-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, JC821n/XWGvSvXUJkRAvXEp0v8VlKily/JkW1Dwa0MLC+yflB8VpmreGNL6Bb58+ 7xL3RdZyW3cF7GVfwIBPrA== 0000065350-94-000025.txt : 19940811 0000065350-94-000025.hdr.sgml : 19940811 ACCESSION NUMBER: 0000065350-94-000025 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19940810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN EDISON CO CENTRAL INDEX KEY: 0000065350 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 230870160 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-53673 FILM NUMBER: 94542606 BUSINESS ADDRESS: STREET 1: 2800 POTTSVILLE PIKE STREET 2: MUHLENBERG TOWNSHIP CITY: BERKS COUNTY STATE: PA ZIP: 19605 BUSINESS PHONE: 2159293601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MET ED CAPITAL LP CENTRAL INDEX KEY: 0000923074 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 510355042 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-53673-01 FILM NUMBER: 94542607 BUSINESS ADDRESS: STREET 1: C/O GPU SERVICE CORPORATION STREET 2: 100 INTERPACE PARKWAY CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 201-263-6500 MAIL ADDRESS: STREET 1: MELLON BANK CENTER STREET 2: TENTH & MARKET STREETS CITY: WILMINGTON STATE: DE ZIP: 19801 S-3/A 1 FORM S-3 FOR MET-ED AND MET-ED CAPITAL Registration Nos. 33-53673 33-53673-01 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________ AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __________________ METROPOLITAN EDISON COMPANY MET-ED CAPITAL, L.P. (Exact name of registrant as (Exact name of registrant as specified in its charter) specified in its charter) PENNSYLVANIA DELAWARE (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) 23-0870160 51-0355042 (I.R.S. Employer (I.R.S. Employer Identification No.) Identification No.) 2800 Pottsville Pike Mellon Bank Center Reading, Pennsylvania 19605 Tenth and Market Streets (610) 929-3601 Wilmington, Delaware 19801 (302) 654-5893 (Addresses, including zip codes, and telephone numbers, including area codes, of registrants' principal executive offices) DON W. MYERS Vice President and Treasurer GPU Service Corporation 100 Interpace Parkway Parsippany, New Jersey 07054-1149 (201) 263-6500 (Name, address, including zip code, and telephone number, including area code, of agent for service for each registrant) Please send copies of all communications to: W. C. MATTHEWS, ESQ. W. EDWIN OGDEN, ESQ. Secretary Ryan, Russell, Ogden & Metropolitan Edison Company Seltzer 2800 Pottsville Pike 1100 Berkshire Boulevard P.O. Box 16001 P.O. Box 6219 Reading, Pennsylvania 19640 Reading, Pennsylvania 19610 (610) 929-3601 (610) 372-4761 DOUGLAS E. DAVIDSON, ESQ. CLIVE D. CONLEY, ESQ. Berlack, Israels & Liberman Reid & Priest 120 West 45th Street 40 West 57th Street New York, New York 10036-4003 New York, New York 10019 (212) 704-0100 (212) 603-2000 ____________________ Approximate date of commencement of proposed sale to the public: to be determined by market conditions after the effective date of this Registration Statement. ____________________ If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box: /X/ ____________________ This Registration Statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or on such date as the Commission, acting pursuant to said Section 8(a), may determine. SUBJECT TO COMPLETION, DATED AUGUST 10, 1994 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST , 1994 4,000,000 Preferred Securities Met-Ed Capital __% Cumulative Monthly Income Preferred Securities ("MIPS"*), Series A (liquidation preference $25 per Preferred Security) guaranteed to the extent the issuer has funds as set forth herein by METROPOLITAN EDISON COMPANY __________________ The __% Cumulative Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities"), representing the limited partner interests offered hereby, are being issued by Met-Ed Capital, L.P., a limited partnership formed under the laws of the State of Delaware ("Met-Ed Capital"). All of the general partner interests in Met-Ed Capital are owned by Met-Ed Preferred Capital, Inc. (the "General Partner"), a Delaware corporation and a wholly owned subsidiary of Metropolitan Edison Company, a Pennsylvania corporation (the "Company"). Met-Ed Capital exists for the sole purpose of issuing its partner interests and using the proceeds thereof to purchase the Company's subordinated debentures. The limited partner interests represented by the Series A Preferred Securities will have a preference with respect to cash distributions (hereinafter called "Dividends") and amounts payable on liquidation over the general partner interests in Met-Ed Capital. See "Description of Preferred Securities" in the accompanying Prospectus. Holders of the Series A Preferred Securities will be entitled to receive cumulative preferential cash Dividends at an annual rate of __% of the liquidation preference of $25 per Series A Preferred Security, accruing from the date of original issuance and payable monthly in arrears on the last day of each calendar month of each year, commencing ___________, 1994. The payment of Dividends, to the extent that Met-Ed Capital has sufficient cash on hand to permit such payments and funds legally available therefor, and payments on liquidation or redemption with respect to the Series A Preferred Securities are guaranteed on a limited basis by the Company to the extent set forth herein and in the accompanying Prospectus (the "Limited Guarantee"). See "Description of the Limited Guarantee" in the accompanying Prospectus. If the Company fails to make interest payments on the ___% Deferrable Interest Subordinated Debentures, Series A ("Series A Deferrable Interest Subordinated Debentures") purchased by Met-Ed Capital with the proceeds of this offering, Met-Ed Capital will have insufficient funds to pay Dividends on the Series A Preferred Securities, and, since the Limited Guarantee does not cover the payment of Dividends for which Met- Ed Capital does not have sufficient funds available, the Company would not be obligated under the Limited Guarantee to make such undeclared Dividend payments. In such event, the remedy of a holder of Series A Preferred Securities is to enforce Met-Ed Capital's rights under the Series A Deferrable Interest Subordinated Debentures. See "Description of the Deferrable Interest Subordinated Debentures - Enforcement of Certain Rights by Holders of Preferred Securities". The Company's obligations under the Limited Guarantee and the Series A Deferrable Interest Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company (which aggregated approximately $673,000,000 at June 30, 1994). In addition, the Company may defer interest payments on the Series A Deferrable Interest Subordinated Debentures for up to 60 consecutive months. However, during any deferral period (which the Company considers remote), the Company may not declare or pay any dividends on, or redeem or acquire, any of its preferred or common stock. The Series A Preferred Securities are redeemable at the option of Met-Ed Capital, in whole or in part, from time to time, on or after ___________, 1999, at $25 per Series A Preferred Security plus any accumulated, unpaid and additional Dividends accrued thereon to the date fixed for redemption (the "Redemption Price"), and will be redeemed at such price from the proceeds of any repayment or redemption of the Series A Deferrable Interest Subordinated Debentures. See "Description of Preferred Securities-Mandatory Redemption; Optional Redemption". If at any time Met-Ed Capital or the Company, due to a change in law or a pronouncement or decision interpreting or applying any applicable law, is or would be required to pay certain additional amounts or to withhold or deduct certain amounts, the Series A Preferred Securities are redeemable in whole or in part at the Redemption Price at the option of Met-Ed Capital. In addition, upon the occurrence of certain special events arising from a change in law or a pronouncement or decision interpreting or applying such law, the Series A Preferred Securities are redeemable in whole at the Redemption Price at the option of Met-Ed Capital. Upon the occurrence of such a special event, Met-Ed Capital may dissolve and cause Series A Deferrable Interest Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of their interests in Met-Ed Capital. See "Description of Preferred Securities-Optional Redemption; Special Event Redemption or Distribution" and "Description of the Deferrable Interest Subordinated Debentures" in the accompanying Prospectus. If the Series A Deferrable Interest Subordinated Debentures are so distributed, the Company will use its best efforts to have them listed on the same exchange on which the Series A Preferred Securities are then listed. In the event of the dissolution of Met-Ed Capital, the holders of Series A Preferred Securities will be entitled to a liquidation preference for each Series A Preferred Security of $25 plus any accumulated, unpaid and additional Dividends accrued thereon to the date of payment, unless, in connection with such dissolution, Series A Deferrable Interest Subordinated Debentures are distributed to the holders of the Series A Preferred Securities. See "Description of Preferred Securities-Liquidation Distribution" in the accompanying Prospectus. ___________________ See "Certain Investment Considerations" for certain considerations relevant to an investment in the Series A Preferred Securities, including circumstances under which payment of Dividends on the Series A Preferred Securities may be deferred and optional redemption events. ___________________ The Series A Preferred Securities have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. ___________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ____________________ Proceeds to Initial Public Underwriting Met-Ed Offering Price Commission(1) Capital (2)(3) Per Series A Preferred Security..........$ (2) $ Total..............$ (2) $ ________ (1) Met-Ed Capital and the Company have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (2) In view of the fact that the proceeds of the sale of the Series A Preferred Securities will be used to purchase the Company's Series A Deferrable Interest Subordinated Debentures, the Company will pay the Underwriters, as compensation for their services, the amount of $____ per Series A Preferred Security (or $____ in the aggregate), except that such compensation will be $___ per Series A Preferred Security sold to certain institutions, thus reducing the aggregate compensation specified above. See "Underwriting". (3) Expenses of the offering which are payable by the Company are estimated to be $480,000. The Series A Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of certificates for the Series A Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company on or about , 1994. ________ * An application has been filed by Goldman, Sachs & Co. with the United States Patent and Trademark Office for the registration of the MIPS servicemark. Goldman, Sachs & Co. Dean Witter Reynolds Inc. A.G. Edwards & Sons, Inc. Kidder, Peabody & Co. Incorporated Morgan Stanley & Co. Incorporated PaineWebber Incorporated Prudential Securities Incorporated The date of this Prospectus Supplement is , 1994. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus supplement shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER- ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ___________________ 2 The following information concerning the Series A Preferred Securities, the Limited Guarantee and the Series A Deferrable Interest Subordinated Debentures supplements and should be read in conjunction with the information contained in the accompanying Prospectus. Capitalized terms used in this Prospectus Supplement have the same meanings as in the accompanying Prospectus. MET-ED CAPITAL Met-Ed Capital is a limited partnership formed under the laws of the State of Delaware, all of the general partner interests in which are owned by the General Partner, a wholly owned special purpose subsidiary of the Company. Met-Ed Capital exists solely for the purpose of issuing its partner interests and utilizing the proceeds thereof to acquire the Company's Deferrable Interest Subordinated Debentures. All of the business and affairs of Met-Ed Capital will be managed by the General Partner, subject to Met-Ed Capital's Amended and Restated Limited Partnership Agreement, which will be substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus form a part. METROPOLITAN EDISON COMPANY The Company, a public utility furnishing electric service wholly within the Commonwealth of Pennsylvania, is a subsidiary of General Public Utilities Corporation ("GPU"), a holding company registered under the Public Utility Holding Company Act of 1935. In 1993, the Company provided retail service to approximately 445,000 customers in an area in eastern and south central Pennsylvania having an estimated population of 950,000. The Company also sells electricity at wholesale to four municipalities having an estimated population of over 11,000. The Company is affiliated with Jersey Central Power & Light Company and Pennsylvania Electric Company, which are also wholly owned subsidiaries of GPU. CERTAIN INVESTMENT CONSIDERATIONS Prospective purchasers of the Series A Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and in the accompanying Prospectus and should particularly consider the following matters: Subordinate Obligations Under the Limited Guarantee and the Series A Deferrable Interest Subordinated Debentures. The Company's obligations under the Limited Guarantee and the Series A Deferrable Interest Subordinated Debentures are subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company. At June 30 , 1994, Senior Indebtedness of the Company aggregated approximately $673,000,000. There are no terms in the Series A Preferred Securities, the Series A Deferrable Interest Subordinated Debentures or the Limited Guarantee that limit the Company's ability to incur additional indebtedness, including indebtedness that ranks senior to the Series A Deferrable Interest Subordinated Debentures and 3 the Limited Guarantee. See "Description of the Limited Guarantee-Status of the Limited Guarantee" and "Description of the Deferrable Interest Subordinated Debentures- Subordination" in the accompanying Prospectus. Option to Extend Interest Payment Period. The Company has the right under the