PROSPECTUS SUPPLEMENT
- ----------------------
(TO PROSPECTUS DATED AUGUST 11, 1999)
$150,000,000
METROPOLITAN EDISON COMPANY
MEDIUM-TERM NOTES, SERIES D
DUE ONE YEAR OR MORE FROM DATE OF ISSUE
The notes:
o We will offer notes from time to time and specify the terms and conditions
of each issue of notes in a pricing supplement.
o Initially, the notes will be senior secured debt securities of Metropolitan
Edison Company, and will become unsecured upon the occurrence of certain
events described in this prospectus supplement.
o We will pay amounts due on the notes in U.S. dollars or any other
consideration described in the applicable pricing supplement.
o The notes will have stated maturities ranging from one year to thirty-five
years from the date they are originally issued.
o The notes may bear interest at fixed or floating rates. If the notes bear
interest at a floating rate, the floating rate may be based on one or more
indices or formulas plus or minus a fixed amount or multiplied by a factor.
o We will specify whether the notes can be redeemed or repaid before their
maturity and whether they are subject to mandatory redemption, redemption
at the option of Metropolitan Edison Company or repayment at the option of
the holders of the notes.
There is currently no public market for the notes. We do not intend to list
the notes on any securities exchange.
The mailing address and telephone number of our principal executive offices
are: 2800 Pottsville Pike, Reading, Pennsylvania 19605, (610) 929-3601.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement, the accompanying prospectus or any pricing supplement is
truthful or complete. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
PUBLIC OFFERING AGENT'S DISCOUNTS PROCEEDS, BEFORE EXPENSES, TO
PRICE AND COMMISSIONS METROPOLITAN EDISON COMPANY
--------------- ----------------- ------------------------------
<S> <C> <C> <C>
Per note............................ 100% .150%-.750% 99.850%-99.250%
Total............................... $150,000,000 $225,000-$1,125,000 $149,775,000-$148,875,000
</TABLE>
We are offering the notes on a continual basis through the agents listed
below. Each agent has agreed to use its reasonable best efforts to solicit
purchase of the notes. In addition, the notes may be sold to any agent, as
principal, for resale to investors or other purchasers. We reserve the right to
withdraw, cancel or modify the offer made here without notice. We, or the agent
who solicits any offer, may reject that offer in whole or in part.
If we sell other securities referred to in the accompanying prospectus, the
amount of notes that we may offer and sell under this prospectus supplement may
be reduced.
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MERRILL LYNCH & CO. ABN AMRO INCORPORATED
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The date of this prospectus supplement is August 11, 1999
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You should rely on the information incorporated by reference or provided in this
prospectus supplement or the accompanying prospectus. Metropolitan Edison
Company has not authorized anyone else to provide you with different
information. Neither Metropolitan Edison Company nor the agents are making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus supplement or the
prospectus is accurate as of any date other than the date on the front of those
documents.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Introductory Statement ................................................... S-3
Metropolitan Edison Company .............................................. S-3
Use of Proceeds .......................................................... S-3
Description of the Notes ................................................. S-4
Plan of Distribution of Notes............................................. S-16
PROSPECTUS
Available Information .................................................... 2
Incorporation of Certain Documents
By Reference ........................................................... 3
Metropolitan Edison Company .............................................. 4
Financing Program ........................................................ 4
Use of Proceeds .......................................................... 5
Company Coverage Ratios .................................................. 5
Description of Senior Notes .............................................. 6
Description of Senior Note Mortgage Bonds................................. 16
Plan of Distribution ..................................................... 20
Legal Matters ............................................................ 21
Experts .................................................................. 21
<PAGE>
INTRODUCTORY STATEMENT
Metropolitan Edison Company ("Met-Ed") is offering medium term notes (the
"Notes"), in the principal amount of $150,000,000. If Met-Ed sells other Senior
Notes as described in the accompanying prospectus, the aggregate principal
amount of Notes that Met-Ed may offer and sell under this prospectus supplement
would be reduced.
Met-Ed intends to use this prospectus supplement, the attached prospectus
and a related pricing supplement to offer the Notes from time to time. This
prospectus supplement provides you with certain terms of the Notes and
supplements the description of Senior Notes contained in the attached
prospectus. If any information in this prospectus supplement is inconsistent
with the prospectus, this prospectus supplement replaces the inconsistent
information. Each time Met-Ed issues Notes, Met-Ed will prepare a pricing
supplement that will contain additional terms of the offering and the
description of the specific Notes offered. The pricing supplement also may add,
update or change information in this prospectus supplement or the attached
prospectus, including provisions describing the calculation of interest and the
method of making payments under the terms of a Note. Any information in the
pricing supplement that is inconsistent with this prospectus supplement will
replace the inconsistent information in this prospectus supplement.
METROPOLITAN EDISON COMPANY
Met-Ed, a public utility furnishing electric service within Pennsylvania,
is a wholly owned subsidiary of GPU, Inc. ("GPU"), a holding company registered
under the Public Utility Holding Company Act of 1935. Met-Ed, which does
business under the name "GPU Energy," provides electric service within a
territory located in eastern and south central Pennsylvania having a population
of almost one million. Met-Ed's principal executive offices are located at 2800
Pottsville Pike, Reading, Pennsylvania 19605, and its telephone number is (610)
929-3601.
USE OF PROCEEDS
Met-Ed will use the net proceeds from the sale of the Notes (i) to redeem
or repurchase other outstanding securities of Met-Ed, (ii) to reduce Met-Ed's
short-term borrowings, (iii) for construction purposes and (iv) for other
corporate purposes, including to reimburse Met-Ed's treasury for funds
previously expended for the purposes described above.
S-3
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DESCRIPTION OF THE NOTES
The following is a summary of certain terms of the Notes, does not purport
to be complete, and is subject to, and qualified in its entirety by, the
description of Senior Notes in the accompanying Prospectus, the form of the
Senior Note Indenture (as defined below), which is on file with the Securities
and Exchange Commission, and the Trust Indenture Act of 1939. Certain
capitalized terms used herein are defined in the Senior Note Indenture. The
following description of certain terms of the Notes supplements and, to the
extent inconsistent therewith, replaces the description of the general terms and
provisions of the Senior Notes set forth in the accompanying Prospectus, to
which reference is hereby made. The following description will apply unless
otherwise specified in an applicable pricing supplement.
GENERAL
The Notes are being issued as a series of Senior Notes under the Senior
Note Indenture, as it may be amended or supplemented from time to time (the
"Senior Note Indenture") between Met-Ed and United States Trust Company of New
York (the "Senior Note Trustee"). Until the Release Date (as defined below), all
of the Senior Notes, including the Notes, outstanding under the Senior Note
Indenture will be secured by one or more series of Met-Ed's Senior Note Mortgage
Bonds issued and delivered by Met-Ed to the Senior Note Trustee. The Senior Note
Mortgage Bonds are first mortgage bonds ("First Mortgage Bonds") to be issued
under and secured by Met-Ed's Indenture dated November 1, 1944 (the "Mortgage")
between Met-Ed and United States Trust Company of New York, as successor
trustee, as heretofore amended and supplemented.
The Release Date is the date upon which the Senior Note Trustee holds
Senior Note Mortgage Bonds constituting 80% or more of all of Met-Ed's
outstanding First Mortgage Bonds. ON THE RELEASE DATE, THE SENIOR NOTE TRUSTEE
WILL SURRENDER THE SENIOR NOTE MORTGAGE BONDS FOR CANCELLATION AND THE NOTES
WILL CEASE TO BE SECURED BY THE SENIOR NOTE MORTGAGE BONDS, WILL BECOME
UNSECURED GENERAL OBLIGATIONS OF MET-ED AND WILL RANK ON A PARITY WITH OTHER
UNSECURED AND UNSUBORDINATED INDEBTEDNESS OF MET-ED. See "Description of Senior
Notes -- Security; Release Date" in the accompanying Prospectus. As of the date
of this prospectus supplement, approximately $570 Million of First Mortgage
Bonds remain outstanding, none of which are Senior Note Mortgage Bonds. The
Senior Note Indenture provides that prior to the Release Date, the principal
amount of the Notes that may be issued and outstanding cannot exceed the
principal amount of the Senior Note Mortgage Bonds then held by the Senior Note
Trustee. After the issuance of the first series of the Senior Notes, no
additional First Mortgage Bonds will be issued under the Mortgage other than as
collateral security for the Senior Notes. See "Description of Senior Note
Mortgage Bonds" in the accompanying Prospectus.
For further information concerning the Notes, see "Description of Senior
Notes" in the accompanying Prospectus.
S-4
<PAGE>
The Notes will be offered on a continual basis and will mature on any
Business Day (as defined below) from one year to 35 years from the date of
issue, as selected by the purchaser and agreed to by Met-Ed. Prior to maturity,
the Notes may be subject to optional redemption by Met-Ed at the price or prices
set forth in the applicable pricing supplement. Each Note will bear interest at
a fixed or floating rate as specified in the applicable pricing supplement.
The pricing supplement relating to each Note will describe the following
terms: (i) the title of such Notes; (ii) the aggregate principal amount of such
Notes; (iii) the date on which such Notes will be issued ("Original Issue
Date"), (iv) the price (expressed as a percentage of principal amount) at which
such Notes will be issued; (v) the date or dates on which the principal of such
Notes is payable; (vi) the rate or rates at which such Notes will bear interest,
the date or dates from which such interest will accrue, the dates on which such
interest will be payable ("Interest Payment Dates"), and the regular record
dates for the interest payable on such Interest Payment Dates; (vii) the option,
if any, of Met-Ed to redeem such Notes and the period or periods within which,
or the date or dates on which, the prices at which and the terms and conditions
upon which, such Notes may be redeemed, in whole or in part, upon the exercise
of such option; (viii) the obligation, if any, of Met-Ed to redeem or purchase
such Notes at the option of the registered holder or pursuant to any sinking
fund or analogous provisions and the period or periods within which, or the date
or dates on which, the price or prices at which and the terms and conditions
upon which, such Notes will be redeemed or purchased, in whole or in part,
pursuant to such obligation; (ix) the denominations in which such Notes will be
issuable, if other than $1,000 and integral multiples thereof; and (x) any other
terms of such Notes, including with respect to any series, if applicable.
Except under certain circumstances, Met-Ed will issue the Notes in
book-entry form only.
