SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27660; 70-9189)
Supplemental Order Authorizing the Solicitation of Proxies by a Registered Holding Company
March 20, 2003
Entergy Corporation ("Entergy"), a registered public utility holding company located in New Orleans, Louisiana, has filed with this Commission a post-effective amendment ("Declaration") under section 12(e) and rules 54, 62 and 65 of the Public Utility Holding Company Act of 1935, as amended (the "Act") to its application-declaration under the Act.
Entergy seeks authority to solicit proxies from its stockholders in connection with Entergy's proposed Amended and Restated 1998 Equity Ownership Plan ("Equity Plan") to maintain compliance with Section 162(m) of the Internal Revenue Code. The Equity Plan will be an amendment and restatement of Entergy's current Equity Ownership Plan (the "1998 Plan") which was approved by its stockholders in 1998 (see HCAR No. 35-26895).
Under the Equity Plan, awards may be granted to certain designated officers and executive personnel ("key employees") of Entergy and those companies with respect to which Entergy owns, or directly or indirectly controls, a majority of the combined
voting power ("Subsidiaries") and members of the Board of Directors of Entergy who are not otherwise employed by Entergy or the Subsidiaries. The purpose of the Equity Plan is to give key employees and outside directors an opportunity to acquire shares of the Common Stock, $0.01 par value, of Entergy ("Common Stock"), to tie more closely the interests of key employees and outside directors to those of Entergy's stockholders, and to reward the effective leadership of Entergy and the Subsidiaries through the use of equity incentives. Key employees are those who, in the opinion of the Committee (as defined below), have significant responsibility for the continued growth, development and financial success of Entergy and the Subsidiaries.
The Equity Plan provides for several mechanisms for building the equity holdings of key employees and outside directors. These mechanisms include: (1) stock options, which may be either nonstatutory stock options or incentive stock options as provided in Section 422 of the Internal Revenue Code ("Options"); (2) shares of Common Stock, which vest over a period of time ("Restricted Shares"); (3) units which are awarded upon attainment of specified performance goals and are payable in cash ("Performance Units"); or (4) equity awards in the form of phantom stock units also payable in cash ("Equity Awards"). The Committee may select from among these mechanisms when making awards under the Equity Plan.
The Equity Plan makes a maximum of 15,000,000 shares of Common Stock available for awards, and approximately 7,100,000 shares have already been awarded. This leaves approximately 7,900,000 shares available under the Plan, subject to adjustment due to stock dividends, stock splits, recapitalizations, mergers, consolidations or other reorganizations. Shares of Common Stock awarded under the Equity Plan may be either authorized but unissued shares or shares acquired in the open market. Shares of Common Stock covered by awards which are not earned, or which are forfeited for any reason, and Options which expire unexercised, will again be available for subsequent awards under the Equity Plan. To the extent that shares of Common Stock previously held in a participant's name are surrendered upon the exercise of an Option or shares relating to an award are used to pay withholding taxes, those shares shall become available for subsequent awards under the Equity Plan. Certain provisions of the Equity Plan call for accelerated payments should a change of control occur.
The proposed Equity Plan would make several revisions to the 1998 Plan. First, two of the four award types, performance units and equity awards, are to be paid only in cash. The provisions relating to the Options have been revised in a number of respects, the most significant of which are that top executives must retain at least 75% of their after tax net profit from option exercise in Company stock until the earlier of 60 months or termination of their full-time employment with the Company; reloads are no longer available under the Equity Plan; and the Personnel Committee would no longer have authority to re-price Options after grant. Also, while there was no cap on Restricted Share grants under the 1998 Plan, the proposed Equity Plan places a cap on the aggregate number of Restricted Shares that may be granted under the Plan equal to 1,500,000 shares. In addition, under the proposed Equity Plan, there is now a cap on the total value of all Performance Units available to be granted to named executive officers, as that term is defined in Item 402 of Regulation S-K, in any Performance Period, equal to 1% of operating cash flow, which is in addition to the cap on the value of Performance Units available to any one individual during a single Performance Period, equal to units having a value of 0.5% of operating cash flow for the Performance Period. Performance Shares have been eliminated. Finally, under the proposed Equity Plan, payments made to certain executives are allowed to be deferred into the Company's Executive Deferral Compensation Plan, and authority is granted to the Committee or its delegee to determine whether other investment options should be available for amounts held in Equity Plan deferral accounts. All of these changes would only apply to grants or elections made after the effective date, which is February 13, 2003 if the Equity Plan is approved by shareholders.
The Equity Plan will be administered by the Personnel Committee of the Board of Directors of Entergy or whatever other committee ("Committee") as the Board may determine is qualified, to the extent required, to administer the Equity Plan in accordance with applicable New York Stock Exchange rules and rule 16b-3 under the Securities Exchange Act of 1934, as amended. The Committee will have the full power under the Equity Plan to select from among eligible key employees and outside directors those individuals to whom awards will be granted, to grant any combination of awards to any participants and to determine the specific terms and conditions of each award. The Committee will also have the exclusive authority to interpret the Equity Plan.
In accordance with the requirements of Section 162(m) of the Internal Revenue Code, the Equity Plan will be submitted to the stockholders of Entergy for approval at the Annual Meeting of Stockholders to be held May 9, 2003. That approval requires the affirmative vote of the holders of a majority of the shares of Common Stock cast on this matter. Entergy proposes to solicit proxies from its stockholders to approve the Equity Plan. Entergy requests that an order authorizing the solicitation of proxies be issued as soon as practicable under rule 62(d).
Fees, commissions, and expenses to be incurred in connection with the proposed solicitation are estimated by be approximately $52,500. Entergy states that no state or federal commission, other than this Commission, has jurisdiction over the proposed solicitation.
It appears to the Commission that the declaration should be permitted to become effective immediately under rule 62(d).
IT IS ORDERED, under rule 62 under the Act, that the Declaration is permitted to become effective immediately, subject to the terms and conditions contained in rule 24 under the Act.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.