Registration Nos. 33-53673
33-53673-01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
METROPOLITAN EDISON COMPANY MET-ED CAPITAL, L.P.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
PENNSYLVANIA DELAWARE
(State or other jurisdiction of (State or other jurisdiction
of incorporation or organization) incorporation or
organization)
23-0870160 51-0355042
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
2800 Pottsville Pike Mellon Bank Center
Reading, Pennsylvania 19605 Tenth and Market Streets
(610) 929-3601 Wilmington, Delaware 19801
(302) 654-5893
(Addresses, including zip codes, and telephone numbers, including
area codes, of registrants' principal executive offices)
DON W. MYERS
Vice President and Treasurer
GPU Service Corporation
100 Interpace Parkway
Parsippany, New Jersey 07054-1149
(201) 263-6500
(Name, address, including zip code, and telephone number,
including area code, of agent for service for each registrant)
Please send copies of all communications to:
W. C. MATTHEWS, ESQ. W. EDWIN OGDEN, ESQ.
Secretary Ryan, Russell, Ogden &
Metropolitan Edison Company Seltzer
2800 Pottsville Pike 1100 Berkshire Boulevard
P.O. Box 16001 P.O. Box 6219
Reading, Pennsylvania 19640 Reading, Pennsylvania 19610
(610) 929-3601 (610) 372-4761
<PAGE>
DOUGLAS E. DAVIDSON, ESQ. CLIVE D. CONLEY, ESQ.
Berlack, Israels & Liberman Reid & Priest
120 West 45th Street 40 West 57th Street
New York, New York 10036-4003 New York, New York 10019
(212) 704-0100 (212) 603-2000
____________________
Approximate date of commencement of proposed sale to the
public: to be determined by market conditions after the effective
date of this Registration Statement.
____________________
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box: / /
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, please check the following box: /X/
____________________
This Registration Statement shall hereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or
on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 10, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST , 1994
4,000,000 Preferred Securities
Met-Ed Capital
__% Cumulative Monthly Income Preferred Securities ("MIPS"*),
Series A
(liquidation preference $25 per Preferred Security)
guaranteed to the extent the issuer has funds
as set forth herein by
METROPOLITAN EDISON COMPANY
__________________
The __% Cumulative Monthly Income Preferred Securities,
Series A (the "Series A Preferred Securities"), representing the
limited partner interests offered hereby, are being issued by
Met-Ed Capital, L.P., a limited partnership formed under the laws
of the State of Delaware ("Met-Ed Capital"). All of the general
partner interests in Met-Ed Capital are owned by Met-Ed Preferred
Capital, Inc. (the "General Partner"), a Delaware corporation and
a wholly owned subsidiary of Metropolitan Edison Company, a
Pennsylvania corporation (the "Company"). Met-Ed Capital exists
for the sole purpose of issuing its partner interests and using
the proceeds thereof to purchase the Company's subordinated
debentures. The limited partner interests represented by the
Series A Preferred Securities will have a preference with respect
to cash distributions (hereinafter called "Dividends") and
amounts payable on liquidation over the general partner interests
in Met-Ed Capital. See "Description of Preferred Securities" in
the accompanying Prospectus.
Holders of the Series A Preferred Securities will be
entitled to receive cumulative preferential cash Dividends at an
annual rate of __% of the liquidation preference of $25 per
Series A Preferred Security, accruing from the date of original
issuance and payable monthly in arrears on the last day of each
calendar month of each year, commencing ___________, 1994. The
payment of Dividends, to the extent that Met-Ed Capital has
sufficient cash on hand to permit such payments and funds legally
available therefor, and payments on liquidation or redemption
with respect to the Series A Preferred Securities are guaranteed
on a limited basis by the Company to the extent set forth herein
and in the accompanying Prospectus (the "Limited Guarantee").
See "Description of the Limited Guarantee" in the accompanying
Prospectus. If the Company fails to make interest payments on
the ___% Deferrable Interest Subordinated Debentures, Series A
("Series A Deferrable Interest Subordinated Debentures")
purchased by Met-Ed Capital with the proceeds of this offering,
Met-Ed Capital will have insufficient funds to pay Dividends on
the Series A Preferred Securities, and, since the Limited
Guarantee does not cover the payment of Dividends for which Met-
Ed Capital does not have sufficient funds available, the Company
would not be obligated under the Limited Guarantee to make such
undeclared Dividend payments. In such event, the remedy of a
<PAGE>
holder of Series A Preferred Securities is to enforce Met-Ed
Capital's rights under the Series A Deferrable Interest
Subordinated Debentures. See "Description of the Deferrable
Interest Subordinated Debentures - Enforcement of Certain Rights
by Holders of Preferred Securities".
The Company's obligations under the Limited Guarantee and
the Series A Deferrable Interest Subordinated Debentures are
subordinate and junior in right of payment to all present and
future Senior Indebtedness of the Company (which aggregated
approximately $673,000,000 at June 30, 1994). In addition, the
Company may defer interest payments on the Series A Deferrable
Interest Subordinated Debentures for up to 60 consecutive months.
However, during any deferral period (which the Company considers
remote), the Company may not declare or pay any dividends on, or
redeem or acquire, any of its preferred or common stock.
The Series A Preferred Securities are redeemable at the
option of Met-Ed Capital, in whole or in part, from time to time,
on or after ___________, 1999, at $25 per Series A Preferred
Security plus any accumulated, unpaid and additional Dividends
accrued thereon to the date fixed for redemption (the "Redemption
Price"), and will be redeemed at such price from the proceeds of
any repayment or redemption of the Series A Deferrable Interest
Subordinated Debentures. See "Description of Preferred
Securities-Mandatory Redemption; Optional Redemption".
If at any time Met-Ed Capital or the Company, due to a
change in law or a pronouncement or decision interpreting or
applying any applicable law, is or would be required to pay
certain additional amounts or to withhold or deduct certain
amounts, the Series A Preferred Securities are redeemable in
whole or in part at the Redemption Price at the option of Met-Ed
Capital. In addition, upon the occurrence of certain special
events arising from a change in law or a pronouncement or
decision interpreting or applying such law, the Series A
Preferred Securities are redeemable in whole at the Redemption
Price at the option of Met-Ed Capital. Upon the occurrence of
such a special event, Met-Ed Capital may dissolve and cause
Series A Deferrable Interest Subordinated Debentures to be
distributed to the holders of the Series A Preferred Securities
in liquidation of their interests in Met-Ed Capital. See
"Description of Preferred Securities-Optional Redemption; Special
Event Redemption or Distribution" and "Description of the
Deferrable Interest Subordinated Debentures" in the accompanying
Prospectus. If the Series A Deferrable Interest Subordinated
Debentures are so distributed, the Company will use its best
efforts to have them listed on the same exchange on which the
Series A Preferred Securities are then listed.
In the event of the dissolution of Met-Ed Capital, the
holders of Series A Preferred Securities will be entitled to a
liquidation preference for each Series A Preferred Security of
$25 plus any accumulated, unpaid and additional Dividends accrued
thereon to the date of payment, unless, in connection with such
dissolution, Series A Deferrable Interest Subordinated Debentures
are distributed to the holders of the Series A Preferred
Securities. See "Description of Preferred Securities-Liquidation
Distribution" in the accompanying Prospectus.
<PAGE>
___________________
See "Certain Investment Considerations" for certain
considerations relevant to an investment in the Series A
Preferred Securities, including circumstances under which payment
of Dividends on the Series A Preferred Securities may be deferred
and optional redemption events.
___________________
The Series A Preferred Securities have been approved for listing
on the New York Stock Exchange, subject to official
notice of issuance.
___________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
____________________
Proceeds to
Initial Public Underwriting Met-Ed
Offering Price Commission(1) Capital (2)(3)
Per Series A
Preferred
Security..........$ (2) $
Total..............$ (2) $
________
(1) Met-Ed Capital and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting".
(2) In view of the fact that the proceeds of the sale of the
Series A Preferred Securities will be used to purchase the
Company's Series A Deferrable Interest Subordinated Debentures,
the Company will pay the Underwriters, as compensation for their
services, the amount of $____ per Series A Preferred Security (or
$____ in the aggregate), except that such compensation will be
$___ per Series A Preferred Security sold to certain
institutions, thus reducing the aggregate compensation specified
above. See "Underwriting".
(3) Expenses of the offering which are payable by the
Company are estimated to be $480,000.
The Series A Preferred Securities offered hereby are offered
severally by the Underwriters, as specified herein, subject to
receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that
delivery of certificates for the Series A Preferred Securities
will be made only in book-entry form through the facilities of
The Depository Trust Company on or about , 1994.
________
<PAGE>
* An application has been filed by Goldman, Sachs & Co. with the
United States Patent and Trademark Office for the registration of
the MIPS servicemark.
Goldman, Sachs & Co.
Dean Witter Reynolds Inc.
A.G. Edwards & Sons, Inc.
Kidder, Peabody & Co. Incorporated
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Incorporated
The date of this Prospectus Supplement is , 1994.
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus supplement shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
such state.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
___________________
2
<PAGE>
The following information concerning the Series A Preferred
Securities, the Limited Guarantee and the Series A Deferrable
Interest Subordinated Debentures supplements and should be read
in conjunction with the information contained in the accompanying
Prospectus. Capitalized terms used in this Prospectus Supplement
have the same meanings as in the accompanying Prospectus.
MET-ED CAPITAL
Met-Ed Capital is a limited partnership formed under the
laws of the State of Delaware, all of the general partner
interests in which are owned by the General Partner, a wholly
owned special purpose subsidiary of the Company. Met-Ed Capital
exists solely for the purpose of issuing its partner interests
and utilizing the proceeds thereof to acquire the Company's
Deferrable Interest Subordinated Debentures. All of the business
and affairs of Met-Ed Capital will be managed by the General
Partner, subject to Met-Ed Capital's Amended and Restated Limited
Partnership Agreement, which will be substantially in the form
filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus form a
part.
METROPOLITAN EDISON COMPANY
The Company, a public utility furnishing electric service
wholly within the Commonwealth of Pennsylvania, is a subsidiary
of General Public Utilities Corporation ("GPU"), a holding
company registered under the Public Utility Holding Company Act
of 1935. In 1993, the Company provided retail service to
approximately 445,000 customers in an area in eastern and south
central Pennsylvania having an estimated population of 950,000.
The Company also sells electricity at wholesale to four
municipalities having an estimated population of over 11,000.
The Company is affiliated with Jersey Central Power & Light
Company and Pennsylvania Electric Company, which are also wholly
owned subsidiaries of GPU.
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Series A Preferred Securities
should carefully review the information contained elsewhere in
this Prospectus Supplement and in the accompanying Prospectus and
should particularly consider the following matters:
Subordinate Obligations Under the Limited Guarantee and
the Series A Deferrable Interest Subordinated Debentures.
The Company's obligations under the Limited Guarantee and
the Series A Deferrable Interest Subordinated Debentures are
subordinate and junior in right of payment to all present
and future Senior Indebtedness of the Company. At June 30
, 1994, Senior Indebtedness of the Company aggregated
approximately $673,000,000. There are no terms in the
Series A Preferred Securities, the Series A Deferrable
Interest Subordinated Debentures or the Limited Guarantee
that limit the Company's ability to incur additional
indebtedness, including indebtedness that ranks senior to
the Series A Deferrable Interest Subordinated Debentures and
3
<PAGE>
the Limited Guarantee. See "Description of the Limited
Guarantee-Status of the Limited Guarantee" and "Description
of the Deferrable Interest Subordinated Debentures-
Subordination" in the accompanying Prospectus.
Option to Extend Interest Payment Period. The Company
has the right under the Indenture to extend the interest
payment period on the Series A Deferrable Interest
Subordinated Debentures at any time and from time to time to
up to 60 consecutive months, and, as a consequence, monthly
Dividends on the Series A Preferred Securities can be
deferred by Met-Ed Capital during any such extended interest
payment period (but will continue to accumulate, with
Dividends accruing thereon at the rate applicable to the
Series A Preferred Securities). In the event that the
Company exercises its right to extend, the Company may not
declare or pay dividends on any shares of its preferred or
common stock until deferred interest on the Series A
Deferrable Interest Subordinated Debentures is paid in full.
Met-Ed Capital and the Company currently believe that the
extension of an interest payment period on the Series A
Deferrable Interest Subordinated Debentures is remote. See
"Description of Preferred Securities-Dividends" and
"Description of the Deferrable Interest Subordinated
Debentures-Option to Extend Interest Payment Period" in the
accompanying Prospectus.
Should an extended interest payment period occur, Met-
Ed Capital will continue to accrue income for United States
federal income tax purposes with respect to such deferred
interest which income will be allocated, but not
distributed, to holders of Series A Preferred Securities.
As a result, such a holder will include such interest in
gross income for United States federal income tax purposes
in advance of the receipt of cash, and will not receive the
cash related to such income from Met-Ed Capital if such a
holder disposes of the Series A Preferred Securities prior
to the record date for payment of Dividends. See "United
States Taxation-Potential Extension of Interest Payment
Period" in the accompanying Prospectus.
Special Event Redemption or Distribution. Upon the
occurrence and continuation of a Tax Event arising from a
change in law or a pronouncement or decision interpreting or
applying any applicable law (see "Description of Preferred
Securities - Special Event Redemption or Distribution" in
the accompanying Prospectus), the General Partner may elect
to either: (i) redeem the Series A Preferred Securities in
whole (and not in part); or (ii) dissolve Met-Ed Capital and
cause the Series A Deferrable Interest Subordinated
Debentures to be distributed to the holders of the Series A
Preferred Securities in liquidation of such holders'
interests in Met-Ed Capital, provided that Met-Ed Capital
shall have received an opinion of counsel (which may be
regular tax counsel to the Company or an affiliate but not
an employee thereof) to the effect that the holders of the
Series A Preferred Securities will not recognize any gain or
loss for federal income tax purposes as a result of such
4
<PAGE>
dissolution and distribution. Alternatively, Met-Ed Capital
may elect to cause the Series A Preferred Securities to
remain outstanding. If an Investment Company Act Event (see
"Description of Preferred Securities -Special Event
Redemption or Distribution" in the accompanying Prospectus)
shall occur and be continuing, Met-Ed Capital must elect
either option (i) or (ii) above.
In April 1994, the Internal Revenue Service issued
certain notices generally addressing the characteristics
which distinguish debt from equity for various purposes
under the federal income tax laws. In these notices, the
IRS indicated that transactions involving securities that,
like the securities offered hereunder, have both debt and
equity characteristics would be reviewed with scrutiny to
determine how they would be treated for tax purposes. Based
upon advice from Carter, Ledyard & Milburn, the Company's
special tax counsel, the Company believes that interest on
the Series A Deferrable Interest Subordinated Debentures
will be deductible under the tests referred to in these
notices. If, as a result of a change in law or a
pronouncement or decision interpreting or applying any
applicable law, Met-Ed Capital receives an opinion of
counsel to the effect that interest on the Series A
Deferrable Interest Subordinated Debentures would not be
deductible, Met-Ed Capital would have the option to redeem
the Series A Preferred Securities or to dissolve and cause
Series A Deferrable Interest Subordinated Debentures to be
distributed to the holders of the Series A Preferred
Securities, as described under "Description of Preferred
Securities-Special Event Redemption or Distribution" in the
accompanying Prospectus.
USE OF PROCEEDS
The proceeds to be received by Met-Ed Capital from the sale
of the Series A Preferred Securities will be used to purchase
Series A Deferrable Interest Subordinated Debentures of the
Company and will be applied by the Company to the repayment of
outstanding short-term debt, for construction purposes and for
other general corporate purposes, including the redemption of
outstanding senior securities pursuant to the optional redemption
provisions thereof, if economical.
CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES
The following information should be read in conjunction with
the statements under "Description of Preferred Securities" in the
accompanying Prospectus.
Amount, Dividends, Redemption
An aggregate of _____________ Series A Preferred Securities,
having an aggregate stated liquidation preference of
$____________ ($25 per Series A Preferred Security), are being
offered hereby. Dividends on the Series A Preferred Securities
5
<PAGE>
will be cumulative, will accrue from ____________, 1994 and will
be payable monthly in arrears on the last day of each calendar
month of each year, commencing ______________, 1994, except as
otherwise described in the accompanying Prospectus.
The Dividends payable on each Series A Preferred Security
will be fixed at a rate per annum of __% of the $25 stated
liquidation preference thereof.
The Series A Preferred Securities will be redeemable at the
option of Met-Ed Capital, in whole or in part from time to time,
on or after _________________, 1999 at the Redemption Price. In
addition, the Series A Preferred Securities are subject to
redemption at the Redemption Price under circumstances described
under "Description of Preferred Securities-Mandatory
Redemption;Optional Redemption; Special Event Redemption or
Distribution" in the accompanying Prospectus.
CERTAIN TERMS OF THE SERIES A DEFERRABLE INTEREST SUBORDINATED
DEBENTURES
The following information should be read in conjunction with
the statements under "Description of the Deferrable Interest
Subordinated Debentures" in the accompanying Prospectus.
General
The Series A Deferrable Interest Subordinated Debentures
will be issued under the Indenture dated as of ______________,
1994 between the Company and United States Trust Company of New
York, as Trustee, and may be distributed to the holders of Series
A Preferred Securities upon a dissolution of Met-Ed Capital under
circumstances described under "Description of Preferred
Securities-Special Event Redemption or Distribution" in the
accompanying Prospectus.
Principal Amount, Interest, Maturity, Redemption
An aggregate of $_________ principal amount of Series A
Deferrable Interest Subordinated Debentures will be issued, such
amount being the sum of the aggregate stated liquidation
preference of the Series A Preferred Securities and the General
Partner's related capital contribution.
Each Series A Deferrable Interest Subordinated Debenture
will bear interest at the rate of __% per annum from the original
date of issuance, payable monthly in arrears on the last day of
each calendar month of each year, except as otherwise provided in
the accompanying Prospectus.
The Series A Deferrable Interest Subordinated Debentures
will mature on __________, 2043 and will be redeemable at the
option of the Company at any time on or after _________________,
1999 at a Debenture Redemption Price equal to 100% of their
principal amount plus accrued and unpaid interest to the
Redemption Date, together with any additional interest accrued
thereon. The Series A Deferrable Interest Subordinated
6
<PAGE>
Debentures are also redeemable upon the occurrence of certain
events which cause the Series A Preferred Securities to become
redeemable. Proceeds from the repayment or redemption of Series
A Deferrable Interest Subordinated Debentures will be applied to
redeem the Series A Preferred Securities.
UNDERWRITING
Subject to the terms and conditions of the Underwriting
Agreement, Met-Ed Capital has agreed to sell to each of the
several Underwriters named below, and each of the Underwriters,
for whom Goldman, Sachs & Co., Dean Witter Reynolds Inc., A.G.
Edwards & Sons, Inc., Kidder, Peabody & Co. Incorporated, Morgan
Stanley & Co. Incorporated, PaineWebber Incorporated and
Prudential Securities Incorporated are acting as Representatives,
has severally agreed to purchase from Met-Ed Capital the
respective number of Series A Preferred Securities set forth
opposite its name below:
Number of
Series A
Preferred
Underwriter Securities
Goldman, Sachs & Co. . . . . . . . . . . .
Dean Witter Reynolds Inc. . . . . . . . . .
A.G. Edwards & Sons, Inc. . . . . . . . . .
Kidder, Peabody & Co. Incorporated . . . .
Morgan Stanley & Co. Incorporated . . . . .
PaineWebber Incorporated . . . . . . . . .
Prudential Securities Incorporated . . . .
Total . . . . . . . . . . . . . 4,000,000
Under the terms and conditions of the Underwriting
Agreement, the Underwriters are committed to take and pay for all
such Series A Preferred Securities offered hereby, if any are
taken.
The Underwriters propose to offer the Series A Preferred
Securities in part directly to the public at the initial public
offering price set forth on the cover page of this Prospectus
Supplement, and in part to certain securities dealers at such
price less a concession of $____ per Series A Preferred Security,
except that such concession will be $___ per Series A Preferred
Security sold to certain institutions. The Underwriters may
allow, and such dealers may reallow, a concession not in excess
of $____ per Series A Preferred Security to certain brokers and
dealers. After the Series A Preferred Securities are released
for sale to the public, the offering price and other selling
terms may from time to time be varied by the Representatives.
7
<PAGE>
In view of the fact that the proceeds of the sale of the
Series A Preferred Securities will be used to purchase the
Company's Series A Deferrable Interest Subordinated Debentures,
the Company will pay to the Underwriters, as compensation for
their services, the amount of $____ per Series A Preferred
Security for the accounts of the several Underwriters, except
that such compensation will be $___ per Series A Preferred
Security sold to certain institutions.
The Company and Met-Ed Capital have agreed, during the
period beginning from the date of the Underwriting Agreement and
continuing to and including the earlier of (i) the date, after
the closing date, on which the distribution of the Series A
Preferred Securities and the Limited Guarantee ceases, as
determined by the Underwriters, or (ii) 90 days after the closing
date, not to offer, sell, contract to sell, or otherwise dispose
of any Series A Preferred Securities, any limited partner
interests of Met-Ed Capital, or any preferred stock or any other
securities of Met-Ed Capital or the Company which are
substantially similar to the Series A Preferred Securities or the
Limited Guarantee, or any securities convertible into or
exchangeable for Series A Preferred Securities, limited partner
interests, preferred stock or such substantially similar
securities of either Met-Ed Capital or the Company without the
prior written consent of the Underwriters.
Prior to this offering, there has been no public market for
the Series A Preferred Securities. In order to meet one of the
requirements for listing the Series A Preferred Securities on the
New York Stock Exchange, the Underwriters will undertake to sell
lots of 100 or more Series A Preferred Securities to a minimum of
400 beneficial holders.
Met-Ed Capital and the Company have agreed to indemnify the
Underwriters against certain liabilities, including liabilities
under the Securities Act.
Certain of the Underwriters engage in transactions with, and
from time to time have performed services for, the Company and
its affiliates in the ordinary course of business.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company
and Met-Ed Capital by Berlack, Israels & Liberman, New York, New
York, and Ryan, Russell, Ogden & Seltzer, Reading, Pennsylvania,
and for the Underwriters by Reid & Priest, New York, New York.
Certain matters of Delaware law relating to the validity of the
Preferred Securities will be passed upon by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to
Met-Ed Capital. Berlack, Israels & Liberman and Reid & Priest
may rely on the opinion of Ryan, Russell, Ogden & Seltzer as to
matters of Pennsylvania law, and Berlack, Israels & Liberman,
Ryan, Russell, Ogden & Seltzer and Reid & Priest may rely on the
opinion of Richards, Layton & Finger, P.A., as to matters of
Delaware law. Members and attorneys of Berlack, Israels &
Liberman own an aggregate of 12,091 shares of the Common Stock of
8
<PAGE>
the Company's parent, GPU. In addition, one such member holds
986 such shares as custodian for his children. Members and
attorneys of Ryan, Russell, Ogden & Seltzer own an aggregate of
2,000 shares of the Common Stock of GPU.
9
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 10, 1994
PROSPECTUS
$125,000,000
MET-ED CAPITAL
Preferred Securities
guaranteed to the extent the issuer has funds as
set forth herein by,
METROPOLITAN EDISON COMPANY
Met-Ed Capital, L.P. ("Met-Ed Capital"), a Delaware limited
partnership, all of the general partner interests in which are
owned by a wholly owned subsidiary of Metropolitan Edison Company
(the "Company"), may offer, from time to time, its preferred
securities, representing limited partner interests ("Preferred
Securities"), in one or more series. The payment of periodic
cash distributions (hereinafter called "Dividends") with respect
to Preferred Securities of any series, out of funds held by Met-
Ed Capital and legally available therefor, and payments on
liquidation or redemption with respect to the Preferred
Securities are guaranteed on a limited basis by the Company to
the extent described herein (the "Limited Guarantee"). The
Company's obligations under the Limited Guarantee are subordinate
and junior in right of payment to all present and future Senior
Indebtedness (as defined herein) of the Company but senior in
right of payment to the Company's preferred and common stock.
Deferrable Interest Subordinated Debentures of the Company
("Deferrable Interest Subordinated Debentures") will also be
issued and sold from time to time in one or more series by the
Company to Met-Ed Capital in connection with the investment of
the proceeds from the offering of Preferred Securities.
Deferrable Interest Subordinated Debentures subsequently may be
distributed to holders of Preferred Securities in connection with
a dissolution of Met-Ed Capital upon the occurrence of certain
events as described under "Description of Preferred Securities -
Special Event Redemption or Distribution". The Deferrable
Interest Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to all present and
future Senior Indebtedness of the Company. The Preferred
Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that
the aggregate initial public offering price of all Preferred
Securities offered hereby shall not exceed $125,000,000.
The specific designation, Dividend rate (or method of
determination thereof), and any other rights, preferences,
privileges, limitations and restrictions relating to the
Preferred Securities of the particular series in respect of which
this Prospectus is being delivered will be set forth in a
<PAGE>
Prospectus Supplement pertaining to such series (a "Prospectus
Supplement").
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_________________________
The Preferred Securities may be sold to or through
underwriters or dealers as designated from time to time. See
"Plan of Distribution". The names of any such underwriters or
dealers involved in the sale of the Preferred Securities of the
particular series in respect of which this Prospectus is being
delivered, the number of Preferred Securities to be purchased by
any such underwriters or dealers and any applicable commissions
or discounts will be set forth in a Prospectus Supplement. The
net proceeds to the Company will also be set forth in a
Prospectus Supplement.
The date of this Prospectus is ___________, 1994.
<PAGE>
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed by the
Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Seven World Trade Center, New York,
New York 10048; and 500 West Madison Street, Chicago, Illinois
60661-2511. Copies of such material can also be obtained from
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
Certain of the Company's securities are listed on, and reports
and other information concerning the Company may also be
inspected at the offices of, the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005.
This Prospectus does not contain all the information set
forth in the Registration Statement on Form S-3 (herein, together
with all amendments and exhibits thereto, referred to as the
"Registration Statement"), which the Company and Met-Ed Capital
have filed with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"). Statements contained or
incorporated by reference herein concerning the provisions of
documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the
Registration Statement.
No separate financial statements of Met-Ed Capital have been
included herein. The Company and Met-Ed Capital do not consider
that such financial statements would be material to holders of
Preferred Securities because Met-Ed Capital is a newly formed
special purpose entity, has no operating history and no
independent operations and is not engaged in, and does not
propose to engage in, any activity other than as set forth below.
See "Met-Ed Capital".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with
the Commission pursuant to the Exchange Act are incorporated
herein by reference:
1. The Company's Annual Report on Form 10-K for
the year ended December 31, 1993;
2. The Company's Current Reports on Form 8-K
dated February 16, 1994, February 28, 1994 , June 10, 1994, July
12, 1994 and August 9, 1994; and
3. The Company's Quarterly Reports on Form 10-
Q for the quarters ended March 31, 1994 and June 30, 1994.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
2
<PAGE>
the termination of the offering of the securities offered hereby
shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of filing of such documents. Any
statement contained herein or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein or in a
Prospectus Supplement modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
Any person receiving a copy of this Prospectus or any
Prospectus Supplement may obtain, without charge, upon written or
oral request, a copy of any or all of the documents incorporated
herein or therein by reference (not including the exhibits to
such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such
copies should be directed to Metropolitan Edison Company, P.O.
Box 16001, Reading, Pennsylvania 19640, Attention: Secretary.
The Company's telephone number is (610) 929-3601.
METROPOLITAN EDISON COMPANY
The Company, a public utility furnishing electric service
wholly within the Commonwealth of Pennsylvania, is a subsidiary
of General Public Utilities Corporation ("GPU"), a holding
company registered under the Public Utility Holding Company Act
of 1935. In 1993, the Company provided retail service to
approximately 445,000 customers in an area in eastern and south
central Pennsylvania having an estimated population of 950,000.
The Company also sells electricity at wholesale to four
municipalities having an estimated population of over 11,000.
The Company's subsidiary, York Haven Power Company, is the owner
and licensee of the York Haven Hydroelectric Project. The
Company's principal executive offices are located at 2800
Pottsville Pike, Reading, Pennsylvania 19605, and its telephone
number is (610) 929-3601.
For the year 1993, electric sales to residential customers
accounted for about 43% of operating revenues from customers and
36% of kilowatt-hour ("kwh") sales to customers; sales to
commercial customers accounted for about 28% of operating
revenues from customers and 26% of kwh sales to customers; sales
to industrial customers accounted for about 27% of operating
revenues from customers and 35% of kwh sales to customers; and
sales to rural electric cooperatives, municipalities (primarily
for street and highway lighting) and others accounted for about
2% of operating revenues from customers and 3% of kwh sales to
customers. The Company also makes interchange and spot market
sales of electricity to other utilities. The revenues derived
from the largest single industrial customer accounted for
approximately 2% of operating revenues from customers for the
year 1993 and the 25 largest industrial customers in the
aggregate accounted for approximately 11% of such revenues.
3
<PAGE>
The electric generating and transmission facilities of the
Company and its affiliates, Jersey Central Power & Light Company
and Pennsylvania Electric Company (collectively, the "GPU
System"), are physically interconnected and are operated as a
single integrated and coordinated system. The transmission
facilities of the integrated system are physically interconnected
with neighboring nonaffiliated utilities in Pennsylvania, New
Jersey, Maryland, New York and Ohio. The Company is a member of
the Pennsylvania-New Jersey-Maryland Interconnection ("PJM") and
the Mid-Atlantic Area Council, an organization providing
coordinated review of the planning by utilities in the PJM area.
The interconnection facilities are used for substantial capacity
and energy interchange and purchased power transactions as well
as emergency assistance.
The Company owns 50% undivided interests in Unit 1 and the
inactive Unit 2 of the Three Mile Island nuclear generating
station near Middletown, Pennsylvania. The Company's nuclear
generating facilities are operated and maintained by GPU Nuclear
Corporation, a subsidiary of GPU. The Company and its affiliates
are seeking regulatory approvals for GPU Generation Corporation,
a newly formed subsidiary of GPU, to operate and maintain their
fossil-fueled and hydroelectric generating facilities.
RECENT DEVELOPMENTS
On July 11, 1994, the Pennsylvania Commonwealth Court
reversed a March 1993 rate order issued by the Pennsylvania
Public Utility Commission ("PaPUC") allowing the Company to
recover from customers certain future Three Mile Island Unit No.
2 ("TMI-2") retirement costs. As a result of this decision, the
Company recorded a pre-tax charge to income totalling
$127.6 million in the quarter ended June 30, 1994. The Company
plans to begin making non-recoverable contributions to an
external trust to fund its TMI-2 retirement costs in late 1995.
The Company will also be required to charge to expense its share
of any future increases in the estimates of these costs. The
Company intends to file a petition with the Pennsylvania Supreme
Court seeking review of the Commonwealth Court decision.
Also during the quarter ended June 30, 1994, the
Company recorded a pre-tax charge to income of $35 million for
costs related to acceptance by Company employees of a voluntary
enhanced retirement program offered in April 1994. Approximately
11% of the GPU System's workforce accepted the program, which is
part of the GPU System's corporate realignment program designed
to reduce overall costs and enhance the System's competitive
position.
