Filed pursuant to Rule 424(b)(5)
Registration Statements No. 333-102173, 333-102173-01 and 333-102173-03
Subject to Completion
Preliminary Prospectus Supplement dated March 2, 2004
PROSPECTUS SUPPLEMENT
(To prospectus dated April 3, 2003)
10,000,000 PREFERRED TRUST SECURITIES
FPL GROUP CAPITAL TRUST I
% PREFERRED TRUST SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED TRUST SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED AS DESCRIBED HEREIN BY
FPL GROUP, INC.
[FPL GROUP CAPITAL LOGO]
----------------
A brief description of the % Preferred Trust Securities can be found under
"Prospectus Supplement Summary - Summary - Q&A" beginning on page S-3 of this
prospectus supplement.
FPL Group Capital Trust I plans to list the Preferred Trust Securities on
the New York Stock Exchange. Trading on the New York Stock Exchange is expected
to commence within 30 days after the Preferred Trust Securities are first
issued.
SEE "RISK FACTORS" BEGINNING ON PAGE S-6 OF THIS PROSPECTUS SUPPLEMENT TO
READ ABOUT CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE MAKING AN INVESTMENT IN
THESE SECURITIES.
----------------
PER PREFERRED TRUST
SECURITY TOTAL
------------------- -----------
Price to the public(1)....................................... $ $
Underwriters' discount to be paid by FPL Group Capital Inc... (2) (2)
Proceeds to FPL Group Capital Trust I........................ $ $
<FN>
(1) Plus accumulated distributions from , 2004, if settlement
occurs after that date.
(2) Underwriting commissions of $ per Preferred Trust Security (or $ for
all Preferred Trust Securities) will be paid by FPL Group Capital Inc.
However, such compensation will be $ per Preferred Trust Security for
certain institutions. In addition, other expenses of the offering will
be paid by FPL Group Capital Inc except as discussed under
"Underwriting" in this prospectus supplement.
</FN>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement and the accompanying prospectus are truthful or complete.
Any representation to the contrary is a criminal offense.
The Preferred Trust Securities are expected to be delivered to the
underwriters in book-entry only form through The Depository Trust Company on or
about March , 2004.
----------------
Joint Book-Running Managers
CITIGROUP
MERRILL LYNCH & CO.
MORGAN STANLEY
WACHOVIA SECURITIES
----------------
Co-Managers
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS
The date of this prospectus supplement is March , 2004.
The information in this preliminary prospectus supplement is not complete and
may be changed. Neither this preliminary prospectus supplement nor the
accompanying prospectus is an offer to sell these securities and neither is
soliciting any offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary................................................S-3
Risk Factors.................................................................S-6
Selected Consolidated Income Statement Data of FPL Group and Subsidiaries...S-13
Consolidated Capitalization of FPL Group and Subsidiaries...................S-13
Accounting Treatment Relating to Preferred Trust Securities.................S-13
Use of Proceeds.............................................................S-14
Specific Terms of the Preferred Trust Securities............................S-14
Specific Terms of the Junior Subordinated Debentures........................S-18
Material United States Federal Income Tax Consequences Relating to the
Preferred Trust Securities................................................S-19
Underwriting................................................................S-22
Legal Opinions..............................................................S-23
PROSPECTUS
About this Prospectus..........................................................2
Risk Factors...................................................................3
FPL Group Capital..............................................................5
FPL Group......................................................................6
FPL Group Capital Trust I and FPL Group Capital Trust II.......................6
Use of Proceeds................................................................6
Consolidated Ratio of Earnings to Fixed Charges................................6
Where You Can Find More Information............................................7
Incorporation by Reference.....................................................7
Cautionary Statements..........................................................7
Description of Offered Debt Securities.........................................8
Description of the Debt Securities Guarantee..................................18
Description of Common Stock...................................................20
Description of Stock Purchase Contracts and Stock Purchase Units..............24
Description of Preferred Trust Securities.....................................24
Description of the Preferred Trust Securities Guarantee.......................32
Description of the Junior Subordinated Debentures and the Subordinated
Guarantee...................................................................35
Information Concerning the Trustees...........................................50
Plan of Distribution..........................................................50
Experts.......................................................................51
Legal Opinions................................................................51
THE ACCOMPANYING PROSPECTUS IS PART OF A REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION
INCORPORATED BY REFERENCE OR PROVIDED IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ACCOMPANYING PROSPECTUS. NONE OF FPL GROUP, FPL GROUP CAPITAL OR FPL GROUP
CAPITAL TRUST I HAVE AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH ADDITIONAL OR
DIFFERENT INFORMATION. NONE OF FPL GROUP, FPL GROUP CAPITAL OR FPL GROUP CAPITAL
TRUST I ARE MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT OR IN THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS OR THAT THE INFORMATION
INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THE
DOCUMENT INCORPORATED BY REFERENCE.
S-2
PROSPECTUS SUPPLEMENT SUMMARY
You should read the following summary in conjunction with the more detailed
information incorporated by reference or provided in this prospectus supplement
or in the accompanying prospectus. This prospectus supplement and the
accompanying prospectus contain forward-looking statements (as that term is
defined in the Private Securities Litigation Reform Act of 1995).
Forward-looking statements should be read with the cautionary statements in the
accompanying prospectus under the heading "Cautionary Statements" and the
important factors discussed in this prospectus supplement and in the
incorporated documents. You should pay special attention to the "Risk Factors"
section beginning on page S-6 of this prospectus supplement to determine whether
an investment in these securities is appropriate for you.
SUMMARY - Q&A
WHAT ARE THE PREFERRED TRUST SECURITIES?
FPL Group Capital Trust I, a Delaware statutory trust, was created by FPL
Group to make this offering. FPL Group Capital Trust I is referred to in this
prospectus supplement as the "Trust." The Trust will sell 10,000,000 of its %
Preferred Trust Securities, referred to in this prospectus supplement as
"Preferred Trust Securities," to the public and its common trust securities,
referred to in this prospectus supplement as "Common Trust Securities," to FPL
Group. It will use the proceeds from these sales to buy the % Junior
Subordinated Debentures, due March , 2044, referred to in this prospectus
supplement as the "Junior Subordinated Debentures," from FPL Group Capital. Each
Preferred Trust Security will represent an undivided beneficial interest in the
assets of the Trust. The Preferred Trust Securities and the Junior Subordinated
Debentures will have essentially the same terms.
FPL Group will acquire all of the Common Trust Securities of the Trust. The
Common Trust Securities will represent an undivided beneficial interest in the
assets of the Trust. The liquidation amount of all the Common Trust Securities
will equal approximately 3% of the total capital of the Trust. The Common Trust
Securities will generally rank equally with the Preferred Trust Securities.
However, in the case of specific defaults, the Common Trust Securities will rank
junior to the Preferred Trust Securities with respect to distributions,
redemption and liquidation. Except in limited circumstances specified in the
Trust Agreement (as defined below under "Specific Terms of Preferred Trust
Securities--General"), the Common Trust Securities will have sole voting power
with respect to matters to be voted upon by the Trust securityholders.
WHAT DISTRIBUTIONS WILL BE PAID BY THE TRUST?
If you purchase the Preferred Trust Securities, you will be entitled to
receive cumulative cash distributions at an annual rate of % of the liquidation
amount of $25, or $ per Preferred Trust Security. Distributions will accumulate
from the date the Trust issues the Preferred Trust Securities and will be paid
quarterly in arrears on March , June , September and December of each year,
beginning June , 2004.
WHEN CAN PAYMENT OF DISTRIBUTIONS BE DEFERRED?
So long as there is no default in the payment of interest on the Junior
Subordinated Debentures, FPL Group Capital may defer interest payments on the
Junior Subordinated Debentures for an extension period of up to 20 consecutive
quarters. FPL Group Capital may defer payments in this way more than once, but
not beyond the maturity date of the Junior Subordinated Debentures (which is
March , 2044). If FPL Group Capital defers interest payments on the Junior
Subordinated Debentures, the Trust will also defer distributions on the
Preferred Trust Securities. During this period you will still accumulate
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Trust Security, and you will accrue interest on unpaid distributions
at the same rate, compounded quarterly. Once FPL Group Capital makes all
interest payments on the Junior Subordinated Debentures, with accrued interest,
it can again postpone interest payments on the Junior Subordinated Debentures.
During any period in which FPL Group Capital defers interest payments on
the Junior Subordinated Debentures, neither FPL Group nor FPL Group Capital may
(with limited exceptions):
S-3
o declare or pay any dividend or distribution on its capital stock;
o redeem, purchase, acquire or make a liquidation payment with respect
to any of its capital stock;
o pay any principal, interest or premium on, or repay, repurchase or
redeem any debt securities that are equal or junior in right of
payment with the Junior Subordinated Debentures or the Subordinated
Guarantee (as defined below) (as the case may be); or
o make any payments with respect to any guarantee of debt securities if
such guarantee is equal or junior in right of payment to the Junior
Subordinated Debentures or the Subordinated Guarantee (as the case may
be).
Even though you will not receive any cash distributions on your Preferred
Trust Securities during an extension period, you will be required to accrue
interest income and include original issue discount in your gross income for
United States federal income tax purposes on an economic accrual basis, even if
you are a cash basis taxpayer. You should consult with your own tax advisor
regarding the tax consequences of an investment in the Preferred Trust
Securities. See "Material United States Federal Income Tax Consequences Relating
to the Preferred Trust Securities--Original Issue Discount" in this prospectus
supplement.
WHEN CAN THE TRUST REDEEM THE PREFERRED TRUST SECURITIES?
The Trust must redeem the Preferred Trust Securities when the Junior
Subordinated Debentures are paid at maturity on March , 2044, or if the Junior
Subordinated Debentures are redeemed before they mature. On or after March ,
2009, FPL Group Capital may redeem any of the Junior Subordinated Debentures at
any time or from time to time. In addition, FPL Group Capital may choose to
redeem all, but not less than all, of the Junior Subordinated Debentures if
certain changes in tax or investment company law and regulations occur. If the
Preferred Trust Securities are redeemed, the holders will receive the
liquidation amount of $25 per Preferred Trust Security plus any unpaid
distributions to the date of redemption.
WHAT IS FPL GROUP'S GUARANTEE OF THE PREFERRED TRUST SECURITIES?
FPL Group will fully and unconditionally guarantee payments due on the
Preferred Trust Securities through a combination of the following:
o FPL Group's guarantee of FPL Group Capital's payment obligations under
the Junior Subordinated Debentures (referred to in this prospectus
supplement as the "Subordinated Guarantee");
o the rights of holders of Preferred Trust Securities to enforce FPL
Group's obligations under the Subordinated Guarantee and the
Subordinated Indenture (as defined under "Specific Terms of the Junior
Subordinated Debentures--General");
o FPL Group's obligations under the Trust Agreement and agreement to pay
the expenses of the Trust; and
o FPL Group's guarantee of payments due on the Preferred Trust
Securities to the extent of the Trust's legally available assets
(referred to in this prospectus supplement as the "Preferred Trust
Securities Guarantee").
FPL Group's obligations under the Subordinated Guarantee and FPL Group
Capital's obligations under the Junior Subordinated Debentures are unsecured and
subordinate and junior in right to all of their respective Senior Indebtedness
(as defined in "Description of the Junior Subordinated Debentures and the
Subordinated Guarantee--Subordination" in the accompanying prospectus). At
December 31, 2003, FPL Group Capital had approximately $4.8 billion of Senior
Indebtedness. As of that date, FPL Group had approximately $4.8 billion of
Senior Indebtedness, which amount consisted solely of FPL Group's guarantees of
FPL Group Capital indebtedness referred to in the previous sentence.
S-4
The payment of distributions on the Preferred Trust Securities is
guaranteed by FPL Group under the Preferred Trust Securities Guarantee, but only
to the extent the Trust has funds legally available to make distributions. If
FPL Group Capital does not make required principal or interest payments on the
Junior Subordinated Debentures and FPL Group does not make such payment pursuant
to the Subordinated Guarantee, the Trust will not have funds legally available
to make distributions. In this event, the Preferred Trust Securities Guarantee
is not applicable to those distributions until the Trust has funds available to
make the distribution. If this is the case, the Property Trustee of the Trust
(as defined under "Specific Terms of the Preferred Trust Securities--General"),
or, if the Property Trustee fails to act, the holders of the Preferred Trust
Securities may institute a legal proceeding directly against FPL Group or FPL
Group Capital for enforcement of payments under the Subordinated Guarantee or
the Junior Subordinated Debentures. FPL Group's obligations under the Preferred
Trust Securities Guarantee are unsecured and:
o subordinate and junior in right of payment to its other liabilities;
o equal in right of payment with its most senior preferred or preference
stock that may be issued and with any guarantee that may be entered
into in respect of any preferred or preference stock of any of its
affiliates; and
o senior to its common stock.
WHEN COULD THE JUNIOR SUBORDINATED DEBENTURES BE DISTRIBUTED TO YOU?
FPL Group has the right to terminate the Trust at any time. If FPL Group
terminates the Trust, the Trust will liquidate by distributing a proportionate
amount of the Junior Subordinated Debentures to each holder of Preferred Trust
Securities and the Common Trust Securities. See "Description of Preferred Trust
Securities--Liquidation Distribution upon Dissolution" in the accompanying
prospectus.
WILL THE PREFERRED TRUST SECURITIES BE LISTED ON A STOCK EXCHANGE?
The Trust plans to list the Preferred Trust Securities on the New York
Stock Exchange under the trading symbol "FPLPrC." If approved for listing,
trading of the Preferred Trust Securities is expected to begin within 30 days
after they are first issued.
WILL HOLDERS OF PREFERRED TRUST SECURITIES HAVE ANY VOTING RIGHTS?
Generally, the holders of the Preferred Trust Securities will not have any
voting rights. See "Description of Preferred Trust Securities--Voting Rights" in
the accompanying prospectus.
IN WHAT FORM WILL THE PREFERRED TRUST SECURITIES BE ISSUED?
The Preferred Trust Securities will be issued by one or more global
securities that will be deposited with and registered in the name of The
Depository Trust Company ("DTC") or its nominee. This means that you will not
receive a certificate for your Preferred Trust Securities and that your broker
will maintain your position in the Preferred Trust Securities. FPL Group expects
that the Preferred Trust Securities will be ready for delivery through DTC on or
about March , 2004. See "Specific Terms of the Preferred Trust
Securities--Book-Entry Only Issuance--The Depository Trust Company" in this
prospectus supplement for additional information.
S-5
RISK FACTORS
Before purchasing the Preferred Trust Securities, investors should
carefully consider the following risk factors and the other information
incorporated by reference or provided in this prospectus supplement or in the
accompanying prospectus in order to evaluate an investment in the Preferred
Trust Securities. The following risk factors update and restate the risk factors
contained in the accompanying prospectus, and therefore are intended to
supersede those risk factors.
RISKS RELATING TO FPL GROUP'S BUSINESS
FPL GROUP AND FPL GROUP CAPITAL ARE SUBJECT TO COMPLEX LAWS AND REGULATIONS AND
TO CHANGES IN LAWS AND REGULATIONS, INCLUDING INITIATIVES REGARDING
RESTRUCTURING OF THE ENERGY INDUSTRY. THESE FACTORS MAY HAVE A NEGATIVE IMPACT
ON THE BUSINESS AND RESULTS OF OPERATIONS OF FPL GROUP AND FPL GROUP CAPITAL.
o FPL Group and FPL Group Capital are subject to changes in laws or
regulations, including the Public Utility Regulatory Policies Act of
1978 and the Public Utility Holding Company Act of 1935, changing
governmental policies and regulatory actions, including those of the
Federal Energy Regulatory Commission, the Florida Public Service
Commission and the utility commissions of other states in which FPL
Group or FPL Group Capital have operations, and the U.S. Nuclear
Regulatory Commission, with respect to, among other things, allowed
rates of return, industry and rate structure, operation of nuclear
power facilities, operation and construction of plant facilities,
operation and construction of transmission facilities, acquisition,
disposal, depreciation and amortization of assets and facilities,
recovery of fuel and purchased power costs, decommissioning costs,
return on common equity and equity ratio limits, and present or
prospective wholesale and retail competition (including but not
limited to retail wheeling and transmission costs). The Florida Public
Service Commission has the authority to disallow recovery by Florida
Power & Light Company of costs that it considers excessive or
imprudently incurred.
o The regulatory process generally restricts Florida Power & Light
Company's ability to grow earnings and does not provide any assurance
as to achievement of earnings levels.
o FPL Group and FPL Group Capital are subject to extensive federal,
state and local environmental statutes, rules and regulations relating
to air quality, water quality, waste management, wildlife mortality,
natural resources and health and safety that could, among other
things, restrict or limit the output of certain facilities or the use
of certain fuels required for the production of electricity and/or
increase costs. There are significant capital, operating and other
costs associated with compliance with these environmental statutes,
rules and regulations, and those costs could be even more significant
in the future.
o FPL Group and FPL Group Capital operate in a changing market
environment influenced by various legislative and regulatory
initiatives regarding deregulation, regulation or restructuring of the
energy industry, including deregulation of the production and sale of
electricity. FPL Group and its subsidiaries will need to adapt to
these changes and may face increasing competitive pressure.
o FPL Group's and FPL Group Capital's results of operations could be
affected by their ability to renegotiate franchise agreements with
municipalities and counties in Florida.
THE OPERATION OF POWER GENERATION FACILITIES, INCLUDING NUCLEAR FACILITIES,
INVOLVES SIGNIFICANT RISKS THAT COULD ADVERSELY AFFECT THE RESULTS OF OPERATIONS
AND FINANCIAL CONDITION OF FPL GROUP AND FPL GROUP CAPITAL.
o The operation of power generation facilities involves many risks,
including start up risks, breakdown or failure of equipment,
transmission lines or pipelines, use of new technology, the dependence
on a specific fuel source or the impact of unusual or adverse weather
conditions (including natural disasters such as hurricanes), as well
as the risk of performance below expected levels of output or
efficiency. This could result in lost revenues and/or increased
expenses. Insurance, warranties or performance guarantees may not
S-6
cover any or all of the lost revenues or increased expenses, including
the cost of replacement power. In addition to these risks, FPL Group's
nuclear units face certain risks that are unique to the nuclear
industry including the ability to dispose of spent nuclear fuel, as
well as additional regulatory actions up to and including shutdown of
the units stemming from public safety concerns, whether at FPL Group's
plants or at the plants of other nuclear operators. Breakdown or
failure of an operating facility of FPL Energy, LLC, a subsidiary of
FPL Group Capital, may prevent the facility from performing under
applicable power sales agreements which, in certain situations, could
result in termination of the agreement or incurring a liability for
liquidated damages.
THE CONSTRUCTION OF, AND CAPITAL IMPROVEMENTS TO, POWER GENERATION FACILITIES
INVOLVE SUBSTANTIAL RISKS. SHOULD CONSTRUCTION OR CAPITAL IMPROVEMENT EFFORTS BE
UNSUCCESSFUL, THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF FPL GROUP AND
FPL GROUP CAPITAL COULD BE NEGATIVELY AFFECTED.
o FPL Group's and FPL Group Capital's ability to successfully and timely
complete their power generation facilities currently under
construction, those projects yet to begin construction or capital
improvements to existing facilities is contingent upon many variables
and subject to substantial risks. Should any such efforts be
unsuccessful, FPL Group and FPL Group Capital could be subject to
additional costs, termination payments under committed contracts
and/or the write-off of their investment in the project or
improvement.
THE USE OF DERIVATIVE CONTRACTS BY FPL GROUP AND FPL GROUP CAPITAL IN THE NORMAL
COURSE OF BUSINESS COULD RESULT IN FINANCIAL LOSSES THAT NEGATIVELY IMPACT THE
RESULTS OF OPERATIONS OF FPL GROUP AND FPL GROUP CAPITAL.
o FPL Group and FPL Group Capital use derivative instruments, such as
swaps, options, futures and forwards to manage their commodity and
financial market risks, and to a lesser extent, engage in limited
trading activities. FPL Group and FPL Group Capital could recognize
financial losses as a result of volatility in the market values of
these contracts, or if a counterparty fails to perform. In the absence
of actively quoted market prices and pricing information from external
sources, the valuation of these derivative instruments involves
management's judgment or use of estimates. As a result, changes in the
underlying assumptions or use of alternative valuation methods could
affect the value of the reported fair value of these contracts. In
addition, Florida Power & Light Company's use of such instruments
could be subject to prudency challenges by the Florida Public Service
Commission and if found imprudent, cost recovery could be disallowed
by the Florida Public Service Commission.
FPL GROUP'S NON-RATE REGULATED BUSINESSES, PARTICULARLY FPL ENERGY, ARE SUBJECT
TO RISKS, MANY OF WHICH ARE BEYOND THE CONTROL OF FPL GROUP AND FPL GROUP
CAPITAL, THAT MAY REDUCE THE REVENUES AND ADVERSELY IMPACT THE RESULTS OF
OPERATIONS AND FINANCIAL CONDITION OF FPL GROUP AND FPL GROUP CAPITAL.
o There are other risks associated with FPL Group's and FPL Group
Capital's non-rate regulated businesses, particularly FPL Energy. In
addition to risks discussed elsewhere, risk factors specifically
affecting FPL Energy's success in competitive wholesale markets
include the ability to efficiently develop and operate generating
assets, the successful and timely completion of project restructuring
activities, maintenance of the qualifying facility status of certain
projects, the price and supply of fuel, transmission constraints,
competition from new sources of generation, excess generation capacity
and demand for power. There can be significant volatility in market
prices for fuel and electricity, and there are other financial,
counterparty and market risks that are beyond the control of FPL
Energy. FPL Energy's inability or failure to effectively hedge its
assets or positions against changes in commodity prices, interest
rates, counterparty credit risk or other risk measures could
significantly impair its future financial results. In keeping with
industry trends, a portion of FPL Energy's power generation facilities
operate wholly or partially without long-term power purchase
agreements. As a result, power from these facilities is sold on the
spot market or on a short-term contractual basis, which may affect the
volatility of FPL Group's and FPL Group Capital's financial results.
In addition, FPL Energy's business depends upon transmission
facilities owned and operated by others; if transmission is disrupted
or capacity is inadequate or unavailable, FPL Energy's ability to sell
and deliver its wholesale power may be limited.
S-7
FPL GROUP'S AND FPL GROUP CAPITAL'S ABILITY TO SUCCESSFULLY IDENTIFY AND
COMPLETE ACQUISITIONS IS SUBJECT TO SIGNIFICANT RISKS, INCLUDING THE EFFECT OF
INCREASED COMPETITION RESULTING FROM THE CONSOLIDATION OF THE POWER INDUSTRY.
o FPL Group and FPL Group Capital are likely to encounter significant
competition for acquisition opportunities that may become available as
a result of the consolidation of the power industry. In addition, FPL
Group and FPL Group Capital may be unable to identify attractive
acquisition opportunities at favorable prices and to successfully and
timely complete and integrate them.
BECAUSE FPL GROUP AND FPL GROUP CAPITAL RELY ON ACCESS TO CAPITAL MARKETS, THE
INABILITY TO ACCESS CAPITAL MARKETS ON FAVORABLE TERMS MAY LIMIT THE ABILITY OF
FPL GROUP AND FPL GROUP CAPITAL TO GROW THEIR BUSINESSES AND WOULD LIKELY
INCREASE INTEREST COSTS.
o FPL Group and FPL Group Capital rely on access to capital markets as a
significant source of liquidity for capital requirements not satisfied
by operating cash flows. The inability of FPL Group and FPL Group
Capital to maintain their current credit ratings could affect their
ability to raise capital on favorable terms, particularly during times
of uncertainty in the capital markets which, in turn could impact FPL
Group's and FPL Group Capital's ability to grow their businesses and
would likely increase their interest costs.
WEATHER CONDITIONS CAN AFFECT FPL GROUP'S AND FPL GROUP CAPITAL'S RESULTS OF
OPERATIONS.
o FPL Group's and FPL Group Capital's results of operations can be
affected by changes in the weather. Weather conditions directly
influence the demand for electricity and natural gas and affect the
price of energy commodities, and can affect the production of
electricity at wind and hydro-powered facilities. In addition, severe
weather can be destructive, causing outages and/or property damage,
which could require additional costs to be incurred.
FPL GROUP AND FPL GROUP CAPITAL ARE SUBJECT TO COSTS AND OTHER EFFECTS OF LEGAL
PROCEEDINGS, CHANGES IN TAX AND INFLATION RATES, AND CHANGES IN OR ADDITIONS TO
APPLICABLE TAX POLICIES, RATES OF INFLATION, ACCOUNTING STANDARDS, SECURITIES
LAWS AND CORPORATE GOVERNANCE REQUIREMENTS.
o FPL Group and FPL Group Capital are subject to costs and other effects
of legal and administrative proceedings, settlements, investigations
and claims; as well as the effect of new, or changes in, tax rates or
policies, rates of inflation, accounting standards, securities laws or
corporate governance requirements.
THREATS OF TERRORISM AND CATASTROPHIC EVENTS THAT COULD RESULT FROM TERRORISM
MAY IMPACT THE OPERATIONS OF FPL GROUP AND FPL GROUP CAPITAL IN UNPREDICTABLE
WAYS.
o FPL Group and FPL Group Capital are subject to direct and indirect
effects of terrorist threats and activities. Generation and
transmission facilities, in general, have been identified as potential
targets. The effects of terrorist threats and activities include,
among other things, terrorist actions or responses to such actions or
threats, the inability to generate, purchase or transmit power, the
risk of a significant slowdown in growth or a decline in the U.S.
economy, delay in economic recovery in the U.S., and the increased
cost and adequacy of security and insurance.
THE ABILITY OF FPL GROUP AND FPL GROUP CAPITAL TO OBTAIN INSURANCE AND THE TERMS
OF ANY AVAILABLE INSURANCE COVERAGE COULD BE AFFECTED BY NATIONAL AND
COMPANY-SPECIFIC EVENTS.
o FPL Group's and FPL Group Capital's ability to obtain insurance, and
the cost of and coverage provided by such insurance, could be affected
by national events as well as company-specific events.
S-8
FPL GROUP AND FPL GROUP CAPITAL ARE SUBJECT TO EMPLOYEE WORKFORCE FACTORS THAT
COULD AFFECT THE BUSINESSES AND FINANCIAL CONDITION OF FPL GROUP AND FPL GROUP
CAPITAL.
o FPL Group and FPL Group Capital are subject to employee workforce
factors, including loss or retirement of key executives, availability
of qualified personnel, collective bargaining agreements with union
employees or work stoppage that could affect the business and
financial condition of FPL Group and FPL Group Capital.
RISKS RELATING TO THE PREFERRED TRUST SECURITIES
THE TRUST HAS NO INDEPENDENT OPERATIONS OR ASSETS. IF FPL GROUP CAPITAL OR FPL
GROUP DOES NOT PROVIDE SUFFICIENT FUNDS, THE TRUST WILL NOT BE ABLE TO MAKE
PAYMENTS ON THE PREFERRED TRUST SECURITIES. THE OBLIGATIONS OF FPL GROUP CAPITAL
UNDER THE JUNIOR SUBORDINATED DEBENTURES AND FPL GROUP UNDER THE SUBORDINATED
GUARANTEE AND THE PREFERRED TRUST SECURITIES GUARANTEE ARE SUBORDINATED.
o The Trust's ability to pay amounts when they are due on the Preferred
Trust Securities is solely dependent upon FPL Group Capital's payment
of amounts when they are due on the Junior Subordinated Debentures and
FPL Group's guarantee of such payments pursuant to the Subordinated
Guarantee. If FPL Group Capital fails to pay principal or interest
when due on the Junior Subordinated Debentures and FPL Group does not
make any guarantee payments with respect thereto, the Trust will not
have funds to pay distributions on the Preferred Trust Securities or
amounts due when the Preferred Trust Securities are redeemed or when
the Trust is liquidated.
o The obligations of FPL Group Capital under the Junior Subordinated
Debentures are unsecured and will rank junior in right of payment to
FPL Group Capital's Senior Indebtedness. This means that FPL Group
Capital cannot make any payments on the Junior Subordinated Debentures
if it defaults on a payment of Senior Indebtedness and does not cure
such default within the applicable grace period or if the Senior
Indebtedness becomes immediately due because of a default and has not
yet been paid in full. As of December 31, 2003, FPL Group Capital had
approximately $4.8 billion of Senior Indebtedness. FPL Group Capital
is a holding company that derives substantially all of its income from
its operating subsidiaries. Therefore, the Junior Subordinated
Debentures will be effectively subordinated to all indebtedness and
other liabilities, including trade payables, debt and preferred stock
incurred or issued by FPL Group Capital's subsidiaries. The
Subordinated Indenture does not place any limit on the amount of
Senior Indebtedness that FPL Group Capital may issue, guarantee or
otherwise incur or the amount of liabilities including debt or
preferred stock, that FPL Group Capital's subsidiaries may issue,
guarantee or otherwise incur.
o The obligations of FPL Group under the Subordinated Guarantee will
rank junior in right of payment to FPL Group's Senior Indebtedness.
This means that FPL Group cannot make any payments under the
Subordinated Guarantee and the Preferred Trust Securities Guarantee if
it defaults on a payment of Senior Indebtedness and does not cure such
default within the applicable grace period or if the Senior
Indebtedness becomes immediately due because of a default and has not
yet been paid in full. As of December 31, 2003, FPL Group had
approximately $4.8 billion of Senior Indebtedness, which amount
consisted solely of FPL Group's guarantees of FPL Group Capital
indebtedness referred to in the prior paragraph. FPL Group's
obligations under the Preferred Trust Securities Guarantee are
unsecured and will rank
o subordinate and junior in right of payment to all other
liabilities of FPL Group, including the Subordinated Guarantee
and the Debt Securities Guarantee (as defined in the accompanying
prospectus);
o equal in right of payment with the most senior preferred or
preference stock that may be issued by FPL Group and with any
guarantee that may be entered into by FPL Group in respect of any
preferred or preference stock of any affiliate of FPL Group; and
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o senior to FPL Group common stock.