PAYMENT OF PRINCIPAL AND INTEREST
Until the Notes are paid or payment thereof is provided for, Met-Ed will,
at all times, maintain a paying agent (the "Paying Agent") in The City of New
York capable of performing the duties described herein to be performed by the
Paying Agent. Met-Ed has initially appointed United States Trust Company of New
York, 114 West 47th Street, New York, New York 10036 as Paying Agent. Met-Ed
will notify the holders of the Notes in accordance with the Senior Note
Indenture of any change in the Paying Agent or its address.
Unless otherwise specified in a pricing supplement, each Note will bear
interest from its Original Issue Date until the principal amount thereof is paid
or made available for payment. Unless otherwise specified in a pricing
supplement, interest on each Note will be payable on the Interest Payment Date
as set forth in a related pricing supplement and at maturity or upon earlier
redemption; provided, however, that the first payment of interest on any Note
with an Original Issue Date between a Record Date (as defined below) and an
Interest Payment Date will be made on the succeeding Interest Payment Date to
the registered holder. Each payment of interest in respect of an Interest
Payment Date will include interest accrued to but excluding such Interest
Payment Date.
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Interest payable on any Interest Payment Date will be paid to the
person in whose name a Note is registered at the close of business on the Record
Date immediately preceding such Interest Payment Date; provided, however, that
interest payable at maturity or upon earlier redemption will be payable to the
person to whom principal shall be payable. Unless Met-Ed otherwise specifies in
the applicable pricing supplement, the "Record Date" with respect to any
Interest Payment Date will be the fifteenth day of the calendar month
immediately preceding such Interest Payment Date (whether or not a Business
Day).
"Business Day" shall mean each day that is not a day on which banking
institutions or trust companies in the Borough of Manhattan, the City and State
of New York, or in the city where the corporate trust office of the Senior Note
Trustee is located, are obligated or authorized by law or executive order to
close; provided that with respect to Notes for which interest is based on the
LIBOR index, such day is also a London Business Day. "London Business Day" means
a day on which commercial banks are open for business (including dealings in
United States dollars) in London.
INTEREST AND INTEREST RATES
GENERAL
In the related pricing supplement, Met-Ed will designate each Note as a
Fixed Rate Note or a Floating Rate Note and describe the method of determining
the interest rate, including any Spread and/or Spread Multiplier. Met-Ed may
also specify a maximum and a minimum interest rate in the related pricing
supplement.
Interest rates on the Notes that Met-Ed offers may differ depending
upon, among other things, the aggregate principal amount of Notes purchased in
any single transaction. Met-Ed may offer Notes with similar variable terms but
different interest rates, as well as Notes with different variable terms,
concurrently to different investors. Met-Ed may, from time to time, change the
interest rates or formulas and other terms of Notes, but no such change will
affect any Note already issued or as to which an offer to purchase has been
accepted.
FIXED RATE NOTES
In the pricing supplement for Fixed Rate Notes, Met-Ed will specify a
fixed interest rate per annum payable in arrears on the Interest Payment Dates.
The Interest Payment Dates for Fixed Rate Notes will be August 1 and February 1
of each year or on such other date(s) specified in the applicable pricing
supplement. Interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months. If the maturity date or an Interest
Payment Date for any Fixed Rate Note is not a Business Day, Met-Ed will pay
principal, any premium, and any interest for that Note on the next Business Day
with the same force and effect as if made on such date, and no interest will
accrue from and after the maturity date or Interest Payment Date.
S-6
<PAGE>
FLOATING RATE NOTES
Unless otherwise specified in a pricing supplement, each Floating Rate
Note will have an interest rate basis or formula based on LIBOR.
In the pricing supplement, Met-Ed will indicate the Index Maturity as
well as any Spread and/or Spread Multiplier which would be applied to the
interest rate formula to determine the interest rate. Any Floating Rate Note may
have a maximum or minimum interest rate limitation. In addition to any maximum
interest rate limitation, the interest rate on the Floating Rate Notes will in
no event be higher than the maximum rate permitted by New York law, as the same
may be modified by United States law of general application.
The "Spread" is the number of basis points (one one-hundredth of a
percentage point) to be added to or subtracted from the related basis or bases
applicable to such Floating Rate Note. The "Spread Multiplier" is the percentage
of the related basis or bases applicable to such Floating Rate Note and by which
such basis or bases will be multiplied to determine the applicable interest rate
on such Floating Rate Note. The "Index Maturity" is the period to maturity of
the instrument or obligation with respect to which the related basis or bases
will be calculated.
Met-Ed will appoint a calculation agent to calculate interest rates on
the Floating Rate Notes. Unless Met-Ed identifies a different party in the
pricing supplement, the Paying Agent will be the calculation agent for each
Note. Each Floating Rate Note will have a specified "Interest Reset Date",
"Interest Determination Date" and, where applicable, "Calculation Date"
associated with it. An "Interest Reset Date" is the date on which the interest
rate on the Note is subject to change. An "Interest Determination Date" is the
date as of which the new interest rate is determined for a particular Interest
Reset Date, based on the applicable interest rate basis or formula as of that
Interest Determination Date. The "Calculation Date" is the date by which the
calculation agent will determine the new interest rate that became effective on
a particular Interest Reset Date based on the applicable interest rate basis or
formula on the Interest Determination Date. The interest rate determined by the
calculation agent, absent manifest error, shall be binding and conclusive upon
beneficial owners and holders of Floating Rate Notes and on Met-Ed. Promptly on
such determination, the calculation agent will notify the Senior Note Trustee
and the Paying Agent (if the calculation agent is not the Paying Agent) of the
new interest rate.
CHANGE OF INTEREST RATE. Met-Ed may reset the interest rate on each
Floating Rate Note daily, weekly, monthly, quarterly, semi-annually, annually or
on some other basis that Met-Ed specifies. The Interest Reset Date will be
specified in the pricing supplement:
The related pricing supplement will describe the initial interest rate
or interest rate formula on each Note. That rate is effective until the
following Interest Reset Date. Thereafter, the interest rate will be the rate
determined on each Interest Determination Date. Each time a new interest rate is
determined, it becomes effective on the subsequent Interest Reset Date. Unless
otherwise specified in a pricing supplement, if any Interest Reset Date is not a
Business
S-7
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Day, then the Interest Reset Date is postponed to the next Business Day, except
if the next Business Day is in the next calendar month, the Interest Reset Date
will be the immediately preceding Business Day.
DATE INTEREST RATE IS DETERMINED. Unless otherwise specified in a
pricing supplement, the Interest Determination Date will be the second London
Business Day immediately preceding the applicable Interest Reset Date.
CALCULATION DATE. Unless Met-Ed specifies a different date in a pricing
supplement, the "Calculation Date", where applicable, relating to an Interest
Determination Date will be the earlier of
(1) the tenth calendar day after such Interest Determination Date or,
if such day is not a Business Day, the next succeeding Business Day, or
(2) the Business Day immediately preceding the relevant Interest
Payment Date or the maturity date, as the case may be.
Upon the request of the beneficial holder of any Floating Rate Note,
the calculation agent will provide the interest rate then in effect and, if
different, the interest rate that will become effective on the next Interest
Reset Date for the Floating Rate Note.
PAYMENT OF INTEREST. Met-Ed will pay installments of interest on
Floating Rate Notes as specified in the applicable pricing supplement.
Met-Ed will also pay interest at maturity, redemption or repurchase.
If an Interest Payment Date for any Floating Rate Note (other than an
Interest Payment Date occurring on the maturity date) is not a Business Day,
such Interest Payment Date will be postponed to the next succeeding Business
Day, except that in the case of a Floating Rate Note as to which LIBOR is the
applicable interest rate basis and such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day. If the maturity date, date of redemption or repurchase
of any Floating Rate Note is not a Business Day, principal, premium, if any, and
interest for that Note will be paid on the next Business Day, and no interest
will accrue from and after the maturity date, date of redemption or repurchase.
Met-Ed will calculate accrued interest on a Floating Rate Note by
multiplying the principal amount of a Note by an accrued interest factor. The
accrued interest factor is the sum of the interest factors calculated for each
day in the period for which accrued interest is being calculated.
Unless otherwise specified in the applicable pricing supplement, the
interest factor for each day is computed by dividing the interest rate in effect
on that day by 360. All percentages resulting from any calculation are rounded
to the nearest one hundredth of a percentage point,
S-8
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with five one-thousandths of a percentage point rounded upward. For example,
9.875% (or .09875) will be rounded to 9.88% (or .0988). Dollar amounts used in
the calculation are rounded to the nearest cent (with one-half cent being
rounded upward).
CALCULATION OF INTEREST
On each Interest Determination Date, the calculation agent will
determine LIBOR as follows:
- If the pricing supplement specifies "LIBOR Telerate", LIBOR on any
Interest Determination Date will be the rate for deposits in United
States dollars having the Index Maturity described in the related
pricing supplement on the applicable Interest Reset Date, as such rate
appears on the Designated LIBOR Page as of 11:00 A.M., London time, on
that Interest Determination Date.
- If the pricing supplement specifies "LIBOR Reuters", LIBOR on any
Interest Determination Date will be the average of the offered rates
for deposits in United States dollars having the Index Maturity
described in the related pricing supplement on the applicable Interest
Reset Date, as such rates appear on the Designated LIBOR Page as of
11:00 A.M., London time, on that Interest Determination Date, if at
least two such offered rates appear on the Designated LIBOR Page.
- If the pricing supplement does not specify "LIBOR Telerate" or "LIBOR
Reuters" the LIBOR Rate will be LIBOR Telerate. In addition, if the
Designated LIBOR Page by its terms provides only for a single rate,
that single rate will be used regardless of the foregoing provisions
requiring more than one rate.
On any Interest Determination Date on which fewer than the required
number of applicable rates appear or no rate appears on the applicable
Designated LIBOR Page, the calculation agent will determine LIBOR as follows:
- LIBOR will be determined on the basis of the offered rates at which
deposits in United States dollars having the Index Maturity described
in the related pricing supplement on the Interest Determination Date
and in a principal amount that is representative of a single
transaction in that market at that time are offered by four major banks
in the London interbank market at approximately 11:00 A.M., London
time, on the Interest Determination Date to prime banks in the London
interbank market. The calculation agent will select the four banks and
request the principal London office of each of those banks to provide a
quotation of its rate for deposits in United States dollars. If at
least two quotations are provided, LIBOR for that Interest
Determination Date will be the average of those quotations.
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<PAGE>
- If fewer than two quotations are provided as mentioned above, LIBOR
will be the average of the rates quoted by three major banks in the
City of New York selected by the calculation agent at approximately
11:00 A.M. in the City of New York, on the Interest Determination Date
for loans to leading European banks in United States dollars having the
Index Maturity designated in the pricing supplement and in a principal
amount that is representative for a single transaction in United States
dollars in that market at that time. The calculation agent will select
the three banks referred to above.
