (together, "OPTIONS"), obligating FPL or any of its
subsidiaries to issue or sell any shares of capital stock of FPL or to grant,
extend or enter into any Option with respect thereto.
(ii) Except as permitted by this Agreement and except as
disclosed in the FPL SEC Reports filed prior to the date of this Agreement or
Section 3.01(b) of the FPL Disclosure Letter, all of the outstanding shares of
capital stock of each subsidiary of FPL are duly authorized, validly issued,
fully paid and nonassessable and are owned,
<PAGE>
16
beneficially and of record, by FPL or a subsidiary, free and clear of any liens,
claims, mortgages, encumbrances, pledges, security interests, equities and
charges of any kind (each a "LIEN"). The shares of the Company owned by FPL are
owned free and clear of any Lien. Except as disclosed in the FPL SEC Reports
filed prior to the date of this Agreement or Section 3.01(b) of the FPL
Disclosure Letter, there are no (A) outstanding Options obligating FPL or any of
its subsidiaries to issue or sell any shares of capital stock of any subsidiary
of FPL or to grant, extend or enter into any such Option or (B) voting trusts,
proxies or other commitments, understandings, restrictions or arrangements in
favor of any person other than FPL or a subsidiary wholly owned, directly or
indirectly, by FPL with respect to the voting of or the right to participate in
dividends or other earnings on any capital stock of any subsidiary of FPL.
(iii) Except for Florida Power & Light Company ("FPL
UTILITY"), as of the date of this Agreement, none of the subsidiaries of FPL or
the FPL Joint Ventures is a "PUBLIC UTILITY COMPANY", a "HOLDING COMPANY", a
"SUBSIDIARY COMPANY" or an "AFFILIATE" of any public utility company within the
meaning of Section 2(a)(5), 2(a)(8) or 2(a)(11) of the Public Utility Holding
Company Act of 1935, as amended (the "1935 ACT"), respectively. None of FPL, its
subsidiaries and the FPL Joint Ventures is registered under the 1935 Act.
(iv) Except as disclosed in Section 3.01(b)(iv) of the FPL
Disclosure Letter, as of the date of this Agreement, no bonds, debentures, notes
or other indebtedness of FPL or any of its subsidiaries having the right to vote
(or which are convertible into or exercisable for securities having the right to
vote) (collectively, "FPL VOTING DEBT") on any matters on which FPL shareholders
may vote are issued or outstanding nor are there any outstanding Options
obligating FPL or any of its subsidiaries to issue or sell any FPL Voting Debt
or to grant, extend or enter into any Option with respect thereto.
(c) AUTHORITY. FPL has full corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and, subject to
obtaining FPL Shareholders Approval (as defined in Section 3.01(p)), to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by FPL and the consummation by FPL of the
transactions contemplated hereby have been duly and validly adopted and approved
by the Board of Directors of FPL, the Board of Directors of FPL has recommended
approval of this Agreement by the
<PAGE>
17
shareholders of FPL and directed that this Agreement be submitted to the
shareholders of FPL for their approval, and no other corporate proceedings on
the part of FPL or its shareholders are necessary to authorize the execution,
delivery and performance of this Agreement by FPL and the consummation by FPL of
the FPL Merger and the other transactions contemplated hereby, other than
obtaining FPL Shareholders Approval. This Agreement has been duly and validly
executed and delivered by FPL and constitutes a legal, valid and binding
obligation of FPL enforceable against FPL in accordance with its terms.
(d) NO CONFLICTS; APPROVALS AND CONSENTS. (i) The execution
and delivery of this Agreement by FPL do not, and the performance by FPL of its
obligations hereunder and the consummation of the Mergers and the other
transactions contemplated hereby will not, conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancelation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the assets or
properties of FPL or any of its subsidiaries or any of the FPL Joint Ventures
under, any of the terms, conditions or provisions of (A) the certificates or
articles of incorporation or bylaws (or other comparable charter documents) of
FPL or any of its subsidiaries, or (B) subject to the obtaining of FPL
Shareholders Approval and the taking of the actions described in paragraph (ii)
of this Section 3.01(d) and obtaining the Entergy Required Statutory Approvals,
(x) any statute, law, rule, regulation or ordinance (together, "LAWS"), or any
judgment, order, writ or decree (together, "ORDERS"), of any Federal, state,
local or foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (each, a "GOVERNMENTAL AUTHORITY")
applicable to FPL or any of its subsidiaries or any of the FPL Joint Ventures or
any of their respective assets or properties, or (y) except as disclosed in
Section 3.01(d) of the FPL Disclosure Letter, any note, bond, mortgage, security
agreement, agreement, indenture, franchise, concession, contract, lease or other
instrument to which FPL or any of its subsidiaries or any of the FPL Joint
Ventures is a party or by which FPL or any of its subsidiaries or any of the FPL
Joint Ventures or any of their respective assets or properties is bound,
excluding from the foregoing clauses (x) and (y) such items that, individually
or in the aggregate, have not had and could not reasonably be expected to have a
material adverse effect on FPL.
<PAGE>
18
(ii) Except for (A) compliance with, and filings under, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"); (B) the filing with and, to the
extent required, the declaration of effectiveness by the Securities and Exchange
Commission (the "SEC") of (1) a proxy statement relating to the approval of this
Agreement by FPL's shareholders (such proxy statement, together with the proxy
statement relating to the approval of this Agreement by Entergy's shareholders,
in each case as amended or supplemented from time to time, the "JOINT PROXY
STATEMENT") pursuant to the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "EXCHANGE ACT"), (2) the registration
statement on Form S-4 prepared in connection with the issuance of Company Common
Stock in the Mergers (the "FORM S-4") and (3) such reports under the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated hereby; (C) the filing of documents with various state securities
authorities that may be required in connection with the transactions
contemplated hereby; (D) such filings with and approvals of the NYSE to permit
the shares of Company Common Stock that are to be issued pursuant to Article II
to be listed on the NYSE; (E) the registration, consents, approvals and notices
required under the 1935 Act; (F) notice to, and the consent and approval of, the
Federal Energy Regulatory Commission (the "FERC") under Section 203 of the
Federal Power Act, as amended (the "POWER ACT"), or an order under the Power Act
disclaiming jurisdiction over the transactions contemplated hereby; (G) the
filing of an application to, and consent and approval of, and issuance of any
required licenses and license amendments by, the Nuclear Regulatory Commission
(the "NRC") under the Atomic Energy Act of 1954, as amended (the "ATOMIC ENERGY
ACT"); (H) the filing of the FPL Certificate of Merger and other appropriate
merger documents required by the FBCA with the Secretary of State of the State
of Florida and appropriate documents with the relevant authorities of other
states in which FPL is qualified to do business; (I) compliance with and such
filings as may be required under applicable Environmental Laws (as defined in
Section 3.01(n)); (J) to the extent required, notice to and the approval of (1)
the Florida Public Service Commission ("FPSC"), (2) the Louisiana Public Service
Commission ("LPSC"), (3) the New Orleans City Council ("NOCC"), (4) the Arkansas
Public Service Commission ("APSC"), (5) the Public Utility Commission of Texas
("PUCT"), (6) the Mississippi Public Service Commission ("MPSC") and (7)
municipalities or other local governmental bodies in the State of Texas (the
"MUNICIPALITIES" and, collectively with the FPSC, the LPSC, the NOCC, the APSC,
the PUCT and the MPSC, the "APPLICABLE
<PAGE>
19
PSCS"); (K) required pre-approvals (the "FCC PRE-APPROVALS") of license
transfers with the Federal Communications Commission (the "FCC"); and (L) such
other items as disclosed in Section 3.01(d) of the FPL Disclosure Letter (the
items set forth above in clauses (A) through (H) and (J)(1) through (J)(6),
together with the items identified with an "*" in Section 3.01(d) of the FPL
Disclosure Letter, collectively, the "FPL REQUIRED STATUTORY APPROVALS"), no
consent, approval, license, order or authorization ("CONSENTS") or action of,
registration, declaration or filing with or notice to any Governmental Authority
is necessary or required to be obtained or made in connection with the execution
and delivery of this Agreement by FPL, the performance by FPL of its obligations
hereunder or the consummation of the Mergers and the other transactions
contemplated hereby, other than such items that the failure to make or obtain,
as the case may be, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on FPL.
(e) SEC REPORTS, FINANCIAL STATEMENTS AND UTILITY REPORTS. (i)
FPL and its subsidiaries have filed each form, report, schedule, registration
statement, registration exemption, if applicable, definitive proxy statement and
other document (together with all amendments thereof and supplements thereto)
required to be filed by FPL or any of its subsidiaries pursuant to the
Securities Act of 1933 and the rules and regulations thereunder (the "SECURITIES
ACT") or the Exchange Act with the SEC since January 1, 1997 (as such documents
have since the time of their filing been amended or supplemented, the "FPL SEC
REPORTS"). As of their respective dates, the FPL SEC Reports (A) complied as to
form in all material respects with the requirements of the Securities Act or the
Exchange Act, if applicable, as the case may be, and (B) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(ii) The audited consolidated financial statements and
unaudited interim consolidated financial statements (including, in each case,
the notes, if any, thereto) included in the FPL SEC Reports (the "FPL FINANCIAL
STATEMENTS") complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with U.S. generally accepted accounting principles ("GAAP") applied
on a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to unaudited statements
as permitted by
<PAGE>
20
Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited
interim financial statements, to normal, recurring year-end audit adjustments
that were not or are not expected to be, individually or in the aggregate,
materially adverse to FPL) the consolidated financial position of FPL and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended.
(iii) All filings (other than immaterial filings) required to
be made by FPL or any of its subsidiaries since January 1, 1997, under the 1935
Act, the Power Act, the Atomic Energy Act, the Communications Act of 1934 and
applicable state laws and regulations, have been filed with the SEC, the FERC,
the Department of Energy (the "DOE"), the NRC, the FCC or any applicable state
public utility commissions (including, to the extent required, the FPSC), as the
case may be, including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements appertaining
thereto, including all rates, tariffs, franchises, service agreements and
related documents and all such filings complied, as of their respective dates,
with all applicable requirements of the applicable statute and the rules and
regulations thereunder, except for filings the failure of which to make,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on FPL.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the FPL SEC Reports filed prior to the date of this Agreement or Section
3.01(f) of the FPL Disclosure Letter, since December 31, 1999, there has not
been any change, event or development that, individually or in the aggregate,
has had or could reasonably be expected to have a material adverse effect on
FPL.
(g) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected or reserved against in the balance sheet (or notes thereto) as of
December 31, 1999, included in FPL Financial Statements or as disclosed in
Section 3.01(g) of the FPL Disclosure Letter, as of the date of this Agreement,
neither FPL nor any of its subsidiaries has any liabilities or obligations
(whether absolute, accrued, contingent, fixed or otherwise, or whether due or to
become due) of any nature that would be required by GAAP to be reflected on a
consolidated balance sheet of FPL and its consolidated subsidiaries (including
the notes thereto), except liabilities or obligations (i) that were incurred in
the ordinary course of business consistent with past
<PAGE>
21
practice since December 31, 1999, or (ii) that, individually or in the
aggregate, have not had and could not reasonably be expected to have a material
adverse effect on FPL.
(h) LEGAL PROCEEDINGS. Except as disclosed in the FPL SEC
Reports filed prior to the date of this Agreement or in Section 3.01(h) of the
FPL Disclosure Letter and except for environmental matters that are governed by
Section 3.01(n), as of the date of this Agreement, (i) there are no actions,
suits, arbitrations or proceedings pending or, to the knowledge of FPL,
threatened against, relating to or affecting, nor to the knowledge of FPL are
there any Governmental Authority investigations or audits pending or threatened
against, relating to or affecting, FPL or any of its subsidiaries or any of the
FPL Joint Ventures or any of their respective assets and properties that, in
each case, individually or in the aggregate, have had or could reasonably be
expected to have a material adverse effect on FPL, and (ii) neither FPL nor any
of its subsidiaries is subject to any order of any Governmental Authority that,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect on FPL.
(i) INFORMATION SUPPLIED. None of the information supplied or
to be supplied by FPL for inclusion or incorporation by reference in (i) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) the Joint Proxy Statement will, at the date it
is first mailed to FPL's shareholders or Entergy's shareholders or at the time
of the FPL Shareholders Meeting (as defined in Section 5.01) or the Entergy
Shareholders Meeting (as defined in Section 5.01), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation is made by FPL with respect to statements made or incorporated by
reference therein based on information supplied by or on behalf of Entergy for
inclusion or incorporation by reference in the Joint Proxy Statement.
<PAGE>
22
(j) PERMITS; COMPLIANCE WITH LAWS AND ORDERS. Except as
disclosed in Section 3.01(j)(i) of the FPL Disclosure Letter, FPL, its
subsidiaries and the FPL Joint Ventures hold all permits, licenses,
certificates, authorizations and approvals of all Governmental Authorities
("PERMITS") necessary for the lawful conduct of their respective businesses,
except for failures to hold such Permits that, individually or in the aggregate,
have not had and could not reasonably be expected to have a material adverse
effect on FPL. FPL, its subsidiaries and the FPL Joint Ventures are in
compliance with the terms of their Permits, except failures so to comply that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on FPL. Except as disclosed in the
FPL SEC Reports filed prior to the date of this Agreement or in Section
3.01(j)(ii) of the FPL Disclosure Letter, FPL, its subsidiaries and the FPL
Joint Ventures are not in violation of or default under any law or order of any
Governmental Authority, except for such violations or defaults that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on FPL. This Section 3.01(j) does not
relate to matters with respect to taxes, which are the subject of Section
3.01(k), Environmental Laws, which are the subject of Section 3.01(n), benefits
plans, which are the subject of Section 3.01(l), and nuclear power plants, which
are the subject of Section 3.01(o).
(k) TAXES. Except as disclosed in Section 3.01(k) of the FPL
Disclosure Letter:
(i) each of FPL, its subsidiaries, any predecessor thereof and
any member of any consolidated group of which any of the foregoing is
or has been a member (together, the "FPL TAXPAYERS") has timely filed,
or has caused to be timely filed on its behalf, all Tax Returns (as
defined below) required to be filed by it, and all such Tax Returns are
true, complete and accurate, except to the extent any failures to file
or any inaccuracies in any filed Tax Returns, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on FPL. All Taxes (as defined below) shown to
be due and owing on such Tax Returns have been timely paid, except to
the extent that any failure to pay, individually or in the aggregate,
has not had and could not reasonably be expected to have a material
adverse effect on FPL.
<PAGE>
23
(ii) The most recent financial statements contained in the FPL
SEC Reports filed prior to the date of this Agreement reflect, in
accordance with GAAP, an adequate reserve for all Taxes payable by the
FPL Taxpayers for all Taxable periods through the date of such
financial statements, except to the extent that the aggregate amount of
such Taxes payable exceeds the amount of such reserve by an amount
that, individually or in the aggregate, has not had or could not
reasonably be expected to have a material adverse effect on FPL. No
deficiency with respect to any Taxes has been proposed, asserted or
assessed against any FPL Taxpayer, and no requests for waivers of the
time to assess any such Taxes are pending, except to the extent any
such deficiency or request for waiver, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on FPL.
(iii) The Federal income Tax Returns of the FPL Taxpayers
consolidated in such Tax Returns have been examined by and settled with
the United States Internal Revenue Service for all years through 1985.
All material assessments for Taxes due with respect to such completed
and settled examinations or any concluded litigation have been fully
paid.
(iv) There are no material Liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of any FPL
Taxpayer. None of the FPL Taxpayers is bound by any agreement with
respect to Taxes.
(v) Neither FPL nor any of its Subsidiaries has taken or
agreed to take any action or knows of any fact, agreement, plan or
other circumstance that is reasonably likely to prevent or impede the
Mergers from constituting an exchange governed by Section 351 of the
Code.
(vi) For purposes of this Agreement:
"TAXES" means all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, imposed by any
level of government or Governmental Authority, or in connection with
any agreement with respect to Taxes, including any direct or indirect
Taxes, whatever their nature, on income or otherwise, together with all
interest, surcharges and penalties imposed with respect to such
amounts.
<PAGE>
24
"TAX RETURN" means all Tax returns, declarations, statements,
reports, schedules, forms and information to be filed with any level of
government or Governmental Authority of the United States or elsewhere,
and any amended Tax return relating to
Taxes.
(l) EMPLOYEE BENEFIT PLANS; ERISA. (i) Except (x) as disclosed
in the FPL SEC Reports filed prior to the date of this Agreement or Section
3.01(l) of the FPL Disclosure Letter and (y) for such matters that, individually
or in the aggregate, have not had and could not reasonably be expected to have a
material adverse effect on FPL, (A) all FPL Employee Benefit Plans are in
compliance with all applicable requirements of law, including ERISA and the
Code, and (B) except for regular contribution, funding and vesting requirements
of the FPL Employee Benefit Plans (as defined below), neither FPL nor any of its
subsidiaries has any liabilities or obligations with respect to any such FPL
Employee Benefit Plans, whether accrued, contingent or otherwise, nor to the
knowledge of FPL are any such liabilities or obligations reasonably expected to
be incurred. Except as disclosed in Section 3.01(l) of the FPL Disclosure
Letter, the execution of this Agreement, and the transactions contemplated
hereby, will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any FPL Employee Benefit Plan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee of FPL. The
only material employment agreements, severance agreements or severance policies
applicable to FPL or any of its subsidiaries or other FPL ERISA Affiliates (as
defined below) are the agreements and policies disclosed to in Section 3.01(l)
of the FPL Disclosure Letter.
(ii) As used herein:
(A) "FPL EMPLOYEE BENEFIT PLAN" means any Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by FPL or any of its subsidiaries or other FPL ERISA
Affiliates for the benefit of the current or former employees or
directors of FPL or any of its subsidiaries or other FPL ERISA
Affiliates and existing on the date of this Agreement or at any time
subsequent thereto and on or prior to the FPL Effective Time and, in
the case of a Plan that is subject to Part 3 of Title I of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations
<PAGE>
25
thereunder ("ERISA"), Section 412 of the Code or Title IV of ERISA, at
any time during the five-year period preceding the date of this
Agreement with respect to which FPL or any of its subsidiaries has or
could reasonably be expected to have any present or future actual or
contingent liabilities;
(B) "PLAN" means any employment, bonus, incentive
compensation, deferred compensation, long term incentive, pension,
profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, medical, accident, disability, workmen's compensation or
other insurance, severance, separation, termination, change of control
or other benefit plan, agreement, practice, policy, program, scheme or
arrangement of any kind, whether written or oral, including any
"EMPLOYEE BENEFIT PLAN" within the meaning of Section 3(3) of ERISA;
and
(C) "FPL ERISA AFFILIATE" means any person who, on or before
the FPL Effective Time, is under common control with FPL within the
meaning of Section 414 of the Code.
(iii) No event has occurred, and there exists no condition or
set of circumstances in connection with any FPL Employee Benefit Plan, that has
had or could reasonably be expected to have a material adverse effect on FPL.
(iv) No transaction contemplated hereby could reasonably be
expected to result in liability to the Pension Benefit Guaranty Corporation (the
"PBGC") or otherwise under Section 302(c)(ii), 4062, 4063, 4064 or 4069 of
ERISA, or otherwise, with respect to FPL, any subsidiary or any corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA, and no event or condition exists or
has existed that could reasonably be expected to result in any such liability
with respect to FPL, any subsidiary or any such corporation or organization.
(m) LABOR MATTERS. Except as disclosed in the FPL SEC Reports
filed prior to the date of this Agreement or Section 3.01(m) of the FPL
Disclosure Letter, neither FPL nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor agreement with any union or labor
organization. Except as disclosed in the FPL SEC Reports filed prior to the date
of this Agreement or in Section 3.01(m) of the FPL Disclosure Letter, as of the
date
<PAGE>
26
of this Agreement, there are no disputes pending or, to the knowledge of FPL,
threatened between FPL or any of its subsidiaries and any trade union or other
representatives of its employees and there is no charge or complaint pending or
threatened in writing against FPL or any of its subsidiaries before the National
Labor Relations Board (the "NLRB"), except in each case as, individually or in
the aggregate, have not had and could not reasonably be expected to have a
material adverse effect on FPL, and, to the knowledge of FPL, as of the date of
this Agreement, there are no material organizational efforts presently being
made involving any of the employees of FPL or any of its subsidiaries. From
December 31, 1996, to the date of this Agreement, there has been no work
stoppage, strike or other concerted action by employees of FPL or any of its
subsidiaries and, to the knowledge of FPL, no such action has been threatened in
writing, except in each case as, individually or in the aggregate, have not had
and could not reasonably be expected to have a material adverse effect on FPL.
Except as disclosed in the FPL SEC Reports filed prior to the date of this
Agreement or in Section 3.01(m) of the FPL Disclosure Letter, since January 1,
1994, neither FPL nor any of its subsidiaries has engaged in any "plant closing"
or "mass layoff", as defined in the Worker Adjustment Retraining and
Notification Act or any comparable state or local law, without complying with
the notice requirements of such laws, except for such failures to comply with
the notice requirements of such laws that, individually or in the aggregate,
have not had and could not reasonably be expected to have a material adverse
effect on FPL.
(n) ENVIRONMENTAL MATTERS. Except as disclosed in the FPL SEC
Reports filed prior to the date of this Agreement or Section 3.01(n) of the FPL
Disclosure Letter:
(i) Each of FPL, its subsidiaries and the FPL Joint Ventures
has been and is in compliance with all applicable Environmental Laws
(as hereinafter defined), except where the failure to be in such
compliance, individually or in the aggregate, has not had and could not
reasonably be expected to have a material adverse effect on FPL.
(ii) Each of FPL, its subsidiaries and the FPL Joint Ventures
has obtained all environmental Permits (collectively, the
"ENVIRONMENTAL PERMITS") necessary for the construction of their
facilities and the conduct of their operations as of the date of this
Agreement, as applicable, and all such Environmental Permits are in
good standing or, where applicable, a renewal application has been
timely filed and is
<PAGE>
27
pending agency approval, and FPL, its subsidiaries and the FPL Joint
Ventures are in compliance with all terms and conditions of the
Environmental Permits, except where the failure to obtain such
Environmental Permits, of such Permits to be in good standing or, where
applicable, of a renewal application to have been timely filed and be
pending or to be in such compliance, individually or in the aggregate,
has not had and could not reasonably be expected to have a material
adverse effect on FPL.
(iii) There is no Environmental Claim (as hereinafter defined)
pending:
(A) against FPL or any of its subsidiaries or any of the FPL
Joint Ventures;
(B) to the knowledge of FPL, against any person or entity
whose liability for such Environmental Claim FPL or any of its
subsidiaries or any of the FPL Joint Ventures has retained or assumed
either contractually or by operation of law; or
(C) against any real or personal property or operations that
FPL or any of its subsidiaries or any of the FPL Joint Ventures owns,
leases or manages, in whole or in part, or, to the knowledge of FPL,
formerly owned, leased or managed, in whole or in part,
in each case, except for such Environmental Claims that, individually
or in the aggregate, have not had and could not reasonably be expected
to have a material adverse effect on FPL.
(iv) To the knowledge of FPL, there have not been any Releases
(as hereinafter defined) of any Hazardous Material (as hereinafter
defined) that would be reasonably likely to form the basis of any
Environmental Claim against FPL or any of its subsidiaries or any of
the FPL Joint Ventures, in each case, except for such Releases that,
individually or in the aggregate, have not had and could not reasonably
be expected to have a material adverse effect on FPL.
(v) As used in this Section 3.01(n) and in Section 3.02(n):
(A) "ENVIRONMENTAL CLAIM" means any and all administrative,
regulatory or judicial actions, suits, orders, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices or
<PAGE>
28
noncompliance, liability or violation (written or oral) by any person
or entity (including any Governmental Authority) alleging potential
liability (including potential responsibility or liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based
on or resulting from
(1) the presence or Release into the environment of
any Hazardous Materials at any location;
(2) circumstances forming the basis of any actual or
alleged violation of, or liability under, any Environmental
Law or Environmental Permit; or
(3) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence
or Release of, or exposure to, any Hazardous Materials;
(B) "ENVIRONMENTAL LAWS" means all domestic or foreign
Federal, state and local laws, principles of common law and orders
relating to pollution, the environment (including ambient air, surface
water, groundwater, land surface or subsurface strata) or protection of
human health as it relates to the environment including laws relating
to the presence or Release of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of, or exposure to, Hazardous
Materials;
(C) "HAZARDOUS MATERIALS" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, and polychlorinated
biphenyls; and (b) any chemical, material, substance or waste that is
now prohibited, limited or regulated under any Environmental Law; and
(D) "RELEASE" means any actual or threatened release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface water,
groundwater or property.
<PAGE>
29
(o) OPERATIONS OF NUCLEAR POWER PLANTS. Except as disclosed in
the FPL SEC Reports filed prior to the date of this Agreement or Section 3.01(o)
of the FPL Disclosure Letter, the operations of the nuclear generation stations
owned, in whole or part, by FPL or its subsidiaries (collectively, the "FPL
NUCLEAR FACILITIES") are and have been conducted in compliance with all
applicable laws and Permits, except for such failures to comply that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on FPL. Each of the FPL Nuclear
Facilities maintains, and is in material compliance with, emergency plans
designed to respond to an unplanned Release (as defined in Section 3.01(n))
therefrom of radioactive materials and each such plan conforms with the
requirements of applicable law in all material respects. The plans for the
decommissioning of each of the FPL Nuclear Facilities and for the storage of
spent nuclear fuel conform with the requirements of applicable law in all
material respects and, solely with respect to the portion of the FPL Nuclear
Facilities owned, directly or indirectly, by FPL, are funded consistent with
applicable law. The operations of the FPL Nuclear Facilities are not the subject
of any outstanding notices of violation or requests for information from the NRC
or any other agency with jurisdiction over such facility, except for such
notices or requests for information that, individually or in the aggregate, have
not had and could not reasonably be expected to have a material adverse effect
on FPL. Liability insurance to the full extent required by law for operating the
FPL Nuclear Facilities remains in full force and effect regarding such
facilities, except for failures to maintain such insurance in full force and
effect that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on FPL.
(p) VOTE REQUIRED. Assuming the accuracy of the representation
and warranty contained in Section 3.02(s), the affirmative vote of the holders
of record of at least a majority of the outstanding shares of FPL Common Stock,
with respect to the approval of this Agreement (the "FPL SHAREHOLDER APPROVAL"),
is the only vote of the holders of any class or series of the capital stock of
FPL or its subsidiaries required to approve this Agreement, the FPL Merger and
the other transactions contemplated hereby.
(q) OPINION OF FINANCIAL ADVISOR. FPL has received the opinion
of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated the date of this
Agreement, to the effect that, as of the date of this Agreement, the FPL
Exchange Ratio is fair from a financial point of view to the
<PAGE>
30
shareholders of FPL.
(r) FPL RIGHTS AGREEMENT. As of the date of this Agreement,
FPL or the Board of Directors of FPL, as the case may be, has (i) taken all
necessary actions so that the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in a
"Distribution Date" (as defined in the FPL Rights Agreement) and (ii) amended
the FPL Rights Agreement to render it inapplicable to this Agreement, the FPL
Merger and other transactions contemplated hereby.
(s) OWNERSHIP OF ENTERGY CAPITAL STOCK. Neither FPL nor any of
its subsidiaries or other affiliates beneficially owns any shares of Entergy
Capital Stock.
(t) ARTICLE VI OF FPL'S ARTICLES OF INCORPORATION AND SECTION
607.0901 OF THE FBCA NOT APPLICABLE. FPL has taken all necessary actions, if
any, so that neither the provisions of Article VI of FPL's Articles of
Incorporation nor the provisions of Section 607.0901 of the FBCA will, before
the termination of this Agreement, apply to this Agreement, the FPL Merger or
the other transactions contemplated hereby.
(u) JOINT VENTURE REPRESENTATIONS. Each representation or
warranty made by FPL in this Section 3.01 relating to an FPL Joint Venture that
is neither operated nor managed by FPL or an FPL subsidiary shall be deemed made
only to the knowledge of FPL.
(v) INSURANCE. Except as set forth in Section 3.01(v) of the
FPL Disclosure Letter and except for failures to maintain insurance or
self-insurance that, individually or in the aggregate, have not had and could
not reasonably be expected to have a material adverse effect on FPL, from
January 1, 1999, through the date of this Agreement, each of FPL and its
subsidiaries has been continuously insured with financially responsible insurers
or has self-insured, in each case in such amounts and with respect to such risks
and losses as are customary for companies in the United States conducting the
business conducted by FPL and its subsidiaries during such time period. Except
as set forth in Section 3.01(v) of the FPL Disclosure Letter, neither FPL nor
any of its subsidiaries has received any notice of cancelation or termination
with respect to any insurance policy of FPL or any of its subsidiaries, except
with respect to any cancelation or termination that, individually or in the
aggregate, has not had and could not reasonably be expected to have a material
adverse effect on FPL.
<PAGE>
31
(w) TRADING. FPL has established risk parameters, limits and
guidelines in compliance with the risk management policy approved by the finance
committee of FPL's Board of Directors (the "FPL TRADING GUIDELINES") to restrict
the level of risk that FPL and its subsidiaries are authorized to take with
respect to, among other things, the net position resulting from all physical
commodity transactions, exchange-traded futures and options transactions,
over-the-counter transactions and derivatives thereof and similar transactions
(the "NET FPL POSITION") and monitors compliance by FPL and its subsidiaries
with such risk parameters. FPL has provided the FPL Trading Guidelines to
Entergy prior to the date of this Agreement. As of the date of this Agreement,
(i) the Net FPL Position is within the risk parameters that are set forth in the
FPL Trading Guidelines and (ii) the exposure of FPL and its subsidiaries with
respect to the Net FPL Position resulting from all such transactions is not
material to FPL and its subsidiaries taken as a whole. From March 31, 2000 to
the date of this Agreement, FPL and its subsidiaries have not, in accordance
with generally recognized mark to market accounting policies, experienced an
aggregate net loss in its trading and related operations that would be material
to FPL and its subsidiaries taken as a whole.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF ENTERGY.