FPL Group is a holding company that derives substantially all of its
income from its operating subsidiaries. Therefore, the Subordinated
Guarantee and the Preferred Trust Securities Guarantee will be
effectively subordinated to all indebtedness and other liabilities,
including trade payables, debt and preferred stock incurred or issued
by FPL Group's subsidiaries. None of the Subordinated Indenture, the
Subordinated Guarantee or the Preferred Trust Securities Guarantee
places any limit on the amount of Senior Indebtedness FPL Group may
incur, guarantee or otherwise incur or the amount of liabilities,
including debt or preferred stock, that FPL Group's subsidiaries may
issue, guarantee or otherwise incur. The FPL Group consolidated
financial statements that are incorporated by reference show the
aggregate amount of FPL Group subsidiary debt and preferred stock as
of the date of those statements.
See "Description of the Preferred Trust Securities
Guarantee--Security and Ranking" and "Description of the Junior
Subordinated Debentures and the Subordinated
Guarantee--Subordination" in the accompanying prospectus.
FPL GROUP CAPITAL CAN DEFER INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED
DEBENTURES. THIS MAY AFFECT THE MARKET PRICE OF THE PREFERRED TRUST SECURITIES.
o So long as there is no default in the payment of interest on the
Junior Subordinated Debentures, FPL Group Capital may defer interest
payments on the Junior Subordinated Debentures, from time to time, for
an extension period of up to 20 consecutive quarters. At the end of an
extension period, if all amounts due are paid, FPL Group Capital could
start a new extension period of up to 20 consecutive quarters. During
any extension period, distributions on the Preferred Trust Securities
would be deferred but would accumulate at an annual rate of % and you
will accrue interest on unpaid distributions at the same rate,
compounded quarterly. No extension period may extend beyond the
maturity of the Junior Subordinated Debentures. During an extension
period, interest payments will not be due and payable and, therefore,
FPL Group will not be obligated to make payments under the
Subordinated Guarantee. If FPL Group Capital exercises this extension
right, the market price of the Preferred Trust Securities is likely to
be affected. See "Specific Terms of the Preferred Trust
Securities--Extension of Payment Periods" in this prospectus
supplement and "Description of the Junior Subordinated Debentures and
the Subordinated Guarantee--Option to Extend Interest Payment Period"
in the accompanying prospectus.
o If FPL Group Capital exercises its right to defer interest payments,
the Preferred Trust Securities may trade at a price that does not
fully reflect the value of accrued but unpaid interest in the Junior
Subordinated Debentures. In addition, as a result of FPL Group
Capital's right to extend the interest payment period, the market
price of the Preferred Trust Securities may be more volatile than
other securities that do not have these rights.
IF FPL GROUP CAPITAL DEFERS INTEREST PAYMENTS ON THE JUNIOR SUBORDINATED
DEBENTURES, THERE WILL BE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO
HOLDERS OF THE PREFERRED TRUST SECURITIES.
o If FPL Group Capital extends the interest payment period for the
Junior Subordinated Debentures, you will be required to accrue
interest income as original issue discount, referred to in this
prospectus supplement as "OID," in respect of the deferred
distributions on your Preferred Trust Securities. As a result, for
United States federal income tax purposes you will include that OID in
gross income before you receive distributions, regardless of your
regular method of accounting for United States federal income taxes.
However, FPL Group Capital has no current intention of deferring
interest payments on the Junior Subordinated Debentures.
o If you sell your Preferred Trust Securities before the record date for
the payment of distributions at the end of an extension period, you
will not receive those distributions. Instead, the accrued
distributions will be paid to the holder of record on the record date,
regardless of who the holder of record may have been on any other date
during the extension period. Moreover, the accrued OID will be added
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to your adjusted tax basis in the Preferred Trust Securities but may
not be reflected in the amount you realize on the sale. To the extent
the amount realized on a sale is less than your adjusted tax basis,
you will recognize a capital loss for United States federal income tax
purposes. The deductibility of capital losses is subject to
limitations. See "Material United States Federal Income Tax
Consequences Relating to the Preferred Trust Securities--Original
Issue Discount" in this prospectus supplement.
THE PREFERRED TRUST SECURITIES GUARANTEE IS LIMITED TO THE FUNDS AVAILABLE TO
THE TRUST.
o The Preferred Trust Securities Guarantee guarantees the payment when
due of distributions on the Preferred Trust Securities, to the extent
the Trust has funds legally available to make those payments.
o The Preferred Trust Securities Guarantee also guarantees payment on
redemption or on a bankruptcy or dissolution of the Trust, except
where Junior Subordinated Debentures are distributed to the holders,
of the liquidation amount and all accrued and unpaid distributions on
the Preferred Trust Securities to the date of payment or, if less, the
amount of the assets of the Trust remaining available for
distribution. If FPL Group Capital were to default on its obligations
under the Junior Subordinated Debentures and FPL Group were to default
on its obligations under the Subordinated Guarantee, the Trust would
lack funds necessary for the payment of distributions or amounts
payable on liquidation of the Trust or redemption of the Preferred
Trust Securities. As a result, you would then not be able to rely on
the Preferred Trust Securities Guarantee for payment of those amounts.
Instead, the Property Trustee would have to enforce the Trust's rights
under the Junior Subordinated Debentures and the Subordinated
Guarantee. If the Property Trustee fails to act, you could institute a
legal proceeding directly against FPL Group or FPL Group Capital to
enforce payment to you of amounts with respect to Junior Subordinated
Debentures in a principal amount equal to the liquidation amount of
your Preferred Trust Securities and the accrued interest on those
Junior Subordinated Debentures. See "Description of the Preferred
Trust Securities Guarantee--General Terms of the Preferred Trust
Securities Guarantee" and "Description of the Junior Subordinated
Debentures and the Subordinated Guarantee--Enforcement of Certain
Rights by Holders of Preferred Trust Securities" in the accompanying
prospectus.
FPL GROUP CAPITAL HAS THE RIGHT TO REDEEM THE JUNIOR SUBORDINATED DEBENTURES IF
CERTAIN CHANGES IN TAX OR INVESTMENT COMPANY LAW OCCUR. THIS REDEMPTION WOULD
RESULT IN A REDEMPTION OF YOUR PREFERRED TRUST SECURITIES AND WOULD SUBJECT YOU
TO ADDITIONAL TAX.
o Certain tax law changes have been proposed from time to time which
could affect the deductibility of interest paid on the Junior
Subordinated Debentures. None of these proposals has become law. If
specified changes in tax or investment company law occur, FPL Group
Capital will have the right to redeem the Junior Subordinated
Debentures, in whole, but not in part, at any time within 90 days
following the occurrence of these changes, which we sometimes refer to
as Special Events. That would, in turn, cause a mandatory redemption
of all of the Preferred Trust Securities and the Common Trust
Securities at 100% of their liquidation amount plus any accrued
distributions. The redemption of your Preferred Trust Securities would
be a taxable event to you for United States federal income tax
purposes. See "Specific Terms of the Preferred Trust Securities--Right
to Redeem upon a Special Event" in this prospectus supplement.
FPL GROUP MAY DISSOLVE THE TRUST AT ANY TIME. THIS COULD HAVE AN ADVERSE EFFECT
ON THE MARKET PRICES OF THE PREFERRED TRUST SECURITIES OR THE JUNIOR
SUBORDINATED DEBENTURES.
o At any time, FPL Group may dissolve the Trust, pay its creditors, if
any, and distribute the Junior Subordinated Debentures to the holders
of the Preferred Trust Securities and Common Trust Securities.
o There is no assurance as to the market prices for Preferred Trust
Securities or Junior Subordinated Debentures that may be distributed
in exchange for Preferred Trust Securities if the Trust is liquidated.
The Preferred Trust Securities or the Junior Subordinated Debentures
may trade at a discount from the price that an investor paid to
purchase the Preferred Trust Securities in this offer. FPL Group
Capital has no obligation or current intention to apply for any
separate listing of Junior Subordinated Debentures in the event that
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the Trust is liquidated. There can be no assurance as to the liquidity
of any secondary market that may develop for the Junior Subordinated
Debentures, a holder's ability to sell these securities or whether a
trading market, if it develops, will continue.
o A distribution of the Junior Subordinated Debentures upon the
liquidation of the Trust would not be a taxable event to holders of
the Preferred Trust Securities unless that liquidation of the Trust
occurs because the Trust is subject to United States federal income
tax with respect to income on the Junior Subordinated Debentures. If
there is a Tax Event (as defined below under "Specific Terms of the
Preferred Trust Securities--Right to Redeem Upon a Special Event")
because the Trust's income on the Junior Subordinated Debentures is
subject to United States federal income tax and Junior Subordinated
Debentures are distributed to the holders of the Preferred Trust
Securities by the Trust, the holders of the Preferred Trust Securities
would likely recognize gain or loss as if the holders of the Preferred
Trust Securities had exchanged Preferred Trust Securities for the
Junior Subordinated Debentures in a taxable exchange.
o As a prospective purchaser of Preferred Trust Securities, you are also
making an investment decision about the Junior Subordinated
Debentures. You should carefully review all the information about the
Junior Subordinated Debentures in this prospectus supplement and in
the accompanying prospectus. See "Specific Terms of the Preferred
Trust Securities--Distribution of the Junior Subordinated Debentures"
in this prospectus supplement.
THE SECONDARY MARKET FOR THE PREFERRED TRUST SECURITIES MAY BE ILLIQUID.
o The Preferred Trust Securities constitute a new issue of securities,
and there is currently no secondary market for the Preferred Trust
Securities. It is not possible to predict how the Preferred Trust
Securities will trade in the secondary market or whether the secondary
market will be liquid or illiquid. The Trust will apply to list the
Preferred Trust Securities on the New York Stock Exchange. FPL Group
Capital has no obligation or current intention to apply for any
separate listing of Junior Subordinated Debentures in the event that
the Trust is liquidated. There can be no assurance as to the liquidity
of any secondary market that may develop for the Preferred Trust
Securities, a holder's ability to sell these securities or whether a
trading market, if it develops, will continue.
o The underwriters currently plan to make a market in the Preferred
Trust Securities. However, there can be no assurance that the
underwriters will engage in those activities or that any active market
in the Preferred Trust Securities will develop or be maintained.
HOLDERS OF THE PREFERRED TRUST SECURITIES WILL HAVE LIMITED VOTING RIGHTS.
o Holders of Preferred Trust Securities will have limited voting rights,
exercisable only in the event of a proposed change in the terms of the
Preferred Trust Securities. See "Description of Preferred Trust
Securities--Voting Rights" in the accompanying prospectus.
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SELECTED CONSOLIDATED INCOME STATEMENT DATA OF FPL GROUP AND SUBSIDIARIES
The following material, which is presented in this prospectus supplement
solely to furnish limited introductory information, is qualified in its entirety
by, and should be considered in conjunction with, the more detailed information
incorporated by reference or provided in this prospectus supplement or in the
accompanying prospectus.
(IN MILLIONS, EXCEPT EARNINGS PER SHARE AND RATIOS)
---------------------------------------------------
TWELVE MONTHS ENDED DECEMBER 31,
------------- -------------- ----------------
2003 2002 2001
------------- -------------- ----------------
Operating revenues................... $9,630 $8,173 $8,217
Net income........................... $ 890(a) $ 473(b) $ 781(c)
Weighted-average common shares
outstanding (assuming dilution)... 178.2 173.3 168.9
Earnings per share of common
stock (assuming dilution)......... $ 5.00(a) $ 2.73(b) $ 4.62(c)
Ratio of earnings to fixed charges and
ratio of earnings to fixed charges
plus preferred dividends.......... 3.38 3.08 3.77
<FN>
(a) Includes the cumulative effect of an accounting change and net unrealized
mark-to-market gains associated with non-qualifying hedges.
(b) Includes the cumulative effect of an accounting change, impairment and
restructuring charges, charges related to certain wind projects and
leveraged leases, a favorable settlement of litigation with the IRS and net
unrealized mark-to-market gains associated with non-qualifying hedges.
(c) Includes merger-related expenses and net unrealized mark-to-market gains
associated with non-qualifying hedges.
</FN>
CONSOLIDATED CAPITALIZATION OF FPL GROUP AND SUBSIDIARIES
OUTSTANDING ADJUSTED
AT --------------------------------
DECEMBER 31, 2003 AMOUNT PERCENT
---------------------- ------------ ----------
(UNAUDITED)
(IN MILLIONS)
Common Shareholders' Equity................... $ 6,967
Long-term debt (excluding current
maturities)................................ $ 8,723
Preferred stock of Florida
Power & Light Company without
sinking fund requirements.................. $ 5
---------------------- ------------ ----------
Total Capitalization..................... $ 15,695
====================== ============ ==========
ACCOUNTING TREATMENT RELATING TO PREFERRED TRUST SECURITIES
In accordance with the provisions of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, the Trust will not be consolidated
into FPL Group's consolidated financial statements. Accordingly, the Junior
Subordinated Debentures issued by FPL Group Capital to the Trust will be
classified in the consolidated balance sheet of FPL Group as long-term debt, and
appropriate disclosures concerning the Trust will be included in the notes to
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the consolidated financial statements. FPL Group will record interest amounts
payable on the Junior Subordinated Debentures as interest expense in the
consolidated statement of income.
USE OF PROCEEDS
The information in this section adds to the information in the "Use of
Proceeds" section on page 6 of the accompanying prospectus. Please read these
two sections together.
The proceeds to be received by the Trust from the sale of the Preferred
Trust Securities and Common Trust Securities will be used to purchase the Junior
Subordinated Debentures. FPL Group Capital will add the net proceeds from the
sale of the Junior Subordinated Debentures to its general funds and expects to
use general funds equal to the net proceeds to repay a portion of commercial
paper issued to fund investments by FPL Group Capital in independent power
projects. At February 23, 2004, FPL Group Capital had an aggregate of $335
million of commercial paper outstanding, which had maturities of up to 27 days
and which had annual interest rates of 1.08% to 1.12%. FPL Group Capital will
temporarily invest in short-term instruments any proceeds that are not
immediately required for these purposes.
SPECIFIC TERMS OF THE PREFERRED TRUST SECURITIES
The information in this section adds to the information in the "Description
of Preferred Trust Securities" section beginning on page 24 of the accompanying
prospectus. Please read these two sections together.
GENERAL. The Trust will issue the Preferred Trust Securities pursuant to
the Amended and Restated Trust Agreement, dated as of March , 2004, among FPL
Group, as depositor, The Bank of New York, as property trustee ("Property
Trustee"), The Bank of New York (Delaware), as Delaware trustee, the
administrative trustees named therein and the several holders of the Preferred
Trust Securities and the Common Trust Securities, and referred to in this
prospectus supplement as the "Trust Agreement."
DISTRIBUTIONS. Distributions on the Preferred Trust Securities will:
o be payable in U.S. dollars at % per annum of the liquidation amount,
including interest payable on overdue distributions, computed on the
basis of a 360-day year consisting of twelve 30-day months;
o be cumulative and payable quarterly in arrears on March , June ,
September and December of each year, commencing June , 2004;
and
o originally accrue from, and include, the date they are issued.
In the event that any distribution date is not a business day, payment will
be made on the next business day, and no interest or other payment will result
from the delay. However, if the delayed payment date is in the next calendar
year, the payment will be made on the last business day of the earlier year.
The record date for distributions shall be, for so long as the Preferred
Trust Securities remain in book-entry only form, one business day prior to the
relevant distribution date. In the event the Preferred Trust Securities are not
in book-entry only form, the record date for distributions will be the 15th day
prior to the relevant distribution date.
EXTENSION OF PAYMENT PERIODS. So long as there is no default in the payment
of interest on the Junior Subordinated Debentures, FPL Group Capital may defer
interest payments on the Junior Subordinated Debentures for an extension period
of up to 20 consecutive quarters. Distributions on the Preferred Trust
Securities would not be paid during any extension period, but would accumulate,
with interest on unpaid distributions accruing at an annual rate of %,
compounded quarterly. With certain exceptions, during an extension period FPL
Group and FPL Group Capital could not make specified payments on their capital
stock, or on debt securities which are equal or junior in right of payment.
These payments are described under "Description of the Junior Subordinated
Debentures and the Subordinated Guarantee--Option to Extend Interest Payment
Period" in the accompanying prospectus.
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Before the end of any extension period that is shorter than 20 consecutive
quarters, FPL Group Capital could further extend the period, so long as the
entire extension period would not exceed 20 consecutive quarters. No payments
can be deferred beyond the maturity date of the Junior Subordinated Debentures.
At the end of any extension period, if all amounts then due on the Junior
Subordinated Debentures, including additional interest on unpaid interest, have
been paid, FPL Group Capital could elect to begin a new extension period. See
"Description of the Junior Subordinated Debentures and the Subordinated
Guarantee--Option to Extend Interest Payment Period" in the accompanying
prospectus.
REDEMPTION OF PREFERRED TRUST SECURITIES. The Junior Subordinated
Debentures will mature on March , 2044. FPL Group Capital has the right to
redeem any of the Junior Subordinated Debentures at 100% of their principal
amount plus accrued interest, at any time or from time to time on or after
March , 2009. FPL Group Capital may also redeem all of the Junior Subordinated
Debentures if there is a Special Event, as described below.
When Junior Subordinated Debentures mature or are redeemed, the Property
Trustee will use the proceeds to redeem a like amount of the Trust's Preferred
Trust Securities and Common Trust Securities. Holders will be sent notice at
least 30 days but not more than 60 days ahead of a redemption. See "Description
of Preferred Trust Securities--Redemption" in the accompanying prospectus.
RIGHT TO REDEEM UPON A SPECIAL EVENT. FPL Group Capital will have the right
to redeem the Junior Subordinated Debentures, in whole, but not in part, at 100%
of their principal amount, plus accrued interest, at any time within 90 days
after the occurrence of an Investment Company Act Event or a Tax Event, each of
which is referred to in this prospectus supplement as a "Special Event."
An "Investment Company Act Event" happens when the Trust, FPL Group or FPL
Group Capital has received an opinion of independent counsel to the effect that,
as a result of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority after the date of this
prospectus supplement, there is more than an insubstantial risk that the Trust
is or will be considered an investment company under the Investment Company Act
of 1940.
FPL Group Capital will have the right to redeem the Junior Subordinated
Debentures within 90 days after a Tax Event happens if:
o tax counsel with appropriate experience gives FPL Group an opinion
that, if FPL Group dissolved the Trust and distributed the Junior
Subordinated Debentures to the holders of the Preferred Trust
Securities, there would be more than an insubstantial risk that one of
the adverse tax consequences described below would continue to exist;
or
o the Junior Subordinated Debentures are not held by the Trust.
A "Tax Event" happens when the Trust, FPL Group or FPL Group Capital has
received an opinion of experienced tax counsel that, as a result of:
o any amendment to, clarification of, or change, including any announced
prospective change, in the laws or treaties of the United States or
any of its political subdivisions or taxing authorities, or any
regulations under those laws or treaties;
o an administrative action, which means any judicial decision or any
official administrative pronouncement, ruling, regulatory procedure,
notice or announcement including any notice or announcement of intent
to issue or adopt any administrative pronouncement, ruling, regulatory
procedure or regulation; or
o any amendment to, clarification of, or change in the official position
or the interpretation of any administrative action or judicial
decision or any interpretation or pronouncement that provides for a
position with respect to an administrative action or judicial decision
that differs from the previously generally accepted position, in each
case by any legislative body, court, governmental authority or
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regulatory body, regardless of the time or manner in which that
amendment, clarification or change is introduced or made known;
which amendment, clarification, or change is effective or the administrative
action is taken or judicial decision, interpretation or pronouncement is issued
after the date of this prospectus supplement, there is more than an
insubstantial risk that:
o the Trust is, or will be, subject to United States federal income tax
with respect to interest received on the Junior Subordinated
Debentures;
o interest payable by FPL Group Capital on the Junior Subordinated
Debentures is not, or will not be, fully deductible by FPL Group
Capital for United States federal income tax purposes; or
o the Trust is, or will be, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
Each of the circumstances described immediately above is referred to in this
prospectus supplement as an adverse tax consequence.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES. At any time, FPL Group
may:
o dissolve the Trust; and
o after satisfaction of liabilities of creditors of the Trust, cause
Junior Subordinated Debentures to be distributed to the holders of the
Preferred Trust Securities and Common Trust Securities.
After that, the Preferred Trust Securities and the Common Trust Securities
will no longer be outstanding and the Junior Subordinated Debentures distributed
to the holders of Preferred Trust Securities will:
o have a principal amount equal to the liquidation amount of the
Preferred Trust Securities; and
o bear interest at a rate of % per year; and
o bear accrued and unpaid interest from the last date interest was paid
on the Junior Subordinated Debentures held by the Trust.
If the Trust distributes Junior Subordinated Debentures to holders of
Preferred Trust Securities in a dissolution of the Trust, those Junior
Subordinated Debentures will be issued in certificated form in denominations of
$25 and integral multiples of $25. They may be transferred or exchanged at the
offices of the Subordinated Indenture Trustee described in "Description of the
Junior Subordinated Debentures and the Subordinated Guarantee--Transfer and
Exchange" in the accompanying prospectus.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY. The Preferred Trust
Securities will trade through DTC. The Preferred Trust Securities will be
represented by one or more global certificates and registered in the name of
Cede & Co., DTC's nominee.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Securities Exchange Act of 1934. DTC holds securities
for its participants. DTC also facilitates the post-trade settlement of
securities transactions among its participants through electronic computerized
book-entry transfers and pledges in the participants' accounts. This eliminates
the need for physical movement of securities certificates. The participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is a wholly-owned subsidiary
of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned
by a number of participants of DTC, members of other clearing corporations and
by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the
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National Association of Securities Dealers, Inc. Others who maintain a custodial
relationship with a participant can use the DTC system. The rules that apply to
DTC and those using its systems are on file with the Securities and Exchange
Commission.
Purchases of the Preferred Trust Securities within the DTC system must be
made through participants, which will receive a credit for the Preferred Trust
Securities on DTC's records. The beneficial ownership interest of each purchaser
will be recorded on the participants' records. Beneficial owners will not
receive written confirmation from DTC of their purchases, but beneficial owners
should receive written confirmations of the transactions, as well as periodic
statements of their holdings, from the participants through which they purchased
Preferred Trust Securities. Transfers of ownership in the Preferred Trust
Securities are to be accomplished by entries made on the books of the
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates for their Preferred Trust Securities, except if use of the
book-entry system for the Preferred Trust Securities is discontinued.
To facilitate subsequent transfers, all Preferred Trust Securities
deposited by participants with DTC are registered in the name of DTC's nominee,
Cede & Co. The deposit of the Preferred Trust Securities with DTC and their
registration in the name of Cede & Co. effects no change in beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the Preferred
Trust Securities. DTC's records reflect only the identity of the participants to
whose accounts such Preferred Trust Securities are credited. These participants
may or may not be the beneficial owners. Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to participants, and
by participants to beneficial owners, will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time. Beneficial owners of Preferred Trust Securities may wish to
take certain steps to augment transmission to them of notices of significant
events with respect to the Preferred Trust Securities, such as redemptions,
tenders, defaults, and proposed amendments to the Preferred Trust Securities.
Beneficial owners of the Preferred Trust Securities may wish to ascertain that
the nominee holding the Preferred Trust Securities has agreed to obtain and
transmit notices to the beneficial owners.
Redemption notices will be sent to Cede & Co., as registered holder of the
Preferred Trust Securities. If less than all of the Preferred Trust Securities
are being redeemed, DTC's practice is to determine by lot the amount of
Preferred Trust Securities of each participant to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with respect to
Preferred Trust Securities, unless authorized by a participant in accordance
with DTC's procedures. Under its usual procedures, DTC would mail an omnibus
proxy to the Trust as soon as possible after the record date. The omnibus proxy
assigns the consenting or voting rights of Cede & Co. to those participants to
whose accounts the Preferred Trust Securities are credited on the record date.
FPL Group, FPL Group Capital and the Trust believe that these arrangements will
enable the beneficial owners to exercise rights equivalent in substance to the
rights that can be directly exercised by a registered holder of the Preferred
Trust Securities.
Payments of redemption proceeds and distributions on the Preferred Trust
Securities will be made to Cede & Co., or such other nominee as may be requested
by DTC. DTC's practice is to credit participants' accounts upon DTC's receipt of
funds and corresponding detail information from the Trust or its agent, on the
payable date in accordance with their respective holdings shown on DTC's
records. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices. Payments will be the
responsibility of participants and not of DTC, FPL Group, FPL Group Capital, the
Trust or any trustee, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of redemption proceeds and distributions
to Cede & Co. (or such other nominee as may be requested by DTC) is the
responsibility of the Trust. Disbursement of payments to participants is the
responsibility of DTC, and disbursement of payments to the beneficial owners is
the responsibility of participants.
Except as provided in this prospectus supplement, a beneficial owner will
not be entitled to receive physical delivery of the Preferred Trust Securities.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the Preferred Trust Securities.
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DTC may discontinue providing its services as securities depositary with
respect to the Preferred Trust Securities at any time by giving reasonable
notice to the Trust. In the event no successor securities depositary is
obtained, certificates for the Preferred Trust Securities will be printed and
delivered. The administrative trustees and FPL Group may decide to replace DTC
or any successor depositary. Additionally, the administrative trustees and FPL
Group may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary) with respect to the Preferred Trust
Securities. In that event, certificates for the Preferred Trust Securities will
be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that FPL Group, FPL Group Capital and the Trust
believe to be reliable, but FPL Group, FPL Group Capital and the Trust do not
take responsibility for the accuracy of this information.
SPECIFIC TERMS OF THE JUNIOR SUBORDINATED DEBENTURES
The information in this section adds to the information in the "Description
of the Junior Subordinated Debentures and the Subordinated Guarantee" section
beginning on page 35 of the accompanying prospectus. Please read these two
sections together.
GENERAL. FPL Group Capital will issue the Junior Subordinated Debentures
under an indenture, dated as of March 1, 2004, among FPL Group Capital, FPL
Group and The Bank of New York, as subordinated indenture trustee, and referred
to in this prospectus supplement as "Subordinated Indenture." An officer's
certificate will supplement the Subordinated Indenture and establish the
specific terms of the Junior Subordinated Debentures. Under the Subordinated
Indenture, FPL Group Capital may issue an unlimited amount of additional debt
securities. The Subordinated Indenture does not limit the aggregate amount of
indebtedness FPL Group Capital, FPL Group or their respective subsidiaries may
issue, guarantee or incur.
INTEREST AND MATURITY. Unless an earlier redemption has occurred, the
entire principal amount of the Junior Subordinated Debentures will mature and
become due and payable, together with any accrued and unpaid interest, including
Additional Interest, if any, on March , 2044. See "Description of Junior
Subordinated Debentures and the Subordinated Guarantee--Additional Interest" in
the accompanying prospectus.
Each Junior Subordinated Debenture shall bear interest at the rate of % per
year, from and including the original issue date. Interest will be cumulative
and payable quarterly in arrears on March , June , September and December of
each year, beginning June , 2004.
The amount of interest payable for any period will be computed on the basis
of a 360-day year consisting of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period for which interest
is computed will be computed on the basis of the number of days in the period
using 30-day calendar months. For so long as the Preferred Trust Securities or
Junior Subordinated Debentures distributed to holders of Preferred Trust
Securities remain in book-entry only form, the record date for interest payments
will be one business day prior to the scheduled distribution or interest payment
date. For any of the securities not in book-entry only form, the record date for
interest payments will be the 15th day before the scheduled interest payment
date. In the event that any date on which interest is payable on the Junior
Subordinated Debentures is not a business day, then payment of the interest
payable on that date will be made on the next day which is a business day, and
no interest or payment will be paid in respect of the delay. However, if that
business day is in the next calendar year, that payment will be made on the
preceding business day, in each case with the same force and effect as if made
on the scheduled payment date.
REDEMPTION. FPL Group Capital may redeem any of the Junior Subordinated
Debentures at 100% of their principal amount plus accrued and unpaid interest
thereon, at any time or from time to time on or after March , 2009. FPL Group
Capital also may redeem, at 100% of their principal amount plus accrued and
unpaid interest thereon, including Additional Interest, if any, in whole, but
not in part, the Junior Subordinated Debentures at any time within 90 days after
there is a Special Event. The Trust would use the proceeds of any redemption to
redeem its Preferred Trust Securities and Common Trust Securities.
S-18
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
RELATING TO THE PREFERRED TRUST SECURITIES
The following summary describes material United States federal income tax
consequences of the ownership and disposition of Preferred Trust Securities as
of the date of this prospectus supplement and represents the opinion of Thelen
Reid & Priest LLP, counsel to FPL Group, FPL Group Capital and the Trust,
insofar as it relates to matters of law or legal conclusions. Except where
noted, it deals only with Preferred Trust Securities held as capital assets
within the meaning of Section 1221 of the Internal Revenue Code of 1986, or the
Code, and does not deal with special situations, such as those of dealers in
securities or currencies, financial institutions, life insurance companies, tax
exempt entities, persons holding Preferred Trust Securities as a part of a
hedging or conversion transaction or a straddle, United States holders (as
defined below) whose "functional currency" is not the U.S. dollar, or persons
who are not United States holders. In addition, this discussion does not address
the tax consequences to persons who purchase Preferred Trust Securities other
than in their initial issuance and distribution. Furthermore, the discussion
below is based upon the provisions of the Code and Treasury regulations,
administrative rulings and judicial decisions under the Code and those
regulations as of the date of this prospectus supplement. Those authorities may
be repealed, revoked or modified so as to result in United States federal income
tax consequences different from those discussed below.