As a result of these pre-tax charges to income, the
interest and dividend coverage requirements in the Company's
indenture and charter will prevent the Company from issuing any
additional first mortgage bonds or cumulative preferred stock
(other than $65 million of additional first mortgage bonds
issuable on the basis of previously retired bonds) for
approximately one year. The issuance of Preferred Securities is
not subject to such coverage requirements; the Company's ability
to issue Deferrable Interest Subordinated Debentures is, however,
4
<PAGE>
subject to the restrictions in the Company's charter that
outstanding unsecured indebtedness may not, in general, exceed
20% of the Company's outstanding secured indebtedness and capital
stock, premium and surplus thereon.
(For further information, reference is made to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994 which is incorporated herein by reference).
FINANCING PROGRAM
Depending upon market conditions, during 1994 and 1995 Met-
Ed Capital expects to offer up to $125,000,000 stated liquidation
preference of Preferred Securities, the proceeds of which would
be used to purchase the Company's Deferrable Interest
Subordinated Debentures. The Company may also offer during
such period additional first mortgage bonds, which may be in the
form of secured medium-term notes, although the Company will be
able to issue only $65 million of such additional securities
until mid 1995 due to interest coverage restrictions in the
Company's indenture. See "Recent Developments". The Company
also expects to have short-term borrowings outstanding from time
to time during such period.
CERTAIN COMPANY CONSOLIDATED FINANCIAL INFORMATION (1)
(Dollars In Thousands)
Twelve
Months Ended
June 30,
1994
Years Ended December 31, (unaudited)
1991 1992 1993
Income Summary:
Operating
Revenues $788,462 $821,823 $801,487 $807,148
Net Income 62,341 73,077 77,875 (3,875)
5
<PAGE>
June 30, 1994
(unaudited)
Actual Pro Forma (2)
Amount % Amount %
Capital Structure:
Long-term debt
(including unamortized
net discount)(3) $ 570,315 46.3% $ 570,315 42.1%
Preferred Stock
(including premium) 58,659 4.8 58,659 4.3
Preferred Securities of
Subsidiary - - 125,000 9.2
Common Equity 601,876 48.9 601,876 44.4
Total $1,230,850 100.0 $1,355,850 100.0
____________________
(1) This information should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
(2) Gives effect to the issuance of $125,000 aggregate stated
liquidation preference of Preferred Securities and the use
of the proceeds thereof to purchase the Company's Deferrable
Interest Subordinated Debentures.
(3) Includes obligations due within one year.
COMPANY COVERAGE RATIOS
(Dollars in Thousands)
The Company's Ratio of Earnings to Fixed Charges for each of
the periods indicated was as follows:
Twelve
Months Ended
June 30, 1994
Years Ended December 31, (unaudited)
1989 1990 1991 1992 1993 Actual ProForma(1)
3.88 3.66 2.44 3.41 3.28 .75(2) .64(2)
The Ratio of Earnings to Fixed Charges represents, on a pre-
tax basis, the number of times earnings cover fixed charges.
Earnings consist of Income Before Cumulative Effect of Accounting
Change, to which has been added fixed charges and taxes based on
income. Fixed charges consist of interest on funded
indebtedness, other interest, amortization of net discount on
debt and the interest portion of all rentals charged to income.
6
<PAGE>
The Company's Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends for each of the periods indicated
was as follows:
Twelve
Months Ended
June 30, 1994
Years Ended December 31, (unaudited)
1989 1990 1991 1992 1993 Actual ProForma(1)
2.92 2.83 1.86 2.55 2.72 .61(2) .56(2)
________________________
(1) Gives effect to the issuance of $125,000 aggregate
principal amount of Deferrable Interest Subordinated
Debentures at an assumed interest rate of 9% per annum.
(2) Pre-tax earnings for the twelve months ended June 30, 1994
are inadequate to cover both fixed charges and combined
fixed charges and preferred stock dividends. The deficiency
in pre-tax earnings for the ratio of earnings to fixed
charges and the ratio of earnings to combined fixed charges
and preferred stock dividends is $15,108 and $29,269,
respectively, on an actual basis, and $26,358 and $35,660,
respectively, on a pro forma basis. Such amounts represent
additional pre-tax earnings needed to reach a one-to-one
ratio.
The Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends represents, on a pre-tax basis, the
number of times earnings cover fixed charges and preferred stock
dividends. Earnings consist of Income Before Cumulative Effect
of Accounting Change, to which has been added fixed charges and
taxes based on income of the Company. Combined fixed charges and
preferred stock dividends consist of interest on funded
indebtedness, other interest, amortization of net discount on
debt, preferred stock dividends (increased to reflect the pre-
tax earnings required to cover such dividend requirements) and
the interest portion of all rentals charged to income.
USE OF PROCEEDS
The proceeds to be received by Met-Ed Capital from the sale
of the Preferred Securities will be used to purchase Deferrable
Interest Subordinated Debentures of the Company and, unless
otherwise specified in any Prospectus Supplement, will be applied
by the Company to the repayment of outstanding short-term debt,
for construction purposes and for other general corporate
purposes, including the redemption of outstanding senior
securities pursuant to the optional redemption provisions
thereof, if economical.
MET-ED CAPITAL
7
<PAGE>
Met-Ed Capital is a limited partnership formed under the
laws of the State of Delaware. All of its general partner
interests, which are non-transferable, are owned by Met-Ed
Preferred Capital, Inc. (the "General Partner"), a Delaware
corporation and a wholly owned special purpose subsidiary of the
Company, which will be the sole general partner of Met-Ed
Capital. Met-Ed Capital's principal executive offices are
located at Mellon Bank Center, Tenth and Market Streets,
Wilmington, Delaware 19801, and its telephone number is (302)
654-5893. As a limited partnership, all of the business and
affairs of Met-Ed Capital will be managed by the General Partner.
Met-Ed Capital exists solely for the purpose of issuing its
partner interests and utilizing the proceeds thereof to acquire
the Company's Deferrable Interest Subordinated Debentures, which
will be issued under and pursuant to the Indenture (the
"Indenture") dated as of ___________________, 1994 between the
Company and United States Trust Company of New York, as Trustee
(the "Trustee").
Met-Ed Capital has been advised by its special Delaware
counsel that, assuming that a holder of Preferred Securities acts
in conformity with the provisions of Met-Ed Capital's Amended and
Restated Limited Partnership Agreement, which will be
substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part (the "Limited
Partnership Agreement"), a holder of Preferred Securities (other
than the General Partner) will not be liable for the debts,
obligations and liabilities of Met-Ed Capital, whether arising in
contract, tort or otherwise, solely by reason of being a limited
partner of Met-Ed Capital (subject to the obligation of a limited
partner to repay any funds wrongfully distributed to it).
Pursuant to the Limited Partnership Agreement, each holder
of Preferred Securities, upon acquisition thereof, will be deemed
to have appointed the General Partner as such holder's attorney-
in-fact to execute, in the name, place and stead of such holder,
certain instruments, documents and certificates as may be
required from time to time for the purposes contemplated in the
Limited Partnership Agreement.
DESCRIPTION OF PREFERRED SECURITIES
General
All of the general partner interests of Met-Ed Capital will
be owned by the General Partner. The Limited Partnership
Agreement will authorize the General Partner to establish series
of Preferred Securities having such designations, rights,
privileges, restrictions, and other terms and provisions, whether
in regard to distributions, return of capital or otherwise, as
the General Partner may determine. Met-Ed Capital will therefore
be authorized to issue and sell additional Preferred Securities
from time to time, pursuant to the Registration Statement of
which this Prospectus forms a part or otherwise; provided,
however, that all Preferred Securities shall be of equal rank
with regard to participation in the profits and the assets of
Met-Ed Capital. The summary of certain terms and provisions of
the Preferred Securities set forth below does not purport to be
8
<PAGE>
complete and is subject to, and qualified in its entirety by
reference to, the Limited Partnership Agreement.
Dividends
Dividends on each series of Preferred Securities will be
cumulative, will accrue from the date of issuance thereof and
will be payable monthly in arrears on the last day of each
calendar month of each year, except as otherwise described below.
The Dividend rate applicable to a series of Preferred
Securities shall be specified in a Prospectus Supplement.
The Company has the right under the Indenture to extend the
interest payment period on the Deferrable Interest Subordinated
Debentures at any time and from time to time to up to 60
consecutive months and, as a consequence, monthly Dividends on
the Preferred Securities can be deferred (but will continue to
accumulate) by Met-Ed Capital during any such extended interest
payment period. Accrued and unpaid Dividends on the Preferred
Securities will accrue additional Dividends in respect thereof at
the Dividend rate per annum applicable to the Preferred
Securities. In the event that the Company exercises its right to
extend the interest payment period, the Company may not declare
or pay dividends on, or redeem, purchase or acquire, any of its
preferred or common stock. Met-Ed Capital and the Company
currently believe that an extension of an interest payment period
on the Deferrable Interest Subordinated Debentures and thus on
the Preferred Securities is remote. See "Voting Rights" and
"Description of the Deferrable Interest Subordinated Debentures-
Option to Extend Interest Payment Period".
The amount of the Dividends payable for any period will be
computed on the basis of twelve 30-day months and a 360-day year
and, for any period shorter than a full monthly Dividend period,
will be computed on the basis of the actual number of days
elapsed in such period.
Met-Ed Capital may not pay a Dividend or make a distribution
to a partner to the extent that at the time of the Dividend or
distribution, after giving effect thereto, all liabilities of
Met-Ed Capital, other than liabilities to partners on account of
their partner interests and liabilities for which the recourse of
creditors is limited to specified property of Met-Ed Capital,
exceed the fair value of the assets of Met-Ed Capital, except
that the fair value of property that is subject to a liability
for which the recourse of creditors is limited shall be included
in the assets of Met-Ed Capital only to the extent that the fair
value of that property exceeds that liability.
Dividends on the Preferred Securities must be paid by Met-
Ed Capital in any calendar year or portion thereof to the extent
that Met-Ed Capital has cash on hand sufficient to permit such
payments and funds legally available therefor. It is anticipated
that Met-Ed Capital's earnings will consist only of interest
payable by the Company under the Deferrable Interest Subordinated
Debentures. See "Description of the Deferrable Interest
Subordinated Debentures-Interest".
9
<PAGE>
Dividends on the Preferred Securities will be payable to the
holders thereof as they appear on the books and records of Met-
Ed Capital on the relevant record dates, which, so long as the
Preferred Securities remain in book-entry-only form, will be one
Business Day prior to the relevant payment dates. Subject to any
applicable laws and regulations and the provisions of the Limited
Partnership Agreement, each such payment will be made as
described under "Book-Entry-Only Issuance-The Depository Trust
Company". In the event that the Preferred Securities do not
remain in book-entry-only form, the record dates will be the
fifteenth day of each month. In the event that any date on which
Dividends are payable on the Preferred Securities is not a
Business Day, then payment of the Dividend payable on such date
will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same
force and effect as if made on such date. A "Business Day" shall
mean any day other than a day on which banking institutions in
The City of New York are authorized or required by law to close.
Certain Restrictions on Met-Ed Capital
If Dividends have not been paid in full on any series of
Preferred Securities, Met-Ed Capital may not:
(i) pay or declare any Dividends on any other
series of Preferred Securities unless the amount of any
Dividends paid or declared on any Preferred Securities
is paid or declared on all Preferred Securities then
outstanding on a pro rata basis on the date such
Dividends are paid or declared, so that
(x) (a) the aggregate amount of Dividends
paid or declared on such series of Preferred
Securities bears to (b) the aggregate amount of
Dividends paid or declared on all such Preferred
Securities outstanding the same ratio as
(y) (a) the aggregate of all accumulated
arrears of unpaid Dividends in respect of such
series of Preferred Securities bears to (b) the
aggregate of all accumulated arrears of unpaid
Dividends in respect of all such Preferred
Securities outstanding;
(ii) pay or declare any distributions on any of
its general partner interests; or
(iii) redeem, purchase or otherwise acquire any
Preferred Securities or its general partner interests;
until, in each case, such time as all accumulated and unpaid
Dividends on all series of Preferred Securities shall have been
paid in full for all prior Dividend periods. As of the date of
this Prospectus, there are no Preferred Securities outstanding.
10
<PAGE>
Mandatory Redemption
If the Company pays when due the Deferrable Interest
Subordinated Debentures purchased by Met-Ed Capital with the
proceeds of the sale of a series of Preferred Securities or
redeems such Deferrable Interest Subordinated Debentures at any
time as described under "Description of the Deferrable Interest
Subordinated Debentures-Optional Redemption", the proceeds will
be applied to redeem the related series of Preferred Securities
at a redemption price equal to the stated liquidation preference
thereof, plus any accumulated, unpaid and additional Dividends
accrued thereon to the date fixed for redemption (the "Redemption
Price").
Optional Redemption
The Preferred Securities of each series will be redeemable,
at the option of Met-Ed Capital, in whole or in part, at such
time or times as shall be specified in a Prospectus Supplement,
at the Redemption Price.
If at any time after the issuance of any Preferred
Securities, Met-Ed Capital is or would be required to pay
Additional Amounts or the Company is or would be required to
withhold or deduct certain amounts as described under "Additional
Amounts" and "Description of the Limited Guarantee-Additional
Amounts", then Met-Ed Capital may, at its option, redeem the
Preferred Securities in whole or, if such requirement relates
only to certain of the Preferred Securities, the Preferred
Securities subject to such requirement, in each case at the
Redemption Price.
Special Event Redemption or Distribution
If a Tax Event (as defined below) shall occur and be
continuing, Met-Ed Capital may either: (i) redeem the Preferred
Securities in whole (but not in part) at the Redemption Price
within 90 days following the occurrence of such Special Event (as
defined below); provided that, if at the time there is available
to the General Partner the opportunity to eliminate, within such
90 day period, the Special Event by taking some ministerial
action, such as filing a form or making an election, or pursuing
some other similar reasonable measure which would not involve
unreasonable cost or expense, which has no adverse effect on Met-
Ed Capital or the Company, the General Partner will pursue such
measure in lieu of redemption; or (ii) dissolve Met-Ed Capital
and cause Deferrable Interest Subordinated Debentures with an
aggregate principal amount equal to the aggregate stated
liquidation preference of, and with an interest rate identical
to, the Preferred Securities, to be distributed to the holders of
the Preferred Securities in liquidation of such holders'
interests in Met-Ed Capital, within 90 days following the
occurrence of such Special Event, provided, however, that Met-Ed
Capital shall have received an opinion of counsel (which may be
regular tax counsel to the Company or an affiliate but not an
employee thereof) to the effect that the holders of the Preferred
Securities will not recognize any gain or loss for federal income
11
<PAGE>
tax purposes as a result of such dissolution and distribution.
Alternatively, Met-Ed Capital may elect to have the Preferred
Securities remain outstanding. If an Investment Company Act
Event (as defined below) shall occur and be continuing, Met-Ed
Capital must elect either option (i) or (ii) above. Either a Tax
Event or an Investment Company Act Event shall be deemed a
"Special Event".
"Tax Event" means that Met-Ed Capital shall have received an
opinion of counsel (which may be regular tax counsel to the
Company or an affiliate but not an employee thereof) to the
effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting
taxation, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying any
applicable laws or regulations, which amendment or change is
effective, or which pronouncement or decision has been issued or
rendered, on or after the date of issuance of any series of
Preferred Securities, there is more than an insubstantial risk
that (i) Met-Ed Capital will be subject to federal income tax
with respect to interest received on the Deferrable Interest
Subordinated Debentures or Met-Ed Capital will otherwise not be
taxed as a partnership, (ii) interest payable on the Deferrable
Interest Subordinated Debentures will not be deductible for
federal income tax purposes or (iii) Met-Ed Capital is subject to
more than a de minimis amount of other taxes, duties or other
governmental charges.