- If fewer than three banks selected by the calculation agent are
quoting as mentioned above, LIBOR will remain LIBOR then in effect on
that Interest Determination Date.
"Designated LIBOR Page" means:
- If the pricing supplement specifies "LIBOR Reuters", the display on
the Reuters Monitor Money Rates Service (or any successor service) on
the page specified in such pricing supplement (or any other page as may
replace such page on such service) for the purpose of displaying the
London interbank rates of major banks for United States dollars; or
- If the pricing supplement specifies "LIBOR Telerate" or neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
pricing supplement as the method of calculating LIBOR, the display on
Bridge Telerate, Inc. (or any successor service, "Telerate") on the
page specified in such pricing supplement (or any other page as may
replace such page on such service) for the purpose of displaying the
London interbank rates of major banks for United States dollars.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
The Senior Note Mortgage Bonds will be issued under the Mortgage
against property additions and/or previously retired First Mortgage Bonds. At
June 30, 1999, Met-Ed had available property additions sufficient to permit it
to issue a maximum of approximately $338 million aggregate principal amount of
additional First Mortgage Bonds. In addition, Met-Ed could issue approximately
$100 million aggregate principal amount of Senior Note Mortgage Bonds on the
basis of previously retired First Mortgage Bonds. See "Description of Senior
Note Mortgage Bonds - Issuance of Additional First Mortgage Bonds" in the
accompanying Prospectus.
At June 30, 1999, Met-Ed had approximately $252 million of retained
earnings available for the declaration of payment of dividends on Met-Ed's
common stock pursuant to the restrictions contained in the Mortgage, as
described under "Description of Senior Note Mortgage Bonds -- Dividend
Restrictions" in the accompanying Prospectus.
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<PAGE>
REDEMPTION AND REPURCHASE
The pricing supplement relating to each Note will describe the option,
if any, of Met-Ed to redeem such Notes and the period or periods within which,
or the date or dates on which, the prices at which and the terms and conditions
upon which, such Notes may be redeemed, in whole or in part, upon the exercise
of such option. Unless Met-Ed otherwise specifies in the applicable pricing
supplement, the Notes will be redeemable only upon at least 30 days, but not
more than 60 days, prior notice mailed to the registered address of each holder
of the Notes. See "Description of Senior Notes - Redemption Provisions" in the
accompanying Prospectus. Met-Ed's redemption options may include redemptions at
par, redemptions pursuant to a declining redemption price schedule and
redemptions pursuant to a make-whole formula (a "Make-Whole Redemption"), in
each case subject to the terms and conditions of such option set forth in the
related pricing supplement or herein. If the applicable pricing supplement for
Notes states that such Notes are redeemable under a Make-Whole Redemption
provision, such Notes will be redeemable, as a whole or in part, at Met-Ed's
option, at any time or from time to time at a redemption price equal to the
greater of (1) 100% of the principal amount of the Notes to be redeemed or (2)
the sum of the present values of the Remaining Scheduled Payments (as defined
below) discounted, on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months), at a rate equal to the sum of the Treasury Rate (as
defined below) and a number of basis points to be set forth in the applicable
pricing supplement.
In each case accrued interest will be payable to the redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by Met-Ed.
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the Reference Treasury Dealer Quotations for such redemption
date after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the Senior Note Trustee obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Senior Note Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Senior Note Trustee by such Reference Treasury Dealer at 3:30
p.m., New York City time, on the third Business Day preceding such redemption
date.
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"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner
& Smith Incorporated (or its affiliate which is a primary U.S. Government
securities dealer (a "Primary Treasury Dealer")), ABN AMRO Incorporated (or its
affiliate which is a Primary Treasury Dealer) and their respective successors
and such other three (3) Primary Treasury Dealers selected by Met-Ed. If any of
the foregoing shall cease to be a Primary Treasury Dealer, Met-Ed shall
substitute another nationally recognized investment banking firm that is a
Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of principal of and interest on such
Note that would be due after the related redemption date but for such
redemption. If such redemption date is not an Interest Payment Date with respect
to such Note, the amount of the next succeeding scheduled interest payment on
such Note will be reduced by the amount of interest accrued on such Note to such
redemption date.
Met-Ed may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by Met-Ed will be surrendered to the Senior
Note Trustee for cancellation.
BOOK-ENTRY NOTES
The Notes will be issued in book-entry form (a Note so represented, a
"Book-Entry Note"), and any Note so issued will be issued in the form of one or
more fully registered Global Securities (each a "Global Security") that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") or such other Depositary which may replace DTC as Depositary for
the Book-Entry Notes (the "Depositary"), and registered in the name of a nominee
of the Depositary.
Upon issuance, all Book-Entry Notes of the same series will be
represented by one or more Global Securities. Except under the circumstances
described below, Book-Entry Notes will not be exchangeable for Notes in
certificated form and will not otherwise be issuable in certificated form.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed, Met-Ed will issue Notes
in certificated form ("Certificated Notes") in exchange for the Global Security
or Global Securities representing the corresponding Book-Entry Notes. In
addition, Met-Ed may at any time and in its sole discretion determine not to
have any Book-Entry Notes represented by one or more Global Securities and, in
such event, will issue individual Certificated Notes in exchange for the Global
Security or Global Securities representing the corresponding Book-Entry Notes.
In any such instance, an owner of a Book-Entry Note represented by a Global
Security will be entitled to physical delivery of individual Certificated Notes
equal in principal amount to such Book-Entry Notes and to have such Certificated
Notes registered in its name. Individual Certificated Notes will be issued as
registered notes in denominations of $1,000 or any higher integral multiple of
$1,000.
The following is based on information furnished by DTC:
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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 Securities Exchange Act of 1934 (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
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 of DTC ("Direct Participants") include securities brokers
and dealers, banks, trust companies, clearing corporations, and certain
other organizations. 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
Securities and Exchange Commission.
Purchases of Book-Entry Notes under the DTC system must be
made by or through Direct Participants, which will receive a credit for
the Book-Entry Notes on DTC's records. The ownership interest of each
actual purchaser of each Book-Entry Note ("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 purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Book-Entry Notes 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 Book-Entry
Notes, except in the event that use of the book-entry system for the
Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Book-Entry Notes
deposited with, or on behalf of, DTC are registered in the name of
DTC's partnership nominee, Cede & Co. The deposit of Book-Entry Notes
with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Book-Entry Notes; DTC's records reflect only
the identity of the Direct Participants to whose accounts such
Book-Entry Notes are credited which may or may not be the Beneficial
Owners. The 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
S-13
<PAGE>
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 shall be sent to Cede & Co. If less than
all of the Book-Entry Notes having the same Original Issue Date and
other terms are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant to be so
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect
to the Book-Entry Notes. Under its usual procedures, DTC mails an
Omnibus Proxy to Met-Ed 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 Book-Entry Notes are credited
on the applicable record date (identified in a listing attached to the
Omnibus Proxy).
Principal and any premium and/or interest payments on the
Book-Entry Notes will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the date on which interest is payable
in accordance with the respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payment on
such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form
or registered in "street name", and will be the responsibility of such
Participant and not of DTC, the underwriters or Met-Ed, subject to any
statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and any premium and/or interest to DTC is
the responsibility of Met-Ed and the Senior Note Trustee. Disbursement
of such payments to Direct Participants shall be the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners shall
be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities
Depositary with respect to the Book-Entry Notes at any time by giving
reasonable notice to Met-Ed and the Senior Note Trustee. Under such
circumstances, in the event that a successor securities Depositary is
not obtained, Notes in certificated form are required to be printed and
delivered in exchange for Book-Entry Notes held by DTC.
Met-Ed may decide to discontinue use of the system and
book-entry transfers through DTC (or a successor securities
Depositary). In that event, Notes in certificated form will be printed
and delivered in exchange for Book-Entry Notes held by DTC.
Management of DTC is aware that some computer applications,
systems and the like for processing data ("Systems") that are dependent
upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed Direct
Participants and Indirect Participants and other members of the
financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and interest
payments) to securityholders, book-entry deliveries, and settlement
S-14
<PAGE>
of trades within DTC ("Depositary Services"), continue to function
appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is
also dependent upon other parties, including, but not limited to,
issuers and their agents, as well as DTC's Direct Participants and
Indirect Participants, third party vendors from whom DTC licenses
software and hardware, and third party vendors on whom DTC relies for
information or the provision of services, including telecommunication
and electrical utility service providers, among others. DTC has
informed the Industry that it is contacting (and will continue to
contact) third party vendors from whom DTC acquires services to: (1)
impress upon them the importance of such services being Year 2000
compliant; and (2) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In
addition, DTC is in the process of developing such contingency plans as
it deems appropriate.
According to DTC, the information in the preceding two
paragraphs with respect to DTC has been provided to the Industry for
informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources (including DTC) that Met-Ed believes to be
reliable, but Met-Ed takes no responsibility for the accuracy thereof.
If the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered under the Exchange Act
and a successor Depositary is not appointed by Met-Ed, Met-Ed will issue
Certificated Notes in exchange for the Notes of the same series represented by
the Global Securities held by the Depositary. In addition, Met-Ed may at any
time and in its sole discretion determine not to have Notes represented by a
Global Security and, in such event, will issue individual Certificated Notes in
fully registered form, without coupons, in exchange for the Book-Entry Notes
represented by the Global Security.
NONE OF MET-ED, THE SENIOR NOTE TRUSTEE, THE AGENTS OR ANY UNDERWRITERS
OR ANY AGENT FOR PAYMENT ON OR REGISTRATION OF TRANSFER OR EXCHANGE OF ANY
GLOBAL SECURITY WILL HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE
RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH
GLOBAL SECURITY OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS
RELATING TO SUCH BENEFICIAL INTERESTS.