PROSPECTIVE PURCHASERS OF PREFERRED TRUST SECURITIES, INCLUDING PERSONS WHO
ARE NOT UNITED STATES HOLDERS AND PERSONS WHO PURCHASE PREFERRED TRUST
SECURITIES IN THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR TAX
ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF PREFERRED TRUST SECURITIES IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX
LAWS.
UNITED STATES HOLDERS. As used in this prospectus supplement, a "United
States holder" means a beneficial owner of a Preferred Trust Security that is:
o a citizen or resident of the United States;
o a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision of
the United States;
o an estate the income of which is subject to United States federal
income taxation regardless of its source; or
o a trust the administration of which is subject to the primary
supervision of a court within the United States and for which one or
more United States persons have the authority to control all
substantial decisions.
CLASSIFICATION OF THE TRUST. Thelen Reid & Priest LLP is of the opinion
that, under current law and assuming full compliance with the terms of the
Subordinated Indenture and the instruments establishing the Trust and other
documents, the Trust should be classified as a "grantor trust" for United States
federal income tax purposes and will not be classified as an association taxable
as a corporation. Each United States holder will be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures. Investors
should be aware that the opinion of Thelen Reid & Priest LLP is not binding on
the Internal Revenue Service or the courts.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES. Thelen Reid & Priest
LLP is of the opinion that, under current law and assuming full compliance with
the terms of the Junior Subordinated Debentures and related documents, the
Junior Subordinated Debentures will constitute indebtedness of FPL Group Capital
for United States federal income tax purposes. Investors should be aware that
the opinion of Thelen Reid & Priest LLP is not binding on the Internal Revenue
Service or the courts. The remainder of this discussion assumes that the Junior
Subordinated Debentures will be classified as indebtedness of FPL Group Capital
for United States federal income tax purposes.
S-19
PAYMENTS OF INTEREST. Except as described below, stated interest on a
Junior Subordinated Debenture will generally be taxable to a United States
holder as ordinary income at the time it is paid or accrued in accordance with
the United States holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT. FPL Group Capital has the right to extend the
interest payment period of the Junior Subordinated Debentures from time to time
for a period not exceeding 20 consecutive quarterly periods prior to the stated
maturity of the Junior Subordinated Debentures.
FPL Group Capital believes that the likelihood of its deferring the payment
of interest on the Junior Subordinated Debentures is "remote" within the meaning
of applicable Treasury regulations, in part because doing so would prevent FPL
Group Capital and FPL Group from making certain payments with respect to their
respective capital stock and certain of their respective debt securities. See
"Description of the Junior Subordinated Debentures and the Subordinated
Guarantee--Option to Extend Interest Payment Period" in the accompanying
prospectus. Consequently, FPL Group Capital believes that the Junior
Subordinated Debentures will not be treated as having been issued with OID for
United States federal income tax purposes. It should be noted that the
applicable Treasury regulations have not yet been addressed in any rulings or
other interpretations by the Internal Revenue Service. Accordingly, it is
possible that the Internal Revenue Service could take a different position.
If FPL Group Capital exercises its right to defer the payment of interest,
the Junior Subordinated Debentures would at that time be treated as having been
retired and reissued with OID. As a result, United States holders would be
required, for the remaining term of the Junior Subordinated Debentures, to
accrue interest income even if they used the cash method of accounting.
Consequently, in the event that the payment of interest was deferred, a United
States holder would be required to include OID in income on an economic accrual
basis, notwithstanding that FPL Group Capital would not make any interest
payments on the Junior Subordinated Debentures during that period.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST. The Junior Subordinated Debentures may be distributed to United States
holders in exchange for the Preferred Trust Securities upon liquidation of the
Trust. Unless the liquidation of the Trust occurs as a result of the Trust being
subject to United States federal income tax with respect to interest on the
Junior Subordinated Debentures, for United States federal income tax purposes
the distribution would be treated as a non-taxable event to each United States
holder, and each United States holder would receive an aggregate tax basis in
the Junior Subordinated Debentures equal to the holder's aggregate tax basis in
its Preferred Trust Securities. A United States holder's holding period for the
Junior Subordinated Debentures received would include the period during which
the holder held the Preferred Trust Securities. If, however, the liquidation of
the Trust were to occur because the Trust was subject to United States federal
income tax with respect to interest on the Junior Subordinated Debentures, the
distribution of the Junior Subordinated Debentures to a United States holder by
the Trust would likely be a taxable event to the holder, and the holder would
recognize gain or loss as if the holder had exchanged its Preferred Trust
Securities for Junior Subordinated Debentures in a taxable exchange. See
"--Sale, Exchange and Redemption of the Preferred Trust Securities."
In specific situations, the Junior Subordinated Debentures may be redeemed
for cash and the proceeds of the redemption distributed to holders of Preferred
Trust Securities in redemption of the Preferred Trust Securities. The redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the Preferred Trust Securities, and a holder would recognize gain
or loss as if the holder had sold such redeemed Preferred Trust Securities. See
"--Sale, Exchange and Redemption of the Preferred Trust Securities."
SALE, EXCHANGE AND REDEMPTION OF THE PREFERRED TRUST SECURITIES. Upon the
sale, exchange or redemption of Preferred Trust Securities, a United States
holder will recognize gain or loss equal to the difference between the amount
realized upon the sale, exchange or redemption, except for amounts attributable
to accrued and unpaid interest, and the holder's adjusted tax basis in the
Preferred Trust Securities. A holder's adjusted tax basis in the Preferred Trust
Securities will generally equal the amount paid for the Preferred Trust
Securities, increased by any OID included in income and decreased by any
subsequent distributions on the Preferred Trust Securities. The gain or loss
will be capital gain or loss and will be long-term capital gain or loss if, at
the time of sale, exchange or redemption, the Preferred Trust Securities have
been held for more than one year. Generally, for non-corporate United States
holders, net long-term capital gains are subject to United States federal income
S-20
tax at a maximum rate of 15% for years 2004 through 2008, and 20% for years 2009
and later. Under current law, deductibility of capital losses is subject to
limitations.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Subject to the qualification
discussed below, income on the Preferred Trust Securities will be reported to
United States holders on Forms 1099, which should be mailed to holders by
January 31 following each calendar year.
If required by law, the Trust will report annually to the holders of record
of the Preferred Trust Securities the interest income paid or OID accrued during
the year with respect to the Junior Subordinated Debentures. The Trust currently
intends to report that information on Form 1099 prior to January 31 following
each calendar year. Under current law, holders of record of Preferred Trust
Securities who hold as nominees for beneficial holders will not have any
obligation to report information regarding the beneficial holders to the Trust.
The Trust, moreover, will not have any obligation to report to beneficial
holders who are not also record holders. Thus, beneficial holders of Preferred
Trust Securities who hold their Preferred Trust Securities through nominee
holders will typically receive Forms 1099 reflecting the income on their
Preferred Trust Securities from the nominee holders rather than from the Trust.
Payments made in respect of, and proceeds from the sale of, Preferred Trust
Securities (or Junior Subordinated Debentures distributed to holders of
Preferred Trust Securities) may be subject to "backup" withholding tax if the
holder fails to comply with specified identification requirements, or has
previously failed to report in full dividend and interest income, or does not
otherwise establish its entitlement to an exemption. The backup withholding tax
rate for the years 2004 through 2010 is 28%; and for years 2011 and later, 31%.
Any withheld amounts will be allowed as a refund or a credit against the
holder's United States federal income tax liability, provided the required
information is provided to the Internal Revenue Service.
S-21
UNDERWRITING
The information in this section adds to the information in the "Plan of
Distribution" section beginning on page 50 of the accompanying prospectus.
Please read these two sections together.
The Trust is selling the Preferred Trust Securities to the underwriters
named in the table below pursuant to an underwriting agreement dated the date of
this prospectus supplement. Subject to certain conditions, the Trust has agreed
to sell to each of the underwriters, and each of the underwriters has severally
agreed to purchase, the number of Preferred Trust Securities set forth opposite
that underwriter's name in the table below:
NUMBER OF
UNDERWRITER PREFERRED TRUST SECURITIES
----------- --------------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................
Citigroup Global Markets Inc.......................
Morgan Stanley & Co. Incorporated..................
Wachovia Capital Markets, LLC......................
Credit Suisse First Boston LLC.....................
Lehman Brothers Inc................................
A.G. Edwards & Sons, Inc...........................
BNY Capital Markets, Inc...........................
Credit Lyonnais Securities (USA) Inc...............
Harris Nesbitt Corp................................
KBC Financial Products.............................
Raymond James & Associates, Inc....................
Robert W. Baird & Co. Incorporated.................
Scotia Capital (USA) Inc...........................
SunTrust Capital Markets, Inc......................
The Williams Capital Group, L.P....................
--------------------------
Total.....................................
==========================
Under the terms and conditions of the underwriting agreement, the
underwriters must buy all of the Preferred Trust Securities if they buy any of
them. The underwriting agreement provides that the obligations of the
underwriters pursuant thereto are subject to certain conditions. In the event of
a default by an underwriter, the underwriting agreement provides that, in
certain circumstances, the purchase commitment of the non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.
The underwriters will sell the Preferred Trust Securities to the public when and
if the underwriters buy the Preferred Trust Securities from the Trust.
The underwriters initially propose to offer part of the Preferred Trust
Securities directly to the public at the initial public offering price set forth
on the cover page of this prospectus supplement and all or part to dealers at a
price that represents a concession not in excess of $ per Preferred Trust
Security under the public offering price. Any underwriter may allow, and the
dealers may reallow, a concession not in excess of $ per Preferred Trust
Security to other underwriters or to other dealers. After the initial offering
of the Preferred Trust Securities, the offering price and other selling terms
may from time to time be varied by the underwriters named on the cover page of
this prospectus supplement.
Prior to this offering, there has been no market for the Preferred Trust
Securities. The Trust plans to list the Preferred Trust Securities on the New
York Stock Exchange, and trading of the Preferred Trust Securities on the New
York Stock Exchange is expected to begin within a 30-day period after the
Preferred Trust Securities are first issued. FPL Group and the Trust have been
advised by the underwriters that they intend to make a market in the Preferred
Trust Securities prior to the commencement of trading on the New York Stock
Exchange but are not obligated to do so and may discontinue their market making
at any time without notice. There can be no assurance that an active trading
S-22
market will develop for the Preferred Trust Securities or that the Preferred
Trust Securities will trade at or above the initial price to the public in the
public market subsequent to offering.
In order to facilitate the offering of the Preferred Trust Securities, the
underwriters may engage in transactions that stabilize, maintain, or otherwise
affect the price of the Preferred Trust Securities. Specifically, the
underwriters may over-allot in connection with the offering, creating a short
position in the Preferred Trust Securities for their own account. In addition,
to cover over-allotments or to stabilize the price of the Preferred Trust
Securities, the underwriters may bid for, and purchase, the Preferred Trust
Securities in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Preferred Trust Securities in the offering, if the syndicate repurchases
previously distributed Preferred Trust Securities in transactions to cover
syndicate short positions, in stabilization transactions, or otherwise. Any of
these activities may stabilize or maintain the market price of the Preferred
Trust Securities above independent market levels. The underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
FPL Group Capital will pay the expenses incurred in connection with the
offer and sale of the Preferred Trust Securities and estimates that those
expenses, other than underwriting discounts, will be $600,000. This estimate
includes expenses relating to printing, rating agency fees, trustees' fees and
legal fees, among other expenses. The underwriters have agreed to make a payment
to FPL Group Capital in lieu of reimbursement of expenses in connection with the
offering.
Because the proceeds of the sale of the Preferred Trust Securities will
ultimately be used to purchase the Junior Subordinated Debentures of FPL Group
Capital, the underwriting agreement provides that FPL Group Capital will pay to
the underwriters as compensation for their services $ per Preferred Trust
Security, or $ in the aggregate.
FPL Group, FPL Group Capital and the Trust have agreed to indemnify the
underwriters against, or contribute to payments the underwriters may be required
to make in respect of, certain liabilities, including liabilities under the
Securities Act of 1933.
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, FPL Group, its subsidiaries and its affiliates
in the ordinary course of business and have engaged, and may engage in the
future engage, in commercial banking and investment banking transactions with
FPL Group, its subsidiaries and its affiliates.
LEGAL OPINIONS
The information in this section replaces the information in the "Legal
Opinions" section beginning on page 51 of the accompanying prospectus.
Certain matters of Delaware law relating to the validity of the Preferred
Trust Securities will be passed upon on behalf of FPL Group, FPL Group Capital
and the Trust by Morris, James, Hitchens & Williams LLP, special Delaware
counsel to FPL Group, FPL Group Capital and the Trust. The validity of the
Junior Subordinated Debentures, the Subordinated Guarantee and Preferred Trust
Securities Guarantee and certain matters relating thereto will be passed on
behalf of FPL Group and FPL Group Capital by Thelen Reid & Priest LLP, New York,
New York and Steel Hector & Davis LLP, Miami, Florida, co-counsel to FPL Group
and FPL Group Capital. Thelen Reid & Priest LLP will also pass upon certain
matters relating to United States federal income tax consequences. Certain legal
matters will be passed upon for the Underwriters by Hunton & Williams LLP, New
York, New York. Thelen Reid & Priest LLP and Hunton & Williams LLP may rely as
to all matters of Florida law upon the opinion of Steel Hector & Davis LLP, and
Steel Hector & Davis LLP may rely as to all matters of New York law upon the
opinion of Thelen Reid & Priest LLP.
S-23
PROSPECTUS
FPL GROUP CAPITAL INC
DEBT SECURITIES AND JUNIOR SUBORDINATED DEBENTURES
GUARANTEED AS DESCRIBED IN THIS PROSPECTUS BY
FPL GROUP, INC.
--------------------------
FPL GROUP, INC.
COMMON STOCK WITH ATTACHED PREFERRED SHARE PURCHASE RIGHTS
STOCK PURCHASE CONTRACTS
AND
STOCK PURCHASE UNITS
--------------------------
FPL GROUP CAPITAL TRUST I
FPL GROUP CAPITAL TRUST II
PREFERRED TRUST SECURITIES
GUARANTEED AS DESCRIBED IN THIS PROSPECTUS BY
FPL GROUP, INC.
--------------------------
Each of FPL Group, Inc., FPL Group Capital Inc, FPL Group Capital Trust I
and FPL Group Capital Trust II may offer from time to time up to $1,337,450,000
of securities provided that the aggregate amount of securities offered by all
such issuers may not exceed $1,337,450,000. In addition, FPL Group Capital may
offer from time to time up to $662,550,000 of additional debt securities
guaranteed by FPL Group.
FPL Group, FPL Group Capital, FPL Group Capital Trust I and FPL Group
Capital Trust II will provide specific terms of the securities, including the
offering prices, in supplements to this prospectus. The supplements may also
add, update or change information contained in this prospectus. You should read
this prospectus and any supplements carefully before you invest.
FPL Group's common stock is listed on the New York Stock Exchange and
trades under the symbol "FPL."
FPL Group, FPL Group Capital, FPL Group Capital Trust I and FPL Group
Capital Trust II may offer these securities directly or through underwriters,
agents or dealers. The supplements to this prospectus will describe the terms of
any particular plan of distribution, including any underwriting arrangements.
The "Plan of Distribution" section beginning on page 50 of this prospectus also
provides more information on this topic.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS TO READ ABOUT
CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE MAKING AN INVESTMENT IN THESE
SECURITIES.
FPL Group's, FPL Group Capital's, FPL Group Capital Trust I's and FPL Group
Capital Trust II's principal executive offices are located at 700 Universe
Boulevard, Juno Beach, Florida 33408, telephone number (561) 694-4000, and their
mailing address is P.O. Box 14000, Juno Beach, Florida 33408-0420.
---------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
April 3, 2003
ABOUT THIS PROSPECTUS
This prospectus is a combined prospectus which relates to two different
registration statements filed at different times with the Securities and
Exchange Commission ("SEC"), each using a "shelf" registration process. The
registration statements to which this combined prospectus relates are the
following:
(1) Registration Statement Nos. 333-85218 and 333-85218-01, declared
effective by the SEC on April 24, 2002, pursuant to which FPL Group
Capital may offer from time to time, in one or more offerings, up to a
total of $662,550,000 of debt securities guaranteed by FPL Group; and
(2) Registration Statement Nos. 333-102173, 333-102173-01, 333-102173-02
and 333-102173-03, declared effective by the SEC on April 3, 2003,
pursuant to which
(a) FPL Group may offer from time to time, in one or more offerings,
up to a total of $1,337,450,000 of common stock with attached
preferred share purchase rights, stock purchase contracts, stock
purchase units, guarantees of FPL Group Capital's debt securities
and junior subordinated debentures and/or guarantees of the
preferred trust securities of FPL Group Capital Trust I and FPL
Group Capital Trust II,
(b) FPL Group Capital may offer from time to time, in one or more
offerings, up to a total of $1,337,450,000 of debt securities and
junior subordinated debentures, and
(c) FPL Group Capital Trust I and FPL Group Capital Trust II may
offer from time to time, in one or more offerings, up to a total
of $1,337,450,000 of preferred trust securities;
provided that the aggregate amount of all such securities or
combinations of such securities offered by FPL Group, FPL Group
Capital, FPL Group Capital Trust I and FPL Group Capital Trust II
under that registration statement may not exceed $1,337,450,000. FPL
Group Capital Trust I and FPL Group Capital Trust II are each referred
to in this prospectus as the "Trust."
This prospectus provides you with a general description of the securities
that FPL Group, FPL Group Capital and/or the Trust may offer. Each time FPL
Group, FPL Group Capital and/or the Trust sells securities, FPL Group, FPL Group
Capital and/or the Trust will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read both this prospectus and any prospectus supplement together with
additional information described under the headings "Where You Can Find More
Information" and "Incorporation by Reference."
For more detailed information about the securities, you can read the
exhibits to the registration statement. Those exhibits have been either filed
with the registration statement or incorporated by reference to earlier SEC
filings listed in the registration statement.
2
RISK FACTORS
Before purchasing the securities, investors should carefully consider the
following risk factors together with the other information incorporated by
reference or provided in this prospectus or in a prospectus supplement in order
to evaluate an investment in the securities.
FPL GROUP AND FPL GROUP CAPITAL ARE SUBJECT TO COMPLEX LAWS AND REGULATIONS AND
TO CHANGES IN LAWS AND REGULATIONS, INCLUDING INITIATIVES REGARDING
RESTRUCTURING OF THE ENERGY INDUSTRY. THESE FACTORS MAY HAVE A NEGATIVE IMPACT
ON THE BUSINESS AND RESULTS OF OPERATIONS OF FPL GROUP AND FPL GROUP CAPITAL.
FPL Group and FPL Group Capital are subject to changes in laws or
regulations, including the Public Utility Regulatory Policies Act of 1978 and
the Public Utility Holding Company Act of 1935, changing governmental policies
and regulatory actions, including those of the Federal Energy Regulatory
Commission, the Florida Public Service Commission and the utility commissions of
other states in which FPL Group or FPL Group Capital have operations, and the
U.S. Nuclear Regulatory Commission, with respect to, among other things, allowed
rates of return, industry and rate structure, operation of nuclear power
facilities, operation and construction of plant facilities, operation and
construction of transmission facilities, acquisition, disposal, depreciation and
amortization of assets and facilities, recovery of fuel and purchased power
costs, decommissioning costs, return on common equity and equity ratio limits,
and present or prospective wholesale and retail competition (including but not
limited to retail wheeling and transmission costs). The Florida Public Service
Commission has the authority to disallow recovery of costs that it considers
excessive or imprudently incurred.
The regulatory process generally restricts Florida Power & Light Company's
ability to grow earnings and does not provide any assurance as to achievement of
earnings levels.
FPL Group and FPL Group Capital are subject to extensive federal, state and
local environmental statutes, rules and regulations relating to air quality,
water quality, waste management, natural resources and health and safety that
could, among other things, restrict or limit the use of certain fuels required
for the production of electricity. There are significant capital, operating and
other costs associated with compliance with these environmental statutes, rules
and regulations, and those costs could be even more significant in the future.
FPL Group and FPL Group Capital operate in a changing market environment
influenced by various legislative and regulatory initiatives regarding
deregulation, regulation or restructuring of the energy industry, including
deregulation of the production and sale of electricity. FPL Group and its
subsidiaries will need to adapt to these changes and may face increasing
competitive pressure.
THE OPERATION OF POWER GENERATION FACILITIES, INCLUDING NUCLEAR FACILITIES,
INVOLVES SIGNIFICANT RISKS THAT COULD ADVERSELY AFFECT THE RESULTS OF OPERATIONS
AND FINANCIAL CONDITION OF FPL GROUP AND FPL GROUP CAPITAL.
The operation of power generation facilities involves many risks, including
start up risks, breakdown or failure of equipment, transmission lines or
pipelines, the dependence on a specific fuel source or the impact of unusual or
adverse weather conditions (including natural disasters such as hurricanes), as
well as the risk of performance below expected levels of output or efficiency.
This could result in lost revenues and/or increased expenses. Insurance,
warranties or performance guarantees may not cover any or all of the lost
revenues or increased expenses, including the cost of replacement power. In
addition to these risks, FPL Group's nuclear units face certain risks that are
unique to the nuclear industry including additional regulatory actions up to and
including shut down of the units stemming from public safety concerns, whether
at FPL Group's plants or at the plants of other nuclear operators. Breakdown or
failure of an operating facility of FPL Energy, LLC, a subsidiary of FPL Group
Capital, may prevent the facility from performing under applicable power sales
agreements which, in certain situations, could result in termination of the
agreement or incurring a liability for liquidated damages.
3
THE CONSTRUCTION OF, AND CAPITAL IMPROVEMENTS TO, POWER GENERATION FACILITIES
INVOLVE SUBSTANTIAL RISKS. SHOULD CONSTRUCTION OR CAPITAL IMPROVEMENT EFFORTS BE
UNSUCCESSFUL, THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF FPL GROUP AND
FPL GROUP CAPITAL COULD BE NEGATIVELY AFFECTED.
FPL Group's and FPL Group Capital's ability to successfully and timely
complete their power generation facilities currently under construction, those
projects yet to begin construction or capital improvements to existing
facilities is contingent upon many variables and subject to substantial risks.
Should any such efforts be unsuccessful, FPL Group and FPL Group Capital could
be subject to additional costs, termination payments under committed contracts
and/or the write off of their investment in the project or improvement.
THE USE OF DERIVATIVE CONTRACTS BY FPL GROUP AND FPL GROUP CAPITAL IN THE NORMAL
COURSE OF BUSINESS COULD RESULT IN FINANCIAL LOSSES THAT NEGATIVELY IMPACT THE
RESULTS OF OPERATIONS OF FPL GROUP AND FPL GROUP CAPITAL.
FPL Group and FPL Group Capital use derivative instruments, such as swaps,
options, futures and forwards to manage their commodity and financial market
risks, and to a lesser extent, engage in limited trading activities. FPL Group
and FPL Group Capital could recognize financial losses as a result of volatility
in the market values of these contracts, or if a counterparty fails to perform.
In addition, Florida Power & Light Company's use of such instruments could be
subject to prudency challenges by the Florida Public Service Commission and if
found imprudent, cost disallowance.
FPL GROUP'S UNREGULATED BUSINESSES, PARTICULARLY FPL ENERGY, ARE SUBJECT TO
RISKS, MANY OF WHICH ARE BEYOND THE CONTROL OF FPL GROUP AND FPL GROUP CAPITAL,
THAT MAY REDUCE THE REVENUES AND ADVERSELY IMPACT THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF FPL GROUP AND FPL GROUP CAPITAL.
There are other risks associated with FPL Group's and FPL Group Capital's
nonregulated businesses, particularly FPL Energy. In addition to risks discussed
elsewhere, risk factors specifically affecting FPL Energy's success in
competitive wholesale markets include the ability to efficiently develop and
operate generating assets, the price and supply of fuel, transmission
constraints, competition from new sources of generation, excess generation
capacity and demand for power. There can be significant volatility in market
prices for fuel and electricity, and there are other financial, counterparty and
market risks that are beyond the control of FPL Energy. FPL Energy's inability
or failure to effectively hedge its assets or positions against changes in
commodity prices, interest rates, counterparty credit risk or other risk
measures could significantly impair its future financial results. In keeping
with industry trends, a portion of FPL Energy's power generation facilities
operate wholly or partially without long-term power purchase agreements. As a
result, power from these facilities is sold on the spot market or on a
short-term contractual basis, which may affect the volatility of FPL Group's and
FPL Group Capital's financial results. In addition, FPL Energy's business
depends upon transmission facilities owned and operated by others; if
transmission is disrupted or capacity is inadequate or unavailable FPL Energy's
ability to sell and deliver its wholesale power may be limited.
FPL GROUP'S AND FPL GROUP CAPITAL'S ABILITY TO SUCCESSFULLY IDENTIFY AND
COMPLETE ACQUISITIONS IS SUBJECT TO SIGNIFICANT RISKS, INCLUDING THE EFFECT OF
INCREASED COMPETITION RESULTING FROM THE CONSOLIDATION OF THE POWER INDUSTRY.
FPL Group and FPL Group Capital are likely to encounter significant
competition for acquisition opportunities that may become available as a result
of the consolidation of the power industry. In addition, FPL Group and FPL Group
Capital may be unable to identify attractive acquisition opportunities at
favorable prices and to successfully and timely complete and integrate them.
BECAUSE FPL GROUP AND FPL GROUP CAPITAL RELY ON ACCESS TO CAPITAL MARKETS, THE
INABILITY TO ACCESS CAPITAL MARKETS ON FAVORABLE TERMS MAY LIMIT THE ABILITY OF
FPL GROUP AND FPL GROUP CAPITAL TO GROW THEIR BUSINESSES AND WOULD LIKELY
INCREASE INTEREST COSTS.
FPL Group and FPL Group Capital rely on access to capital markets as a
significant source of liquidity for capital requirements not satisfied by
operating cash flows. The inability of FPL Group and FPL Group Capital to
4
maintain their current credit ratings could affect their ability to raise
capital on favorable terms, particularly during times of uncertainty in the
capital markets which, in turn could impact FPL Group's and FPL Group Capital's
ability to grow their businesses and would likely increase their interest costs.
WEATHER CONDITIONS CAN AFFECT FPL GROUP'S AND FPL GROUP CAPITAL'S RESULTS OF
OPERATIONS.
FPL Group's and FPL Group Capital's results of operations can be affected
by changes in the weather. Weather conditions directly influence the demand for
electricity and natural gas and affect the price of energy commodities, and can
affect the production of electricity at wind and hydro-powered facilities. In
addition, severe weather can be destructive, causing outages and/or property
damage, which could require additional costs to be incurred.
FPL GROUP AND FPL GROUP CAPITAL ARE SUBJECT TO COSTS AND OTHER EFFECTS OF LEGAL
PROCEEDINGS, CHANGES IN TAX AND INFLATION RATES, AND CHANGES IN OR ADDITIONS TO
APPLICABLE TAX POLICIES, RATES OF INFLATION AND ACCOUNTING STANDARDS.
FPL Group and FPL Group Capital are subject to costs and other effects of
legal and administrative proceedings, settlements, investigations and claims; as
well as the effect of new, or changes in, tax rates or policies, rates of
inflation or accounting standards.
THREATS OF TERRORISM AND CATASTROPHIC EVENTS THAT COULD RESULT FROM TERRORISM
MAY IMPACT THE OPERATIONS OF FPL GROUP AND FPL GROUP CAPITAL IN UNPREDICTABLE
WAYS.
FPL Group and FPL Group Capital are subject to direct and indirect effects
of terrorist threats and activities. Generation and transmission facilities, in
general, have been identified as potential targets. The effects of terrorist
threats and activities include, among other things, terrorist actions or
responses to such actions or threats, the inability to generate, purchase or
transmit power, the risk of a significant slowdown in growth or a decline in the
U.S. economy, delay in economic recovery in the U.S., and the increased cost and
adequacy of security and insurance.
THE ABILITY OF FPL GROUP AND FPL GROUP CAPITAL TO OBTAIN INSURANCE AND THE TERMS
OF ANY AVAILABLE INSURANCE COVERAGE COULD BE AFFECTED BY NATIONAL AND
COMPANY-SPECIFIC EVENTS.
FPL Group's and FPL Group Capital's ability to obtain insurance, and the
cost of and coverage provided by such insurance, could be affected by national
events as well as company-specific events.
FPL GROUP AND FPL GROUP CAPITAL ARE SUBJECT TO EMPLOYEE WORKFORCE FACTORS THAT
COULD AFFECT THE BUSINESSES AND FINANCIAL CONDITION OF FPL GROUP AND FPL GROUP
CAPITAL.
FPL Group and FPL Group Capital are subject to employee workforce factors,
including loss or retirement of key executives, availability of qualified
personnel, collective bargaining agreements with union employees or work
stoppage that could affect the business and financial condition of FPL Group and
FPL Group Capital.
FPL GROUP CAPITAL
FPL Group Capital was incorporated in 1985 as a Florida corporation and is
a wholly-owned subsidiary of FPL Group. FPL Group Capital holds the capital
stock of, and provides funding for, FPL Group's operating subsidiaries other
than Florida Power & Light Company. These operating subsidiaries' business
activities primarily consist of independent power projects.