"Investment Company Act Event" means the occurrence of a
change in law or regulation or a change in an official
interpretation of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in
40 Act Law") to the effect that Met-Ed Capital is or will be
considered an "investment company" required to be registered
under the Investment Company Act of 1940, as amended (the "1940
Act"), which Change in 40 Act Law becomes effective on or after
the date of issuance of any series of Preferred Securities;
provided that no Investment Company Act Event shall be deemed to
have occurred if Met-Ed Capital shall have received an opinion of
counsel (which may be regular counsel to the Company or an
affiliate but not an employee thereof) to the effect that the
Company and/or Met-Ed Capital have taken reasonable measures, in
their discretion, to avoid such Change in 40 Act Law so that in
the opinion of such counsel, notwithstanding such Change in 40
Act Law, Met-Ed Capital is not required to be registered as an
"investment company" within the meaning of the 1940 Act.
After the date fixed for any such dissolution of Met-Ed
Capital and distribution of Deferrable Interest Subordinated
Debentures, (i) the Preferred Securities will no longer be deemed
to be outstanding, (ii) The Depository Trust Company or its
nominee, as the record holder of the Preferred Securities, will
exchange the global certificate or certificates representing the
Preferred Securities for a registered global certificate or
certificates representing the Deferrable Interest Subordinated
Debentures to be so delivered and (iii) any certificates
12
<PAGE>
representing Preferred Securities not held by The Depository
Trust Company or its nominee will be deemed to represent
Deferrable Interest Subordinated Debentures having a principal
amount equal to the stated liquidation preference of such
Preferred Securities until such certificates are presented to the
Company or its agent for replacement.
Redemption Procedures
Met-Ed Capital may not redeem any outstanding Preferred
Securities unless all accumulated and unpaid Dividends have been
paid on all Preferred Securities for all monthly Dividend periods
terminating on or prior to the date of redemption.
If Met-Ed Capital gives a notice of redemption in respect of
a series of Preferred Securities (which notice will be given not
less than 30 nor more than 90 days prior to the redemption date
and will be irrevocable), then, on the redemption date, Met-Ed
Capital will irrevocably deposit with The Depository Trust
Company or its successor securities depository funds sufficient
to pay the applicable Redemption Price and will give The
Depository Trust Company or its successor securities depository
irrevocable instructions and authority to pay the Redemption
Price to the Beneficial Owners (as defined under "Book-Entry-
Only Issuance-The Depository Trust Company"). If notice of
redemption shall have been given and funds deposited as required,
then on the date of such deposit, all rights of holders of such
series of Preferred Securities so called for redemption will
cease, except the right of the holders of such series of
Preferred Securities to receive the Redemption Price, but without
interest. In the event that any date fixed for redemption of
such series of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made
on the next succeeding day which is a Business Day (and without
any interest or other payment in respect of any such delay),
except that if such Business Day falls in the next succeeding
calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the
Redemption Price in respect of any Preferred Securities is not
made either by Met-Ed Capital or by the Company pursuant to the
Limited Guarantee described under "Description of the Limited
Guarantee", Dividends on such Preferred Securities will continue
to accrue at the then applicable rate, from the original
redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
In the event that less than all of a series of outstanding
Preferred Securities are to be so redeemed, the Preferred
Securities to be redeemed will be selected as described under
"Book-Entry-Only Issuance-The Depository Trust Company". In the
case of a partial redemption of a series of Preferred Securities
resulting from a requirement that Met-Ed Capital pay Additional
Amounts or the Company withhold or deduct certain amounts (see
"Optional Redemption"), Met-Ed Capital will (i) cause the global
certificates representing all of such series of Preferred
Securities to be withdrawn from The Depository Trust Company or
its successor securities depository (see "Book-Entry-Only
13
<PAGE>
Issuance-The Depository Trust Company"), (ii) issue certificates
in definitive form representing such series of Preferred
Securities, and (iii) redeem the Preferred Securities subject to
such requirement to withhold or deduct Additional Amounts.
Subject to applicable law, the Company or its subsidiaries
may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private
agreement.
If a partial redemption or a purchase of outstanding
Preferred Securities by tender, in the open market or by private
agreement would result in a delisting of such series of Preferred
Securities from any national securities exchange on which such
series of Preferred Securities is then listed, Met-Ed Capital may
then only redeem or purchase such series of Preferred Securities
in whole.
Liquidation Distribution
In the event of any voluntary or involuntary dissolution and
winding up of Met-Ed Capital, other than in connection with the
distribution of Deferrable Interest Subordinated Debentures in
liquidation of all of the interests of the holders of Preferred
Securities, as described under "Special Event Redemption or
Distribution" ("Distribution Event"), the holders of a series of
Preferred Securities at the time outstanding will be entitled to
receive out of the assets of Met-Ed Capital, after satisfaction
of liabilities to creditors as required by Delaware law, before
any distribution of assets is made to holders of its general
partner interests, but together with the holders of every other
series of Preferred Securities outstanding, an amount equal to
the aggregate of the stated liquidation preference thereof and
any accumulated, unpaid and additional Dividends accrued thereon
to the date of payment and any accrued and unpaid Additional
Amounts (the "Liquidation Distribution").
If, upon such liquidation, the Liquidation Distribution can
be paid only in part because Met-Ed Capital has insufficient
assets available to pay in full the aggregate Liquidation
Distribution and the aggregate liquidation distributions on all
other Preferred Securities then outstanding, then the amounts
payable directly by Met-Ed Capital on such series of Preferred
Securities and on all other Preferred Securities then outstanding
shall be paid on a pro rata basis, so that
(i) (x) the aggregate amount paid in respect of
the Liquidation Distribution bears to (y) the aggregate
amount paid as liquidation distributions on all other
Preferred Securities then outstanding the same ratio as
(ii) (x) the aggregate Liquidation Distribution
bears to (y) the aggregate liquidation distributions on
all other Preferred Securities then outstanding.
Pursuant to the Limited Partnership Agreement, Met-Ed Capital
shall be dissolved and its affairs shall be wound up: (i) upon
the expiration of the term of Met-Ed Capital on June 30, 2060,
14
<PAGE>
(ii) upon the bankruptcy, liquidation, dissolution or winding up
of the Company, (iii) upon the occurrence of an event that causes
the General Partner to cease being the general partner of Met-Ed
Capital (provided that Met-Ed Capital will not be so dissolved
under certain circumstances, including, without limitation, a
transfer of the general partner interest to a permitted successor
of the General Partner as set forth in the Limited Partnership
Agreement), (iv) upon the entry of a decree of judicial
dissolution, (v) in connection with a Distribution Event, or (vi)
upon the written consent of the General Partner and all of the
holders of the Preferred Securities.
Merger, Consolidation, Amalgamation, etc. of Met-Ed Capital
Met-Ed Capital may not consolidate, amalgamate, merge with
or into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any corpor-
ation or other entity, except with the prior approval of the
holders of not less than 66-2/3% of the aggregate stated liquida-
tion preference of the outstanding Preferred Securities or except
as described below. The General Partner may, without the consent
of the holders of the Preferred Securities, cause Met-Ed Capital
to consolidate, amalgamate, merge with or into, or be replaced
by, or convey, transfer or lease its properties and assets
substantially as an entirety to, a corporation, a limited
liability company, a limited partnership, a trust or other entity
organized as such under the laws of the United States or any
state thereof or the District of Columbia, provided that (i) such
successor entity either (x) expressly assumes all of the terms
and provisions of the Preferred Securities by which Met-Ed
Capital is bound and the other obligations of Met-Ed Capital or
(y) substitutes for the Preferred Securities other securities
having substantially the same terms as the Preferred Securities
(the "Successor Securities") so long as the Successor Securities
rank, with regard to participation in the profits and the assets
of the successor entity, at least as high as the Preferred
Securities rank, with regard to participation in the profits and
the assets of Met-Ed Capital, (ii) the Company confirms its
obligation under the Limited Guarantee with regard to the
Preferred Securities or Successor Securities, if any, (iii) such
consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease does not cause any series of Preferred
Securities or Successor Securities, if any, to be delisted by any
national securities exchange on which such series of Preferred
Securities or Successor Securities, if any, is then listed, (iv)
such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease does not cause the Preferred
Securities or Successor Securities, if any, to be downgraded by
any "nationally recognized statistical rating organization", as
that term is defined by the Commission for purposes of Rule
436(g)(2) under the Securities Act, (v) such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease
does not adversely affect the powers, preferences and other
special rights of holders of Preferred Securities or Successor
Securities, if any, in any material respect, (vi) such successor
entity has a purpose substantially identical to that of Met-Ed
Capital and (vii) prior to such consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease, Met-Ed
15
<PAGE>
Capital shall have received an opinion of counsel (which may be
regular tax or other counsel to the Company or an affiliate but
not an employee thereof) to the effect that (w) the holders of
outstanding Preferred Securities will not recognize any gain or
loss for federal income tax purposes as a result of the
consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease, (x) such successor entity will be treated as a
partnership for federal income tax purposes, (y) following such
consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease, the Company and such successor entity will be
in compliance with the 1940 Act without registering thereunder as
an investment company, and (z) such consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease will not
adversely affect the limited liability of the holders of
Preferred Securities.
Voting Rights
Except as provided below and under "Merger, Consolidation,
Amalgamation, etc. of Met-Ed Capital", "Description of the
Limited Guarantee-Amendments and Assignment" and "Description of
the Deferrable Interest Subordinated Debentures-Amendment of the
Indenture" and as otherwise required by law and the Limited
Partnership Agreement, the holders of the Preferred Securities
will have no voting rights.
If (i) Met-Ed Capital fails to pay Dividends in full on the
Preferred Securities for 18 consecutive monthly Dividend periods,
or (ii) an Event of Default (as defined in the Indenture) occurs
and is continuing, or (iii) the Company is in default on any of
its payment or other obligations under the Limited Guarantee (as
described under "Description of the Limited Guarantee-Certain
Covenants of the Company"), then the holders of all Preferred
Securities, acting as a single class, will be entitled, by a vote
of the holders of a majority of the aggregate stated liquidation
preference thereof, to appoint and authorize a special
representative of Met-Ed Capital and the holders of Preferred
Securities (a "Special Representative") to enforce Met-Ed
Capital's rights under the Indenture, including, after failure to
pay interest for 60 consecutive monthly interest periods, the
payment of interest on the Deferrable Interest Subordinated
Debentures, and to enforce the obligations of the Company under
the Limited Guarantee. The Special Representative shall not be
admitted as a partner in Met-Ed Capital or otherwise be deemed to
be a partner in Met-Ed Capital and shall have no liability for
the debts, obligations or liabilities of Met-Ed Capital.
For purposes of determining whether Met-Ed Capital has
failed to pay Dividends in full for 18 consecutive monthly
Dividend periods, Dividends shall be deemed to remain in arrears,
notwithstanding any payments in respect thereof, until full
cumulative Dividends have been or contemporaneously are paid with
respect to all monthly Dividend periods terminating on or prior
to the date of payment of such full cumulative Dividends.
Subject to requirements of applicable law, not later than 30 days
after such right to appoint a Special Representative arises, the
General Partner will convene a general meeting for the above
purpose. If the General Partner fails to convene such meeting
16
<PAGE>
within such 30-day period, the holders of 10% of the aggregate
stated liquidation preference of the Preferred Securities will be
entitled to convene such meeting. The provisions of the Limited
Partnership Agreement relating to the convening and conduct of
the general meetings of partners will apply with respect to any
such meeting. Any Special Representative so appointed shall
cease to act in such capacity immediately if Met-Ed Capital (or
the Company pursuant to the Limited Guarantee) shall have paid in
full all accumulated and unpaid Dividends on the Preferred
Securities or such default or breach, as the case may be, shall
have been cured. Notwithstanding the appointment of any such
Special Representative, the Company shall retain all rights under
the Indenture, including the right to extend the interest payment
period on the Deferrable Interest Subordinated Debentures as
provided under "Description of the Deferrable Interest
Subordinated Debentures-Option to Extend Interest Payment
Period".
If any proposed amendment to the Limited Partnership
Agreement provides for, or the General Partner otherwise proposes
to effect, any action which would materially adversely affect the
powers, preferences or special rights of any series of Preferred
Securities, then the holders of such series of Preferred
Securities will be entitled to vote on such amendment or action
of the General Partner (but not on any other amendment or action)
and, in the case of an amendment or action which would equally
materially adversely affect the powers, preferences or special
rights of any other series of Preferred Securities outstanding,
all such series of Preferred Securities will be entitled to vote
together as a single class on such amendment or action of the
General Partner (but not on any other amendment or action), and
such amendment or action shall not be effective except with the
approval of the holders of not less than 66-2/3% of the aggregate
stated liquidation preference of such Preferred Securities.
Except in certain circumstances described under "Liquidation
Distribution", which include a dissolution in connection with a
Distribution Event, Met-Ed Capital will be dissolved and wound up
only with the consent of the holders of all Preferred Securities
then outstanding.
The rights attached to any Preferred Securities will be
deemed not to be adversely affected by the creation or issue of,
and no vote will be required for the creation or issue of, any
further series of Preferred Securities, any other securities
which are pari passu with the Preferred Securities or any general
partner interests of Met-Ed Capital. Holders of Preferred
Securities have no preemptive rights.
The Limited Partnership Agreement provides that the General
Partner will not permit or cause Met-Ed Capital to file a
voluntary petition in bankruptcy without the approval of the
holders of not less than 66-2/3% of the aggregate stated
liquidation preference of the outstanding Preferred Securities.
So long as any Deferrable Interest Subordinated Debentures
are held by Met-Ed Capital, the General Partner shall not (i)
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or executing any trust
17
<PAGE>
or power conferred on the Trustee with respect to such series,
(ii) waive any past default which is available under the
Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Deferrable Interest
Subordinated Debentures shall be due and payable, or (iv) consent
to any amendment, modification or termination of the Indenture,
where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of not less than
66-2/3% of the aggregate stated liquidation preference of all
Preferred Securities affected thereby, acting as a single class;
provided, however, that where a consent under the Indenture would
require the consent of each holder affected thereby, no such
consent shall be given by the General Partner without the prior
consent of each holder of Preferred Securities affected thereby.
The General Partner shall not revoke any action previously
authorized or approved by a vote of any holders of Preferred
Securities. The General Partner shall notify all holders of
Preferred Securities of any notice of default received from the
Trustee with respect to the Deferrable Interest Subordinated
Debentures.
Any required approval of holders of Preferred Securities may
be given at a separate meeting of such holders convened for such
purposes, at a general meeting of holders of Met-Ed Capital's
partner interests or pursuant to written consent. Met-Ed Capital
will cause a notice of any meeting at which holders of any series
of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of such series of
Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which
such action is to be taken, (ii) a description of any matter to
be voted on at such meeting or upon which written consent is
sought, and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the holders of the Preferred
Securities will be required for Met-Ed Capital to redeem and
cancel Preferred Securities in accordance with the Limited
Partnership Agreement.
Notwithstanding that holders of Preferred Securities are
entitled to vote or consent under any of the circumstances
described above, any of the Preferred Securities that are owned
by the Company or any entity owned more than 50% by the Company,
either directly or indirectly, shall not be entitled to vote or
consent and shall, for the purposes of such vote or consent, be
treated as if they were not outstanding.
Holders of Preferred Securities will have no rights to
remove or replace the General Partner.