Entergy represents and warrants to FPL as follows:
(a) ORGANIZATION AND QUALIFICATION. (i) Each of Entergy and
its subsidiaries is duly organized, validly existing and in good standing (with
respect to jurisdictions that recognize the concept of good standing) under the
laws of its jurisdiction of incorporation and has full corporate power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties, except for such failures to be so
organized, existing and in good standing (with respect to jurisdictions that
recognize the concept of good standing) or to have such power and authority
that, individually or in the aggregate, have not had and could not be reasonably
expected to have a material adverse effect (as defined in Section 8.03) on
Entergy. Each of Entergy and its subsidiaries is duly qualified, licensed or
admitted to do business and is in good standing (with respect to jurisdictions
that recognize the concept of good standing) in each jurisdiction in which the
ownership, use or leasing of its assets and properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for such failures to be so qualified, licensed or admitted and in good
standing (with respect to jurisdictions that
<PAGE>
32
recognize the concept of good standing) that, individually or in the aggregate,
have not had and could not reasonably be expected to have a material adverse
effect on Entergy. Section 3.02(a) of the letter dated the date of this
Agreement and delivered to FPL by Entergy concurrently with the execution and
delivery of this Agreement (the "ENTERGY DISCLOSURE LETTER") sets forth as of
the date of this Agreement the name and jurisdiction of organization of each
subsidiary of Entergy.
(ii) Section 3.02(a) of the Entergy Disclosure Letter sets
forth a description as of the date of this Agreement, of all Entergy Joint
Ventures, including (x) the name of each such entity and (y) a brief description
of the principal line or lines of business conducted by each such entity.
(iii) Except for interests in the subsidiaries of Entergy, the
Entergy Joint Ventures and interests acquired after the date of this Agreement
without violating any covenant, and except as disclosed in the Entergy SEC
Reports (as defined in Section 3.02(e)) filed prior to the date of this
Agreement or Section 3.02(a) of the Entergy Disclosure Letter, Entergy does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any person, which interest individually has a fair market value as
of the date of this Agreement in excess of $60,000,000, as reasonably determined
by Entergy.
(b) CAPITAL STOCK. (i) The authorized capital stock of Entergy
consists of 500,000,000 shares of Entergy Common Stock, of which 222,895,585
shares were issued and outstanding as of July 26, 2000. No shares of capital
stock of Entergy were issued or outstanding from July 26, 2000, to and including
the date of this Agreement.
As of July 30, 2000, 23,709,144 shares of Entergy Common Stock
were held in the treasury of Entergy. As of the date of this Agreement,
12,471,609 shares of Entergy Common Stock were subject to outstanding Entergy
Employee Stock Options (as defined in Section 5.06) and 1,076,503 additional
shares of Entergy Common Stock were reserved for issuance pursuant to the Equity
Ownership Plan of Entergy Corporation and Subsidiaries, Equity Awards Plan of
Entergy Corporation and Subsidiaries, Entergy Service Recognition Program for
Outside Directors and Entergy Stock Plan for Outside Directors (collectively,
the "ENTERGY OPTION PLANS"). All of the issued and outstanding shares of Entergy
Common Stock are, and all shares reserved for issuance will be, upon issuance in
accordance with the terms
<PAGE>
33
specified in the instruments or agreements pursuant to which they are issuable,
duly authorized, validly issued, fully paid and nonassessable. Except as
disclosed in this Section 3.02(b) or in Section 3.02(b) of the Entergy
Disclosure Letter, on the date of this Agreement there are no outstanding
Options obligating Entergy or any of its subsidiaries to issue or sell any
shares of capital stock of Entergy or to grant, extend or enter into any Option
with respect thereto.
(ii) Except as permitted by this Agreement and except as
disclosed in the Entergy SEC Reports filed prior to the date of this Agreement
or Section 3.02(b) of the Entergy Disclosure Letter, all of the outstanding
shares of capital stock of each subsidiary of Entergy are duly authorized,
validly issued, fully paid and nonassessable and are owned, beneficially and of
record, by Entergy or a subsidiary, free and clear of any Liens. The shares of
the Company owned by Entergy are owned free and clear of any Lien. Except as
disclosed in the Entergy SEC Reports filed prior to the date of this Agreement
or Section 3.02(b) of the Entergy Disclosure Letter, there are no (A)
outstanding Options obligating Entergy or any of its subsidiaries to issue or
sell any shares of capital stock of any subsidiary of Entergy or to grant,
extend or enter into any such Option or (B) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any person
other than Entergy or a subsidiary wholly owned, directly or indirectly, by
Entergy with respect to the voting of or the right to participate in dividends
or other earnings on any capital stock of any subsidiary of Entergy.
(iii) Except for Entergy Arkansas, Inc., Entergy Gulf States,
Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans,
Inc., Entergy Power, Inc. and System Energy Resources, Inc. (the "ENTERGY
UTILITIES"), and except as disclosed in Section 3.02(b) of the Entergy
Disclosure Letter, as of the date of this Agreement, none of the subsidiaries of
Entergy or the Entergy Joint Ventures is a "PUBLIC UTILITY COMPANY", a "HOLDING
COMPANY", a "SUBSIDIARY COMPANY" or an "AFFILIATE" of any public utility company
within the meaning of Section 2(a)(5), 2(a)(8) or 2(a)(11) of the 1935 Act,
respectively. Except for Entergy, none of Entergy, its subsidiaries and the
Entergy Joint Ventures is registered under the 1935 Act.
(iv) Except as disclosed in Section 3.02(b)(iv) of the Entergy
Disclosure Letter, as of the date of this Agreement, no bonds, debentures, notes
or other indebtedness of Entergy or any of its subsidiaries having the right to
<PAGE>
34
vote (or which are convertible into or exercisable for securities having the
right to vote) (collectively, "ENTERGY VOTING DEBT") on any matters on which
Entergy shareholders may vote are issued or outstanding nor are there any
outstanding Options obligating Entergy or any of its subsidiaries to issue or
sell any Entergy Voting Debt or to grant, extend or enter into any Option with
respect thereto.
(c) AUTHORITY. Entergy has full corporate power and authority
to enter into this Agreement, to perform its obligations hereunder and, subject
to obtaining Entergy Shareholders Approval (as defined in Section 3.02(p)), to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Entergy and the consummation by Entergy of the
transactions contemplated hereby have been duly and validly adopted and approved
by the Board of Directors of Entergy, the Board of Directors of Entergy has
recommended approval of this Agreement by the shareholders of Entergy and
directed that this Agreement be submitted to the shareholders of Entergy for
their approval, and no other corporate proceedings on the part of Entergy or its
shareholders are necessary to authorize the execution, delivery and performance
of this Agreement by Entergy and the consummation by Entergy of the Entergy
Merger and the other transactions contemplated hereby, other than obtaining
Entergy Shareholders Approval. This Agreement has been duly and validly executed
and delivered by Entergy and constitutes a legal, valid and binding obligation
of Entergy enforceable against Entergy in accordance with its terms.
(d) NO CONFLICTS; APPROVALS AND CONSENTS. (i) The execution
and delivery of this Agreement by Entergy do not, and the performance by Entergy
of its obligations hereunder and the consummation of the Mergers and the other
transactions contemplated hereby will not, conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancelation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the assets or
properties of Entergy or any of its subsidiaries or any of the Entergy Joint
Ventures under, any of the terms, conditions or provisions of (A) the
certificates or articles of incorporation or bylaws (or other comparable charter
documents) of Entergy or any of its subsidiaries, or (B) subject to the
obtaining of Entergy Shareholders Approval and the taking of the actions
described in paragraph (ii) of this Section 3.02(d) and obtaining the FPL
Required Statutory Approvals, (x) any laws or orders of any Governmental
Authority applicable to
<PAGE>
35
Entergy or any of its subsidiaries or any of the Entergy Joint Ventures or any
of their respective assets or properties, or (y) except as disclosed in Section
3.02(d) of the Entergy Disclosure Letter, any note, bond, mortgage, security
agreement, agreement, indenture, license, franchise, permit, concession,
contract, lease or other instrument to which Entergy or any of its subsidiaries
or any of the Entergy Joint Ventures is a party or by which Entergy or any of
its subsidiaries or any of the Entergy Joint Ventures or any of their respective
assets or properties is bound, excluding from the foregoing clauses (x) and (y)
such items that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Entergy. Prior to
the date of this Agreement, Entergy has received the consent and waiver of Koch
Industries, Inc. ("KOCH") to the execution and delivery by Entergy of this
Agreement, the performance by Entergy of its obligations hereunder and the
consummation of the Mergers and the other transactions contemplated hereby, and
such consent and waiver is in full force and effect. Accordingly, the execution
and delivery by Entergy of this Agreement do not, and the performance by Entergy
of its obligations hereunder and the consummation of the Mergers and the other
transactions contemplated hereby will not, conflict with, result in a violation
or a breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancelation, modification or acceleration of, or
result in any change in any rights or obligations of Entergy or any of its
subsidiaries or the Entergy Joint Ventures with respect to, any of the terms,
conditions or provisions of the Contribution Agreement for Entergy-Koch, LP
dated as of May 26, 2000 (the "CONTRIBUTION AGREEMENT"), between Koch, Koch
Industries International Limited and certain subsidiaries of Entergy and all
related agreements entered into, or to be entered into, in connection therewith.
Entergy has previously delivered to FPL true and correct copies of the
Contribution Agreement and all related agreements.
(ii) Except for (A) compliance with, and filings under, the
HSR Act; (B) the filing with, and to the extent required, the declaration of
effectiveness by, the SEC of (1) the Joint Proxy Statement with the SEC pursuant
to the Exchange Act, (2) the Form S-4 and (3) such reports under the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated hereby; (C) the filing of documents with various state securities
authorities that may be required in connection with the transactions
contemplated hereby; (D) such filings with and approvals of the NYSE to permit
the shares of Company Common
<PAGE>
36
Stock that are to be issued pursuant to Article II to be listed on the NYSE; (E)
the registration, consents, approvals and notices required under the 1935 Act;
(F) notice to, and the consent and approval of, FERC under Section 203 of the
Power Act, or an order under the Power Act disclaiming jurisdiction over the
transactions contemplated hereby; (G) the filing of an application to, and
consent and approval of, and issuance of any required licenses and license
amendments by, the NRC under the Atomic Energy Act; (H) the filing of the
Entergy Certificate of Merger and other appropriate merger documents required by
the DGCL with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which Entergy is
qualified to do business; (I) compliance with and such filings as may be
required under applicable Environmental Laws; (J) to the extent required, notice
to and the approval of, the Applicable PSCs; (K) the FCC Pre-Approvals; and (L)
such other items as disclosed in Section 3.02(d) of the Entergy Disclosure
Letter (the items set forth above in clauses (A) through (H) and (J) (other than
with respect to the Municipalities), collectively, the "ENTERGY REQUIRED
STATUTORY APPROVALS"), no Consents or action of, registration, declaration or
filing with or notice to any Governmental Authority is necessary or required to
be obtained or made in connection with the execution and delivery of this
Agreement by Entergy, the performance by Entergy of its obligations hereunder or
the consummation of the Mergers and the other transactions contemplated hereby,
other than such items that the failure to make or obtain, as the case may be,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on Entergy.
(e) SEC REPORTS, FINANCIAL STATEMENTS AND UTILITY REPORTS. (i)
Entergy and its subsidiaries have filed each form, report, schedule,
registration statement, registration exemption, if applicable, definitive proxy
statement and other document (together with all amendments thereof and
supplements thereto) required to be filed by Entergy or any of its subsidiaries
pursuant to the Securities Act or the Exchange Act with the SEC since January 1,
1997 (as such documents have since the time of their filing been amended or
supplemented, the "ENTERGY SEC REPORTS"). As of their respective dates, the
Entergy SEC Reports (A) complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, if applicable, as the
case may be, and (B) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the
<PAGE>
37
statements therein, in light of the circumstances under which they were made,
not misleading.
(ii) The audited consolidated financial statements and
unaudited interim consolidated financial statements (including, in each case,
the notes, if any, thereto) included in the Entergy SEC Reports (the "ENTERGY
FINANCIAL STATEMENTS") complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments that were not or are
not expected to be, individually or in the aggregate, materially adverse to
Entergy) the consolidated financial position of Entergy and its consolidated
subsidiaries as of the respective dates thereof and the consolidated results of
their operations and cash flows for the respective periods then ended.
(iii) All filings (other than immaterial filings) required to
be made by Entergy or any of its subsidiaries since January 1, 1997, under the
1935 Act, the Power Act, the Atomic Energy Act, the Communications Act of 1934
and applicable state laws and regulations, have been filed with the SEC, the
FERC, the DOE, the NRC, the FCC or any applicable state public utility
commissions (including, to the extent required, the Applicable PSCs other than
the FPSC), as the case may be, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, including all rates, tariffs, franchises,
service agreements and related documents and all such filings complied, as of
their respective dates, with all applicable requirements of the applicable
statute and the rules and regulations thereunder, except for filings the failure
of which to make, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Entergy.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Entergy SEC Reports filed prior to the date of this Agreement or Section
3.02(f) of the Entergy Disclosure Letter, since December 31, 1999, there has not
been any change, event or development that, individually or in the aggregate,
has had or could reasonably be expected to have a material adverse effect on
Entergy.
<PAGE>
38
(g) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected or reserved against in the balance sheet (or notes thereto) as of
December 31, 1999, included in Entergy Financial Statements or as disclosed in
Section 3.02(g) of the Entergy Disclosure Letter, as of the date of this
Agreement, neither Entergy nor any of its subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature that would be required by GAAP to be
reflected on a consolidated balance sheet of Entergy and its consolidated
subsidiaries (including the notes thereto), except liabilities or obligations
(i) that were incurred in the ordinary course of business consistent with past
practice since December 31, 1999, or (ii) that, individually or in the
aggregate, have not had and could not reasonably be expected to have a material
adverse effect on Entergy.
(h) LEGAL PROCEEDINGS. Except as disclosed in the Entergy SEC
Reports filed prior to the date of this Agreement or in Section 3.02(h) of the
Entergy Disclosure Letter and except for environmental matters that are governed
by Section 3.02(n), as of the date of this Agreement, (i) there are no actions,
suits, arbitrations or proceedings pending or, to the knowledge of Entergy,
threatened against, relating to or affecting, nor to the knowledge of Entergy
are there any Governmental Authority investigations or audits pending or
threatened against, relating to or affecting, Entergy or any of its subsidiaries
or any of the Entergy Joint Ventures or any of their respective assets and
properties that, in each case, individually or in the aggregate, have had or
could reasonably be expected to have a material adverse effect on Entergy, and
(ii) neither Entergy nor any of its subsidiaries is subject to any order of any
Governmental Authority that, individually or in the aggregate, has had or could
reasonably be expected to have a material adverse effect on Entergy.
(i) INFORMATION SUPPLIED. None of the informa tion supplied or
to be supplied by Entergy for inclusion or incorporation by reference in (i) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) the Joint Proxy Statement will, at the date it
is first mailed to FPL's shareholders or Entergy's shareholders or at the time
of the FPL Shareholders Meeting or the Entergy Shareholders Meeting,
<PAGE>
39
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by Entergy with respect to
statements made or incorporated by reference therein based on information
supplied by or on behalf of FPL for inclusion or incorporation by reference in
the Joint Proxy Statement.
(j) PERMITS; COMPLIANCE WITH LAWS AND ORDERS. Except as
disclosed in Section 3.02(j)(i) of the Entergy Disclosure Letter, Entergy, its
subsidiaries and the Entergy Joint Ventures hold all Permits necessary for the
lawful conduct of their respective businesses, except for failures to hold such
Permits that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Entergy. Entergy,
its subsidiaries and the Entergy Joint Ventures are in compliance with the terms
of their Permits, except failures so to comply that, individually or in the
aggregate, have not had and could not reasonably be expected to have a material
adverse effect on Entergy. Except as disclosed in the Entergy SEC Reports filed
prior to the date of this Agreement or in Section 3.02(j)(ii) of the Entergy
Disclosure Letter, Entergy, its subsidiaries and the Entergy Joint Ventures are
not in violation of or default under any law or order of any Governmental
Authority, except for such violations or defaults that, individually or in the
aggregate, have not had and could not reasonably be expected to have a material
adverse effect on Entergy. This Section 3.02(j) does not relate to matters with
respect to taxes, which are the subject of Section 3.02(k), Environmental Laws,
which are the subject of Section 3.02(n), benefits plans, which are the subject
of Section 3.02(l), and nuclear power plants, which are the subject of Section
3.02(o).
(k) TAXES. Except as disclosed in Section 3.02(k) of the
Entergy Disclosure Letter:
(i) Each of Entergy, its subsidiaries, any predecessor thereof
and any member of any consolidated group of which any of the foregoing
is or has been a member (together, the "ENTERGY TAXPAYERS") has timely
filed, or has caused to be timely filed on its behalf, all Tax Returns
(as defined below) required to be filed by it, and all such Tax Returns
are true, complete and
<PAGE>
40
accurate, except to the extent any failures to file or any inaccuracies
in any filed Tax Returns, individually or in the aggregate, have not
had and could not reasonably be expected to have a material adverse
effect on Entergy. All Taxes (as defined below) shown to be due and
owing on such Tax Returns have been timely paid, except to the extent
that any failure to pay, individually or in the aggregate, has not had
and could not reasonably be expected to have a material adverse effect
on Entergy.
(ii) The most recent financial statements contained in the
Entergy SEC Reports filed prior to the date of this Agreement reflect,
in accordance with GAAP, an adequate reserve for all Taxes payable by
the Entergy Taxpayers for all Taxable periods through the date of such
financial statements, except to the extent that the aggregate amount of
such Taxes payable exceeds the amount of such reserve by an amount
that, individually or in the aggregate, has not had or could not
reasonably be expected to have a material adverse effect on Entergy. No
deficiency with respect to any Taxes has been proposed, asserted or
assessed against any Entergy Taxpayer, and no requests for waivers of
the time to assess any such Taxes are pending, except to the extent any
such deficiency or request for waiver, individually or in the
aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Entergy.
(iii) The Federal income Tax Returns of the Entergy Taxpayers
consolidated in such Tax Returns have been examined by and settled with
the United States Internal Revenue Service for all years through 1994.
All material assessments for Taxes due with respect to such completed
and settled examinations or any concluded litigation have been fully
paid.
(iv) There are no material Liens for Taxes (other than for
current Taxes not yet due and payable) on the assets of any Entergy
Taxpayer. None of the Entergy Taxpayers is bound by any agreement with
respect to Taxes.
(v) Neither Entergy nor any of its Subsidiaries has taken or
agreed to take any action or knows of any fact, agreement, plan or
other circumstance that is reasonably likely to prevent or impede the
Mergers from constituting an exchange governed by Section 351 of the
Code.
<PAGE>
41
(l) EMPLOYEE BENEFIT PLANS; ERISA. (i) Except (x) as disclosed
in the Entergy SEC Reports filed prior to the date of this Agreement or Section
3.02(l) of the Entergy Disclosure Letter and (y) for such matters that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Entergy, (A) all Entergy Employee
Benefit Plans are in compliance with all applicable requirements of law,
including ERISA and the Code, and (B) except for regular contribution, funding
and vesting requirements of the Entergy Employee Benefit Plans (as defined
below), neither Entergy nor any of its subsidiaries has any liabilities or
obligations with respect to any such Entergy Employee Benefit Plans, whether
accrued, contingent or otherwise, nor to the knowledge of Entergy are any such
liabilities or obligations reasonably expected to be incurred. Except as
disclosed in Section 3.02(l) of the Entergy Disclosure Letter, the execution of
this Agreement, and the transactions contemplated hereby, will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Entergy Employee Benefit Plan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee of Entergy. The only material employment
agreements, severance agreements or severance policies applicable to Entergy or
any of its subsidiaries or other Entergy ERISA Affiliates (as defined below) are
the agreements and policies disclosed in Section 3.02(l) of the Entergy
Disclosure Letter.
(ii) As used herein:
(A) "ENTERGY EMPLOYEE BENEFIT PLAN" means any Plan entered
into, established, maintained, sponsored, contributed to or required to
be contributed to by Entergy or any of its subsidiaries or other
Entergy ERISA Affiliates for the benefit of the current or former
employees or directors of Entergy or any of its subsidiaries or other
Entergy ERISA Affiliates and existing on the date of this Agreement or
at any time subsequent thereto and on or prior to the Entergy Effective
Time and, in the case of a Plan that is subject to Part 3 of Title I of
ERISA, Section 412 of the Code or Title IV of ERISA, at any time during
the five-year period preceding the date of this Agreement with respect
to which Entergy or any of its subsidiaries has or could reasonably be
expected to have any present or future actual or contingent
liabilities; and
<PAGE>
42
(B) "ENTERGY ERISA AFFILIATE" means any person who, on or
before the Entergy Effective Time, is under common control with Entergy
within the meaning of Section 414 of the Code.
(iii) No event has occurred, and there exists no condition or
set of circumstances in connection with any Entergy Employee Benefit Plan, that
has had or could reasonably be expected to have a material adverse effect on
Entergy.
(iv) No transaction contemplated hereby could reasonably be
expected to result in liability to the PBGC or otherwise under Section
302(c)(ii), 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to
Entergy, any subsidiary or any corporation or organization controlled by or
under common control with any of the foregoing within the meaning of Section
4001 of ERISA, and no event or condition exists or has existed that could
reasonably be expected to result in any such liability with respect to Entergy,
any subsidiary or any such corporation or organization.
(m) LABOR MATTERS. Except as disclosed in the Entergy SEC
Reports filed prior to the date of this Agreement or Section 3.02(m) of the
Entergy Disclosure Letter, neither Entergy nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor agreement with any
union or labor organization. Except as disclosed in the Entergy SEC Reports
filed prior to the date of this Agreement or in Section 3.02(m) of the Entergy
Disclosure Letter, as of the date of this Agreement, there are no disputes
pending or, to the knowledge of Entergy, threatened between Entergy or any of
its subsidiaries and any trade union or other representatives of its employees
and there is no charge or complaint pending or threatened in writing against
Entergy or any of its subsidiaries before the NLRB, except in each case as,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on Entergy, and, to the knowledge of
Entergy, as of the date of this Agreement, there are no material organizational
efforts presently being made involving any of the employees of Entergy or any of
its subsidiaries. From December 31, 1996, to the date of this Agreement, there
has been no work stoppage, strike or other concerted action by employees of
Entergy or any of its subsidiaries and, to the knowledge of Entergy, no such
action has been threatened in writing, except in each case as, individually or
in the aggregate, have not had and could not reasonably be expected to have a
material adverse effect on Entergy. Except as disclosed in the Entergy SEC
Reports filed prior to the date of this Agreement or in Section
<PAGE>
43
3.02(m) of the Entergy Disclosure Letter, since January 1, 1994, neither Entergy
nor any of its subsidiaries has engaged in any "plant closing" or "mass layoff",
as defined in the Worker Adjustment Retraining and Notification Act or any
comparable state or local law, without complying with the notice requirements of
such laws, except for such failures to comply with the notice requirements of
such laws that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Entergy.
(n) ENVIRONMENTAL MATTERS. Except as disclosed in the Entergy
SEC Reports filed prior to the date of this Agreement or Section 3.02(n) of the
Entergy Disclosure Letter:
(i) Each of Entergy, its subsidiaries and the Entergy Joint
Ventures has been and is in compliance with all applicable
Environmental Laws, except where the failure to be in such compliance,
individually or in the aggregate, has not had and could not reasonably
be expected to have a material adverse effect on Entergy.
(ii) Each of Entergy, its subsidiaries and the Entergy Joint
Ventures has obtained all Environmental Permits necessary for the
construction of their facilities and the conduct of their operations as
of the date of this Agreement, as applicable, and all such
Environmental Permits are in good standing or, where applicable, a
renewal application has been timely filed and is pending agency
approval, and Entergy, its subsidiaries and the Entergy Joint Ventures
are in compliance with all terms and conditions of the Environmental
Permits, except where the failure to obtain such Environmental Permits,
of such Permits to be in good standing or, where applicable, of a
renewal application to have been timely filed and be pending or to be
in such compliance, individually or in the aggregate, has not had and
could not reasonably be expected to have a material adverse effect on
Entergy.
(iii) There is no Environmental Claim pending
(A) against Entergy or any of its subsidiaries or any of the
Entergy Joint Ventures;
(B) to the knowledge of Entergy, against any person or entity
whose liability for such Environmental Claim Entergy or any of its
subsidiaries or any of the
<PAGE>
44
Entergy Joint Ventures has retained or assumed either contractually or
by operation of law; or
(C) against any real or personal property or operations that
Entergy or any of its subsidiaries or any of the Entergy Joint Ventures
owns, leases or manages, in whole or in part, or, to the knowledge of
Entergy, formerly owned, leased or arranged, in whole or in part,
in each case, except for such Environmental Claims that, individually
or in the aggregate, have not had and could not reasonably be expected
to have a material adverse effect on Entergy.
(iv) To the knowledge of Entergy, there have not been any
Releases of any Hazardous Material that would be reasonably likely to
form the basis of any Environmental Claim against Entergy or any of its
subsidiaries or any of the Entergy Joint Ventures, in each case, except
for such Releases that, individually or in the aggregate, have not had
and could not reasonably be expected to have a material adverse effect
on Entergy.
(o) OPERATIONS OF NUCLEAR POWER PLANTS. Except as disclosed in
the Entergy SEC Reports filed prior to the date of this Agreement or Section
3.02(o) of the Entergy Disclosure Letter, the operations of the nuclear
generation stations owned, in whole or part, by Entergy or its subsidiaries
(collectively, the "ENTERGY NUCLEAR FACILITIES") are and have been conducted in
compliance with all applicable laws and Permits, except for such failures to
comply that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Entergy. Each of the
Entergy Nuclear Facilities maintains, and is in material compliance with,
emergency plans designed to respond to an unplanned Release (as defined in
Section 3.02(n)) therefrom of radioactive materials and each such plan conforms
with the requirements of applicable law in all material respects. The plans for
the decommissioning of each of the Entergy Nuclear Facilities and for the
storage of spent nuclear fuel conform with the requirements of applicable law in
all material respects and, solely with respect to the portion of the Entergy
Nuclear Facilities owned, directly of indirectly, by Entergy, are funded
consistent with applicable law. The operations of the Entergy Nuclear Facilities
are not the subject of any outstanding notices of violation or requests for
information from the NRC or any other agency with jurisdiction over such
facility, except for such notices or
<PAGE>
45
requests for information that, individually or in the aggregate, have not had
and could not reasonably be expected to have a material adverse effect on
Entergy. Liability insurance to the full extent required by law for operating
the Entergy Nuclear Facilities remains in full force and effect regarding such
facilities, except for failures to maintain such insurance in full force and
effect that, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Entergy.
(p) VOTE REQUIRED. Assuming the accuracy of the representation
and warranty contained in Section 3.01(s), the affirmative vote of the holders
of record of at least a majority of the outstanding shares of Entergy Common
Stock, with respect to the approval of this Agreement (the "ENTERGY SHAREHOLDER
APPROVAL"), is the only vote of the holders of any class or series of the
capital stock of Entergy or its subsidiaries required to approve this Agreement,
the Entergy Merger and the other transactions contemplated hereby.
(q) OPINION OF FINANCIAL ADVISOR. Entergy has received the
opinions of Morgan Stanley Dean Witter & Co. and J.P. Morgan Securities Inc.
dated the date of this Agreement, to the effect that, as of the date of this
Agreement, the Entergy Exchange Ratio is fair from a financial point of view to
the shareholders of Entergy.
(r) OWNERSHIP OF FPL CAPITAL STOCK. Neither Entergy nor any of
its subsidiaries or other affiliates beneficially owns any shares of FPL Capital
Stock.
(s) SECTION 203 OF THE DGCL NOT APPLICABLE. Entergy has taken
all necessary actions, if any, so that the provisions of Section 203 of the DGCL
will not, before the termination of this Agreement, apply to this Agreement, the
Entergy Merger or the other transactions contemplated hereby.
(t) JOINT VENTURE REPRESENTATIONS. Each representation or
warranty made by Entergy in this Section 3.02 relating to an Entergy Joint
Venture that is neither operated nor managed by Entergy or an Entergy subsidiary
shall be deemed made only to the knowledge of Entergy.
(u) INSURANCE. Except as set forth in Section 3.02(u) of the
Entergy Disclosure Letter and except for failures to maintain insurance or
self-insurance that, individually or in the aggregate, have not had and could
not reasonably be expected to have a material adverse effect on
<PAGE>
46
Entergy, from January 1, 1999, through the date of this Agreement, each of
Entergy and its subsidiaries has been continuously insured with financially
responsible insurers or has self-insured, in each case in such amounts and with
respect to such risks and losses as are customary for companies in the United
States conducting the business conducted by Entergy and its subsidiaries during
such time period. Except as set forth in Section 3.02(u) of the Entergy
Disclosure Letter, neither Entergy nor any of its subsidiaries has received any
notice of cancelation or termination with respect to any insurance policy of
Entergy or any of its subsidiaries, except with respect to any cancelation or
termination that, individually or in the aggregate, has not had and could not
reasonably be expected to have a material adverse effect on Entergy.