5
FPL GROUP
FPL Group is a holding company incorporated in 1984 as a Florida
corporation. FPL Group's principal subsidiary, Florida Power & Light Company, is
engaged in the generation, transmission, distribution and sale of electric
energy. Other operations are conducted through FPL Group Capital. FPL Group is a
public utility holding company, as defined in the Public Utility Holding Company
Act of 1935. FPL Group is exempt from substantially all of the provisions of the
Public Utility Holding Company Act of 1935 on the basis that the businesses of
FPL Group and Florida Power & Light Company, FPL Group's principal subsidiary,
are predominantly intrastate in character.
FPL GROUP CAPITAL TRUST I AND FPL GROUP CAPITAL TRUST II
FPL Group Capital Trust I and FPL Group Capital Trust II are identical
Delaware statutory trusts created pursuant to separate trust agreements among
FPL Group as depositor of the Trust, The Bank of New York as the Property
Trustee, The Bank of New York (Delaware) as the Delaware Trustee and one or more
Administrative Trustees appointed by FPL Group. The trust agreements will be
amended and restated substantially in the form filed as an exhibit to the
registration statement. Each trust agreement, as so amended and restated, is
referred to in this prospectus as the "Trust Agreement." The Trust exists only
to issue its preferred trust securities and common trust securities and to hold
the junior subordinated debentures of FPL Group Capital as trust assets. All of
the common trust securities will be owned by FPL Group. The common trust
securities will represent at least 3% of the total capital of the Trust.
Payments on any distribution payment date or redemption date will be made on the
common trust securities pro rata with the preferred trust securities, except
that the common trust securities' right to payment will be subordinated to the
rights of the preferred trust securities if there is a default under the trust
agreement. The Trust has a term of approximately 40 years, but may dissolve
earlier as provided in the Trust Agreement.
The Trust's business and affairs will be conducted by its Administrative
Trustees. The office of the Delaware Trustee in the State of Delaware is White
Clay Center, Route 273, Newark, Delaware 19711. The principal place of business
of the Trust is 700 Universe Boulevard, Juno Beach, Florida 33408, and the
telephone number is (561) 694-4000.
USE OF PROCEEDS
Unless otherwise stated in a prospectus supplement, FPL Group Capital and
FPL Group will each add the net proceeds from the sale of these securities to
its respective general funds. FPL Group uses its general funds for corporate
purposes, including to provide funds for its subsidiaries. FPL Group Capital
uses its general funds for corporate purposes, including to repay short-term
borrowings and to redeem or repurchase outstanding long-term debt obligations.
FPL Group Capital and FPL Group will each temporarily invest any proceeds that
it does not need to use immediately in short-term instruments.
The Trust will use the proceeds from the sale of preferred trust securities
and common trust securities to invest in junior subordinated debentures issued
by FPL Group Capital. FPL Group Capital will add the net proceeds from the sale
of such junior subordinated debentures to its general funds, which will be used
as described above.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table shows FPL Group's consolidated ratio of earnings to
fixed charges for each of its last five fiscal years:
Years Ended December 31,
---------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
3.08 3.77 4.30 5.26 3.88
6
WHERE YOU CAN FIND MORE INFORMATION
FPL Group files annual, quarterly and other reports and other information
with the SEC. You can read and copy any information filed by FPL Group with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain additional information about the Public Reference
Room by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains an Internet site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including FPL Group.
FPL Group also maintains an Internet site (http://www.fplgroup.com).
FPL Group Capital does not file reports or other information with the SEC.
FPL Group includes summarized financial information relating to FPL Group
Capital in some of its reports filed with the SEC. FPL Group does not intend to
include any separate financial information with respect to FPL Group Capital in
its consolidated financial statements because FPL Group and FPL Group Capital
have determined that this information is not material to the holders of FPL
Group Capital's debt securities.
No separate financial statements of the Trust are included in this
prospectus. FPL Group and the Trust do not consider those financial statements
to be material to holders of the preferred trust securities because (1) the
Trust is a newly formed special purpose entity and has no operating history or
independent operations, and (2) the Trust is not engaged in and does not propose
to engage in any activity other than holding as trust assets the junior
subordinated debentures of FPL Group Capital and issuing its preferred trust
securities and common trust securities. FPL Group and the Trust do not expect
the Trust to file periodic reports under Sections 13 or 15(d) of the Securities
Exchange Act of 1934.
INCORPORATION BY REFERENCE
The SEC allows FPL Group Capital, FPL Group and the Trust to "incorporate
by reference" the information that FPL Group files with the SEC, which means
that FPL Group Capital, FPL Group and the Trust may, in this prospectus,
disclose important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus.
Information that FPL Group files in the future with the SEC will automatically
update and supersede this information. FPL Group Capital, FPL Group and the
Trust are incorporating by reference the document listed below and any future
filings FPL Group makes with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 after the date of this prospectus until FPL
Group, FPL Group Capital and/or the Trust sell all of these securities:
(1) FPL Group's Annual Report on Form 10-K for the year ended December 31, 2002.
You may request a copy of these documents, at no cost to you, by writing or
calling Robert J. Reger, Jr., Esq., Thelen Reid & Priest LLP, 875 Third Avenue,
New York, New York, 10022, (212) 603-2000. FPL Group will provide to each
person, including any beneficial owner, to whom this prospectus is delivered, a
copy of any or all of the information that has been incorporated by reference in
this prospectus but not delivered with this prospectus.
CAUTIONARY STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, FPL Group, FPL Group Capital and the Trust are
hereby filing cautionary statements identifying important factors that could
cause FPL Group's and FPL Group Capital's actual results to differ materially
from those projected in forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995) made by or on behalf of
FPL Group, FPL Group Capital and the Trust in this prospectus or any supplement
to this prospectus, in presentations, in response to questions or otherwise. Any
statements that express, or involve discussions as to expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as "will likely result," "are
expected to," "will continue," "is anticipated," "estimated," "projection,"
"target," "outlook") are not statements of historical facts and may be
forward-looking. Forward-looking statements involve estimates, assumptions and
uncertainties. Accordingly, any such statements are qualified in their entirety
7
by reference to, and are accompanied by, the specific factors discussed in "Risk
Factors" herein and in the reports that are incorporated herein by reference (in
addition to any assumptions and other factors referred to specifically in
connection with such forward-looking statements) that could cause FPL Group's or
FPL Group Capital's actual results to differ materially from those contained in
forward-looking statements made by or on behalf of FPL Group, FPL Group Capital
or the Trust.
Any forward-looking statement speaks only as of the date on which that
statement is made, and neither FPL Group, FPL Group Capital nor the Trust
undertakes any obligation to update any forward-looking statement to reflect
events or circumstances after the date on which that statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to
time and it is not possible for management to predict all of those factors, nor
can it assess the impact of each of those factors on the business or the extent
to which any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking statement.
The issues and associated risks and uncertainties discussed in "Risk
Factors" herein and in the reports that are incorporated by reference herein are
not the only ones FPL Group or FPL Group Capital may face. Additional issues may
arise or become material as the energy industry evolves. The risks and
uncertainties associated with those additional issues could impair FPL Group's
and FPL Group Capital's businesses in the future.
DESCRIPTION OF OFFERED DEBT SECURITIES
GENERAL. FPL Group Capital will issue its debt securities (other than the
Junior Subordinated Debentures (as defined herein)), in one or more series,
under an Indenture, dated as of June 1, 1999, between FPL Group Capital and The
Bank of New York, as trustee. This Indenture, as it may be amended and
supplemented from time to time, is referred to in this prospectus as the
"Indenture." The Bank of New York, as trustee under the Indenture, is referred
to in this prospectus as the "Indenture Trustee." These debt securities are
referred to in this prospectus as the "Offered Debt Securities."
The Indenture provides for the issuance from time to time of debentures,
notes or other debt by FPL Group Capital in an unlimited amount. The Offered
Debt Securities and all other debentures, notes or other debt of FPL Group
Capital issued under the Indenture are collectively referred to in this
prospectus as the "Debt Securities."
This section briefly summarizes some of the terms of the Offered Debt
Securities and some of the provisions of the Indenture. This summary does not
contain a complete description of the Offered Debt Securities. You should read
this summary together with the Indenture and the officer's certificates or other
documents establishing the Offered Debt Securities for a complete understanding
of all the provisions and for the definitions of some terms used in this
summary. The Indenture, the form of officer's certificate that may be used to
establish a series of Offered Debt Securities and a form of Offered Debt
Securities have been previously filed with the SEC, and are exhibits to the
registration statement filed with the SEC of which this prospectus is a part. In
addition, the Indenture is qualified under the Trust Indenture Act of 1939 and
is therefore subject to the provisions of the Trust Indenture Act of 1939. You
should read the Trust Indenture Act of 1939 for a complete understanding of its
provisions.
Each series of Offered Debt Securities may have different terms. FPL Group
Capital will include some or all of the following information about a specific
series of Offered Debt Securities in the prospectus supplement(s) relating to
those Offered Debt Securities:
(1) the title of those Offered Debt Securities,
(2) any limit upon the aggregate principal amount of those Offered
Debt Securities,
(3) the date(s) on which FPL Group Capital will pay the principal of
those Offered Debt Securities,
8
(4) the rate(s) of interest on those Offered Debt Securities, or how
the rate(s) of interest will be determined, the date(s) from
which interest will accrue, the dates on which FPL Group Capital
will pay interest and the record date for any interest payable on
any interest payment date,
(5) the person to whom FPL Group Capital will pay interest on those
Offered Debt Securities on any interest payment date, if other
than the person in whose name those Offered Debt Securities are
registered at the close of business on the record date for that
interest payment,
(6) the place(s) at which or methods by which FPL Group Capital will
make payments on those Offered Debt Securities and the place(s)
at which or methods by which the registered owners of those
Offered Debt Securities may transfer or exchange those Offered
Debt Securities and serve notices and demands to or upon FPL
Group Capital,
(7) the security registrar and any paying agent or agents for those
Offered Debt Securities,
(8) any date(s) on which, the price(s) at which and the terms and
conditions upon which FPL Group Capital may, at its option,
redeem those Offered Debt Securities, in whole or in part, and
any restrictions on those redemptions,
(9) any sinking fund or other provisions or options held by the
registered owners of those Offered Debt Securities that would
obligate FPL Group Capital to repurchase or redeem those Offered
Debt Securities,
(10) the denominations in which FPL Group Capital may issue those
Offered Debt Securities, if other than denominations of $1,000
and any integral multiple of $1,000,
(11) the currency or currencies in which FPL Group Capital may pay the
principal of or premium, if any, or interest on those Offered
Debt Securities (if other than in U.S. dollars),
(12) if FPL Group Capital or a registered owner may elect to pay, or
receive, principal of or premium, if any, or interest on those
Offered Debt Securities in a currency other than that in which
those Offered Debt Securities are stated to be payable, the terms
and conditions upon which that election may be made,
(13) if FPL Group Capital will, or may, pay the principal of or
premium, if any, or interest on those Offered Debt Securities in
securities or other property, the type and amount of those
securities or other property and the terms and conditions upon
which FPL Group Capital or a registered owner may elect to pay or
receive those payments,
(14) if the amount payable in respect of principal of or premium, if
any, or interest on those Offered Debt Securities may be
determined by reference to an index or other fact or event
ascertainable outside of the Indenture, the manner in which those
amounts will be determined,
(15) the portion of the principal amount of those Offered Debt
Securities that FPL Group Capital will pay upon declaration of
acceleration of the maturity of those Offered Debt Securities, if
other than the entire principal amount of those Offered Debt
Securities,
(16) any events of default with respect to those Offered Debt
Securities and any covenants of FPL Group Capital for the benefit
of the registered owners of those Offered Debt Securities, other
than those specified in the Indenture,
(17) the terms, if any, pursuant to which those Offered Debt
Securities may be exchanged for shares of capital stock or other
securities of any other entity,
9
(18) a definition of "Eligible Obligations" under the Indenture with
respect to those Offered Debt Securities denominated in a
currency other than U.S. dollars, and any other provisions for
the reinstatement of FPL Group Capital's indebtedness in respect
of those Offered Debt Securities after their satisfaction and
discharge,
(19) if FPL Group Capital will issue those Offered Debt Securities in
global form, necessary information relating to the issuance of
those Offered Debt Securities in global form,
(20) if FPL Group Capital will issue those Offered Debt Securities as
bearer securities, necessary information relating to the issuance
of those Offered Debt Securities as bearer securities,
(21) any limits on the rights of the registered owners of those
Offered Debt Securities to transfer or exchange those Offered
Debt Securities or to register their transfer, and any related
service charges,
(22) any exceptions to the provisions governing payments due on legal
holidays or any variations in the definition of business day with
respect to those Offered Debt Securities,
(23) other than the Guarantee described under "Description of the Debt
Securities Guarantee" below, any collateral security, assurance,
or guarantee for those Offered Debt Securities, and
(24) any other terms of those Offered Debt Securities that are not
inconsistent with the provisions of the Indenture. (Indenture,
Section 301).
FPL Group Capital may sell Offered Debt Securities at a discount below
their principal amount. Some of the important United States federal income tax
considerations applicable to Offered Debt Securities sold at a discount below
their principal amount may be discussed in the related prospectus supplement. In
addition, some of the important United States federal income tax or other
considerations applicable to any Offered Debt Securities that are denominated in
a currency other than U.S. dollars may be discussed in the related prospectus
supplement.
Except as otherwise stated in the related prospectus supplement, the
covenants in the Indenture would not give registered owners of Offered Debt
Securities protection in the event of a highly-leveraged transaction involving
FPL Group Capital or FPL Group.
SECURITY AND RANKING. The Offered Debt Securities will be unsecured
obligations of FPL Group Capital. The Indenture does not limit FPL Group
Capital's ability to provide security with respect to other Debt Securities. All
Debt Securities issued under the Indenture will rank equally and ratably with
all other Debt Securities issued under the Indenture, except to the extent that
FPL Group Capital elects to provide security with respect to any Debt Security
without providing that security to all outstanding Debt Securities as allowed
under the Indenture. The Offered Debt Securities will rank senior to the Junior
Subordinated Debentures. The Indenture does not limit FPL Group Capital's
ability to issue other unsecured debt.
FPL Group Capital is a holding company that derives substantially all of
its income from its operating subsidiaries. Therefore, the Debt Securities will
be effectively subordinated to all indebtedness and other liabilities, including
trade payables, debt and preferred stock, incurred or issued by FPL Group
Capital's subsidiaries. The Indenture does not place any limit on the amounts of
liabilities, including debt or preferred stock, that FPL Group Capital's
subsidiaries may issue, guarantee or otherwise incur.
PAYMENT AND PAYING AGENTS. Except as stated in the related prospectus
supplement, on each interest payment date FPL Group Capital will pay interest on
each Offered Debt Security to the person in whose name that Offered Debt
Security is registered as of the close of business on the record date relating
to that interest payment date. However, on the date that the Offered Debt
Securities mature, FPL Group Capital will pay the interest to the person to whom
it pays the principal. Also, if FPL Group Capital has defaulted in the payment
of interest on any Offered Debt Security, it may pay that defaulted interest to
the registered owner of that Offered Debt Security:
10
(1) as of the close of business on a date that the Indenture Trustee
selects, which may not be more than 15 days or less than 10 days
before the date that FPL Group Capital proposes to pay the defaulted
interest, or
(2) in any other lawful manner that does not violate the requirements of
any securities exchange on which that Offered Debt Security is listed
and that the Indenture Trustee believes is acceptable. (Indenture,
Section 307).
Unless otherwise stated in the related prospectus supplement, the
principal, premium, if any, and interest on the Offered Debt Securities at
maturity will be payable when such Offered Debt Securities are presented at the
main corporate trust office of The Bank of New York, as paying agent, in The
City of New York. FPL Group Capital may change the place of payment on the
Offered Debt Securities, appoint one or more additional paying agents, including
itself, and remove any paying agent. (Indenture, Section 602).
TRANSFER AND EXCHANGE. Unless otherwise stated in the related prospectus
supplement, Offered Debt Securities may be transferred or exchanged at the main
corporate trust office of The Bank of New York, as security registrar, in The
City of New York. FPL Group Capital may change the place for transfer and
exchange of the Offered Debt Securities and may designate one or more additional
places for that transfer and exchange.
Except as otherwise stated in the related prospectus supplement, there will
be no service charge for any transfer or exchange of the Offered Debt
Securities. However, FPL Group Capital may require payment of any tax or other
governmental charge in connection with any transfer or exchange of the Offered
Debt Securities.
FPL Group Capital will not be required to transfer or exchange any Offered
Debt Security selected for redemption. Also, FPL Group Capital will not be
required to transfer or exchange any Offered Debt Security during a period of 15
days before selection of Offered Debt Securities to be redeemed. (Indenture,
Section 305).
DEFEASANCE. FPL Group Capital may, at any time, elect to have all of its
obligations discharged with respect to all or a portion of any Debt Securities.
To do so, FPL Group Capital must irrevocably deposit with the Indenture Trustee
or any paying agent, in trust:
(1) money in an amount that will be sufficient to pay all or that portion
of the principal, premium, if any, and interest due and to become due
on those Debt Securities, on or prior to their maturity, or
(2) in the case of a deposit made prior to the maturity of that series of
Debt Securities,
(a) direct obligations of, or obligations unconditionally guaranteed
by, the United States and entitled to the benefit of its full
faith and credit that do not contain provisions permitting their
redemption or other prepayment at the option of their issuer, and
(b) certificates, depositary receipts or other instruments that
evidence a direct ownership interest in those obligations or in
any specific interest or principal payments due in respect of
those obligations that do not contain provisions permitting their
redemption or other prepayment at the option of their issuer, the
principal of and the interest on which, when due, without any
regard to reinvestment of that principal or interest, will
provide money that, together with any money deposited with or
held by the Indenture Trustee, will be sufficient to pay all or
that portion of the principal, premium, if any, and interest due
and to become due on those Debt Securities, on or prior to their
maturity, or
(3) a combination of (1) and (2) that will be sufficient to pay all or
that portion of the principal, premium, if any, and interest due and
to become due on those Debt Securities, on or prior to their maturity.
(Indenture, Section 701).
LIMITATION ON LIENS. So long as any Debt Securities remain outstanding, FPL
Group Capital will not secure any indebtedness with a lien on any shares of the
capital stock of any of its majority-owned subsidiaries, which shares of capital
11
stock FPL Group Capital now or hereafter directly owns, unless FPL Group Capital
equally secures all Debt Securities. However, this restriction does not apply to
or prevent:
(1) any lien on capital stock created at the time FPL Group Capital
acquires that capital stock, or within 270 days after that time, to
secure all or a portion of the purchase price for that capital stock,
(2) any lien on capital stock existing at the time FPL Group Capital
acquires that capital stock (whether or not FPL Group Capital assumes
the obligations secured by the lien and whether or not the lien was
created in contemplation of the acquisition),
(3) any extensions, renewals or replacements of the liens described in (1)
and (2) above, or of any indebtedness secured by those liens;
provided, that,
(a) the principal amount of indebtedness secured by those liens
immediately after the extension, renewal or replacement may not
exceed the principal amount of indebtedness secured by those
liens immediately before the extension, renewal or replacement,
and
(b) the extension, renewal or replacement lien is limited to no more
than the same proportion of all shares of capital stock as were
covered by the lien that was extended, renewed or replaced, or
(4) any lien arising in connection with court proceedings; provided, that,
either
(a) the execution or enforcement of that lien is effectively stayed
within 30 days after entry of the corresponding judgment (or the
corresponding judgment has been discharged within that 30 day
period) and the claims secured by that lien are being contested
in good faith by appropriate proceedings,
(b) the payment of that lien is covered in full by insurance and the
insurance company has not denied or contested coverage, or
(c) so long as that lien is adequately bonded, any appropriate legal
proceedings that have been duly initiated for the review of the
corresponding judgement, decree or order have not been fully
terminated or the periods within which those proceedings may be
initiated have not expired.
Liens on any shares of the capital stock of any of FPL Group Capital's
majority-owned subsidiaries, which shares of capital stock FPL Group Capital now
or hereafter directly owns, other than liens described in (1) through (4) above,
are referred to in this prospectus as "Restricted Liens." The foregoing
limitation does not apply to the extent that FPL Group Capital creates any
Restricted Liens to secure indebtedness that, together with all other
indebtedness of FPL Group Capital secured by Restricted Liens, does not at the
time exceed 5% of FPL Group Capital's Consolidated Capitalization. (Indenture,
Section 608).
For this purpose, "Consolidated Capitalization" means the sum of:
(1) Consolidated Shareholders' Equity;
(2) Consolidated Indebtedness for borrowed money (exclusive of any amounts
which are due and payable within one year); and, without duplication
(3) any preference or preferred stock of FPL Group Capital or any
Consolidated Subsidiary which is subject to mandatory redemption or
sinking fund provisions.
The term "Consolidated Shareholders' Equity" as used above means the total
assets of FPL Group Capital and its Consolidated Subsidiaries less all
liabilities of FPL Group Capital and its Consolidated Subsidiaries. As used in
this definition, the term "liabilities" means all obligations which would, in
accordance with generally accepted accounting principles, be classified on a
balance sheet as liabilities, including without limitation:
12
(1) indebtedness secured by property of FPL Group Capital or any of its
Consolidated Subsidiaries whether or not FPL Group Capital or such
Consolidated Subsidiary is liable for the payment thereof unless, in
the case that FPL Group Capital or such Consolidated Subsidiary is not
so liable, such property has not been included among the assets of FPL
Group Capital or such Consolidated Subsidiary on such balance sheet,
(2) deferred liabilities, and
(3) indebtedness of FPL Group Capital or any of its Consolidated
Subsidiaries that is expressly subordinated in right and priority of
payment to other liabilities of FPL Group Capital or such Consolidated
Subsidiary.
As used in this definition, "liabilities" includes preference or preferred stock
of FPL Group Capital or any Consolidated Subsidiary only to the extent of any
such preference or preferred stock that is subject to mandatory redemption or
sinking fund provisions.
The term "Consolidated Indebtedness" means total indebtedness as shown on
the consolidated balance sheet of FPL Group Capital and its Consolidated
Subsidiaries.
The term "Consolidated Subsidiary," means at any date any direct or
indirect majority-owned subsidiary whose financial statements would be
consolidated with those of FPL Group Capital in FPL Group Capital's consolidated
financial statements as of such date in accordance with generally accepted
accounting principles. (Indenture, Section 608).
The foregoing limitation does not limit in any manner the ability of:
(1) FPL Group Capital to place liens on any of its assets other than the
capital stock of directly held, majority-owned subsidiaries,
(2) FPL Group Capital or FPL Group to cause the transfer of its assets or
those of its subsidiaries, including the capital stock covered by the
foregoing restrictions,
(3) FPL Group to place liens on any of its assets, or
(4) any of the direct or indirect subsidiaries of FPL Group Capital or FPL
Group (other than FPL Group Capital) to place liens on any of their
assets.
CONSOLIDATION, MERGER, AND SALE OF ASSETS. Under the Indenture, FPL Group
Capital may not consolidate with or merge into any other entity or convey,
transfer or lease its properties and assets substantially as an entirety to any
entity, unless:
(1) the entity formed by that consolidation, or the entity into which FPL
Group Capital is merged, or the entity that acquires or leases FPL
Group Capital's property and assets, is an entity organized and
existing under the laws of the United States, any state or the
District of Columbia and that entity expressly assumes FPL Group
Capital's obligations on all Debt Securities and under the Indenture,
(2) immediately after giving effect to the transaction, no event of
default under the Indenture and no event that, after notice or lapse
of time or both, would become an event of default under the Indenture
exists, and
(3) FPL Group Capital delivers an officer's certificate and an opinion of
counsel to the Indenture Trustee, as provided in the Indenture.
(Indenture, Section 1101).
The Indenture does not restrict FPL Group Capital in a merger in which FPL
Group Capital is the surviving entity.
13
EVENTS OF DEFAULT. Each of the following is an event of default under the
Indenture with respect to the Debt Securities of any series:
(1) failure to pay interest on the Debt Securities of that series within
30 days after it is due,
(2) failure to pay principal or premium, if any, on the Debt Securities of
that series when it is due,
(3) failure to comply with any other covenant in the Indenture, other than
a covenant that does not relate to that series of Debt Securities,
that continues for 90 days after FPL Group Capital receives written
notice of such failure to comply from the Indenture Trustee, or FPL
Group Capital and the Indenture Trustee receive written notice of such
failure to comply from the registered owners of at least 33% in
principal amount of the Debt Securities of that series,
(4) certain events of bankruptcy, insolvency or reorganization of FPL
Group Capital, and
(5) any other event of default specified with respect to the Debt
Securities of that series. (Indenture, Section 801).
In the case of the third event of default listed above, the Indenture
Trustee may extend the grace period. In addition, if registered owners of a
particular series have given a notice of default, then registered owners of at
least the same percentage of Debt Securities of that series, together with the
Indenture Trustee, may also extend the grace period. The grace period will be
automatically extended if FPL Group Capital has initiated and is diligently
pursuing corrective action. (Indenture, Section 801). An event of default with
respect to the Debt Securities of a particular series will not necessarily
constitute an event of default with respect to Debt Securities of any other
series issued under the Indenture.
REMEDIES. If an event of default applicable to the Debt Securities of one
or more series, but not applicable to all outstanding Debt Securities, exists,
then either the Indenture Trustee or the registered owners of at least 33% in
aggregate principal amount of the Debt Securities of each of the affected series
may declare the principal of and accrued but unpaid interest on all the Debt
Securities of that series to be due and payable immediately. However, under the
Indenture, some Debt Securities may provide for a specified amount less than
their entire principal amount to be due and payable upon that declaration. These
Debt Securities are defined as "Discount Securities" in the Indenture.
If the event of default is applicable to all outstanding Debt Securities,
then only the Indenture Trustee or the registered owners of at least 33% in
aggregate principal amount of all outstanding Debt Securities of all series,
voting as one class, and not the registered owners of any one series, may make a
declaration of acceleration. However, the event of default giving rise to the
declaration relating to any series of Debt Securities will be automatically
waived, and that declaration and its consequences will be automatically
rescinded and annulled, if, at any time after that declaration and before a
judgment or decree for payment of the money due has been obtained:
(1) FPL Group Capital deposits with the Indenture Trustee a sum sufficient
to pay:
(a) all overdue interest on all Debt Securities of that series,
(b) the principal of and any premium on any Debt Securities of that
series that have become due for reasons other than that
declaration, and interest that is then due,
(c) interest on overdue interest for that series, and
(d) all amounts due to the Indenture Trustee under the Indenture, and
(2) any other event of default with respect to the Debt Securities of that
series has been cured or waived as provided in the Indenture.
(Indenture, Section 802).
14
Other than its obligations and duties in case of an event of default under
the Indenture, the Indenture Trustee is not obligated to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
registered owners, unless those registered owners offer reasonable indemnity to
the Indenture Trustee. (Indenture, Section 903). If they provide this reasonable
indemnity, the registered owners of a majority in principal amount of any series
of Debt Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred on the Indenture Trustee, with respect
to the Debt Securities of that series. However, if an event of default under the
Indenture relates to more than one series of Debt Securities, only the
registered owners of a majority in aggregate principal amount of all affected
series of Debt Securities, considered as one class, will have the right to make
that direction. Also, the direction must not violate any law or the Indenture,
and may not expose the Indenture Trustee to personal liability in circumstances
where its indemnity would not, in the Indenture Trustee's sole discretion, be
adequate. (Indenture, Section 812).
No registered owner of Debt Securities of any series will have any right to
institute any proceeding under the Indenture, or any remedy under the Indenture,
unless:
(1) that registered owner has previously given to the Indenture Trustee
written notice of a continuing event of default with respect to the
Debt Securities of that series,
(2) the registered owners of a majority in aggregate principal amount of
the outstanding Debt Securities of all series in respect of which an
event of default under the Indenture exists, considered as one class,
have made written request to the Indenture Trustee, and have offered
reasonable indemnity to the Indenture Trustee to institute that
proceeding in its own name as trustee, and
(3) the Indenture Trustee has failed to institute any proceeding, and has
not received from the registered owners of a majority in aggregate
principal amount of the outstanding Debt Securities of all series in
respect of which an event of default under the Indenture exists,
considered as one class, a direction inconsistent with that request,
within 60 days after that notice, request and offer. (Indenture,
Section 807).
However, these limitations do not apply to a suit instituted by a registered
owner of a Debt Security for the enforcement of payment of the principal of or
premium, if any, or interest on that Debt Security on or after the applicable
due date specified in that Debt Security. (Indenture, Section 808).
FPL Group Capital is required to deliver to the Indenture Trustee an annual
statement as to its compliance with all conditions and covenants under the
Indenture. (Indenture, Section 606).