Additional Amounts
All payments in respect of the Preferred Securities by Met-
Ed Capital will be made without withholding or deduction for or
on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied upon or
18
<PAGE>
as a result of such payment by or on behalf of the United States,
any state thereof or any other jurisdiction through which or from
which such payment is made, or any authority therein or thereof
having power to tax, unless the withholding or deduction of such
taxes, duties, assessments or governmental charges is required by
law. In the event that any such withholding or deduction is
required as a consequence of (i) the Deferrable Interest
Subordinated Debentures not being treated as indebtedness for
United States federal income tax purposes or (ii) Met-Ed Capital
not being treated as a partnership for United States federal
income tax purposes, Met-Ed Capital will pay as a Dividend such
additional amounts as may be necessary in order that the net
amounts received by the holders of the Preferred Securities after
such withholding or deduction will equal the amounts which would
have been receivable in respect of such Preferred Securities in
the absence of such withholding or deduction ("Additional
Amounts"), except that no such Additional Amounts will be payable
to a holder of Preferred Securities (or a third party on such
holder's behalf) with respect to Preferred Securities if:
(a) such holder is liable for such taxes, duties,
assessments or governmental charges in respect of such
Preferred Securities by reason of such holder's having
a connection with the United States, any state thereof
or any other jurisdiction through which or from which
such payment is made, or in which such holder resides,
conducts business or has other contacts, other than
being a holder of Preferred Securities, or
(b) Met-Ed Capital has notified such holder of the
obligation to withhold or deduct taxes and requested
but not received from such holder a declaration of non-
residence, a valid taxpayer identification number or
other claim for exemption, and such withholding or
deduction would not have been required had such
declaration, taxpayer identification number or claim
been received.
Book-Entry-Only Issuance-The Depository Trust Company
The Depository Trust Company ("DTC") will act as securities
depository for the Preferred Securities. Each series of
Preferred Securities will be issued only as fully-registered
securities registered in the name of Cede & Co. (DTC's nominee).
One or more fully-registered global Preferred Security
certificates will be issued, representing in the aggregate the
total number of Preferred Securities of each series, and will be
deposited with DTC.
DTC is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act.
DTC holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and
19
<PAGE>
pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the DTC system
is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the
Commission.
Purchases of Preferred Securities under the DTC system must
be made by or through Direct Participants, which will receive a
credit for the Preferred Securities on DTC's records. The
ownership interest of each actual purchaser of each Preferred
Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or
Indirect Participants through which the Beneficial Owners
purchased Preferred Securities. Transfers of ownership interests
in the Preferred Securities are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Preferred Securities,
except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the
Preferred Securities; DTC's records reflect only the identity of
the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial
Owners. Direct and Indirect Participants will remain responsible
for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
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.
Redemption notices will be sent to Cede & Co. If less than
all of a series of Preferred Securities are being redeemed, DTC's
practice is to determine by lot the amount of the interest of
each Direct Participant in such series to be redeemed.
Although voting with respect to the Preferred
Securities is limited, in those cases where a vote is required,
neither DTC nor Cede & Co. will consent or vote with respect to
20
<PAGE>
Preferred Securities. Under its usual procedure, DTC would mail
an Omnibus Proxy to Met-Ed Capital as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.'s consenting
or voting rights to those Direct Participants to whose accounts
the Preferred Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Dividend payments on the Preferred Securities will be made
to DTC. DTC's practice is to credit Direct Participants'
accounts on the relevant payable date in accordance with their
respective holdings shown on DTC's records unless DTC has reason
to believe that it will not receive payments on such payable
date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customer practices and will
be the responsibility of such Participants and not of DTC, Met-
Ed Capital, the General Partner or the Company, subject to any
statutory or regulatory requirements as may be in effect from
time to time. Payment of Dividends to DTC is the responsibility
of Met-Ed Capital, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that Met-Ed
Capital and the Company believe to be reliable, but neither Met-
Ed Capital nor the Company takes any responsibility for the
accuracy thereof.
DTC may discontinue providing its services as securities
depository with respect to the Preferred Securities at any time
by giving reasonable notice to Met-Ed Capital. Under such
circumstances, in the event that a successor securities
depository is not obtained, Preferred Security certificates are
required to be printed and delivered. Additionally, Met-Ed
Capital (with the consent of the General Partner) may decide to
discontinue use of the system of book-entry transfers through DTC
(or a successor depository). In that event, certificates for the
Preferred Securities will be printed and delivered.
Additionally, in the event that Met-Ed Capital exercises its
option to redeem only a portion of a series of Preferred
Securities because Met-Ed Capital or the Company is or would be
required to withhold or deduct Additional Amounts in regard to
such Preferred Securities to be redeemed, Met-Ed Capital will
cause the global certificates representing all of such series of
Preferred Securities to be withdrawn from DTC (or a successor
depository) and will issue certificates in definitive form
representing such series of Preferred Securities. Thereafter,
the Preferred Securities subject to such requirement to withhold
or deduct Additional Amounts will be redeemed.
Registrar, Transfer Agent and Paying Agent
In the event that the Preferred Securities do not remain in
book-entry-only form, the following provisions would apply:
Mellon Bank, N.A. will act as registrar, transfer agent and
paying agent for the Preferred Securities, but the Company may
21
<PAGE>
designate an additional or substitute registrar, transfer agent
and paying agent at any time.
Registration of transfers of Preferred Securities will be
effected without charge by or on behalf of Met-Ed Capital, but
upon payment (with the giving of such indemnity as Met-Ed Capital
or the transfer agent may require) in respect of any tax or other
governmental charges which may be imposed in relation to it.
Met-Ed Capital will not be required to register or cause to
be registered the transfer of Preferred Securities after such
Preferred Securities have been called for redemption.
Miscellaneous
The General Partner is authorized and directed to use its
best efforts to conduct the affairs of, and to operate, Met-Ed
Capital in such a way that Met-Ed Capital would not be deemed to
be an "investment company" required to be registered under the
1940 Act or taxed as a corporation for federal income tax
purposes and so that the Deferrable Interest Subordinated
Debentures will be treated as indebtedness of the Company for
federal income tax purposes. In this connection, the General
Partner is authorized to take any action not inconsistent with
applicable law, the Certificate of Limited Partnership of Met-Ed
Capital or the Limited Partnership Agreement, that does not
materially adversely affect the interests of holders of Preferred
Securities, that the General Partner determines in its discretion
to be necessary or desirable for such purposes.
DESCRIPTION OF THE LIMITED GUARANTEE
Set forth below is a summary of information concerning the
Limited Guarantee which will be executed and delivered by the
Company in connection with each series of Preferred Securities
for the benefit of the holders from time to time of the series of
Preferred Securities to which it relates. This summary describes
certain terms and provisions of the Limited Guarantee, but does
not purport to be complete. References to provisions of the
Limited Guarantee are qualified in their entirety by reference to
the text of the Limited Guarantee, which will be substantially in
the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
General
The Company will agree, on a limited basis as set forth
therein, to pay in full, to the holders of the Preferred
Securities, the Limited Guarantee Payments (as defined below)
(except to the extent paid by Met-Ed Capital), as and when due,
regardless of any defense, right of set-off or counterclaim which
the Company or Met-Ed Capital may have or assert. The following
payments to the extent not paid by Met-Ed Capital (the "Limited
Guarantee Payments") will be subject to the Limited Guarantee
(without duplication): (i) any accumulated and unpaid monthly
Dividends on the Preferred Securities (except for monthly
Dividends which are not paid during an Extension Period (as
22
<PAGE>
defined under "Description of the Deferrable Interest
Subordinated Debentures-Option to Extend Interest Payment
Period")) to the extent that Met-Ed Capital has sufficient cash
on hand to permit such payments and funds legally available
therefor, (ii) the Redemption Price with respect to any Preferred
Securities called for redemption by Met-Ed Capital to the extent
that Met-Ed Capital has sufficient cash on hand to permit such
payments and funds legally available therefor, (iii) upon a
liquidation of Met-Ed Capital other than in connection with a
Distribution Event, the lesser of (a) the Liquidation
Distribution and (b) the amount of assets of Met-Ed Capital
available for distribution to holders of Preferred Securities in
liquidation of Met-Ed Capital, and (iv) any Additional Amounts
payable by Met-Ed Capital in respect of the Preferred Securities.
The Limited Guarantee further provides that the Company shall (a)
cause the General Partner to declare and pay Dividends to the
extent that Met-Ed Capital has legally available funds and
sufficient cash and (b) so long as any of the Preferred
Securities are outstanding, cause the General Partner to remain
the general partner of Met-Ed Capital and timely perform all its
duties as such (including the duty to pay Dividends on the
Preferred Securities) in all material respects, which include,
among other things, the General Partner's duties under the
Limited Partnership Agreement to directly pay all costs and
expenses of Met-Ed Capital (thereby insuring that the full amount
of the Company's payments on its Deferrable Interest Subordinated
Debentures will be available to allow payment to the holders of
the Preferred Securities) and the covenant of the General Partner
in the Limited Partnership Agreement to at all times maintain a
"fair market value net worth" of, initially, at least 10% of the
total contributions (less redemptions) to Met-Ed Capital.
Accordingly, the Limited Guarantee, together with the related
covenants contained in the Limited Partnership Agreement and the
Company's obligations under the Deferrable Interest Subordinated
Debentures, provides for the Company's full and unconditional
guarantee of the Preferred Securities as set forth above.
The Company's obligation to make a Limited Guarantee Payment
may be satisfied by direct payment of the required amounts by the
Company to the holders of Preferred Securities or by payment of
such amounts by Met-Ed Capital to such holders, and may be
enforced directly by or for the benefit of the holders of
Preferred Securities.
Certain Covenants of the Company
So long as any Preferred Securities remain outstanding,
neither the Company, nor any majority owned subsidiary of the
Company, will declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of its preferred or common stock (other than dividends to the
Company by a wholly owned subsidiary of the Company) (i) during
an Extension Period (as defined under "Description of the
Deferrable Interest Subordinated Debentures-Option to Extend
Interest Payment Period") or (ii) if at such time the Company
shall be in default with respect to its payment or other
obligations under the Limited Guarantee or there shall have
occurred any event that, with the giving of notice or the lapse
23
<PAGE>
of time or both, would constitute an Event of Default under the
Indenture.
In addition, so long as any Preferred Securities remain
outstanding, the Company will (i) maintain direct or indirect
100% ownership of the general partner interests in Met-Ed
Capital; (ii) cause at least 3% of the total value of Met-Ed
Capital and at least 3% of all interests in the capital, income,
gain, loss, deduction and credit of Met-Ed Capital to be
represented by general partner interests; (iii) not cause Met-Ed
Capital to be voluntarily dissolved and wound-up except upon the
entry of a decree of judicial dissolution, in connection with a
Distribution Event or certain mergers, consolidations or similar
transactions permitted by the Limited Partnership Agreement or as
otherwise described under "Description of Preferred Securities-
Liquidation Distribution"; (iv) except as otherwise provided in
the Limited Partnership Agreement, cause the General Partner to
remain the general partner of Met-Ed Capital and timely perform
all of its duties as general partner of Met-Ed Capital (including
the duty to pay Dividends on the Preferred Securities out of cash
on hand and funds legally available therefor) in all material
respects, provided that any permitted successor of the Company
under the Indenture may directly or indirectly succeed to the
duties as general partner of Met-Ed Capital; and (v) use its
reasonable efforts to cause Met-Ed Capital to remain a limited
partnership and otherwise continue to be treated as a partnership
for United States federal income tax purposes.
Additional Amounts
All Limited Guarantee Payments will be made without
withholding or deduction for or on account of any present or
future taxes, duties, assessments or governmental charges of
whatever nature imposed or levied upon or as a result of such
payment by or on behalf of the United States, any state thereof
or any other jurisdiction through which or from which such
payment is made, or any authority therein or thereof having power
to tax, unless the withholding or deduction of such taxes,
duties, assessments or governmental charges is required by law.
In the event that any such withholding or deduction is required
as a consequence of (i) the Deferrable Interest Subordinated
Debentures not being treated as indebtedness for United States
federal income tax purposes or (ii) Met-Ed Capital not being
treated as a partnership for United States federal income tax
purposes, the Company will pay such additional amounts as may be
necessary in order that the net amounts received by the holders
of the Preferred Securities after such withholding or deduction
will equal the amount which would have been receivable in respect
of the Preferred Securities in the absence of such withholding or
deduction, except that no such additional amounts will be payable
to a holder of Preferred Securities (or a third party on such
holder's behalf) if:
(a) such holder is liable for such taxes, duties,
assessments or governmental charges in respect of the
Preferred Securities by reason of such holder's having
a connection with the United States, any state thereof
or any other jurisdiction through which or from which
24
<PAGE>
such payment is made, or in which such holder resides,
conducts business or has other contacts, other than
being a holder of Preferred Securities, or
(b) Met-Ed Capital or the Company has notified
such holder of the obligation to withhold or deduct
taxes and requested but not received from such holder a
declaration of non-residence, a valid taxpayer
identification number or other claim for exemption, and
such withholding or deduction would not have been
required had such declaration, taxpayer identification
number or claim been received.
Amendments and Assignment
The Limited Guarantee may only be amended by a written
instrument executed by the Company; provided that, so long as any
of the Preferred Securities remain outstanding, any such
amendment that materially adversely affects the holders of the
related series of Preferred Securities, any termination of the
Limited Guarantee and any waiver of compliance with any covenant
thereunder shall be effected only with the prior approval of the
holders of not less than 66-2/3% of the aggregate stated
liquidation preference of the affected series of Preferred
Securities. Except in connection with a merger, sale, transfer
or lease involving the Company as may be permitted under the
Indenture (see "Description of the Deferrable Interest
Subordinated Debentures-Consolidation, Merger, Sale or Conveyance
"), the Company may not assign its obligations under the Limited
Guarantee without the approval of the holders of not less than
66-2/3% of the aggregate stated liquidation preference of the
related series of Preferred Securities. See "Description of
Preferred Securities-Voting Rights". All guarantees and
agreements contained in the Limited Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the
Preferred Securities.
Termination of the Limited Guarantee
The Limited Guarantee will terminate and be of no further
force and effect upon full payment of the Redemption Price of all
of the related series of Preferred Securities or upon full
payment of the amounts payable upon liquidation of Met-Ed Capital
or upon consummation of a Distribution Event. The Limited
Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of such series of
Preferred Securities must restore payment of any sums paid under
such Preferred Securities or the Limited Guarantee.
Status of the Limited Guarantee
The Limited Guarantee will constitute an unsecured
obligation of the Company and will rank (i) subordinate and
junior in right of payment to all present and future Senior
Indebtedness of the Company, and (ii) senior in right of payment
to the Company's preferred and common stock. The Limited
Partnership Agreement provides that each holder of Preferred
25
<PAGE>
Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Limited Guarantee.
The Limited Guarantee will constitute a limited guarantee of
payment and not of collection. The Limited Guarantee will be
held for the benefit of the holders of the related series of
Preferred Securities. If appointed, a Special Representative may
enforce the Limited Guarantee. If no Special Representative has
been appointed to enforce the Limited Guarantee, the General
Partner has the right to enforce the Limited Guarantee on behalf
of the holders of the Preferred Securities. If the General
Partner or the Special Representative fails to enforce the
Limited Guarantee, any holder of Preferred Securities may
institute a legal proceeding directly against the Company to
enforce its rights under the Limited Guarantee, without first
instituting a legal proceeding against Met-Ed Capital or any
other person or entity.
DESCRIPTION OF THE DEFERRABLE INTEREST SUBORDINATED DEBENTURES
Set forth below is a description of the Deferrable Interest
Subordinated Debentures which will be purchased by Met-Ed Capital
with the proceeds of the sale of the Preferred Securities and the
General Partner's related capital contribution. This description
is a brief summary of certain provisions contained in the
Indenture, does not purport to be complete and is qualified in
its entirety by reference to the text of the Indenture, including
the definition therein of certain capitalized terms, a copy of
which is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
Under certain circumstances following the occurrence of a
Special Event, Met-Ed Capital may dissolve and cause Deferrable
Interest Subordinated Debentures to be distributed to the holders
of the Preferred Securities in liquidation of their interests in
Met-Ed Capital. See "Description of Preferred Securities-
Special Event Redemption or Distribution".