(v) TRADING. Entergy has established risk parameters, limits
and guidelines in compliance with the risk management policy approved by
Entergy's Board of Directors (the "ENTERGY TRADING GUIDELINES") to restrict the
level of risk that Entergy and its subsidiaries are authorized to take with
respect to, among other things, the net position resulting from all physical
commodity transactions, exchange-traded futures and options transactions,
over-the-counter transactions and derivatives thereof and similar transactions
(the "NET ENTERGY POSITION") and monitors compliance by Entergy and its
subsidiaries with such risk parameters. Entergy has provided the Entergy Trading
Guidelines to FPL prior to the date of this Agreement. As of the date of this
Agreement, (i) the Net Entergy Position is within the risk parameters that are
set forth in the Entergy Trading Guidelines and (ii) the exposure of Entergy and
its subsidiaries with respect to the Net Entergy Position resulting from all
such transactions is not material to Entergy and its subsidiaries taken as a
whole. From March 31, 2000 to the date of this Agreement, Entergy and its
subsidiaries have not, in accordance with generally recognized mark to market
accounting policies, experienced an aggregate net loss in its trading and
related operations that would be material to Entergy and its subsidiaries taken
as a whole.
ARTICLE IV
COVENANTS
SECTION 4.01. COVENANTS OF FPL. From and after the date of
this Agreement until the FPL Effective Time, FPL covenants and agrees as to
itself and its subsidiaries that (except as expressly contemplated or permitted
by this
<PAGE>
47
Agreement, as set forth in Section 4.01 of the FPL Disclosure Letter or to the
extent that Entergy shall otherwise previously consent in writing):
(a) ORDINARY COURSE. FPL and each of its subsidiaries shall
conduct their businesses in all material respects in the ordinary course of
business consistent with past practice. Without limiting the generality of the
foregoing, FPL and its subsidiaries shall use commercially reasonable efforts to
preserve intact in all material respects their present business organizations,
to maintain in effect all existing Permits, subject to prudent management of
workforce and business needs, to keep available the services of their key
officers and employees, to maintain their assets and properties in good working
order and condition, ordinary wear and tear excepted, to maintain insurance on
their tangible assets and businesses in such amounts and against such risks and
losses as are currently in effect, to preserve their relationships with
Governmental Authorities, customers and suppliers and others having significant
business dealings with them and to comply in all material respects with all
laws, orders and Permits of all Governmental Authorities applicable to them.
(b) CHARTER DOCUMENTS. FPL shall not amend or propose to amend
its or, other than in a manner that would not materially restrict the operation
of their businesses, its subsidiaries' articles of incorporation or by-laws (or
other comparable corporate charter documents).
(c) DIVIDENDS. FPL shall not, nor shall it permit any of its
subsidiaries to, (i) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock or share capital, except:
(A) that FPL may continue the declaration and payment of
regular quarterly cash dividends on FPL Common Stock, not to exceed
$0.54 per share, with usual record and payment dates for such dividends
in accordance with past dividend practice; provided, that (1) dividends
payable in respect of periods after July 31, 2000, may exceed by up to
5% per share the dividend payable during the prior 12-month period in
respect of the comparable time period and (2) if the FPL Effective Time
does not occur between a record date and payment date of a regular
quarterly dividend, a special dividend may be declared and paid in
respect of FPL Common Stock with respect to the quarter in which the
FPL Effective Time occurs with a record date in such quarter and on or
prior to the date on which the FPL Effective Time occurs, which
dividend does not
<PAGE>
48
exceed an amount equal to the product of (i) a fraction the (x)
numerator of which is equal to the number of days between the last
payment date of a regular quarterly dividend and the record date of
such special dividend (excluding such last payment date but including
the record date of such special dividend) and (y) the denominator of
which is equal to the number of days between the last payment date of a
regular quarterly dividend and the same calendar day in the third month
after the month in which such last payment date occurred (excluding
such last payment date but including such same calendar day),
multiplied by (ii) the then permitted quarterly dividend per share, and
(B) for the declaration and payment of dividends by a direct
or indirect wholly-owned subsidiary solely to its parent corporation,
or by a direct or indirect partially owned subsidiary of FPL (provided
that FPL or the FPL subsidiary receives or is to receive its
proportionate share of such dividend or distribution), and
(C) for the declaration and payment of regular cash dividends
with respect to preferred stock of FPL's subsidiaries outstanding as of
the date of the Agreement or permitted to be issued under the terms of
this Agreement,
(ii) split, combine, reclassify or take similar action with
respect to any of its capital stock or share capital or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or
comprised in its share capital, (iii) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (iv) except as disclosed in
Section 4.01(c)(iv) of the FPL Disclosure Letter, directly or
indirectly redeem, repurchase or otherwise acquire any shares of its
capital stock or any Option with respect thereto except:
(A) in connection with intercompany purchases of
capital stock or share capital, or
(B) for the purpose of funding the FPL Option Plans
or employee stock ownership or dividend reinvestment and stock
purchase plans, or
<PAGE>
49
(C) mandatory repurchases or redemptions of preferred
stock of FPL's subsidiaries in accordance with the terms
thereof, or
(D) in connection with the refinancing of capital
stock at a lower cost of funds, or
(E) the repurchase by FPL of shares of FPL Common
Stock as contemplated by Section 5.15.
(d) SHARE ISSUANCES. FPL shall not, nor shall it permit any of
its subsidiaries to issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any Option
with respect thereto (other than (i) the issuance of FPL Common Stock upon the
exercise of FPL Employee Stock Options in accordance with their terms, (ii) the
issuance of FPL Common Stock in respect of target performance share awards,
shareholder value awards and restricted stock awards granted under the FPL
Option Plans in accordance with their terms, (iii) the issuance of FPL Employee
Stock Options and the grant of equity awards pursuant to the FPL Option Plans in
accordance with their terms providing, in aggregate, up to an additional
3,400,000 shares of FPL Common Stock, PROVIDED, HOWEVER, that any FPL Employee
Stock Options and equity awards granted after the date of this Agreement (other
than any such FPL Employee Stock Options or equity awards granted to the FPL
officers whose names are set forth in Section 4.01(d) of the FPL Disclosure
Letter) shall be granted on terms pursuant to which such FPL Employee Stock
Options and equity awards shall not vest on the FPL Shareholder Approval or
otherwise on the occurrence of the transactions contemplated hereby, and shall,
at the FPL Effective Time, be converted into options or equity-based awards to
acquire or in respect of, as applicable, Company Common Stock in the manner
contemplated by Section 5.06, (iv) the issuance of FPL Preferred Stock in
respect of FPL Rights, (v) the issuance of shares of capital stock in connection
with the refinancing of capital stock in accordance with Section 4.01(c)(iv)(D)
and (vi) the pro rata issuance by a subsidiary of its capital stock to its
shareholders), or modify or amend any right of any holder of outstanding shares
of capital stock or Options with respect thereto other than to give effect to
Section 5.06.
(e) ACQUISITIONS; CAPITAL EXPENDITURES. Except for (x)
acquisitions of, or capital expenditures relating to, the entities, assets and
facilities identified in Section 4.01(e) of the FPL Disclosure Letter, (y)
expenditures of amounts set forth in FPL's capital expenditure plan included in
Section 4.01(e) of the FPL
<PAGE>
50
Disclosure Letter, and (z) capital expenditures (1) required by law or
Governmental Authorities or (2) incurred in connection with the repair or
replacement of facilities destroyed or damaged due to casualty or accident
(whether or not covered by insurance), FPL shall not, nor shall it permit any of
its subsidiaries to, make any capital expenditures, or acquire or agree to
acquire (whether by merger, consolidation, purchase or otherwise) any person or
assets, if the amount to be expended pursuant thereto exceeds, in the aggregate
(A) during the period ending on the first anniversary of the date of this
Agreement, $350,000,000 (the "FPL FIRST YEAR EXPENDITURE AMOUNT") and (B) during
the period commencing on the first anniversary of the date of this Agreement and
ending on the second anniversary of the date of this Agreement, an amount equal
to the sum of $350,000,000 and the portion, if any, of the FPL First Year
Expenditure Amount that remains unspent on the first anniversary of the date of
this Agreement.
(f) DISPOSITIONS. Except as disclosed in Section 4.01(f) of
the FPL Disclosure Letter, FPL shall not, nor shall it permit any of its
subsidiaries to, sell, lease, grant any security interest in or otherwise
dispose of or encumber any of its assets or properties, other than (i)
dispositions of obsolete equipment or assets or dispositions of assets being
replaced, in each case in the ordinary course of business consistent with past
practice, (ii) dispositions by FPL Utility of its utility assets in accordance
with the terms of restructuring and divestiture plans mandated or approved by
applicable local or state regulatory agencies or (iii) dispositions having an
aggregate value of less than $100,000,000.
(g) INDEBTEDNESS. Except as disclosed in Section 4.01(g) of
the FPL Disclosure Letter, FPL shall not, nor shall it permit any of its
subsidiaries to, (A) incur or guarantee any indebtedness or enter into any "keep
well" or other agreement to maintain any financial condition of another person
or enter into any arrangement having the economic effect of any of the foregoing
(including any capital leases, "synthetic" leases or conditional sale or other
title retention agreements) other than (i) short-term borrowings incurred in the
ordinary course of business consistent with past practice, (ii) letters of
credit obtained in the ordinary course of business consistent with past
practice, (iii) borrowings made in connection with the refunding of existing
indebtedness or refinancing of capital stock (x) at maturity or upon final
mandatory redemption (without the need for the occurrence of any special event)
or (y) at a lower cost of funds, (iv) borrowings to finance capital expenditures
or acquisitions permitted pursuant to
<PAGE>
51
Section 4.01(e), (v) other borrowings in an aggregate principal amount not to
exceed $250,000,000 outstanding at any time, (vi) borrowings to finance common
stock repurchases contemplated by Section 5.15 or (vii) continuation of
guarantees existing as of the date of this Agreement, or (B) make any loans or
advances to any other person, other than in the ordinary course of business
consistent with past practice or to any direct or indirect wholly owned
subsidiary of FPL.
(h) MARKETING OF ENERGY; TRADING. FPL shall not, nor shall it
permit any of its subsidiaries to, (i) permit any material change in policies
governing or otherwise relating to the trading or marketing of energy other than
as a result of acquisitions or capital expenditures permitted pursuant to
Section 4.01(e) or (ii) enter into any physical commodity transactions,
exchange-traded futures and options transactions, over-the-counter transactions
and derivatives thereof or similar transactions other than as permitted by the
FPL Trading Guidelines.
(i) EMPLOYEE BENEFITS. Except as required by law or the terms
of any collective bargaining agreement, or as disclosed in Section 4.01(i) of
the FPL Disclosure Letter, FPL shall not, nor shall it permit any of its
subsidiaries to, enter into, adopt, amend or terminate any FPL Employee Benefit
Plan, or other agreement, arrangement, plan or policy between FPL or one of its
subsidiaries and one or more of its directors, officers or employees, or except
for normal increases in the ordinary course of business consistent with past
practice, increase in any manner the compensation or fringe benefits of any
director, executive officer or other employee, or pay any benefit not required
by any plan or arrangement in effect as of the date of this Agreement, PROVIDED,
HOWEVER, that the foregoing shall not restrict FPL or its subsidiaries from (i)
entering into or making available to newly hired officers and employees or to
officers and employees in the context of promotions based on job performance or
workplace requirements in the ordinary course of business consistent with past
practice, plans, agreements, benefits and compensation arrangements (including
incentive grants) that have, consistent with past practice, been made available
to newly hired or promoted officers and employees, or (ii) entering into or
amending collective bargaining agreements with existing collective bargaining
representatives or newly certified bargaining units regarding mandatory subjects
of bargaining under applicable law, in each case in a manner consistent with
past practice to the extent permitted by law.
<PAGE>
52
(j) REGULATORY STATUS. Except as disclosed in Section 4.01(j)
of the FPL Disclosure Letter, FPL shall not, nor shall it permit any of its
subsidiaries to, agree or consent to any material agreements or material
modifications of existing agreements or course of dealings with any Governmental
Authority in respect of the operations of their businesses, except (i) as
required by law to renew Permits or agreements in the ordinary course of
business consistent with past practice, (ii) as may be necessary or required in
connection with the consummation of any acquisition permitted pursuant to
Section 4.01(e) or (iii) to effect the consummation of the transactions
contemplated hereby.
(k) ACCOUNTING. FPL shall not, nor shall it permit any of its
subsidiaries to, make any changes in their accounting methods materially
affecting the reported consolidated assets, liabilities or results of operations
of FPL, except as required by law or GAAP.
(l) TRANSMISSION REORGANIZATION. Notwithstanding any other
provision in this Agreement, this Agreement shall not in any manner restrict FPL
Utility from, directly or indirectly, (i) transferring ownership or control, in
whole or in part, whether by sale, lease or otherwise, of its transmission and
related assets to an entity jointly owned by FPL and another person or persons,
(ii) transferring control of such assets to an independent system operator or
other similar entity or (iii) otherwise transferring ownership or control of
such assets for fair value (including in connection with a public offering), in
the case of each of clause (i), (ii) and (iii), as part of an arrangement
commonly understood to be a "transco" or the formation of a regional
transmission organization under the rules and regulations of the FERC (any of
the foregoing being referred to as the "FPL RTO FORMATION"). So long as the FPL
RTO Formation does not cause the representation set forth in Section 3.01(k)(v)
to be untrue, the failure of the performance of the covenant set forth in
Section 5.14 or the failure of the conditions set forth in Sections 6.02(c) and
6.03(c), such FPL RTO Formation shall not constitute (x) a breach of or failure
to perform any of the representations, warranties, covenants or other agreements
contained in this Agreement (including those contained in Section 4.03) or (y)
otherwise result in the failure of any condition set forth in Article VI hereof
to be satisfied.
(m) INSURANCE. FPL shall, and shall cause its subsidiaries to,
maintain with financially responsible insurance companies (or through
self-insurance, consistent with past practice) insurance in such amounts and
against
<PAGE>
53
such risks and losses as are customary for companies engaged in their respective
businesses.
SECTION 4.02. COVENANTS OF ENTERGY. From and after the date of
this Agreement until the Entergy Effective Time, Entergy covenants and agrees as
to itself and its subsidiaries that (except as expressly contemplated or
permitted by this Agreement, as set forth in Section 4.02 of the Entergy
Disclosure Letter or to the extent that FPL shall otherwise previously consent
in writing):
(a) ORDINARY COURSE. Entergy and each of its subsidiaries
shall conduct their businesses in all material respects in the ordinary course
of business consistent with past practice. Without limiting the generality of
the foregoing, Entergy and its subsidiaries shall use commercially reasonable
efforts to preserve intact in all material respects their present business
organizations, to maintain in effect all existing Permits, subject to prudent
management of workforce and business needs, to keep available the services of
their key officers and employees, to maintain their assets and properties in
good working order and condition, ordinary wear and tear excepted, to maintain
insurance on their tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect, to preserve their
relationships with Governmental Authorities, customers and suppliers and others
having significant business dealings with them and to comply in all material
respects with all laws, orders and Permits of all Governmental Authorities
applicable to them.
(b) CHARTER DOCUMENTS. Entergy shall not amend or propose to
amend its or, other than in a manner that would not materially restrict the
operation of their businesses, its subsidiaries' certificate of incorporation or
by-laws (or other comparable corporate charter documents).
(c) DIVIDENDS. Entergy shall not, nor shall it permit any of
its subsidiaries to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock or share capital,
except:
(A) that Entergy may continue the declaration and payment of
regular quarterly cash dividends on Entergy Common Stock, not to exceed
$0.30 per share, with usual record and payment dates for such dividends
in accordance with past dividend practice; provided, that (1) dividends
payable in respect of periods after July 31, 2000, may exceed by up to
5% per share the dividend payable during the prior 12-month period in
<PAGE>
54
respect of the comparable time period and (2) if the Entergy Effective
Time does not occur between a record date and payment date of a regular
quarterly dividend, a special dividend may be declared and paid in
respect of Entergy Common Stock with respect to the quarter in which
the Entergy Effective Time occurs with a record date in such quarter
and on or prior to the date on which the Entergy Effective Time occurs,
which dividend does not exceed an amount equal to the product of (i) a
fraction the (x) numerator of which is equal to the number of days
between the last payment date of a regular quarterly dividend and the
record date of such special dividend (excluding such last payment date
but including the record date of such special dividend) and (y) the
denominator of which is equal to the number of days between the last
payment date of a regular quarterly dividend and the same calendar day
in the third month after the month in which such last payment date
occurred (excluding such last payment date but including such same
calendar day), multiplied by (ii) the then permitted quarterly dividend
per share, and
(B) for the declaration and payment of dividends by a direct
or indirect wholly-owned subsidiary solely to its parent corporation,
or by a direct or indirect partially owned subsidiary of Entergy
(provided that Entergy or the Entergy subsidiary receives or is to
receive its proportionate share of such dividend or distribution), and
(C) for the declaration and payment of regular cash dividends
with respect to preferred stock of Entergy's subsidiaries outstanding
as of the date of the Agreement or permitted to be issued under the
terms of this Agreement,
(ii) split, combine, reclassify or take similar action with
respect to any of its capital stock or share capital or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or
comprised in its share capital, (iii) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (iv) directly or indirectly
redeem, repurchase or otherwise acquire any shares of its capital stock
or any Option with respect thereto except:
<PAGE>
55
(A) in connection with intercompany purchases of
capital stock or share capital, or
(B) for the purpose of funding the Entergy Option
Plan or employee stock ownership or dividend reinvestment and
stock purchase plans, or
(C) mandatory repurchases or redemptions of preferred
stock of Entergy's subsidiaries in accordance with the terms
thereof, or
(D) in connection with the refinancing of capital
stock at a lower cost of funds, or
(E) the repurchase by Entergy of shares of Entergy
Common Stock as contemplated by
Section 5.15.
(d) SHARE ISSUANCES. Entergy shall not, nor shall it permit
any of its subsidiaries to issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any Option
with respect thereto (other than (i) the issuance of Entergy Common Stock upon
the exercise of Entergy Employee Stock Options in accordance with their terms,
(ii) the issuance of Entergy Common Stock in respect of target performance share
awards, shareholder value awards and restricted stock awards granted under the
Entergy Option Plans in accordance with their terms, (iii) the issuance of
Entergy Employee Stock Options and the grant of equity awards pursuant to the
Entergy Option Plans in accordance with their terms providing, in aggregate, up
to an additional 15,000,000 shares of Entergy Common Stock, PROVIDED, HOWEVER,
that any Entergy Employee Stock Options and equity awards granted after the date
of this Agreement (other than any such Entergy Employee Stock Options or equity
awards granted to the Entergy officers whose names are set forth in Section
4.02(d) of the Entergy Disclosure Letter) shall be granted on terms pursuant to
which such Entergy Employee Stock Options and equity awards shall not vest on
the Entergy Shareholders Approval or otherwise on the occurrence of the
transactions contemplated hereby, and shall, at the Entergy Effective Time, be
converted into options or equity-based awards to acquire or in respect of, as
applicable, Company Common Stock in the manner contemplated by Section 5.06,
(iv) the issuance of shares of capital stock in connection with the refinancing
of capital stock in accordance with Section 4.02(c)(iv)(D) and (v) the pro rata
issuance by a subsidiary of its capital stock to its shareholders), or modify or
amend any right of any holder of
<PAGE>
56
outstanding shares of capital stock or Options with respect thereto other than
to give effect to Section 5.06.
(e) ACQUISITIONS; CAPITAL EXPENDITURES. Except for (x)
acquisitions of, or capital expenditures relating to, the entities, assets and
facilities identified in Section 4.02(e) of the Entergy Disclosure Letter, (y)
expenditures of amounts set forth in Entergy's capital expenditure plan included
in Section 4.02(e) of the Entergy Disclosure Letter, and (z) capital
expenditures (1) required by law or Governmental Authorities or (2) incurred in
connection with the repair or replacement of facilities destroyed or damaged due
to casualty or accident (whether or not covered by insurance), Entergy shall
not, nor shall it permit any of its subsidiaries to, make any capital
expenditures, or acquire or agree to acquire (whether by merger, consolidation,
purchase or otherwise) any person or assets, if the amount to be expended
pursuant thereto exceeds, in the aggregate (A) during the period ending on the
first anniversary of the date of this Agreement, $350,000,000 (the "ENTERGY
FIRST YEAR EXPENDITURE AMOUNT") and (B) during the period commencing on the
first anniversary of the date of this Agreement and ending on the second
anniversary of the date of this Agreement, an amount equal to the sum of
$350,000,000 and the portion, if any, of the Entergy First Year Expenditure
Amount that remains unspent on the first anniversary of the date of this
Agreement.
(f) DISPOSITIONS. Except as disclosed in Section 4.02(f) of
the Entergy Disclosure Letter, Entergy shall not, nor shall it permit any of its
subsidiaries to, sell, lease, grant any security interest in or otherwise
dispose of or encumber any of its assets or properties, other than (i)
dispositions of obsolete equipment or assets or dispositions of assets being
replaced, in each case in the ordinary course of business consistent with past
practice, (ii) dispositions by any of the Entergy Utilities of their respective
utility assets in accordance with the terms of restructuring and divestiture
plans mandated or approved by applicable local or state regulatory agencies or
(iii) dispositions having an aggregate value of less than $100,000,000.
(g) INDEBTEDNESS. Except as disclosed in Section 4.02(g) of
the Entergy Disclosure Letter, Entergy shall not, nor shall it permit any of its
subsidiaries to, (A) incur or guarantee any indebtedness or enter into any "keep
well" or other agreement to maintain any financial condition of another person
or enter into any arrangement having the economic effect of any of the foregoing
<PAGE>
57
(including any capital leases, "synthetic" leases or conditional sale or other
title retention agreements) other than (i) short-term borrowings incurred in the
ordinary course of business consistent with past practice, (ii) letters of
credit obtained in the ordinary course of business consistent with past
practice, (iii) borrowings made in connection with the refunding of existing
indebtedness or refinancing of capital stock (x) at maturity or upon final
mandatory redemption (without the need for the occurrence of any special event)
or (y) at a lower cost of funds, (iv) borrowings to finance capital expenditures
or acquisitions permitted pursuant to Section 4.02(e), (v) other borrowings in
an aggregate principal amount not to exceed $250,000,000 outstanding at any
time, (vi) borrowings to finance common stock repurchases contemplated by
Section 5.15 or (vii) continuation of guarantees existing as of the date of this
Agreement, or (B) make any loans or advances to any other person, other than in
the ordinary course of business consistent with past practice or to any direct
or indirect wholly owned subsidiary of Entergy.
(h) MARKETING OF ENERGY; TRADING. Entergy shall not, nor shall
it permit any of its subsidiaries to, permit any material change in policies
governing or otherwise relating to the trading or marketing of energy other than
as a result of acquisitions or capital expenditures permitted pursuant to
Section 4.02(e). Entergy shall use its reasonable efforts to promptly establish
for the Koch JV and its subsidiaries policies governing or otherwise relating to
the trading or marketing of energy that are comparable to policies established
by other companies engaged in similar businesses as the Koch JV. Entergy shall
not, nor shall it permit any of its subsidiaries, and shall use its reasonable
efforts to cause the Koch JV and its subsidiaries not to, enter into any
physical commodity transactions, exchange-traded futures and options
transactions, over-the-counter transactions and derivatives thereof or similar
transactions other than as permitted by the Entergy Trading Guidelines or the
policies to be established for the Koch JV and its subsidiaries, as applicable.
(i) EMPLOYEE BENEFITS. Except as required by law or the terms
of any collective bargaining agreement, or as disclosed in Section 4.02(i) of
the Entergy Disclosure Letter, Entergy shall not, nor shall it permit any of its
subsidiaries to, enter into, adopt, amend or terminate any
Entergy Employee Benefit Plan, or other agreement, arrangement, plan or policy
between Entergy or one of its subsidiaries and one or more of its directors,
officers or employees, or except for normal increases in the ordinary course of
business consistent with past practice, increase
<PAGE>
58
in any manner the compensation or fringe benefits of any director, executive
officer or other employee, or pay any benefit not required by any plan or
arrangement in effect as of the date of this Agreement, PROVIDED, HOWEVER, that
the foregoing shall not restrict Entergy or its subsidiaries from (i) entering
into or making available to newly hired officers and employees or to officers
and employees in the context of promotions based on job performance or workplace
requirements in the ordinary course of business consistent with past practice,
plans, agreements, benefits and compensation arrangements (including incentive
grants) that have, consistent with past practice, been made available to newly
hired or promoted officers and employees, or (ii) entering into or amending
collective bargaining agreements with existing collective bargaining
representatives or newly certified bargaining units regarding mandatory subjects
of bargaining under applicable law, in each case in a manner consistent with
past practice to the extent permitted by law.
(j) REGULATORY STATUS. Except as disclosed in Section 4.02(j)
of the Entergy Disclosure Letter, Entergy shall not, nor shall it permit any of
its subsidiaries to, agree or consent to any material agreements or material
modifications of existing agreements or course of dealings with any Governmental
Authority in respect of the operations of their businesses, except (i) as
required by law to renew Permits or agreements in the ordinary course of
business consistent with past practice, (ii) as may be necessary or required in
connection with the consummation of any acquisition permitted pursuant to
Section 4.02(e) or (iii) to effect the consummation of the transactions
contemplated hereby.
(k) ACCOUNTING. Entergy shall not, nor shall it permit any of
its subsidiaries to, make any changes in their accounting methods materially
affecting the reported consolidated assets, liabilities or results of operations
of Entergy, except as required by law or GAAP.
(l) TRANSMISSION REORGANIZATION. Notwithstanding any other
provision in this Agreement, this Agreement shall not in any manner restrict the
Entergy Utilities from, directly or indirectly, (i) transferring ownership or
control, in whole or in part, whether by sale, lease or otherwise, of its
transmission and related assets to an entity jointly owned by Entergy and
another person or persons, (ii) transferring control of such assets to an
independent system operator or other similar entity or (iii) otherwise
transferring ownership or control of such assets for fair value (including in
connection with a public
<PAGE>
59
offering), in the case of each of clause (i), (ii) and (iii), as part of an
arrangement commonly understood to be a "transco" or the formation of a regional
transmission organization under the rules and regulations of the FERC (any of
the foregoing being referred to as the "ENTERGY RTO FORMATION"). So long as the
Entergy RTO Formation does not cause the representation set forth in Section
3.02(k)(v) to be untrue, the failure of the performance of the covenant set
forth in Section 5.14 or the failure of the conditions set forth in Sections
6.02(c) and 6.03(c), such Entergy RTO Formation shall not constitute (x) a
breach of or failure to perform any of the representations, warranties,
covenants or other agreements contained in this Agreement (including those
contained in Section 4.04) or (y) otherwise result in the failure of any
condition set forth in Article VI hereof to be satisfied.
(m) INSURANCE. Entergy shall, and shall cause its subsidiaries
to, maintain with financially responsible insurance companies (or through
self-insurance, consistent with past practice) insurance in such amounts and
against such risks and losses as are customary for companies engaged in their
respective businesses.
SECTION 4.03. NO SOLICITATION BY FPL. (a) FPL shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or permit any
of its directors, officers or employees to, and shall use its reasonable best
efforts to cause any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of its subsidiaries not to,
directly or indirectly, (i) solicit, initiate or knowingly encourage (including
by way of furnishing information), or knowingly take any other action designed
to facilitate, any inquiries or the making of any proposal that constitutes an
FPL Takeover Proposal (as defined below) or (ii) participate in any negotiations
or substantive discussions regarding any FPL Takeover Proposal; PROVIDED,
HOWEVER, that if, at any time prior to receipt of the FPL Shareholder Approval
(the "FPL APPLICABLE PERIOD"), the Board of Directors of FPL determines in good
faith, after consultation with its legal and financial advisors, that an FPL
Takeover Proposal that was not solicited by it and that did not otherwise result
from a breach of this Section 4.03(a) is, or is reasonably likely to result in,
an FPL Superior Proposal (as defined in Section 4.03(b)), and subject to
providing prior written notice of its decision to take such action to Entergy
(the "FPL INFORMATION NOTICE") and compliance with Section 4.03(c), FPL may (x)
furnish information with respect to FPL and its subsidiaries to the person
making such proposal (and its representatives) pursuant to a
<PAGE>
60
customary confidentiality agreement containing terms no less favorable to FPL
than those set forth in the Confidentiality Agreement (the "CONFIDENTIALITY
AGREEMENT") dated June 8, 2000, between FPL and Entergy (provided that such
confidentiality agreement shall not in any way restrict FPL from complying with
its disclosure obligations under this Agreement, including with respect to such
proposal, but such confidentiality agreement may allow such party to submit to
FPL a proposal or offer relating to a transaction) and (y) participate in
discussions or negotiations regarding such proposal. FPL, its subsidiaries and
their representatives immediately shall cease and cause to be terminated any
existing activities, discussions or negotiations with any parties with respect
to any FPL Takeover Proposal. For purposes of this Agreement, "FPL TAKEOVER
PROPOSAL" means any inquiry, proposal or offer from any person relating to (i)
any direct or indirect acquisition or purchase of a business (an "FPL MATERIAL
BUSINESS") that constitutes 20% or more of the net revenues, net income or the
assets (including equity securities) of FPL and its subsidiaries, taken as a
whole, (ii) any direct or indirect acquisition or purchase of 20% or more of any
class of voting securities of FPL or any subsidiary of FPL owning, operating or
controlling an FPL Material Business, (iii) any tender offer or exchange offer
that if consummated would result in any person beneficially owning 20% or more
of any class of voting securities of FPL or any subsidiary of FPL owning,
operating or controlling an FPL Material Business or (iv) any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving FPL or any such subsidiary of FPL owning,
operating or controlling an FPL Material Business, in each case other than the
transactions contemplated by this Agreement.