MODIFICATION AND WAIVER. Without the consent of any registered owner of
Debt Securities, FPL Group Capital and the Indenture Trustee may amend or
supplement the Indenture for any of the following purposes:
(1) to provide for the assumption by any permitted successor to FPL Group
Capital of FPL Group Capital's obligations under the Indenture and the
Debt Securities in the case of a merger or consolidation or a
conveyance, transfer or lease of its assets substantially as an
entirety,
(2) to add covenants of FPL Group Capital or to surrender any right or
power conferred upon FPL Group Capital by the Indenture,
(3) to add any additional events of default,
(4) to change, eliminate or add any provision of the Indenture, provided
that if that change, elimination or addition will materially adversely
affect the interests of the registered owners of Debt Securities of
any series or tranche, that change, elimination or addition will
become effective with respect to that series or tranche only
15
(a) when the required consent of the registered owners of Debt
Securities of that series or tranche has been obtained, or
(b) when no Debt Securities of that series or tranche remain
outstanding under the Indenture,
(5) to provide collateral security for all but not a part of the Debt
Securities,
(6) to establish the form or terms of Debt Securities of any other series
or tranche,
(7) to provide for the authentication and delivery of bearer securities
and the related coupons and for other matters relating to those bearer
securities,
(8) to accept the appointment of a successor Indenture Trustee with
respect to the Debt Securities of one or more series and to change any
of the provisions of the Indenture as necessary to provide for the
administration of the trusts under the Indenture by more than one
trustee,
(9) to add procedures to permit the use of a non-certificated system of
registration for the Debt Securities of all or any series or tranche,
(10) to change any place where
(a) the principal of and premium, if any, and interest on all or any
series or tranche of Debt Securities are payable,
(b) all or any series or tranche of Debt Securities may be
transferred or exchanged, and
(c) notices and demands to or upon FPL Group Capital in respect of
Debt Securities and the Indenture may be served, or
(11) to cure any ambiguity or inconsistency or to add or change any other
provisions with respect to matters and questions arising under the
Indenture, provided those changes or additions may not materially
adversely affect the interests of the registered owners of Debt
Securities of any series or tranche. (Indenture, Section 1201).
The registered owners of a majority in aggregate principal amount of the
Debt Securities of all series then outstanding may waive compliance by FPL Group
Capital with certain restrictive provisions of the Indenture. (Indenture,
Section 607). The registered owners of a majority in principal amount of the
outstanding Debt Securities of any series may waive any past default under the
Indenture with respect to that series, except a default in the payment of
principal, premium, if any, or interest and a default with respect to certain
restrictive covenants or provisions of the Indenture that cannot be modified or
amended without the consent of the registered owner of each outstanding Debt
Security of that series affected. (Indenture, Section 813).
In addition to any amendments described above, if the Trust Indenture Act
of 1939 is amended after the date of the Indenture in a way that requires
changes to the Indenture or in a way that permits changes to, or the elimination
of, provisions that were previously required by the Trust Indenture Act of 1939,
the Indenture will be deemed to be amended to conform to that amendment of the
Trust Indenture Act of 1939 or to make those changes, additions or eliminations.
FPL Group Capital and the Indenture Trustee may, without the consent of any
registered owners, enter into supplemental indentures to make that amendment.
(Indenture, Section 1201).
Except for any amendments described above, the consent of the registered
owners of a majority in aggregate principal amount of the Debt Securities of all
series then outstanding, considered as one class, is required for all other
modifications to the Indenture. However, if less than all of the series of Debt
Securities outstanding are directly affected by a proposed supplemental
indenture, then the consent only of the registered owners of a majority in
aggregate principal amount of outstanding Debt Securities of all directly
affected series, considered as one class, is required. But, if FPL Group Capital
issues any series of Debt Securities in more than one tranche and if the
16
proposed supplemental indenture directly affects the rights of the registered
owners of Debt Securities of less than all of those tranches, then the consent
only of the registered owners of a majority in aggregate principal amount of the
outstanding Debt Securities of all directly affected tranches, considered as one
class, will be required. However, none of those amendments or modifications may:
(1) change the dates on which the principal of or interest on a Debt
Security is due without the consent of the registered owner of that
Debt Security,
(2) reduce any Debt Security's principal amount or rate of interest (or
the amount of any installment of that interest) or change the method
of calculating that rate without the consent of the registered owner
of that Debt Security,
(3) reduce any premium payable upon the redemption of a Debt Security
without the consent of the registered owner of that Debt Security,
(4) change the currency (or other property) in which a Debt Security is
payable without the consent of the registered owner of that Debt
Security,
(5) impair the right to sue to enforce payments on any Debt Security on or
after the date that it states that the payment is due (or, in the case
of redemption, on or after the redemption date) without the consent of
the registered owner of that Debt Security,
(6) reduce the percentage in principal amount of the outstanding Debt
Security of any series or tranche whose owners must consent to an
amendment, supplement or waiver without the consent of the registered
owner of each outstanding Debt Security of that series or tranche,
(7) reduce the requirements for quorum or voting of any series or tranche
without the consent of the registered owner of each outstanding Debt
Security of that series or tranche, or
(8) modify certain of the provisions of the Indenture relating to
supplemental indentures, waivers of certain covenants and waivers of
past defaults with respect to the Debt Securities of any series or
tranche, without the consent of the registered owner of each
outstanding Debt Security affected by the modification.
A supplemental indenture that changes or eliminates any provision of the
Indenture that has expressly been included only for the benefit of one or more
particular series or tranches of Debt Securities, or that modifies the rights of
the registered owners of Debt Securities of that series or tranche with respect
to that provision, will not affect the rights under the Indenture of the
registered owners of the Debt Securities of any other series or tranche.
(Indenture, Section 1202).
The Indenture provides that, in order to determine whether the registered
owners of the required principal amount of the outstanding Debt Securities have
given any request, demand, authorization, direction, notice, consent or waiver
under the Indenture, or whether a quorum is present at the meeting of the
registered owners of Debt Securities, Debt Securities owned by FPL Group Capital
or any other obligor upon the Debt Securities or any affiliate of FPL Group
Capital or of that other obligor (unless FPL Group Capital, that affiliate or
that obligor owns all Debt Securities outstanding under the Indenture,
determined without regard to this provision) will be disregarded and deemed not
to be outstanding. (Indenture, Section 101).
If FPL Group Capital solicits any action under the Indenture from
registered owners of Debt Securities, FPL Group Capital may, at its option, by
signing a written request to the Indenture Trustee, fix in advance a record date
for determining the registered owners of Debt Securities entitled to take that
action. However, FPL Group Capital will not be obligated to do this. If FPL
Group Capital fixes such a record date, that action may be taken before or after
that record date, but only the registered owners of record at the close of
business on that record date will be deemed to be registered owners of Debt
Securities for the purposes of determining whether registered owners of the
required proportion of the outstanding Debt Securities have authorized that
17
action. For these purposes, the outstanding Debt Securities will be computed as
of the record date. Any action of a registered owner of any Debt Security under
the Indenture will bind every future registered owner of that Debt Security, or
any Debt Security replacing that Debt Security, with respect to anything that
the Indenture Trustee or FPL Group Capital do, fail to do, or allow to be done
in reliance on that action, whether or not that action is noted upon that Debt
Security. (Indenture, Section 104).
RESIGNATION OF INDENTURE TRUSTEE. The Indenture Trustee may resign at any
time with respect to any series of Debt Securities by giving written notice of
its resignation to FPL Group Capital. Also, the registered owners of a majority
in principal amount of the outstanding Debt Securities of one or more series of
Debt Securities may remove the Indenture Trustee at any time with respect to the
Debt Securities of that series, by delivering an instrument evidencing this
action to the Indenture Trustee and FPL Group Capital. The resignation or
removal of the Indenture Trustee and the appointment of a successor trustee will
not become effective until a successor trustee accepts its appointment.
Except with respect to an Indenture Trustee appointed by the registered
owners of Debt Securities, the Indenture Trustee will be deemed to have resigned
and the successor will be deemed to have been appointed as trustee in accordance
with the Indenture if:
(1) no event of default under the Indenture or event that, after notice or
lapse of time, or both, would become an event of default under the
Indenture exists, and
(2) FPL Group Capital has delivered to the Indenture Trustee a resolution
of its Board of Directors appointing a successor trustee and that
successor trustee has accepted that appointment in accordance with the
terms of the Indenture. (Indenture, Section 910).
NOTICES. Notices to registered owners of Debt Securities will be sent by
mail to the addresses of those registered owners as they appear in the security
register for those Debt Securities. (Indenture, Section 106).
TITLE. FPL Group Capital, the Indenture Trustee, and any agent of FPL Group
Capital or the Indenture Trustee, may treat the person in whose name a Debt
Security is registered as the absolute owner of that Debt Security, whether or
not that Debt Security is overdue, for the purpose of making payments and for
all other purposes, regardless of any notice to the contrary. (Indenture,
Section 308).
GOVERNING LAW. The Indenture and the Debt Securities will be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to New York's conflict of law principles, except to the extent that the
law of any other jurisdiction is mandatorily applicable. (Indenture,
Section 112).
DESCRIPTION OF THE DEBT SECURITIES GUARANTEE
GENERAL. This section briefly summarizes some of the provisions of the
Guarantee Agreement, dated as of June 1, 1999, between FPL Group and The Bank of
New York, as Guarantee Trustee. The Guarantee Agreement was executed for the
benefit of the Indenture Trustee, which holds the Guarantee Agreement for the
benefit of registered owners of the Debt Securities covered by the Guarantee
Agreement. This summary does not contain a complete description of the Guarantee
Agreement. You should read this summary together with the Guarantee Agreement
for a complete understanding of all the provisions. The Guarantee Agreement has
been previously filed with the SEC and is an exhibit to the registration
statement filed with the SEC of which this prospectus is a part. In addition,
the Guarantee Agreement is qualified as an indenture under the Trust Indenture
Act of 1939 and is therefore subject to the provisions of the Trust Indenture
Act of 1939. You should read the Trust Indenture Act of 1939 for a complete
understanding of its provisions.
Under the Guarantee Agreement, FPL Group absolutely, irrevocably and
unconditionally guarantees the prompt and full payment, when due and payable
(including upon acceleration or redemption), of the principal, interest and
premium, if any, on the Debt Securities that are covered by the Guarantee
Agreement to the registered owners of those Debt Securities, according to the
terms of those Debt Securities and the Indenture. Pursuant to the Guarantee
Agreement, all of the Debt Securities are covered by the Guarantee Agreement
18
except Debt Securities that by their terms are expressly not entitled to the
benefit of the Guarantee Agreement. All of the Offered Debt Securities will be
covered by the Guarantee Agreement. This guarantee is referred to in this
prospectus as the "Guarantee." FPL Group is only required to make these payments
if FPL Group Capital fails to pay or provide for punctual payment of any of
those amounts on or before the expiration of any applicable grace periods.
(Guarantee Agreement, Section 5.01). In the Guarantee Agreement, FPL Group has
waived its right to require the Guarantee Trustee, the Indenture Trustee or the
registered owners of Debt Securities covered by the Guarantee Agreement to
exhaust their remedies against FPL Group Capital prior to bringing suit against
FPL Group. (Guarantee Agreement, Section 5.06).
The Guarantee is a guarantee of payment when due (i.e., the guaranteed
party may institute a legal proceeding directly against FPL Group to enforce its
rights under the Guarantee Agreement without first instituting a legal
proceeding against any other person or entity). The Guarantee is not a guarantee
of collection. (Guarantee Agreement, Section 5.01).
Except as otherwise stated in the related prospectus supplement, the
covenants in the Guarantee Agreement would not give registered owners of the
Debt Securities covered by the Guarantee Agreement protection in the event of a
highly-leveraged transaction involving FPL Group.
SECURITY AND RANKING. The Guarantee is an unsecured obligation of FPL Group
and will rank equally and ratably with all other unsecured and unsubordinated
indebtedness of FPL Group. The Guarantee will rank senior to the Preferred Trust
Securities Guarantee and the Subordinated Guarantee (each as defined below).
There is no limit on the amount of other indebtedness, including guarantees,
that FPL Group may incur or issue.
FPL Group is a holding company that derives substantially all of its income
from its operating subsidiaries. Therefore, the Guarantee is effectively
subordinated to all indebtedness and other liabilities, including trade
payables, debt and preferred stock incurred or issued by FPL Group's
subsidiaries. Neither the Indenture nor the Guarantee Agreement places any limit
on the amount of liabilities, including debt or preferred stock, that FPL
Group's subsidiaries may issue, guarantee or otherwise incur.
EVENTS OF DEFAULT. An event of default under the Guarantee Agreement will
occur upon the failure of FPL Group to perform any of its payment obligations
under the Guarantee Agreement. (Guarantee Agreement, Section 1.01). The
registered owners of a majority of the aggregate principal amount of the
outstanding Debt Securities covered by the Guarantee Agreement have the right
to:
(1) direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee under the Guarantee
Agreement, or
(2) direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee Agreement. (Guarantee Agreement, Section
3.01).
The Guarantee Trustee must give notice of any event of default under the
Guarantee Agreement known to the Guarantee Trustee to the registered owners of
Debt Securities covered by the Guarantee Agreement within 90 days after the
occurrence of that event of default, in the manner and to the extent provided in
subsection (c) of Section 313 of the Trust Indenture Act of 1939, unless such
event of default has been cured or waived prior to the giving of such notice.
(Guarantee Agreement, Section 2.07). The registered owners of all outstanding
Debt Securities may waive any past event of default and its consequences.
(Guarantee Agreement, Section 2.06).
The Guarantee Trustee, the Indenture Trustee and the registered owners of
Debt Securities covered by the Guarantee Agreement have all of the rights and
remedies available under applicable law and may sue to enforce the terms of the
Guarantee Agreement and to recover damages for the breach of the Guarantee
Agreement. The remedies of each of the Guarantee Trustee, the Indenture Trustee
and the registered owners of Debt Securities covered by the Guarantee Agreement,
to the extent permitted by law, are cumulative and in addition to any other
remedy now or hereafter existing at law or in equity. At the option of any of
the Guarantee Trustee, the Indenture Trustee or the registered owners of Debt
Securities covered by the Guarantee Agreement, that person or entity may join
FPL Group in any lawsuit commenced by that person or entity against FPL Group
19
Capital with respect to any obligations under the Guarantee Agreement. Also,
that person or entity may recover against FPL Group in that lawsuit, or in any
independent lawsuit against FPL Group, without first asserting, prosecuting or
exhausting any remedy or claim against FPL Group Capital. (Guarantee Agreement,
Section 5.06).
FPL Group is required to deliver to the Guarantee Trustee an annual
statement as to its compliance with all conditions under the Guarantee
Agreement. (Guarantee Agreement, Section 2.04).
MODIFICATION. FPL Group and the Guarantee Trustee may, without the consent
of any registered owner of Debt Securities covered by the Guarantee Agreement,
agree to any changes to the Guarantee Agreement that do not materially adversely
affect the rights of registered owners. The Guarantee Agreement also may be
amended with the prior approval of the registered owners of a majority in
aggregate principal amount of all outstanding Debt Securities covered by the
Guarantee Agreement. However, the right of any registered owner of Debt
Securities covered by the Guarantee Agreement to receive payment under the
Guarantee Agreement on the due date of the Debt Securities held by that
registered owner, or to institute suit for the enforcement of that payment on or
after that due date, may not be impaired or affected without the consent of that
registered owner. (Guarantee Agreement, Section 6.01).
TERMINATION OF THE GUARANTEE AGREEMENT. The Guarantee Agreement will
terminate and be of no further force and effect upon full payment of all Debt
Securities covered by the Guarantee Agreement. (Guarantee Agreement,
Section 5.05).
GOVERNING LAW. The Guarantee Agreement will be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict of
laws principles thereunder, except to the extent that the law of any other
jurisdiction is mandatorily applicable. (Guarantee Agreement, Section 5.07).
DESCRIPTION OF COMMON STOCK
GENERAL. The following statements describing FPL Group's common stock are
not intended to be a complete description. For additional information, please
see FPL Group's Restated Articles of Incorporation ("Charter") and its bylaws,
which set forth the terms of the common stock. Please also see the Restated
Articles of Incorporation of Florida Power & Light Company, and the Mortgage and
Deed of Trust, dated as of January 1, 1944, between Florida Power & Light
Company and Deutsche Bank Trust Company Americas, as trustee, as amended and
supplemented (the "Mortgage"), which contain restrictions which may limit the
ability of Florida Power & Light Company to pay dividends to FPL Group. Each of
these documents has been previously filed with the SEC and are exhibits to the
registration statement filed with the SEC of which this prospectus is a part.
Reference is also made to the laws of the State of Florida.
FPL Group's authorized capital stock consists of 300,000,000 shares of
common stock, $.01 par value, and 100,000,000 shares of serial preferred stock,
$.01 par value. As of March 13, 2003, 183,124,562 shares of common stock were
issued and outstanding and no shares of serial preferred stock were issued and
outstanding. See "Description of Common Stock--Preferred Share Purchase Rights"
below. The FPL Group common stock has no preemptive, subscription or conversion
rights, and there are no redemption or sinking fund provisions applicable
thereto. The outstanding shares of common stock are, and when issued the shares
offered hereby will be, fully paid and nonassessable.
All outstanding FPL Group common stock is listed on the NYSE and trades
under the symbol "FPL." The registrar and transfer agent for the FPL Group
common stock is EquiServe Trust Company, N.A.
A number of provisions that are in FPL Group's Charter and bylaws will make
it difficult for another company to acquire FPL Group and for a holder of FPL
Group common stock to receive any related takeover premium for its shares. See
"--Voting Rights and Non-Cumulative Voting" and "--Preferred Share Purchase
Rights" below.
DIVIDEND RIGHTS. Each share of common stock is entitled to participate
equally with respect to dividends declared on the common stock out of funds
legally available for the payment thereof.
20
The Charter of FPL Group does not limit the dividends that can be paid on
the common stock. However, as a practical matter, the ability of FPL Group to
pay dividends on the common stock is dependent upon dividends paid to it by its
subsidiaries, primarily Florida Power & Light Company. Florida Power & Light
Company's ability to pay dividends is limited by restrictions contained in
Florida Power & Light Company's Restated Articles of Incorporation and in the
Mortgage. However, these restrictions do not currently limit Florida Power &
Light Company's ability to pay dividends to FPL Group from its retained
earnings.
VOTING RIGHTS AND NON-CUMULATIVE VOTING. In general, the holders of FPL
Group common stock are entitled to one vote per share for the election of
directors and for other corporate purposes. The Charter:
(1) permits the shareholders to remove a director only for cause and only
by the affirmative vote of 75% in voting power of the outstanding
shares of common stock and other outstanding voting stock, voting as a
class;
(2) provides that a vacancy on the Board of Directors may be filled only
by the remaining directors;
(3) permits shareholders to take action only at an annual meeting, or a
special meeting duly called by certain officers, the Board of
Directors or the holders of a majority in voting power of the
outstanding shares of voting stock entitled to vote on the matter;
(4) requires the affirmative vote of 75% in voting power of the
outstanding shares of voting stock to approve certain Business
Combinations (as defined below) with an Interested Shareholder (as
defined below) or its affiliate, unless approved by a majority of the
Continuing Directors (as defined below) or, in certain cases, unless
certain minimum price and procedural requirements are met; and
(5) requires the affirmative vote of 75% in voting power of the
outstanding shares of voting stock to amend the bylaws or to amend
certain provisions of the Charter including those provisions discussed
in (1) through (4) above.
Such provisions may have significant effects on the ability of the shareholders
to change the composition of an incumbent Board of Directors or to benefit from
certain transactions which are opposed by an incumbent Board of Directors.
The term "Interested Shareholder" is defined in the Charter to include a
security holder who owns 10% or more in voting power of the outstanding shares
of voting stock, and the term "Continuing Director" is defined in the Charter to
include any director who is not an affiliate of an Interested Shareholder. The
above provisions dealing with Business Combinations involving FPL Group and an
Interested Shareholder may discriminate against a security holder who becomes an
Interested Shareholder by reason of the beneficial ownership of such amount of
common or other voting stock. The term "Business Combination" is defined in the
Charter to include:
(1) any merger or consolidation of FPL Group or any direct or indirect
majority-owned subsidiary with (a) an Interested Shareholder or (b)
any other corporation which is, or after such merger or consolidation
would be, an affiliate of an Interested Shareholder;
(2) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition in one transaction or a series of transactions to or with
any Interested Shareholder or any affiliate of an Interested
Shareholder of assets of FPL Group or any direct or indirect
majority-owned subsidiary having an aggregate fair market value of
$10,000,000 or more;
(3) the issuance or transfer by FPL Group or any direct or indirect
majority-owned subsidiary in one transaction or a series of
transactions of any securities of FPL Group or any subsidiary to any
Interested Shareholder or any affiliate of any Interested Shareholder
in exchange for cash, securities or other property, or a combination
thereof, having an aggregate fair market value of $10,000,000 or more;
21
(4) the adoption of any plan or proposal for the liquidation or
dissolution of FPL Group proposed by or on behalf of an Interested
Shareholder or an affiliate of an Interested Shareholder; or
(5) any reclassification of securities, including any reverse stock split,
or recapitalization, of FPL Group, or any merger or consolidation of
FPL Group with any of its direct or indirect majority-owned
subsidiaries or any other transaction which has the direct or indirect
effect of increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of FPL Group or any
direct or indirect wholly-owned subsidiary which is directly or
indirectly owned by any Interested Shareholder or any affiliate of any
Interested Shareholder.
The holders of common stock do not have cumulative voting rights, and
therefore the holders of more than 50% of a quorum (majority) of the outstanding
shares of common stock can elect all of FPL Group's directors. Unless otherwise
provided in the Charter or the bylaws or in accordance with applicable law, the
affirmative vote of a majority of the total number of shares represented at a
meeting and entitled to vote is required for shareholder action on a matter.
Voting rights for the election of directors or otherwise, if any, for any series
of the serial preferred stock, will be established by the Board of Directors
when such series is issued.
LIQUIDATION RIGHTS. After satisfaction of creditors and payments due the
holders of serial preferred stock, if any, the holders of common stock are
entitled to share ratably in the distribution of all remaining assets.
PREFERRED SHARE PURCHASE RIGHTS. The following statements describing FPL
Group's preferred share purchase rights (each, a "Right") are not intended to be
a complete description. For additional information, please see the form of
Rights Agreement, dated as of July 1, 1996, between FPL Group and EquiServe
Trust Company, N.A., as successor Rights Agent, as amended, which sets forth the
terms of the Rights. The Rights Agreement and amendments thereto have been
previously filed with the SEC and are exhibits to the registration statement
filed with SEC of which this prospectus is a part.
On June 17, 1996, FPL Group's Board of Directors declared a dividend of one
Right for each outstanding share of common stock. Thereafter, until the
Distribution Date (as defined below), FPL Group will issue one Right with each
newly issued share of common stock. Each Right (prior to the expiration or
redemption of the Rights) will entitle the holder thereof to purchase from FPL
Group one-hundredth of a share of FPL Group's Series A Junior Participating
Preferred Stock, $.0l par value (Junior Preferred Shares), at an exercise price
of $120 per Right (Purchase Price), subject to adjustment. Until the
Distribution Date, the Rights are represented by the shares of common stock, and
are not exercisable or transferable apart from the common stock. The
Distribution Date is the earlier to occur of:
(1) the tenth day after the public announcement that a person or group has
acquired beneficial ownership of 10% or more of the common stock, or
(2) the tenth business day after a person commences, or announces an
intention to commence, a tender or exchange offer, the consummation of
which would result in the beneficial ownership by a person or group of
10% or more of the common stock. At any time before a person or group
becomes a 10% holder, the Board of Directors may extend the 10-day
period.
Separate certificates evidencing the Rights will be mailed to holders of the
common stock as of the close of business on the Distribution Date. The Rights
are exercisable at any time after the Distribution Date, unless earlier
redeemed, or exchanged, and could then begin trading separately from the common
stock. The Rights do not have any voting rights and are not entitled to
dividends.
If a person or group becomes a 10% holder, each Right not owned by the 10%
holder would become exercisable for the number of shares of common stock which,
at that time, would have a market value of two times the exercise price of the
Right. In the event that FPL Group is acquired in a merger or other business
combination transaction, or 50% or more of FPL Group's assets or earning power
are sold or otherwise transferred, after a person or group has become a 10%
holder, each Right will entitle its holder to purchase, at the exercise price of
22
the Right, that number of shares of common stock of the acquiring company which
at the time of such transaction would have a market value of two times the
exercise price of the Right.
The Rights are redeemable by FPL Group's Board of Directors in whole, but
not in part, at $.01 per Right at any time prior to the time that a person or
group acquires beneficial ownership of 10% or more of the outstanding common
stock. The Rights will expire on June 30, 2006 (unless the expiration date is
extended or the Rights are earlier redeemed or exchanged as described below).
The Purchase Price, and the number of Junior Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution
(1) in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Junior Preferred Shares,
(2) as a result of the grant to holders of Junior Preferred Shares of
certain rights or warrants to subscribe for or purchase Junior
Preferred Shares at a price, or securities convertible into Junior
Preferred Shares with a conversion price, at less than the current
market price of Junior Preferred Shares, or
(3) as a result of the distribution to holders of Junior Preferred Shares
of evidences of indebtedness or assets (excluding regular periodic
cash dividends or dividends payable in Junior Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in the
Purchase Price. The number of Rights and the number of Junior Preferred Shares
purchasable upon exercise of each Right are also subject to adjustment in the
event of a stock split, subdivision, consolidation, combination or common stock
dividend on the common stock prior to the Distribution Date.
The Board of Directors of FPL Group may exchange the Rights at an exchange
ratio of one share of common stock per Right at any time that is
(1) after the acquisition by a person or group of affiliated or associated
persons of beneficial ownership of 10% or more of the outstanding
common stock; and
(2) before the acquisition by a person or group of 50% or more of the
outstanding common stock.
The Rights have anti-takeover effects. The Rights will cause substantial
dilution to a person or group that attempts to acquire FPL Group without
conditioning the offer on the redemption of the Rights or on the acquisition of
a certain number of Rights. The Rights beneficially owned by that person or
group may become null and void. The Rights should not interfere with any merger
or other business combination approved by the Board of Directors of FPL Group,
since the Rights may be redeemed by FPL Group at $.01 per Right prior to the
time that a person or group has acquired beneficial ownership of 10% or more of
the common stock.
The Junior Preferred Shares purchasable upon exercise of the Rights will be
entitled to cumulative quarterly dividends in preference to the common stock at
a rate per share equal to the greater of $10 and 100 times the dividend declared
on the common stock for such quarter. In the event of any merger, consolidation
or other transaction in which the shares of common stock are exchanged, each
Junior Preferred Share will be entitled to receive 100 times the amount and type
of consideration received per share of common stock. In the event of a
liquidation of FPL Group, the holders of Junior Preferred Shares will be
entitled to receive in preference to the common stock the greater of $100 per
share and 100 times the payment made per share of common stock. FPL Group has
the right to issue other serial preferred stock ranking prior to the Junior
Preferred Shares with respect to dividend and liquidation preferences. The
Junior Preferred Shares will be redeemable after June 30, 2006, at FPL Group's
option, in whole or in part, at a redemption price per share equal to the
greater of
(1) the per share Purchase Price, and
23
(2) the then current market price of a Junior Preferred Share.
Each Junior Preferred Share will have 100 votes on all matters submitted to a
vote of the shareholders of FPL Group, voting together with the common stock.
The rights of the Junior Preferred Shares as to dividends, liquidation,
redemption and voting, and in the event of mergers and consolidations, are
protected by customary anti-dilution provisions. Because of the nature of the
dividend, liquidation, redemption and voting rights of the Junior Preferred
Shares, the value of the interest in a Junior Preferred Share purchasable upon
the exercise of each Right should approximate the value of one share of common
stock.
The Board of Directors of FPL Group may amend the Rights Agreement and the
Rights, without the consent of the holders of the Rights. However, any amendment
adopted after a person or group becomes a 10% holder may not adversely affect
the interests of holders of Rights. The 10% holder level discussed above is
subject to certain exceptions.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
FPL Group may issue stock purchase contracts, including contracts that
obligate holders to purchase from FPL Group, and FPL Group to sell to these
holders, a specified number of shares of common stock at a future date or dates.
The consideration per share of common stock may be fixed at the time the stock
purchase contracts are issued or may be determined by reference to a specific
formula set forth in the stock purchase contracts. The stock purchase contracts
may be issued separately or as a part of stock purchase units consisting of a
stock purchase contract and either debt securities of FPL Group Capital
(including, but not limited to, Debt Securities and Junior Subordinated
Debentures), preferred trust securities of one or more FPL Group subsidiary
trusts or other subsidiary entities (including, but not limited to, Preferred
Trust Securities (as defined herein)), or debt securities of third parties
including, but not limited to, U.S. Treasury securities, that would secure the
holders' obligations to purchase the common stock under the stock purchase
contracts. The stock purchase contracts may require FPL Group to make periodic
payments to the holders of some or all of the stock purchase units or vice
versa, and such payments may be unsecured or prefunded on some basis. The stock
purchase contracts may require holders to secure their obligations under these
stock purchase contracts in a specified manner.
A prospectus supplement will describe the terms of any stock purchase
contracts or stock purchase units being offered. The description in the
prospectus supplement will not necessarily be complete, and reference will be
made to the stock purchase contracts. Some of the important United States
federal income tax considerations applicable to the stock purchase units and
stock purchase contracts will be discussed in the related prospectus supplement.
DESCRIPTION OF PREFERRED TRUST SECURITIES
GENERAL. The Trust may issue preferred trust securities and common trust
securities under the Trust Agreement. These preferred trust securities and
common trust securities are referred to in this prospectus as "Preferred Trust
Securities" and "Common Trust Securities," respectively, and collectively as
"Trust Securities." These Trust Securities will represent undivided beneficial
interests in the assets of the Trust. The junior subordinated debentures issued
by FPL Group Capital and held by the Trust are referred to in this prospectus as
the "Junior Subordinated Debentures." This section briefly summarizes some of
the provisions of the Trust Agreement. This summary does not contain a complete
description of the Trust Agreement. You should read this summary together with
the Trust Agreement for a complete understanding of all the provisions. The form
of the Trust Agreement has been previously filed with the SEC and is an exhibit
to the registration statement filed with the SEC of which this prospectus is a
part. In addition, the Trust Agreement will be qualified as an indenture under
the Trust Indenture Act of 1939 and is therefore subject to the provisions of
the Trust Indenture Act of 1939. You should read the Trust Indenture Act of 1939
for a complete understanding of its provisions.