<PAGE>
PLAN OF DISTRIBUTION OF NOTES
The Notes are being offered on a continual basis by Met-Ed through
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and ABN
AMRO Incorporated (the "Agents"), each of which has agreed to use its reasonable
best efforts to solicit purchases of the Notes. The Notes will be issued at 100%
of the principal amount thereof unless otherwise specified in the applicable
pricing supplement. Met-Ed will pay each Agent a commission of 0.150% to .750%
of the principal amount of the Notes, depending on their maturity, sold through
such Agent. Met-Ed may also sell Notes to an Agent acting as principal or to a
group of underwriters named in the applicable pricing supplement for whom such
Agent will act as representative, unless otherwise specified in the applicable
pricing supplement, at a discount equal to the commission applicable to an
agency sale of a Note of identical maturity. Such Notes may be resold by each
Agent or such underwriters for resale to one or more investors or other
purchasers at varying prices related to prevailing market prices at the time of
such resale, as determined by such Agent. Such Notes may also be resold by an
Agent or such underwriters to certain securities dealers at the public offering
price set forth in the applicable pricing supplement less a concession equal to
all or any portion of the discount received by such Agent or underwriter. In
connection with the purchase of Notes by any Agent as principal, such Agent may
use a selling group and may reallow any portion of the discount or commission
payable to such Agent to other dealers or purchasers. The offering price and
other selling terms for such resales may from time to time be varied by such
Agent. Met-Ed also has agreed to reimburse the Agents for certain expenses.
Met-Ed will have the sole right to accept offers to purchase Notes in
whole or in part. Each Agent will have the right, in its discretion reasonably
exercised, to reject any offer to purchase Notes received by it in whole or in
part. Met-Ed reserves the right to withdraw, cancel or modify the offer made
hereby without notice.
The Notes will not have an established trading market when issued. The
Notes will not be listed on any securities exchange. Each Agent may make a
market in the Notes, but such Agent is not obligated to do so and may
discontinue any market-making at any time without notice. There can be no
assurance of a secondary market for any Notes, or that the Notes will be sold.
In connection with an offering of Notes purchased by one or more Agents
as principal on a fixed-price basis, such Agent(s) will be permitted to engage
in certain transactions that stabilize the price of such Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of such Notes. If the Agent or Agents creates or
create, as the case may be, a short position in such Notes (i.e., if it sells or
they sell Notes in an aggregate principal amount exceeding that set forth in the
applicable pricing supplement), such Agent(s) may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of such purchases.
Neither Met-Ed nor any of the Agents make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither Met-Ed
nor any of the Agents make any representations that the Agents will engage in
any such transactions or that such transactions, once commenced, will not be
discontinued.
S-16
<PAGE>
The Agents and affiliates thereof engage in transactions with and
perform services for Met-Ed and its affiliates in the ordinary course of
business.
Met-Ed has agreed to indemnify each Agent against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Act"), or to contribute to payments such Agent may be required to make in
respect thereof.
Each Agent may be deemed to be an "underwriter" within the meaning of
the Act with respect to Notes sold through it.
S-17
<PAGE>
PROSPECTUS $150,000,000
METROPOLITAN EDISON COMPANY
SENIOR NOTES
--------------------
Metropolitan Edison Company, a Pennsylvania corporation (the
"Company"), may offer, from time to time in one or more series, up to
$150,000,000 aggregate principal amount of Senior Notes (the "Senior Notes")
secured by its Senior Note Mortgage Bonds (as defined herein) until the Release
Date (as defined herein), and in amounts, at prices and on terms to be
determined at or prior to the time or times of sale. Until the Release Date, the
Senior Notes will be secured by Senior Note Mortgage Bonds issued and delivered
by the Company to the Senior Note Trustee (as defined herein). See "Description
of Senior Notes - Security; Release Date". On the Release Date, the Senior Notes
will cease to be secured, will become unsecured general obligations of the
Company and will rank on a parity with other unsecured and unsubordinated
indebtedness of the Company (except to the extent such indebtedness may be
secured under the limited circumstances described under the caption "Description
of Senior Notes - Certain Covenants of the Company - Limitations on Liens").
Certain specific terms of the Senior Notes in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement or Supplements, together with the terms of the particular Senior
Notes, the initial price thereof and the net proceeds from the sale thereof. The
Prospectus Supplement will set forth the designation, aggregate principal
amount, maturity date or dates, interest rate or rates (or method of calculation
thereof) and times of payment of interest, the terms of any redemption, exchange
or sinking fund provisions, the purchase price and any other specific terms of
the offering.
The Senior Notes may be sold to or through underwriters, through
dealers or agents, directly to purchasers or through a combination of such
methods. See "Plan of Distribution". The names of any underwriters, dealers or
agents involved in the sale of the Senior Notes in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them, will be set forth in the related Prospectus Supplement.
See "Plan of Distribution" for possible indemnification and contribution
arrangements for dealers, underwriters and agents.
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is August 11, 1999.
<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 "SEC") and the New York Stock Exchange. Such reports
and other information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C., and at the following regional offices of the SEC:
New York Regional Office, 13th Floor, Seven World Trade Center, New York, New
York and Chicago Regional Office, 14th Floor, 500 West Madison Street, Chicago,
Illinois. Copies of such materials can also be obtained at prescribed rates from
the Public Reference Section of the SEC at its principal office at Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549. Such material is also
available from the SEC's Web site at "http//www.sec.gov". Certain of the
Company's securities are listed on the New York Stock Exchange and such reports
and other information can also be inspected and copied at the office of such
exchange on the 7th Floor, 20 Broad Street, New York, New York.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Senior Notes. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Reference is made to the Registration Statement and to
the exhibits relating thereto for further information with respect to the
Company and the Senior Notes. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC or incorporated by reference herein are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed for a more complete description of the matter involved. Each
such statement is qualified in its entirety by such reference.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates herein by reference the following
documents which have been filed by the Company with the SEC pursuant to the
Exchange Act:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
2. The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31 and June 30, 1999.
3. The Company's Current Report on Form 8-K, dated May 28, 1999.
All documents subsequently filed by the Company with the SEC pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering made hereby shall be deemed to be incorporated
herein by reference and to be a part hereof from the respective dates of filing
thereof. The documents incorporated or deemed to be incorporated herein by
reference are sometimes hereinafter called the "Incorporated Documents". Any
statement contained herein or in an Incorporated Document shall be deemed to be
modified or superseded for all purposes to the extent that a statement contained
herein or in any Prospectus Supplement or in any subsequently filed Incorporated
Document modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral the request of any such person, a
copy of any or all of the Incorporated Documents, excluding the exhibits thereto
unless such exhibits are specifically incorporated by reference into such
documents. Requests for such documents should be directed to Metropolitan Edison
Company, 2800 Pottsville Pike, Reading, Pennsylvania 19605, attention:
Secretary. The Company's telephone number is (610) 929-3601.
In addition to the historical information contained or incorporated by
reference herein, this Prospectus contains or incorporates by reference a number
of "forward-looking statements" within the meaning of the Exchange Act. Such
statements address future events and conditions concerning capital expenditures,
resolution and impact of litigation, regulatory matters, liquidity and capital
resources and accounting matters. Actual results in each case could differ
materially from those projected in such statements due to a variety of factors
including, without limitation, restructuring of the utility industry; future
economic conditions; earnings retention and dividend payout policies;
developments in the legislative, regulatory and competitive environments in
which the Company operates; and other circumstances that could affect
anticipated revenues and costs, such as compliance with laws and regulations.
These and other factors are discussed in the Company's filings with the SEC.
3
<PAGE>
METROPOLITAN EDISON COMPANY
Metropolitan Edison Company (the "Company"), a public utility
furnishing electric service wholly within the Commonwealth of Pennsylvania, is a
subsidiary of GPU, Inc. ("GPU"), a holding company registered under the Public
Utility Holding Company Act of 1935. The Company provides retail electric
service within a territory located in eastern and south central Pennsylvania
having a population of almost one million. 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 1998, residential sales accounted for about 41% of the
Company's operating revenues from customers and 35% of kilowatt-hour sales to
customers; commercial sales accounted for about 30% of the Company's operating
revenues from customers and 28% of kilowatt-hour sales to customers; industrial
sales accounted for about 28% of the Company's operating revenues from customers
and 36% of kilowatt-hour sales to customers; and sale to rural electric
cooperatives, municipalities (primarily for street and highway lighting) and
others accounted for about 1% of the Company's operating revenues from customers
and 1% of kilowatt-hour sales to customers. The revenues derived from the 25
largest customers in the aggregate accounted for approximately 12% of operating
revenues from customers for the year 1998. The Company also makes interchange
and spot market sales of electricity to other utilities.
The electric generating and transmission facilities of the Company and
its affiliates, Pennsylvania Electric Company and Jersey Central Power & Light
Company (collectively doing business as "GPU Energy"), 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
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.
FINANCING PROGRAM
Depending upon market conditions, during the next two years the Company
expects to offer pursuant to one or more separate offerings, up to $150,000,000
aggregate principal amount of Senior Notes. The Company also expects to have
short-term borrowings outstanding from time to time during such period.
4
<PAGE>
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement,
the Company intends to use the net proceeds from the sale of the Senior Notes
offered hereby (i) to redeem other outstanding securities of the Company, (ii)
to repay outstanding short-term bank loans or other unsecured indebtedness,
(iii) for construction purposes and (iv) for other corporate purposes, including
to reimburse the Company's treasury for funds previously expended therefrom for
the above purposes. Any specific allocation of the proceeds to a particular
purpose that has been made at the date of any Prospectus Supplement will be
described therein.
COMPANY COVERAGE RATIOS
The Company's Ratio of Earnings to Fixed Charges for each of the
periods indicated was as follows:
TWELVE MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1999 ------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
2.78 2.37 3.42 2.83 4.69 0.87(1)
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis,
the number of times earnings cover fixed charges. Earnings consist of net income
to which has been added fixed charges and taxes based on income of the Company.
Fixed charges consist of interest on funded indebtedness, other interest
(including distributions on Company Obligated Mandatorily Redeemable Preferred
Securities), amortization of net gain on reacquired debt and net discount on
debt and interest portion of all rentals charged to income.
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 YEARS ENDED DECEMBER 31,
JUNE 30, 1999 ------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
2.76 2.34 3.38 2.76 4.58 0.81(2)
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 net income to
which has been added fixed charges and taxes based on income of the Company.
Combined fixed charges and preferred stock dividends consist
- ----------
(1) The deficiency amount is $8,015,000.
(2) The deficiency amount is $13,189,000.
5
<PAGE>
of interest on funded indebtedness, other interest (including distribution on
Company Obligated Mandatorily Redeemable Preferred Securities), amortization of
net gain on reacquired debt and 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.
DESCRIPTION OF SENIOR NOTES
The following is a summary of certain terms and provisions of the
Senior Notes and the Senior Note Indenture (as defined below). Reference is made
to the Senior Note Indenture which is an exhibit to the Registration Statement
of which this Prospectus forms a part.