(b) Except as contemplated by this Section 4.03, neither the
Board of Directors of FPL nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Entergy, the approval or recommendation by such Board of Directors or such
committee of this Agreement or the FPL Merger, (ii) approve or recommend, or
propose publicly to approve or recommend, any FPL Takeover Proposal, or (iii)
cause FPL to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "FPL ACQUISITION
AGREEMENT") related to any FPL Takeover Proposal. Notwithstanding the foregoing,
in response to an FPL Takeover Proposal that was not solicited by it and that
did not otherwise result from a breach of Section 4.03(a), during the FPL
Applicable Period, the Board of Directors of FPL may, if it determines in good
faith, after consulting
<PAGE>
61
with outside counsel, that the failure to take such action would be reasonably
likely to result in a breach of the Board of Directors' fiduciary obligations to
the shareholders of FPL under applicable law, (i) withdraw or modify, or propose
publicly to withdraw or modify, the approval or recommendation by such Board of
Directors or any committee thereof of this Agreement or the FPL Merger, (ii)
approve or recommend, or propose to approve or recommend, any FPL Superior
Proposal, or (iii) terminate this Agreement pursuant to Section 7.01(d), but
only if (x) in the case of each of clauses (ii) or (iii), such Board of
Directors determines in good faith that such FPL Takeover Proposal constitutes
an FPL Superior Proposal, and (y) in the case of clause (iii), (A) FPL has
notified Entergy in writing of the determination that such FPL Takeover Proposal
constitutes an FPL Superior Proposal and (B) at least seven business days
following receipt by Entergy of such notice, the Board of Directors of FPL
determines that such FPL Superior Proposal remains an FPL Superior Proposal. For
purposes of this Agreement, an "FPL SUPERIOR PROPOSAL" means any written FPL
Takeover Proposal that the Board of Directors of FPL determines in good faith
(based on the written opinion, with only customary qualifications, of a
financial advisor of nationally recognized reputation) to be more favorable
(taking into account (i) all financial and strategic considerations, including
relevant legal, financial, regulatory and other aspects of such FPL Takeover
Proposal and the Mergers and the other transactions contemplated by this
Agreement deemed relevant by the Board of Directors, (ii) the identity of the
third party making such FPL Takeover Proposal and (iii) the conditions and
prospects for completion of such FPL Takeover Proposal) to FPL's shareholders
than the FPL Merger and the other transactions contemplated by this Agreement
(taking into account all of the terms of any proposal by Entergy to amend or
modify the terms of the FPL Merger and the other transactions contemplated by
this Agreement), except that (x) the reference to "20%" in clauses (i), (ii) and
(iii) of the definition of "FPL Takeover Proposal" in Section 4.03(a) shall be
deemed to be a reference to "50%", (y) an "FPL Takeover Proposal" shall only be
deemed to refer to a transaction involving FPL, and not any of its subsidiaries
or FPL Material Businesses alone, and (z) the references to "or any subsidiary
of FPL owning, operating or controlling an FPL Material Business" in clauses
(ii), (iii) and (iv) shall be deemed to be deleted.
(c) In addition to the obligations of FPL set forth in
paragraphs (a) and (b) of this Section 4.03, FPL shall immediately advise
Entergy, orally and in writing, of any request for information or of any FPL
Takeover Proposal,
<PAGE>
62
the principal terms and conditions of such request or FPL Takeover Proposal and
the identity of the person making such request or FPL Takeover Proposal. FPL
shall keep Entergy informed of the status and details (including amendments or
proposed amendments) of any such request or FPL Takeover Proposal.
(d) Nothing contained in this Section 4.03 shall prohibit FPL
from (i) taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to FPL's shareholders if, in the good faith judgment of the Board of Directors
of FPL, after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law or (ii) taking actions
permitted by Sections 4.01(f) or 4.01(l).
SECTION 4.04. NO SOLICITATION BY ENTERGY. (a) Entergy shall
not, nor shall it permit any of its subsidiaries to, nor shall it authorize or
permit any of its directors, officers or employees to, and shall use its
reasonable best efforts to cause any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries not to, directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing information), or knowingly take any
other action designed to facilitate, any inquiries or the making of any proposal
that constitutes an Entergy Takeover Proposal (as defined below) or (ii)
participate in any negotiations or substantive discussions regarding any Entergy
Takeover Proposal; PROVIDED, HOWEVER, that if, at any time prior to receipt of
the Entergy Shareholder Approval (the "ENTERGY APPLICABLE PERIOD"), the Board of
Directors of Entergy determines in good faith, after consultation with its legal
and financial advisors, that an Entergy Takeover Proposal that was not solicited
by it and that did not otherwise result from a breach of this Section 4.04(a)
is, or is reasonably likely to result in, an Entergy Superior Proposal (as
defined in Section 4.04(b)), and subject to providing prior written notice of
its decision to take such action to FPL (the "ENTERGY INFORMATION NOTICE") and
compliance with Section 4.04(c), Entergy may (x) furnish information with
respect to Entergy and its subsidiaries to the person making such proposal (and
its representatives) pursuant to a customary confidentiality agreement
containing terms no less favorable to Entergy than those set forth in the
Confidentiality Agreement (provided that such confidentiality agreement shall
not in any way restrict Entergy from complying with its disclosure obligations
under
<PAGE>
63
this Agreement, including with respect to such proposal, but such
confidentiality agreement may allow such party to submit to Entergy a proposal
or offer relating to a transaction) and (y) participate in discussions or
negotiations regarding such proposal. Entergy, its subsidiaries and their
representatives immediately shall cease and cause to be terminated any existing
activities, discussions or negotiations with any parties with respect to any
Entergy Takeover Proposal. For purposes of this Agreement, "ENTERGY TAKEOVER
PROPOSAL" means any inquiry, proposal or offer from any person relating to (i)
any direct or indirect acquisition or purchase of a business (an "ENTERGY
MATERIAL BUSINESS") that constitutes 20% or more of the net revenues, net income
or the assets (including equity securities) of Entergy and its subsidiaries,
taken as a whole, (ii) any direct or indirect acquisition or purchase of 20% or
more of any class of voting securities of Entergy or any subsidiary of Entergy
owning, operating or controlling an Entergy Material Business, (iii) any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of voting securities of Entergy or
any subsidiary of Entergy owning, operating or controlling an Entergy Material
Business or (iv) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Entergy or any such subsidiary of Entergy owning, operating or controlling an
Entergy Material Business, in each case other than the transactions contemplated
by this Agreement.
(b) Except as contemplated by this Section 4.04, neither the
Board of Directors of Entergy nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to FPL,
the approval or recommendation by such Board of Directors or such committee of
this Agreement or the Entergy Merger, (ii) approve or recommend, or propose
publicly to approve or recommend, any Entergy Takeover Proposal, or (iii) cause
Entergy to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "ENTERGY ACQUISITION AGREEMENT")
related to any Entergy Takeover Proposal. Notwithstanding the foregoing, in
response to an Entergy Takeover Proposal that was not solicited by it and that
did not otherwise result from a breach of Section 4.04(a), during the Entergy
Applicable Period, the Board of Directors of Entergy may, if it determines in
good faith, after consulting with outside counsel, that the failure to take such
action would be reasonably likely to result in a breach of the Board of
Directors' fiduciary obligations to the shareholders of Entergy under applicable
law, (i) withdraw or modify, or
<PAGE>
64
propose publicly to withdraw or modify, the approval or recommendation by such
Board of Directors or any committee thereof of this Agreement or the Entergy
Merger, (ii) approve or recommend, or propose to approve or recommend, any
Entergy Superior Proposal, or (iii) terminate this Agreement pursuant to Section
7.01(g), but only if (x) in the case of each of clauses (ii) or (iii), such
Board of Directors determines in good faith that such Entergy Takeover Proposal
constitutes an Entergy Superior Proposal, and (y) in the case of clause (iii),
(A) Entergy has notified FPL in writing of the determination that such Entergy
Takeover Proposal constitutes an Entergy Superior Proposal and (B) at least
seven business days following receipt by FPL of such notice, the Board of
Directors of Entergy determines that such Entergy Superior Proposal remains an
Entergy Superior Proposal. For purposes of this Agreement, an "ENTERGY SUPERIOR
PROPOSAL" means any written Entergy Takeover Proposal that the Board of
Directors of Entergy determines in good faith (based on the written opinion,
with only customary qualifications, of a financial advisor of nationally
recognized reputation) to be more favorable (taking into account (i) all
financial and strategic considerations, including relevant legal, financial,
regulatory and other aspects of such Entergy Takeover Proposal and the Mergers
and the other transactions contemplated by this Agreement deemed relevant by the
Board of Directors, (ii) the identity of the third party making such Entergy
Takeover Proposal and (iii) the conditions and prospects for completion of such
Entergy Takeover Proposal) to Entergy's shareholders than the Entergy Merger and
the other transactions contemplated by this Agreement (taking into account all
of the terms of any proposal by FPL to amend or modify the terms of the Entergy
Merger and the other transactions contemplated by this Agreement), except that
(x) the reference to "20%" in clauses (i), (ii) and (iii) of the definition of
"Entergy Takeover Proposal" in Section 4.04(a) shall be deemed to be a reference
to "50%", (y) an "Entergy Takeover Proposal" shall only be deemed to refer to a
transaction involving Entergy, and not any of its subsidiaries or Entergy
Material Businesses alone, and (z) the references to "or any subsidiary of
Entergy owning, operating or controlling an Entergy Material Business" in
clauses (ii), (iii) and (iv) shall be deemed to be deleted.
(c) In addition to the obligations of Entergy set forth in
paragraphs (a) and (b) of this Section 4.04, Entergy shall immediately advise
FPL, orally and in writing, of any request for information or of any Entergy
Takeover Proposal, the principal terms and conditions of such request or Entergy
Takeover Proposal and the identity of the person making such request or Entergy
Takeover Proposal. Entergy
<PAGE>
65
shall keep FPL informed of the status and details (including amendments or
proposed amendments) of any such request or Entergy Takeover Proposal.
(d) Nothing contained in this Section 4.04 shall prohibit
Entergy from (i) taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to Entergy's shareholders if, in the good faith judgment of the
Board of Directors of Entergy, after consultation with outside counsel, failure
so to disclose would be inconsistent with its obligations under applicable law
or (ii) taking actions permitted by Sections 4.02(f) or 4.02(l).
SECTION 4.05. OTHER ACTIONS. FPL and Entergy shall not, and
shall not permit any of their respective subsidiaries to, take any action that
would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that is
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties that is not so qualified becoming untrue in any material respect
or (iii) any condition to the Mergers set forth in Article VI not being
satisfied.
SECTION 4.06. COORDINATION OF DIVIDENDS. Each of FPL and
Entergy shall coordinate with the other regarding the declaration and payment of
dividends in respect of FPL Common Stock and Entergy Common Stock and the record
dates and payment dates relating thereto, it being the intention of FPL and
Entergy that no holder of FPL Common Stock, Entergy Common Stock or Company
Common Stock shall receive two dividends, or fail to receive one dividend, for
any single calendar quarter with respect to its shares of FPL Common Stock or
Entergy Common Stock, as the case may be, and/or any shares of Company Common
Stock any such holder receives in exchange therefor pursuant to the Mergers.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE FORM S-4 AND THE JOINT PROXY
STATEMENT; SHAREHOLDERS MEETINGS. (a) As soon as practicable following the date
of this Agreement, FPL and Entergy shall prepare and file with the SEC the Joint
Proxy Statement and FPL, Entergy and the Company shall prepare and file with the
SEC the Form S-4, in which the Joint Proxy Statement will be included. Each of
FPL, Entergy and the
<PAGE>
66
Company shall use its reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing.
FPL will use its reasonable best efforts to cause the Joint Proxy Statement to
be mailed to FPL's shareholders, and Entergy will use its reasonable best
efforts to cause the Joint Proxy Statement to be mailed to Entergy's
shareholders, in each case as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Each party hereto shall also take
any action required to be taken under any applicable state or provincial
securities laws in connection with the issuance of Company Common Stock in the
Mergers and each party shall furnish all information concerning itself and its
shareholders as may be reasonably requested in connection with any such action.
Each party will advise the others, promptly after it receives notice thereof, of
the time when the Form S-4 has become effective or any supplement or amendment
has been filed, the issuance of any stop order, the suspension of the
qualification of the Company Common Stock issuable in connection with the
Mergers for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Joint Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. If prior to
the Effective Time any event occurs with respect to FPL, Entergy or any
subsidiary of FPL or Entergy, respectively, or any change occurs with respect to
information supplied by or on behalf of FPL or Entergy, respectively, for
inclusion in the Joint Proxy Statement or the Form S-4 that, in each case, is
required to be described in an amendment of, or a supplement to, the Joint Proxy
Statement or the Form S-4, FPL or Entergy, as applicable, shall promptly notify
the other and the Company of such event, and FPL or Entergy, as applicable,
shall cooperate with the Company in the prompt filing with the SEC of any
necessary amendment or supplement to the Joint Proxy Statement and the Form S-4
and, as required by law, in disseminating the information contained in such
amendment or supplement to FPL's shareholders and to Entergy's shareholders.
(b) FPL shall, as soon as reasonably practicable following the
date of this Agreement, duly call, give notice of, convene and hold a meeting of
its shareholders (the "FPL SHAREHOLDERS MEETING") for the purpose of obtaining
the FPL Shareholder Approval. Without limiting the generality of the foregoing,
FPL agrees that its obligations pursuant to the first sentence of this Section
5.01(b) shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to FPL of any FPL Takeover Proposal, (ii) the
withdrawal or modification by the Board of Directors of FPL of its approval or
recommendation of
<PAGE>
67
this Agreement, the FPL Merger or the other transactions contemplated hereby or
(iii) the approval or recommendation of any FPL Superior Proposal.
(c) Entergy shall, as soon as reasonably practicable following
the date of this Agreement, duly call, give notice of, convene and hold a
meeting of its shareholders (the "ENTERGY SHAREHOLDERS MEETING") for the purpose
of obtaining the Entergy Shareholder Approval. Without limiting the generality
of the foregoing, Entergy agrees that its obligations pursuant to the first
sentence of this Section 5.01(c) shall not be affected by (i) the commencement,
public proposal, public disclosure or communication to Entergy of any Entergy
Takeover Proposal, (ii) the withdrawal or modification by the Board of Directors
of Entergy of its approval or recommendation of this Agreement, the Entergy
Merger or the other transactions contemplated hereby or (iii) the approval or
recommendation of any Entergy Superior Proposal.
(d) FPL and Entergy will use their reasonable best efforts to
hold the Entergy Shareholders Meeting and the FPL Shareholders Meeting on the
same date and as soon as practicable after the date of this Agreement.
SECTION 5.02. LETTERS OF FPL'S ACCOUNTANTS. FPL shall use its
reasonable best efforts to cause to be delivered to Entergy two letters from
FPL's independent accountants, one dated a date within two business days before
the date on which the Form S-4 shall become effective and one dated a date
within two business days before the Closing Date, each addressed to Entergy, in
form and substance reasonably satisfactory to Entergy and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.03. LETTERS OF ENTERGY'S ACCOUNTANTS. Entergy shall
use its reasonable best efforts to cause to be delivered to FPL two letters from
Entergy's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated a
date within two business days before the Closing Date, each addressed to FPL, in
form and substance reasonably satisfactory to FPL and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.04. ACCESS TO INFORMATION; EFFECT OF REVIEW. (a)
ACCESS. Subject to the Confidentiality
<PAGE>
68
Agreement, to the extent permitted by applicable law, each of FPL and Entergy
shall, and shall cause each of its respective subsidiaries to, and, so long as
consistent with its confidentiality obligations under its applicable agreements,
shall use its respective reasonable best efforts to cause the FPL Joint Ventures
and Entergy Joint Ventures, respectively, to, afford to the other party and to
the officers, employees, accountants, counsel, financial advisors and other
representatives of such other party reasonable access during normal business
hours during the period prior to the Effective Time to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, to the extent permitted by applicable law, each of FPL and Entergy
shall, and shall cause each of its respective subsidiaries to, and, so long as
consistent with its confidentiality obligations under its applicable agreements,
shall use its respective reasonable best efforts to cause the FPL Joint Ventures
and Entergy Joint Ventures, respectively, to, (i) confer on a regular and
frequent basis with one or more representatives of the other party to discuss
material operational and regulatory matters and the general status of its
ongoing operations, (ii) advise the other party of any change or event that has
had or could reasonably be expected to have a material adverse effect on such
party and (iii) furnish promptly all other information concerning its business,
properties and personnel, in each case as such other party may reasonably
request; PROVIDED, HOWEVER, that no actions shall be taken pursuant to this
Section 5.04(a) that would result in a waiver of the attorney/client privilege.
Notwithstanding the foregoing, if a party requests access to proprietary
information of the other party, the disclosure of which would have a material
adverse effect on the other party if the Closing were not to occur (giving
effect to the requesting party's obligations under the Confidentiality
Agreement), such information shall only be disclosed to the extent reasonably
agreed upon by the chief financial officers (or their designees) of FPL and
Entergy. All information exchanged pursuant to this Section 5.04(a) shall be
subject to the Confidentiality Agreement.
(b) EFFECT OF REVIEW. No review pursuant to this Section 5.04
shall have an effect for the purpose of determining the accuracy of any
representation or warranty given by any of the parties hereto to any of the
other parties hereto.
SECTION 5.05. REGULATORY MATTERS; REASONABLE BEST EFFORTS. (a)
REGULATORY APPROVALS. Each party hereto shall cooperate and promptly prepare and
file all necessary documentation, to effect all necessary applications,
<PAGE>
69
notices, petitions and filings, and shall use reasonable best efforts to obtain
all necessary approvals and authorizations of all Governmental Authorities,
necessary or advisable to consummate and make effective, in the most expeditious
manner reasonably practicable, the Mergers and the other transactions
contemplated by this Agreement, including the FPL Required Statutory Approvals
and the Entergy Required Statutory Approvals; PROVIDED, HOWEVER, that FPL shall
have primary responsibility for the preparation and filing of any related
applications, filings or other materials with the FPSC and, PROVIDED, FURTHER,
that Entergy shall have primary responsibility for the preparation and filing of
any related applications, filings or other materials with all Applicable PSCs,
other than the FPSC, and the SEC with respect to the 1935 Act. FPL shall have
the right to review and approve in advance all characterizations of the
information relating to FPL, on the one hand, and Entergy shall have the right
to review and approve in advance all characterizations of the information
relating to Entergy, on the other hand, in either case, that appear in any
application, notice, petition or filing made in connection with the Mergers or
the other transactions contemplated by this Agreement. FPL and Entergy agree
that they will consult and cooperate with each other with respect to the
obtaining of all such necessary approvals and authorizations of Governmental
Authorities.
(b) FURTHER ACTIONS. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things reasonably necessary or advisable to consummate and make
effective, in the most expeditious manner reasonably practicable, the Mergers
and the other transactions contemplated by this Agreement, including (i) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Authority vacated or reversed, and (ii) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement.
(c) STATE ANTI-TAKEOVER STATUTES. Without limiting the
generality of Section 5.05(b), FPL and Entergy shall (i) take all action
necessary to ensure that no state anti-takeover statute or similar statute or
regulation is or becomes applicable to the Mergers, this Agreement or any of
<PAGE>
70
the other transactions contemplated by this Agreement and (ii) if any state
anti-takeover statute or similar statute or regulation becomes applicable to the
Mergers, this Agreement or any other transaction contemplated by this Agreement,
take all action necessary to ensure that the Mergers and the other transactions
contemplated by this Agreement may be consummated as promptly as reasonably
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Mergers and the other
transactions contemplated by this Agreement.
SECTION 5.06. STOCK OPTIONS; RESTRICTED STOCK AND EQUITY
AWARDS; STOCK PLANS. (a) Prior to the FPL Effective Time, the Board of Directors
of FPL (or, if appropriate, any committee administering the FPL Option Plans)
shall adopt such resolutions or take such other actions as may be required to
effect the following:
(i) adjust the terms of all outstanding stock options (the
"FPL EMPLOYEE STOCK OPTIONS") granted under the FPL Option Plans,
whether vested or unvested, as necessary to provide that, at the
Effective Time, each FPL Employee Stock Option outstanding immediately
prior to the Effective Time shall be amended and converted into an
option to acquire, on the same terms and conditions as were applicable
under such FPL Employee Stock Option, including vesting (taking into
account any acceleration of vesting that may occur as a result of the
FPL Shareholder Approval or the transactions contemplated hereby), the
same number of shares of Company Common Stock at the same price per
share of Company Common Stock (each, as so adjusted, a "FPL ADJUSTED
OPTION");
(ii) ensure that the conversion pursuant to Section 2.01(a) of
the FPL Common Stock held by any director or officer of FPL and the
conversion pursuant to this Section 5.06(a) into Company Stock Options
of FPL Employee Stock Options held by any director or officer of FPL
will be eligible for exemption under Rule 16b-3(e);
(iii) make such other changes to the FPL Option Plans as FPL
and Entergy may agree are appropriate to give effect to the FPL Merger,
including as provided in Section 5.07;
(iv) provide that each restricted share of FPL Common Stock
shall be converted into a restricted share of Company Common Stock, on
the same terms and
<PAGE>
71
conditions as were applicable to such share of FPL Common Stock,
including vesting; and
(v) except as disclosed in Section 5.06(a) of the FPL
Disclosure Letter, adjust the terms of all outstanding FPL equity or
equity-based awards (other than FPL Employee Stock Options and
restricted shares of FPL Common Stock), whether vested or unvested, as
necessary to provide that each such award outstanding immediately prior
to the Effective Time shall be amended and converted into an equity or
equity-based award in respect of the same number of shares of Company
Common Stock, on the same terms and conditions as were applicable to
such FPL equity or equity-based award, including vesting.
(b) Prior to the Entergy Effective Time, the Board of
Directors of Entergy (or, if appropriate, any committee administering the
Entergy Option Plans) shall adopt such resolutions or take such other actions as
may be required to effect the following:
(i) adjust the terms of all outstanding stock options (the
"ENTERGY EMPLOYEE STOCK OPTIONS") granted under the Entergy Option
Plans, whether vested or unvested, as necessary to provide that, at the
Effective Time, each Entergy Employee Stock Option outstanding
immediately prior to the Effective Time shall be amended and converted
into an option to acquire, on the same terms and conditions as were
applicable under such Entergy Employee Stock Option, including vesting
(taking into account any acceleration of vesting that may occur as a
result of the Entergy Shareholder Approval or the transactions
contemplated hereby), the same number of shares of Company Common Stock
(rounded down to the nearest whole share) as the holder of such Entergy
Employee Stock Option would have been entitled to receive pursuant to
the Entergy Merger had such holder been vested and exercised such
Entergy Employee Stock Option in full immediately prior to the
Effective Time, at a price per share of Company Common Stock (rounded
up to the nearest cent) equal to (A) the aggregate exercise price for
the shares of Entergy Common Stock otherwise purchasable pursuant to
such Entergy Employee Stock Option divided by (B) the aggregate number
of shares of Company Common Stock deemed purchasable pursuant to such
Entergy Employee Stock Option (each, as so adjusted, a "ENTERGY
ADJUSTED OPTION", and, together with the FPL Adjusted Options, the
"ADJUSTED OPTIONS");
<PAGE>
72
(ii) ensure that the conversion pursuant to Section 2.01(b)
of the Entergy Common Stock held by any director or officer of
Entergy and the conversion pursuant to this Section 5.06(b) into
Company Stock Options of Entergy Employee Stock Options held by any
director or officer of Entergy will be eligible for exemption under
Rule 16b-3(e);
(iii) make such other changes to the Entergy Option Plans
as FPL and Entergy may agree are appropriate to give effect to the
Entergy Merger, including as provided in Section 5.07;
(iv) provide that each restricted share of Entergy Common
Stock shall be converted into a number of restricted shares of
Company Common Stock equal to the Entergy Ratio, on the same terms
and conditions as were applicable to such share of Entergy Common
Stock, including vesting; and
(v) except as disclosed in Section 5.06(b) of the Entergy
Disclosure Letter, adjust the terms of all outstanding Entergy equity
or equity-based awards (other than Entergy Employee Stock Options and
restricted shares of Entergy Common Stock), whether vested or unvested,
as necessary to provide that each such award outstanding immediately
prior to the Effective Time shall be amended and converted into an
equity or equity-based award in respect of a number of shares of
Company Common Stock equal to the number of shares of Entergy Common
Stock represented by such award multiplied by the Entergy Ratio, on the
same terms and conditions as were applicable to such Entergy equity or
equity-based award, including vesting.
(c) As soon as practicable after the Effective Time, the
Company shall deliver to the holders of FPL Employee Stock Options and Entergy
Employee Stock Options (collectively, the "STOCK OPTIONS") appropriate notices
setting forth such holders' rights pursuant to the respective FPL Option Plans
or Entergy Option Plans, as the case may be (collectively, the "STOCK PLANS"),
and the agreements evidencing the grants of such Stock Options, and that such
Stock Options and agreements shall be assumed by the Company and shall continue
in effect on the same terms and conditions (subject to the adjustments required
by this Section 5.06 after giving effect to the Mergers).
(d) Except as otherwise contemplated by this Section 5.06 and
except to the extent required under the respective terms of the Stock Options,
all restrictions or
<PAGE>
73
limitations on transfer and vesting with respect to Stock Options awarded under
the Stock Plans, or any other plan, program or arrangement of FPL, Entergy or
any of their subsidiaries, to the extent that such restrictions or limitations
shall not have already lapsed, shall remain in full force and effect with
respect to such Stock Options after giving effect to the Mergers and the
assumption by the Company as set forth above.
(e) At the Effective Time, by virtue of the Mergers, the Stock
Plans shall be assumed by the Company, with the result that all obligations of
FPL and Entergy under the Stock Plans, including with respect to awards
outstanding at the Effective Time under each Stock Plan, shall be obligations of
the Company following the Effective Time. Prior to the Effective Time, the
Company shall take all necessary actions for the assumption of the Stock Plans,
including the reservation, issuance and listing of Company Common Stock in a
number at least equal to the number of shares of Company Common Stock that will
be subject to Adjusted Options. As promptly as practicable following the
Effective Time, the Company shall prepare and file with the SEC a registration
statement on Form S-8 (or another appropriate form) registering a number of
shares of Company Common Stock determined in accordance with the preceding
sentence. Such registration statement shall be kept effective (and the current
status of the prospectus or prospectuses required thereby shall be maintained)
at least for so long as Adjusted Options remain outstanding.
SECTION 5.07. EMPLOYEE MATTERS. (a) Following the Effective
Time, the Company will (subject to this Section 5.07 and Section 5.08) cause its
subsidiaries to honor all obligations under any contracts, agreements,
collective bargaining agreements, plans (as such may be amended in accordance
with this Agreement) and commitments of FPL and Entergy and their respective
subsidiaries that exist on the date of this Agreement (or as established or
amended in accordance with or permitted by this Agreement) that apply to any
current or former employee, or current or former director, of either of the
parties hereto or any of their subsidiaries; PROVIDED, HOWEVER, that this
undertaking is not intended to prevent the Company from enforcing such
contracts, agreements, collective bargaining agreements, plans (as such may be
amended in accordance with this Agreement) and commitments in accordance with
their terms, including any reserved right to amend, modify, suspend, revoke or
terminate any such contract, agreement, collective bargaining agreement or
commitment.
<PAGE>
74
(b) At the Effective Time, it shall be the intent of the
Company, that (subject to obligations under applicable law and applicable
collective bargaining agreements) (i) any reductions in the employee work force
of the Company and its subsidiaries shall be made on a fair and equitable basis
(as determined by the Company and its subsidiaries), in light of the
circumstances and the objectives to be achieved, giving consideration to
previous work history, job experience and qualifications, without regard to
whether employment prior to the Effective Time was with FPL and its subsidiaries
or Entergy and its subsidiaries, and any employees whose employment is
terminated or jobs are eliminated by the Company or any of its subsidiaries
during such period shall be entitled to participate on a fair and equitable
basis (as determined by the Company and its subsidiaries) in the job opportunity
and employment placement programs offered by the Company or any of its
subsidiaries for which they are eligible and (ii) employees shall be entitled to
participate in all job training, career development and educational programs of
the Company and its subsidiaries for which they are eligible, and shall be
entitled to fair and equitable consideration (as determined by the Company and
its subsidiaries) in connection with any job opportunities with the Company and
its subsidiaries, in each case without regard to whether employment prior to the
Effective Time was with FPL and its subsidiaries or Entergy and its
subsidiaries.
(c) Subject to its obligations under applicable law and
applicable collective bargaining agreements, the Company and its subsidiaries
shall give credit under each of their respective employee benefit plans,
programs and arrangements to employees for all service prior to the Effective
Time with FPL or Entergy or their respective subsidiaries, as applicable, or any
predecessor employer (to the extent that such credit was given by FPL or Entergy
or any of their respective subsidiaries, as applicable) for all purposes for
which such service was taken into account or recognized by FPL or Entergy or
their respective subsidiaries, as applicable, but not to the extent crediting
such service would result in duplication of benefits (including for benefit
accrual purposes under defined benefit pension plans).
SECTION 5.08. INDEMNIFICATION, EXCULPATION AND INSURANCE. (a)
Each of the Company, Merger Sub A and Merger Sub B agrees that all rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or former
directors, officers, employees or fiduciaries under benefit plans currently
indemnified of FPL
<PAGE>
75
and its subsidiaries or Entergy and its subsidiaries, as the case may be, as
provided in their respective certificates of incorporation, by-laws (or
comparable organizational documents) or other agreements providing
indemnification shall survive the Mergers and shall continue in full force and
effect in accordance with their terms. In addition, from and after the Effective
Time, directors, officers, employees and fiduciaries under benefit plans
currently indemnified of FPL or Entergy or their respective subsidiaries who
become directors, officers, employees or fiduciaries under benefit plans of the
Company will be entitled to the indemnity rights and protections afforded to
directors, officers, employees and fiduciaries under benefit plans of the
Company.