The Preferred Trust Securities and Common Trust Securities issued by the
Trust will be substantially the same except that, if there is an event of
default under the Trust Agreement, as described below, that results from an
event of default under the Subordinated Indenture (as such term is defined below
under "Description of the Junior Subordinated Debentures and the Subordinated
24
Guarantee--General"), the right of FPL Group, as holder of the Common Trust
Securities, to payment of distributions and upon liquidation or redemption will
be subordinated to the rights of the holders of the Preferred Trust Securities.
(Trust Agreement, Section 4.03). All of the Common Trust Securities will be
owned by FPL Group. (Trust Agreement, Section 5.10).
FPL Group will fully and unconditionally guarantee payments due on the
Preferred Trust Securities through a combination of the following:
(1) FPL Group's guarantee of FPL Group Capital's payment obligations under
the Junior Subordinated Debentures (referred to in this prospectus as
the "Subordinated Guarantee");
(2) the rights of holders of Preferred Trust Securities to enforce those
obligations;
(3) FPL Group's agreement to pay the expenses of the Trust; and
(4) FPL Group's guarantee of payments due on the Preferred Trust
Securities to the extent of the Trust's legally available assets
(referred to in this prospectus as the "Preferred Trust Securities
Guarantee").
No single one of the documents listed above standing alone or operating in
conjunction with fewer than all of the other documents constitutes the guarantee
by FPL Group. It is only the combined operation of these documents that has the
effect of providing a full and unconditional, but subordinated, guarantee as to
payment by FPL Group of the Preferred Trust Securities.
The Trust will use the proceeds from the sale of the Trust Securities to
purchase Junior Subordinated Debentures from FPL Group Capital. (Trust
Agreement, Section 2.05). The Junior Subordinated Debentures will be guaranteed
by FPL Group pursuant to the Subordinated Guarantee described below and issued
under a Subordinated Indenture between FPL Group Capital and The Bank of New
York, as trustee. The Junior Subordinated Debentures will be held in trust for
the benefit of holders of the Preferred Trust Securities and Common Trust
Securities. (Trust Agreement, Section 2.09).
A prospectus supplement relating to the Preferred Trust Securities will
include specific terms of those securities and of the Junior Subordinated
Debentures. Material United States federal income tax considerations applicable
to the Preferred Trust Securities will also be discussed in the prospectus
supplement relating to the Preferred Trust Securities. For a description of some
specific terms that will affect both the Preferred Trust Securities and the
Junior Subordinated Debentures, and holders' rights under each, see "Description
of the Junior Subordinated Debentures and the Subordinated Guarantee" below.
DISTRIBUTIONS. The only income of the Trust available for distribution to
the holders of Preferred Trust Securities will be payments on the Junior
Subordinated Debentures. (Trust Agreement, Section 8.01). If neither FPL Group
Capital nor FPL Group makes interest payments on the Junior Subordinated
Debentures, the Trust will not have funds available to pay distributions on
Preferred Trust Securities. The payment of distributions, if and to the extent
the Trust has sufficient funds available for the payment of such distributions,
is guaranteed on a limited basis by FPL Group as described under "Description of
the Preferred Trust Securities Guarantee."
So long as no event of default under the Subordinated Indenture has
occurred and is continuing, FPL Group Capital may extend the interest payment
period from time to time on the Junior Subordinated Debentures for one or more
periods. (Subordinated Indenture, Section 312). As a consequence, distributions
on Preferred Trust Securities would be deferred during any such period. Interest
would, however, continue to accrue. (Trust Agreement, Section 4.01). During any
extended interest period, or for so long as an "Event of Default" under the
Subordinated Indenture resulting from a payment default or any payment default
under the Preferred Trust Securities Guarantee has occurred and is continuing,
neither FPL Group nor FPL Group Capital may:
(1) declare or pay any dividend or distribution on its capital stock;
(2) redeem, purchase, acquire or make a liquidation payment with respect
to any of its capital stock;
25
(3) pay any principal, interest or premium on, or repay, repurchase or
redeem any debt securities that are equal or junior in right of
payment with the Junior Subordinated Debentures or the Subordinated
Guarantee (as the case may be); or
(4) make any payments with respect to any guarantee of debt securities by
FPL Group if such guarantee is equal or junior in right of payment to
the Junior Subordinated Debentures or the Subordinated Guarantee (as
the case may be),
other than
(1) purchases, redemptions or other acquisitions of its capital stock in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors
or agents or a stock purchase or dividend reinvestment plan, or the
satisfaction of its obligations pursuant to any contract or security
outstanding on the date that the interest payment period is extended
requiring it to purchase, redeem or acquire its capital stock;
(2) as a result of a reclassification of its capital stock or the exchange
or conversion of all or a portion of one class or series of its
capital stock for another class or series of its capital stock;
(3) the purchase of fractional interests in shares of its capital stock
pursuant to the conversion or exchange provisions of its capital stock
or the security being converted or exchanged, or in connection with
the settlement of stock purchase contracts;
(4) dividends or distributions paid or made in its capital stock (or
rights to acquire its capital stock), or repurchases, redemptions or
acquisitions of capital stock in connection with the issuance or
exchange of capital stock (or of securities convertible into or
exchangeable for shares of its capital stock and distributions in
connection with the settlement of stock purchase contracts);
(5) redemptions, exchanges or repurchases of, or with respect to, any
rights outstanding under a shareholder rights plan or the declaration
or payment thereunder of a dividend or distribution of or with respect
to rights in the future;
(6) payments under any preferred trust securities guarantee or guarantee
of junior subordinated debentures executed and delivered by FPL Group
concurrently with the issuance by a trust of any preferred trust
securities, so long as the amount of payments made on any preferred
trust securities or junior subordinated debentures (as the case may
be) is paid on all preferred trust securities or junior subordinated
debentures (as the case may be) then outstanding on a pro rata basis
in proportion to the full distributions to which each series of
preferred trust securities or junior subordinated debentures (as the
case may be) is then entitled if paid in full;
(7) dividends or distributions by FPL Group Capital on its capital stock
owned by FPL Group, provided that FPL Group owns 100% of such capital
stock at the time of, or any record date for, such payment; or
(8) redemptions, purchases, acquisitions or liquidation payments by FPL
Group Capital with respect to its capital stock owned by FPL Group,
provided that FPL Group owns 100% of such capital stock at the time
of, or any record date for, such payment.
Before an extension period ends, FPL Group Capital may further extend the
interest payment period. No extension period as further extended may exceed 20
consecutive quarters. After any extension period and the payment of all amounts
then due, FPL Group Capital may select a new extended interest payment period.
No interest period may be extended beyond the maturity of the Junior
Subordinated Debentures.
26
REDEMPTION. Whenever Junior Subordinated Debentures are repaid, whether at
maturity or earlier redemption, the Property Trustee will apply the proceeds to
redeem a like amount of Preferred Trust Securities and Common Trust Securities.
(Trust Agreement, Section 4.02(a)).
Preferred Trust Securities will be redeemed at the redemption price plus
accrued and unpaid distributions with the proceeds from the contemporaneous
redemption or repayment of Junior Subordinated Debentures. Redemptions of the
Preferred Trust Securities will be made on a redemption date only if the Trust
has funds available for the payment of the redemption price plus accrued and
unpaid distributions. (Trust Agreement, Section 4.02(c)).
Holders of Preferred Trust Securities will be given not less than 30 nor
more than 60 days' notice of any redemption. (Trust Agreement, Section 4.02(b)).
On or before the redemption date, the Trust will irrevocably deposit with the
paying agent for Preferred Trust Securities sufficient funds and will give the
paying agent irrevocable instructions and authority to pay the redemption price
plus accrued and unpaid distributions to the holders upon surrender of their
Preferred Trust Securities. Distributions payable on or before a redemption date
will be payable to the holders on the record date for the distribution payment.
If notice is given and funds are deposited as required, then on the redemption
date all rights of holders of the Preferred Trust Securities called for
redemption will cease, except the right of the holders to receive the redemption
price plus accrued and unpaid distributions, and the Preferred Trust Securities
will cease to be outstanding. No interest will accrue on amounts payable on the
redemption date. In the event that any date fixed for redemption of Preferred
Trust Securities is not a business day, then payment will be made on the next
business day, except that, if such business day falls in the next calendar year,
then payment will be made on the immediately preceding business day. No interest
will be payable because of any such delay. If payment of Preferred Trust
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by FPL Group pursuant to the Preferred Trust Securities
Guarantee, distributions on such Preferred Trust Securities will continue to
accrue to the date of payment. In that event, the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
redemption price plus accrued and unpaid distributions. (Trust Agreement,
Section 4.02(d)).
Subject to applicable law, including United States federal securities law,
FPL Group or its affiliates may at any time and from time to time purchase
outstanding Preferred Trust Securities by tender, in the open market or by
private agreement.
If Preferred Trust Securities are partially redeemed on a redemption date,
a corresponding percentage of the Common Trust Securities will be redeemed. The
particular Preferred Trust Securities to be redeemed will be selected not more
than 60 days prior to the redemption date by the Property Trustee by such method
as the Property Trustee shall deem fair, taking into account the denominations
in which they were issued. The Property Trustee will promptly notify the
Preferred Trust Security registrar in writing of the Preferred Trust Securities
selected for redemption and, where applicable, the partial amount to be
redeemed. (Trust Agreement, Section 4.02(f)).
SUBORDINATION OF COMMON TRUST SECURITIES. Payment of distributions on, and
the redemption price, plus accrued and unpaid distributions, of, the Preferred
Trust Securities and Common Trust Securities shall be made pro rata based on the
liquidation preference amount of such securities. However, if on any
distribution payment date or redemption date an event of default under the Trust
Agreement resulting from an event of default under the Subordinated Indenture
has occurred and is continuing, no payment on any Common Trust Security shall be
made until all payments due on the Preferred Trust Securities have been made. In
that case, funds available to the Property Trustee shall first be applied to the
payment in full of all distributions on, or the redemption price plus accrued
and unpaid distributions of, Preferred Trust Securities then due and payable.
(Trust Agreement, Section 4.03(a)).
If an event of default under the Trust Agreement results from an event of
default under the Subordinated Indenture, the holder of Common Trust Securities
cannot take action with respect to the Trust Agreement default until the effect
of all defaults with respect to Preferred Trust Securities has been cured,
waived or otherwise eliminated. Until the event of default under the Trust
Agreement with respect to Preferred Trust Securities has been cured, waived or
otherwise eliminated, the Property Trustee shall, to the fullest extent
permitted by law, act solely on behalf of the holders of Preferred Trust
Securities and not the holder of the Common Trust Securities, and only the
27
holders of Preferred Trust Securities will have the right to direct the Property
Trustee to act on their behalf. (Trust Agreement, Section 4.03(b)).
LIQUIDATION DISTRIBUTION UPON DISSOLUTION. The Trust will be dissolved and
liquidated by the Property Trustee on the first to occur of:
(1) the expiration of the term of the Trust;
(2) the bankruptcy, dissolution or liquidation of FPL Group;
(3) the redemption of all of the Preferred Trust Securities;
(4) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction; or
(5) at any time, at the election of FPL Group. (Trust Agreement, Sections
9.01 and 9.02).
If a dissolution of the Trust occurs, the Trust will be liquidated by the
Property Trustee as expeditiously as the Property Trustee determines to be
appropriate. If a dissolution of the Trust occurs other than by redemption of
all the Preferred Trust Securities, the Property Trustee will provide for the
satisfaction of liabilities of creditors, if any, and distribute to each holder
of the Preferred Trust Securities and Common Trust Securities a proportionate
amount of Junior Subordinated Debentures. If a distribution of Junior
Subordinated Debentures is determined by the Property Trustee not to be
practical, holders of Preferred Trust Securities will be entitled to receive,
out of the assets of the Trust after adequate provision for the satisfaction of
liabilities of creditors, if any, an amount equal to the aggregate liquidation
preference of the Preferred Trust Securities plus accrued and unpaid
distributions thereon to the date of payment. If this liquidation distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate liquidation distribution, then the amounts payable by
the Trust on the Preferred Trust Securities shall be paid on a pro rata basis.
FPL Group, as holder of the Common Trust Securities, will be entitled to receive
distributions upon any dissolution pro rata with the holders of the Preferred
Trust Securities, except that if an event of default (or event that, with the
lapse of time or giving of notice, would become such an event of default) has
occurred and is continuing under the Subordinated Indenture, the Preferred Trust
Securities will have a preference over the Common Trust Securities. (Trust
Agreement, Section 9.04).
EVENTS OF DEFAULT; NOTICE. Any one of the following events will be an event
of default under the Trust Agreement whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body:
(1) the occurrence of an event of default as described in the Subordinated
Indenture;
(2) default by the Trust in the payment of any distribution when it
becomes due and payable, and continuation of that default for a period
of 30 days;
(3) default by the Trust in the payment of any redemption price, plus
accrued and unpaid distributions, of any Preferred Trust Security or
Common Trust Security when it becomes due and payable;
(4) default in the performance, or breach, in any material respect, of any
covenant or warranty of the trustees in the Trust Agreement which is
not dealt with above, and continuation of that default or breach for a
period of 90 days after written notice to the Trust, the defaulting
trustee under the Trust Agreement and FPL Group by the holders of
Preferred Trust Securities having at least 33% of the total
liquidation preference amount of the outstanding Preferred Trust
Securities. However, the holders of Preferred Trust Securities will be
deemed to have agreed to an extension of the 90 day period if
corrective action is initiated by any of the trustees within such
period and is diligently pursued in good faith; or
(5) the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust. (Trust Agreement, Section 1.01).
28
Within 90 days after the occurrence of any default known to the Property
Trustee, the Property Trustee shall transmit to the holders of Preferred Trust
Securities, FPL Group and the Administrative Trustees notice of any such
default, unless that default will have been cured or waived. (Trust Agreement,
Section 8.02).
A holder of Preferred Trust Securities may directly institute a proceeding
to enforce payment when due to the holder of the Preferred Trust Securities of
the principal of or interest on Junior Subordinated Debentures having a
principal amount equal to the aggregate liquidation preference amount of the
holder's Preferred Trust Securities. The holders of Preferred Trust Securities
have no other rights to exercise directly any other remedies available to the
holder of the Junior Subordinated Debentures unless the trustees under the Trust
Agreement fail to do so. (Trust Agreement, Section 6.01(a)).
REMOVAL OF TRUSTEES. Unless an event of default under the Subordinated
Indenture has occurred and is continuing, the holder of the Common Trust
Securities may remove any trustee under the Trust Agreement at any time. If an
event of default under the Subordinated Indenture has occurred and is
continuing, the holders of a majority of the total liquidation preference amount
of the outstanding Preferred Trust Securities may remove the Property Trustee or
the Delaware Trustee, or both of them. The holder of the Common Trust Securities
may remove any Administrative Trustee at any time. Any resignation or removal of
a trustee under the Trust Agreement will take effect only on the acceptance of
appointment by the successor trustee. (Trust Agreement, Section 8.10).
Holders of Preferred Trust Securities will have no right to appoint or
remove the Administrative Trustees of the Trust, who may be appointed, removed
or replaced solely by FPL Group as the holder of the Common Trust Securities.
(Trust Agreement, Section 8.10).
VOTING RIGHTS. Except as provided below and under "Description of the
Preferred Trust Securities Guarantee--Modification and Assignment," and as
otherwise required by law or the Trust Agreement, the holders of Preferred Trust
Securities will have no voting rights.
While Junior Subordinated Debentures are held by the Property Trustee, the
Property Trustee shall not:
(1) direct the time, method and place to conduct any proceeding for any
remedy available to the Subordinated Indenture Trustee (as such term
is defined below under "Description of the Junior Subordinated
Debentures and the Subordinated Guarantee--General"), or execute any
trust or power conferred on the Subordinated Indenture Trustee with
respect to the Junior Subordinated Debentures;
(2) waive any past default under the Subordinated Indenture;
(3) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debentures will be due and
payable; or
(4) consent to any amendment, modification or termination of the
Subordinated Indenture or the Junior Subordinated Debentures, where
that consent will be required;
without, in each case, obtaining the prior approval of the holders of Preferred
Trust Securities having at least a majority of the aggregate liquidation
preference amount of all outstanding Preferred Trust Securities. Where a consent
of each holder of Junior Subordinated Debentures affected is required, no
consent shall be given by the Property Trustee without the prior consent of each
holder of the Preferred Trust Securities affected. The Property Trustee shall
not revoke any action previously authorized or approved by a vote of the holders
of Preferred Trust Securities, except pursuant to the subsequent vote of the
holders of Preferred Trust Securities. (Trust Agreement, Section 6.01(b)). If
the Property Trustee fails to enforce its rights, as holder, under the Junior
Subordinated Debentures or the Trust Agreement, a holder of the Preferred Trust
Securities may institute a legal proceeding directly against FPL Group or FPL
Group Capital, as the case may be, to enforce the Property Trustee's rights
under the Junior Subordinated Debentures or the Trust Agreement without first
instituting any legal proceeding against the Property Trustee or anyone else.
(Trust Agreement, Section 6.01(a)). The Property Trustee shall notify all
holders of Preferred Trust Securities of any notice of default received from the
Subordinated Indenture Trustee. The Property Trustee shall not take any action
approved by the consent of the holders without an opinion of counsel experienced
29
in those matters to the effect that the Trust will be classified as a grantor
trust and not as an association taxable as a corporation for United States
federal income tax purposes on account of that action. (Trust Agreement,
Section 6.01(b)).
Holders of Preferred Trust Securities may give any required approval at a
meeting convened for such purpose or by written consent without prior notice.
(Trust Agreement, Section 6.06). The Administrative Trustees will give notice of
any meeting at which holders of Preferred Trust Securities are entitled to vote.
(Trust Agreement, Section 6.02).
No vote or consent of the holders of Preferred Trust Securities will be
required for the Trust to redeem and cancel Preferred Trust Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of Preferred Trust Securities are entitled to
vote or consent under any of the circumstances described above, any Preferred
Trust Securities that are owned by FPL Group Capital, FPL Group, any
Administrative Trustee or any affiliate of any of them, shall be treated as if
they were not outstanding for purposes of such vote or consent. (Trust
Agreement, Section 1.01).
AMENDMENTS. The Trust Agreement may be amended from time to time by a
majority of the Administrative Trustees and FPL Group, without the consent of
any holders of Preferred Trust Securities or the other trustees under the Trust
Agreement in order to:
(1) cure any ambiguity; correct or supplement any provision that may be
inconsistent with any other provision of the Trust Agreement or
amendment to the Trust Agreement; or make any other provisions with
respect to matters or questions arising under the Trust Agreement;
(2) change the name of the Trust; or
(3) modify, eliminate or add to any provisions of the Trust Agreement to
the extent necessary to ensure that the Trust will not be classified
for United States federal income tax purposes other than as a grantor
trust (and not an association taxable as a corporation) at any time
that any Preferred Trust Securities and Common Trust Securities are
outstanding or to ensure the Trust's exemption from the status of an
"investment company" under the Investment Company Act of 1940.
No amendment described above may materially adversely affect the interests
of any holder of Preferred Trust Securities or Common Trust Securities without
the applicable consents required pursuant to the following two paragraphs. Any
of the amendments of the Trust Agreement described in paragraph (1) above shall
become effective when notice of the amendment is given to the holders of
Preferred Trust Securities and Common Trust Securities in accordance with the
provisions of the Trust Agreement. (Trust Agreement, Section 10.03(a)).
Except as provided below, any provision of the Trust Agreement may be
amended by the Administrative Trustees and FPL Group with:
(1) the consent of holders of Preferred Trust Securities and Common Trust
Securities representing not less than a majority in aggregate
liquidation preference amount of the Preferred Trust Securities and
Common Trust Securities then outstanding; and
(2) receipt by the trustees of an opinion of counsel to the effect that
such amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not affect the Trust's status as a
grantor trust for federal income tax purposes (and not an association
taxable as a corporation) or affect the Trust's exemption from the
status of an "investment company" under the Investment Company Act of
1940. (Trust Agreement, Section 10.03(b)).
Each affected holder of Preferred Trust Securities must consent to any
amendment to the Trust Agreement that:
30
(1) adversely changes the amount or timing of any distribution with
respect to Preferred Trust Securities or otherwise adversely affects
the amount of any distribution required to be made in respect of
Preferred Trust Securities and Common Trust Securities as of a
specified date;
(2) restricts the right of a holder of Preferred Trust Securities to
institute suit for the enforcement of any such payment on or after
that date; or
(3) modify the provisions described in clauses (1) and (2) above. (Trust
Agreement, Section 10.03(c)).
FORM, EXCHANGE AND TRANSFER. Preferred Trust Securities may be exchanged
for other Preferred Trust Securities in any authorized denomination and of like
tenor and aggregate liquidation preference. (Trust Agreement, Section 5.04).
Subject to the terms of the Trust Agreement, Preferred Trust Securities may
be presented for exchange as provided above or for registration of transfer,
duly endorsed or accompanied by a duly executed instrument of transfer, at the
office of the Preferred Trust Security registrar. The Administrative Trustees
may designate FPL Group or FPL Group Capital or any affiliate of either of them
as the Preferred Trust Security registrar. The Property Trustee will initially
act as the Preferred Trust Security registrar and transfer agent. (Trust
Agreement, Section 5.08). No service charge will be made for any registration of
transfer or exchange of Preferred Trust Securities, but the Preferred Trust
Security registrar may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with the transfer or exchange. A
transfer or exchange will be made when the Preferred Trust Security registrar
and Administrative Trustees are satisfied with the documents of title and
identity of the person making the request. (Trust Agreement, Section 5.04). The
Administrative Trustees may at any time designate additional transfer agents or
rescind the designation of any transfer agent or approve a change in the office
through which any transfer agent acts, except that FPL Group will, or will cause
the Preferred Trust Security registrar to, maintain an office or agency in The
City of New York where Preferred Trust Securities may be transferred or
exchanged. (Trust Agreement, Section 5.08).
The Trust will not be required to:
(1) issue, register the transfer of, or exchange any Preferred Trust
Securities during the period beginning at the opening of business 15
calendar days before the mailing of a notice of redemption of any
Preferred Trust Securities called for redemption and ending at the
close of business on the day the notice is mailed; or
(2) register the transfer of or exchange any Preferred Trust Securities so
selected for redemption, in whole or in part, except the unredeemed
portion of any Preferred Trust Securities being redeemed in part.
(Trust Agreement, Section 5.04).
PAYMENT ON PREFERRED TRUST SECURITIES AND PAYING AGENT. Unless otherwise
stated in a prospectus supplement, payments in respect of the Preferred Trust
Securities will be made on the applicable distribution dates by check mailed to
the address of the holder entitled thereto as such address appears on the
Preferred Trust Security register. (Trust Agreement, Section 4.04). The paying
agent shall initially be the Property Trustee and any co-paying agent chosen by
the Property Trustee that is acceptable to the Administrative Trustees, FPL
Group Capital and FPL Group, which may be FPL Group Capital or FPL Group. The
paying agent may resign upon 30 days' written notice to the Administrative
Trustees, the Property Trustee, FPL Group Capital and FPL Group. In the event
that the Property Trustee shall no longer be the paying agent, the
Administrative Trustees shall appoint a successor, which shall be a bank, trust
company or affiliate of FPL Group reasonably acceptable to the Property Trustee,
FPL Group Capital and FPL Group to act as paying agent. (Trust Agreement,
Section 5.09).
DUTIES OF THE TRUSTEES. The Delaware Trustee will act as the resident
trustee in the State of Delaware and will have no other significant duties. The
Property Trustee will hold the Junior Subordinated Debentures on behalf of the
Trust and will maintain a payment account with respect to the Preferred Trust
Securities and Common Trust Securities, and will also act as trustee under the
Trust Agreement for the purposes of the Trust Indenture Act of 1939. (Trust
Agreement, Sections 2.06 and 2.07(b)).
31
The Administrative Trustees of the Trust are authorized and directed to
conduct the affairs of the Trust and to operate the Trust so that
(1) the Trust will not be deemed to be an "investment company" required to
be registered under the Investment Company Act of 1940,
(2) the Trust will not be taxed as a corporation and
(3) the Junior Subordinated Debentures will be treated as indebtedness of
FPL Group Capital for United States federal income tax purposes.
In this regard, FPL Group and the Administrative Trustees are authorized to take
any action, not inconsistent with applicable law, the certificate of trust or
the Trust Agreement, that FPL Group and the Administrative Trustees determine in
their discretion to be necessary or desirable for those purposes, as long as the
action does not materially adversely affect the interests of the holders of the
Preferred Trust Securities. (Trust Agreement, Section 2.07(d)).
MISCELLANEOUS. Holders of the Preferred Trust Securities have no preemptive
or similar rights. (Trust Agreement, Section 5.13).
NOTICES. Notices to holders of Preferred Trust Securities will be sent by
mail to the addresses of those holders as they appear in the security register
for those Preferred Trust Securities. (Trust Agreement, Section 6.02).
TITLE. The Property Trustee, the Delaware Trustee, the Administrative
Trustees, and the Preferred Trust Security registrar and transfer agent, and any
agent of the Property Trustee, the Delaware Trustee, the Administrative
Trustees, or the Preferred Trust Security registrar and transfer agent, may
treat the person in whose name a Preferred Trust Security is registered as the
absolute owner of that Preferred Trust Security for the purpose of receiving
distributions and all other purposes, regardless of any notice to the contrary.
(Trust Agreement, Section 5.06).
GOVERNING LAW. The Trust Agreement, the Preferred Trust Securities and the
Common Trust Securities will be governed by and construed in accordance with the
laws of the State of Delaware, without regard to conflict of laws principles
thereunder, except to the extent that the law of any other jurisdiction is
mandatorily applicable. (Trust Agreement, Section 10.05).
DESCRIPTION OF THE PREFERRED TRUST SECURITIES GUARANTEE
GENERAL. This section briefly summarizes some of the provisions of the
Preferred Trust Securities Guarantee Agreement that FPL Group will execute and
deliver for the benefit of the holders of the Preferred Trust Securities. This
summary does not contain a complete description of the Preferred Trust
Securities Guarantee Agreement. You should read this summary together with the
Preferred Trust Securities Guarantee Agreement for a complete understanding of
all the provisions. The form of Preferred Trust Securities Guarantee Agreement
has been previously filed with the SEC and is an exhibit to the registration
statement filed with the SEC of which this prospectus is a part. In addition,
the Preferred Trust Securities Guarantee Agreement will be qualified as an
indenture under the Trust Indenture Act of 1939 and is therefore subject to the
provisions of the Trust Indenture Act of 1939. You should read the Trust
Indenture Act of 1939 for a complete understanding of its provisions.
The Bank of New York will act as Preferred Trust Securities Guarantee
Trustee under the Preferred Trust Securities Guarantee Agreement and will hold
the Preferred Trust Securities Guarantee for the benefit of the holders of the
Preferred Trust Securities.
GENERAL TERMS OF THE PREFERRED TRUST SECURITIES GUARANTEE. FPL Group will
absolutely, irrevocably and unconditionally agree to make the guarantee payments
listed below in full to the holders of the Preferred Trust Securities if they
are not made by the Trust, as and when due, regardless of any defense, right of
set-off or counterclaim that the Trust may have or assert. (Preferred Trust
Securities Guarantee Agreement, Section 5.01). The following payments will be
subject to the Preferred Trust Securities Guarantee (without duplication):
32
(1) any accrued and unpaid distributions required to be paid on Preferred
Trust Securities, to the extent the Trust has funds in the payment
account maintained by the Property Trustee legally available for these
payments at such time;
(2) the redemption price, plus all accrued and unpaid distributions to the
redemption date, for any Preferred Trust Securities called for
redemption by the Trust, to the extent the Trust has funds in the
payment account maintained by the Property Trustee legally available
for these payments at such time; and
(3) upon a voluntary or involuntary dissolution, winding-up or termination
of the Trust (except in connection with the distribution of Junior
Subordinated Debentures to the holders in exchange for Preferred Trust
Securities as provided in the Trust Agreement or upon a redemption of
all of the Preferred Trust Securities upon maturity or redemption of
the Junior Subordinated Debentures as provided in the Trust
Agreement), the lesser of:
(a) the aggregate of the liquidation preference amount and all
accrued and unpaid distributions on Preferred Trust Securities to
the date of payment, to the extent the Trust has funds in the
payment account maintained by the Property Trustee legally
available for these payments at such time; and
(b) the amount of assets of the Trust remaining available for
distribution to holders of Preferred Trust Securities in
liquidation of the Trust after satisfaction of liabilities to
creditors of the Trust as required by applicable law.
(Preferred Trust Securities Guarantee Agreement, Section 1.01). FPL Group's
obligation to make a guarantee payment may be satisfied by either making a
direct payment of the required amounts by FPL Group to the holders of Preferred
Trust Securities or causing the Trust to pay such amounts to those holders.
(Preferred Trust Securities Guarantee Agreement, Section 5.01).
The Preferred Trust Securities Guarantee will be a guarantee, subject to
certain subordination provisions, as to payment with respect to the Preferred
Trust Securities, but will not apply to any payment of distributions if and to
the extent that the Trust does not have funds legally available to make those
payments. (Preferred Trust Securities Guarantee Agreement, Sections 1.01 and
5.05). If neither FPL Group Capital nor FPL Group makes interest payments on the
Junior Subordinated Debentures held by the Trust, the Trust will not have funds
available to pay distributions on the Preferred Trust Securities.