Indenture to extend the interest payment period on the Series A Deferrable Interest Subordinated Debentures at any time and from time to time to up to 60 consecutive months, and, as a consequence, monthly Dividends on the Series A Preferred Securities can be deferred by Met-Ed Capital during any such extended interest payment period (but will continue to accumulate, with Dividends accruing thereon at the rate applicable to the Series A Preferred Securities). In the event that the Company exercises its right to extend, the Company may not declare or pay dividends on any shares of its preferred or common stock until deferred interest on the Series A Deferrable Interest Subordinated Debentures is paid in full. Met-Ed Capital and the Company currently believe that the extension of an interest payment period on the Series A Deferrable Interest Subordinated Debentures is remote. See "Description of Preferred Securities-Dividends" and "Description of the Deferrable Interest Subordinated Debentures-Option to Extend Interest Payment Period" in the accompanying Prospectus. Should an extended interest payment period occur, Met- Ed Capital will continue to accrue income for United States federal income tax purposes with respect to such deferred interest which income will be allocated, but not distributed, to holders of Series A Preferred Securities. As a result, such a holder will include such interest in gross income for United States federal income tax purposes in advance of the receipt of cash, and will not receive the cash related to such income from Met-Ed Capital if such a holder disposes of the Series A Preferred Securities prior to the record date for payment of Dividends. See "United States Taxation-Potential Extension of Interest Payment Period" in the accompanying Prospectus. Special Event Redemption or Distribution. Upon the occurrence and continuation of a Tax Event arising from a change in law or a pronouncement or decision interpreting or applying any applicable law (see "Description of Preferred Securities - Special Event Redemption or Distribution" in the accompanying Prospectus), the General Partner may elect to either: (i) redeem the Series A Preferred Securities in whole (and not in part); or (ii) dissolve Met-Ed Capital and cause the Series A Deferrable Interest Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities in liquidation of such holders' interests in Met-Ed Capital, provided that Met-Ed Capital shall have received an opinion of counsel (which may be regular tax counsel to the Company or an affiliate but not an employee thereof) to the effect that the holders of the Series A Preferred Securities will not recognize any gain or loss for federal income tax purposes as a result of such 4 dissolution and distribution. Alternatively, Met-Ed Capital may elect to cause the Series A Preferred Securities to remain outstanding. If an Investment Company Act Event (see "Description of Preferred Securities -Special Event Redemption or Distribution" in the accompanying Prospectus) shall occur and be continuing, Met-Ed Capital must elect either option (i) or (ii) above. In April 1994, the Internal Revenue Service issued certain notices generally addressing the characteristics which distinguish debt from equity for various purposes under the federal income tax laws. In these notices, the IRS indicated that transactions involving securities that, like the securities offered hereunder, have both debt and equity characteristics would be reviewed with scrutiny to determine how they would be treated for tax purposes. Based upon advice from Carter, Ledyard & Milburn, the Company's special tax counsel, the Company believes that interest on the Series A Deferrable Interest Subordinated Debentures will be deductible under the tests referred to in these notices. If, as a result of a change in law or a pronouncement or decision interpreting or applying any applicable law, Met-Ed Capital receives an opinion of counsel to the effect that interest on the Series A Deferrable Interest Subordinated Debentures would not be deductible, Met-Ed Capital would have the option to redeem the Series A Preferred Securities or to dissolve and cause Series A Deferrable Interest Subordinated Debentures to be distributed to the holders of the Series A Preferred Securities, as described under "Description of Preferred Securities-Special Event Redemption or Distribution" in the accompanying Prospectus. USE OF PROCEEDS The proceeds to be received by Met-Ed Capital from the sale of the Series A Preferred Securities will be used to purchase Series A Deferrable Interest Subordinated Debentures of the Company and will be applied by the Company to the repayment of outstanding short-term debt, for construction purposes and for other general corporate purposes, including the redemption of outstanding senior securities pursuant to the optional redemption provisions thereof, if economical. CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES The following information should be read in conjunction with the statements under "Description of Preferred Securities" in the accompanying Prospectus. Amount, Dividends, Redemption An aggregate of _____________ Series A Preferred Securities, having an aggregate stated liquidation preference of $____________ ($25 per Series A Preferred Security), are being offered hereby. Dividends on the Series A Preferred Securities 5 will be cumulative, will accrue from ____________, 1994 and will be payable monthly in arrears on the last day of each calendar month of each year, commencing ______________, 1994, except as otherwise described in the accompanying Prospectus. The Dividends payable on each Series A Preferred Security will be fixed at a rate per annum of __% of the $25 stated liquidation preference thereof. The Series A Preferred Securities will be redeemable at the option of Met-Ed Capital, in whole or in part from time to time, on or after _________________, 1999 at the Redemption Price. In addition, the Series A Preferred Securities are subject to redemption at the Redemption Price under circumstances described under "Description of Preferred Securities-Mandatory Redemption;Optional Redemption; Special Event Redemption or Distribution" in the accompanying Prospectus. CERTAIN TERMS OF THE SERIES A DEFERRABLE INTEREST SUBORDINATED DEBENTURES The following information should be read in conjunction with the statements under "Description of the Deferrable Interest Subordinated Debentures" in the accompanying Prospectus. General The Series A Deferrable Interest Subordinated Debentures will be issued under the Indenture dated as of ______________, 1994 between the Company and United States Trust Company of New York, as Trustee, and may be distributed to the holders of Series A Preferred Securities upon a dissolution of Met-Ed Capital under circumstances described under "Description of Preferred Securities-Special Event Redemption or Distribution" in the accompanying Prospectus. Principal Amount, Interest, Maturity, Redemption An aggregate of $_________ principal amount of Series A Deferrable Interest Subordinated Debentures will be issued, such amount being the sum of the aggregate stated liquidation preference of the Series A Preferred Securities and the General Partner's related capital contribution. Each Series A Deferrable Interest Subordinated Debenture will bear interest at the rate of __% per annum from the original date of issuance, payable monthly in arrears on the last day of each calendar month of each year, except as otherwise provided in the accompanying Prospectus. The Series A Deferrable Interest Subordinated Debentures will mature on __________, 2043 and will be redeemable at the option of the Company at any time on or after _________________, 1999 at a Debenture Redemption Price equal to 100% of their principal amount plus accrued and unpaid interest to the Redemption Date, together with any additional interest accrued thereon. The Series A Deferrable Interest Subordinated 6 Debentures are also redeemable upon the occurrence of certain events which cause the Series A Preferred Securities to become redeemable. Proceeds from the repayment or redemption of Series A Deferrable Interest Subordinated Debentures will be applied to redeem the Series A Preferred Securities. UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, Met-Ed Capital has agreed to sell to each of the several Underwriters named below, and each of the Underwriters, for whom Goldman, Sachs & Co., Dean Witter Reynolds Inc., A.G. Edwards & Sons, Inc., Kidder, Peabody & Co. Incorporated, Morgan Stanley & Co. Incorporated, PaineWebber Incorporated and Prudential Securities Incorporated are acting as Representatives, has severally agreed to purchase from Met-Ed Capital the respective number of Series A Preferred Securities set forth opposite its name below: Number of Series A Preferred Underwriter Securities Goldman, Sachs & Co. . . . . . . . . . . . Dean Witter Reynolds Inc. . . . . . . . . . A.G. Edwards & Sons, Inc. . . . . . . . . . Kidder, Peabody & Co. Incorporated . . . . Morgan Stanley & Co. Incorporated . . . . . PaineWebber Incorporated . . . . . . . . . Prudential Securities Incorporated . . . . Total . . . . . . . . . . . . . 4,000,000 Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all such Series A Preferred Securities offered hereby, if any are taken. The Underwriters propose to offer the Series A Preferred Securities in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and in part to certain securities dealers at such price less a concession of $____ per Series A Preferred Security, except that such concession will be $___ per Series A Preferred Security sold to certain institutions. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $____ per Series A Preferred Security to certain brokers and dealers. After the Series A Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. 7 In view of the fact that the proceeds of the sale of the Series A Preferred Securities will be used to purchase the Company's Series A Deferrable Interest Subordinated Debentures, the Company will pay to the Underwriters, as compensation for their services, the amount of $____ per Series A Preferred Security for the accounts of the several Underwriters, except that such compensation will be $___ per Series A Preferred Security sold to certain institutions. The Company and Met-Ed Capital have agreed, during the period beginning from the date of the Underwriting Agreement and continuing to and including the earlier of (i) the date, after the closing date, on which the distribution of the Series A Preferred Securities and the Limited Guarantee ceases, as determined by the Underwriters, or (ii) 90 days after the closing date, not to offer, sell, contract to sell, or otherwise dispose of any Series A Preferred Securities, any limited partner interests of Met-Ed Capital, or any preferred stock or any other securities of Met-Ed Capital or the Company which are substantially similar to the Series A Preferred Securities or the Limited Guarantee, or any securities convertible into or exchangeable for Series A Preferred Securities, limited partner interests, preferred stock or such substantially similar securities of either Met-Ed Capital or the Company without the prior written consent of the Underwriters. Prior to this offering, there has been no public market for the Series A Preferred Securities. In order to meet one of the requirements for listing the Series A Preferred Securities on the New York Stock Exchange, the Underwriters will undertake to sell lots of 100 or more Series A Preferred Securities to a minimum of 400 beneficial holders. Met-Ed Capital and the Company have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. Certain of the Underwriters engage in transactions with, and from time to time have performed services for, the Company and its affiliates in the ordinary course of business. LEGAL OPINIONS Certain legal matters will be passed upon for the Company and Met-Ed Capital by Berlack, Israels & Liberman, New York, New York, and Ryan, Russell, Ogden & Seltzer, Reading, Pennsylvania, and for the Underwriters by Reid & Priest, New York, New York. Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to Met-Ed Capital. Berlack, Israels & Liberman and Reid & Priest may rely on the opinion of Ryan, Russell, Ogden & Seltzer as to matters of Pennsylvania law, and Berlack, Israels & Liberman, Ryan, Russell, Ogden & Seltzer and Reid & Priest may rely on the opinion of Richards, Layton & Finger, P.A., as to matters of Delaware law. Members and attorneys of Berlack, Israels & Liberman own an aggregate of 12,091 shares of the Common Stock of 8 the Company's parent, GPU. In addition, one such member holds 986 such shares as custodian for his children. Members and attorneys of Ryan, Russell, Ogden & Seltzer own an aggregate of 2,000 shares of the Common Stock of GPU. 9 SUBJECT TO COMPLETION, DATED AUGUST 10, 1994 PROSPECTUS $125,000,000 MET-ED CAPITAL Preferred Securities guaranteed to the extent the issuer has funds as set forth herein by, METROPOLITAN EDISON COMPANY Met-Ed Capital, L.P. ("Met-Ed Capital"), a Delaware limited partnership, all of the general partner interests in which are owned by a wholly owned subsidiary of Metropolitan Edison Company (the "Company"), may offer, from time to time, its preferred securities, representing limited partner interests ("Preferred Securities"), in one or more series. The payment of periodic cash distributions (hereinafter called "Dividends") with respect to Preferred Securities of any series, out of funds held by Met- Ed Capital and legally available therefor, and payments on liquidation or redemption with respect to the Preferred Securities are guaranteed on a limited basis by the Company to the extent described herein (the "Limited Guarantee"). The Company's obligations under the Limited Guarantee are subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined herein) of the Company but senior in right of payment to the Company's preferred and common stock. Deferrable Interest Subordinated Debentures of the Company ("Deferrable Interest Subordinated Debentures") will also be issued and sold from time to time in one or more series by the Company to Met-Ed Capital in connection with the investment of the proceeds from the offering of Preferred Securities. Deferrable Interest Subordinated Debentures subsequently may be distributed to holders of Preferred Securities in connection with a dissolution of Met-Ed Capital upon the occurrence of certain events as described under "Description of Preferred Securities - Special Event Redemption or Distribution". The Deferrable Interest Subordinated Debentures will be unsecured and subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company. The Preferred Securities may be offered in amounts, at prices and on terms to be determined at the time of offering; provided, however, that the aggregate initial public offering price of all Preferred Securities offered hereby shall not exceed $125,000,000. The specific designation, Dividend rate (or method of determination thereof), and any other rights, preferences, privileges, limitations and restrictions relating to the Preferred Securities of the particular series in respect of which this Prospectus is being delivered will be set forth in a Prospectus Supplement pertaining to such series (a "Prospectus Supplement"). _________________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. _________________________ The Preferred Securities may be sold to or through underwriters or dealers as designated from time to time. See "Plan of Distribution". The names of any such underwriters or dealers involved in the sale of the Preferred Securities of the particular series in respect of which this Prospectus is being delivered, the number of Preferred Securities to be purchased by any such underwriters or dealers and any applicable commissions or discounts will be set forth in a Prospectus Supplement. The net proceeds to the Company will also be set forth in a Prospectus Supplement. The date of this Prospectus is ___________, 1994. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of the Commission: Seven World Trade Center, New York, New York 10048; and 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain of the Company's securities are listed on, and reports and other information concerning the Company may also be inspected at the offices of, the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. This Prospectus does not contain all the information set forth in the Registration Statement on Form S-3 (herein, together with all amendments and exhibits thereto, referred to as the "Registration Statement"), which the Company and Met-Ed Capital have filed with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). Statements contained or incorporated by reference herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the Registration Statement. No separate financial statements of Met-Ed Capital have been included herein. The Company and Met-Ed Capital do not consider that such financial statements would be material to holders of Preferred Securities because Met-Ed Capital is a newly formed special purpose entity, has no operating history and no independent operations and is not engaged in, and does not propose to engage in, any activity other than as set forth below. See "Met-Ed Capital". INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed by the Company with the Commission pursuant to the Exchange Act are incorporated herein by reference: 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1993; 2. The Company's Current Reports on Form 8-K dated February 16, 1994, February 28, 1994 , June 10, 1994, July 12, 1994 and August 9, 1994; and 3. The Company's Quarterly Reports on Form 10- Q for the quarters ended March 31, 1994 and June 30, 1994. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to 2 the termination of the offering of the securities offered hereby shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document all or a portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein or in a Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Any person receiving a copy of this Prospectus or any Prospectus Supplement may obtain, without charge, upon written or oral request, a copy of any or all of the documents incorporated herein or therein by reference (not including the exhibits to such documents, unless such exhibits are specifically incorporated by reference in such documents). Requests for such copies should be directed to Metropolitan Edison Company, P.O. Box 16001, Reading, Pennsylvania 19640, Attention: Secretary. The Company's telephone number is (610) 929-3601. METROPOLITAN EDISON COMPANY The Company, a public utility furnishing electric service wholly within the Commonwealth of Pennsylvania, is a subsidiary of General Public Utilities Corporation ("GPU"), a holding company registered under the Public Utility Holding Company Act of 1935. In 1993, the Company provided retail service to approximately 445,000 customers in an area in eastern and south central Pennsylvania having an estimated population of 950,000. The Company also sells electricity at wholesale to four municipalities having an estimated population of over 11,000. The Company's subsidiary, York Haven Power Company, is the owner and licensee of the York Haven Hydroelectric Project. The Company's principal executive offices are located at 2800 Pottsville Pike, Reading, Pennsylvania 19605, and its telephone number is (610) 929-3601. For the year 1993, electric sales to residential customers accounted for about 43% of operating revenues from customers and 36% of kilowatt-hour ("kwh") sales to customers; sales to commercial customers accounted for about 28% of operating revenues from customers and 26% of kwh sales to customers; sales to industrial customers accounted for about 27% of operating revenues from customers and 35% of kwh sales to customers; and sales to rural electric cooperatives, municipalities (primarily for street and highway lighting) and others accounted for about 2% of operating revenues from customers and 3% of kwh sales to customers. The Company also makes interchange and spot market sales of electricity to other utilities. The revenues derived from the largest single industrial customer accounted for approximately 2% of operating revenues from customers for the year 1993 and the 25 largest industrial customers in the aggregate accounted for approximately 11% of such revenues. 3 The electric generating and transmission facilities of the Company and its affiliates, Jersey Central Power & Light Company and Pennsylvania Electric Company (collectively, the "GPU System"), are physically interconnected and are operated as a single integrated and coordinated system. The transmission facilities of the integrated system are physically interconnected with neighboring nonaffiliated utilities in Pennsylvania, New Jersey, Maryland, New York and Ohio. The Company is a member of the Pennsylvania-New Jersey-Maryland Interconnection ("PJM") and the Mid-Atlantic Area Council, an organization providing coordinated review of the planning by utilities in the PJM area. The interconnection facilities are used for substantial capacity and energy interchange and purchased power transactions as well as emergency assistance. The Company owns 50% undivided interests in Unit 1 and the inactive Unit 2 of the Three Mile Island nuclear generating station near Middletown, Pennsylvania. The Company's nuclear generating facilities are operated and maintained by GPU Nuclear Corporation, a subsidiary of GPU. The Company and its affiliates are seeking regulatory approvals for GPU Generation Corporation, a newly formed subsidiary of GPU, to operate and maintain their fossil-fueled and hydroelectric generating facilities. RECENT DEVELOPMENTS On July 11, 1994, the Pennsylvania Commonwealth Court reversed a March 1993 rate order issued by the Pennsylvania Public Utility Commission ("PaPUC") allowing the Company to recover from customers certain future Three Mile Island Unit No. 2 ("TMI-2") retirement costs. As a result of this decision, the Company recorded a pre-tax charge to income totalling $127.6 million in the quarter ended June 30, 1994. The Company plans to begin making non-recoverable contributions to an external trust to fund its TMI-2 retirement costs in late 1995. The Company will also be required to charge to expense its share of any future increases in the estimates of these costs. The Company intends to file a petition with the Pennsylvania Supreme Court seeking review of the Commonwealth Court decision. Also during the quarter ended June 30, 1994, the Company recorded a pre-tax charge to income of $35 million for costs related to acceptance by Company employees of a voluntary enhanced retirement program offered in April 1994. Approximately 11% of the GPU System's workforce accepted the program, which is part of the GPU System's corporate realignment program designed to reduce overall costs and enhance the System's competitive position. As a result of these pre-tax charges to income, the interest and dividend coverage requirements in the Company's indenture and charter will prevent the Company from issuing any additional first mortgage bonds or cumulative preferred stock (other than $65 million of additional first mortgage bonds issuable on the basis of previously retired bonds) for approximately one year. The issuance of Preferred Securities is not subject to such coverage requirements; the Company's ability to issue Deferrable Interest Subordinated Debentures is, however, 4 subject to the restrictions in the Company's charter that outstanding unsecured indebtedness may not, in general, exceed 20% of the Company's outstanding secured indebtedness and capital stock, premium and surplus thereon. (For further information, reference is made to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 which is incorporated herein by reference). FINANCING PROGRAM Depending upon market conditions, during 1994 and 1995 Met- Ed Capital expects to offer up to $125,000,000 stated liquidation preference of Preferred Securities, the proceeds of which would be used to purchase the Company's Deferrable Interest Subordinated Debentures. The Company may also offer during such period additional first mortgage bonds, which may be in the form of secured medium-term notes, although the Company will be able to issue only $65 million of such additional securities until mid 1995 due to interest coverage restrictions in the Company's indenture. See "Recent Developments". The Company also expects to have short-term borrowings outstanding from time to time during such period. CERTAIN COMPANY CONSOLIDATED FINANCIAL INFORMATION (1) (Dollars In Thousands) Twelve Months Ended June 30, 1994 Years Ended December 31, (unaudited) 1991 1992 1993 Income Summary: Operating Revenues $788,462 $821,823 $801,487 $807,148 Net Income 62,341 73,077 77,875 (3,875) 5 June 30, 1994 (unaudited) Actual Pro Forma (2) Amount % Amount % Capital Structure: Long-term debt (including unamortized net discount)(3) $ 570,315 46.3% $ 570,315 42.1% Preferred Stock (including premium) 58,659 4.8 58,659 4.3 Preferred Securities of Subsidiary - - 125,000 9.2 Common Equity 601,876 48.9 601,876 44.4 Total $1,230,850 100.0 $1,355,850 100.0 ____________________ (1) This information should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1993. (2) Gives effect to the issuance of $125,000 aggregate stated liquidation preference of Preferred Securities and the use of the proceeds thereof to purchase the Company's Deferrable Interest Subordinated Debentures. (3) Includes obligations due within one year. COMPANY COVERAGE RATIOS (Dollars in Thousands) The Company's Ratio of Earnings to Fixed Charges for each of the periods indicated was as follows: Twelve Months Ended June 30, 1994 Years Ended December 31, (unaudited) 1989 1990 1991 1992 1993 Actual ProForma(1) 3.88 3.66 2.44 3.41 3.28 .75(2) .64(2) The Ratio of Earnings to Fixed Charges represents, on a pre- tax basis, the number of times earnings cover fixed charges. Earnings consist of Income Before Cumulative Effect of Accounting Change, to which has been added fixed charges and taxes based on income. Fixed charges consist of interest on funded indebtedness, other interest, amortization of net discount on debt and the interest portion of all rentals charged to income. 6 The Company's Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends for each of the periods indicated was as follows: Twelve Months Ended June 30, 1994 Years Ended December 31, (unaudited) 1989 1990 1991 1992 1993 Actual ProForma(1) 2.92 2.83 1.86 2.55 2.72 .61(2) .56(2) ________________________ (1) Gives effect to the issuance of $125,000 aggregate principal amount of Deferrable Interest Subordinated Debentures at an assumed interest rate of 9% per annum. (2) Pre-tax earnings for the twelve months ended June 30, 1994 are inadequate to cover both fixed charges and combined fixed charges and preferred stock dividends. The deficiency in pre-tax earnings for the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends is $15,108 and $29,269, respectively, on an actual basis, and $26,358 and $35,660, respectively, on a pro forma basis. Such amounts represent additional pre-tax earnings needed to reach a one-to-one ratio. The Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends represents, on a pre-tax basis, the number of times earnings cover fixed charges and preferred stock dividends. Earnings consist of Income Before Cumulative Effect of Accounting Change, to which has been added fixed charges and taxes based on income of the Company. Combined fixed charges and preferred stock dividends consist of interest on funded indebtedness, other interest, amortization of net discount on debt, preferred stock dividends (increased to reflect the pre- tax earnings required to cover such dividend requirements) and the interest portion of all rentals charged to income. USE OF PROCEEDS The proceeds to be received by Met-Ed Capital from the sale of the Preferred Securities will be used to purchase Deferrable Interest Subordinated Debentures of the Company and, unless otherwise specified in any Prospectus Supplement, will be applied by the Company to the repayment of outstanding short-term debt, for construction purposes and for other general corporate purposes, including the redemption of outstanding senior securities pursuant to the optional redemption provisions thereof, if economical. MET-ED CAPITAL 7 Met-Ed Capital is a limited partnership formed under the laws of the State of Delaware. All of its general partner interests, which are non-transferable, are owned by Met-Ed Preferred Capital, Inc. (the "General Partner"), a