(b) For six years after the Effective Time, the Company shall
maintain in effect the directors' and officers' liability (and fiduciary)
insurance policies currently maintained by FPL and Entergy covering acts or
omissions occurring prior to the Effective Time with respect to those persons
who are currently covered by FPL's and Entergy's respective directors' and
officers' liability insurance policies on terms with respect to such coverage
and in amounts no less favorable than those set forth in the relevant policy in
effect on the date of this Agreement. If such insurance coverage cannot be
maintained, the Company shall maintain the most advantageous policies of
directors' and officers' insurance otherwise obtainable.
(c) The provisions of Section 5.08(a) (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his or
her heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.09. FEES AND EXPENSES. (a) Except as provided in
this Section 5.09, all fees and expenses incurred in connection with the
Mergers, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Mergers are consummated, except that each of FPL and Entergy shall bear and pay
one-half of the costs and expenses incurred in connection with (1) the filing,
printing and mailing of the Form S-4 and the Joint Proxy Statement (including
SEC filing fees) and (2) the filings of the premerger notification and report
forms under the HSR Act (including filing fees). The Company shall file any
return with respect to, and shall pay, any state or local taxes (including any
penalties or interest with respect
<PAGE>
76
thereto), if any, that are attributable to (i) the transfer of the beneficial
ownership of FPL's or Entergy's real property and (ii) the transfer of FPL
Common Stock or Entergy Common Stock pursuant to this Agreement as a result of
the Mergers. FPL and Entergy shall cooperate with the Company in the filing of
such returns, including supplying any information that is reasonably necessary
to complete such returns.
(b) In the event that (i) following the FPL Shareholder
Approval, an FPL Takeover Proposal shall have been made known to FPL or any of
its subsidiaries or shall have been made directly to FPL's shareholders or any
person shall have publicly announced an intention (whether or not conditional)
to make an FPL Takeover Proposal and thereafter this Agreement is terminated by
either FPL or Entergy pursuant to Section 7.01(b)(i), (ii) prior to or during
the FPL Shareholders Meeting (or any subsequent meeting of FPL shareholders at
which it is proposed that the FPL Merger be approved), an FPL Takeover Proposal
shall have been publicly disclosed or any person shall have publicly announced
an intention (whether or not conditional) to make an FPL Takeover Proposal and
thereafter this Agreement is terminated by either FPL or Entergy pursuant to
Section 7.01(b)(iii), (iii) this Agreement is terminated by FPL pursuant to
Section 7.01(d) or (iv) this Agreement is terminated by Entergy pursuant to
Section 7.01(j)(i) or (iii), then FPL shall immediately pay Entergy a fee equal
to $215,000,000 (the "TERMINATION FEE"), payable by wire transfer of same day
funds; PROVIDED, HOWEVER, that no Termination Fee shall be payable to Entergy
(x) pursuant to clause (i) of this paragraph (b) unless and until within 12
months of such termination FPL or any of its subsidiaries enters into any FPL
Acquisition Agreement or consummates any FPL Takeover Proposal, in either case
with the person (or an affiliate of such person) that made the FPL Takeover
Proposal referred to in clause (i) of this paragraph (b), or (y) pursuant to
clause (ii) of this paragraph (b) unless and until within 24 months of such
termination FPL or any of its subsidiaries enters into any FPL Acquisition
Agreement or consummates any FPL Takeover Proposal (for the purposes of the
foregoing proviso the terms "FPL ACQUISITION AGREEMENT" and "FPL TAKEOVER
PROPOSAL" shall have the meanings assigned to such terms in Section 4.03 except
that the references to "20%" in the definition of "FPL Takeover Proposal" in
Section 4.03(a) shall be deemed to be references to "35%"), in which event the
Termination Fee shall be immediately payable upon the first to occur of such
events.
(c) In the event that (i) following the Entergy Shareholder
Approval, an Entergy Takeover Proposal shall
<PAGE>
77
have been made known to Entergy or any of its subsidiaries or shall have been
made directly to Entergy's shareholders generally or any person shall have
publicly announced an intention (whether or not conditional) to make an Entergy
Takeover Proposal and thereafter this Agreement is terminated by either FPL or
Entergy pursuant to Section 7.01(b)(i), (ii) prior to or during the Entergy
Shareholders Meeting (or any subsequent meeting of Entergy shareholders at which
it is proposed that the Entergy Merger be approved), an Entergy Takeover
Proposal shall have been publicly disclosed or any person shall have publicly
announced an intention (whether or not conditional) to make an Entergy Takeover
Proposal and thereafter this Agreement is terminated by either FPL or Entergy
pursuant to Section 7.01(b)(ii), (iii) this Agreement is terminated by Entergy
pursuant to Section 7.01(g) or (iv) this Agreement is terminated by FPL pursuant
to Section 7.01(i)(i) or (iii), then Entergy shall immediately pay FPL the
Termination Fee, payable by wire transfer of same day funds; PROVIDED, HOWEVER,
that no Termination Fee shall be payable to FPL (x) pursuant to clause (i) of
this paragraph (b) unless and until within 12 months of such termination Entergy
or any of its subsidiaries enters into any Entergy Acquisition Agreement or
consummates any Entergy Takeover Proposal, in either case with the person (or an
affiliate of such person) that made the Entergy Takeover Proposal referred to in
clause (i) of this paragraph (c), or (y) pursuant to clause (ii) of this
paragraph (c) unless and until within 24 months of such termination Entergy or
any of its subsidiaries enters into any Entergy Acquisition Agreement or
consummates any Entergy Takeover Proposal (for the purposes of the foregoing
proviso the terms "ENTERGY ACQUISITION AGREEMENT" and "ENTERGY TAKEOVER
PROPOSAL" shall have the meanings assigned to such terms in Section 4.04 except
that the references to "20%" in the definition of "Entergy Takeover Proposal" in
Section 4.04(a) shall be deemed to be references to "35%"), in which event the
Termination Fee shall be immediately payable upon the first to occur of such
events.
(d) If this Agreement is terminated by FPL or Entergy pursuant
to Section 7.01(b)(i) (after an FPL Takeover Proposal shall have been made known
to FPL or any of its subsidiaries or has been made directly to FPL's
shareholders or any person shall have publicly announced an intention (whether
or not conditional) to make an FPL Takeover Proposal) or Section 7.01(b)(iii)
(after the public disclosure of an FPL Takeover Proposal or the announcement by
any person of the intention whether or not conditional) to make an FPL Takeover
Proposal), by Entergy pursuant to Section 7.01(j)(i) or (iii) or by FPL pursuant
to
<PAGE>
78
Section 7.01(d), FPL shall reimburse Entergy promptly upon demand, but in no
event later than three business days after the date of such demand, by wire
transfer of same day funds, for all fees and expenses, incurred or paid by or on
behalf of, Entergy in connection with the Mergers or the transactions
contemplated by this Agreement, including all fees and expenses of counsel,
investment banking firms, accountants, experts and consultants to Entergy;
PROVIDED, HOWEVER, that FPL shall not be obligated to make payments pursuant to
this Section 5.09(d) in excess of $25,000,000 in the aggregate.
(e) If this Agreement is terminated by FPL or Entergy pursuant
to Section 7.01(b)(i) (after an Entergy Takeover Proposal shall have been made
known to Entergy or any of its subsidiaries or has been made directly to
Entergy's shareholders or any person shall have publicly announced an intention
(whether or not conditional) to make an Entergy Takeover Proposal) or Section
7.01(b)(ii) (after the public disclosure of an Entergy Takeover Proposal or the
announcement by any person of the intention (whether or not conditional) to make
an Entergy Takeover Proposal), by FPL pursuant to Section 7.01(i)(i) or (iii) or
by Entergy pursuant to Section 7.01(g), Entergy shall reimburse FPL promptly
upon demand, but in no event later than three business days after the date of
such demand, by wire transfer of same day funds, for all fees and expenses
incurred, or paid by or on behalf of, FPL in connection with the Mergers or the
transactions contemplated by this Agreement, including all fees and expenses of
counsel, investment banking firms, accountants, experts and consultants to FPL;
PROVIDED, HOWEVER, that Entergy shall not be obligated to make payments pursuant
to this Section 5.09(e) in excess of $25,000,000 in the aggregate.
(f) FPL acknowledges that the agreements contained in Sections
5.09(b) and 5.09(d) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Entergy would not enter into
this Agreement; accordingly, if FPL fails promptly to pay the amount due
pursuant to Section 5.09(b) or 5.09(d), and, in order to obtain such payment,
Entergy commences a suit that results in a judgment against FPL for the fees set
forth in Section 5.09(b) or 5.09(d), FPL shall pay to Entergy its costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the prime rate of Citibank
N.A. in effect on the date such payment was required to be made.
<PAGE>
79
(g) Entergy acknowledges that the agreements contained in
Sections 5.09(c) and 5.09(e) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, FPL would
not enter into this Agreement; accordingly, if Entergy fails promptly to pay the
amount due pursuant to Section 5.09(c) or 5.09(e), and, in order to obtain such
payment, FPL commences a suit that results in a judgment against Entergy for the
fees set forth in Section 5.09(c) or 5.09(e), Entergy shall pay to FPL its costs
and expenses (including attorneys' fees and expenses) in connection with such
suit, together with interest on the amount of the fee at the prime rate of
Citibank N.A. in effect on the date such payment was required to be made.
SECTION 5.10. PUBLIC ANNOUNCEMENTS. FPL and Entergy will
consult with each other before issuing, and provide each other the reasonable
opportunity to review, comment upon and concur with, any press release or other
public statements with respect to the transactions contemplated by this
Agreement, including the Mergers, and shall not issue any such press release or
make any such public statement prior to such consultation, except as any party,
after consultation with counsel, may determine is required by applicable law.
SECTION 5.11. AFFILIATES. As soon as practicable after the
date of this Agreement, FPL shall deliver to Entergy, and Entergy shall deliver
to FPL, a letter identifying all persons who are, at the time this Agreement is
submitted for adoption by the respective shareholders of Entergy and FPL,
"affiliates" of FPL or Entergy, as the case may be, for purposes of Rule 145
under the Securities Act. FPL and Entergy shall use their respective reasonable
best efforts to cause each such person to deliver to the Company as of the
Closing Date, a written agreement substantially in the form attached as Exhibit
D hereto.
SECTION 5.12. NYSE LISTING. The Company shall use its
reasonable best efforts to cause the shares of Company Common Stock issuable to
FPL's shareholders and Entergy's shareholders as contemplated by this Agreement
to be approved for listing on the NYSE, subject to official notice of issuance,
as promptly as practicable after the date of this Agreement, and in any event
prior to the Closing Date.
SECTION 5.13. SHAREHOLDER LITIGATION. Each of FPL and Entergy
shall give the other the reasonable opportunity to consult concerning the
defense of any shareholder litigation against FPL or Entergy, as
<PAGE>
80
applicable, or any of their respective directors relating to the transactions
contemplated by this Agreement.
SECTION 5.14. TAX TREATMENT. Each of FPL and Entergy shall
not, and shall not permit any of their respective subsidiaries to, voluntarily
take any action, or fail to take any action, that would, or would reasonably be
expected to, result in (i) the inability of either of the Mergers to constitute
a tax-free transaction governed by Section 351 of the Code or (ii) the inability
of FPL or Entergy to obtain the opinions of counsel referred to in Sections
6.02(c) and 6.03(c).
SECTION 5.15. COMMON STOCK REPURCHASES. FPL shall use
commercially reasonable efforts to purchase prior to the Closing at prevailing
market prices to the extent possible shares of FPL Common Stock for an aggregate
consideration of $570,000,000 (which amount includes amounts remaining from
FPL's common stock repurchase program announced prior to the date of this
Agreement), and Entergy shall use commercially reasonable efforts to purchase
prior to the Closing at prevailing market prices to the extent possible shares
of Entergy Common Stock for an aggregate consideration of $430,000,000 (which
amount includes amounts remaining from Entergy's common stock repurchase program
announced prior to the date of this Agreement). Notwithstanding the foregoing,
FPL or Entergy, as applicable, shall not be required to make any such purchases
to the extent that (after considering factors including (i) the performance of
the FPL Common Stock or the Entergy Common Stock, as applicable, in relation to
the Standard & Poor's Electric Utility Index, (ii) whether such purchases are
consistent with establishing with Standard & Poor's Corporation a BBB+ credit
rating for the Company and maintaining with Standard & Poor's Corporation
satisfactory credit ratings for FPL and its subsidiaries or Entergy and its
subsidiaries, as applicable, (iii) the likelihood of the Closing occurring, (iv)
whether such purchases would allow adequate resources to fund capital
expenditures and (v) whether such purchases would be consistent with applicable
law) FPL or Entergy, as applicable, reasonably determines that it would be
imprudent to make such repurchases. FPL and Entergy shall consult on a regular
basis concerning the purchases described in the first sentence of this Section
5.15 and cooperate in connection therewith. Neither FPL nor Entergy shall
purchase shares pursuant to this Section 5.15 if it is reasonably likely that
such purchases would result in the failure of the closing conditions set forth
in Sections 6.02(c) and 6.03(c) or the failure of the Mergers and the other
transactions
<PAGE>
81
contemplated hereby to be treated as a "purchase" of Entergy by FPL under GAAP.
SECTION 5.16. STANDSTILL AGREEMENTS; CONFIDENTIALITY
AGREEMENTS. During the period from the date of this Agreement through the
Effective Time, neither FPL nor Entergy shall terminate, amend, modify or waive
any provision of any confidentiality or standstill agreement to which it or any
of its respective subsidiaries is a party unless required by applicable law.
During such period, FPL or Entergy, as the case may be, shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGERS. The respective obligation of each party to effect the Mergers is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) SHAREHOLDER APPROVALS. Each of the Entergy Shareholder
Approval and the FPL Shareholder Approval shall have been obtained.
(b) NO INJUNCTIONS OR RESTRAINTS. No (i) temporary restraining
order or preliminary or permanent injunction or other order by any
Federal or state court of competent jurisdiction preventing
consummation of either of the Mergers or (ii) applicable Federal or
state law prohibiting consummation of either of the Mergers
(collectively, "RESTRAINTS") shall be in effect.
(c) FORM S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(d) NYSE LISTING. The shares of Company Common Stock issuable
to FPL's shareholders and Entergy's shareholders as contemplated by
this Agreement shall have been approved for listing on the NYSE,
subject to official notice of issuance.
<PAGE>
82
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF FPL. The obligation
of FPL to effect the FPL Merger is further subject to satisfaction or waiver of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Entergy set forth herein shall be true and correct both
when made and at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date,
in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) does not have, and could not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on Entergy.
(b) PERFORMANCE OF OBLIGATIONS OF ENTERGY. Entergy shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(c) TAX OPINION. FPL shall have received from Cravath, Swaine
& Moore, counsel to FPL, on the Closing Date, its opinion dated as of
such date or no more than two days prior thereto, stating that the FPL
Merger will be treated for Federal income tax purposes as a tax-free
transaction governed by Section 351 of the Code. In rendering such
opinion, counsel for FPL shall be entitled to rely upon representations
of officers of FPL and Entergy substantially in the form set forth in
Section 6.02(c) of the Entergy Disclosure Letter.
(d) STATUTORY APPROVALS. The FPL Required Statutory Approvals
and the Entergy Required Statutory Approvals shall have been obtained
(including, in each case, the expiration or termination of the waiting
periods (and any extensions thereof) under the HSR Act applicable to
the Mergers and the transactions contemplated by this Agreement) at or
prior to the Effective Time, such approvals shall have become Final
Orders (as defined below) and such Final Orders shall not impose terms
or conditions that, individually or in the aggregate, could reasonably
be expected to have a material adverse effect on (i) the Company and
its prospective subsidiaries taken as a whole or (ii) Entergy and its
subsidiaries taken as a whole. A "FINAL ORDER" means action by the
relevant Governmental Authority that has not been reversed, stayed,
enjoined,
<PAGE>
83
set aside, annulled or suspended, with respect to which any waiting
period prescribed by law before the transactions contemplated hereby
may be consummated has expired, and as to which all conditions to the
consummation of such transactions prescribed by law, regulation or
order have been satisfied.
(e) NO MATERIAL ADVERSE EFFECT. Except as disclosed in the
Entergy SEC Reports filed prior to the date of this Agreement or
Section 3.02(f) of the Entergy Disclosure Letter, since December 31,
1999, there shall not have been any change, event or development that,
individually or in the aggregate, has had or could reasonably be
expected to have a material adverse effect on Entergy.
(f) CLOSING CERTIFICATES. FPL shall have received a
certificate signed by an executive officer of Entergy, dated the
Effective Time, to the effect that, to such officer's knowledge, the
conditions set forth in Sections 6.02(a), 6.02(b) and 6.02(e) have been
satisfied.
SECTION 6.03. CONDITIONS TO OBLIGATIONS OF ENTERGY. The
obligation of Entergy to effect the Entergy Merger is further subject to
satisfaction or waiver of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of FPL set forth herein shall be true and correct both when
made and at and as of the Closing Date, as if made at and as of such
time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) does not have, and could not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on FPL.
(b) PERFORMANCE OF OBLIGATIONS OF FPL. FPL shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(c) TAX OPINION. Entergy shall have received from Skadden,
Arps, Slate, Meagher & Flom LLP, counsel to Entergy, on the Closing
Date, its opinion, dated as of such date or no more than two days prior
thereto, stating that the Entergy Merger will be treated for
<PAGE>
84
Federal income tax purposes as a tax-free transaction governed by
Section 351 of the Code. In rendering such opinion, counsel for Entergy
shall be entitled to rely upon representations of officers of FPL and
Entergy substantially in the form set forth in Section 6.02(c) of the
Entergy Disclosure Letter.
(d) STATUTORY APPROVALS. The FPL Required Statutory Approvals
and the Entergy Required Statutory Approvals shall have been obtained
(including, in each case, the expiration or termination of the waiting
periods (and any extensions thereof) under the HSR Act applicable to
the Mergers and the transactions contemplated by this Agreement) at or
prior to the Effective Time, such approvals shall have become Final
Orders and such Final Orders shall not impose terms or conditions that,
individually or in the aggregate, could reasonably be expected to have
a material adverse effect on (i) the Company and its prospective
subsidiaries taken as a whole or (ii) FPL and its subsidiaries taken as
a whole.
(e) NO MATERIAL ADVERSE EFFECT. Except as disclosed in the FPL
SEC Reports filed prior to the date of this Agreement or Section
3.01(f) of the FPL Disclosure Letter, since December 31, 1999, there
shall not have been any change, event or development that, individually
or in the aggregate, has had or could reasonably be expected to have a
material adverse effect on FPL.
(f) CLOSING CERTIFICATES. Entergy shall have received a
certificate signed by an executive officer of FPL, dated the Effective
Time, to the effect that, to such officer's knowledge, the conditions
set forth in Sections 6.03(a), 6.03(b) and 6.03(e) have been satisfied.
SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS. Neither FPL
nor Entergy may rely on the failure of any condition set forth in Section 6.01,
6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by
such party's failure to use reasonable best efforts to consummate the Mergers
and the other transactions contemplated by this Agreement, to the extent
required by and subject to Section 5.05.
<PAGE>
85
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, whether before or (other than pursuant to
clauses (d) and (g) below) after the Entergy Shareholder Approval or the FPL
Shareholder Approval:
(a) by mutual written consent of FPL and Entergy;
(b) by either FPL or Entergy:
(i) if the Mergers shall not have been consummated by
April 30, 2002 (the "INITIAL TERMINATION DATE"); PROVIDED,
HOWEVER, that the right to terminate this Agreement pursuant
to this Section 7.01(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this
Agreement results in the failure of the Mergers to be
consummated by such time; and PROVIDED, FURTHER, that, if on
the Initial Termination Date the conditions to the Closing set
forth in Sections 6.02(d) and/or 6.03(d) shall not have been
fulfilled but all other conditions to the Closing shall have
been fulfilled or shall be capable of being fulfilled, then
the Initial Termination Date shall be extended to October 31,
2002;
(ii) if the Entergy Shareholder Approval shall not
have been obtained at an Entergy Shareholders Meeting duly
convened therefor or at any adjournment or postponement
thereof;
(iii) if the FPL Shareholder Approval shall not have
been obtained at an FPL Shareholders Meeting duly convened
therefor or at any adjournment or postponement thereof;
(iv) if any Restraint having any of the effects set
forth in Section 6.01(b) shall be in effect and shall have
become final and nonappealable; PROVIDED that the party
seeking to terminate this Agreement pursuant to this Section
7.01(b)(iv) shall have used its reasonable best efforts to
prevent the entry of and to remove such Restraint; or
<PAGE>
86
(v) if any condition to the obligation of such party
to consummate the FPL Merger or the Entergy Merger, as
applicable, set forth in Section 6.02 (in the case of FPL) or
in Section 6.03 (in the case of Entergy) becomes incapable of
satisfaction prior to the Initial Termination Date (or, if the
Initial Termination Date is extended in accordance with the
second proviso to Section 7.01(b)(i), such date as extended);
PROVIDED, HOWEVER, in the case of Section 6.02(d) and 6.03(d),
the Initial Termination Date shall refer to such date as it
may be extended pursuant to the second proviso to Section
7.01(b)(i); and PROVIDED FURTHER, that the failure of any such
condition to be capable of satisfaction is not the result of a
material breach of this Agreement by the party seeking to
terminate this Agreement.
(c) by FPL, if Entergy shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach
or failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.02(a) or (b), and (B) is incapable of being
cured by Entergy or is not cured by Entergy within 30 days following
receipt of written notice from FPL of such breach or failure to
perform;
(d) by FPL in accordance with Section 4.03(b); PROVIDED that,
in order for the termination of this Agreement pursuant to this
paragraph (d) to be deemed effective, FPL shall have complied with
Section 4.03 and with applicable requirements, including the payment of
the Termination Fee, of Section 5.09;
(e) by FPL, if Entergy or any of its directors or officers
shall participate in discussions or negotiations in breach (other than
in immaterial respects) of Section 4.04;
(f) by Entergy, if FPL shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach
or failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.03(a) or (b), and (B) is incapable of being
cured by FPL or is not cured by FPL within 30 days following receipt of
written
<PAGE>
87
notice from Entergy of such breach or failure to perform;
(g) by Entergy in accordance with Section 4.04(b); PROVIDED
that, in order for the termination of this Agreement pursuant to this
paragraph (g) to be deemed effective, Entergy shall have complied with
Section 4.04 and with applicable requirements, including the payment of
the Termination Fee, of Section 5.09;
(h) by Entergy, if FPL or any of its directors or officers
shall participate in discussions or negotiations in breach (other than
in immaterial respects) of Section 4.03;
(i) by FPL, if the Board of Directors of Entergy (or any
committee thereof) (i) shall have withdrawn or modified, or proposed
publicly to withdraw or modify, the approval or recommendation by such
Board of Directors of this Agreement or the Entergy Merger, (ii) shall
fail to reaffirm such approval or recommendation within 10 business
days of receipt of FPL's written request at any time when an Entergy
Takeover Proposal shall have been made and not rejected by the Board of
Directors of Entergy or (iii) shall have approved or recommended, or
proposed to approve or recommend, an Entergy Takeover Proposal; or
(j) by Entergy, if the Board of Directors of FPL (or any
committee thereof) (i) shall have withdrawn or modified, or proposed
publicly to withdraw or modify, the approval or recommendation by such
Board of Directors of this Agreement or the FPL Merger, (ii) shall fail
to reaffirm such approval or recommendation within 10 business days of
receipt of Entergy's written request at any time when an FPL Takeover
Proposal shall have been made and not rejected by the Board of
Directors of FPL or (iii) shall have approved or recommended, or
proposed to approve or recommend, an FPL Takeover Proposal.
SECTION 7.02. EFFECT OF TERMINATION. In the event of
termination of this Agreement by either Entergy or FPL as provided in Section
7.01, this Agreement shall forthwith become null and void and have no effect,
without any liability or obligation on the part of FPL or Entergy, other than
the provisions of Section 5.09, this Section 7.02 and Article VIII, which
provisions survive such termination, and except to the extent that such
termination results from the willful and material breach by a party of any of
its
<PAGE>
88
representations, warranties, covenants or agreements set forth in this
Agreement, in which case such termination shall not relieve any party of any
liability or damages resulting from its willful and material breach of this
Agreement (including any such case in which a Termination Fee is, or any
expenses of FPL or Entergy in connection with the transactions contemplated by
this Agreement are, payable pursuant to Section 5.09 to FPL or Entergy, as the
case may be (the "INJURED PARTY"), to the extent any such liability or damage
suffered by the Injured Party exceeds the amount of the Termination Fee and any
expenses payable pursuant to Section 5.09 to the Injured Party).
SECTION 7.03. AMENDMENT. This Agreement may be amended by the
parties at any time before or after the FPL Shareholder Approval or the Entergy
Shareholder Approval; PROVIDED, HOWEVER, that after any such approval, there
shall not be made any amendment that by law requires further approval by the
shareholders of FPL or Entergy without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.03, waive compliance by the other parties with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION
OR WAIVER. A termination of this Agreement pursuant to Section 7.01, an
amendment of this Agreement pursuant to Section 7.03 or an extension or material
waiver pursuant to Section 7.04 shall, in order to be effective, require, in the
case of FPL or Entergy, action by its Board of Directors or, with respect to any
amendment to this Agreement, the duly authorized committee of its Board of
Directors to the extent permitted by law.
<PAGE>
89
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the parties
that by its terms contemplates performance after the Effective Time.
SECTION 8.02. NOTICES. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given (as of the time of delivery or, in the case of a telecopied
communication, of confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to FPL, to
FPL Group, Inc.
700 Universe Boulevard
Juno Beach, Florida 33408
Telecopy No.: (561) 691-7177
Attention: Dennis P. Coyle
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telecopy No.: (212) 474-3700
Attention: George W. Bilicic, Jr.
<PAGE>
90
(b) if to Entergy, to
Entergy Corporation
639 Loyola Avenue
New Orleans, Louisiana 70113
Telecopy No.: (504) 576-2977
Attention: Michael G. Thompson
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Telecopy No.: (212) 735-2000
Attention: Sheldon S. Adler
SECTION 8.03. DEFINITIONS. For purposes of this Agreement:
(a) an "AFFILIATE" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person,
where "CONTROL" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise;
(b) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT"
means, when used in connection with FPL, Entergy or the Company, any
change, effect, event, occurrence or state of facts (i) that is
materially adverse to the business, assets, properties, financial
condition or results of operations of such person and its subsidiaries
taken as a whole or (ii) that prevents such person from performing its
material obligations under this Agreement or prevents consummation of
the transactions contemplated hereby;
(c) "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
<PAGE>
91
(d) "SUBSIDIARY" means, with respect to any person, any other
person, whether incorporated or unincorporated, of which more than 50%
of either the equity interests in, or the voting control of, such other
person is, directly or indirectly through subsidiaries or otherwise,
beneficially owned by such first person.
SECTION 8.04. INTERPRETATION. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns.
SECTION 8.05. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each party and delivered to the other parties.
SECTION 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement (including the documents and instruments referred to herein) and
the Confidentiality Agreement (except for Section 7 thereof) (i) constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement
<PAGE>
92
(including Section 7 of the Confidentiality Agreement) and (ii) except for the
provisions of Section 5.08, are not intended to confer upon any person other
than the parties any rights or remedies.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other party. Any attempted or purported
assignment in violation of the preceding sentence shall be null and void and of
no effect whatsoever. Subject to the preceding two sentences, this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
SECTION 8.09. ENFORCEMENT. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the Federal court located in the
Borough of Manhattan in The City of New York, or if such court does not have
jurisdiction, in any New York state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of the
Federal court located in the Borough of Manhattan in The City of New York, or if
such court does not have jurisdiction, in any New York state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the Borough of Manhattan in The City of New York, or if
such court does not have jurisdiction, in any New York state court.
<PAGE>
93
SECTION 8.10. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.11. WAIVER OF JURY TRIAL. Each party to this
Agreement waives, to the fullest extent permitted by applicable law, any right
it may have to a trial by jury in
<PAGE>
94
respect of any action, suit or proceeding arising out of or relating to this
Agreement.
IN WITNESS WHEREOF, FPL Group, Inc., Entergy Corporation, the
Company, Merger Sub A and Merger Sub B have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
written above.
FPL GROUP, INC.,
by
/s/ JAMES L. BROADHEAD
--------------------------
Name: James L. Broadhead
Title: Chairman and Chief
Executive Officer
ENTERGY CORPORATION,
by
/s/ J. WAYNE LEONARD
--------------------------
Name: J. Wayne Leonard
Title: Chief Executive
Officer
WCB HOLDING CORP.,
by
/s/ DENNIS P. COYLE
--------------------------
Name: Dennis P. Coyle
Title: Vice President and
Secretary
RANGER ACQUISITION CORP.,
by
/s/ DENNIS P. COYLE
--------------------------
Name: Dennis P. Coyle
Title: Vice President and
Secretary
RING ACQUISITION CORP.,
by
/s/ J. WAYNE LEONARD
--------------------------
Name: J. Wayne Leonard
Title: President
<PAGE>
EXHIBIT A
TO THE MERGER AGREEMENT
FORM OF CERTIFICATE OF INCORPORATION OF THE
COMPANY AS OF THE EFFECTIVE TIME
RESTATED CERTIFICATE OF INCORPORATION
OF
[ ]
[ ], a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY AS
FOLLOWS:
1. The name of the corporation is [ ] and the
name under which the corporation was originally incorporated is WCB Holding
Corp. The original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on July 25, 2000.
2. This Restated Certificate of Incorporation, having been
duly adopted in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware (the "DGCL") and by the unanimous written consent
of the stockholders of the Corporation in accordance with Section 228 of the
DGCL, restates and integrates and further amends the provisions of the
Certificate of Incorporation as amended or supplemented heretofore. As so
restated and integrated and further amended, the Restated Certificate of
Incorporation (hereinafter, this "Certificate of Incorporation") reads as
follows:
ARTICLE FIRST
NAME
The name of the corporation is [ ].