The Preferred Trust Securities Guarantee is unsecured and will rank
subordinate and junior in right of payment to all other liabilities of FPL Group
(except those made pari passu or subordinate by their terms). (Preferred Trust
Securities Guarantee Agreement, Section 6.01). The Preferred Trust Securities
Guarantee Agreement does not limit FPL Group from incurring or issuing
additional debt or incurring other liabilities, whether secured or unsecured, or
making guarantees, senior to or equal in right of payment to the Preferred Trust
Securities Guarantee in the future. See "--Security and Ranking" below.
FPL Group will fully and unconditionally guarantee payments due on the
Preferred Trust Securities through a combination of the following:
(1) the Subordinated Guarantee;
(2) the rights of holders of Preferred Trust Securities to enforce FPL
Group's payment obligations under the Subordinated Guarantee;
(3) FPL Group's agreement to pay the expenses of the Trust; and
(4) the Preferred Trust Securities Guarantee.
33
No single one of the documents listed above standing alone or operating in
conjunction with fewer than all of the other documents constitutes the guarantee
by FPL Group. It is only the combined operation of these documents that has the
effect of providing a full and unconditional, but subordinated, guarantee as to
payment by FPL Group of the Preferred Trust Securities.
Except as otherwise stated in the related prospectus supplement, the
covenants in the Preferred Trust Securities Guarantee Agreement would not give
holders of the Preferred Trust Securities protection in the event of a
highly-leveraged transaction involving FPL Group.
SECURITY AND RANKING. The Preferred Trust Securities Guarantee will be an
unsecured obligation of FPL Group and will rank:
(1) subordinate and junior in right of payment to all other liabilities of
FPL Group, including the Subordinated Guarantee and the Debt
Securities Guarantee;
(2) equal in right of payment with the most senior preferred or preference
stock that may be issued by FPL Group and with any guarantee that may
be entered into by FPL Group in respect of any preferred or preference
stock of any affiliate of FPL Group; and
(3) senior to FPL Group common stock. (Preferred Trust Securities
Guarantee Agreement, Section 6.01).
The Trust Agreement provides that by accepting Preferred Trust Securities,
a holder agrees to the subordination provisions and other terms of the Preferred
Trust Securities Guarantee. (Trust Agreement, Section 5.02).
The Preferred Trust Securities Guarantee will be a guarantee of payment and
not of collection, that is, the guaranteed party may institute a legal
proceeding directly against FPL Group to enforce its rights under the Preferred
Trust Securities Guarantee without first instituting a legal proceeding against
anyone else. (Preferred Trust Securities Guarantee Agreement, Sections 5.04 and
5.05).
FPL Group is a holding company that derives substantially all of its income
from its operating subsidiaries. Therefore, the Preferred Trust Securities
Guarantee will be effectively subordinated to all indebtedness and other
liabilities, including trade payables, debt and preferred stock incurred or
issued by FPL Group's subsidiaries. Neither the Subordinated Indenture nor the
Preferred Trust Securities Guarantee Agreement places any limit on the amount of
liabilities, including debt or preferred stock, that FPL Group's subsidiaries
may issue, guarantee or otherwise incur.
EVENTS OF DEFAULT. An event of default under the Preferred Trust Securities
Guarantee Agreement will occur upon failure of FPL Group to perform any of its
payment obligations under the Preferred Trust Securities Guarantee Agreement,
which failure has not been cured within 90 days of receipt of notice thereof.
(Preferred Trust Securities Guarantee Agreement, Section 1.01). The holders of
the Preferred Trust Securities having a majority of the aggregate liquidation
preference of the Preferred Trust Securities have the right to:
(1) direct the time, method and place of conducting any proceeding for any
remedy available to the Preferred Trust Securities Guarantee Trustee
under the Preferred Trust Securities Guarantee Agreement, or
(2) direct the exercise of any trust or power conferred upon the Preferred
Trust Securities Guarantee Trustee under the Preferred Trust
Securities Guarantee Agreement. (Preferred Trust Securities Guarantee
Agreement, Section 5.04).
Any holder of the Preferred Trust Securities may enforce the Preferred
Trust Securities Guarantee, or institute a legal proceeding directly against FPL
Group to enforce the Preferred Trust Securities Guarantee Trustee's rights under
the Preferred Trust Securities Guarantee Agreement without first instituting a
legal proceeding against the Trust, the Preferred Trust Securities Guarantee
Trustee or anyone else. (Preferred Trust Securities Guarantee Agreement,
34
Section 5.04). The holders of the Preferred Trust Securities having a majority
of the aggregate liquidation preference of the Preferred Trust Securities may
waive any past event of default and its consequences. (Preferred Trust
Securities Guarantee Agreement, Section 2.06).
FPL Group will be required to deliver to the Preferred Trust Securities
Guarantee Trustee an annual statement as to its compliance with all conditions
under the Preferred Trust Securities Guarantee Agreement. (Preferred Trust
Securities Guarantee Agreement, Section 2.04).
MODIFICATION AND ASSIGNMENT. No consent of holders of Preferred Trust
Securities is required for changes to the Preferred Trust Securities Guarantee
Agreement that do not materially adversely affect their rights. Except as
provided below, changes to the Preferred Trust Securities Guarantee Agreement
that materially adversely affect the rights of Preferred Trust Securities
require the prior approval of the holders of Preferred Trust Securities having
at least a majority of the aggregate liquidation preference amount of the
outstanding Preferred Trust Securities. Each affected holder of Preferred Trust
Securities must consent to any amendment to the Preferred Trust Securities
Guarantee Agreement that impairs the right of such holder to receive guarantee
payments under the Preferred Trust Securities Guarantee Agreement or to
institute suit for enforcement of any such payment. (Preferred Trust Securities
Guarantee Agreement, Section 8.01).
All guarantees and agreements contained in the Preferred Trust Securities
Guarantee Agreement will bind the successors, assigns, receivers, trustees and
representatives of FPL Group and will inure to the benefit of the holders of the
Preferred Trust Securities then outstanding. (Preferred Trust Securities
Guarantee Agreement, Section 8.02).
TERMINATION OF THE PREFERRED TRUST SECURITIES GUARANTEE. The Preferred
Trust Securities Guarantee Agreement will terminate and be of no further force
and effect upon:
(1) full payment of the redemption price, plus accrued and unpaid
distributions to the redemption date, for all the Preferred Trust
Securities;
(2) the distribution of Junior Subordinated Debentures to holders of the
Preferred Trust Securities in exchange for all of the Preferred Trust
Securities; or
(3) full payment of the amounts payable upon liquidation of the Trust.
However, the Preferred Trust Securities Guarantee will continue to be effective
or will be reinstated, as the case may be, if at any time, as result of the
subordination provisions or any mistake or any judicial proceeding or otherwise,
any holder of Preferred Trust Securities must return any sums paid under the
Preferred Trust Securities or the Preferred Trust Securities Guarantee.
(Preferred Trust Securities Guarantee Agreement, Section 7.01).
GOVERNING LAW. The Preferred Trust Securities Guarantee Agreement provides
that it is to be governed by and construed in accordance with the laws of the
State of New York, without regard to conflict of laws principles thereunder,
except to the extent that the law of any other jurisdiction is mandatorily
applicable. (Preferred Trust Securities Guarantee Agreement, Section 8.06).
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
AND THE SUBORDINATED GUARANTEE
GENERAL. The Junior Subordinated Debentures, which the Property Trustee
will hold on behalf of the Trust as trust assets, will be issued by FPL Group
Capital in one or more series under an Indenture among FPL Group Capital, FPL
Group and The Bank of New York, as trustee. This Indenture, as it may be amended
and supplemented from time to time, is referred to in this prospectus as the
"Subordinated Indenture." The Bank of New York, as trustee under the
Subordinated Indenture, is referred to in this prospectus as the "Subordinated
Indenture Trustee." The Subordinated Indenture provides for the issuance from
time to time of subordinated debt in an unlimited amount. The Junior
Subordinated Debentures and all other subordinated debt issued previously or
hereafter under the Subordinated Indenture are collectively referred to in this
prospectus as the "Subordinated Indenture Securities."
35
This section briefly summarizes some of the terms of the Junior
Subordinated Debentures and the Subordinated Guarantee and some of the
provisions of the Subordinated Indenture. This summary does not contain a
complete description of the Junior Subordinated Debentures or the Subordinated
Guarantee. You should read this summary together with the Subordinated Indenture
and the officer's certificates or other documents establishing the Junior
Subordinated Debentures and the Subordinated Guarantee for a complete
understanding of all the provisions and for the definitions of some terms used
in this summary. The form of the Subordinated Indenture (which contains the form
of the Subordinated Guarantee), the form of officer's certificate that may be
used to establish a series of Junior Subordinated Debentures and a form of the
Junior Subordinated Debentures have been previously filed with the SEC, and are
exhibits to the registration statement. In addition, the Subordinated Indenture
will be qualified under the Trust Indenture Act of 1939 and is therefore subject
to the provisions of the Trust Indenture Act of 1939. You should read the Trust
Indenture Act of 1939 for a complete understanding of its provisions.
Junior Subordinated Debentures issued by FPL Group Capital to the Trust
will constitute a separate series under the Subordinated Indenture and will be
limited in aggregate principal amount to the sum of the aggregate liquidation
preference amount of the Preferred Trust Securities and the consideration paid
by FPL Group for the Common Trust Securities.
The Junior Subordinated Debentures will be unsecured, subordinated
obligations of FPL Group Capital which rank junior to all of FPL Group Capital's
Senior Indebtedness (as defined herein). The Junior Subordinated Debentures will
be unconditionally guaranteed by FPL Group as to payment of principal, and any
interest and premium, pursuant to a subordinated guarantee of FPL Group,
included in the Subordinated Indenture, which ranks junior to all of FPL Group's
Senior Indebtedness (as defined herein). See "--Subordinated Guarantee" below.
Each series of Junior Subordinated Debentures may have different terms. FPL
Group Capital will include some or all of the following information about a
specific series of Junior Subordinated Debentures in the prospectus
supplement(s) relating to those Junior Subordinated Debentures:
(1) the title of those Junior Subordinated Debentures,
(2) any limit upon the aggregate principal amount of those Junior
Subordinated Debentures,
(3) the date(s) on which FPL Group Capital will pay the principal of those
Junior Subordinated Debentures,
(4) the rate(s) of interest on those Junior Subordinated Debentures, or
how the rate(s) of interest will be determined, the date(s) from which
interest will accrue, the dates on which FPL Group Capital will pay
interest and the record date for any interest payable on any interest
payment date,
(5) the person to whom FPL Group Capital will pay interest on those Junior
Subordinated Debentures on any interest payment date, if other than
the person in whose name those Junior Subordinated Debentures are
registered at the close of business on the record date for that
interest payment,
(6) the place(s) at which or methods by which FPL Group Capital will make
payments on those Junior Subordinated Debentures and the place(s) at
which or methods by which the registered owners of those Junior
Subordinated Debentures may transfer or exchange those Junior
Subordinated Debentures and serve notices and demands to or upon FPL
Group Capital,
(7) the security registrar and any paying agent or agents for those Junior
Subordinated Debentures,
(8) any date(s) on which, the price(s) at which and the terms and
conditions upon which FPL Group Capital may, at its option, redeem
those Junior Subordinated Debentures, in whole or in part, and any
restrictions on those redemptions,
36
(9) any sinking fund or other provisions or options held by the registered
owners of those Junior Subordinated Debentures that would obligate FPL
Group Capital to repurchase or redeem those Junior Subordinated
Debentures,
(10) the denominations in which FPL Group Capital may issue those Junior
Subordinated Debentures, if other than denominations of $25 and any
integral multiple of $25,
(11) the currency or currencies in which FPL Group Capital may pay the
principal of or premium, if any, or interest on those Junior
Subordinated Debentures (if other than in U.S. dollars),
(12) if FPL Group Capital or a registered owner may elect to pay, or
receive, principal of or premium, if any, or interest on those Junior
Subordinated Debentures in a currency other than that in which those
Junior Subordinated Debentures are stated to be payable, the terms and
conditions upon which that election may be made,
(13) if FPL Group Capital will, or may, pay the principal of or premium, if
any, or interest on those Junior Subordinated Debentures in securities
or other property, the type and amount of those securities or other
property and the terms and conditions upon which FPL Group Capital or
a registered owner may elect to pay or receive those payments,
(14) if the amount payable in respect of principal of or premium, if any,
or interest on those Junior Subordinated Debentures may be determined
by reference to an index or other fact or event ascertainable outside
of the Subordinated Indenture, the manner in which those amounts will
be determined,
(15) the portion of the principal amount of those Junior Subordinated
Debentures that FPL Group Capital will pay upon declaration of
acceleration of the maturity of those Junior Subordinated Debentures,
if other than the entire principal amount of those Junior Subordinated
Debentures,
(16) any events of default with respect to those Junior Subordinated
Debentures and any covenants of FPL Group Capital for the benefit of
the registered owners of those Junior Subordinated Debentures, other
than those specified in the Subordinated Indenture,
(17) the terms, if any, pursuant to which those Junior Subordinated
Debentures may be exchanged for shares of capital stock or other
securities of any other entity,
(18) a definition of "Eligible Obligations" under the Subordinated
Indenture with respect to those Junior Subordinated Debentures
denominated in a currency other than U.S. dollars, and any other
provisions for the reinstatement of FPL Group Capital's indebtedness
in respect of those Junior Subordinated Debentures after their
satisfaction and discharge,
(19) if FPL Group Capital will issue those Junior Subordinated Debentures
in global form, necessary information relating to the issuance of
those Junior Subordinated Debentures in global form,
(20) if FPL Group Capital will issue those Junior Subordinated Debentures
as bearer securities, necessary information relating to the issuance
of those Junior Subordinated Debentures as bearer securities,
(21) any limits on the rights of the registered owners of those Junior
Subordinated Debentures to transfer or exchange those Junior
Subordinated Debentures or to register their transfer, and any related
service charges,
(22) any exceptions to the provisions governing payments due on legal
holidays or any variations in the definition of business day with
respect to those Junior Subordinated Debentures,
37
(23) any collateral security, assurance, or guarantee for those Junior
Subordinated Debentures, in addition to, or any exceptions to, the
Subordinated Guarantee described under "--Subordinated Guarantee"
below,
(24) the designation of the trust to which the Junior Subordinated
Debentures are to be issued,
(25) the terms relating to any additional interest that may be payable as a
result of any tax, assessment or governmental charges, and
(26) any other terms of those Junior Subordinated Debentures that are not
inconsistent with the provisions of the Subordinated Indenture.
(Subordinated Indenture, Section 301).
Except as otherwise stated in the related prospectus supplement, the
covenants in the Subordinated Indenture would not give registered owners of
Junior Subordinated Debentures protection in the event of a highly-leveraged
transaction involving FPL Group Capital or FPL Group.
SUBORDINATION. The Junior Subordinated Debentures will be subordinate and
junior in right of payment to all Senior Indebtedness of FPL Group Capital.
(Subordinated Indenture, Article Fifteen). No payment of the principal
(including redemption and sinking fund payments) of, or interest, or premium, if
any, on the Junior Subordinated Debentures may be made by FPL Group Capital
until all holders of Senior Indebtedness of FPL Group Capital have been paid in
full (or provision has been made for such payment), if any of the following
occurs:
(1) certain events of bankruptcy, insolvency or reorganization of FPL
Group Capital;
(2) any Senior Indebtedness of FPL Group Capital is not paid when due
(after the expiration of any applicable grace period) and that default
continues without waiver; or
(3) any other default has occurred and continues without waiver (after the
expiration of any applicable grace period) pursuant to which the
holders of Senior Indebtedness of FPL Group Capital are permitted to
accelerate the maturity of such Senior Indebtedness. (Subordinated
Indenture, Section 1502).
Upon any distribution of assets of FPL Group Capital to creditors in
connection with any insolvency, bankruptcy or similar proceeding, all principal
of, and premium, if any, and interest due or to become due on all Senior
Indebtedness of FPL Group Capital must be paid in full before the holders of the
Junior Subordinated Debentures are entitled to receive or retain any payment
from such distribution. (Subordinated Indenture, Section 1502).
"Senior Indebtedness," when used with respect to FPL Group Capital or FPL
Group, means all of FPL Group Capital's or FPL Group's obligations, as the case
may be, whether presently existing or from time to time hereafter incurred,
created, assumed or existing, to pay principal, premium, interest, penalties,
fees and any other payment in respect of any of the following:
(1) obligations for borrowed money, including without limitation, such
obligations as are evidenced by credit agreements, notes, debentures,
bonds or other securities or instruments;
(2) capitalized lease obligations;
(3) all obligations of the types referred to in clauses (1) and (2) of
others which FPL Group or FPL Group Capital, as the case may be, has
assumed, endorsed, guaranteed, contingently agreed to purchase or
provide funds for the payment of, or otherwise becomes liable for,
under any agreement; or
(4) all renewals, extensions or refundings of obligations of the kinds
described in any of the preceding categories.
38
Any such indebtedness, renewal, extension or refunding, however, will not be
Senior Indebtedness if the instrument creating or evidencing it or the
assumption or guarantee of it provides that it is not superior in right of
payment to or is equal in right of payment with the Junior Subordinated
Debentures or the Subordinated Guarantee, as the case may be. Furthermore trade
accounts payable or long-term purchase obligations will not be Senior
Indebtedness. Senior Indebtedness will be entitled to the benefits of the
subordination provisions in the Subordinated Indenture irrespective of the
amendment, modification or waiver of any term of the Senior Indebtedness.
(Subordinated Indenture, Section 101).
FPL Group Capital is a holding company that derives substantially all of
its income from its operating subsidiaries. Therefore, the Subordinated Debt
Securities will be effectively subordinated to all indebtedness and other
liabilities, including trade payables, debt and preferred stock incurred or
issued by FPL Group Capital's subsidiaries. The Subordinated Indenture does not
place any limit on the amount of liabilities including debt or preferred stock,
that FPL Group Capital's subsidiaries may issue, guarantee or otherwise incur.
SUBORDINATED GUARANTEE. Pursuant to the Subordinated Guarantee, FPL Group
will unconditionally and irrevocably guarantee the payment of principal of and
any interest and premium, if any, on the Junior Subordinated Debentures, when
due and payable, whether at the stated maturity date, by declaration of
acceleration, call for redemption or otherwise, in accordance with the terms of
such Junior Subordinated Debentures and the Subordinated Indenture. The
Subordinated Guarantee will remain in effect until the entire principal of and
any premium, if any, and interest on the Junior Subordinated Debentures has been
paid in full or otherwise discharged in accordance with the provisions of the
Subordinated Indenture. (Subordinated Indenture, Article Fourteen).
The Subordinated Guarantee will be subordinate and junior in right of
payment to all Senior Indebtedness of FPL Group. (Subordinated Indenture,
Section 1402). No payment of the principal (including redemption and sinking
fund payments) of, or interest, or premium, if any, on, the Junior Subordinated
Debentures may be made by FPL Group under the Subordinated Guarantee until all
holders of Senior Indebtedness of FPL Group have been paid in full (or provision
has been made for such payment), if any of the following occurs:
(1) certain events of bankruptcy, insolvency or reorganization of FPL
Group;
(2) any Senior Indebtedness of FPL Group is not paid when due (after the
expiration of any applicable grace period) and that default continues
without waiver; or
(3) any other default has occurred and continues without waiver (after the
expiration of any applicable grace period) pursuant to which the
holders of Senior Indebtedness of FPL Group are permitted to
accelerate the maturity of such Senior Indebtedness. (Subordinated
Indenture, Section 1403).
Upon any distribution of assets of FPL Group to creditors in connection
with any insolvency, bankruptcy or similar proceeding, all principal of, and
premium, if any, and interest due or to become due on all Senior Indebtedness of
FPL Group must be paid in full before the holders of the Junior Subordinated
Debentures are entitled to receive or retain any payment from such distribution.
(Subordinated Indenture, Section 1403).
FPL Group is a holding company that derives substantially all of its income
from its operating subsidiaries. Therefore, the Subordinated Guarantee is
effectively subordinated to all indebtedness and other liabilities, including
trade payables, debt and preferred stock incurred or issued by FPL Group's
subsidiaries. The Subordinated Indenture does not place any limit on the amount
of liabilities, including debt or preferred stock, that FPL Group's subsidiaries
may issue, guarantee or otherwise incur.
PAYMENT AND PAYING AGENTS. Except as stated in the related prospectus
supplement, on each interest payment date FPL Group Capital will pay interest on
each Junior Subordinated Debenture to the person in whose name that Junior
Subordinated Debenture is registered as of the close of business on the record
date relating to that interest payment date. However, on the date that the
Junior Subordinated Debentures mature, FPL Group Capital will pay the interest
to the person to whom it pays the principal. Also, if FPL Group Capital has
defaulted in the payment of interest on any Junior Subordinated Debenture, it
may pay that defaulted interest to the registered owner of that Junior
Subordinated Debenture:
39
(1) as of the close of business on a date that the Subordinated Indenture
Trustee selects, which may not be more than 15 days or less than 10
days before the date that FPL Group Capital proposes to pay the
defaulted interest, or
(2) in any other lawful manner that does not violate the requirements of
any securities exchange on which that Junior Subordinated Debenture is
listed and that the Subordinated Indenture Trustee believes is
acceptable. (Subordinated Indenture, Section 307).
Unless otherwise stated in the related prospectus supplement, the
principal, premium, if any, and interest on the Junior Subordinated Debentures
at maturity will be payable when such Junior Subordinated Debentures are
presented at the main corporate trust office of The Bank of New York, as paying
agent, in The City of New York. FPL Group Capital and/or FPL Group may change
the place of payment on the Junior Subordinated Debentures, appoint one or more
additional paying agents, including itself, and remove any paying agent.
(Subordinated Indenture, Section 602).
TRANSFER AND EXCHANGE. Unless otherwise stated in the related prospectus
supplement, Junior Subordinated Debentures may be transferred or exchanged at
the main corporate trust office of The Bank of New York, as security registrar,
in The City of New York. FPL Group Capital may change the place for transfer and
exchange of the Junior Subordinated Debentures and may designate one or more
additional places for that transfer and exchange.
Except as otherwise stated in the related prospectus supplement, there will
be no service charge for any transfer or exchange of the Junior Subordinated
Debentures. However, FPL Group Capital may require payment of any tax or other
governmental charge in connection with any transfer or exchange of the Junior
Subordinated Debentures.
FPL Group Capital will not be required to transfer or exchange any Junior
Subordinated Debenture selected for redemption. Also, FPL Group Capital will not
be required to transfer or exchange any Junior Subordinated Debenture during a
period of 15 days before selection of Junior Subordinated Debentures to be
redeemed. (Subordinated Indenture, Section 305).
Unless otherwise stated in the related prospectus supplement, if Junior
Subordinated Debentures are distributed to holders of Preferred Trust Securities
in a dissolution of the Trust, the Junior Subordinated Debentures will be issued
in fully registered certificated form in the denominations and integral
multiples thereof in which the Preferred Trust Securities have been issued, and
they may be transferred or exchanged as described above. (Trust Agreement,
Section 9.04).
DEFEASANCE. FPL Group Capital and FPL Group may, at any time, elect to have
all of their obligations discharged with respect to all or a portion of any
Subordinated Indenture Securities (including the Junior Subordinated
Debentures). To do so, FPL Group Capital or FPL Group must irrevocably deposit
with the Subordinated Indenture Trustee or any paying agent, in trust:
(1) money in an amount that will be sufficient to pay all or that portion
of the principal, premium, if any, and interest due and to become due
on those Subordinated Indenture Securities, on or prior to their
maturity, or
(2) in the case of a deposit made prior to the maturity of that series of
Subordinated Indenture Securities,
(a) direct obligations of, or obligations unconditionally guaranteed
by, the United States and entitled to the benefit of its full
faith and credit that do not contain provisions permitting their
redemption or other prepayment at the option of their issuer, and
(b) certificates, depositary receipts or other instruments that
evidence a direct ownership interest in those obligations or in
any specific interest or principal payments due in respect of
those obligations that do not contain provisions permitting their
redemption or other prepayment at the option of their issuer, the
principal of and the interest on which, when due, without any
40
regard to reinvestment of that principal or interest, will
provide money that, together with any money deposited with or
held by the Subordinated Indenture Trustee, will be sufficient to
pay all or that portion of the principal, premium, if any, and
interest due and to become due on those Subordinated Indenture
Securities, on or prior to their maturity, or
(3) a combination of (1) and (2) that will be sufficient to pay all or
that portion of the principal, premium, if any, and interest due and
to become due on those Subordinated Indenture Securities, on or prior
to their maturity. (Subordinated Indenture, Section 701).
OPTION TO EXTEND INTEREST PAYMENT PERIOD. So long as no event of default
under the Subordinated Indenture has occurred and is continuing, FPL Group
Capital may extend the interest payment period from time to time on the Junior
Subordinated Debentures for one or more periods. (Subordinated Indenture,
Section 312). As a consequence, distributions on Preferred Trust Securities
would be deferred during any extension period. Interest would, however, continue
to accrue on the Junior Subordinated Debentures. During any extended interest
period, or for so long as an "Event of Default" under the Subordinated Indenture
resulting from any payment default or a payment default under the Preferred
Trust Securities Guarantee has occurred and is continuing, neither FPL Group nor
FPL Group Capital may:
(1) declare or pay any dividend or distribution on its capital stock;
(2) redeem, purchase, acquire or make a liquidation payment with respect
to any of its capital stock;
(3) pay any principal, interest or premium on, or repay, repurchase or
redeem any debt securities that are equal or junior in right of
payment with the Junior Subordinated Debentures or the Subordinated
Guarantee (as the case may be); or
(4) make any payments with respect to any guarantee of debt securities by
FPL Group if such guarantee is equal or junior in right of payment to
the Junior Subordinated Debentures or the Subordinated Guarantee (as
the case may be),
other than
(1) purchases, redemptions or other acquisitions of its capital stock in
connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of employees, officers, directors
or agents or a stock purchase or dividend reinvestment plan, or the
satisfaction of its obligations pursuant to any contract or security
outstanding on the date that the interest payment period is extended
requiring it to purchase, redeem or acquire its capital stock;
(2) as a result of a reclassification of its capital stock or the exchange
or conversion of all or a portion of one class or series of its
capital stock for another class or series of its capital stock;
(3) the purchase of fractional interests in shares of its capital stock
pursuant to the conversion or exchange provisions of its capital stock
or the security being converted or exchanged, or in connection with
the settlement of stock purchase contracts;
(4) dividends or distributions paid or made in its capital stock (or
rights to acquire its capital stock), or repurchases, redemptions or
acquisitions of capital stock in connection with the issuance or
exchange of capital stock (or of securities convertible into or
exchangeable for shares of its capital stock and distributions in
connection with the settlement of stock purchase contracts);
(5) redemptions, exchanges or repurchases of, or with respect to, any
rights outstanding under a shareholder rights plan or the declaration
or payment thereunder of a dividend or distribution of or with respect
to rights in the future;
41
(6) payments under any preferred trust securities guarantee or guarantee
of junior subordinated debentures executed and delivered by FPL Group
concurrently with the issuance by a trust of any preferred trust
securities, so long as the amount of payments made on any preferred
trust securities or junior subordinated debentures (as the case may
be) is paid on all preferred trust securities or junior subordinated
debentures (as the case may be) then outstanding on a pro rata basis
in proportion to the full distributions to which each series of
preferred trust securities or junior subordinated debentures (as the
case may be) is then entitled if paid in full;
(7) dividends or distributions by FPL Group Capital on its capital stock
owned by FPL Group, provided that FPL Group owns 100% of such capital
stock at the time of, or any record date for, such payment; or
(8) redemptions, purchases, acquisitions or liquidation payments by FPL
Group Capital with respect to its capital stock owned by FPL Group,
provided that FPL Group owns 100% of such capital stock at the time
of, or any record date for, such payment. (Subordinated Indenture,
Section 608).
Any extension period with respect to any securities of FPL Group Capital
similar to the Junior Subordinated Debentures or any other securities issued
under the Subordinated Indenture will also apply to payments of interest on the
Junior Subordinated Debentures.
Any extension period with respect to payment of interest on the Junior
Subordinated Debentures will, except as provided in (6) above, also apply to:
(1) payments of interest on all junior subordinated debt securities of FPL
Group Capital, including all other securities issued under the
Subordinated Indenture;
(2) distributions on the related preferred trust securities; and
(3) distributions on all other securities of the Trust or any other
subsidiary trust of FPL Group with terms substantially the same as
those of the Trust Agreement.
Before an extension period ends, FPL Group Capital may further extend the
interest payment period. No extension period as further extended may exceed 20
consecutive quarters. After any extension period and the payment of all amounts
then due, FPL Group Capital may select a new extended interest payment period.
No interest period may be extended beyond the maturity of the Junior
Subordinated Debentures. FPL Group Capital will give the Trust and the
Subordinated Indenture Trustee notice of its election of an extension period
prior to the earlier of (i) one business day before the record date for the
distribution on the Preferred Trust Securities which would occur if FPL Group
Capital did not make the election to extend or (ii) the date the Administrative
Trustees are required to give notice to any securities exchange or any other
applicable self-regulatory organization of the record date for such a
distribution. The Property Trustee shall send notice of that election to the
holders of Preferred Trust Securities.
ADDITIONAL INTEREST. So long as any Preferred Trust Securities remain
outstanding, if the Trust is required to pay any taxes, duties, assessments or
governmental charges imposed by the United States or any other taxing authority
on income derived from the interest payments on the Junior Subordinated
Debentures, then FPL Group Capital will pay as interest on the Junior
Subordinated Debentures any additional interest that may be necessary in order
that the net amounts received and retained by the Trust after the payment of
those taxes, duties, assessments or governmental charges will be the same as the
Trust would have had in the absence of such payment. (Subordinated Indenture,
Section 313).