GENERAL
The Senior Notes may be issued from time to time in one or more series
in amounts and on terms to be determined at or prior to the time or times of
sale, under the Senior Note Indenture, as it may be amended or supplemented (the
"Senior Note Indenture") between the Company and United States Trust Company of
New York (the "Senior Note Trustee").
Until the Release Date (as defined below), all of the Senior Notes
outstanding under the Senior Note Indenture will be secured by one or more
series of the Company's Senior Note Mortgage Bonds (as defined below) issued and
delivered by the Company to the Senior Note Trustee. See "--Security; Release
Date". ON THE RELEASE DATE, THE SENIOR NOTES WILL CEASE TO BE SECURED BY THE
SENIOR NOTE MORTGAGE BONDS, WILL BECOME UNSECURED GENERAL OBLIGATIONS OF THE
COMPANY AND WILL RANK ON A PARITY WITH OTHER UNSECURED AND UNSUBORDINATED
INDEBTEDNESS OF THE COMPANY. The Senior Note Indenture provides that prior to
the Release Date, the principal amount of the Senior Notes that may be issued
and outstanding cannot exceed the principal amount of the Senior Note Mortgage
Bonds then held by the Senior Note Trustee. See "Description of Senior Note
Mortgage Bonds".
There is no requirement under the Senior Note Indenture that future
issues of debt securities of the Company be issued exclusively under the Senior
Note Indenture; accordingly, the Company will be free to employ other indentures
or documentation, containing provisions different from those included in the
Senior Note Indenture or applicable to one or more issues of Senior Notes, in
connection with future issues of other debt securities. There is no limitation
on the amount of Senior Notes that may be issued under the Senior Note
Indenture. Notwithstanding the foregoing, the Senior Note Indenture contains
certain restrictive covenants, including a restriction that the Company may not
issue, assume, guarantee or permit to exist, so long as any Senior Notes are
outstanding and after the Release Date, any debt that ranks senior to the Senior
Notes, subject to certain exceptions. In addition, the Senior Note Indenture
also provides that so long as any Senior Notes are outstanding, certain
sale/leaseback arrangements are restricted.
There is no provision in the Senior Note Indenture or the Senior Notes
that requires the Company to redeem, or permit the holders to cause a redemption
of, the Senior Notes or that
6
<PAGE>
otherwise protects the holders in the event that the Company incurs substantial
additional indebtedness, whether or not in connection with a change in control
of the Company.
Reference is made to the Prospectus Supplement for a description of the
following terms of the series of Senior Notes in respect of which this
Prospectus is being delivered: (i) the title of such Senior Notes; (ii) the
aggregate principal amount of such Senior Notes; (iii) the price (expressed as a
percentage of principal amount) at which such Senior Notes will be issued; (iv)
the date or dates on which the principal of such Senior Notes is payable; (v)
the rate or rates at which such Senior Notes will bear interest, the date or
dates from which such interest will accrue, the dates on which such interest
will be payable ("Interest Payment Dates"), and the regular record dates for the
interest payable on such Interest Payment Dates; (vi) the option, if any, of the
Company to redeem such Senior Notes and the period or periods within which, or
the date or dates on which, the prices at which and the terms and conditions
upon which, such Senior Notes may be redeemed, in whole or in part, upon the
exercise of such option; (vii) the obligation, if any, of the Company to redeem
or purchase such Senior Notes at the option of the registered holder or pursuant
to any sinking fund or analogous provisions and the period or periods within
which, or the date or dates on which, the price or prices at which and the terms
and conditions upon which, such Senior Notes will be redeemed or purchased, in
whole or in part, pursuant to such obligation; (viii) the denominations in which
such Senior Notes will be issuable, if other than $1,000 and integral multiples
thereof; (ix) whether such Senior Notes are to be issued in whole or in part in
book-entry form and represented by one or more global Senior Notes and, if so,
the identity of the depository for such global Senior Notes and the specific
terms of the depository arrangements therefor; and (x) any other terms of such
Senior Notes, including with respect to any series, if applicable.
REDEMPTION PROVISIONS
Any terms for the optional or mandatory redemption of the Senior Notes
will be set forth in the Prospectus Supplement or Supplements. Except as shall
otherwise be provided in the applicable Prospectus Supplement or Supplements,
the Senior Notes will be redeemable only upon notice by mail not less than 30
nor more than 60 days prior to the date fixed for redemption, and, if less than
all the Senior Notes of a series, or any tranche thereof, are to be redeemed,
the particular Senior Notes to be redeemed will be selected by the Senior Note
Trustee in such a manner as it shall deem appropriate and fair.
Any notice of redemption at the option of the Company shall state that
such redemption will be conditional upon receipt by the Senior Note Trustee, on
or prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest on such Senior Notes and that if
such money has not been so received, such notice will be of no force and effect
and the Company will not be required to redeem such Senior Notes.
SECURITY; RELEASE DATE
Until the Release Date, the Senior Notes will be secured by one or more
series of the Company's first mortgage bonds ("Senior Note Mortgage Bonds")
issued and delivered by the Company to the Senior Note Trustee (see "Description
of Senior Note Mortgage Bonds"). Upon the issuance of Senior Notes prior to the
Release Date, the Company will simultaneously issue
7
<PAGE>
and deliver to the Senior Note Trustee, as security for all the Senior Notes,
Senior Note Mortgage Bonds that will have the same stated maturity date and will
be in the same aggregate principal amount and have the same interest rate as the
corresponding Senior Notes being issued. Any payment by the Company to the
Senior Note Trustee of principal of, premium, if any, and interest on, Senior
Note Mortgage Bonds will be applied by the Senior Note Trustee to satisfy the
Company's obligations with respect to principal of, premium, if any, and
interest on, the respective corresponding Senior Notes.
THE RELEASE DATE WILL BE THE EARLIER OF (I) THE DATE THAT ALL FIRST
MORTGAGE BONDS (AS DEFINED HEREIN) OTHER THAN THE SENIOR NOTE MORTGAGE BONDS,
HAVE BEEN RETIRED (WHETHER AT, BEFORE OR AFTER THE MATURITY THEREOF) THROUGH
PAYMENT, REDEMPTION, PURCHASE, DEFEASANCE OR OTHERWISE AND (II) THE DATE UPON
WHICH THE SENIOR NOTE TRUSTEE HOLDS SENIOR NOTE MORTGAGE BONDS CONSTITUTING NOT
LESS THAN 80% IN AGGREGATE PRINCIPAL AMOUNT OF ALL OUTSTANDING FIRST MORTGAGE
BONDS. ON THE RELEASE DATE, THE SENIOR NOTE TRUSTEE WILL DELIVER TO THE COMPANY
FOR CANCELLATION ALL SENIOR NOTE MORTGAGE BONDS AND, NOT LATER THAN 30 DAYS
THEREAFTER, WILL PROVIDE NOTICE TO ALL HOLDERS OF THE SENIOR NOTES OF THE
OCCURRENCE OF THE RELEASE DATE. AS A RESULT, ON THE RELEASE DATE, THE SENIOR
NOTE MORTGAGE BONDS SHALL CEASE TO SECURE THE SENIOR NOTES AND THE SENIOR NOTES
WILL BECOME UNSECURED AND UNSUBORDINATED GENERAL OBLIGATIONS OF THE COMPANY.
Under certain circumstances, all of the Company's First Mortgage Bonds
are mandatorily redeemable by the Company in the event that all of the Company's
common stock is acquired by a governmental body or instrumentality or
substantially all of the Company's property is released from the lien of the
Mortgage. In such event, the Senior Note Mortgage Bonds will be redeemed at a
redemption price of 0.0% of the principal amount thereof. Upon such redemption,
the Release Date will occur and the Senior Notes will remain outstanding as
unsecured obligations of the Company. See "Description of Senior Note Mortgage
Bonds -- Redemption Provisions of Senior Note Mortgage Bonds".
Each series of Senior Note Mortgage Bonds will be a series of First
Mortgage Bonds of the Company. See "Description of Senior Note Mortgage Bonds -
Kind and Priority of Lien". Upon the payment or cancellation of any outstanding
Senior Notes, the Senior Note Trustee shall surrender to the Company for
cancellation an equal principal amount of the related series of Senior Note
Mortgage Bonds of like terms. The Company shall not permit, at any time prior to
the Release Date, the aggregate principal amount of Senior Note Mortgage Bonds
held by the Senior Note Trustee to be less than the aggregate principal amount
of the Senior Notes outstanding. The Senior Note Indenture includes a
restriction that the Company may not issue, guarantee or permit to exist, so
long as any of the Senior Notes are outstanding and after the Release Date, any
debt that ranks senior to the Senior Notes, subject to certain exceptions. After
the issuance of the first series of the Senior Notes, no additional First
Mortgage Bonds will be issued under the Mortgage (as defined herein) other than
as collateral security for the Senior Notes.
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EVENTS OF DEFAULT
The following constitute events of default under the Senior Note
Indenture: (a) default in the payment of principal of or premium, if any, on any
Senior Note when due and payable; (b) default in the payment of interest on any
Senior Note when due which continues for 60 days; (c) default in the performance
or breach of any other covenant or agreement of the Company in the Senior Notes
or in the Senior Note Indenture and the continuation thereof for 90 days after
written notice thereof to the Company by the Senior Note Trustee or the holders
of at least 33% in aggregate principal amount of the outstanding Senior Notes;
(d) prior to the Release Date, the occurrence of a "completed default" (as
defined) under the Mortgage; provided, however, that the waiver or cure of such
default and the recision and annulment of the consequences thereof under the
Mortgage shall constitute a waiver of the corresponding event of default under
the Senior Note Indenture and a recision and annulment of the consequences
thereof under the Senior Note Indenture; and (e) certain events of bankruptcy,
insolvency, reorganization, assignment or receivership of the Company.
If an event of default occurs and is continuing, either the Senior Note
Trustee or the holders of a majority in aggregate principal amount of the
outstanding Senior Notes may declare the principal amount of all of the Senior
Notes to be due and payable immediately. Upon such acceleration of the Senior
Notes, the Senior Note Mortgage Bonds shall be immediately redeemable upon
demand of the Senior Note Trustee (and surrender thereof to the Mortgage
Trustee, as defined) at a redemption price of 100% of the principal amount
thereof, together with interest to the redemption date. See "Description of
Senior Note Mortgage Bonds - Redemption Provisions of Senior Note Mortgage
Bonds". At any time after an acceleration of the Senior Notes has been declared
(and provided the acceleration of all Senior Note Mortgage Bonds has not
occurred), if the Company pays or deposits with the Senior Note Trustee a sum
sufficient to pay all matured installments of interest and the principal and any
premium which has become due on the Senior Notes otherwise than by acceleration
and all defaults shall have been cured or waived, then such payment or deposit
will cause an automatic rescission and annulment of the acceleration of the
Senior Notes.