ARTICLE SECOND
REGISTERED OFFICE
The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.
<PAGE>
2
ARTICLE THIRD
PURPOSE
The purpose for which the Corporation is organized is the
transaction of any or all lawful business for which corporations may be
incorporated under the DGCL.
ARTICLE FOURTH
CAPITAL STOCK
(a) The aggregate number of shares of stock that the
Corporation shall have authority to issue is [ ] shares, consisting of [ ]
shares of Common Stock, par value $.01 per share (the "Common Stock"), and
[ ] shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock").
(b) The Board of Directors of the Corporation shall have the
full authority permitted by law, at any time and from time to time, to divide
the authorized and unissued shares of Preferred Stock into series and, with
respect to each such series, to determine by resolution or resolutions the
number of shares constituting such series and the designation of such series,
the voting powers, if any, of the shares of such series, and the preferences and
relative, participating, optional or other special rights, if any, and any
qualifications, limitations or restrictions thereof, of the shares of any such
series of Preferred Stock to the full extent now or hereafter permitted by the
law of the State of Delaware. The powers, preferences and relative,
participating, optional and other special rights of each series of Preferred
Stock and the qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding.
(c) Subject to applicable law and the rights, if any, of the
holders of any series of Preferred Stock or any class or series of stock having
a preference over or the right to participate with the Common Stock with respect
to the payment of dividends, dividends may be declared and paid on the Common
Stock at such times and in such amounts as the Board of Directors of the
Corporation in its discretion shall determine. Nothing in this ARTICLE FOURTH
shall limit the power of the Board of Directors to create a series of Preferred
Stock with dividends the rate of which is calculated by reference to, and the
payment of which is concurrent with, dividends on shares of Common Stock.
<PAGE>
3
(d) In the event of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, subject to the rights of the
holders of any series of the Preferred Stock, the net assets of the Corporation
available for distribution to stockholders of the Corporation shall be
distributed PRO RATA to the holders of the Common Stock in accordance with their
respective rights and interests. If the assets of the Corporation are not
sufficient to pay the amounts, if any, owing to holders of shares of Preferred
Stock in full, holders of all shares of Preferred Stock will participate in the
distribution of assets ratably in proportion to the full amounts to which they
are entitled or in such order or priority, if any, as will have been fixed in
the resolution or resolutions providing for the issue of the series of Preferred
Stock. Neither the merger or consolidation of the Corporation into or with any
other corporation, nor a sale, transfer or lease of all or part of its assets,
will be deemed a liquidation, dissolution or winding up of the Corporation
within the meaning of this paragraph except to the extent specifically provided
for herein. Nothing in this ARTICLE FOURTH shall limit the power of the Board of
Directors to create a series of Preferred Stock for which the amount to be
distributed upon any liquidation, dissolution or winding up of the Corporation
is calculated by reference to, and the payment of which is concurrent with, the
amount to be distributed to the holders of shares of Common Stock.
(e) Except as otherwise required by law, as otherwise provided
herein or as otherwise determined by the Board of Directors as to the shares of
any series of Preferred Stock, the holders of Preferred Stock shall have no
voting rights and shall not be entitled to any notice of meetings of
stockholders.
(f) Except as otherwise required by law and subject to the
rights of the holders of any series of Preferred Stock, with respect to all
matters upon which stockholders are entitled to vote or to which stockholders
are entitled to give consent, the holders of any outstanding shares of Common
Stock shall vote together as a class, and every holder of Common Stock shall be
entitled to cast thereon one vote in person or by proxy for each share of Common
Stock standing in such holder's name on the books of the Corporation; PROVIDED,
HOWEVER, that, except as otherwise required by law, holders of Common Stock, as
such, shall not be entitled to vote on any amendment to this Certificate of
Incorporation (including any certificate of designations relating to any series
of Preferred Stock) that relates solely to the terms of one or more outstanding
series of Preferred Stock if the holders of such affected
<PAGE>
4
series are entitled, either separately or together with the holders of one or
more other such series, to vote thereon pursuant to this Certificate of
Incorporation (including any certificate of designations relating to any series
of Preferred Stock) or pursuant to applicable law. Subject to the rights of the
holders of any series of Preferred Stock, stockholders of the Corporation shall
not have any preemptive rights to subscribe for additional issues of stock of
the Corporation and no stockholder will be permitted to cumulate votes at any
election of directors.
ARTICLE FIFTH
BOARD OF DIRECTORS
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. Except as otherwise
fixed by or pursuant to the provisions of ARTICLE FOURTH of this Certificate of
Incorporation relating to the rights of the holders of any series of Preferred
Stock, and subject to Section 2.11 of the By-laws of the Corporation, the Board
of Directors shall consist of 15 directors or such other number as may be
determined from time to time by the Board of Directors (as so adjusted, the
"entire Board of Directors"). The Board of Directors may increase or decrease
the number of directors by resolution adopted by a majority of the entire Board
of Directors; PROVIDED, HOWEVER, that no decrease in the number of directors so
made by the Board of Directors shall shorten the term of any incumbent director
and PROVIDED FURTHER that any such increase or decrease (including any change
fixed by or pursuant to the provisions of ARTICLE FOURTH of this Certificate of
Incorporation relating to the rights of the holders of any series of Preferred
Stock) prior to the earlier of (x) the occurrence of the first vacancy on the
Board of Directors with respect to a Ranger Director (as defined in Section
2.11(c) of the By-laws) following the 12-month anniversary of the Effective Time
(as such term is defined in the Agreement and Plan of Merger dated as of July
30, 2000, by and among Ranger, Ring, the Corporation, Ranger Acquisition Corp.
and Ring Acquisition Corp.) and (y) the third annual stockholders' meeting of
the Corporation that occurs following the end of the calendar year in which the
Effective Time occurs shall require the affirmative vote of at least two-thirds
of the entire Board of Directors. Except as otherwise provided by or pursuant to
the provisions of ARTICLE FOURTH of this Certificate of Incorporation with
respect to any directors elected by the holders of any series of Preferred Stock
pursuant to the terms of this Certificate of Incorporation, at each annual
<PAGE>
5
meeting of the stockholders of the Corporation, the date of which shall be fixed
by or pursuant to the By-laws of the Corporation, directors shall be elected and
each director shall hold office until the next annual meeting of stockholders
and until his or her successor is duly elected and qualified, or until his or
her earlier death, incapacity, resignation or removal from office in accordance
with applicable law or pursuant to an order of a court of competent
jurisdiction. The election of directors need not be by written ballot.
(b) Except as otherwise provided for or fixed by or pursuant
to the provisions of ARTICLE FOURTH of this Certificate of Incorporation
relating to the rights of the holders of any series of Preferred Stock, and
subject to Section 2.11 of the By-laws of the Corporation, any vacancy on the
Board of Directors of the Corporation resulting from death, incapacity,
resignation, removal or other cause and any newly created directorship resulting
from any increase in the authorized number of directors between annual meetings
of stockholders shall be filled only by the vote of a majority of the directors
then in office, even though less than a quorum, and any director so chosen shall
hold office until the next annual meeting of stockholders and until his or her
successor is duly elected and qualified or his or her earlier death, incapacity,
resignation or removal from office in accordance with applicable law or pursuant
to an order of a court of competent jurisdiction.
(c) A director may be removed from office with or without
cause; PROVIDED, HOWEVER, that, subject to applicable law, any director elected
by the holders of any series of Preferred Stock may be removed without cause
only by the holders of a majority of the shares of such series of Preferred
Stock.
ARTICLE SIXTH
ACTION BY STOCKHOLDERS
(a) Subject to the rights of the holders of any series of
Preferred Stock, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be effected by
any consent in writing by such stockholders. Subject to the rights of the
holders of any series of Preferred Stock, special meetings of stockholders of
the Corporation may be called only by the Chairman of the Board of Directors or
by the Board of Directors pursuant to a resolution approved by
<PAGE>
6
a majority of the entire Board of Directors. Subject to paragraph (b) below, the
ability of the stockholders to call a special meeting is hereby specifically
denied.
(b) Notwithstanding the foregoing, whenever the holders of any
one or more series of Preferred Stock issued by the Corporation, if any, shall
have the right, voting separately as a class or series, as applicable, to elect
directors at an annual or special meeting of stockholders, the calling of
special meetings of the holders of such series shall be governed by the terms of
the applicable resolution or resolutions of the Board of Directors adopted
pursuant to ARTICLE FOURTH of this Certificate of Incorporation.
ARTICLE SEVENTH
AMENDMENT OF CERTIFICATE OF INCORPORATION
(a) The Corporation reserves the right to supplement, amend or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the laws of the State of Delaware and this
Certificate of Incorporation, and all rights conferred on shareholders,
directors and officers herein, if any, are granted subject to this reservation.
(b) Prior to the date on which Section 2.11 of the By-laws of
the Corporation terminates according to its terms, any action by the Board of
Directors relating to any proposed amendment to or modification of ARTICLE FIFTH
of this Certificate of Incorporation or this sentence shall require the
affirmative vote of at least two-thirds of the entire Board.
ARTICLE EIGHTH
AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred
upon it by law, except as otherwise provided in Sections 2.11 and 3.03 of the
By-laws of the Corporation as in effect on the date of this Certificate of
Incorporation, the Board of Directors of the Corporation is expressly authorized
to adopt, repeal, alter or amend the By-laws of the Corporation by the
affirmative vote of a majority of the entire Board of Directors.
<PAGE>
7
ARTICLE NINTH
LIMITATION OF LIABILITY
Except to the extent elimination or limitation of liability is
not permitted by applicable law, no director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty in such capacity. Any repeal or modification of
this ARTICLE NINTH by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
ARTICLE TENTH
LIABILITY OF STOCKHOLDERS
The holders of the capital stock of the Corporation shall not
be personally liable for the payment of the Corporation's debts, and the private
property of the holders of the capital stock of the Corporation shall not be
subject to the payment of debts of the Corporation to any extent whatsoever.
<PAGE>
8
IN WITNESS WHEREOF, I, the [INSERT TITLE] of the
Corporation, have executed this Restated Certificate of Incorporation as of
the [ ] day of [ ], 2000, and DO HEREBY CERTIFY under the penalties of
perjury that the facts stated in this Restated Certificate of Incorporation
are true.
By
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT B
TO THE MERGER AGREEMENT
FORM OF BY-LAWS OF THE COMPANY
AS OF THE EFFECTIVE TIME
AMENDED AND RESTATED
BY-LAWS
of
[ ]
Effective as of [ ]
<PAGE>
i
TABLE OF CONTENTS
Page
----
ARTICLE I
STOCKHOLDERS
SECTION 1.01. Place of Stockholders' Meetings........................1
SECTION 1.02. Day and Time of Annual Meetings of Stockholders........1
SECTION 1.03. Purposes of Annual Meetings............................1
SECTION 1.04. Special Meetings of Stockholders.......................2
SECTION 1.05. Notice of Meetings of Stockholders.....................3
SECTION 1.06. Quorum of Stockholders.................................3
SECTION 1.07. Chairman of the Board and Secretary of Meeting.........4
SECTION 1.08. Voting by Stockholders.................................4
SECTION 1.09. Proxies................................................5
SECTION 1.10. Inspectors.............................................5
SECTION 1.11. List of Stockholders...................................5
SECTION 1.12. Fixing of Record Date for Determination
of Stockholders of Record..............................5
ARTICLE II
DIRECTORS
SECTION 2.01. Method of Election.....................................6
SECTION 2.02. Resignations and Vacancies on Board....................8
SECTION 2.03. Meetings of the Board..................................8
SECTION 2.04. Quorum and Action......................................9
SECTION 2.05. Presiding Officer and Secretary of Meeting.............9
SECTION 2.06. Action by Consent without Meeting......................9
SECTION 2.07. Standing Committees....................................9
SECTION 2.08. Meetings of Committees................................11
SECTION 2.09. Quorum of Committee...................................11
SECTION 2.10. Other Committees......................................11
SECTION 2.11. Representation on the Board...........................12
<PAGE>
ii
ARTICLE III
OFFICERS
SECTION 3.01. Officers, Titles, Elections, Terms....................13
SECTION 3.02. Powers and Duties of Officers.........................14
SECTION 3.03. Employment Agreements.................................14
ARTICLE IV
INDEMNIFICATION
SECTION 4.01. Indemnification.......................................15
SECTION 4.02. Insurance, Contracts and Funding......................16
SECTION 4.03. Indemnification; Not Exclusive Right..................16
SECTION 4.04. Advancement of Expenses...............................16
SECTION 4.05. Indemnification Procedures;
Presumptions and Effect of
Certain Proceedings; Remedies; Definitions..........17
SECTION 4.06. Indemnification of Employees
and Agents..........................................22
SECTION 4.07. Severability..........................................22
ARTICLE V
CAPITAL STOCK
SECTION 5.01. Stock Certificates....................................23
SECTION 5.02. Record Ownership......................................23
SECTION 5.03. Transfer of Record Ownership..........................23
SECTION 5.04. Transfer Agent; Registrar; Rules
Respecting Certificates.............................24
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
SECTION 6.01. Voting.......................................24
SECTION 6.02. General Authorization to Transfer
Securities held by the Corporation.........24
<PAGE>
iii
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 7.01. Amendment..............................................25
ARTICLE VIII
OTHER OFFICERS
SECTION 8.01. Registered Office and Agent............................25
SECTION 8.02. Other Offices..........................................25
<PAGE>
AMENDED AND RESTATED BY-LAWS
of
[ ]
(A CORPORATION ORGANIZED UNDER THE LAWS OF THE
STATE OF DELAWARE, THE "CORPORATION")
(EFFECTIVE AS OF [ ])
ARTICLE I
STOCKHOLDERS
SECTION 1.01. PLACE OF STOCKHOLDERS' MEETINGS. All meetings of
the stockholders of the Corporation shall be held at such place or places,
within or outside the State of Delaware, as may be fixed by the Corporation's
Board of Directors (the "Board", and each member thereof a "Director") from time
to time or as shall be specified in the respective notices thereof.
SECTION 1.02. DAY AND TIME OF ANNUAL MEETINGS OF STOCKHOLDERS.
An annual meeting of stockholders shall be held at such date and hour as shall
be determined by the Board and designated in the notice thereof. Any previously
scheduled annual meeting of stockholders may be postponed by action of the Board
taken prior to the time previously scheduled for such annual meeting of
stockholders.
SECTION 1.03. PURPOSES OF ANNUAL MEETINGS. (a) Subject to the
rights of the holders of any series of Preferred Stock of the Corporation, at
each annual meeting, the stockholders shall elect the Directors. At any such
annual meeting any other business properly brought before the meeting may be
transacted.
(b) To be properly brought before an annual meeting, business
must be (i) specified in the notice of the meeting (or any supplement thereto)
given by or at the direction of the Board, (ii) otherwise properly brought
before the meeting by or at the direction of the Board or (iii) otherwise
properly brought before the meeting by a stockholder who is a holder of record
at the time of the giving of notice provided for in this Section 1.03(b), who is
entitled to vote at the meeting and who complies with the procedures set forth
in this Section 1.03(b). For business to be properly brought before an annual
meeting by a stockholder, such business must be a proper matter for stockholder
actions under applicable law and the stockholder
<PAGE>
2
must have given written notice thereof, either by personal delivery or by United
States mail, postage prepaid, to the Secretary of the Corporation (the
"Secretary") at the principal executive offices of the Corporation, not less
than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting (provided, that the first such anniversary
date occurring after the effective date of these By-laws shall be deemed to be
[ ]). Any such notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, and, in the event that such
business includes a proposal to amend either the Restated Certificate of
Incorporation of the Corporation (the "Certificate") or these By-laws, the text
of the proposed amendment; (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business; (iii) the class
and number of shares of the Corporation that are beneficially owned by the
stockholder; (iv) any material interest of the stockholder in such business; and
(v) if the stockholder intends to solicit proxies in support of such
stockholder's proposal, a representation to that effect. The foregoing notice
requirements shall be deemed satisfied by a stockholder if the stockholder has
notified the Corporation of his or her intention to present a proposal at an
annual meeting and such stockholder's proposal has been included in a proxy
statement that has been prepared by management of the Corporation to solicit
proxies for such annual meeting; PROVIDED, HOWEVER, that if such stockholder
does not appear or send a qualified representative to present such proposal at
such annual meeting, the Corporation need not present such proposal for a vote
at such meeting, notwithstanding that proxies in respect of such vote may have
been received by the Corporation. No business shall be conducted at an annual
meeting of stockholders except in accordance with this Section 1.03(b), and the
presiding officer of any annual meeting of stockholders may refuse to permit any
business to be brought before an annual meeting without compliance with the
foregoing procedures or if the stockholder solicits proxies in support of such
stockholder's proposal without such stockholder having made the representation
required by clause (v) of the second preceding sentence.
SECTION 1.04. SPECIAL MEETINGS OF STOCKHOLDERS. (a) Except as
otherwise expressly required by the Certificate or applicable law and subject to
the rights of the holders of any series of Preferred Stock of the Corporation,
special meetings of the stockholders or of any
<PAGE>
3
class or series entitled to vote may be called for any purpose or purposes by
the Chairman of the Board or by a majority vote of the entire Board of
Directors, as defined in the Certificate (the "entire Board"), to be held at
such place (within or without the State of Delaware), date and hour as shall be
determined by the Chairman or the Board, as applicable, and designated in the
notice thereof. At any such special meeting any business properly brought before
the meeting may be transacted.
(b) To be properly brought before a special meeting, business
must be (i) specified in the notice of the meeting (or any supplement thereto)
given by or at the direction of the Board or (ii) otherwise properly brought
before the meeting by or at the direction of the Board. No business shall be
conducted at a special meeting of stockholders except in accordance with this
Section 1.04(b) or as required by applicable law.
SECTION 1.05. NOTICE OF MEETINGS OF STOCKHOLDERS. Except as
otherwise expressly required by the Certificate or applicable law, not less than
ten days nor more than 60 days before the date of every annual or special
stockholders' meeting the Secretary shall cause to be delivered to each
stockholder of record entitled to vote at such meeting notice stating the place,
date and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Except as otherwise expressly
required by applicable law, notice of any adjourned meeting of stockholders need
not be given if the time and place thereof are announced at the meeting at which
the adjournment is taken. Any notice, if mailed, shall be deemed to be given
when deposited in the United States mail, postage prepaid, addressed to the
stockholder at the address for notices to such stockholder as it appears on the
books of the Corporation.
SECTION 1.06. QUORUM OF STOCKHOLDERS. (a) Unless otherwise
expressly required by the Certificate or applicable law, at any meeting of the
stockholders, the presence in person or by proxy of stockholders entitled to
cast a majority of the votes entitled to be cast thereat shall constitute a
quorum for the entire meeting, notwithstanding the withdrawal of stockholders
entitled to cast a sufficient number of votes in person or by proxy to reduce
the number of votes represented at the meeting below a quorum. Shares of the
Corporation's stock belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in an election of the directors of such
other corporation is held by the Corporation, shall neither be counted for the
purpose of determining the
<PAGE>
4
presence of a quorum nor be entitled to vote at any meeting of the stockholders;
PROVIDED, HOWEVER, that the foregoing shall not limit the right of the
Corporation to vote stock, including its own stock, held by it in a fiduciary
capacity.
(b) At any meeting of the stockholders at which a quorum shall
be present, a majority of those present in person or by proxy may adjourn the
meeting from time to time. Whether or not a quorum is present, the officer
presiding thereat shall have power to adjourn the meeting from time to time.
Except as otherwise expressly required by applicable law, notice of any
adjourned meeting other than announcement at the meeting at which an adjournment
is taken shall not be required to be given.
(c) At any adjourned meeting, any business may be transacted
that might have been transacted at the meeting originally called, but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof unless a new record
date is fixed by the Board.
SECTION 1.07. CHAIRMAN OF THE BOARD AND SECRETARY OF MEETING.
The Chairman of the Board or, in his or her absence, another officer of the
Corporation designated by the Chairman of the Board, shall preside at meetings
of the stockholders. The Secretary shall act as secretary of the meeting, or in
the absence of the Secretary, an Assistant Secretary of the Corporation shall so
act, or if neither is present, then the presiding officer may appoint a person
to act as secretary of the meeting.
SECTION 1.08. VOTING BY STOCKHOLDERS. (a) Except as otherwise
expressly required by the Certificate or applicable law, at every meeting of the
stockholders each stockholder of record shall be entitled to the number of votes
specified in the Certificate (or, with respect to any series of Preferred Stock,
in the applicable certificate of designations providing for the creation of such
series), in person or by proxy, for each share of stock standing in his or her
name on the books of the Corporation on the date fixed pursuant to the
provisions of Section 1.12 of these By-laws as the record date for the
determination of the stockholders who shall be entitled to receive notice of and
to vote at such meeting.
(b) When a quorum is present at any meeting of the
stockholders, all questions shall be decided by the vote of a majority in voting
power of the stockholders present in person or by proxy and entitled to vote at
such meeting, unless the question is one upon which by express provision
<PAGE>
5
of law, the rules or regulations of any stock exchange or governmental or
regulatory body applicable to the Corporation, the Certificate or these By-laws,
a different vote is required, in which case such express provision shall govern
and control the decision of such question.
(c) Except as otherwise expressly required by applicable law,
the vote at any meeting of stockholders on any question need not be by ballot,
unless so directed by the presiding officer of the meeting.
SECTION 1.09. PROXIES. Any stockholder entitled to vote at any
meeting of stockholders may vote either in person or by his or her
attorney-in-fact or proxy.
SECTION 1.10. INSPECTORS. Prior to each meeting of
stockholders, the Board shall appoint not less than two nor more than seven
inspectors of election who shall have such duties and perform such functions in
connection with the meeting as shall be determined by the Board.
SECTION 1.11. LIST OF STOCKHOLDERS. (a) At least ten days
before every meeting of stockholders, the officer who has charge of the stock
ledger of the Corporation shall cause to be prepared and made a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder.
(b) Such list shall be open to examination by any stockholder
for any purpose germane to the meeting as required by applicable law.
(c) The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list required by this
Section 1.11 or the books of the Corporation, or to vote in person or by proxy
at any meeting of stockholders.
SECTION 1.12. FIXING OF RECORD DATE FOR DETERMINATION OF
STOCKHOLDERS OF RECORD. (a) The Board may fix a date as the record date for the
purpose of determining the stockholders entitled to notice of, or to vote at,
any meeting of the stockholders or any adjournment thereof, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than 60 days nor
less than ten days before the date of a meeting of the stockholders. If no
record date is fixed by the Board, the record date for determining the
stockholders entitled to
<PAGE>
6
notice of or to vote at a stockholders' meeting shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; PROVIDED, HOWEVER, that the Board may fix a new record date for
the adjourned meeting.
(b) The Board may fix a date as the record date for the
purpose of determining the stockholders entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or in order to make a determination of the stockholders for the purpose of any
other lawful action, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall not be more than 60 calendar days prior to such action. If no record date
is fixed by the Board, the record date for determining the stockholders for any
such purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
ARTICLE II
DIRECTORS
SECTION 2.01. METHOD OF ELECTION. Directors need not be
stockholders of the Corporation or citizens of the United States of America.
Persons who, on the date of the stockholders' meeting at which they would be
elected, would be older than 71 years of age shall not be eligible to be
nominated for election as Directors. Any Director whose seventy-first birthday
occurs on or after the date of his or her election to the Board shall be
permitted to complete his or her term in office.
Subject to the rights of the holders of any series of
Preferred Stock of the Corporation, nominations of persons for election as
Directors may be made by the Board or by any stockholder who is a stockholder of
record at the time of giving of the notice of nomination provided for in this
Section 2.01 and who is entitled to vote for the election of Directors. Any
stockholder of record entitled to vote for the election of Directors at a
meeting may nominate a person or persons for election as Directors only if
written notice of such stockholder's intent to make such nomination is given,
either by personal delivery or by
<PAGE>
7
United States mail, postage prepaid, to the Secretary at the principal executive
offices of the Corporation, not later than (i) with respect to an election to be
held at an annual meeting of stockholders, not less than 90 nor more than 120
days prior to the anniversary date of the immediately preceding annual meeting
(provided, that the first such anniversary date occurring after the effective
date of these By-laws shall be deemed to be [ ]) and (ii) with respect to an
election to be held at a special meeting of stockholders for the election of
Directors, not earlier than the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior to such
special meeting or the tenth day following the day on which public announcement
of the date of the special meeting and of the nominees to be elected at such
meeting is first made. Each such notice shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board; (e) the consent of each nominee to serve as a
Director if so elected; and (f) if the stockholder intends to solicit proxies in
support of such stockholder's nominee(s), a representation to that effect. The
presiding officer of any meeting of stockholders to elect Directors and the
Board may refuse to acknowledge any attempted nomination of any person not made
in compliance with the foregoing procedure or if the stockholder solicits
proxies in support of such stockholder's nominee(s) without such stockholder
having made the representation required by clause (f) of the preceding sentence.
Only such persons who are nominated in accordance with the procedures set forth
in this Section 2.01 shall be eligible to serve as Directors of the Corporation.
At each meeting of the stockholders for the election of
Directors at which a quorum is present, the persons receiving the greatest
number of votes, up to the number of Directors to be elected, shall be the
Directors.
<PAGE>
8
SECTION 2.02. RESIGNATIONS AND VACANCIES ON BOARD. Any
Director may resign from office at any time by delivering a resignation to the
Chairman of the Board or the Secretary. The resignation will take effect at the
time specified therein, or, if no time is specified, at the time of its receipt
by the Corporation. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly so provided in the resignation. Subject to
Section 2.11 of these By-laws, any vacancy on the Board shall be filled as
specified in the Certificate.
SECTION 2.03. MEETINGS OF THE BOARD. (a) The Board may hold
its meetings, both regular and special, either within or outside the State of
Delaware, at such places as from time to time may be determined by the Board or
as may be designated in the respective notices or waivers of notice thereof.
(b) Regular meetings of the Board shall be held at such times
and at such places as from time to time shall be determined by the Board.
(c) The first meeting of each newly elected Board shall be
held as soon as practicable after the annual meeting of the stockholders and
shall be for the election of officers and the transaction of such other business
as may come before such meeting.
(d) Special meetings of the Board shall be held whenever
called by direction of the Chairman of the Board or at the request of Directors
constituting one-third of the number of Directors then in office.
(e) Members of the Board or any Committee of the Board may
participate in a meeting of the Board or such Committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and by any
other means of remote communication permitted by applicable law, and such
participation shall constitute presence in person at such meeting.
(f) The Secretary shall give notice to each Director of any
meeting of the Board by mailing, faxing or otherwise electronically delivering
the same at least two days before the meeting or by personally delivering the
same not later than the day before the meeting. Such notice need not include a
statement of the business to be transacted at, or the purpose of, any such
meeting. Any and all business may be transacted at any meeting of the Board. No
notice of any adjourned meeting need be given. No notice to or waiver
<PAGE>
9
by any Director shall be required with respect to any meeting at which the
Director is present except when such Director attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting was not lawfully called or convened.
SECTION 2.04. QUORUM AND ACTION. Except as otherwise expressly
required by the Certificate, these Bylaws or applicable law, at any meeting of
the Board, the presence of at least a majority of the entire Board shall
constitute a quorum for the transaction of business; but if there shall be less
than a quorum at any meeting of the Board, a majority of those present may
adjourn the meeting from time to time. Unless otherwise provided by applicable
law, the Certificate or these By-laws, the vote of a majority of the Directors
present at any meeting at which a quorum is present shall be necessary for the
approval and adoption of any resolution or the approval of any act of the Board.
SECTION 2.05. PRESIDING OFFICER AND SECRETARY OF MEETING. The
Chairman of the Board or, in the absence of the Chairman of the Board, a member
of the Board selected by the members present, shall preside at meetings of the
Board. The Secretary shall act as secretary of the meeting, but in the
Secretary's absence the presiding officer may appoint a secretary of the
meeting.
SECTION 2.06. ACTION BY CONSENT WITHOUT MEETING. Any action
required or permitted to be taken at any meeting of the Board or of any
Committee thereof may be taken without a meeting as permitted by applicable law.
SECTION 2.07. STANDING COMMITTEES. By resolution adopted by a
majority of the entire Board, the Board shall elect, from among its members,
individuals to serve on the Standing Committees established by this Section
2.07. Each Standing Committee shall be comprised of such even number of
Directors, not less than two, as shall be elected to such Committee. At the
Effective Time (as such term is defined in the Agreement and Plan of Merger
dated July 30, 2000, by and among Ranger, Ring, the Corporation, Ranger
Acquisition Corp. and Ring Acquisition Corp. (the "Merger Agreement")), each
Standing Committee shall be comprised of an equal number of Ranger Directors and
Ring Directors (as such terms are defined in Section 2.11(c)). Each Committee
shall keep a record of all its proceedings and report the same to the Executive
Committee and/or the Board. The chairmen of the various Committees shall
preside, when present, at all meetings of such Committees, and shall have such
powers and
<PAGE>
10
perform such duties as the Board may from time to time prescribe. The Standing
Committees of the Board, and functions of each, are as follows:
(a) EXECUTIVE COMMITTEE. Except as otherwise expressly
required by applicable law, the Executive Committee shall, during the intervals
between the meetings of the Board, possess and exercise all of the powers of the
Board in the management of the property, business and affairs of the
Corporation.
(b) AUDIT COMMITTEE. The Audit Committee shall aid the Board
in carrying out its responsibilities for accurate and informative financial
reporting, shall assist the Board in making recommendations with respect to the
efforts of the management of the Corporation to maintain and improve financial
controls, shall review reports of examination by the independent auditors of the
Corporation and, except as otherwise expressly required by applicable law, shall
have authority to act for the Board in any matter delegated to the Committee by
the Board. The Committee shall recommend each year an independent certified
public accounting firm as independent auditors for the Corporation.