REDEMPTION. For so long as the Trust is the holder of all the Junior
Subordinated Debentures, the proceeds of any redemption of Junior Subordinated
Debentures will be used by the Trust to redeem Preferred Trust Securities and
Common Trust Securities in accordance with their terms. (Trust Agreement,
Section 4.02(a)).
42
The redemption terms of the Junior Subordinated Debentures, if any, will be
set forth in a prospectus supplement. Unless set forth differently in a
prospectus supplement, and except with respect to Junior Subordinated Debentures
redeemable at the option of the holder, Junior Subordinated Debentures will be
redeemable upon notice between 30 and 60 days prior to the redemption date. If
less than all of the Junior Subordinated Debentures of any series or any tranche
thereof are to be redeemed, the Subordinated Indenture Trustee will select the
Junior Subordinated Debentures to be redeemed. In the absence of any provision
for selection, the Subordinated Indenture Trustee will choose a method of random
selection as it deems fair and appropriate. (Subordinated Indenture,
Sections 403 and 404).
Junior Subordinated Debentures selected for redemption will cease to bear
interest on the redemption date. The paying agent will pay the redemption price
and any accrued interest once the Junior Subordinated Debentures are surrendered
for redemption. (Subordinated Indenture, Section 405). If only part of a Junior
Subordinated Debenture is redeemed, the Subordinated Indenture Trustee will
deliver a new Junior Subordinated Debenture of the same series for the remaining
portion without charge. (Subordinated Indenture, Section 406).
Any redemption at the option of FPL Group Capital may be conditional upon
the receipt by the paying agent, on or prior to the date fixed for redemption,
of money sufficient to pay the redemption price. If the paying agent has not
received such money by the date fixed for redemption, neither FPL Group Capital
nor FPL Group will be required to redeem such Junior Subordinated Debentures.
(Subordinated Indenture, Section 404).
Subject to applicable law, including United States federal securities law,
FPL Group or its affiliates, including FPL Group Capital, may at any time and
from time to time purchase outstanding Junior Subordinated Debentures by tender,
in the open market or by private agreement.
CONSOLIDATION, MERGER, AND SALE OF ASSETS. Under the Subordinated
Indenture, neither FPL Group Capital nor FPL Group may consolidate with or merge
into any other entity or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, unless:
(1) the entity formed by that consolidation, or the entity into which FPL
Group Capital or FPL Group, as the case may be, is merged, or the
entity that acquires or leases FPL Group Capital's or FPL Group's, as
the case may be, property and assets, is an entity organized and
existing under the laws of the United States, any state or the
District of Columbia and that entity expressly assumes FPL Group
Capital's or FPL Group's, as the case may be, obligations on all
Subordinated Indenture Securities and under the Subordinated
Indenture,
(2) immediately after giving effect to the transaction, no event of
default under the Subordinated Indenture and no event that, after
notice or lapse of time or both, would become an event of default
under the Subordinated Indenture exists, and
(3) FPL Group Capital or FPL Group, as the case may be, delivers an
officer's certificate and an opinion of counsel to the Subordinated
Indenture Trustee, as provided in the Subordinated Indenture.
(Subordinated Indenture, Section 1101).
The Subordinated Indenture does not prevent or restrict:
(1) any consolidation or merger after the consummation of which FPL Group
Capital or FPL Group would be the surviving or resulting entity;
(2) any consolidation of FPL Group Capital with FPL Group or any other
entity all of the outstanding voting securities of which are owned,
directly or indirectly, by FPL Group; or any merger of any such entity
into any other of such entities; or any conveyance or other transfer,
or lease, of properties or assets by any thereof to any other thereof;
(3) any conveyance or other transfer, or lease, of any part of the
properties or assets of FPL Group Capital or FPL Group which does not
constitute the entirety, or substantially the entirety, thereof; or
43
(4) the approval by FPL Group Capital or FPL Group of, or the consent by
FPL Group Capital or FPL Group to, any consolidation or merger to
which any direct or indirect subsidiary or affiliate of FPL Group, may
be a party or any conveyance, transfer or lease by any such subsidiary
or affiliate of any or all of its properties or assets. (Subordinated
Indenture, Section 1103.)
EVENTS OF DEFAULT. Each of the following is an event of default under the
Subordinated Indenture with respect to the Subordinated Indenture Securities of
any series:
(1) failure to pay interest on the Subordinated Indenture Securities of
that series within 30 days after it is due (provided, however, that a
valid extension of the interest period by FPL Group Capital will not
constitute an event of default),
(2) failure to pay principal or premium, if any, on the Subordinated
Indenture Securities of that series when it is due,
(3) failure to comply with any other covenant in the Subordinated
Indenture, other than a covenant that does not relate to that series
of Subordinated Indenture Securities, that continues for 90 days after
FPL Group Capital and FPL Group receive written notice of such failure
to comply from the Subordinated Indenture Trustee, or FPL Group
Capital, FPL Group and the Subordinated Indenture Trustee receive
written notice of such failure to comply from the registered owners of
at least 33% in principal amount of the Subordinated Indenture
Securities of that series,
(4) certain events of bankruptcy, insolvency or reorganization of FPL
Group Capital or FPL Group,
(5) with certain exceptions, the Subordinated Guarantee ceases to be
effective, is found by a judicial proceeding to be unenforceable or
invalid or is denied or disaffirmed by FPL Group, and
(6) any other event of default specified with respect to the Subordinated
Indenture Securities of that series. (Subordinated Indenture, Section
801).
In the case of the third event of default listed above, the Subordinated
Indenture Trustee may extend the grace period. In addition, if holders of a
particular series have given a notice of default, then holders of at least the
same percentage of Junior Subordinated Debentures of that series, together with
the Subordinated Indenture Trustee, may also extend the grace period. The grace
period will be automatically extended if FPL Group Capital or FPL Group has
initiated and is diligently pursuing corrective action in good faith.
(Subordinated Indenture, Section 801). An event of default with respect to the
Subordinated Indenture Securities of a particular series will not necessarily
constitute an event of default with respect to Subordinated Indenture Securities
of any other series issued under the Subordinated Indenture.
REMEDIES. If an event of default applicable to the Subordinated Indenture
Securities of one or more series, but not applicable to all outstanding
Subordinated Indenture Securities, exists, then either the Subordinated
Indenture Trustee or the registered owners of at least 33% in aggregate
principal amount of the Subordinated Indenture Securities of each of the
affected series may declare the principal of and accrued but unpaid interest on
all the Subordinated Indenture Securities of that series to be due and payable
immediately. (Subordinated Indenture, Section 802).
If the event of default is applicable to all outstanding Subordinated
Indenture Securities, then only the Subordinated Indenture Trustee or the
registered owners of at least 33% in aggregate principal amount of all
outstanding Subordinated Indenture Securities of all series, voting as one
class, and not the registered owners of any one series, may make a declaration
of acceleration. (Subordinated Indenture, Section 802). However, the event of
default giving rise to the declaration relating to any series of Subordinated
Indenture Securities will be automatically waived, and that declaration and its
consequences will be automatically rescinded and annulled, if, at any time after
that declaration and before a judgment or decree for payment of the money due
has been obtained:
44
(1) FPL Group Capital or FPL Group deposits with the Subordinated
Indenture Trustee a sum sufficient to pay:
(a) all overdue interest on all Subordinated Indenture Securities of
that series,
(b) the principal of and any premium on any Subordinated Indenture
Securities of that series that have become due for reasons other
than that declaration, and interest that is then due,
(c) interest on overdue interest for that series, and
(d) all amounts due to the Subordinated Indenture Trustee under the
Subordinated Indenture, and
(2) any other event of default with respect to the Subordinated Indenture
Securities of that series has been cured or waived as provided in the
Subordinated Indenture. (Subordinated Indenture, Section 802).
Other than its obligations and duties in case of an event of default under
the Subordinated Indenture, the Subordinated Indenture Trustee is not obligated
to exercise any of its rights or powers under the Subordinated Indenture at the
request or direction of any of the registered owners, unless those registered
owners offer reasonable indemnity to the Subordinated Indenture Trustee.
(Subordinated Indenture, Section 903). If they provide this reasonable
indemnity, the registered owners of a majority in principal amount of any series
of Subordinated Indenture Securities will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Subordinated Indenture Trustee, or exercising any trust or power conferred on
the Subordinated Indenture Trustee, with respect to the Subordinated Indenture
Securities of that series. However, if an event of default under the
Subordinated Indenture relates to more than one series of Subordinated Indenture
Securities, only the registered owners of a majority in aggregate principal
amount of all affected series of Subordinated Indenture Securities, considered
as one class, will have the right to make that direction. Also, the direction
must not violate any law or the Subordinated Indenture, and may not expose the
Subordinated Indenture Trustee to personal liability in circumstances where its
indemnity would not, in the Subordinated Indenture Trustee's sole discretion, be
adequate. (Subordinated Indenture, Section 812).
No registered owner of Subordinated Indenture Securities of any series will
have any right to institute any proceeding under the Subordinated Indenture, or
exercise any remedy under the Subordinated Indenture, unless:
(1) that registered owner has previously given to the Subordinated
Indenture Trustee written notice of a continuing event of default with
respect to the Subordinated Indenture Securities of that series,
(2) the registered owners of a majority in aggregate principal amount of
the outstanding Subordinated Indenture Securities of all series in
respect of which an event of default under the Subordinated Indenture
exists, considered as one class, have made written request to the
Subordinated Indenture Trustee, and have offered reasonable indemnity
to the Subordinated Indenture Trustee to institute that proceeding in
its own name as trustee, and
(3) the Subordinated Indenture Trustee has failed to institute any
proceeding, and has not received from the registered owners of a
majority in aggregate principal amount of the outstanding Subordinated
Indenture Securities of all series in respect of which an event of
default under the Subordinated Indenture exists, considered as one
class, a direction inconsistent with that request, within 60 days
after that notice, request and offer. (Subordinated Indenture, Section
807).
However, these limitations do not apply to a suit instituted by a
registered owner of a Subordinated Indenture Security for the enforcement of
payment of the principal of or any premium, if any, or interest on that
Subordinated Indenture Security on or after the applicable due date specified in
that Subordinated Indenture Security. (Subordinated Indenture, Section 808).
45
Each of FPL Group Capital and FPL Group is required to deliver to the
Subordinated Indenture Trustee an annual statement as to its compliance with all
conditions and covenants applicable to it under the Subordinated Indenture.
(Subordinated Indenture, Section 606).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED TRUST SECURITIES. If
there is an event of default with respect to Junior Subordinated Debentures held
by the Trust, then the holders of Preferred Trust Securities issued by the Trust
will rely on the Property Trustee or the Subordinated Indenture Trustee, acting
for the benefit of the Property Trustee, to enforce the Property Trustee's
rights against FPL Group Capital and FPL Group as a holder of the Junior
Subordinated Debentures. However, a holder of Preferred Trust Securities may
enforce the Subordinated Indenture directly against FPL Group Capital to the
same extent, and upon the same conditions, as if the holder of Preferred Trust
Securities held a principal amount of Junior Subordinated Debentures equal to
the aggregate liquidation amount of its Preferred Trust Securities.
(Subordinated Indenture, Section 610).
Subject to their right to bring suit to enforce their right to payment, the
holders of Preferred Trust Securities would not be able to institute any
proceeding with respect to the Subordinated Indenture unless the Subordinated
Indenture Trustee has failed to do so for 60 days after a request of the holders
of at least 33% of the aggregate liquidation amount of outstanding Preferred
Trust Securities. Upon such failure, the holders of a majority of the aggregate
liquidation amount of the outstanding Preferred Trust Securities would have the
right to directly institute proceedings for enforcement of all other rights of
the Subordinated Indenture Trustee against FPL Group Capital to the fullest
extent permitted by law. (Subordinated Indenture, Sections 807, 808 and 812).
MODIFICATION AND WAIVER. Without the consent of any registered owner of
Subordinated Indenture Securities, FPL Group, FPL Group Capital and the
Indenture Trustee may amend or supplement the Subordinated Indenture for any of
the following purposes:
(1) to provide for the assumption by any permitted successor to FPL Group
Capital or FPL Group of FPL Group Capital's or FPL Group's, as the
case may be, obligations with respect to the Subordinated Indenture
and the Subordinated Indenture Securities in the case of a merger or
consolidation or a conveyance, transfer or lease of its properties and
assets substantially as an entirety,
(2) to add covenants of FPL Group Capital or FPL Group or to surrender any
right or power conferred upon FPL Group Capital or FPL Group by the
Subordinated Indenture,
(3) to add any additional events of default,
(4) to change, eliminate or add any provision of the Subordinated
Indenture, provided that if that change, elimination or addition will
materially adversely affect the interests of the registered owners of
Subordinated Indenture Securities of any series or tranche, that
change, elimination or addition will become effective with respect to
that series or tranche only
(a) when the required consent of the registered owners of
Subordinated Indenture Securities of that series or tranche has
been obtained, or
(b) when no Subordinated Indenture Securities of that series or
tranche remain outstanding under the Subordinated Indenture,
(5) to provide collateral security for all but not a part of the
Subordinated Indenture Securities,
(6) to establish the form or terms of Subordinated Indenture Securities of
any other series or tranche,
(7) to provide for the authentication and delivery of bearer securities
and the related coupons and for other matters relating to those bearer
securities,
(8) to accept the appointment of a successor Subordinated Indenture
Trustee or co-trustee with respect to the Subordinated Indenture
Securities of one or more series and to change any of the provisions
46
of the Subordinated Indenture as necessary to provide for the
administration of the trusts under the Subordinated Indenture by more
than one trustee,
(9) to add procedures to permit the use of a non-certificated system of
registration for the Subordinated Indenture Securities of all or any
series or tranche,
(10) to change any place where
(a) the principal of and premium, if any, and interest on all or any
series or tranche of Subordinated Indenture Securities are
payable,
(b) all or any series or tranche of Subordinated Indenture Securities
may be transferred or exchanged, and
(c) notices and demands to or upon FPL Group Capital or FPL Group in
respect of Subordinated Indenture Securities and the Subordinated
Indenture may be served, or
(11) to cure any ambiguity or inconsistency or to add or change any other
provisions with respect to matters and questions arising under the
Subordinated Indenture, provided those changes or additions may not
materially adversely affect the interests of the registered owners of
Subordinated Indenture Securities of any series or tranche.
(Subordinated Indenture, Section 1201).
The registered owners of a majority in aggregate principal amount of the
Subordinated Indenture Securities of all series then outstanding may waive
compliance by FPL Group Capital or FPL Group with certain restrictive provisions
of the Subordinated Indenture. (Subordinated Indenture, Section 607). The
registered owners of a majority in principal amount of the outstanding
Subordinated Indenture Securities of any series may waive any past default under
the Subordinated Indenture with respect to that series, except a default in the
payment of principal, premium, if any, or interest and a default with respect to
certain restrictive covenants or provisions of the Subordinated Indenture that
cannot be modified or amended without the consent of the registered owner of
each outstanding Subordinated Indenture Security of that series affected.
(Subordinated Indenture, Section 813). If the Trust holds Subordinated Indenture
Securities of any series, the Trust may not waive compliance, or any default in
compliance, by FPL Group Capital or FPL Group with any covenant or term
contained in, or any past default under, the Subordinated Indenture or the
Subordinated Indenture Securities of such series, without the approval of at
least a majority (or such greater percentage required by the Trust Agreement) in
aggregate liquidation preference amount of the outstanding Preferred Trust
Securities. (Subordinated Indenture, Sections 607 and 813).
In addition to any amendments described above, if the Trust Indenture Act
of 1939 is amended after the date of the Subordinated Indenture in a way that
requires changes to the Subordinated Indenture or in a way that permits changes
to, or the elimination of, provisions that were previously required by the Trust
Indenture Act of 1939, the Subordinated Indenture will be deemed to be amended
to conform to that amendment of the Trust Indenture Act of 1939 or to make those
changes, additions or eliminations. FPL Group Capital, FPL Group and the
Subordinated Indenture Trustee may, without the consent of any registered
owners, enter into supplemental indentures to make that amendment. (Subordinated
Indenture, Section 1201).
Except for any amendments described above, the consent of the registered
owners of a majority in aggregate principal amount of the Subordinated Indenture
Securities of all series then outstanding, considered as one class, is required
for all other modifications to the Subordinated Indenture. However, if less than
all of the series of Subordinated Indenture Securities outstanding are directly
affected by a proposed supplemental indenture, then the consent only of the
registered owners of a majority in aggregate principal amount of outstanding
Subordinated Indenture Securities of all directly affected series, considered as
one class, is required. But, if FPL Group Capital issues any series of
Subordinated Indenture Securities in more than one tranche and if the proposed
supplemental indenture directly affects the rights of the registered owners of
Subordinated Indenture Securities of less than all of those tranches, then the
consent only of the registered owners of a majority in aggregate principal
amount of the outstanding Subordinated Indenture Securities of all directly
affected tranches, considered as one class, will be required. However, none of
those amendments or modifications may:
47
(1) change the dates on which the principal of or interest (except as
described above under "--Option to Extend Interest Payment Period") on
a Subordinated Indenture Security is due without the consent of the
registered owner of that Subordinated Indenture Security,
(2) reduce any Subordinated Indenture Security's principal amount or rate
of interest (or the amount of any installment of that interest) or
change the method of calculating that rate without the consent of the
registered owner of that Subordinated Indenture Security,
(3) reduce any premium payable upon the redemption of a Subordinated
Indenture Security without the consent of the registered owner of that
Subordinated Indenture Security,
(4) change the currency (or other property) in which a Subordinated
Indenture Security is payable without the consent of the registered
owner of that Subordinated Indenture Security,
(5) impair the right to sue to enforce payments on any Subordinated
Indenture Security on or after the date that it states that the
payment is due (or, in the case of redemption, on or after the
redemption date) without the consent of the registered owner of that
Subordinated Indenture Security,
(6) impair the right to receive payments under the Subordinated Guarantee
or to institute suit for enforcement of any such payment under the
Subordinated Guarantee,
(7) reduce the percentage in principal amount of the outstanding
Subordinated Indenture Securities of any series or tranche whose
owners must consent to an amendment, supplement or waiver without the
consent of the registered owner of each outstanding Subordinated
Indenture Security of that series or tranche,
(8) reduce the requirements for quorum or voting of any series or tranche
without the consent of the registered owner of each outstanding
Subordinated Indenture Security of that series or tranche, or
(9) modify certain of the provisions of the Subordinated Indenture
relating to supplemental indentures, waivers of certain covenants and
waivers of past defaults with respect to the Subordinated Indenture
Securities of any series or tranche, without the consent of the
registered owner of each outstanding Subordinated Indenture Security
affected by the modification.
A supplemental indenture that changes or eliminates any provision of the
Subordinated Indenture that has expressly been included only for the benefit of
one or more particular series or tranches of Subordinated Indenture Securities,
or that modifies the rights of the registered owners of Subordinated Indenture
Securities of that series or tranche with respect to that provision, will not
affect the rights under the Subordinated Indenture of the registered owners of
the Subordinated Indenture Securities of any other series or tranche. So long as
any Preferred Trust Securities are outstanding, the Subordinated Indenture
Trustee may not consent to any supplemental indenture without the prior consent
of the holders of a majority in aggregate liquidation preference of all
outstanding Preferred Trust Securities affected or, in the case of changes
described in clauses (1) through (9) immediately above, 100% in aggregate
liquidation preference of all such outstanding Preferred Trust Securities
affected. (Subordinated Indenture, Section 1202).
The Subordinated Indenture provides that, in order to determine whether the
registered owners of the required principal amount of the outstanding
Subordinated Indenture Securities have given any request, demand, authorization,
direction, notice, consent or waiver under the Subordinated Indenture, or
whether a quorum is present at the meeting of the registered owners of
Subordinated Indenture Securities, Subordinated Indenture Securities owned by
FPL Group Capital, FPL Group or any other obligor upon the Subordinated
Indenture Securities or any affiliate of FPL Group Capital, FPL Group or of that
other obligor (unless FPL Group Capital, FPL Group, that affiliate or that
obligor owns all Subordinated Indenture Securities outstanding under the
Subordinated Indenture, determined without regard to this provision) will be
disregarded and deemed not to be outstanding. (Subordinated Indenture, Section
101).
48
If FPL Group Capital or FPL Group solicits any action under the
Subordinated Indenture from registered owners of Subordinated Indenture
Securities, each of FPL Group Capital or FPL Group may, at its option, by
signing a written request to the Subordinated Indenture Trustee, fix in advance
a record date for determining the registered owners of Subordinated Indenture
Securities entitled to take that action. However, neither FPL Group Capital nor
FPL Group will be obligated to do this. If FPL Group Capital or FPL Group, as
the case may be, fixes such a record date, that action may be taken before or
after that record date, but only the registered owners of record at the close of
business on that record date will be deemed to be registered owners of
Subordinated Indenture Securities for the purposes of determining whether
registered owners of the required proportion of the outstanding Subordinated
Indenture Securities have authorized that action. For these purposes, the
outstanding Subordinated Indenture Securities will be computed as of the record
date. Any action of a registered owner of any Subordinated Indenture Security
under the Subordinated Indenture will bind every future registered owner of that
Subordinated Indenture Security, or any Subordinated Indenture Security
replacing that Subordinated Indenture Security, with respect to anything that
the Indenture Trustee, FPL Group Capital or FPL Group do, fail to do, or allow
to be done in reliance on that action, whether or not that action is noted upon
that Subordinated Indenture Security. (Subordinated Indenture, Section 104).
RESIGNATION OF SUBORDINATED INDENTURE TRUSTEE. The Subordinated Indenture
Trustee may resign at any time with respect to any series of Subordinated
Indenture Securities by giving written notice of its resignation to FPL Group
Capital and FPL Group. Also, the registered owners of a majority in principal
amount of the outstanding Subordinated Indenture Securities of one or more
series of Subordinated Indenture Securities may remove the Subordinated
Indenture Trustee at any time with respect to the Subordinated Indenture
Securities of that series, by delivering an instrument evidencing this action to
the Subordinated Indenture Trustee, FPL Group Capital and FPL Group. However, so
long as any Preferred Trust Securities remain outstanding, the Trust cannot
deliver an instrument evidencing this action without the consent of the holders
of a majority in aggregate liquidation preference of Preferred Trust Securities
outstanding. (Subordinated Indenture, Section 910). The resignation or removal
of the Subordinated Indenture Trustee and the appointment of a successor trustee
will not become effective until a successor trustee accepts its appointment.
Except with respect to a Subordinated Indenture Trustee appointed by the
registered owners of Subordinated Indenture Securities, the Subordinated
Indenture Trustee will be deemed to have resigned and the successor will be
deemed to have been appointed as trustee in accordance with the Subordinated
Indenture if:
(1) no event of default under the Subordinated Indenture or event that,
after notice or lapse of time, or both, would become an event of
default under the Subordinated Indenture exists, and
(2) FPL Group Capital and FPL Group have delivered to the Subordinated
Indenture Trustee resolutions of their Boards of Directors appointing
a successor trustee and that successor trustee has accepted that
appointment in accordance with the terms of the Subordinated
Indenture. (Subordinated Indenture, Section 910).
NOTICES. Notices to registered owners of Subordinated Indenture Securities
will be sent by mail to the addresses of those registered owners as they appear
in the security register for those Subordinated Indenture Securities.
(Subordinated Indenture, Section 106).
TITLE. FPL Group Capital, FPL Group, the Subordinated Indenture Trustee,
and any agent of FPL Group Capital, FPL Group or the Subordinated Indenture
Trustee, may treat the person in whose name a Subordinated Indenture Security is
registered as the absolute owner of that Subordinated Indenture Security,
whether or not that Subordinated Indenture Security is overdue, for the purpose
of making payments and for all other purposes, regardless of any notice to the
contrary. (Subordinated Indenture, Section 308).
GOVERNING LAW. The Subordinated Indenture and the Subordinated Indenture
Securities will be governed by, and construed in accordance with, the laws of
the State of New York, without regard to New York's conflict of law principles,
except to the extent that the law of any other jurisdiction is mandatorily
applicable. (Subordinated Indenture, Section 112).
49
INFORMATION CONCERNING THE TRUSTEES
FPL Group and its subsidiaries, including FPL Group Capital, also maintain
various banking and trust relationships with The Bank of New York. In addition
to acting as Subordinated Indenture Trustee, security registrar and paying agent
under the Subordinated Indenture, The Bank of New York acts, or would act, as
(i) Indenture Trustee, security registrar and paying agent under the Indenture
described under "Description of Offered Debt Securities" above, (ii) Guarantee
Trustee under the Guarantee Agreement described under "Description of the Debt
Securities Guarantee" above, (iii) purchase contract agent under a purchase
contract agreement described under "Description of Stock Purchase Contracts and
Stock Purchase Units" above, (iv) Preferred Trust Securities Guarantee Trustee
under the Preferred Trust Securities Guarantee Agreement described under
"Description of the Preferred Trust Securities Guarantee" above and (v) Property
Trustee under the Trust Agreement. The Bank of New York (Delaware) acts as the
Delaware Trustee under the Trust Agreement.
PLAN OF DISTRIBUTION
FPL Group, FPL Group Capital and the Trust may sell the securities offered
pursuant to this prospectus ("Offered Securities"):
(1) through underwriters or dealers,
(2) through agents, or
(3) directly to one or more purchasers.
THROUGH UNDERWRITERS OR DEALERS. If FPL Group, FPL Group Capital and/or the
Trust uses underwriters in the sale of the Offered Securities, the underwriters
will acquire the Offered Securities for their own account. The underwriters may
resell the Offered Securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The underwriters may sell the Offered Securities directly
or through underwriting syndicates represented by managing underwriters. Unless
otherwise stated in the prospectus supplement relating to the Offered
Securities, the obligations of the underwriters to purchase those Offered
Securities will be subject to certain conditions, and the underwriters will be
obligated to purchase all of those Offered Securities if they purchase any of
them. If FPL Group, FPL Group Capital and/or the Trust uses a dealer in the
sale, FPL Group, FPL Group Capital and/or the Trust will sell the Offered
Securities to the dealer as principal. The dealer may then resell those Offered
Securities at varying prices determined at the time of resale.
Any initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers may be changed from time to time.
THROUGH AGENTS. FPL Group, FPL Group Capital and/or the Trust may designate
one or more agents to sell the Offered Securities. Unless otherwise stated in a
prospectus supplement, the agents will agree to use their best efforts to
solicit purchases for the period of their appointment.
DIRECTLY. FPL Group, FPL Group Capital and/or the Trust may sell the
Offered Securities directly to one or more purchasers. In this case, no
underwriters, dealers or agents would be involved.
GENERAL INFORMATION. A prospectus supplement will state the name of any
underwriter, dealer or agent and the amount of any compensation, underwriting
discounts or concessions paid, allowed or reallowed to them. A prospectus
supplement will also state the proceeds to FPL Group, FPL Group Capital and/or
the Trust from the sale of the Offered Securities, any initial public offering
price and other terms of the offering of those Offered Securities.
FPL Group, FPL Group Capital and/or the Trust may authorize underwriters,
dealers or agents to solicit offers by certain institutions to purchase the
Offered Securities from FPL Group, FPL Group Capital and/or the Trust at the
public offering price and on the terms described in the related prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future.
50
FPL Group, FPL Group Capital and/or the Trust may have agreements to
indemnify underwriters, dealers and agents against, or to contribute to payments
which the underwriters, dealers and agents may be required to make in respect
of, certain civil liabilities, including liabilities under the Securities Act of
1933.
EXPERTS
The consolidated financial statements incorporated by reference in this
prospectus from FPL Group's Annual Report on Form 10-K have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated by reference herein, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
LEGAL OPINIONS
Steel Hector & Davis LLP, Miami, Florida and Thelen Reid & Priest LLP, New
York, New York, co-counsel to FPL Group, FPL Group Capital and the Trust, will
pass upon the legality of the Offered Securities for FPL Group, FPL Group
Capital and the Trust. Hunton & Williams, New York, New York, will pass upon the
legality of the Offered Securities for any underwriter, dealer or agent. Certain
matters of Delaware law relating to the validity of the Preferred Trust
Securities, the enforceability of the Trust Agreement and the creation of the
Trust will be passed upon by Reed Smith LLP, special Delaware counsel to FPL
Group, FPL Group Capital and the Trust. Thelen Reid & Priest LLP and Hunton &
Williams may rely as to all matters of Florida law upon the opinion of Steel
Hector & Davis LLP, and on the opinion of Reed Smith LLP, as to matters
involving the law of the State of Delaware in connection with the Preferred
Trust Securities. Steel Hector & Davis LLP may rely as to all matters of New
York law upon the opinion of Thelen Reid & Priest LLP, and on the opinion of
Reed Smith LLP, as to matters involving the law of the State of Delaware in
connection with the Preferred Trust Securities.
-----------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATiON INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. NEITHER FPL GROUP
CAPITAL, FPL GROUP NOR THE TRUST HAS AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH
ADDITIONAL OR DIFFERENT INFORMATION. NEITHER FPL GROUP CAPITAL, FPL GROUP NOR
THE TRUST IS MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THOSE DOCUMENTS OR THAT THE INFORMATION INCORPORATED BY
REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THE DOCUMENT
INCORPORATED BY REFERENCE.
51
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FPL GROUP CAPITAL TRUST I
10,000,000 % PREFERRED TRUST SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED TRUST SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED AS DESCRIBED HEREIN BY
FPL GROUP, INC.
[FPL GROUP CAPITAL LOGO]
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PROSPECTUS SUPPLEMENT
MARCH , 2004
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Joint Book-Running Managers
CITIGROUP
MERRILL LYNCH & CO.
MORGAN STANLEY
WACHOVIA SECURITIES
----------------
Co-Managers
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS
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