Delaware corporation and a wholly owned special purpose subsidiary of the Company, which will be the sole general partner of Met-Ed Capital. Met-Ed Capital's principal executive offices are located at Mellon Bank Center, Tenth and Market Streets, Wilmington, Delaware 19801, and its telephone number is (302) 654-5893. As a limited partnership, all of the business and affairs of Met-Ed Capital will be managed by the General Partner. Met-Ed Capital exists solely for the purpose of issuing its partner interests and utilizing the proceeds thereof to acquire the Company's Deferrable Interest Subordinated Debentures, which will be issued under and pursuant to the Indenture (the "Indenture") dated as of ___________________, 1994 between the Company and United States Trust Company of New York, as Trustee (the "Trustee"). Met-Ed Capital has been advised by its special Delaware counsel that, assuming that a holder of Preferred Securities acts in conformity with the provisions of Met-Ed Capital's Amended and Restated Limited Partnership Agreement, which will be substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part (the "Limited Partnership Agreement"), a holder of Preferred Securities (other than the General Partner) will not be liable for the debts, obligations and liabilities of Met-Ed Capital, whether arising in contract, tort or otherwise, solely by reason of being a limited partner of Met-Ed Capital (subject to the obligation of a limited partner to repay any funds wrongfully distributed to it). Pursuant to the Limited Partnership Agreement, each holder of Preferred Securities, upon acquisition thereof, will be deemed to have appointed the General Partner as such holder's attorney- in-fact to execute, in the name, place and stead of such holder, certain instruments, documents and certificates as may be required from time to time for the purposes contemplated in the Limited Partnership Agreement. DESCRIPTION OF PREFERRED SECURITIES General All of the general partner interests of Met-Ed Capital will be owned by the General Partner. The Limited Partnership Agreement will authorize the General Partner to establish series of Preferred Securities having such designations, rights, privileges, restrictions, and other terms and provisions, whether in regard to distributions, return of capital or otherwise, as the General Partner may determine. Met-Ed Capital will therefore be authorized to issue and sell additional Preferred Securities from time to time, pursuant to the Registration Statement of which this Prospectus forms a part or otherwise; provided, however, that all Preferred Securities shall be of equal rank with regard to participation in the profits and the assets of Met-Ed Capital. The summary of certain terms and provisions of the Preferred Securities set forth below does not purport to be 8 complete and is subject to, and qualified in its entirety by reference to, the Limited Partnership Agreement. Dividends Dividends on each series of Preferred Securities will be cumulative, will accrue from the date of issuance thereof and will be payable monthly in arrears on the last day of each calendar month of each year, except as otherwise described below. The Dividend rate applicable to a series of Preferred Securities shall be specified in a Prospectus Supplement. The Company has the right under the Indenture to extend the interest payment period on the Deferrable Interest Subordinated Debentures at any time and from time to time to up to 60 consecutive months and, as a consequence, monthly Dividends on the Preferred Securities can be deferred (but will continue to accumulate) by Met-Ed Capital during any such extended interest payment period. Accrued and unpaid Dividends on the Preferred Securities will accrue additional Dividends in respect thereof at the Dividend rate per annum applicable to the Preferred Securities. In the event that the Company exercises its right to extend the interest payment period, the Company may not declare or pay dividends on, or redeem, purchase or acquire, any of its preferred or common stock. Met-Ed Capital and the Company currently believe that an extension of an interest payment period on the Deferrable Interest Subordinated Debentures and thus on the Preferred Securities is remote. See "Voting Rights" and "Description of the Deferrable Interest Subordinated Debentures- Option to Extend Interest Payment Period". The amount of the Dividends payable for any period will be computed on the basis of twelve 30-day months and a 360-day year and, for any period shorter than a full monthly Dividend period, will be computed on the basis of the actual number of days elapsed in such period. Met-Ed Capital may not pay a Dividend or make a distribution to a partner to the extent that at the time of the Dividend or distribution, after giving effect thereto, all liabilities of Met-Ed Capital, other than liabilities to partners on account of their partner interests and liabilities for which the recourse of creditors is limited to specified property of Met-Ed Capital, exceed the fair value of the assets of Met-Ed Capital, except that the fair value of property that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of Met-Ed Capital only to the extent that the fair value of that property exceeds that liability. Dividends on the Preferred Securities must be paid by Met- Ed Capital in any calendar year or portion thereof to the extent that Met-Ed Capital has cash on hand sufficient to permit such payments and funds legally available therefor. It is anticipated that Met-Ed Capital's earnings will consist only of interest payable by the Company under the Deferrable Interest Subordinated Debentures. See "Description of the Deferrable Interest Subordinated Debentures-Interest". 9 Dividends on the Preferred Securities will be payable to the holders thereof as they appear on the books and records of Met- Ed Capital on the relevant record dates, which, so long as the Preferred Securities remain in book-entry-only form, will be one Business Day prior to the relevant payment dates. Subject to any applicable laws and regulations and the provisions of the Limited Partnership Agreement, each such payment will be made as described under "Book-Entry-Only Issuance-The Depository Trust Company". In the event that the Preferred Securities do not remain in book-entry-only form, the record dates will be the fifteenth day of each month. In the event that any date on which Dividends are payable on the Preferred Securities is not a Business Day, then payment of the Dividend payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" shall mean any day other than a day on which banking institutions in The City of New York are authorized or required by law to close. Certain Restrictions on Met-Ed Capital If Dividends have not been paid in full on any series of Preferred Securities, Met-Ed Capital may not: (i) pay or declare any Dividends on any other series of Preferred Securities unless the amount of any Dividends paid or declared on any Preferred Securities is paid or declared on all Preferred Securities then outstanding on a pro rata basis on the date such Dividends are paid or declared, so that (x) (a) the aggregate amount of Dividends paid or declared on such series of Preferred Securities bears to (b) the aggregate amount of Dividends paid or declared on all such Preferred Securities outstanding the same ratio as (y) (a) the aggregate of all accumulated arrears of unpaid Dividends in respect of such series of Preferred Securities bears to (b) the aggregate of all accumulated arrears of unpaid Dividends in respect of all such Preferred Securities outstanding; (ii) pay or declare any distributions on any of its general partner interests; or (iii) redeem, purchase or otherwise acquire any Preferred Securities or its general partner interests; until, in each case, such time as all accumulated and unpaid Dividends on all series of Preferred Securities shall have been paid in full for all prior Dividend periods. As of the date of this Prospectus, there are no Preferred Securities outstanding. 10 Mandatory Redemption If the Company pays when due the Deferrable Interest Subordinated Debentures purchased by Met-Ed Capital with the proceeds of the sale of a series of Preferred Securities or redeems such Deferrable Interest Subordinated Debentures at any time as described under "Description of the Deferrable Interest Subordinated Debentures-Optional Redemption", the proceeds will be applied to redeem the related series of Preferred Securities at a redemption price equal to the stated liquidation preference thereof, plus any accumulated, unpaid and additional Dividends accrued thereon to the date fixed for redemption (the "Redemption Price"). Optional Redemption The Preferred Securities of each series will be redeemable, at the option of Met-Ed Capital, in whole or in part, at such time or times as shall be specified in a Prospectus Supplement, at the Redemption Price. If at any time after the issuance of any Preferred Securities, Met-Ed Capital is or would be required to pay Additional Amounts or the Company is or would be required to withhold or deduct certain amounts as described under "Additional Amounts" and "Description of the Limited Guarantee-Additional Amounts", then Met-Ed Capital may, at its option, redeem the Preferred Securities in whole or, if such requirement relates only to certain of the Preferred Securities, the Preferred Securities subject to such requirement, in each case at the Redemption Price. Special Event Redemption or Distribution If a Tax Event (as defined below) shall occur and be continuing, Met-Ed Capital may either: (i) redeem the Preferred Securities in whole (but not in part) at the Redemption Price within 90 days following the occurrence of such Special Event (as defined below); provided that, if at the time there is available to the General Partner the opportunity to eliminate, within such 90 day period, the Special Event by taking some ministerial action, such as filing a form or making an election, or pursuing some other similar reasonable measure which would not involve unreasonable cost or expense, which has no adverse effect on Met- Ed Capital or the Company, the General Partner will pursue such measure in lieu of redemption; or (ii) dissolve Met-Ed Capital and cause Deferrable Interest Subordinated Debentures with an aggregate principal amount equal to the aggregate stated liquidation preference of, and with an interest rate identical to, the Preferred Securities, to be distributed to the holders of the Preferred Securities in liquidation of such holders' interests in Met-Ed Capital, within 90 days following the occurrence of such Special Event, provided, however, that Met-Ed Capital shall have received an opinion of counsel (which may be regular tax counsel to the Company or an affiliate but not an employee thereof) to the effect that the holders of the Preferred Securities will not recognize any gain or loss for federal income 11 tax purposes as a result of such dissolution and distribution. Alternatively, Met-Ed Capital may elect to have the Preferred Securities remain outstanding. If an Investment Company Act Event (as defined below) shall occur and be continuing, Met-Ed Capital must elect either option (i) or (ii) above. Either a Tax Event or an Investment Company Act Event shall be deemed a "Special Event". "Tax Event" means that Met-Ed Capital shall have received an opinion of counsel (which may be regular tax counsel to the Company or an affiliate but not an employee thereof) to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein affecting taxation, or as a result of any official administrative pronouncement or judicial decision interpreting or applying any applicable laws or regulations, which amendment or change is effective, or which pronouncement or decision has been issued or rendered, on or after the date of issuance of any series of Preferred Securities, there is more than an insubstantial risk that (i) Met-Ed Capital will be subject to federal income tax with respect to interest received on the Deferrable Interest Subordinated Debentures or Met-Ed Capital will otherwise not be taxed as a partnership, (ii) interest payable on the Deferrable Interest Subordinated Debentures will not be deductible for federal income tax purposes or (iii) Met-Ed Capital is subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Act Event" means the occurrence of a change in law or regulation or a change in an official interpretation of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 40 Act Law") to the effect that Met-Ed Capital is or will be considered an "investment company" required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"), which Change in 40 Act Law becomes effective on or after the date of issuance of any series of Preferred Securities; provided that no Investment Company Act Event shall be deemed to have occurred if Met-Ed Capital shall have received an opinion of counsel (which may be regular counsel to the Company or an affiliate but not an employee thereof) to the effect that the Company and/or Met-Ed Capital have taken reasonable measures, in their discretion, to avoid such Change in 40 Act Law so that in the opinion of such counsel, notwithstanding such Change in 40 Act Law, Met-Ed Capital is not required to be registered as an "investment company" within the meaning of the 1940 Act. After the date fixed for any such dissolution of Met-Ed Capital and distribution of Deferrable Interest Subordinated Debentures, (i) the Preferred Securities will no longer be deemed to be outstanding, (ii) The Depository Trust Company or its nominee, as the record holder of the Preferred Securities, will exchange the global certificate or certificates representing the Preferred Securities for a registered global certificate or certificates representing the Deferrable Interest Subordinated Debentures to be so delivered and (iii) any certificates 12 representing Preferred Securities not held by The Depository Trust Company or its nominee will be deemed to represent Deferrable Interest Subordinated Debentures having a principal amount equal to the stated liquidation preference of such Preferred Securities until such certificates are presented to the Company or its agent for replacement. Redemption Procedures Met-Ed Capital may not redeem any outstanding Preferred Securities unless