General
Deferrable Interest Subordinated Debentures will be issued
in series under the Indenture. Each series of Deferrable
Interest Subordinated Debentures will be limited in aggregate
principal amount to the amount of the aggregate stated
liquidation preference of the related series of Preferred
Securities together with any related capital contribution from
the General Partner.
So long as any Preferred Securities remain outstanding, any
Special Representative appointed by the holders of Preferred
Securities, as described under "Description of Preferred
Securities-Voting Rights", will be entitled to enforce the
Company's obligations under the Indenture and the Deferrable
Interest Subordinated Debentures directly against the Company.
The Deferrable Interest Subordinated Debentures will become
due and payable, together with (i) all accrued and unpaid
interest to the date of payment, including Additional Interest
26
<PAGE>
(as defined under "Additional Interest"), if any, and (ii) any
accrued interest thereon, on the 49th anniversary of the date of
issuance thereof.
Mandatory Prepayment
If Met-Ed Capital redeems Preferred Securities in accordance
with their terms, the related Deferrable Interest Subordinated
Debentures will become due and payable in a principal amount
equal to the aggregate stated liquidation preference of the
Preferred Securities so redeemed, together with (i) all accrued
and unpaid interest to the date of payment, including Additional
Interest, if any, and (ii) any accrued interest thereon.
Optional Redemption
The Company will have the right to redeem the Deferrable
Interest Subordinated Debentures, without premium or penalty, at
a price equal to 100% of their principal amount, together with
(i) all accrued and unpaid interest on the Deferrable Interest
Subordinated Debentures being redeemed to the Redemption Date,
including Additional Interest, if any, and (ii) any accrued
interest thereon (collectively, the "Debenture Redemption Price")
:
(x) in whole or in part at such time or times as
shall be specified in a Prospectus Supplement; and
(y) in whole at any time if the Company is or
would be required to pay Additional Interest on the
Deferrable Interest Subordinated Debentures or in part
at any time if the Company is or would be required to
pay Additional Interest with respect to only a portion
of the Deferrable Interest Subordinated Debentures,
provided that if a partial redemption would, through
the corresponding partial redemption required under the
terms of the related series of Preferred Securities,
result in a delisting of the related series of
Preferred Securities from any national securities
exchange on which such series of Preferred Securities
is then listed, the Company may only redeem the
Deferrable Interest Subordinated Debentures in whole.
In no event, however, shall the Company have the right
to redeem the Deferrable Interest Subordinated
Debentures, or a portion thereof, under this clause (y)
based on a de minimis obligation to pay Additional
Interest. For purposes of the foregoing, in the event
that the Company is advised by counsel (which may be
regular tax counsel to the Company or an affiliate but
not an employee thereof) that more than an
insubstantial risk exists that Met-Ed Capital will
incur penalties, interest or tax under the Internal
Revenue Code of 1986, as amended, or other applicable
law if it does not withhold or deduct certain amounts
as may be required in connection with monthly Dividends
or other payments made by it with respect to the
Preferred Securities, or that the Company will incur
such penalties, interest or tax if it does not withhold
27
<PAGE>
or deduct in connection with payments made by it under
the Deferrable Interest Subordinated Debentures, the
Company shall have the right to redeem the Deferrable
Interest Subordinated Debentures, or a portion thereof,
under this clause (y) unless the obligation to pay
Additional Interest, if Met-Ed Capital or the Company
does so withhold, is a de minimis obligation.
Redemption Procedures
If the Company gives a notice of redemption in respect of a
series of Deferrable Interest Subordinated Debentures (which
notice will be given not less than 30 nor more than 90 days prior
to the redemption date and will be irrevocable), then, on the
redemption date, the Company will irrevocably deposit with the
Trustee funds sufficient to pay the applicable Debenture
Redemption Price. If notice of redemption shall have been given
and funds deposited as required, then on the date of such
deposit, all rights of holders of such Deferrable Interest
Subordinated Debentures so called for redemption will cease,
except the right of the holders of such Deferrable Interest
Subordinated Debentures to receive the Debenture Redemption
Price, but without interest. In the event that any date fixed
for redemption of Deferrable Interest Subordinated Debentures is
not a Business Day, then payment of the Debenture Redemption
Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such
Business Day falls in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day.
In the event that less than all of a series of outstanding
Deferrable Interest Subordinated Debentures are to be so redeemed
following a Distribution Event, the Deferrable Interest
Subordinated Debentures to be redeemed will be selected as
described under "Description of Preferred Securities-Book-Entry-
Only Issuance-The Depository Trust Company".
Subject to applicable law, after a Distribution Event the
Company or its subsidiaries may at any time and from time to time
purchase outstanding Deferrable Interest Subordinated Debentures
by tender, in the open market or by private agreement.
If a partial redemption or a purchase of outstanding
Deferrable Interest Subordinated Debentures by tender, in the
open market or by private agreement would result in a delisting
of such series of Deferrable Interest Subordinated Debentures
from any national securities exchange on which such series of
Deferrable Interest Subordinated Debentures is then listed, the
Company may then only redeem or purchase such series of
Deferrable Interest Subordinated Debentures in whole.
Interest
Each Deferrable Interest Subordinated Debenture will bear
interest at a rate per annum equal to the Dividend rate on the
related series of Preferred Securities, payable monthly in
28
<PAGE>
arrears on the last day of each calendar month of each year (each
an "Interest Payment Date"), to the person in whose name such
Deferrable Interest Subordinated Debenture is registered, subject
to certain exceptions, at the close of business on the Business
Day next preceding such Interest Payment Date (the "Regular
Record Date"). In the event that the Deferrable Interest
Subordinated Debentures do not remain in book-entry-only form,
the record dates will be the fifteenth day of each month.
The amount of interest payable for any period will be
computed on the basis of twelve 30-day months and a 360-day year
and, for any period shorter than a full monthly interest period,
on the basis of the actual number of days elapsed. In the event
that any date on which interest is payable on the Deferrable
Interest Subordinated Debentures is not a Business Day, then
payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if
made on such date.
Option to Extend Interest Payment Period
The Company will have the right at any time and from time to
time during the term of the Deferrable Interest Subordinated
Debentures, so long as the Company is not in default in the
payment of interest on the Deferrable Interest Subordinated
Debentures, to extend the interest payment period on the
Deferrable Interest Subordinated Debentures to up to 60
consecutive months, provided that at the end of each such period
(an "Extension Period") the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the rate
specified for the Deferrable Interest Subordinated Debentures to
the extent permitted by applicable law). During any such
Extension Period, neither the Company, nor any majority owned
subsidiary of the Company, may declare or pay any dividends on,
or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than dividends to the
Company by a wholly owned subsidiary of the Company). No
interest shall be due and payable during an Extension Period,
except at the end thereof. If Met-Ed Capital shall be the sole
holder of the Deferrable Interest Subordinated Debentures, the
Company shall give Met-Ed Capital notice of its selection of such
extended interest payment period one Business Day prior to the
earlier of (i) the date the related Dividend on the Preferred
Securities is payable or (ii) the date Met-Ed Capital is required
to give notice to any national securities exchange on which the
Preferred Securities are listed or other applicable self-
regulatory organization or to the holders of the Preferred
Securities of the record date or the date such Dividend is
payable, but in any event not less than one Business Day prior to
such record date. The Company shall cause Met-Ed Capital to give
notice of the Company's selection of such extended interest
payment period to the holders of the Preferred Securities. If
Met-Ed Capital shall not be the sole holder of the Deferrable
Interest Subordinated Debentures, the Company will give the
29
<PAGE>
holders of the Deferrable Interest Subordinated Debentures notice
of its selection of such extended interest payment period ten
Business Days prior to the earlier of (i) the Interest Payment
Date or (ii) the date the Company is required to give notice of
the record or payment date of such related interest payment to
any national securities exchange on which the Deferrable Interest
Subordinated Debentures are then listed or other applicable self-
regulatory organization or to holders of the Deferrable Interest
Subordinated Debentures, but in any event not less than two
Business Days prior to such record date.
Additional Interest
If at any time Met-Ed Capital is required to pay any
Additional Amounts in respect of the Preferred Securities
pursuant to the terms thereof, then the Company will pay as
interest ("Additional Interest") on the Deferrable Interest
Subordinated Debentures an amount equal to such Additional
Amounts. In addition, if Met-Ed Capital would be required to pay
any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the
United States, or any other taxing authority, then, in any such
case, the Company will also pay as Additional Interest such
amounts as shall be required so that the net amounts received and
retained by Met-Ed Capital after paying any such taxes, duties,
assessments or governmental charges will be not less than the
amounts Met-Ed Capital would have received had no such taxes,
duties, assessments or governmental charges been imposed.
Credit
Prior to a Distribution Event, the Company shall receive a
credit against any payment it is otherwise required to make under
the Deferrable Interest Subordinated Debentures to the extent it
has theretofore made, or is concurrently making, a payment under
the Limited Guarantee.
Subordination
All payments by the Company in respect of the Deferrable
Interest Subordinated Debentures shall be subordinated to the
prior payment in full of all amounts payable on Senior
Indebtedness. "Senior Indebtedness" consists of (i) the
principal of and premium (if any) in respect of (A) indebtedness
of the Company for money borrowed and (B) indebtedness evidenced
by securities, debentures, bonds or other similar instruments
(including purchase money obligations) for payment of which the
Company is responsible or liable; (ii) all capital lease
obligations of the Company; (iii) all obligations of the Company
issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations
of the Company under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of
business); (iv) certain obligations of the Company for the
reimbursement of any obligor on any letter of credit, banker's
acceptance, security purchase facility or similar credit
transaction; (v) all obligations of the type referred to in
clauses (i) through (iv) of other persons for the payment of
30
<PAGE>
which the Company is responsible or liable as obligor, guarantor
or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other persons secured by any lien on
any property or asset of the Company (whether or not such
obligation is assumed by the Company), except for any such
indebtedness that is by its terms subordinated to or pari passu
with the Deferrable Interest Subordinated Debentures.
Upon any payment or distribution of assets or securities of
the Company or upon any dissolution or winding up or total or
partial liquidation or reorganization of the Company, whether
voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all amounts payable on Senior
Indebtedness (including any interest accruing on such Senior
Indebtedness subsequent to the commencement of a bankruptcy,
insolvency or similar proceeding) shall first be paid in full
before the Trustee or the holders of Preferred Securities or
Deferrable Interest Subordinated Debentures (or the Special
Representative) will be entitled to receive from the Company any
payment of principal of, or interest on, or any other amounts in
respect of, the Deferrable Interest Subordinated Debentures.
No direct or indirect payment by or on behalf of the Company
of principal of or interest on the Deferrable Interest
Subordinated Debentures whether pursuant to the terms of the
Deferrable Interest Subordinated Debentures or upon acceleration
or otherwise may be made if, at the time of such payment, there
exists, (i) a default in the payment of all or any portion of any
Senior Indebtedness or (ii) any other default (other than a
default of the nature described in clause (i) above) affecting
Senior Indebtedness permitting its acceleration, as the result of
which the maturity of Senior Indebtedness has been accelerated,
and in either case requisite notice has been given to the Company
and the Trustee and such default shall not have been cured or
waived by or on behalf of the holders of such Senior
Indebtedness.
If the Trustee or any holder of Preferred Securities or
Deferrable Interest Subordinated Debentures (or the Special
Representative) has received any payment on account of the
principal of or interest on the Deferrable Interest Subordinated
Debentures when such payment is prohibited and before all amounts
payable on Senior Indebtedness are paid in full, then and in such
event such payment or distribution shall be received and held in
trust for the holders of Senior Indebtedness and shall be paid
over or delivered first to the holders of the Senior Indebtedness
remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full.
Upon the payment in full of all Senior Indebtedness, the
Trustee and the holders of Preferred Securities or Deferrable
Interest Subordinated Debentures (and the Special Representative)
shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of assets of
the Company made on such Senior Indebtedness until the Deferrable
Interest Subordinated Debentures are paid in full.
Certain Covenants of the Company
31
<PAGE>
Neither the Company nor any majority owned subsidiary shall
declare or pay any dividend on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its preferred
or common stock (other than dividends to the Company by a wholly
owned subsidiary of the Company) (i) during an Extension Period,
(ii) if there shall have occurred and is continuing any event
that, with the giving of notice or the lapse of time or both,
would constitute an Event of Default under the Indenture or (iii)
so long as any Preferred Securities remain outstanding, if the
Company shall be in default with respect to its payment or other
obligations under the Limited Guarantee.
Book-Entry and Settlement
If Deferrable Interest Subordinated Debentures are
distributed to holders of Preferred Securities, the Deferrable
Interest Subordinated Debentures will be issued in book-entry-
only form. For a description of DTC and the specific terms of
the depository arrangements, see "Description of Preferred
Securities-Book-Entry-Only Issuance-The Depository Trust
Company", which would also apply to the Deferrable Interest
Subordinated Debentures in book-entry-only form.
Neither the Company, the Trustee, any paying agent nor any
other agent of the Company or the Trustee will have any
responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership
interests in a global security for such Deferrable Interest
Subordinated Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership
interests.
Discontinuance of the Depository's Services. A global
security will be exchangeable for Deferrable Interest
Subordinated Debentures registered in the names of persons other
than the depository or its nominee only if (i) the depository
notifies the Company that it is unwilling or unable to continue
as depository for such global security or if at any time the
depository ceases to be a clearing agency registered under the
Exchange Act at a time when the depository is required to be so
registered to act as such depository, (ii) the Company in its
sole discretion determines that such global security shall be so
exchangeable or (iii) there shall have occurred and be continuing
a default in the payment of principal of, or interest on, such
Deferrable Interest Subordinated Debentures or an Event of
Default or an event which, with the giving of notice or the lapse
of time or both, would constitute an Event of Default with
respect to such Deferrable Interest Subordinated Debentures. Any
global security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Deferrable Interest
Subordinated Debentures registered in such names as the
depository shall direct. It is expected that such instructions
will be based upon directions received by the depository from its
Participants with respect to ownership of beneficial interests in
such global security.
Payment; Registration and Transfer
32
<PAGE>
In the event that the Deferrable Interest Subordinated
Debentures do not remain in book-entry-only form, the following
provisions would apply:
Payment of principal of any Deferrable Interest Subordinated
Debenture will be made only against surrender to the Trustee or
the Paying Agent appointed by the Company, if not the Trustee, of
such Deferrable Interest Subordinated Debenture. Principal of,
and interest on, Deferrable Interest Subordinated Debentures will
be payable, subject to any applicable laws and regulations, at
the office of the Trustee or such Paying Agent as the Company may
designate from time to time, except that at the option of the
Company payment of any interest may be made by check mailed to
the address of the person entitled thereto as such address shall
appear in the security Register with respect to such Deferrable
Interest Subordinated Debentures. Payment of interest on a
Deferrable Interest Subordinated Debenture on any Interest
Payment Date will be made to the person in whose name such
Deferrable Interest Subordinated Debenture is registered at the
close of business on the Regular Record Date for such interest,
with certain exceptions.
The Corporate Trust Office of the Trustee in The City of New
York shall initially be designated as the Company's sole Paying
Agent for payments with respect to Deferrable Interest
Subordinated Debentures of each series. The Company may at any
time designate other or additional Paying Agents or rescind the
designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts.