(c) FINANCE COMMITTEE. The Finance Committee shall
periodically formulate and recommend for approval to the Board the financial
policies of the Corporation, including management of the financial affairs of
the Corporation. All capital expenditures of the Corporation shall be reviewed
by the Committee and recommended for approval to the Board. The Committee may
authorize another committee of the Board or one or more of the officers of the
Corporation to approve borrowings, loans, capital expenditures and guarantees up
to such specified amounts or upon such conditions as the Committee may
establish, subject to the approval of the Board.
(d) COMPENSATION COMMITTEE. The Compensation Committee shall
exercise the power of oversight of the compensation and benefits of the
employees of the Corporation, and shall be charged with evaluating management
performance and establishing executive compensation.
(e) NOMINATING COMMITTEE. Subject to Section 2.11 of these
By-laws, the Nominating Committee shall identify and evaluate potential nominees
for election to the Board and recommend candidates for all directorships to be
filled by the stockholders or the Board. Subject to Section 2.11 of these
By-laws, the Committee, in consultation with the Chairman of the Board and the
Chief Executive Officer of the Corporation, shall make
<PAGE>
11
recommendations to the Board regarding the size and composition of the Board,
shall recommend to the Board criteria regarding the personal qualifications
required for Board membership, shall establish procedures for the nomination
process, shall evaluate the performance of the Board as a whole and shall
annually evaluate Board practices and recommend appropriate changes to the
Board.
(f) NUCLEAR COMMITTEE. The Nuclear Committee shall review and
generally oversee, and make reports and recommendations to the Board in
connection with, the operation of the Corporation's nuclear generating units,
shall discuss such matters with the personnel and consultants of the
Corporation, may commission, undertake, receive and review studies and reports
on such matters and shall perform such other services as the Board shall direct
from time to time by resolution of the Board.
SECTION 2.08. MEETINGS OF COMMITTEES. Regular meetings of any
committee may be held without notice at such time and at such place, within or
outside the State of Delaware, as from time to time shall be determined by such
Committee. The Chairman of the Board, the Board or the committee by vote at a
meeting, or by two members of any committee in writing without a meeting, may
call a special meeting of any such Committee at any time by giving each such
committee member at least two days notice of the date, time and place of the
meeting. Such notice may be given orally or in writing in accordance with
Section 2.03(f) hereof. Unless otherwise provided in the Certificate, these
By-laws or by law, neither business to be transacted at, nor the purpose of, any
regular or special meeting of any such committee need be specified in the notice
or any waiver of notice.
SECTION 2.09. QUORUM OF COMMITTEE. At all meetings of any
committee a majority of the total number of its members shall constitute a
quorum for the transaction of business. Except in cases in which it is by law,
by the Certificate, by these By-laws, or by resolution of the Board otherwise
provided, a majority of such quorum shall decide any questions that may come
before the meeting. In the absence of a quorum, the members of the Committee
present by majority vote may adjourn the meeting from time to time, without
notice other than by verbal announcement at the meeting, until a quorum shall
attend.
SECTION 2.10. OTHER COMMITTEES. By resolution passed by a
majority of the entire Board, the Board may also appoint from among its members
such other Committees, Standing or otherwise, as it may from time to time deem
<PAGE>
12
desirable and may delegate to such Committees such powers of the Board as it may
consider appropriate, as permitted by the Articles, these By-laws and by law.
SECTION 2.11. REPRESENTATION ON THE BOARD. (a) Unless this
provision terminates pursuant to Section 2.11(c) below, from the Effective Time
until the third annual stockholders' meeting of the Corporation that occurs
following the end of the calendar year in which the Effective Time occurs (the
"Transition Time"), the Board shall consist of eight Ranger Directors and seven
Ring Directors (as such terms are defined below). If, at any time prior to the
Transition Time, (A) the number of Ranger Directors does not exceed by one the
number of Ring Directors serving, or the number of Ranger Directors that would
be serving following the next stockholders' meeting at which Directors are to be
elected would not exceed by one the number of Ring Directors then serving, then
the Board and the Nominating Committee thereof shall nominate for election at
the next stockholders' meeting at which Directors are to be elected such person
or persons as may be designated by the remaining Ranger Directors (if the number
of Ranger Directors is, or would otherwise become, less than or equal to the
number of Ring Directors) or by the remaining Ring Directors (if the number of
Ring Directors is, or would otherwise become, less than one less than the number
of Ranger Directors) to ensure that, following such election, the number of
Ranger Directors serving on the Board exceeds by one the number of Ring
Directors serving on the Board or (B) there shall occur any vacancy in any
directorship held by any Ranger Director or Ring Director, then the Board shall
appoint for the remainder of the full term of such directorship such person or
persons as may be designated by the remaining Ranger Directors (if the number of
Ranger Directors is, or would otherwise become, less than or equal to the number
of Ring Directors) or by the remaining Ring Directors (if the number of Ring
Directors is, or would otherwise become, less than one less than the number of
Ranger Directors).
(b) Following the 12-month anniversary of the Effective Time,
the first vacancy on the Board that occurs with respect to a Ranger Director
shall not be filled and instead the number of directors that constitutes the
entire Board of Directors at such time shall be reduced by one.
(c) The provisions of this Section 2.11 shall be of no further
effect after the earlier of (x) the occurrence of the first vacancy on the Board
with respect to a Ranger Director following the 12-month anniversary of the
Effective Time (and the reduction in the number of directors by one in
<PAGE>
13
accordance with clause (b) above) and (y) the third annual stockholders' meeting
of the Corporation that occurs following the end of the calendar year in which
the Effective Time occurs. The term "Ranger Director" means (i) any person
serving as a director of Ranger prior to the Effective Time and who becomes a
Director of the Corporation and (ii) any person who becomes a Director of the
Corporation pursuant to the last sentence of subsection (a) above and is
designated by the Ranger Directors; and the term "Ring Director" means (i) any
person serving as a director of Ring prior to the Effective Time and who becomes
a Director of the Corporation and (ii) any person who becomes a Director of the
Corporation pursuant to the last sentence of subsection (a) above and who is
designated by the Ring Directors. Prior to the Transition Time, (i) any action
by the Board relating to any proposed amendment to or modification of ARTICLES
FIFTH or EIGHTH of the Certificate and (ii) any amendment to or modification of
this Section 2.11 or any provision of these By-laws that refers to this Section
2.11 shall require the affirmative vote of at least two-thirds of the entire
Board.
ARTICLE III
OFFICERS
SECTION 3.01. OFFICERS, TITLES, ELECTIONS, TERMS. (a) Subject
to Section 3.03 of these By-laws, the Board may from time to time elect a
Chairman of the Board, a Chief Executive Officer, a President, Group
President(s), a Chief Financial Officer, one or more Executive Vice Presidents,
one or more Senior Vice Presidents, one or more Vice Presidents, a Controller, a
Treasurer, a Secretary and a General Counsel, each to serve at the pleasure of
the Board or otherwise as shall be specified by the Board at the time of such
election and until their successors are elected and qualified or until their
earlier death, incapacity, retirement, resignation or removal from office in
accordance with these By-laws or applicable law or pursuant to an order of a
court of competent jurisdiction.
(b) The Board may elect or appoint at any time such other
officers or agents with such duties as it may deem necessary or desirable. Such
other officers or agents shall serve at the pleasure of the Board or otherwise
as shall be specified by the Board at the time of such election or appointment
and, in the case of such other officers, until their successors are elected and
qualified or until their earlier death, incapacity, retirement, resignation or
removal from office in accordance with these By-laws or
<PAGE>
14
applicable law or pursuant to an order of a court of competent jurisdiction.
Each such officer or agent shall have such authority and shall perform such
duties as may be provided herein or as the Board may prescribe. The Board may
from time to time authorize any officer or agent to appoint and remove any other
such officer or agent and to prescribe such person's authority and duties.
(c) Any two or more offices may be held simultaneously by the
same person, except as otherwise expressly required by applicable law.
(d) Subject to Section 3.03 of these By-laws, any vacancy in
any office may be filled for the unexpired portion of the term by the Board.
Each officer elected or appointed during the year shall hold office until the
next annual meeting of the Board at which officers are regularly elected or
appointed and until his or her successor is elected or appointed and qualified
or until his or her earlier death, incapacity, retirement, resignation or
removal from office in accordance with these By-laws or applicable law or
pursuant to an order of a court of competent jurisdiction.
(e) Subject to Section 3.03 of these By-laws, any officer or
agent may be removed at any time by the affirmative vote of a majority of the
entire Board.
(f) Any officer may resign from office at any time. Such
resignation shall be made in writing and given to the Chief Executive Officer or
the Secretary. Any such resignation shall take effect at the time specified
therein, or, if no time is specified, at the time of its receipt by the
Corporation. The acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
SECTION 3.02. POWERS AND DUTIES OF OFFICERS. Subject to
Section 3.03 of these By-laws, the officers of the Corporation shall have such
powers and duties as usually pertain to their respective offices, except as
otherwise directed by the Board or any designee thereof, and shall also have
such powers and duties as may from time to time be conferred upon them by the
Board or any such designee.
SECTION 3.03. EMPLOYMENT AGREEMENTS. Except as to election to
the positions with the Corporation provided for in the employment agreements
between the Corporation and James L. Broadhead and the Corporation and J. Wayne
Leonard (each an "Employment Agreement" and collectively the "Employment
Agreements"), each entered into in connection
<PAGE>
15
with the Merger Agreement, and until the earlier of (x) the occurrence of the
first vacancy on the Board with respect to a Ranger Director following the
12-month anniversary of the Effective Time and (y) the third annual
stockholders' meeting of the Corporation that occurs following the end of the
calendar year in which the Effective Time occurs, (i) the election of any other
person to the positions with the Corporation provided for in the Employment
Agreements, (ii) the removal or replacement of Messrs. Broadhead or Leonard from
one or more of such positions, (iii) any amendment to or modification of this
Section 3.03 or (iv) any amendment to or modification of the Employment
Agreements, shall require the affirmative vote of at least two-thirds of the
entire Board.
ARTICLE IV
INDEMNIFICATION
SECTION 4.01. INDEMNIFICATION. (a) The Corporation, to the
fullest extent permitted by applicable law, shall indemnify any person who was
or is a Director or officer of the Corporation and who was or is involved in any
manner (including as a party or a witness) or is threatened to be made so
involved in any threatened, pending or completed investigation, claim, action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including any action, suit or proceeding by or in the right of the Corporation
to procure a judgment in its favor) (each, a "Proceeding"), by reason of the
fact that such person was or is a Director or officer of the Corporation or,
while a Director or officer of the Corporation, was or is serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan) (a "Covered Entity"), against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement and actually
and reasonably incurred by such person in connection with such Proceeding. Any
such former or present Director or officer of the Corporation finally determined
to be entitled to indemnification as provided in this Article 4 is hereinafter
called an "Indemnitee". Until such final determination is made, such former or
present Director or officer shall be a "Potential Indemnitee" for purposes of
this Article 4. Notwithstanding the foregoing provisions of this Section
4.01(a), but subject to Section 4.05(c)(iv) hereof, the Corporation shall not
indemnify an Indemnitee with respect to any Proceeding commenced by such
Indemnitee unless the commencement of such Proceeding by such
<PAGE>
16
Indemnitee has been approved by a majority vote of the Disinterested Directors
(as defined in Section 4.05(d)); PROVIDED, HOWEVER, that such approval of a
majority of the Disinterested Directors shall not be required with respect to
any Proceeding commenced by such Indemnitee after a Change in Control (as
defined in Section 4.05(d)) has occurred.
(b) Neither the amendment or repeal of, nor the adoption of a
provision inconsistent with, any provision of this Article 4 (including this
Section 4.01(b)) shall adversely affect the rights of any Director or officer
under this Article 4 (i) with respect to any Proceeding commenced or threatened
prior to such amendment, repeal or adoption of an inconsistent provision or (ii)
after the occurrence of a Change in Control, with respect to any Proceeding
arising out of any action or omission occurring prior to such amendment, repeal
or adoption of an inconsistent provision, in either case without the written
consent of such Director or officer.
SECTION 4.02. INSURANCE, CONTRACTS AND FUNDING. The
Corporation may purchase and maintain insurance to protect itself and any
Director, officer, employee or agent of the Corporation or of any Covered Entity
against any expenses, judgments, fines and amounts paid in settlement as
specified in Section 4.01(a) or Section 4.06 of this Article 4 or incurred by
any such Director, officer, employee or agent in connection with any Proceeding
referred to in such Sections, to the fullest extent permitted by applicable law.
The Corporation may enter into contracts with any Director, officer, employee or
agent of the Corporation or of any Covered Entity in furtherance of the
provisions of this Article 4 and may create a trust fund, grant a security
interest or use other means (including a letter of credit) to ensure the payment
of such amounts as may be necessary to effect indemnification as provided in
this Article 4.
SECTION 4.03. INDEMNIFICATION; NOT EXCLUSIVE RIGHT. The right
of indemnification provided in this Article 4 shall not be exclusive of any
other rights to which an Indemnitee or Potential Indemnitee may otherwise be
entitled, and the provisions of this Article 4 shall inure to the benefit of the
heirs and legal representatives of any Indemnitee or Potential Indemnitee under
this Article 4 and shall be applicable to Proceedings commenced or continuing
after the adoption of this Article 4, whether arising from acts or omissions
occurring before or after such adoption.
<PAGE>
17
SECTION 4.04. ADVANCEMENT OF EXPENSES. All reasonable expenses
(including attorneys' fees) incurred by or on behalf of any Potential Indemnitee
in connection with any Proceeding shall be advanced to such Potential Indemnitee
by the Corporation within 20 days after the receipt by the Corporation of a
statement or statements from such Potential Indemnitee requesting such advance
or advances from time to time, whether prior to or after final disposition of
such Proceeding. Such statement or statements shall reasonably evidence the
expenses incurred by such Potential Indemnitee and, if required by law at the
time of such advance, shall include or be accompanied by an undertaking by or on
behalf of such Potential Indemnitee to repay the amounts advanced if ultimately
it should be determined that such Potential Indemnitee is not entitled to be
indemnified against such expenses pursuant to this Article 4. Notwithstanding
the foregoing provisions of this Section 4.04, the Corporation shall not advance
expenses to a Potential Indemnitee with respect to any Proceeding commenced by
such Potential Indemnitee unless the commencement of such Proceeding by such
Potential Indemnitee has been approved by a majority vote of the Disinterested
Directors; PROVIDED, HOWEVER, that such approval of a majority of the
Disinterested Directors shall not be required with respect to any Proceeding
commenced by such Potential Indemnitee after a Change in Control has occurred.
SECTION 4.05. INDEMNIFICATION PROCEDURES; PRESUMPTIONS AND
EFFECT OF CERTAIN PROCEEDINGS; REMEDIES; DEFINITIONS. In furtherance, but not in
limitation, of the foregoing provisions of this Article 4, the following
procedures, presumptions and remedies shall apply with respect to the right to
indemnification under this Article 4:
(a) PROCEDURES FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION. (i) To obtain indemnification under this Article 4, a Potential
Indemnitee shall submit to the Secretary a written request, including such
documentation and information as is reasonably available to the Potential
Indemnitee and reasonably necessary to determine whether and to what extent the
Potential Indemnitee is entitled to indemnification (the "Supporting
Documentation"). The determination of the Potential Indemnitee's entitlement to
indemnification shall be made not later than 60 days after the later of (A) the
receipt by the Corporation of the written request for indemnification together
with the Supporting Documentation and (B) the receipt by the Corporation of
written notice of final disposition of the Proceeding in respect of which
indemnification is sought. The Secretary shall, promptly upon receipt of such a
request
<PAGE>
18
for indemnification, advise the Board in writing that the Potential Indemnitee
has requested indemnification.
(ii) The Potential Indemnitee's entitlement to indemnification
under this Article 4 shall be determined in one of the following ways: (A) by a
majority vote of the Disinterested Directors, whether or not they constitute a
quorum of the Board; (B) by a committee of the Disinterested Directors
designated by a majority vote of the Disinterested Directors, whether or not
they constitute a quorum of the Board; (C) by a written opinion of Independent
Counsel (as defined in Section 4.05(d)) if (x) a Change in Control shall have
occurred and the Potential Indemnitee so requests or (y) there are no
Disinterested Directors or a majority of such Disinterested Directors so
directs; (D) by the stockholders of the Corporation; or (E) as provided in
Section 4.05(b) of this Article 4.
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
4.05(a)(ii), a majority of the Disinterested Directors (or, if there are no
Disinterested Directors, the General Counsel of the Corporation or, if the
General Counsel is or was a party to the Proceeding in respect of which
indemnification is sought, the highest ranking officer of the Corporation who is
not and was not a party to such Proceeding) shall select the Independent
Counsel, but only an Independent Counsel to which the Potential Indemnitee does
not reasonably object; PROVIDED, HOWEVER, that if a Change in Control shall have
occurred, the Potential Indemnitee shall select such Independent Counsel, but
only an Independent Counsel to which a majority of the Disinterested Directors
does not reasonably object.
(b) PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. Except as
otherwise expressly provided in this Article 4, if a Change in Control shall
have occurred, the Potential Indemnitee shall be presumed to be entitled to
indemnification under this Article 4 (with respect to actions or omissions
occurring prior to such Change in Control) upon submission of a request for
indemnification together with the Supporting Documentation in accordance with
Section 4.05(a)(i) of this Article 4, and thereafter the Corporation shall have
the burden of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered under Section
4.05(a) of this Article 4 to determine entitlement to indemnification shall not
have been appointed or shall not have made a determination within 60 days after
the later of (x) the receipt by the Corporation of the written request for
indemnification together with the Supporting
<PAGE>
19
Documentation and (y) final disposition of the Proceeding in respect of which
indemnification is sought, the Potential Indemnitee shall be deemed to be, and
shall be, entitled to indemnification. The termination of any Proceeding, or of
any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, adversely affect the right of the Potential Indemnitee to
indemnification or create a presumption that the Potential Indemnitee did not
act in good faith and in a manner that the Potential Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal Proceeding, that the Potential Indemnitee had
reasonable cause to believe that his or her conduct was unlawful.
(c) REMEDIES. (i) In the event that a determination is made
pursuant to Section 4.05(a) of this Article 4 that the Potential Indemnitee is
not entitled to indemnification under this Article 4, (A) the Potential
Indemnitee shall be entitled to seek an adjudication of his or her entitlement
to such indemnification either, at the Potential Indemnitee's sole option, in
(x) an appropriate court of the State of Delaware or any other court of
competent jurisdiction or (y) an arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association; (B)
any such judicial proceeding or arbitration shall be DE NOVO and the Potential
Indemnitee shall not be prejudiced by reason of such adverse determination; and
(C) if a Change in Control shall have occurred, in any such judicial proceeding
or arbitration, the Corporation shall have the burden of proving that the
Potential Indemnitee is not entitled to indemnification under this Article 4
(with respect to actions or omissions occurring prior to such Change in
Control).
(ii) If a determination shall have been made or deemed to have
been made, pursuant to Section 4.05(a) or (b) of this Article 4, that the
Potential Indemnitee is entitled to indemnification, the Corporation shall be
obligated to pay the amounts constituting such indemnification within five days
after such determination has been made or deemed to have been made and shall be
conclusively bound by such determination unless (A) the Indemnitee
misrepresented or failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation or (B) such indemnification
is prohibited by applicable law. In the event that payment of indemnification is
not made within five days after a determination of entitlement to
indemnification has been made or deemed to have been made pursuant to Section
4.05(a) or (b) of this Article 4, the
<PAGE>
20
Indemnitee shall be entitled to seek judicial enforcement of the Corporation's
obligation to pay to the Indemnitee such indemnification. Notwithstanding the
foregoing, the Corporation may bring an action, in an appropriate court in the
State of Delaware or any other court of competent jurisdiction, contesting the
right of the Indemnitee to receive indemnification hereunder due to the
occurrence of an event described in clause (A) or (B) of this subsection (each,
a "Disqualifying Event"); PROVIDED, HOWEVER, that in any such action the
Corporation shall have the burden of proving the occurrence of such
Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 4.05(c)
that the procedures and presumptions of this Article 4 are not valid, binding
and enforceable and shall stipulate in any such court or before any such
arbitrator that the Corporation is bound by all the provisions of this Article
4.
(iv) In the event that the Indemnitee or Potential Indemnitee,
pursuant to this Section 4.05(c), seeks a judicial adjudication of or an award
in arbitration to enforce his or her rights under, or to recover damages for
breach of, this Article 4, such person shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any expenses
actually and reasonably incurred by such person in connection with such judicial
adjudication or arbitration if such person prevails in such judicial
adjudication or arbitration. If it shall be determined in such judicial
adjudication or arbitration that such person is entitled to receive part but not
all of the indemnification or advancement of expenses sought, the expenses
incurred by such person in connection with such judicial adjudication or
arbitration shall be prorated accordingly.
(d) DEFINITIONS. For purposes of this Article 4:
(i) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 6(e) (or any successor provision) of Schedule 14A of
Regulation 14A (or any amendment or successor provision thereto)
promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"), whether or not the Corporation is then subject to such
reporting requirement; provided that, without limitation, such a change
in control shall be deemed to have occurred if (A) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Act) is or becomes
the "beneficial owner" (as
<PAGE>
21
defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Corporation representing 15% or more of the voting
power of all outstanding shares of stock of the Corporation entitled to
vote generally in an election of Directors without the prior approval
of at least two-thirds of the members of the Board in office
immediately prior to such acquisition; (B) the Corporation is a party
to any merger, consolidation or share exchange (or other comparable
transaction) in which the Corporation is not the continuing or
surviving corporation or pursuant to which shares of the Corporation's
Common Stock would be converted into cash, securities or other
property, other than a merger or share exchange in which the holders of
the Corporation's Common Stock immediately prior to the merger have the
same proportionate ownership of common stock of the surviving
corporation immediately after the merger; (C) there is a sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Corporation, or liquidation or dissolution of the Corporation; (D) the
Corporation is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which
members of the Board in office immediately prior to such transaction or
event constitute less than a majority of the Board thereafter; or (E)
during any year, individuals who at the beginning of such year
constituted the Board (including for this purpose any new Director
whose election or nomination for election by the stockholders was
approved by a vote of the Directors then still in office who were
Directors at the beginning of such year) cease for any reason to
constitute at least a majority of the Board.
(ii) "Disinterested Director" means a Director who is not and
was not a party to the Proceeding in respect of which indemnification
is sought by the Indemnitee or Potential Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a
law firm that neither presently is, nor in the past five years has
been, retained to represent: (a) the Corporation or the Indemnitee or
Potential Indemnitee in any matter material to either such party or (b)
any other party to the Proceeding giving rise to a claim for
indemnification under this Article 4. Notwithstanding the foregoing,
the term "Independent Counsel" shall not include any person who, under
applicable standards of professional conduct then
<PAGE>
22
prevailing under the law of the State of Delaware, would have a
conflict of interest in representing either the Corporation or the
Indemnitee or Potential Indemnitee in an action to determine the
Indemnitee's or Potential Indemnitee's rights under this Article 4.
SECTION 4.06. INDEMNIFICATION OF EMPLOYEES AND AGENTS.
Notwithstanding any other provision of this Article 4, the Corporation, to the
fullest extent permitted by applicable law, may indemnify any person other than
a Director or officer of the Corporation who is or was an employee or agent of
the Corporation and who is or was involved in any manner (including as a party
or a witness) or is threatened to be made so involved in any threatened, pending
or completed Proceeding, by reason of the fact that such person was or is an
employee or agent of the Corporation or was or is serving at the request of the
Corporation as a director, officer, employee or agent of a Covered Entity,
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection
with such Proceeding. The Corporation may also advance expenses incurred by such
employee or agent in connection with any such Proceeding, consistent with the
provisions of applicable law. If made or advanced, such indemnification shall be
made and such reasonable expenses shall be advanced pursuant to procedures to be
established from time to time by the Board.
SECTION 4.07. SEVERABILITY. If any provision or provisions of
this Article 4 shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (i) the validity, legality and enforceability of the
remaining provisions of this Article 4 (including all portions of any Section of
this Article 4 containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (ii) to the fullest extent
possible, the provisions of this Article 4 (including all portions of any
Section of this Article 4 containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed, to the fullest extent possible, so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
<PAGE>
23
ARTICLE V
CAPITAL STOCK
SECTION 5.01. STOCK CERTIFICATES. The shares of the
Corporation shall be represented by certificates, provided that the Board may
provide by resolution or resolutions that some or all of any or all classes or
series of stock shall be uncertificated shares. Each certificate shall be signed
by, or in the name of, the Corporation by the Chairman of the Board, the
President or any Vice President, and by the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary. In addition, such certificates may
be signed by a transfer agent of a registrar (other than the Corporation itself)
and may be sealed with the seal of the Corporation or a facsimile thereof. Any
or all of the signatures on such certificates may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, such certificate
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of its issuance.
Each certificate representing shares shall state upon the face
thereof: the name of the Corporation; that the Corporation is organized under
the laws of Delaware; the name of the person or persons to whom issued; the
number and class of shares and the designation of the series, if any, which such
certificate represents; and the par value of each share represented by such
certificate or a statement that the shares are without par value.
SECTION 5.02. RECORD OWNERSHIP. A record of the name of the
person, firm or corporation and address of such holder of each certificate, the
number of shares represented thereby and the date of issue thereof shall be made
on the Corporation's books. The Corporation shall be entitled to treat the
holder of record of any share of stock as the holder in fact thereof, and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in any share on the part of any person, whether or not it shall have
express or other notice thereof, except as otherwise expressly required by
applicable law.
SECTION 5.03. TRANSFER OF RECORD OWNERSHIP. Transfers of stock
shall be made on the books of the Corporation only by direction of the person
named in the certificate or such person's attorney, lawfully constituted in
writing, and only upon the surrender of the certificate
<PAGE>
24
therefor and a written assignment of the shares evidenced thereby. Whenever any
transfer of stock shall be made for collateral security, and not absolutely, it
shall be so expressed in the entry of the transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and transferee
request the Corporation to do so.
SECTION 5.04. TRANSFER AGENT; REGISTRAR; RULES RESPECTING
CERTIFICATES. The Corporation shall maintain one or more transfer offices or
agencies (which may include the Corporation) where stock of the Corporation
shall be transferable. The Corporation shall also maintain one or more registry
offices (which may include the Corporation) where such stock shall be
registered. The Board may make such rules and regulations as it may deem
expedient concerning the issue, transfer and registration of stock certificates
in accordance with applicable law.
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
SECTION 6.01. VOTING. Unless the Board shall otherwise order,
any officer of the Corporation shall have full power and authority, on behalf of
the Corporation, to attend, act and vote at any meeting of the stockholders of
any corporation in which the Corporation may hold stock and at such meeting to
exercise any or all rights and powers incident to the ownership of such stock,
and to execute on behalf of the Corporation a proxy or proxies empowering
another or others to act as aforesaid. The Board from time to time may confer
like powers upon any other person or persons.
SECTION 6.02. GENERAL AUTHORIZATION TO TRANSFER SECURITIES
HELD BY THE CORPORATION. (a) Any officer of the Corporation is hereby authorized
and empowered to transfer, convert, endorse, sell, assign and deliver any and
all shares of stock, bonds, debentures, notes, subscription warrants, stock
purchase warrants, evidences of indebtedness, or other securities now or
hereafter standing in the name of or owned by the Corporation, and to make,
execute and deliver any and all written instruments of assignment and transfer
necessary or proper to effectuate the authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of
assignment and transfer executed pursuant to and in accordance with the
foregoing Section 6.02(a), a
<PAGE>
25
certificate of the Secretary or any Assistant Secretary in office at the date of
such certificate setting forth the provisions hereof and stating that they are
in full force and effect and setting forth the names of persons who are then
officers of the corporation, all persons to whom such instrument and annexed
certificate shall thereafter come shall be entitled, without further inquiry or
investigation and regardless of the date of such certificate, to assume and to
act in reliance upon the assumption that (i) the shares of stock or other
securities named in such instrument were theretofore duly and properly
transferred, endorsed, sold, assigned, set over and delivered by the
Corporation, and (ii) with respect to such securities, the authority of these
provisions of these By-laws and of such officers is still in full force and
effect.
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 7.01. AMENDMENT. Except as otherwise expressly
provided in the Certificate or in Sections 2.11 and 3.03 of these By-laws, these
By-laws, or any of them, may from time to time be supplemented, amended or
repealed, or new By-laws may be adopted, by the Board at any regular or special
meeting of the Board, if such supplement, amendment, repeal or adoption is
approved by a majority of the entire Board.
ARTICLE VIII
OFFICES AND AGENT
SECTION 8.01. REGISTERED OFFICE AND AGENT. The address of the
registered office of the Corporation in the State of Delaware shall be 1209
Orange Street, Wilmington, Delaware 19801. The name of the registered agent is
The Corporation Trust Company. Such registered agent has a business office
identical with such registered office.
SECTION 8.02. OTHER OFFICES. The Corporation may also have
offices at other places, either within or outside the State of Delaware, as the
Board of Directors may from time to time determine or as the business of the
Corporation may require.
<PAGE>
EXHIBIT C
TO THE MERGER AGREEMENT
CORPORATE GOVERNANCE OF THE COMPANY
FOLLOWING THE EFFECTIVE TIME
BOARD OF DIRECTORS
Until the 12-month anniversary of the Effective Time (the
"Transition Time"), the Board of Directors of the Company shall consist of eight
directors designated by Ranger (the "Ranger Designees") and seven directors
designated by Ring (the "Ring Designees"). This arrangement will also be as set
forth in Article Fifth of the Articles of Incorporation of the Company (attached
as Exhibit A to the Merger Agreement) and Section 2.11 of the By-laws of the
Company (attached as Exhibit B to the Merger Agreement).