all accumulated and unpaid Dividends have been paid on all Preferred Securities for all monthly Dividend periods terminating on or prior to the date of redemption. If Met-Ed Capital gives a notice of redemption in respect of a series of Preferred Securities (which notice will be given not less than 30 nor more than 90 days prior to the redemption date and will be irrevocable), then, on the redemption date, Met-Ed Capital will irrevocably deposit with The Depository Trust Company or its successor securities depository funds sufficient to pay the applicable Redemption Price and will give The Depository Trust Company or its successor securities depository irrevocable instructions and authority to pay the Redemption Price to the Beneficial Owners (as defined under "Book-Entry- Only Issuance-The Depository Trust Company"). If notice of redemption shall have been given and funds deposited as required, then on the date of such deposit, all rights of holders of such series of Preferred Securities so called for redemption will cease, except the right of the holders of such series of Preferred Securities to receive the Redemption Price, but without interest. In the event that any date fixed for redemption of such series of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day falls in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price in respect of any Preferred Securities is not made either by Met-Ed Capital or by the Company pursuant to the Limited Guarantee described under "Description of the Limited Guarantee", Dividends on such Preferred Securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. In the event that less than all of a series of outstanding Preferred Securities are to be so redeemed, the Preferred Securities to be redeemed will be selected as described under "Book-Entry-Only Issuance-The Depository Trust Company". In the case of a partial redemption of a series of Preferred Securities resulting from a requirement that Met-Ed Capital pay Additional Amounts or the Company withhold or deduct certain amounts (see "Optional Redemption"), Met-Ed Capital will (i) cause the global certificates representing all of such series of Preferred Securities to be withdrawn from The Depository Trust Company or its successor securities depository (see "Book-Entry-Only 13 Issuance-The Depository Trust Company"), (ii) issue certificates in definitive form representing such series of Preferred Securities, and (iii) redeem the Preferred Securities subject to such requirement to withhold or deduct Additional Amounts. Subject to applicable law, the Company or its subsidiaries may at any time and from time to time purchase outstanding Preferred Securities by tender, in the open market or by private agreement. If a partial redemption or a purchase of outstanding Preferred Securities by tender, in the open market or by private agreement would result in a delisting of such series of Preferred Securities from any national securities exchange on which such series of Preferred Securities is then listed, Met-Ed Capital may then only redeem or purchase such series of Preferred Securities in whole. Liquidation Distribution In the event of any voluntary or involuntary dissolution and winding up of Met-Ed Capital, other than in connection with the distribution of Deferrable Interest Subordinated Debentures in liquidation of all of the interests of the holders of Preferred Securities, as described under "Special Event Redemption or Distribution" ("Distribution Event"), the holders of a series of Preferred Securities at the time outstanding will be entitled to receive out of the assets of Met-Ed Capital, after satisfaction of liabilities to creditors as required by Delaware law, before any distribution of assets is made to holders of its general partner interests, but together with the holders of every other series of Preferred Securities outstanding, an amount equal to the aggregate of the stated liquidation preference thereof and any accumulated, unpaid and additional Dividends accrued thereon to the date of payment and any accrued and unpaid Additional Amounts (the "Liquidation Distribution"). If, upon such liquidation, the Liquidation Distribution can be paid only in part because Met-Ed Capital has insufficient assets available to pay in full the aggregate Liquidation Distribution and the aggregate liquidation distributions on all other Preferred Securities then outstanding, then the amounts payable directly by Met-Ed Capital on such series of Preferred Securities and on all other Preferred Securities then outstanding shall be paid on a pro rata basis, so that (i) (x) the aggregate amount paid in respect of the Liquidation Distribution bears to (y) the aggregate amount paid as liquidation distributions on all other Preferred Securities then outstanding the same ratio as (ii) (x) the aggregate Liquidation Distribution bears to (y) the aggregate liquidation distributions on all other Preferred Securities then outstanding. Pursuant to the Limited Partnership Agreement, Met-Ed Capital shall be dissolved and its affairs shall be wound up: (i) upon the expiration of the term of Met-Ed Capital on June 30, 2060, 14 (ii) upon the bankruptcy, liquidation, dissolution or winding up of the Company, (iii) upon the occurrence of an event that causes the General Partner to cease being the general partner of Met-Ed Capital (provided that Met-Ed Capital will not be so dissolved under certain circumstances, including, without limitation, a transfer of the general partner interest to a permitted successor of the General Partner as set forth in the Limited Partnership Agreement), (iv) upon the entry of a decree of judicial dissolution, (v) in connection with a Distribution Event, or (vi) upon the written consent of the General Partner and all of the holders of the Preferred Securities. Merger, Consolidation, Amalgamation, etc. of Met-Ed Capital Met-Ed Capital may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corpor- ation or other entity, except with the prior approval of the holders of not less than 66-2/3% of the aggregate stated liquida- tion preference of the outstanding Preferred Securities or except as described below. The General Partner may, without the consent of the holders of the Preferred Securities, cause Met-Ed Capital to consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, a corporation, a limited liability company, a limited partnership, a trust or other entity organized as such under the laws of the United States or any state thereof or the District of Columbia, provided that (i) such successor entity either (x) expressly assumes all of the terms and provisions of the Preferred Securities by which Met-Ed Capital is bound and the other obligations of Met-Ed Capital or (y) substitutes for the Preferred Securities other securities having substantially the same terms as the Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, with regard to participation in the profits and the assets of the successor entity, at least as high as the Preferred Securities rank, with regard to participation in the profits and the assets of Met-Ed Capital, (ii) the Company confirms its obligation under the Limited Guarantee with regard to the Preferred Securities or Successor Securities, if any, (iii) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not cause any series of Preferred Securities or Successor Securities, if any, to be delisted by any national securities exchange on which such series of Preferred Securities or Successor Securities, if any, is then listed, (iv) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not cause the Preferred Securities or Successor Securities, if any, to be downgraded by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, (v) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease does not adversely affect the powers, preferences and other special rights of holders of Preferred Securities or Successor Securities, if any, in any material respect, (vi) such successor entity has a purpose substantially identical to that of Met-Ed Capital and (vii) prior to such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, Met-Ed 15 Capital shall have received an opinion of counsel (which may be regular tax or other counsel to the Company or an affiliate but not an employee thereof) to the effect that (w) the holders of outstanding Preferred Securities will not recognize any gain or loss for federal income tax purposes as a result of the consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, (x) such successor entity will be treated as a partnership for federal income tax purposes, (y) following such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease, the Company and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company, and (z) such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease will not adversely affect the limited liability of the holders of Preferred Securities. Voting Rights Except as provided below and under "Merger, Consolidation, Amalgamation, etc. of Met-Ed Capital", "Description of the Limited Guarantee-Amendments and Assignment" and "Description of the Deferrable Interest Subordinated Debentures-Amendment of the Indenture" and as otherwise required by law and the Limited Partnership Agreement, the holders of the Preferred Securities will have no voting rights. If (i) Met-Ed Capital fails to pay Dividends in full on the Preferred Securities for 18 consecutive monthly Dividend periods, or (ii) an Event of Default (as defined in the Indenture) occurs and is continuing, or (iii) the Company is in default on any of its payment or other obligations under the Limited Guarantee (as described under "Description of the Limited Guarantee-Certain Covenants of the Company"), then the holders of all Preferred Securities, acting as a single class, will be entitled, by a vote of the holders of a majority of the aggregate stated liquidation preference thereof, to appoint and authorize a special representative of Met-Ed Capital and the holders of Preferred Securities (a "Special Representative") to enforce Met-Ed Capital's rights under the Indenture, including, after failure to pay interest for 60 consecutive monthly interest periods, the payment of interest on the Deferrable Interest Subordinated Debentures, and to enforce the obligations of the Company under the Limited Guarantee. The Special Representative shall not be admitted as a partner in Met-Ed Capital or otherwise be deemed to be a partner in Met-Ed Capital and shall have no liability for the debts, obligations or liabilities of Met-Ed Capital. For purposes of determining whether Met-Ed Capital has failed to pay Dividends in full for 18 consecutive monthly Dividend periods, Dividends shall be deemed to remain in arrears, notwithstanding any payments in respect thereof, until full cumulative Dividends have been or contemporaneously are paid with respect to all monthly Dividend periods terminating on or prior to the date of payment of such full cumulative Dividends. Subject to requirements of applicable law, not later than 30 days after such right to appoint a Special Representative arises, the General Partner will convene a general meeting for the above purpose. If the General Partner fails to convene such meeting 16 within such 30-day period, the holders of 10% of the aggregate stated liquidation preference of the Preferred Securities will be entitled to convene such meeting. The provisions of the Limited Partnership Agreement relating to the convening and conduct of the general meetings of partners will apply with respect to any such meeting. Any Special Representative so appointed shall cease to act in such capacity immediately if Met-Ed Capital (or the Company pursuant to the Limited Guarantee) shall have paid in full all accumulated and unpaid Dividends on the Preferred Securities or such default or breach, as the case may be, shall have been cured. Notwithstanding the appointment of any such Special Representative, the Company shall retain all rights under the Indenture, including the right to extend the interest payment period on the Deferrable Interest Subordinated Debentures as provided under "Description of the Deferrable Interest Subordinated Debentures-Option to Extend Interest Payment Period". If any proposed amendment to the Limited Partnership Agreement provides for, or the General Partner otherwise proposes to effect, any action which would materially adversely affect the powers, preferences or special rights of any series of Preferred Securities, then the holders of such series of Preferred Securities will be entitled to vote on such amendment or action of the General Partner (but not on any other amendment or action) and, in the case of an amendment or action which would equally materially adversely affect the powers, preferences or special rights of any other series of Preferred Securities outstanding, all such series of Preferred Securities will be entitled to vote together as a single class on such amendment or action of the General Partner (but not on any other amendment or action), and such amendment or action shall not be effective except with the approval of the holders of not less than 66-2/3% of the aggregate stated liquidation preference of such Preferred Securities. Except in certain circumstances described under "Liquidation Distribution", which include a dissolution in connection with a Distribution Event, Met-Ed Capital will be dissolved and wound up only with the consent of the holders of all Preferred Securities then outstanding. The rights attached to any Preferred Securities will be deemed not to be adversely affected by the creation or issue of, and no vote will be required for the creation or issue of, any further series of Preferred Securities, any other securities which are pari passu with the Preferred Securities or any general partner interests of Met-Ed Capital. Holders of Preferred Securities have no preemptive rights. The Limited Partnership Agreement provides that the General Partner will not permit or cause Met-Ed Capital to file a voluntary petition in bankruptcy without the approval of the holders of not less than 66-2/3% of the aggregate stated liquidation preference of the outstanding Preferred Securities. So long as any Deferrable Interest Subordinated Debentures are held by Met-Ed Capital, the General Partner shall not (i) direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or executing any trust 17 or power conferred on the Trustee with respect to such series, (ii) waive any past default which is available under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Deferrable Interest Subordinated Debentures shall be due and payable, or (iv) consent to any amendment, modification or termination of the Indenture, where such consent shall be required, without, in each case, obtaining the prior approval of the holders of not less than 66-2/3% of the aggregate stated liquidation preference of all Preferred Securities affected thereby, acting as a single class; provided, however, that where a consent under the Indenture would require the consent of each holder affected thereby, no such consent shall be given by the General Partner without the prior consent of each holder of Preferred Securities affected thereby. The General Partner shall not revoke any action previously authorized or approved by a vote of any holders of Preferred Securities. The General Partner shall notify all holders of Preferred Securities of any notice of default received from the Trustee with respect to the Deferrable Interest Subordinated Debentures. Any required approval of holders of Preferred Securities may be given at a separate meeting of such holders convened for such purposes, at a general meeting of holders of Met-Ed Capital's partner interests or pursuant to written consent. Met-Ed Capital will cause a notice of any meeting at which holders of any series of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of such series of Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any matter to be voted on at such meeting or upon which written consent is sought, and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of the Preferred Securities will be required for Met-Ed Capital to redeem and cancel Preferred Securities in accordance with the Limited Partnership Agreement. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned by the Company or any entity owned more than 50% by the Company, either directly or indirectly, shall not be entitled to vote or consent and shall, for the purposes of such vote or consent, be treated as if they were not outstanding. Holders of Preferred Securities will have no rights to remove or replace the General Partner. Additional Amounts All payments in respect of the Preferred Securities by Met- Ed Capital will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied upon or 18 as a result of such payment by or on behalf of the United States, any state thereof or any other jurisdiction through which or from which such payment is made, or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In the event that any such withholding or deduction is required as a consequence of (i) the Deferrable Interest Subordinated Debentures not being treated as indebtedness for United States federal income tax purposes or (ii) Met-Ed Capital not being treated as a partnership for United States federal income tax purposes, Met-Ed Capital will pay as a Dividend such additional amounts as may be necessary in order that the net amounts received by the holders of the Preferred Securities after such withholding or deduction will equal the amounts which would have been receivable in respect of such Preferred Securities in the absence of such withholding or deduction ("Additional Amounts"), except that no such Additional Amounts will be payable to a holder of Preferred Securities (or a third party on such holder's behalf) with respect to Preferred Securities if: (a) such holder is liable for such taxes, duties, assessments or governmental charges in respect of such Preferred Securities by reason of such holder's having a connection with the United States, any state thereof or any other jurisdiction through which or from which such payment is made, or in which such holder resides, conducts business or has other contacts, other than being a holder of Preferred Securities, or (b) Met-Ed Capital has notified such holder of the obligation to withhold or deduct taxes and requested but not received from such holder a declaration of non- residence, a valid taxpayer identification number or other claim for exemption, and such withholding or deduction would not have been required had such declaration, taxpayer identification number or claim been received. Book-Entry-Only Issuance-The Depository Trust Company The Depository Trust Company ("DTC") will act as securities depository for the Preferred Securities. Each series of Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global Preferred Security certificates will be issued, representing in the aggregate the total number of Preferred Securities of each series, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and 19 pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Preferred Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities is discontinued. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to Cede & Co. If less than all of a series of Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will consent or vote with respect to 20 Preferred Securities. Under its usual procedure, DTC would mail an Omnibus Proxy to Met-Ed Capital as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Dividend payments on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customer practices and will be the responsibility of such Participants and not of DTC, Met- Ed Capital, the General Partner or the Company, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of Dividends to DTC is the responsibility of Met-Ed Capital, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Met-Ed Capital and the Company believe to be reliable, but neither Met- Ed Capital nor the Company takes any responsibility for the accuracy thereof. DTC may discontinue providing its services as securities depository with respect to the Preferred Securities at any time by giving reasonable notice to Met-Ed Capital. Under such circumstances, in the event that a successor securities depository is not obtained, Preferred Security certificates are required to be printed and delivered. Additionally, Met-Ed Capital (with the consent of the General Partner) may decide to discontinue use of the system of book-entry transfers through DTC (or a successor depository). In that event, certificates for the Preferred Securities will be printed and delivered. Additionally, in the event that Met-Ed Capital exercises its option to redeem only a portion of a series of Preferred Securities because Met-Ed Capital or the Company is or would be required to withhold or deduct Additional Amounts in regard to such Preferred Securities to be redeemed, Met-Ed Capital will cause the global certificates representing all of such series of Preferred Securities to be withdrawn from DTC (or a successor depository) and will issue certificates in definitive form representing such series of Preferred Securities. Thereafter, the Preferred Securities subject to such requirement to withhold or deduct Additional Amounts will be redeemed. Registrar, Transfer Agent and Paying Agent In the event that the Preferred Securities do not remain in book-entry-only form, the following provisions would apply: Mellon Bank, N.A. will act as registrar, transfer agent and paying agent for the Preferred Securities, but the Company may 21 designate an additional or substitute registrar, transfer agent and paying agent at any time. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of Met-Ed Capital, but upon payment (with the giving of such indemnity as Met-Ed Capital or the transfer agent may require) in respect of any tax or other governmental charges which may be imposed in relation to it. Met-Ed Capital will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption. Miscellaneous The General Partner is authorized and directed to use its best efforts to conduct the affairs of, and to operate, Met-Ed Capital in such a way that Met-Ed Capital would not be deemed to be an "investment company" required to be registered under the 1940 Act or taxed as a corporation for federal income tax purposes and so that the Deferrable Interest Subordinated Debentures will be treated as indebtedness of the Company for federal income tax purposes. In this connection, the General Partner is authorized to take any action not inconsistent with applicable law, the Certificate of Limited Partnership of Met-Ed Capital or the Limited Partnership Agreement, that does not materially adversely affect the interests of holders of Preferred Securities, that the General Partner determines in its discretion to be necessary or desirable for such purposes. DESCRIPTION OF THE LIMITED GUARANTEE Set forth below is a summary of information concerning the Limited Guarantee which will be executed and delivered by the Company in connection with each series of Preferred Securities for the benefit of the holders from time to time of the series of Preferred Securities to which it relates. This summary describes certain terms and provisions of the Limited Guarantee, but does not purport to be complete. References to provisions of the Limited Guarantee are qualified in their entirety by reference to the text of the Limited Guarantee, which will be substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus forms a part. General The Company will agree, on a limited basis as set forth therein, to pay in full, to the holders of the Preferred Securities, the Limited Guarantee Payments (as defined below) (except to the extent paid by Met-Ed Capital), as and when due, regardless of any defense, right of set-off or counterclaim which the Company or Met-Ed Capital may have or assert. The following payments to the extent not paid by Met-Ed Capital (the "Limited Guarantee Payments") will be subject to the Limited Guarantee (without duplication): (i) any accumulated and unpaid monthly Dividends on the Preferred Securities (except for monthly Dividends which are not paid during an Extension Period (as 22 defined under "Description of the Deferrable Interest Subordinated Debentures-Option to Extend Interest Payment Period")) to the extent that Met-Ed Capital has sufficient cash on hand to permit such payments and funds legally available therefor, (ii) the Redemption Price with respect to any Preferred Securities called for redemption by Met-Ed Capital to the extent that Met-Ed Capital has sufficient cash on hand to permit such payments and funds legally available therefor, (iii) upon a liquidation of Met-Ed Capital other than in connection with a Distribution Event, the lesser of (a) the Liquidation Distribution and (b) the amount of assets of Met-Ed Capital available for distribution to holders of Preferred Securities in liquidation of Met-Ed Capital, and (iv) any Additional Amounts payable by Met-Ed Capital in respect of the Preferred Securities. The Limited Guarantee further provides that the Company shall (a) cause the General Partner to declare and pay Dividends to the extent that Met-Ed Capital has legally available funds and sufficient cash and (b) so long as any of the Preferred Securities are outstanding, cause the General Partner to remain the general partner of Met-Ed Capital and timely perform all its duties as such (including the duty to pay Dividends on the Preferred Securities) in all material respects, which include, among other things, the General Partner's duties under the Limited Partnership Agreement to directly pay all costs and expenses of Met-Ed Capital (thereby insuring that the full amount of the Company's payments on its Deferrable Interest Subordinated Debentures will be available to allow payment to the holders of the Preferred Securities) and the covenant of the General Partner in the Limited Partnership Agreement to at all times maintain a "fair market value net worth" of, initially, at least 10% of the total contributions (less redemptions) to Met-Ed Capital. Accordingly, the Limited Guarantee, together with the related covenants contained in the Limited Partnership Agreement and the Company's obligations under the Deferrable Interest Subordinated Debentures, provides for the Company's full and unconditional guarantee of the Preferred Securities as set forth above. The Company's obligation to make a Limited Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Preferred Securities or by payment of such amounts by Met-Ed Capital to such holders, and may be enforced directly by or for the benefit of the holders of Preferred Securities. Certain Covenants of the Company So long as any Preferred Securities remain outstanding, neither the Company, nor any majority owned subsidiary of the Company, will declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its preferred or common stock (other than dividends to the Company by a wholly owned subsidiary of the Company) (i) during an Extension Period (as defined under "Description of the Deferrable Interest Subordinated Debentures-Option to Extend Interest Payment Period") or (ii) if at such time the Company shall be in default with respect to its payment or other obligations under the Limited Guarantee or there shall have occurred any event that, with the giving of notice or the lapse 23 of time or both, would constitute an Event of Default under the Indenture. In addition, so long as any Preferred Securities remain outstanding, the Company will (i) maintain direct or indirect 100% ownership of the general partner interests in Met-Ed Capital; (ii) cause at least 3% of the total value of Met-Ed Capital and at least 3% of all interests in the capital, income, gain, loss, deduction and credit of Met-Ed Capital to be represented by general partner interests; (iii) not cause Met-Ed Capital to be voluntarily dissolved and wound-up except upon the entry of a decree of judicial dissolution, in connection with a Distribution Event or certain mergers, consolidations or similar transactions permitted by the Limited Partnership Agreement or as otherwise described under "Description of Preferred Securities- Liquidation Distribution"; (iv) except as otherwise provided in the Limited Partnership Agreement, cause the General Partner to remain the general partner of Met-Ed Capital and timely perform all of its duties as general partner of Met-Ed Capital (including the duty to pay Dividends on the Preferred Securities out of cash on hand and funds legally available therefor) in all material respects, provided that any permitted successor of the Company under the Indenture