The Senior Note Indenture provides that the Senior Note Trustee
generally will be under no obligation to exercise any of its rights or powers
under the Senior Note Indenture at the request or direction of any of the
holders of the Senior Notes unless such holders have offered to the Senior Note
Trustee reasonable security or indemnity. Subject to such provisions for
indemnity and certain other limitations contained in the Senior Note Indenture,
the holders of a majority in aggregate principal amount of the outstanding
Senior Notes generally will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Senior Note
Trustee, or of exercising any trust or power conferred on the Senior Note
Trustee. The holders of a majority in aggregate principal amount of the
outstanding Senior Notes generally will have the right to waive any past default
or event of default (other than a payment default) on behalf of all holders of
the Senior Notes. The Senior Note Indenture provides that no holder of the
Senior Notes may institute any action against the Company under the Senior Note
Indenture unless such holder previously shall have given to the Senior Note
Trustee written notice of an event of default and continuance thereof and unless
the holders of not less than a majority in aggregate principal amount of the
Senior Notes then outstanding affected by such event of default shall have
requested the Senior Note Trustee to institute such action and shall have
offered the Senior Note Trustee reasonable indemnity, and the Senior Note
Trustee shall not
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have instituted such action within 60 days of such request. Furthermore, no
holder of the Senior Notes will be entitled to institute any such action if and
to the extent that such action would disturb or prejudice the rights of other
holders of the Senior Notes. Notwithstanding that the right of a holder of the
Senior Notes to institute a proceeding with respect to the Senior Note Indenture
is subject to certain conditions precedent, each holder of a Senior Note has the
right, which is absolute and unconditional, to receive payment of the principal
of, and premium, if any, and interest on such Senior Note when due and to
institute suit for the enforcement of any such payment, and such rights may not
be impaired without the consent of such holders of Senior Notes. The Senior Note
Indenture provides that the Senior Note Trustee, within 90 days after the
occurrence of a default with respect to the Senior Notes, is required to give
holders of the Senior Notes notice of any default known to the Senior Note
Trustee, unless cured or waived, but, except in the case of default in the
payment of principal of, or premium, if any, or interest on, any Senior Notes,
the Senior Note Trustee may withhold such notice if it determines in good faith
that it is in the interest of such holders to do so. The Company is required to
deliver to the Senior Note Trustee each year an officer's certificate as to
whether or not the Company is in compliance with the conditions and covenants
under the Senior Note Indenture.
MODIFICATION WITH APPROVAL
Modification and amendment of the Senior Note Indenture may be effected
by the Company and the Senior Note Trustee with the consent of the holders of a
majority in aggregate principal amount of the outstanding Senior Notes affected
thereby, provided that no such modification or amendment may, without the
consent of the holder of each outstanding Senior Note affected thereby, (a)
change the maturity date of any Senior Note; (b) reduce the rate (or change the
method of calculation thereof) or extend the time of payment of interest on any
Senior Note; (c) reduce the principal amount of, or premium payable on, any
Senior Note; (d) change the coin or currency of any payment of principal of, or
premium, if any, or interest on, any Senior Note; (e) change the date on which
any Senior Note may be redeemed or repaid at the option of the holder thereof or
adversely affect the rights of a holder to institute suit for the enforcement of
any payment on or with respect to any Senior Note; (f) impair the interest of
the Senior Note Trustee in the Senior Note Mortgage Bonds held by it or, prior
to the Release Date, reduce the principal amount of any series of Senior Note
Mortgage Bonds securing the Senior Notes to an amount less than the principal
amount of the related series of Senior Notes or alter the payment provisions of
such Senior Note Mortgage Bonds in a manner adverse to the holders of the Senior
Notes; or (g) modify the foregoing requirements or reduce the percentage of
outstanding Senior Notes necessary to modify or amend the Senior Note Indenture
or to waive any past default to less than a majority.
MODIFICATION WITHOUT APPROVAL
Modification and amendment of the Senior Note Indenture may be effected
by the Company and the Senior Note Trustee without the consent of the holders
(a) to add to the covenants of the Company for the benefit of the holders or to
surrender a right conferred on the Company in the Senior Note Indenture; (b) to
add further security for the Senior Notes; (c) to supply omissions, cure
ambiguities or correct defects, which actions, in each case, are not
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prejudicial to the interest of the holders in any material respect; or (d) to
make any other change that is not prejudicial to the holders of the Senior Notes
in any material respect.
A supplemental indenture which changes or eliminates any covenants or
other provision of the Senior Note Indenture (or any supplemental indenture)
which has expressly been included solely for the benefit of one or more series
of the Senior Notes, or which modifies the rights of the holders of the Senior
Notes of such series with respect to such covenant or provision, will be deemed
not to affect the rights under the Senior Note Indenture of the holders of the
Senior Notes of any other series.
DEFEASANCE AND DISCHARGE
The Senior Note Indenture provides that the Company will be discharged
from any and all obligations in respect to the Senior Notes and the Senior Note
Indenture (except for certain obligations such as obligations to register the
transfer or exchange of the Senior Notes, replace stolen, lost or mutilated
Senior Notes and maintain paying agencies) if, among other things, the Company
irrevocably deposits with the Senior Note Trustee, in trust for the benefit of
the holders of Senior Notes, money or certain United States government
obligations, or any combination thereof, which will provide money in an amount
sufficient, without reinvestment, to make all payments of principal of, premium,
if any, and interest on, the Senior Notes on the dates such payments are due in
accordance with the terms of the Senior Note Indenture and the Senior Notes;
provided that unless all of the Senior Notes mature within 90 days of such
deposit by redemption or otherwise, the Company shall also have delivered to the
Senior Note Trustee an opinion of counsel to the effect that the holders of the
Senior Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or discharge of the Senior Note
Indenture. Thereafter, the holders of the Senior Notes may look only to such
deposit for payment of the principal of, and interest and any premium on, the
Senior Notes.
CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS
The Company may not consolidate with or merge into any other
corporation or sell or otherwise dispose of its properties as or substantially
as an entirety unless (i) the successor or transferee corporation shall be a
corporation or other entity organized and existing under the laws of the United
States or any state thereof or the District of Columbia, (ii) the successor or
transferee entity assumes by supplemental indenture the due and punctual payment
of the principal of and premium, if any, and interest on all the Senior Notes
and the performance of every covenant of the Senior Note Indenture to be
performed or observed by the Company; and (iii) if prior to the Release Date,
the successor or transferee corporation assumes the Company's obligations under
the Mortgage with respect to the Senior Note Mortgage Bonds. Upon any such
consolidation, merger, sale, transfer or other disposition of the properties of
the Company substantially as an entirety, the successor corporation formed by
such consolidation or into which the Company is merged or to which such transfer
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under the Senior Note Indenture with the same effect
as if such successor corporation had been named as the Company therein, and the
Company will be released from all obligations under the Senior Note Indenture.
For purposes of the Senior Note Indenture, the conveyance or other transfer by
the Company of (a) all or any
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portion of its facilities for the generation of electric energy or (b) all of
its facilities for the transmission of electric energy, in each case considered
alone or in any combination with properties described in the other clause, shall
in no event be deemed to constitute a conveyance or other transfer of all the
properties of the Company, as or substantially as an entirety.
CERTAIN COVENANTS OF THE COMPANY
Limitation on Liens
The Senior Note Indenture provides that, so long as any such Senior
Notes are outstanding, the Company may not issue, assume, guarantee or permit to
exist after the Release Date any Debt (as defined below) that is secured by any
mortgage, security interest, pledge or lien ("Lien") of or upon any Operating
Property of the Company (as defined below), whether owned at the date of the
Senior Note Indenture or thereafter acquired, without in any such case
effectively securing the Senior Notes (together with, if the Company shall so
determine, any other indebtedness of the Company ranking equally with the Senior
Notes) equally and ratably with such Debt (but only so long as such Debt is so
secured).
The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of an entity existing at the time such entity is
merged into or consolidated with, or such entity disposes of its properties (or
those of a division) as or substantially as an entirety to, the Company; (3)
Liens on Operating Property to secure the costs of acquisition, construction,
development or substantial repair, alteration or improvement of property or to
secure indebtedness incurred to provide funds for any such purpose or for
reimbursement of funds previously expended for any such purpose, provided such
Liens are created or assumed contemporaneously with, or within 18 months after,
such acquisition or the completion of substantial repair or alteration,
construction, development or substantial improvement; (4) Liens in favor of any
state or any department, agency or instrumentality or political subdivision of
any state, or for the benefit of holders of securities issued by any such entity
(or providers of credit enhancement with respect to such securities), to secure
any Debt (including, without limitation, obligations of the Company with respect
to industrial development, pollution control or similar revenue bonds) incurred
for the purpose of financing all or any part of the purchase price or the cost
of substantially repairing or altering, constructing, developing or
substantially improving Operating Property of the Company; (5) Liens under the
Mortgage, except as provided in the Senior Note Indenture; (6) Liens to
compensate the Senior Note Trustee as provided in the Senior Note Indenture; (7)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in clauses (1)
through (6), provided, however, that the principal amount of Debt secured
thereby and not otherwise authorized by said clauses (1) to (6), inclusive,
shall not exceed the principal amount of Debt, plus any premium or fee payable
in connection with any such extension, renewal or replacement, so secured at the
time of such extension, renewal or replacement. However, the foregoing
restriction will not apply to the issuance, assumption or guarantee by the
Company of Debt secured by a Lien which would otherwise be subject to the
foregoing restriction up to an aggregate amount which, together with all other
secured Debt of the Company (not including secured Debt permitted under any of
the foregoing exceptions) and
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the Value (as defined below) of Sale and Lease-Back Transactions (as defined
below) existing at such time (other than Sale and Lease-Back Transactions the
proceeds of which have been applied to the retirement of certain indebtedness,
Sale and Lease-Back Transactions in which the property involved would have been
permitted to be subjected to a Lien under any of the foregoing exceptions in
clauses (1) to (7) and Sale and Lease-Back Transactions that are permitted by
the first sentence of "Limitations on Sale and Lease-Back Transactions" below),
does not exceed the greater of 15% of Tangible Assets or 15% of Capitalization
(as such terms are defined below).