COMMITTEES OF THE BOARD OF DIRECTORS AND CHAIRPERSONS OF
COMMITTEES
Following the Effective Time, the Board of
Directors of the Company shall initially have six standing
committees: the Executive Committee (Chairperson: James L.
Broadhead), the Audit Committee (Chairperson: to be a
Ranger Designee), the Finance Committee (Chairperson:
Robert v.d. Luft), the Nominating Committee (Chairperson:
J. Wayne Leonard), the Compensation Committee (Chairperson:
to be a Ranger Designee) and the Nuclear Committee
(Chairperson: George W. Davis). At the Effective Time,
(i) the Chairmen of each of the Committees of the Board
shall comprise the membership of the Executive Committee and
(ii) each other standing committee shall be comprised of an
equal number of Ranger Designees and Ring Designees. At the
Transition Time, Mr. Broadhead shall become the Chairman of
the Nominating Committee and Mr. Leonard shall become the
Chairman of the Executive Committee.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
From and after the Effective Time and until the Transition
Time, and pursuant to the terms of the employment agreements entered into
between the Company and James L. Broadhead and the Company and J. Wayne Leonard
(each an "Employment Agreement" and collectively the "Employment Agreements")
and subject to Section 3.03 of the Company's By-laws, (i) Mr. Broadhead shall
hold the position of Chairman of the Board of the Company (in which position he
shall serve in an executive capacity and shall be responsible for implementation
of the integration of the Ranger and Ring businesses) and (ii) Mr. Leonard shall
hold the positions of Chief Executive Officer and President of the Company. In
such capacities, Mr. Broadhead shall report
<PAGE>
2
to the Board of Directors of the Company and Mr. Leonard shall report to Mr.
Broadhead. As Chief Executive Officer, Mr. Leonard shall have all normal chief
executive officer rights and responsibilities, including direct charge of and
general supervision over the business affairs of the Company, interaction with
and presentation of matters to the Board of Directors and such other duties,
rights and responsibilities as may be assigned to him by the Board of Directors.
In addition, Mr. Leonard shall have input into the implementation of the
integration of the Ranger and Ring businesses, although Mr. Broadhead shall have
sole responsibility for such implementation. Following the Transition Time and
prior to the time of the third annual shareholders' meeting of the Corporation
that occurs following the calendar year in which the Effective Time occurs, and
pursuant to the Employment Agreements and subject to Section 3.03 of the By-laws
of the Company, (i) Mr. Broadhead shall hold the position of Chairman of the
Board of the Company (in which position he shall serve in a nonexecutive
capacity) and (ii) Mr. Leonard shall hold the positions of Chief Executive
Officer and President of the Company. In such capacity, Mr. Leonard shall report
to the Board of Directors. If, at the Effective Time, either of such persons is
unable or unwilling to hold such offices as set forth herein, his successor
shall be elected at such time by the Board of Directors of the Company in
accordance with Section 3.03 of the By-laws of the Company. The authority,
duties and responsibilities of the Chairman of the Board and the Chief Executive
Officer, respectively, shall be set forth in the Employment Agreements, which
Employment Agreements shall also set forth in their entirety the rights and
remedies of Messrs. Broadhead and Leonard with respect to employment with the
Company.
VICE CHAIRMEN OF THE BOARD
At the Effective Time, each of Robert v.d. Luft and a Ranger
Designee shall be appointed to the position of Vice Chairman of the Board of the
Company.
<PAGE>
EXHIBIT D
TO THE MERGER AGREEMENT
WCB Holding Corp.
700 Universe Boulevard
Juno Beach, FL 33408
FORM OF AFFILIATE LETTER
Dear Sirs:
The undersigned refers to the Agreement and Plan of Merger
(the "MERGER AGREEMENT") dated as of July 30, 2000, among FPL Group, Inc., a
Florida corporation ("FPL"), Entergy Corporation, a Delaware corporation
("ENTERGY"), WCB Holding Corp., a Delaware corporation (the "COMPANY"), Ranger
Acquisition Corp., a Florida corporation, and Ring Acquisition Corp., a Delaware
corporation. Capitalized terms used but not defined in this letter have the
meanings ascribed to such terms in the Merger Agreement.
The undersigned, a holder of shares of [FPL/Entergy] Common
Stock, is entitled to receive in connection with the [FPL/Entergy] Merger shares
of Company Common Stock. The undersigned acknowledges that the undersigned may
be deemed an "affiliate" of [FPL/Entergy] within the meaning of Rule 145 ("RULE
145") promulgated under the Securities Act, although nothing contained herein
should be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the
Securities Act, the undersigned's ability to sell, assign or transfer the
Company Common Stock received by the undersigned in exchange for any shares of
[FPL/Entergy] Common Stock pursuant to the [FPL/Entergy] Merger may be
restricted unless such transaction is registered under the Securities Act or an
exemption from such registration is available. The undersigned (i) understands
that such exemptions are limited and that the Company is not under any
obligation to effect any such registration and (ii) has obtained advice of
counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities of
Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned hereby represents to and covenants with the
Company that the undersigned will not sell, assign or transfer any of the
Company Common Stock received by the
<PAGE>
2
undersigned in exchange for shares of [FPL/Entergy] Common Stock pursuant to the
[FPL/Entergy] Merger except (i) pursuant to an effective registration statement
under the Securities Act or (ii) in a transaction that, in the opinion of
counsel reasonably satisfactory to the Company or as described in a "no-action"
or interpretive letter from the Staff of the SEC, is not required to be
registered under the Securities Act.
In the event of a sale or other disposition by the undersigned
pursuant to Rule 145, of Company Common Stock received by the undersigned in the
[FPL/Entergy] Merger, the undersigned will supply the Company with evidence of
compliance with such Rule, in the form of a letter in the form of Annex I hereto
and the opinion of counsel or no-action letter referred to above. The
undersigned understands that the Company may instruct its transfer agent to
withhold the transfer of any [FPL/Entergy] securities disposed of by the
undersigned, but that upon receipt of such evidence of compliance the transfer
agent shall effectuate the transfer of the Company Common Stock sold as
indicated in such letter.
The undersigned acknowledges and agrees that (i) the Company
Common Stock issued to the undersigned will all be in certificated form and (ii)
the legend set forth below will be placed on certificates representing Company
Common Stock received by the undersigned in the [FPL/Entergy] Merger or held by
a transferee thereof, which legend will be removed by delivery of substitute
certificates upon receipt of an opinion in form and substance reasonably
satisfactory to the Company from counsel reasonably satisfactory to the Company
to the effect that such legend is no longer required for purposes of the
Securities Act.
There will be placed on the certificates for the Company
Common Stock issued to the undersigned, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate were
issued in a transaction to which Rule 145 promulgated under
the Securities Act of 1933 applies. The shares have been
acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning
of the Securities Act of 1933 and may not be sold, pledged or
otherwise transferred except in accordance with an exemption
from the registration requirement of the Securities Act of
1933."
<PAGE>
3
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other disposition
of the Company Common Stock and (ii) the receipt by the Company of this letter
is an inducement and a condition to [FPL/Entergy]'s and the Company's respective
obligations to consummate the [FPL/Entergy] Merger.
Very truly yours,
Dated:
<PAGE>
ANNEX I
TO EXHIBIT D
[Holdco]
On , the undersigned sold the securities of WCB Holding
Corp. (the "COMPANY") described below in the space provided for that purpose
(the "SECURITIES"). The Securities were received by the undersigned in
connection with the merger of [Ranger Acquisition Corp., a Florida corporation,
with and into FPL Group, Inc., a Florida corporation/Ring Acquisition Corp., a
Delaware corporation, with and into Entergy Corporation, a Delaware
corporation].
Based upon the most recent report or statement filed by the
Company with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in Rule 144(e)
promulgated under the Securities Act of 1933 (the "SECURITIES ACT").
The undersigned hereby represents that the Securities were
sold in "brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that term is
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended.
The undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of securities.]
<PAGE>
Annex B
Opinion of Merrill Lynch, Pierce, Fenner
& Smith Incorporated
July 30, 2000
Board of Directors
FPL Group, Inc.
700 Universe Boulevard
Juno Beach, FL 33408
Members of the Board of Directors:
You have informed us that FPL Group, Inc. (the "Company"), Entergy
Corporation (the "Merger Partner"), WCB Holding Corp., a corporation 50% of
whose outstanding capital stock is owned by each of the Company and the Merger
Partner (the "Parent"), and two wholly-owned subsidiaries of Parent, Ranger
Acquisition Corp. ("Merger Sub A") and Ring Acquisition Corp. ("Merger Sub B"),
propose to enter into an Agreement and Plan of Merger (the "Agreement") which
provides, among other things, that Merger Sub A will merge (the "Company
Merger") with and into the Company in a transaction in which (i) the Company
shall be the surviving corporation and (ii) each outstanding share of common
stock, par value $.01 per share, of the Company (the "Company Common Stock"),
other than any shares of Company Common Stock owned by the Company, the Merger
Partner or the Parent, all of which shall be canceled, will be converted into
the right to receive one (the "Exchange Ratio") share of common stock, par value
$.01 per share, of Parent (the "Parent Common Stock"). The Agreement also
provides, among other things, that Merger Sub B will merge (the "Merger Partner
Merger" and, together with the Company Merger, the "Transaction") with and into
the Merger Partner in a transaction in which (i) the Merger Partner shall be the
surviving corporation and (ii) each outstanding share of common stock, par value
$.01 per share, of the Merger Partner (the "Merger Partner Common Stock"), other
than any shares of Merger Partner Common Stock owned by the Company, the Merger
Partner or the Parent, all of which shall be canceled, will be converted into
the right to receive 0.585 (the "Merger Partner Exchange Ratio") shares of
Parent Common Stock. As a result of the Transaction, the Company and the Merger
Partner will become wholly-owned subsidiaries of the Parent.
You have asked us whether, in our opinion, the Exchange Ratio, taking into
account the Merger Partner Exchange Ratio, is fair from a financial point of
view to the holders of the Company Common Stock.
<PAGE>
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and the Merger Partner that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and
prospects of the Company and the Merger Partner, as well as the amount
and timing of the cost savings and related expenses and synergies
expected to result from the Transaction (the "Expected Synergies")
furnished to us by the Company and the Merger Partner;
(3) Conducted discussions with members of senior management and
representatives of the Company and the Merger Partner concerning the
matters described in clauses 1 and 2 above, as well as their
respective businesses and prospects before and after giving effect to
the Transaction and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the shares of
Company Common Stock and the Merger Partner Common Stock and compared
them with those of certain publicly traded companies that we deemed to
be relevant;
(5) Reviewed the results of operations of the Company and the Merger
Partner and compared them with those of certain publicly traded
companies that we deemed to be relevant;
(6) Participated in certain discussions and negotiations among
representatives of the Company and the Merger Partner and their
financial and legal advisors;
(7) Reviewed the potential pro forma impact of the Transaction;
(8) Reviewed a draft dated July 29, 2000 of the Agreement; and
(9) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Merger Partner or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Merger Partner. With respect to the financial forecast information and
the Expected Synergies furnished to or discussed with us by the Company or the
Merger Partner, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the Company's or
the Merger Partner's management as to the expected future financial performance
of the Company or the Merger Partner, as the case may be, and the Expected
Synergies. We have further assumed that the Transaction will constitute a
transaction governed by Section 351 of the Internal Revenue Code of 1986, as
amended. We have also assumed that the final form of the Agreement will be
substantially similar to the last draft reviewed by us.
<PAGE>
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Transaction, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that would materially affect the
projected results of operations of the pro forma combined company as furnished
to us by the Company.
We are acting as financial advisor to the Company in connection with the
Transaction and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We have, in the past, provided
financial advisory and financing services to the Company and the Merger Partner
and/or its affiliates and may continue to do so and have received, and may
receive, fees for the rendering of such services. In addition, in the ordinary
course of our business, we may actively trade the shares of the Company Common
Stock and other securities of the Company, as well as the shares of the Merger
Partner Common Stock and other securities of the Merger Partner, for our own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Transaction and does not constitute a
recommendation to any shareholder of the Company as to how such shareholder
should vote on the proposed Company Merger or any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
shares of the Company Common Stock or the Parent Common Stock will trade
following the announcement or consummation of the Transaction, as the case may
be.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio, taking into account the Merger
Partner Exchange Ratio, is fair from a financial point of view to the holders of
the Company Common Stock.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
Annex C
Opinion of Morgan Stanley & Co. Incorporated
July 28, 2000
Board of Directors
Entergy Corporation
639 Loyola Avenue
New Orleans, LA 70113
Members of the Board:
We understand that Entergy Corporation ("Entergy"), FPL Group Inc. ("FPL"), WCB
Holding Corp., a company that is held 50% by Entergy and 50% by FPL (the
"Company"), Ranger Acquisition Corp., a wholly owned subsidiary of the Company
(the "FPL Merger Sub"), and Ring Acquisition Corp., a wholly owned subsidiary of
the Company (the "Entergy Merger Sub"), propose to enter into an Agreement and
Plan of Merger dated July 28, 2000 (the "Merger Agreement") which provides,
among other things, for (i) the merger (the "Entergy Merger") of Entergy Merger
Sub with and into Entergy and (ii) the merger (the "FPL Merger", and together
with the Entergy Merger, the "Mergers") of FPL Merger Sub with and into FPL.
Pursuant to the Mergers, each of Entergy and FPL will become wholly-owned
subsidiaries of the Company and (i) each outstanding share of common stock, par
value $.01 per share, of Entergy (the "Entergy Common Stock") other than shares
held in treasury or held by FPL or the Company, will be converted to receive
0.585 shares (the "Entergy Exchange Ratio") of common stock, par value $.01 per
share, of the Company (the "Company Common Stock"), and (ii) each outstanding
share of common stock, par value $.01 per share, of FPL (including the
associated FPL Rights as set forth in the Merger Agreement) (collectively, the
"FPL Common Stock"), other than shares held in treasury or held by Entergy or
the Company, will be converted to receive 1.0 shares of the Company Common
Stock. The terms and conditions of the Mergers are more fully set forth in the
Merger Agreement.
You have asked for our opinion as to whether the Entergy Exchange Ratio pursuant
to the Merger Agreement is fair from a financial point of view to the holders of
shares of Entergy Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of FPL and Entergy;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning FPL prepared by the
management of FPL;
(iii) reviewed certain financial projections prepared by the
management of FPL;
<PAGE>
(iv) discussed the past and current operations and financial
condition and the prospects of FPL, including information
relating to certain strategic, financial and operational
benefits anticipated from the Mergers, with senior executives
of FPL;
(v) reviewed certain internal financial statements and other
financial and operating data concerning Entergy prepared by
the management of Entergy;
(vi) reviewed certain financial projections prepared by the
management of Entergy;
(vii) discussed the past and current operations and financial
condition and the prospects of Entergy, including information
relating to certain strategic, financial and operational
benefits anticipated from the Mergers, with senior executives
of Entergy;
(viii) reviewed the pro forma impact of the Mergers on the Company's
earnings per share, consolidated capitalization and financial
ratios;
(ix) reviewed the reported prices and trading activity for the FPL
Common Stock and the Entergy Common Stock;
(x) compared the financial performance of FPL and the prices and
trading activity of FPL Common Stock with that of certain
other comparable publicly-traded companies and their
securities;
(xi) compared the financial performance of Entergy and the prices
and trading activity of Entergy Common Stock with that of
certain other comparable publicly-traded companies and their
securities;
(xii) reviewed the financial and other terms, to the extent publicly
available, of certain comparable merger transactions;
(xiii) discussed with the managements of Entergy and FPL the
strategic rationale for the Mergers;
(xiv) participated in discussions and negotiations among
representatives of Entergy and FPL and their financial and
legal advisors;
(xv) reviewed the Merger Agreement, and certain related documents;
and
(xvi) performed such other analyses and considered such other
factors as we have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the Mergers, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of
<PAGE>
the future financial performance of FPL and Entergy. In addition, we have
assumed that the Mergers will be consummated in accordance with the terms set
forth in the Merger Agreement, including among other things, that the Merger
will be treated as a tax-free reorganization and/or exchange, each pursuant to
the Internal Revenue Code of 1986. We have not made any independent valuation or
appraisal of the assets or liabilities of FPL and Entergy, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. We note that we are not
legal or regulatory experts and have relied upon, without independent
verification, the assessment of Entergy's legal and regulatory advisors with
respect to the legal and regulatory matters related to the Mergers.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to a business combination or other
extraordinary transaction involving Entergy.
We have acted as financial advisor to Entergy in connection with this
transaction and will receive a fee for our services. In the past, Morgan Stanley
& Co. Incorporated and its affiliates have provided financial advisory and
financing services for Entergy and FPL and have received fees for the rendering
of these services.
It is understood that this letter is for the information of the Board of
Directors of Entergy and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in any
filing made by Entergy in respect of this transaction with the Securities and
Exchange Commission. In addition, this opinion does not in any manner address
the prices at which the Company Common Stock will trade following consummation
of the Mergers, and Morgan Stanley expresses no opinion or recommendation as to
how shareholders of Entergy should vote at the shareholder's meeting held in
connection with the Mergers.
<PAGE>
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Entergy Exchange Ratio pursuant to the Merger Agreement is fair
from a financial point of view to the holders of shares of Entergy Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Thomas M. O'Flynn
-----------------------------------------
Thomas M. O'Flynn
Managing Director
<PAGE>
Annex D
Opinion of J.P. Morgan Securities Inc.
July 30, 2000
The Board of Directors
Entergy Corporation
639 Loyola Avenue
New Orleans, Louisiana 70113
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of Entergy Corporation ("Entergy") of the
consideration proposed to be paid to them in connection with the proposed merger
transactions involving Entergy and FPL Group, Inc. ("FPL"). Pursuant to the
Agreement and Plan of Merger, dated as of July 30, 2000 (the "Agreement"), among
Entergy, FPL, WCB Holding Corp. (the "Company"), which is 50% owned by Entergy
and 50% owned by FPL, Ring Acquisition Corp., a wholly-owned subsidiary of
Entergy (the "Entergy Merger Sub"), and Ranger Acquisition Corp., a wholly-owned
subsidiary of FPL (the "FPL Merger Sub"), (i) the Entergy Merger Sub will merge
with and into Entergy and (ii) the FPL Merger Sub will merge with and into FPL
(together, the "Mergers"). Pursuant to the Mergers, each of Entergy and FPL will
become a wholly-owned subsidiary of the Company and (i) each outstanding share
of common stock, par value $.01 per share, of Entergy (the "Entergy Common
Stock") other than shares held in treasury or held by FPL or the Company, will
be converted to receive .585 shares (the "Entergy Exchange Ratio") of common
stock, par value $.01 per share, of the Company (the "Company Common Stock"),
and (ii) each outstanding share of common stock, par value $.01 per share, of
FPL (including the associated Ranger Rights as set forth in the Agreement)
(collectively, the "FPL Common Stock"), other than shares held in treasury or
held by Entergy or the Company, will be converted to receive 1.0 share of
Company Common Stock. The terms and conditions of the Mergers are more fully set
forth in the Agreement.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) certain
publicly available information concerning the respective businesses of Entergy
and FPL and of certain other companies engaged in businesses comparable to those
of Entergy and FPL, and the reported market prices for certain other companies'
securities deemed comparable; (iii) publicly available terms of certain
comparable merger transactions; (iv) current and historical market prices of and
trading activity in the Company Common Stock and the FPL Common Stock,
respectively; (v) the audited financial statements of each of Entergy and FPL
for the fiscal year ended December 31, 1999, and the unaudited financial
statements of each of Entergy and FPL for the period ended March 31, 2000; (vi)
certain internal financial statements, analyses and forecasts prepared by
Entergy and FPL and their respective managements; and (vii) the terms of other
business combinations that we deemed relevant.
<PAGE>
In addition, we have held discussions with certain members of the management of
Entergy and FPL with respect to certain aspects of the Mergers, and the past and
current business operations of Entergy and FPL, the financial condition and
future prospects and operations of Entergy and FPL, the effects of the Mergers
on the financial condition and future prospects of Entergy and FPL (including
information relating to certain strategic, financial and operational benefits
anticipated from the Mergers), and certain other matters we believed necessary
or appropriate to our inquiry. We have reviewed such other financial studies and
analyses and considered such other information as we deemed appropriate for the
purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by Entergy and FPL or otherwise reviewed by us,
and we have not assumed any responsibility or liability therefor. We have not
conducted any valuation or appraisal of any assets or liabilities, nor have any
such valuations or appraisals been provided to us. In relying on financial
analyses and forecasts provided to us (including information relating to certain
strategic, financial and operational benefits anticipated from the Mergers), we
have assumed that they have been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as
to the expected future results of operations and financial condition of Entergy
and FPL to which such analyses or forecasts relate. In addition, we have assumed
that the Mergers will be consummated in accordance with the terms set forth in
the Agreement, including among other things, that each of the Mergers will be
treated as a tax-free reorganization and/or exchange, each pursuant to the
Internal Revenue Code of 1986. We note that we are not legal or regulatory
experts and have relied upon, without independent verification, the assessment
of Entergy's legal and regulatory advisors with respect to the legal and
regulatory matters related to the Mergers.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the Company's stock
will trade at any future time.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, any expressions of interest from any other parties with respect to a
business combination or other extraordinary transaction involving Entergy.
We have acted as financial advisor to Entergy jointly with Morgan Stanley Dean
Witter & Co. ("Morgan Stanley") with respect to the proposed Mergers, and both
J.P. Morgan and Morgan Stanley will receive a fee from Entergy for their
respective services. We will also receive an additional fee if the proposed
Mergers are consummated. Entergy understands and agrees that J.P. Morgan is
providing its services independently of Morgan Stanley and
-2-
<PAGE>
that J.P. Morgan has not relied upon any services or work performed by Morgan
Stanley. Accordingly, Entergy agrees that J.P. Morgan shall have no liability to
Entergy or its securityholders for any actions or omissions of Morgan Stanley.
In the ordinary course of their businesses, J.P. Morgan and its affiliates may
actively trade the debt and equity securities of Entergy and FPL for their own
account or for the accounts of customers and, accordingly, they may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the Entergy Exchange Ratio pursuant to the Agreement is fair, from a
financial point of view, to the stockholders of Entergy.
This letter is provided to the Board of Directors of Entergy in connection with
and for the purposes of its evaluation of the Mergers. This opinion does not
constitute a recommendation to any stockholder of Entergy as to how such
stockholder should vote with respect to the Mergers. This opinion may not be
disclosed, referred to, or communicated (in whole or in part) to any third party
for any purpose whatsoever except with our prior written consent in each
instance. This opinion may be reproduced in full in any proxy or information
statement mailed to stockholders of Entergy but may not otherwise be disclosed
publicly in any manner without our prior written approval and must be treated as
confidential.
Very truly yours,
J.P. Morgan Securities Inc.
-3-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law permits a corporation to adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director,
but not an officer in his or her capacity as such, to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except that such provision shall not limit the liability of a director for (1)
any breach of the director's duty of loyalty to the corporation or its
shareholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability under
section 174 of the Delaware General Corporation Law for unlawful payment of
dividends or stock purchases or redemptions, or (4) any transaction from which
the director derived an improper personal benefit. The Holdco certificate of
incorporation provides that no director of Holdco shall be personally liable to
Holdco or its shareholders for monetary damages for breach of fiduciary duty as
a director, except to the extent such an exemption from liability or limitation
thereof is not permitted under the Delaware General Corporation Law.
Under Delaware law, a corporation may indemnify any person made a party or
threatened to be made a party to any type of proceeding, other than action by or
in the right of the corporation, because he or she is or was an officer,
director, employee or agent of the corporation or was serving at the request of
the corporation as an officer, director, employee or agent of another
corporation or entity against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such proceeding:
(1) if he or she acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation; or (2) in the
case of a criminal proceeding, he or she had no reasonable cause to believe that
his or her conduct was unlawful. A corporation may indemnify any person made a
party or threatened to be made a party to any threatened, pending or completed
action or suit brought by or in the right of the corporation because he or she
was an officer, director, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or other entity, against expenses actually and
reasonably incurred in connection with such action or suit if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation, provided that such indemnification
will be denied if the person is found liable to the corporation unless, in such
a case, the court determines the person is entitled to indemnification for such
expenses in any event. A corporation must indemnify a present or former director
or officer who successfully defends himself or herself in a proceeding to which
he or she was a party because he or she was a director or officer of the
corporation against expenses actually and reasonably incurred by him or her.
Expenses incurred by an officer or director, or any employees or agents as
deemed appropriate by the board of directors, in defending civil or criminal
proceedings may be paid by the corporation in advance of the final disposition
of such proceedings upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the corporation. The
Delaware law regarding indemnification and expense advancement is not exclusive
of any other rights which may be granted by the Holdco certificate of
incorporation or By-laws, a vote of shareholders or disinterested directors,
agreement or otherwise.
Under the Delaware General Corporation Law, termination of any proceeding
by conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that such person is prohibited from being
indemnified.
The Holdco By-laws provide for the indemnification and advancement of
expenses to the fullest extent permitted by law of any person made, or
threatened to be made, a party to an action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of Holdco or serves or served
any other enterprise at the request of Holdco. However, Holdco will not
indemnify a director or officer who commences any proceeding, unless the
commencement of that proceeding is approved by a majority vote of the
disinterested directors.
After the merger, Holdco has agreed to indemnify each present and former
director and officer, when acting in said capacity, of FPL Group, Entergy or any
of their subsidiaries, against all costs or expenses, judgments, fines, losses,
claims, damages or liabilities in connection with any claim, action, suit,
proceeding or investigation brought within six years of the closing of the
merger for acts or omissions, existing or occurring before the merger, to the
fullest extent permitted under applicable law.
II-1
<PAGE>
For a period of six years after the merger, Holdco has agreed to maintain
a policy of directors' and officers' liability insurance for acts and omissions
occurring before the merger with coverage in an amount and scope at least as
favorable as FPL Group's and Entergy's existing directors' and officers'
liability insurance coverage. If such liability insurance is not available at
all, Holdco must obtain the most advantageous directors' and officers' liability
insurance obtainable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not Applicable.
(c) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(included as Annex B to this joint proxy statement/prospectus which
is a part of this registration statement).
Opinion of Morgan Stanley & Co. Incorporated (included as Annex C
to this joint proxy statement/prospectus which is a part of this
registration statement).
Opinion of J.P. Morgan Securities Inc. (included as Annex D to this
joint proxy statement/prospectus which is a part of this
registration statement).
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to the
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered
II-2
<PAGE>
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a
part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable
registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (c)(1) immediately preceding, or
(ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415,
will be filed a part of an amendment to the registration
statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became
effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, WCB Holding
Corp. has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Juno Beach, State of
Florida, on August 24, 2000.
WCB HOLDING CORP.
By: /s/ Dennis P. Coyle
----------------------
Name: Dennis P. Coyle
Title: Director
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis P. Coyle and Michael G. Thompson and each
of them, his true and lawful attorney-in-fact and agent with full power of
substitution for him and in his name, place and stead, in any and all capacities
to sign any and all amendments (including pre-effective and post-effective
amendments) to this registration statement, and to file the same with all
exhibits thereto and other documents in connection therewith, including any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, with the Securities and Exchange Commission, grants unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lewis Hay, III
----------------------
Lewis Hay, III President (Principal Executive Officer) August 24, 2000
/s/ C. John Wilder
----------------------- Vice President and Treasurer (Principal
C. John Wilder Accounting and Financial Officer) August 24, 2000
/s/ Dennis P. Coyle
----------------------
Dennis P. Coyle Director August 24, 2000
/s/ Michael G. Thompson
----------------------
Michael G. Thompson Director August 24, 2000
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description
Number -----------
-------
2.1 Agreement and Plan of Merger dated as of July 30, 2000 (attached as Annex
A to the joint proxy statement/prospectus)
3.1 Form of Certificate of Incorporation of WCB Holding Corp. to be in effect
as of the effective time of the merger (included as Exhibit A to Annex A
to the joint proxy statement/ prospectus which is a part of this
registration statement)
3.2 Form of By-laws of WCB Holding Corp. to be in effect as of the effective
time of the merger (included as Exhibit B to Annex A to the joint proxy
statement/prospectus which is a part of this registration statement)
*4.1 Specimen certificate of WCB Holding Corp. common stock, par value $.01 per
share
*5.1 Opinion of Cravath, Swaine & Moore, regarding the legality of the
securities being registered
*8.1 Form of Opinion of Cravath, Swaine & Moore as to tax matters
*8.2 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to tax
matters
**10.1 Employment Agreement dated as of July 30, 2000, between WCB Holding
Corp. and James L. Broadhead
***10.2 Employment Agreement dated as of July 30, 2000 between WCB Holding Corp.
and J. Wayne Leonard
23.1 Consents of Deloitte & Touche LLP
23.2 Consent of PricewaterhouseCoopers LLP
*23.3 Consent of Cravath, Swaine & Moore (included in Exhibits 5.1 and 8.1)
*23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit
8.2)
23.5 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
23.6 Consent of Morgan Stanley & Co. Incorporated
23.7 Consent of J.P. Morgan Securities Inc.
24.1 Power of Attorney (included on the signature page of this registration
statement)
*99.1 Form of Proxy Card of FPL Group
*99.2 Form of Proxy Card of Entergy
99.3 Consent of James L. Broadhead
99.4 Consent of J. Wayne Leonard
99.5 Consent of Robert v.d. Luft
99.6 Consent of George W. Davis
----------------
* To be filed by amendment.
** Filed as Exhibit 10.1 to FPL Group's Current Report on Form 8-K on
July 31, 2000.
*** Filed as Exhibit 10.1 to Entergy's Current Report on Form 8-K on July 31,
2000.