may directly or indirectly succeed to the duties as general partner of Met-Ed Capital; and (v) use its reasonable efforts to cause Met-Ed Capital to remain a limited partnership and otherwise continue to be treated as a partnership for United States federal income tax purposes. Additional Amounts All Limited Guarantee Payments will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied upon or as a result of such payment by or on behalf of the United States, any state thereof or any other jurisdiction through which or from which such payment is made, or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In the event that any such withholding or deduction is required as a consequence of (i) the Deferrable Interest Subordinated Debentures not being treated as indebtedness for United States federal income tax purposes or (ii) Met-Ed Capital not being treated as a partnership for United States federal income tax purposes, the Company will pay such additional amounts as may be necessary in order that the net amounts received by the holders of the Preferred Securities after such withholding or deduction will equal the amount which would have been receivable in respect of the Preferred Securities in the absence of such withholding or deduction, except that no such additional amounts will be payable to a holder of Preferred Securities (or a third party on such holder's behalf) if: (a) such holder is liable for such taxes, duties, assessments or governmental charges in respect of the Preferred Securities by reason of such holder's having a connection with the United States, any state thereof or any other jurisdiction through which or from which 24 such payment is made, or in which such holder resides, conducts business or has other contacts, other than being a holder of Preferred Securities, or (b) Met-Ed Capital or the Company has notified such holder of the obligation to withhold or deduct taxes and requested but not received from such holder a declaration of non-residence, a valid taxpayer identification number or other claim for exemption, and such withholding or deduction would not have been required had such declaration, taxpayer identification number or claim been received. Amendments and Assignment The Limited Guarantee may only be amended by a written instrument executed by the Company; provided that, so long as any of the Preferred Securities remain outstanding, any such amendment that materially adversely affects the holders of the related series of Preferred Securities, any termination of the Limited Guarantee and any waiver of compliance with any covenant thereunder shall be effected only with the prior approval of the holders of not less than 66-2/3% of the aggregate stated liquidation preference of the affected series of Preferred Securities. Except in connection with a merger, sale, transfer or lease involving the Company as may be permitted under the Indenture (see "Description of the Deferrable Interest Subordinated Debentures-Consolidation, Merger, Sale or Conveyance "), the Company may not assign its obligations under the Limited Guarantee without the approval of the holders of not less than 66-2/3% of the aggregate stated liquidation preference of the related series of Preferred Securities. See "Description of Preferred Securities-Voting Rights". All guarantees and agreements contained in the Limited Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Preferred Securities. Termination of the Limited Guarantee The Limited Guarantee will terminate and be of no further force and effect upon full payment of the Redemption Price of all of the related series of Preferred Securities or upon full payment of the amounts payable upon liquidation of Met-Ed Capital or upon consummation of a Distribution Event. The Limited Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of such series of Preferred Securities must restore payment of any sums paid under such Preferred Securities or the Limited Guarantee. Status of the Limited Guarantee The Limited Guarantee will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company, and (ii) senior in right of payment to the Company's preferred and common stock. The Limited Partnership Agreement provides that each holder of Preferred 25 Securities by acceptance thereof agrees to the subordination provisions and other terms of the Limited Guarantee. The Limited Guarantee will constitute a limited guarantee of payment and not of collection. The Limited Guarantee will be held for the benefit of the holders of the related series of Preferred Securities. If appointed, a Special Representative may enforce the Limited Guarantee. If no Special Representative has been appointed to enforce the Limited Guarantee, the General Partner has the right to enforce the Limited Guarantee on behalf of the holders of the Preferred Securities. If the General Partner or the Special Representative fails to enforce the Limited Guarantee, any holder of Preferred Securities may institute a legal proceeding directly against the Company to enforce its rights under the Limited Guarantee, without first instituting a legal proceeding against Met-Ed Capital or any other person or entity. DESCRIPTION OF THE DEFERRABLE INTEREST SUBORDINATED DEBENTURES Set forth below is a description of the Deferrable Interest Subordinated Debentures which will be purchased by Met-Ed Capital with the proceeds of the sale of the Preferred Securities and the General Partner's related capital contribution. This description is a brief summary of certain provisions contained in the Indenture, does not purport to be complete and is qualified in its entirety by reference to the text of the Indenture, including the definition therein of certain capitalized terms, a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. Under certain circumstances following the occurrence of a Special Event, Met-Ed Capital may dissolve and cause Deferrable Interest Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of their interests in Met-Ed Capital. See "Description of Preferred Securities- Special Event Redemption or Distribution". General Deferrable Interest Subordinated Debentures will be issued in series under the Indenture. Each series of Deferrable Interest Subordinated Debentures will be limited in aggregate principal amount to the amount of the aggregate stated liquidation preference of the related series of Preferred Securities together with any related capital contribution from the General Partner. So long as any Preferred Securities remain outstanding, any Special Representative appointed by the holders of Preferred Securities, as described under "Description of Preferred Securities-Voting Rights", will be entitled to enforce the Company's obligations under the Indenture and the Deferrable Interest Subordinated Debentures directly against the Company. The Deferrable Interest Subordinated Debentures will become due and payable, together with (i) all accrued and unpaid interest to the date of payment, including Additional Interest 26 (as defined under "Additional Interest"), if any, and (ii) any accrued interest thereon, on the 49th anniversary of the date of issuance thereof. Mandatory Prepayment If Met-Ed Capital redeems Preferred Securities in accordance with their terms, the related Deferrable Interest Subordinated Debentures will become due and payable in a principal amount equal to the aggregate stated liquidation preference of the Preferred Securities so redeemed, together with (i) all accrued and unpaid interest to the date of payment, including Additional Interest, if any, and (ii) any accrued interest thereon. Optional Redemption The Company will have the right to redeem the Deferrable Interest Subordinated Debentures, without premium or penalty, at a price equal to 100% of their principal amount, together with (i) all accrued and unpaid interest on the Deferrable Interest Subordinated Debentures being redeemed to the Redemption Date, including Additional Interest, if any, and (ii) any accrued interest thereon (collectively, the "Debenture Redemption Price") : (x) in whole or in part at such time or times as shall be specified in a Prospectus Supplement; and (y) in whole at any time if the Company is or would be required to pay Additional Interest on the Deferrable Interest Subordinated Debentures or in part at any time if the Company is or would be required to pay Additional Interest with respect to only a portion of the Deferrable Interest Subordinated Debentures, provided that if a partial redemption would, through the corresponding partial redemption required under the terms of the related series of Preferred Securities, result in a delisting of the related series of Preferred Securities from any national securities exchange on which such series of Preferred Securities is then listed, the Company may only redeem the Deferrable Interest Subordinated Debentures in whole. In no event, however, shall the Company have the right to redeem the Deferrable Interest Subordinated Debentures, or a portion thereof, under this clause (y) based on a de minimis obligation to pay Additional Interest. For purposes of the foregoing, in the event that the Company is advised by counsel (which may be regular tax counsel to the Company or an affiliate but not an employee thereof) that more than an insubstantial risk exists that Met-Ed Capital will incur penalties, interest or tax under the Internal Revenue Code of 1986, as amended, or other applicable law if it does not withhold or deduct certain amounts as may be required in connection with monthly Dividends or other payments made by it with respect to the Preferred Securities, or that the Company will incur such penalties, interest or tax if it does not withhold 27 or deduct in connection with payments made by it under the Deferrable Interest Subordinated Debentures, the Company shall have the right to redeem the Deferrable Interest Subordinated Debentures, or a portion thereof, under this clause (y) unless the obligation to pay Additional Interest, if Met-Ed Capital or the Company does so withhold, is a de minimis obligation. Redemption Procedures If the Company gives a notice of redemption in respect of a series of Deferrable Interest Subordinated Debentures (which notice will be given not less than 30 nor more than 90 days prior to the redemption date and will be irrevocable), then, on the redemption date, the Company will irrevocably deposit with the Trustee funds sufficient to pay the applicable Debenture Redemption Price. If notice of redemption shall have been given and funds deposited as required, then on the date of such deposit, all rights of holders of such Deferrable Interest Subordinated Debentures so called for redemption will cease, except the right of the holders of such Deferrable Interest Subordinated Debentures to receive the Debenture Redemption Price, but without interest. In the event that any date fixed for redemption of Deferrable Interest Subordinated Debentures is not a Business Day, then payment of the Debenture Redemption Price payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day. In the event that less than all of a series of outstanding Deferrable Interest Subordinated Debentures are to be so redeemed following a Distribution Event, the Deferrable Interest Subordinated Debentures to be redeemed will be selected as described under "Description of Preferred Securities-Book-Entry- Only Issuance-The Depository Trust Company". Subject to applicable law, after a Distribution Event the Company or its subsidiaries may at any time and from time to time purchase outstanding Deferrable Interest Subordinated Debentures by tender, in the open market or by private agreement. If a partial redemption or a purchase of outstanding Deferrable Interest Subordinated Debentures by tender, in the open market or by private agreement would result in a delisting of such series of Deferrable Interest Subordinated Debentures from any national securities exchange on which such series of Deferrable Interest Subordinated Debentures is then listed, the Company may then only redeem or purchase such series of Deferrable Interest Subordinated Debentures in whole. Interest Each Deferrable Interest Subordinated Debenture will bear interest at a rate per annum equal to the Dividend rate on the related series of Preferred Securities, payable monthly in 28 arrears on the last day of each calendar month of each year (each an "Interest Payment Date"), to the person in whose name such Deferrable Interest Subordinated Debenture is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date (the "Regular Record Date"). In the event that the Deferrable Interest Subordinated Debentures do not remain in book-entry-only form, the record dates will be the fifteenth day of each month. The amount of interest payable for any period will be computed on the basis of twelve 30-day months and a 360-day year and, for any period shorter than a full monthly interest period, on the basis of the actual number of days elapsed. In the event that any date on which interest is payable on the Deferrable Interest Subordinated Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. Option to Extend Interest Payment Period The Company will have the right at any time and from time to time during the term of the Deferrable Interest Subordinated Debentures, so long as the Company is not in default in the payment of interest on the Deferrable Interest Subordinated Debentures, to extend the interest payment period on the Deferrable Interest Subordinated Debentures to up to 60 consecutive months, provided that at the end of each such period (an "Extension Period") the Company shall pay all interest then accrued and unpaid (together with interest thereon at the rate specified for the Deferrable Interest Subordinated Debentures to the extent permitted by applicable law). During any such Extension Period, neither the Company, nor any majority owned subsidiary of the Company, may declare or pay any dividends on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than dividends to the Company by a wholly owned subsidiary of the Company). No interest shall be due and payable during an Extension Period, except at the end thereof. If Met-Ed Capital shall be the sole holder of the Deferrable Interest Subordinated Debentures, the Company shall give Met-Ed Capital notice of its selection of such extended interest payment period one Business