Deferrable Interest Subordinated Debentures may be presented
for registration of transfer (with the form of transfer endorsed
thereon duly executed), at the office of the Registrar appointed
by the Company without service charge and upon payment of any
taxes and other governmental charges as described in the
Indenture. The Company has initially appointed the Trustee as
Registrar with respect to the Deferrable Interest Subordinated
Debentures. The Company shall not be required to make, and the
Registrar need not register, the transfer or exchange of (i) any
Deferrable Interest Subordinated Debenture during a period
beginning at the opening of business five days before the mailing
of a notice of redemption of Deferrable Interest Subordinated
Debentures, and ending at the close of business on the day of
such mailing, or (ii) any Deferrable Interest Subordinated
Debenture selected, called or being called for redemption, in
whole or in part, except in the case of any Deferrable Interest
Subordinated Debenture to be redeemed in part, the portion
thereof not to be redeemed.
Amendment of the Indenture
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a
majority in principal amount of the Deferrable Interest
Subordinated Debentures which are affected by the amendment or
waiver, to amend the Indenture or the Deferrable Interest
Subordinated Debentures or to waive compliance by the Company
33
<PAGE>
with any provision of the Indenture or the Deferrable Interest
Subordinated Debentures; provided that no such amendment or
waiver may, without the consent of the holder of each outstanding
Deferrable Interest Subordinated Debenture affected thereby, (a)
reduce the principal amount of the Deferrable Interest
Subordinated Debentures, (b) reduce the percentage of principal
amount of outstanding Deferrable Interest Subordinated Debentures
of any series, the consent of holders of which is required for
amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain
defaults, (c) change the stated maturity date of the principal
of, or the interest or the rate of interest on, the Deferrable
Interest Subordinated Debentures, (d) change the redemption
provisions applicable to the Deferrable Interest Subordinated
Debentures adversely to the holders thereof, (e) impair the right
to institute suit for the enforcement of any payment with respect
to the Deferrable Interest Subordinated Debentures, (f) change
the currency in which payments with respect to the Deferrable
Interest Subordinated Debentures are to be made, (g) change the
subordination provisions applicable to the Deferrable Interest
Subordinated Debentures adversely to the holders thereof, or (h)
waive a default in the payment of the principal of, or interest
on, any Deferrable Interest Subordinated Debenture. The
Indenture or the Deferrable Interest Subordinated Debentures may
be amended, without the consent of the holders of the Deferrable
Interest Subordinated Debentures, to cure any ambiguity, defect
or inconsistency or to make other changes that do not adversely
affect the rights of such holders.
Events of Default
The following are Events of Default under the Indenture:
(i) default for 15 days in payment of any interest (including
Additional Interest, if any) on Deferrable Interest Subordinated
Debentures (whether by virtue of the provisions described above
under "Subordination" or otherwise); provided that an extension
of the interest payment period by the Company as described under
"Option to Extend Interest Payment Period" shall not constitute a
default in the payment of interest for this purpose; (ii) default
in payment of principal of Deferrable Interest Subordinated
Debentures when due (whether by virtue of the provisions
described above under "Subordination" or otherwise); (iii)
default for 30 days after notice in the performance of any other
covenant in the Indenture; or (iv) certain events of bankruptcy,
insolvency or reorganization of the Company. If an Event of
Default shall occur and be continuing, the Trustee or the holders
of not less than a majority in principal amount of the Deferrable
Interest Subordinated Debentures then outstanding may declare the
principal of, and all accrued and unpaid interest (including
Additional Interest, if any, and any interest accrued but not
paid during an Extension Period) on, the Deferrable Interest
Subordinated Debentures to be due and payable; provided that,
upon certain events of bankruptcy, insolvency or reorganization
of the Company, such amounts shall immediately become due and
payable without any declaration or other action by the Trustee or
such holders. The Company is required to furnish to the Trustee
annually a statement as to the performance by the Company of its
obligations under the Indenture and as to any default in such
34
<PAGE>
performance. Under certain circumstances, any declaration of
acceleration with respect to the Deferrable Interest Subordinated
Debentures may be rescinded and past defaults (except, unless
theretofore cured, a default in the payment of principal of, or
interest on, the Deferrable Interest Subordinated Debentures) may
be waived by the holders of a majority in principal amount of
the Deferrable Interest Subordinated Debentures then outstanding.
The Indenture provides that the Trustee may withhold notice to
the holders of the Deferrable Interest Subordinated Debentures of
any continuing default (except in the payment of the principal
of, or interest on, the Deferrable Interest Subordinated
Debentures) if the Trustee considers it in the interests of
holders of Deferrable Interest Subordinated Debentures to do so.
Enforcement of Certain Rights by Holders of Preferred Securities
So long as any Deferrable Interest Subordinated Debentures
are held by Met-Ed Capital, the holders of any outstanding
Preferred Securities will have the rights referred to under
"Description of Preferred Securities-Voting Rights", including
the right to appoint a Special Representative authorized to
exercise Met-Ed Capital's right, as the holder of Deferrable
Interest Subordinated Debentures, to accelerate the principal
amount of the Deferrable Interest Subordinated Debentures and to
enforce the Company's obligations under the Indenture and the
Deferrable Interest Subordinated Debentures directly against the
Company, without first proceeding against Met-Ed Capital or any
other person or entity.
Consolidation, Merger, Sale or Conveyance
The Indenture provides that the Company may not consolidate
with or merge into any other Person or sell, convey, transfer or
lease all or substantially all of its properties and assets to
any Person, unless (i) the successor Person shall be organized
and existing under the laws of the United States or any state
thereof or the District of Columbia; (ii) the successor Person
shall expressly assume (x) by a supplemental indenture, all of
the Company's obligations under the Deferrable Interest
Subordinated Debentures and the Indenture and (y) so long as any
Preferred Securities remain outstanding, the Company's
obligations under the Limited Guarantee; (iii) so long as any
Preferred Securities remain outstanding, the successor Person
becomes or acquires the General Partner; and (iv) the Company
shall have delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation,
merger, sale, conveyance, transfer or lease and such supplemental
indenture comply with the Indenture. In case of any such
consolidation, merger, sale, conveyance, transfer or lease, such
successor Person will succeed to and be substituted for the
Company as obligor on the Deferrable Interest Subordinated
Debentures, with the same effect as if it had been named in the
Indenture as the issuer in place of the Company.
The Indenture does not contain any other covenant which
restricts the Company's ability to consolidate or merge with, or
sell, convey, transfer or lease all or substantially all of its
35
<PAGE>
assets to, any Person, firm or corporation or otherwise engage in
restructuring transactions.
Title
The Company, the Trustee and any agent of the Company or the
Trustee may treat the registered owner of any Deferrable Interest
Subordinated Debenture as the absolute owner thereof (whether or
not such Deferrable Interest Subordinated Debenture shall be
overdue and notwithstanding any notice to the contrary) for the
purpose of making payment and for all other purposes.
Defeasance and Discharge
Under the terms of the Indenture, the Company will be
discharged from any and all obligations in respect of the
Deferrable Interest Subordinated Debentures of any series (except
in each case for certain obligations to register the transfer or
exchange of Deferrable Interest Subordinated Debentures, replace
stolen, lost or mutilated Deferrable Interest Subordinated
Debentures, maintain paying agencies and hold monies for payment
in trust) if the Company deposits with the Trustee, in trust, (i)
money and/or (ii) U. S. Government Obligations (as defined in the
Indenture) sufficient to pay all the principal of, and interest
on, the Deferrable Interest Subordinated Debentures of such
series on the dates such payments are due; provided that no Event
of Default has occurred and is continuing. In connection with
such a defeasance and discharge, the Company, among other things,
will deliver to the Trustee an Opinion of Counsel to the effect
that (i) the deposit and related defeasance would not cause the
holders of the Deferrable Interest Subordinated Debentures of
such series to recognize income, gain or loss for federal income
tax purposes, or a copy of a ruling or other formal statement or
action to such effect received from or published by the Internal
Revenue Service; and (ii) the trust resulting from the defeasance
is a valid trust and will not constitute a regulated investment
company under the 1940 Act.
Replacement of Deferrable Interest Subordinated Debentures
Any mutilated Deferrable Interest Subordinated Debenture
will be replaced by the Company at the expense of the holder upon
its surrender to the Trustee. Deferrable Interest Subordinated
Debentures that become destroyed, lost or stolen will be replaced
by the Company at the expense of the holder upon delivery to the
Trustee of evidence of the destruction, loss or theft thereof
satisfactory to the Company and the Trustee. In the case of a
destroyed, lost or stolen Deferrable Interest Subordinated
Debenture, an indemnity satisfactory to the Trustee and the
Company may be required at the expense of the holder of such
Deferrable Interest Subordinated Debenture before a replacement
Deferrable Interest Subordinated Debenture will be issued.
Governing Law
The Indenture and the Deferrable Interest Subordinated
Debentures will be governed by and construed in accordance with
the laws of the State of New York.
36
<PAGE>
Information Concerning the Trustee
Subject to the provisions of the Indenture relating to its
duties, the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request, order
or direction of any of the holders thereunder, unless such
holders shall have offered to the Trustee reasonable indemnity.
Subject to such provision for indemnification, the holders of a
majority in principal amount of the Deferrable Interest
Subordinated Debentures then outstanding thereunder will have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee thereunder, or
exercising any trust or power conferred on the Trustee.
The Indenture contains limitations on the right of the
Trustee, as a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise.
In addition, the Trustee may be deemed to have a conflicting
interest and may be required to resign as Trustee if at the time
of default under the Indenture it is a creditor of the Company.
United States Trust Company of New York, the Trustee under
the Indenture, has from time to time engaged in transactions
with, or performed services for, the Company and its affiliates
in the ordinary course of business.
Miscellaneous
For restrictions on certain actions of the General Partner
with respect to Deferrable Interest Subordinated Debentures held
by Met-Ed Capital, see "Description of Preferred Securities-
Voting Rights".
UNITED STATES TAXATION
General
This section is a summary of certain United States federal
income tax considerations that may be relevant to prospective
purchasers of Preferred Securities and represents the opinion of
Carter, Ledyard & Milburn, special tax counsel to the Company and
Met-Ed Capital, insofar as it relates to matters of law and legal
conclusions. This section is based upon current provisions of
the Internal Revenue Code of 1986, as amended ("Code"), existing
and proposed regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change.
Subsequent changes may cause tax consequences to vary
substantially from the consequences described below.
No attempt has been made in the following discussion to
comment on all United States federal income tax matters affecting
purchasers of Preferred Securities. Moreover, the discussion
focuses on holders of Preferred Securities who are individual
citizens or residents of the United States and has only limited
application to corporations, estates, trusts or non-resident
aliens. Accordingly, each prospective purchaser of Preferred
37
<PAGE>
Securities should consult, and should depend on, his or her own
tax advisor in analyzing the federal, state, local and foreign
tax consequences of the purchase, ownership or disposition of
Preferred Securities.
Income from Preferred Securities
In the opinion of Carter, Ledyard & Milburn, Met-Ed Capital
will be treated as a partnership for federal income tax purposes.
Accordingly, each holder of Preferred Securities (a "Preferred
Securityholder") will be required to include in gross income such
holder's distributive share of the income of Met-Ed Capital.
Such income will not exceed Dividends received on such Preferred
Securities, except in limited circumstances as described below
under "Potential Extension of Interest Payment Period". No
portion of such income will be eligible for the dividends
received deduction.
Disposition of Preferred Securities
Gain or loss will be recognized on a sale (including a
redemption for cash) of Preferred Securities in an amount equal
to the difference between the amount realized and the Preferred
Securityholder's tax basis for the Preferred Securities sold.
Gain or loss recognized by a Preferred Securityholder on the sale
or exchange of a Preferred Security held for more than one year
will generally be taxable as long-term capital gain or loss.
Receipt of Deferrable Interest Subordinated Debentures Upon
Liquidation of Met-Ed Capital
Under certain circumstances described under the caption
"Description of Preferred Securities-Special Event Redemption or
Distribution", Met-Ed Capital may dissolve and cause Deferrable
Interest Subordinated Debentures to be distributed to the holders
of Preferred Securities in liquidation of such holders' interests
in Met-Ed Capital. As described in "Description of Preferred
Securities-Special Event Redemption or Distribution", in the case
of a Special Event, Deferrable Interest Subordinated Debentures
may not be distributed to the holders of Preferred Securities in
connection with a dissolution of Met-Ed Capital unless Met-Ed
Capital receives an opinion of counsel to the effect that the
holders of the Preferred Securities will not recognize any gain
or loss for federal income tax purposes as a result of such
dissolution and distribution. Such a tax-free transaction would
result in the holder of Preferred Securities receiving an
aggregate tax basis in the Deferrable Interest Subordinated
Debentures equal to such holder's aggregate tax basis in the
holder's Preferred Securities. A holder's holding period in such
Deferrable Interest Subordinated Debentures would include the
period for which the Preferred Securities were held by such
holder.
Met-Ed Capital Information Returns and Audit Procedures
The General Partner will furnish each Preferred Security-
holder with a Schedule K-1 each year setting forth such Preferred
Securityholder's allocable share of income for the prior calendar
38
<PAGE>
year. The General Partner is required to furnish such schedules
as soon as practicable following the end of the year, but in any
event prior to March 31.
Any person who holds Preferred Securities as a nominee for
another person is required to furnish to Met-Ed Capital (a) the
name, address and taxpayer identification number of the
beneficial owner and the nominee; (b) information as to whether
the beneficial owner is (i) a person that is not a United States
person, (ii) a foreign government, an international organization
or any wholly owned agency or instrumentality of either of the
foregoing, or (iii) a tax-exempt entity; (c) the amount and
description of Preferred Securities held, acquired or transferred
for the beneficial owner; and (d) certain information including
the dates of acquisitions and transfers, means of acquisitions
and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information,
including whether they are United States persons and certain
information on Preferred Securities they acquire, hold or
transfer for their own accounts. A penalty of $50 per failure
(up to a maximum of $100,000 per calendar year) is imposed by the
Code for failure to report such information to Met-Ed Capital.
The nominee is required to supply the beneficial owners of
Preferred Securities with the information furnished to Met-Ed
Capital.
Potential Extension of Interest Payment Period
Under the terms of the Indenture, the Company has the right
to extend from time to time the interest payment period on the
Deferrable Interest Subordinated Debentures to a period not
exceeding 60 consecutive months. In the event that the Company
exercises this right, the Company may not, among other things,
declare dividends on any of its capital stock. Met-Ed Capital
and the Company currently believe that the extension of an
interest payment period is remote. In the event that the
interest payment period is extended, Met-Ed Capital will continue
to accrue income, on an economic accrual basis, generally equal
to the amount of the interest payment due at the end of the
extended interest payment period, over the length of the extended
interest payment period.
Accrued income will be allocated, but not distributed, to
holders of record on the Business Day preceding the last day of
each calendar month. As a result, holders of record during an
extended interest payment period will include interest in gross
income in advance of the receipt of cash, and any such holders
who dispose of Preferred Securities prior to the record date for
the payment of Dividends following such extended interest payment
period will include interest in gross income but will not receive
any cash related thereto from the Company or Met-Ed Capital. The
tax basis of a Preferred Security will be increased by the amount
of any interest that is included in income without a receipt of
cash, and will be decreased when and if such cash is subsequently
received from Met-Ed Capital. The subsequent receipt of such
cash will not be includible in gross income.
39
<PAGE>
United States Alien Holders
For purposes of this discussion, a "United States Alien
Holder" is any holder who or which is (i) a nonresident alien
individual or (ii) a foreign corporation, partnership or estate
or trust, in either case not subject to United States federal
income tax on a net income basis in respect of a Preferred
Security.