Limitation on Sale and Lease-Back Transactions
The Senior Note Indenture provides that so long as any Senior Notes are
outstanding, the Company may not enter into or permit to exist after the Release
Date any Sale and Lease-Back Transaction with respect to any Operating Property
(except for transactions involving leases for a term, including renewals, of not
more than 48 months), if the purchasers' commitment is obtained more than 18
months after the later of the completion of the acquisition, construction or
development of such Operating Property or the placing in operation of such
Operating Property or of such Operating Property as constructed or developed or
substantially repaired, altered or improved. This restriction will not apply if
(a) the Company would be entitled pursuant to any of the provisions described in
clauses (1) to (7) of the first sentence of the second paragraph under
"Limitation on Liens" above to issue, assume, guarantee or permit to exist Debt
secured by a Lien on such Operating Property without equally and ratably
securing the Senior Notes, (b) after giving effect to such Sale and Lease-Back
Transaction, the Company could incur pursuant to the provisions described in the
second sentence of the second paragraph under "Limitation on Liens", at least
$1.00 of additional Debt secured by Liens (other than Liens permitted by clause
(a)), or (c) the Company applies within 180 days an amount equal to, in the case
of a sale or transfer for cash, the net proceeds (not exceeding the net book
value), and, otherwise, an amount equal to the fair value (as determined by its
Board of Directors) of the Operating Property so leased, to the retirement of
Senior Notes or other Debt of the Company ranking equally with the Senior Notes,
subject to reduction for Senior Notes and such Debt retired during such 180-day
period otherwise than pursuant to mandatory sinking fund or prepayment
provisions and payments at stated maturity.
Certain Definitions
"Capitalization" means the total of all the following items appearing
on, or included in, the consolidated balance sheet of the Company: (i)
liabilities for indebtedness maturing more than 12 months from the date of
determination; and (ii) common stock, preferred stock, Hybrid Preferred
Securities (as defined in the Senior Note Indenture), premium on capital stock,
capital surplus, capital in excess of par value and retained earnings (however
the foregoing may be designated), less, to the extent not otherwise deducted,
the cost of shares of capital stock reacquired by the Company.
"Debt" means any outstanding debt for money borrowed evidenced by
notes, debentures, bonds or other securities, or guarantees of any thereof.
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"Operating Property" means (i) any interest in real property owned by
the Company and (ii) any asset owned by the Company that is depreciable in
accordance with generally accepted accounting principles ("GAAP") excluding, in
either case, any interest of the Company as lessee under any lease (except for a
lease that results from a Sale and Lease-Back Transaction) which has been or
would be capitalized on the books of the lessee in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to the Company of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 48 months),
which Operating Property has been or is to be sold or transferred by the Company
to such person; provided, however, Sale and Lease-Back Transaction does not
include any arrangement first entered into prior to the date of the Senior Note
Indenture.
"Tangible Assets" means the amount shown as total assets on the
consolidated balance sheet of the Company, less the following: (i) intangible
assets including, but without limitation, such items as goodwill, trademarks,
trade names, patents, and unamortized debt discount and expense, and (ii)
appropriate adjustments, if any, on account of minority interests. Tangible
Assets shall be determined in accordance with GAAP and practices applicable to
the type of business in which the Company is engaged and that are approved by
the independent accountants that are regularly retained by the Company, and may
be determined as of a date not more than 60 days prior to the happening of the
event for which such determination is being made.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of
any particular time, the amount equal to the greater of (i) the net proceeds to
the Company from the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction, or (ii) the net book value of such property, as
determined by the Company in accordance with GAAP, in either case multiplied by
a fraction, the numerator of which shall be equal to the number of full years of
the term of the lease that is part of such Sale and Lease-Back Transaction
remaining at the time of determination and the denominator of which shall be
equal to the number of full years of such term, without regard, in any case, to
any renewal or extension options contained in such lease.
VOTING OF SENIOR NOTE MORTGAGE BONDS HELD BY SENIOR NOTE TRUSTEE
The Senior Note Trustee, as the holder of Senior Note Mortgage Bonds,
will attend any meeting of bondholders under the Mortgage, or, at its option,
will deliver its proxy in connection therewith relating to matters with respect
to which it is entitled to vote or consent.
The Senior Note Trustee shall vote all Senior Note Mortgage Bonds then
held by it or consent with respect thereto, proportionately with the vote or
consent of the holders of all other First Mortgage Bonds outstanding under the
Mortgage, the holders of which are eligible to vote or consent; provided,
however, that the Senior Note Trustee shall not so vote in favor of, or so
consent to, any amendment or modification of the Mortgage which, if it were an
amendment or modification of the Senior Note Indenture, would require the
consent of the holders of Senior Notes as described under "- Modification",
without the prior consent of holders of Senior Notes which would be required for
such an amendment or modification of the Senior Note Indenture.
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RESIGNATION OR REMOVAL OF SENIOR NOTE TRUSTEE
The Senior Note Trustee may resign at any time upon written notice to
the Company specifying the day upon which the resignation is to take effect and
such resignation will take effect immediately upon the later of the appointment
of a successor Senior Note Trustee and such specified day.
The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with the Senior Note Trustee and signed
by the holders, or their attorneys-in-fact, of at least a majority in aggregate
principal amount of the then outstanding Senior Notes. In addition, so long as
no event of default under the Senior Note Indenture or event which, with the
giving of notice or lapse of time or both, would become an event of default has
occurred and is continuing, the Company may remove the Senior Note Trustee upon
written notice to the holder of each Senior Note outstanding and the Senior Note
Trustee, and appointment of a successor Senior Note Trustee.
CONCERNING THE SENIOR NOTE TRUSTEE
The United States Trust Company of New York is the Senior Note Trustee
under the Senior Note Indenture and the Mortgage Trustee under the Mortgage. The
Senior Note Indenture provides that the Company's obligations to compensate the
Senior Note Trustee and reimburse the Senior Note Trustee for expenses,
disbursements and advances will constitute indebtedness which will be secured by
a lien generally prior to that of the Senior Notes upon all property and funds
held or collected by the Senior Note Trustee as such. The Senior Note Indenture
provides that the Senior Note Trustee shall be subject to and shall comply with
the provisions of Section 310(b) of the Trust Indenture Act of 1939, as amended,
and that nothing in the Senior Note Indenture shall be deemed to prohibit the
Senior Note Trustee or the Company from making any application permitted
pursuant to such section. The Senior Note Trustee is also a depository of the
Company and certain of its affiliates and has in the past made, and may in the
future make, periodic loans to the Company and certain of its affiliates.
GOVERNING LAW
The Senior Note Indenture and each Senior Note will be governed by New
York law.
DESCRIPTION OF SENIOR NOTE MORTGAGE BONDS
GENERAL
The Senior Note Mortgage Bonds are first mortgage bonds ("First
Mortgage Bonds") to be issued under and secured by the Company's Indenture dated
November 1, 1944 between the Company and United States Trust Company of New
York, as successor trustee (the "Mortgage Trustee"), as heretofore amended and
supplemented, and to be further amended and supplemented by one or more
Supplemental Indentures with respect to the Senior Note Mortgage Bonds
(collectively, the "Mortgage"). The statements herein concerning the First
Mortgage
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Bonds and the Mortgage are summaries and do not purport to be complete. They may
make use of defined terms and are subject to, and qualified in their entirety
by, all of the provisions of the Mortgage, which is incorporated herein by
reference.
The Senior Note Mortgage Bonds will be issued as security for the
Company's obligations under the Senior Note Indenture and will be immediately
delivered to and registered in the name of the Senior Note Trustee. The Senior
Note Indenture provides that the Senior Note Trustee shall not transfer any
Senior Note Mortgage Bonds except to a successor trustee, to the Company (as
provided in the Senior Note Indenture) or in compliance with a court order in
connection with a bankruptcy or reorganization proceeding of the Company. The
Senior Note Trustee shall generally vote the Senior Note Mortgage Bonds
proportionately with what it believes to be the vote of the holders of all other
First Mortgage Bonds then outstanding, as described under "Description of Senior
Notes - Voting of Senior Note Mortgage Bonds Held by Senior Note Trustee".
The Senior Note Mortgage Bonds will correspond to the corresponding
series of Senior Notes in respect of principal amount, interest rate and
maturity date. Upon payment of the principal or premium, if any, or interest on
the Senior Notes, Senior Note Mortgage Bonds of the corresponding series in a
principal amount equal to the principal amount of such Senior Notes will, to the
extent of such payment of principal, premium or interest, be deemed fully paid
and the obligation of the Company to make such payment shall be discharged.
REDEMPTION PROVISIONS OF SENIOR NOTE MORTGAGE BONDS
If the Company redeems any Senior Notes prior to maturity, the Senior
Note Trustee shall, on the same date, deliver to the Company Senior Note
Mortgage Bonds in principal amounts corresponding to the Senior Notes so
redeemed. The Senior Note Mortgage Bonds are not redeemable by operation of the
improvement fund or the maintenance provisions of the Mortgage, or with the
proceeds of released property. If all of the Company's common stock is acquired
by a governmental body or instrumentally or substantially all of the Company's
property is released from the lien of the Mortgage, and all First Mortgage Bonds
(other than Senior Note Mortgage Bonds) are redeemed in accordance with Section
8.08 of the Mortgage, the Senior Note Mortgage Bonds shall be redeemed by the
surrender thereof by the Senior Note Trustee to the Mortgage Trustee for
cancellation at a redemption price of 0.0% of the principal amount thereof. Upon
such surrender and redemption, the Release Date will occur and the Senior Notes
will remain outstanding as unsecured obligations of the Company. In the event of
an event of default under the Senior Note Indenture and acceleration of the
Senior Notes, the Senior Note Mortgage Bonds will be immediately redeemable in
whole, upon demand of the Senior Note Trustee, at a redemption price of 100% of
the principal amount thereof, together with accrued interest to the redemption
date. See "Description of Senior Notes - Events of Default".
KIND AND PRIORITY OF LIEN
The Senior Note Mortgage Bonds will rank equally as to security with
all First Mortgage Bonds outstanding under the Mortgage, which is a direct first
lien on substantially all of the Company's property and franchises (except
certain real estate not used in the Company's business,
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cash other than that deposited with the Mortgage Trustee, securities, judgments,
contracts, accounts and choses in action not specifically assigned, pledged,
deposited or delivered to the Mortgage Trustee, materials and supplies not
installed as a part of the fixed property of the Company, merchandise,
appliances and supplies acquired for resale, motor vehicles and timber growing
upon or cut from the lands of the Company and other personal property not
necessary or appropriate to the public utility plant and business of the Company
and to its operation as a going concern), subject to excepted encumbrances, the
lien of the Mortgage Trustee for compensation and expenses and minor matters.
With certain limitations applicable in the cases of consolidation, merger and
sale of substantially all of the Company's assets, the Mortgage contains
provisions subjecting after-acquired property (subject to pre-existing liens) to
the lien thereof.
RELEASE AND SUBSTITUTION OF PROPERTY
Property of a limited nature may be disposed of by the Company without
securing a release or consent by the Mortgage Trustee. Otherwise, property
subject to the lien of the Mortgage may be released only upon the substitution
of cash or certain other property of equivalent value. Money received by the
Mortgage Trustee as the result of any release of property may be withdrawn
against, among other things, bondable value of property additions and the
principal amount of First Mortgage Bonds and prior lien bonds previously issued
and retired. If the fair value of property released is 10% or more of the
principal amount of outstanding First Mortgage Bonds and prior lien bonds, the
Mortgage Trustee is required to report to the bondholders with respect thereto
within ninety days after such release, and annually with respect to all other
property so released.
DIVIDEND RESTRICTIONS
The Mortgage restricts dividends (except dividends payable in shares of
the Company's stock subordinate to its preferred stock) to the amount by which
the Company's accumulated earned surplus exceeds $3,360,052. The amount
available for the declaration and payment of cash dividends on the Company's
common stock after giving effect to this restriction will be contained in a
Prospectus Supplement.
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ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
Subject to conditions and restrictions, certain of which are referred
to below, additional First Mortgage Bonds may be issued under the Mortgage to
the extent of (1) 60% of bondable value of property additions; (2) the principal
amount of refundable prior lien bonds retired as provided in the Mortgage; (3)
the principal amount of Bonds then or theretofore retired; and (4) the amount of
cash deposited with the Mortgage Trustee against the issuance of First Mortgage
Bonds. Cash so deposited with the Mortgage Trustee may be withdrawn in an amount
equal to the principal amount of First Mortgage Bonds which the Company is then
entitled to have authenticated and delivered. First Mortgage Bonds may be issued
pursuant to (1) and (4) (and in certain cases pursuant to (2) and (3) above)
only if net earnings (which are calculated before income taxes but after
deduction of operating expenses, including an amount equal to the greater of the
actual book provision for depreciation or the "minimum provision for
depreciation" as outlined below under "Maintenance Fund"), with non-operating
income or loss limited to 5% of operating income before income taxes, shall be
at least two times the annual interest requirements on First Mortgage Bonds and
prior lien bonds to be outstanding. Moreover, the Company's charter contains
provisions limiting the ratio of securities evidencing funded indebtedness and
unsecured indebtedness to total capitalization.
The principal amount of additional First Mortgage Bonds issuable
pursuant to these provisions will be contained in a Prospectus Supplement.
IMPROVEMENT FUND
The Company is required to deposit with the Mortgage Trustee by March
31 of each year cash equal to 1% of the aggregate principal amount of First
Mortgage Bonds issued prior to January 1 of such year (excluding any First
Mortgage Bonds issued on the basis of retired First Mortgage Bonds). Instead of
depositing cash, or as a means of withdrawing cash so deposited but not used or
applied by the Mortgage Trustee for the purchase, payment or redemption of First
Mortgage Bonds previously issued, the Company may deliver First Mortgage Bonds
or certain refundable prior lien bonds or apply bondable value of property
additions (on the basis of 60% thereof), none of which may thereafter be used
for any other purpose under the Mortgage. The Company has heretofore utilized
bondable value of property additions to meet this requirement and expects to
continue to do so.
MAINTENANCE FUND
The Company is required to make expenditures for property additions
and/or to deposit with the Mortgage Trustee, cash (less, at the option of the
Company, credit for refundable prior lien bonds and First Mortgage Bonds
theretofore or then retired) in amounts equal to the minimum provision for
depreciation, computed cumulatively at the end of each year. Cash so deposited
with the Mortgage Trustee may, during the next succeeding three years, be
withdrawn by the Company to the extent that the amount theretofore expended for
property additions, as aforesaid, exceeds the minimum provision for
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depreciation. The Company has, in the past, made sufficient expenditures for
property additions to meet its obligations with respect to the minimum provision
for depreciation, and no deposits with the Mortgage Trustee have been required
in this connection. The Company expects that this pattern will continue in the
future.
So long as any of the First Mortgage Bonds shall be outstanding, the
term "minimum provision for depreciation" means an amount equal to the greater
of (1) 15% of gross operating revenues during such period from the operation of
bondable property after deducting the aggregate cost of electric energy
purchased for resale during such period in connection with the operation of such
property, less an amount equal to charges for current repairs and maintenance of
such property, or (2) an amount computed at the rate of 2 1/3% per annum of the
average of the depreciable utility property of the Company as for each year or
portion thereof embraced within such period.
MODIFICATION OF MORTGAGE
With the consent of the holders of not less than 75% in principal
amount of the First Mortgage Bonds affected, the Mortgage may be changed in any
way except (a) to reduce the amount or extend the due dates of the principal of
or interest on the First Mortgage Bonds, (b) to reduce the percentage of
bondholders required to effect changes in the Mortgage or (c) to impair or
change the rank of the lien created by the Mortgage.
DEFAULTS AND NOTICE THEREOF
"Completed Defaults" under the Mortgage include default in the payment
of principal and premium, if any, of any of the First Mortgage Bonds or any
prior lien bonds; default, for 60 days, in payment of interest on any of the
First Mortgage Bonds or beyond the period of grace on any prior lien bonds;
default, for 60 days after notice, in the performance of any covenant in the
Mortgage; and bankruptcy, insolvency or reorganization (under certain
circumstances) of the Company. The Mortgage Trustee may withhold notice to
bondholders of default (except default in payment of principal, premium,
interest or sinking and improvement fund installments) if its responsible
officers determine that it is in the interest of the bondholders to do so.
A majority in aggregate principal amount of the First Mortgage Bonds is
necessary to require the Mortgage Trustee to take action to enforce the lien of
the Mortgage. The Mortgage Trustee may require reasonable indemnification before
being required to enforce the lien of the Mortgage. Holders of not less than 25%
in aggregate principal amount of outstanding First Mortgage Bonds or the
Mortgage Trustee may declare the principal and interest of all outstanding First
Mortgage Bonds due upon the occurrence of a completed default, but the holders
of a majority in principal amount of the outstanding First Mortgage Bonds may,
under certain circumstances, including the curing of such default, annul any
such declaration. No holder shall have the right to institute action, unless
holders of 25% in aggregate principal amount of First Mortgage Bonds shall have
made written request to the Mortgage Trustee to institute such action.
CONCERNING THE MORTGAGE TRUSTEE
The Mortgage Trustee, United States Trust Company of New York, is
permitted to engage in other transactions with the Company, except that if the
Mortgage Trustee acquires any
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conflicting interest, as defined, it must eliminate it or resign and is required
in certain cases to share with the bondholders the benefits of payments received
within four months prior to default. United States Trust Company of New York is
also the Senior Note Trustee under the Senior Note Indenture and a depository of
the Company and certain of the Company's affiliates and has in the past made,
and may in the future make, loans to the Company and certain of the Company's
affiliates.
SATISFACTION AND DISCHARGE OF MORTGAGE
Upon the Company's making due provision for the payment of all of the
First Mortgage Bonds and paying all other sums due under the Mortgage, the
Mortgage shall cease to be of further effect and may be satisfied and discharged
of record. Holders of First Mortgage Bonds may wish to consult with their own
tax advisers regarding possible tax effects in the event of a defeasance of the
Mortgage.
EVIDENCE AS TO COMPLIANCE WITH MORTGAGE PROVISIONS
Compliance with Mortgage provisions is evidenced by written statements
of the Company officers or persons selected and paid by the Company. In certain
cases, opinions of counsel and certificates of an engineer, accountant,
appraiser or other expert (who in some instances must be independent) must be
furnished. The Mortgage requires that the Company furnish annually to the
Mortgage Trustee a certificate that the Company has complied with, and is not in
default under, the provisions of the Mortgage.
PLAN OF DISTRIBUTION
The Company may sell the Senior Notes: (i) directly to purchasers; (ii)
to or through underwriters; or (iii) through agents or dealers. The Prospectus
Supplement with respect to the each series of Senior Notes will set forth the
terms of the offering thereof, including the name or names of any such
underwriters, agents or dealers; the purchase price of and the net proceeds to
the Company from such sale; any underwriting discounts and commissions or agency
fees and other items constituting underwriters' or agents' compensation; the
initial public offering price; any discounts or concessions allowed or reallowed
or paid to dealers and any securities exchange on which such series of Senior
Notes may be listed. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in any sale, the Senior Notes will be acquired
by such underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Senior Notes may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering will be named in the Prospectus Supplement
relating to such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will
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be set forth on the cover of such Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Senior will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all such series of
Senior Notes if any are purchased.
If dealers are utilized in a sale of Senior Notes, the Company will
sell such securities to the dealers as principal. The dealers may then resell
such Senior Notes to the public at varying prices to be determined by such
dealers at the time of resale. The names of the dealers and the terms of the
transaction will be set forth in the Prospectus Supplement relating thereto.
The Senior Notes may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Senior Notes with respect to which this Prospectus is delivered will
be named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement relating thereto. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
Agents, dealers and underwriters may be entitled under agreements with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such agents, dealers or underwriters may be required to make
in respect thereof. Agents, dealers and underwriters may be customers of, engage
in transactions with, or perform services for the Company in the ordinary course
of business.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Berlack,
Israels & Liberman LLP, New York, New York and Ryan, Russell, Ogden & Seltzer
LLP, Reading, Pennsylvania and for the agents and underwriters by Thelen Reid &
Priest LLP, New York, New York. Berlack, Israels & Liberman LLP and Thelen Reid
& Priest LLP may rely on the opinion of Ryan, Russell, Ogden & Seltzer, LLP as
to matters of Pennsylvania law. Attorneys of Berlack, Israels & Liberman LLP own
an aggregate of 14,560 shares of the Common Stock of the Company's parent, GPU,
Inc.
EXPERTS
The consolidated financial statements and financial statement schedule,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998, are incorporated herein by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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$150,000,000
METROPOLITAN EDISON COMPANY
MEDIUM TERM NOTES,
SERIES D
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
ABN AMRO INCORPORATED
August 11, 1999
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