Under current United States federal income tax law, subject
to the discussion below with respect to backup withholding, and
assuming satisfaction by the Company of its withholding tax
obligations, if any:
(i) payments by Met-Ed Capital or any of its
paying agents to any holder of a Preferred Security who
or which is a United States Alien Holder will not be
subject to United States federal withholding tax
provided that (a) the beneficial owner of the Preferred
Security does not actually or constructively own 10% or
more of the total combined voting power of all classes
of stock of the Company or 10% or more of the Preferred
Securities entitled to vote, (b) the beneficial owner
of the Preferred Security is not a controlled foreign
corporation that is related to the Company or Met-Ed
Capital through stock ownership, and (c) either: (x)
the beneficial owner of the Preferred Security
certifies to Met-Ed Capital or its agent, under
penalties of perjury, that it is a United States Alien
Holder and provides its name and address or (y) the
holder of the Preferred Security is a securities
clearing organization, bank or other financial
institution that holds customers' securities in the
ordinary course of its trade or business (a "financial
institution"), and such holder certifies to Met-Ed
Capital or its agent, under penalties of perjury, that
such statement has been received from the beneficial
owner by it or by a financial institution between it
and the beneficial owner and furnishes Met-Ed Capital
or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Preferred
Security will generally not be subject to United States
federal withholding tax on any gain realized on the
sale or exchange of a Preferred Security unless such
holder is present in the United States for 183 days or
more in the taxable year of sale and either has a "tax
home" in the United States or certain other
requirements are met.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to
payments of the proceeds of the sale of Preferred Securities
within the United States to noncorporate United States holders,
and "backup withholding" at a rate of 31% will apply to such
payments if the United States holder fails to provide an accurate
taxpayer identification number.
40
<PAGE>
Payments of the proceeds from the sale by a United States
Alien Holder of Preferred Securities made to or through a foreign
office of a broker will not be subject to information reporting
or backup withholding, except that, if the broker is a United
States person, a controlled foreign corporation for United States
tax purposes or a foreign person 50% or more of whose gross
income is effectively connected with a United States trade or
business for a specified three-year period, information reporting
may apply to such payments. Payments of the proceeds from the
sale of Preferred Securities to or through the United States
office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to
its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
PLAN OF DISTRIBUTION
Met-Ed Capital may offer or sell Preferred Securities to one
or more underwriters for public offering and sale by them. Met-
Ed Capital may sell Preferred Securities as soon as practicable
after effectiveness of the Registration Statement, provided that
favorable market conditions exist. Any such underwriter involved
in the offer and sale of the Preferred Securities will be named
in an applicable Prospectus Supplement.
Underwriters may offer and sell the Preferred Securities at
a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices.
In connection with the sale of Preferred Securities, underwriters
may be deemed to have received compensation from the Company
and/or Met-Ed Capital in the form of underwriting discounts or
commissions. Underwriters may sell Preferred Securities to or
through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from the
underwriters.
Any underwriting compensation paid by the Company and/or
Met-Ed Capital to underwriters in connection with the offering of
Preferred Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement.
Underwriters and dealers participating in the distribution of the
Preferred Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit
realized by them on resale of the Preferred Securities may be
deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters and dealers may be entitled, under
agreement with the Company and/or Met-Ed Capital, to
indemnification against and contribution toward certain
liabilities, including liabilities under the Securities Act, and
to reimbursement by the Company and/or Met-Ed Capital for certain
expenses.
Underwriters and dealers may engage in transactions with, or
perform services for, the Company and/or Met-Ed Capital and/or
any of their affiliates in the ordinary course of business.
41
<PAGE>
Each series of Preferred Securities will be a new issue of
securities and will have no established trading market. Any
underwriters to whom Preferred Securities are sold by Met-Ed
Capital for public offering and sale may make a market in such
Preferred Securities, but such underwriters will not be obligated
to do so and may discontinue any market making at any time
without notice. The Preferred Securities may or may not be
listed on a national securities exchange. No assurance can be
given as to the liquidity of or the trading markets for any
Preferred Securities.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company
and Met-Ed Capital by Berlack, Israels & Liberman, New York, New
York, and Ryan, Russell, Ogden & Seltzer, Reading, Pennsylvania,
and for any underwriters by Reid & Priest, New York, New York.
Certain matters of Delaware law relating to the validity of the
Preferred Securities will be passed upon by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to
Met-Ed Capital. Berlack, Israels & Liberman and Reid & Priest
may rely on the opinion of Ryan, Russell, Ogden & Seltzer as to
matters of Pennsylvania law, and Berlack, Israels & Liberman,
Ryan, Russell, Ogden & Seltzer and Reid & Priest may rely on the
opinion of Richards, Layton & Finger, P.A., as to matters of
Delaware law. Members and attorneys of Berlack, Israels &
Liberman own an aggregate of 12,091 shares of the Common Stock of
the Company's parent, GPU. In addition, one such member holds
986 such shares as custodian for his children. Members and
attorneys of Ryan, Russell, Ogden & Seltzer own an aggregate of
2,000 shares of the Common Stock of GPU.
EXPERTS
The financial statements and financial statement schedules
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 are incorporated herein by reference in
reliance on the report of Coopers & Lybrand, independent
accountants, given on the authority of said firm as experts in
auditing and accounting. The report of Coopers & Lybrand,
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 incorporated herein by reference,
contains explanatory paragraphs related to a contingency which
has resulted from the accident at Unit 2 of the Three Mile Island
nuclear generating station and the change in the method of
accounting for unbilled revenues in 1991.
42
<PAGE>
No person has been authorized to
give any information or to make any 4,000,000 Preferred
representations other than those Securities
contained in this Prospectus Supplement
or the Prospectus, and, if given or Met-Ed Capital
made, such information or
representations must not be relied upon % Cumulative
as having been authorized. This Monthly Income
Prospectus Supplement and the Prospectus Preferred Securities,
do not constitute an offer to sell or a Series A
solicitation of an offer to buy any
securities other than the securities
described in this Prospectus Supplement guaranteed to the
or an offer to sell or the solicitation extent the issuer
of an offer to buy such securities in has funds as set
any circumstances in which such offer forth herein by
or solicitation is unlawful. Neither
the delivery of this Prospectus METROPOLITAN
Supplement or the Prospectus nor any EDISON
sale made hereunder or thereunder COMPANY
shall, under any circumstances, create
any implication that the information
contained herein or therein is correct
as of any time subsequent to the date
of such information.
___________________ PROSPECTUS
SUPPLEMENT
TABLE OF CONTENTS
Prospectus Supplement
Page
Met-Ed Capital . . . . . . . . . . .
Metropolitan Edison Company . . . . .
Certain Investment Considerations . .
Use of Proceeds . . . . . . . . . . .
Certain Terms of the Series A
Preferred Securities . . . . . . .
Certain Terms of the Series A
Deferrable Interest Subordinated
Debentures . . . . . . . . . . . .
Underwriting . . . . . . . . . . . .
Legal Opinions . . . . . . . . . . .
Prospectus
Available Information . . . . . . . .
Incorporation of Certain Documents
by Reference . . . . . . . . . . .
Metropolitan Edison Company . . . . .
Recent Developments. . . . . . . . . .
Financing Program . . . . . . . . . .
Certain Company Consolidated Financial
Information . . . . . . . . . . . GOLDMAN, SACHS & CO.
Company Coverage Ratios . . . . . . . DEAN WITTER REYNOLDS INC.
Use of Proceeds . . . . . . . . . . . A.G. EDWARDS & SONS, INC.
Met-Ed Capital . . . . . . . . . . . KIDDER, PEABODY & CO.
Description of Preferred Securities . INCORPORATED
Description of the Limited Guarantee MORGAN STANLEY & CO.
Description of the Deferrable Interest INCORPORATED
Subordinated Debentures . . . . . PAINEWEBBER INCORPORATED
United States Taxation . . . . . . . PRUDENTIAL SECURITIES
Plan of Distribution . . . . . . . . INCORPORATED
<PAGE>
Legal Opinions . . . . . . . . . . . Representatives of the
Experts . . . . . . . . . . . . . . . Underwriters
44
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Filing fees - Securities and Exchange
Commission $ 45,104
Printing and engraving 40,000*
New York Stock Exchange listing fee 15,000*
Legal fees:
Berlack, Israels & Liberman 135,000*
Ryan, Russell, Ogden & Seltzer 45,000*
Carter, Ledyard & Milburn 55,000*
Richards, Layton & Finger, P.A. 25,500*
Blue Sky fees and expenses 15,000*
Accounting fees:
Coopers & Lybrand 15,000*
Indenture Trustee fees and expenses 20,000*
Rating agencies fees and expenses 48,125*
Miscellaneous 21,271*
Total $480,000*
_________________
*Estimated
Item 16. Exhibits:
Exhibit No. Description
12-A - Statement Showing Computation
of Ratio of Earnings to Fixed
Charges and Statement Showing
Computation of Ratio of
Earnings to Combined Fixed
Charges and Preferred Stock
Dividends.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this amendment to its registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Reading, Commonwealth of
Pennsylvania, on the 10th day of August, 1994.
METROPOLITAN EDISON COMPANY
By: *
F.D. Hafer, President
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the registration statement has been signed
below by the following persons in the capacities with respect to
Metropolitan Edison Company and on the dates indicated.
Signature Title Date
* Chairman (Principal August 10, 1994
(J.R. Leva) Executive Officer)
and Director
* President and Director August 10, 1994
(F.D. Hafer)
* Vice President August 10, 1994
(J.G. Graham) (Principal Financial
Officer) and Director
* Comptroller (Principal August 10, 1994
(D.L. O'Brien) Accounting Officer)
2
<PAGE>
* Vice President and August 10, 1994
(G.R. Repko) Director
* Vice President and August 10, 1994
(R.S. Zechman) Director
* Vice President and August 10, 1994
(J.F. Furst) Director
* Vice President and August 10, 1994
(R.C. Arnold) Director
*By: /s/ Don W. Myers
Don W. Myers, Attorney-in fact
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant has duly caused this amendment to its
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Reading,
Commonwealth of Pennsylvania on the 10th day of August, 1994.
MET-ED CAPITAL, L.P.
By: Met-Ed Preferred Capital, Inc.
its general partner
By:________________________________
F.D. Hafer, President
Pursuant to the requirements of the Securities Act of
1933, this amendment to the registration statement has been
signed below by the following person in the capacity on behalf of
Met-Ed Preferred Capital, Inc., as the general partner of Met-Ed
Capital, L.P., and on the date indicated.
Signature Title Date
President and August 10, 1994
(F.D. Hafer) Director
4
<PAGE>
EXHIBITS TO BE FILED BY EDGAR
Exhibit No.
12-A - Statement Showing
Computation of Ratio of
Earnings to Fixed Charges
and Statement Showing
Computation of Ratio of
Earnings to Combined
Fixed Charges and
Preferred Stock
Dividends.
5
<PAGE>
<TABLE>
Exhibit 12-A
Page 1 of 3
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
BASED ON SEC REGULATION S-K, ITEM 503
(Dollars In Thousands)
<CAPTION>
Twelve Months Ended
December 31, December 31, December 31, December 31,
1989 1990 1991 1992
<S> <C> <C> <C> <C>
OPERATING REVENUES $680 458 $719 387 $788 462 $821 823
OPERATING EXPENSES
(excluding taxes
based on income) 521 027 559 701 687 439 660 497
Interest portion
of rentals (A) 6 583 6 830 5 574 5 817
Net expense 514 444 552 871 681 865 654 680
OTHER INCOME:
Allowance for funds
used during
construction 3 529 3 912 2 330 2 858
Other income, net 21 566 17 833 15 531 3 229
Total other income 25 095 21 745 17 861 6 087
EARNINGS AVAILABLE FOR
FIXED CHARGES $191 109 $188 261 $124 458 $173 230
FIXED CHARGES:
Interest on funded
indebtedness $ 32 049 $ 33 512 $ 36 413 $ 38 882
Other interest 10 615 11 121 9 028 6 039
Interest portion
of rentals (A) 6 583 6 830 5 574 5 817
Total fixed charges $ 49 247 $ 51 463 $ 51 015 $ 50 738
RATIO OF EARNINGS TO
FIXED CHARGES 3.88 3.66 2.44 3.41
Preferred stock dividend
requirements $ 10 289 $ 10 289 $ 10 289 $ 10 289
Ratio of income before
provision for income
taxes to net income(B) 157.3% 146.8% 154.9% 167.6%
Preferred stock dividend
requirement on a pre-
tax basis 16 184 15 104 15 937 17 244
Fixed charges, as above 49 247 51 463 51 015 50 738
Total fixed charges
and preferred
stock dividends $ 65 431 $ 66 567 $ 66 952 $ 67 982
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS 2.92 2.83 1.86 2.55
<PAGE>
Exhibit 12-A
Page 2 of 3
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
BASED ON SEC REGULATION S-K, ITEM 503
(Dollars In Thousands)
<CAPTION>
Twelve Months Ended
Proforma
December 31, June 30, June 30,
1993 1994 1994 (c)
<S> <C> <C> <C>
OPERATING REVENUES $801 487 $807 148 $807 148
OPERATING EXPENSES
(excluding taxes
based on income) 624 025 663 188 663 188
Interest portion
of rentals (A) 4 932 4 687 4 687
Net expense 619 093 658 501 658 501
OTHER INCOME:
Allowance for funds
used during
construction 2 919 2 456 2 456
Other income, net (5 581) (105 240) (105 240)
Total other income (2 662) (102 784) (102 784)
EARNINGS AVAILABLE FOR
FIXED CHARGES $179 732 $ 45 863 $ 45 863
FIXED CHARGES:
Interest on funded
indebtedness $ 42 887 $ 42 727 $ 42 727
Other interest 6 990 13 557 24 807
Interest portion
of rentals (A) 4 932 4 687 4 687
Total fixed charges $ 54 809 $ 60 971 $ 72 221
RATIO OF EARNINGS TO
FIXED CHARGES 3.28 .75(D) .64(D)
Preferred stock dividend
requirements $ 6 960 $ 3 632 $ 3 632
Ratio of income before
provision for income
taxes to net income(B) 160.4% 389.9% 256.1%
Preferred stock dividend
requirement on a pre-
tax basis 11 164 14 161 9 302
Fixed charges, as above 54 809 60 971 72 221
Total fixed charges
and preferred
stock dividends $ 65 973 $ 75 132 $ 81 523
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS 2.72 .61(D) .56(D)
<PAGE>
Exhibit 12-A
Page 3 of 3
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY
STATEMENTS SHOWING COMPUTATION OF RATIO
OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
BASED ON SEC REGULATION S-K, ITEM 503
(Dollars In Thousands)
<FN>
NOTES:
(A) The Company included the equivalent of the interest portion of all rentals charged to
income as fixed charges for this statement and has excluded such components from
Operating Expenses.
(B) Represents income before provision for income taxes of $141,862, $136,798, $73,443,
$122,492, $124,923, $(15,108) and $(26,358) for the years 1989 through 1993, twelve
months ended June 30, 1994 and proforma twelve months ended June 30, 1994,
respectively, divided by income before cumulative effect of accounting change of
$90,164, $93,191, $47,400, $73,077, $77,875, $(3,875) and $(10,292), respectively.
(C) Gives effect to the issuance of $125,000 aggregate stated liquidation preference of
Preferred Securities and the use of the proceeds thereof to purchase the Company's
Subordinated Debentures at an assumed rate of 9%.
(D) Pre-tax earnings for the twelve months ended June 30, 1994 and proforma twelve months
ended June 30, 1994 are inadequate to cover both fixed charges and combined fixed
charges and preferred stock dividends. The deficiency in pre-tax earnings for the
ratio of earnings to fixed charges and the combined fixed charges and preferred stock
dividends for the twelve months ended June 30, 1994 is $15,108 and $29,269,
respectively, which represents additional pre-tax earnings needed to reach a one-to-
one ratio. The deficiency in pre-tax earnings for the ratio of earnings to fixed
charges and the combined fixed charges and preferred stock dividends for the proforma
twelve months ended June 30, 1994 is $26,358 and $35,660, respectively.
</FN>
</TABLE>
<PAGE>