Day prior to the earlier of (i) the date the related Dividend on the Preferred Securities is payable or (ii) the date Met-Ed Capital is required to give notice to any national securities exchange on which the Preferred Securities are listed or other applicable self- regulatory organization or to the holders of the Preferred Securities of the record date or the date such Dividend is payable, but in any event not less than one Business Day prior to such record date. The Company shall cause Met-Ed Capital to give notice of the Company's selection of such extended interest payment period to the holders of the Preferred Securities. If Met-Ed Capital shall not be the sole holder of the Deferrable Interest Subordinated Debentures, the Company will give the 29 holders of the Deferrable Interest Subordinated Debentures notice of its selection of such extended interest payment period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date the Company is required to give notice of the record or payment date of such related interest payment to any national securities exchange on which the Deferrable Interest Subordinated Debentures are then listed or other applicable self- regulatory organization or to holders of the Deferrable Interest Subordinated Debentures, but in any event not less than two Business Days prior to such record date. Additional Interest If at any time Met-Ed Capital is required to pay any Additional Amounts in respect of the Preferred Securities pursuant to the terms thereof, then the Company will pay as interest ("Additional Interest") on the Deferrable Interest Subordinated Debentures an amount equal to such Additional Amounts. In addition, if Met-Ed Capital would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company will also pay as Additional Interest such amounts as shall be required so that the net amounts received and retained by Met-Ed Capital after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts Met-Ed Capital would have received had no such taxes, duties, assessments or governmental charges been imposed. Credit Prior to a Distribution Event, the Company shall receive a credit against any payment it is otherwise required to make under the Deferrable Interest Subordinated Debentures to the extent it has theretofore made, or is concurrently making, a payment under the Limited Guarantee. Subordination All payments by the Company in respect of the Deferrable Interest Subordinated Debentures shall be subordinated to the prior payment in full of all amounts payable on Senior Indebtedness. "Senior Indebtedness" consists of (i) the principal of and premium (if any) in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments (including purchase money obligations) for payment of which the Company is responsible or liable; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) certain obligations of the Company for the reimbursement of any obligor on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of other persons for the payment of 30 which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), except for any such indebtedness that is by its terms subordinated to or pari passu with the Deferrable Interest Subordinated Debentures. Upon any payment or distribution of assets or securities of the Company or upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts payable on Senior Indebtedness (including any interest accruing on such Senior Indebtedness subsequent to the commencement of a bankruptcy, insolvency or similar proceeding) shall first be paid in full before the Trustee or the holders of Preferred Securities or Deferrable Interest Subordinated Debentures (or the Special Representative) will be entitled to receive from the Company any payment of principal of, or interest on, or any other amounts in respect of, the Deferrable Interest Subordinated Debentures. No direct or indirect payment by or on behalf of the Company of principal of or interest on the Deferrable Interest Subordinated Debentures whether pursuant to the terms of the Deferrable Interest Subordinated Debentures or upon acceleration or otherwise may be made if, at the time of such payment, there exists, (i) a default in the payment of all or any portion of any Senior Indebtedness or (ii) any other default (other than a default of the nature described in clause (i) above) affecting Senior Indebtedness permitting its acceleration, as the result of which the maturity of Senior Indebtedness has been accelerated, and in either case requisite notice has been given to the Company and the Trustee and such default shall not have been cured or waived by or on behalf of the holders of such Senior Indebtedness. If the Trustee or any holder of Preferred Securities or Deferrable Interest Subordinated Debentures (or the Special Representative) has received any payment on account of the principal of or interest on the Deferrable Interest Subordinated Debentures when such payment is prohibited and before all amounts payable on Senior Indebtedness are paid in full, then and in such event such payment or distribution shall be received and held in trust for the holders of Senior Indebtedness and shall be paid over or delivered first to the holders of the Senior Indebtedness remaining unpaid to the extent necessary to pay such Senior Indebtedness in full. Upon the payment in full of all Senior Indebtedness, the Trustee and the holders of Preferred Securities or Deferrable Interest Subordinated Debentures (and the Special Representative) shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of assets of the Company made on such Senior Indebtedness until the Deferrable Interest Subordinated Debentures are paid in full. Certain Covenants of the Company 31 Neither the Company nor any majority owned subsidiary shall declare or pay any dividend on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its preferred or common stock (other than dividends to the Company by a wholly owned subsidiary of the Company) (i) during an Extension Period, (ii) if there shall have occurred and is continuing any event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default under the Indenture or (iii) so long as any Preferred Securities remain outstanding, if the Company shall be in default with respect to its payment or other obligations under the Limited Guarantee. Book-Entry and Settlement If Deferrable Interest Subordinated Debentures are distributed to holders of Preferred Securities, the Deferrable Interest Subordinated Debentures will be issued in book-entry- only form. For a description of DTC and the specific terms of the depository arrangements, see "Description of Preferred Securities-Book-Entry-Only Issuance-The Depository Trust Company", which would also apply to the Deferrable Interest Subordinated Debentures in book-entry-only form. Neither the Company, the Trustee, any paying agent nor any other agent of the Company or the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a global security for such Deferrable Interest Subordinated Debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Discontinuance of the Depository's Services. A global security will be exchangeable for Deferrable Interest Subordinated Debentures registered in the names of persons other than the depository or its nominee only if (i) the depository notifies the Company that it is unwilling or unable to continue as depository for such global security or if at any time the depository ceases to be a clearing agency registered under the Exchange Act at a time when the depository is required to be so registered to act as such depository, (ii) the Company in its sole discretion determines that such global security shall be so exchangeable or (iii) there shall have occurred and be continuing a default in the payment of principal of, or interest on, such Deferrable Interest Subordinated Debentures or an Event of Default or an event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default with respect to such Deferrable Interest Subordinated Debentures. Any global security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Deferrable Interest Subordinated Debentures registered in such names as the depository shall direct. It is expected that such instructions will be based upon directions received by the depository from its Participants with respect to ownership of beneficial interests in such global security. Payment; Registration and Transfer 32 In the event that the Deferrable Interest Subordinated Debentures do not remain in book-entry-only form, the following provisions would apply: Payment of principal of any Deferrable Interest Subordinated Debenture will be made only against surrender to the Trustee or the Paying Agent appointed by the Company, if not the Trustee, of such Deferrable Interest Subordinated Debenture. Principal of, and interest on, Deferrable Interest Subordinated Debentures will be payable, subject to any applicable laws and regulations, at the office of the Trustee or such Paying Agent as the Company may designate from time to time, except that at the option of the Company payment of any interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the security Register with respect to such Deferrable Interest Subordinated Debentures. Payment of interest on a Deferrable Interest Subordinated Debenture on any Interest Payment Date will be made to the person in whose name such Deferrable Interest Subordinated Debenture is registered at the close of business on the Regular Record Date for such interest, with certain exceptions. The Corporate Trust Office of the Trustee in The City of New York shall initially be designated as the Company's sole Paying Agent for payments with respect to Deferrable Interest Subordinated Debentures of each series. The Company may at any time designate other or additional Paying Agents or rescind the designation of any Paying Agent or approve a change in the office through which any Paying Agent acts. Deferrable Interest Subordinated Debentures may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed), at the office of the Registrar appointed by the Company without service charge and upon payment of any taxes and other governmental charges as described in the Indenture. The Company has initially appointed the Trustee as Registrar with respect to the Deferrable Interest Subordinated Debentures. The Company shall not be required to make, and the Registrar need not register, the transfer or exchange of (i) any Deferrable Interest Subordinated Debenture during a period beginning at the opening of business five days before the mailing of a notice of redemption of Deferrable Interest Subordinated Debentures, and ending at the close of business on the day of such mailing, or (ii) any Deferrable Interest Subordinated Debenture selected, called or being called for redemption, in whole or in part, except in the case of any Deferrable Interest Subordinated Debenture to be redeemed in part, the portion thereof not to be redeemed. Amendment of the Indenture The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in principal amount of the Deferrable Interest Subordinated Debentures which are affected by the amendment or waiver, to amend the Indenture or the Deferrable Interest Subordinated Debentures or to waive compliance by the Company 33 with any provision of the Indenture or the Deferrable Interest Subordinated Debentures; provided that no such amendment or waiver may, without the consent of the holder of each outstanding Deferrable Interest Subordinated Debenture affected thereby, (a) reduce the principal amount of the Deferrable Interest Subordinated Debentures, (b) reduce the percentage of principal amount of outstanding Deferrable Interest Subordinated Debentures of any series, the consent of holders of which is required for amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults, (c) change the stated maturity date of the principal of, or the interest or the rate of interest on, the Deferrable Interest Subordinated Debentures, (d) change the redemption provisions applicable to the Deferrable Interest Subordinated Debentures adversely to the holders thereof, (e) impair the right to institute suit for the enforcement of any payment with respect to the Deferrable Interest Subordinated Debentures, (f) change the currency in which payments with respect to the Deferrable Interest Subordinated Debentures are to be made, (g) change the subordination provisions applicable to the Deferrable Interest Subordinated Debentures adversely to the holders thereof, or (h) waive a default in the payment of the principal of, or interest on, any Deferrable Interest Subordinated Debenture. The Indenture or the Deferrable Interest Subordinated Debentures may be amended, without the consent of the holders of the Deferrable Interest Subordinated Debentures, to cure any ambiguity, defect or inconsistency or to make other changes that do not adversely affect the rights of such holders. Events of Default The following are Events of Default under the Indenture: (i) default for 15 days in payment of any interest (including Additional Interest, if any) on Deferrable Interest Subordinated Debentures (whether by virtue of the provisions described above under "Subordination" or otherwise); provided that an extension of the interest payment period by the Company as described under "Option to Extend Interest Payment Period" shall not constitute a default in the payment of interest for this purpose; (ii) default in payment of principal of Deferrable Interest Subordinated Debentures when due (whether by virtue of the provisions described above under "Subordination" or otherwise); (iii) default for 30 days after notice in the performance of any other covenant in the Indenture; or (iv) certain events of bankruptcy, insolvency or reorganization of the Company. If an Event of Default shall occur and be continuing, the Trustee or the holders of not less than a majority in principal amount of the Deferrable Interest Subordinated Debentures then outstanding may declare the principal of, and all accrued and unpaid interest (including Additional Interest, if any, and any interest accrued but not paid during an Extension Period) on, the Deferrable Interest Subordinated Debentures to be due and payable; provided that, upon certain events of bankruptcy, insolvency or reorganization of the Company, such amounts shall immediately become due and payable without any declaration or other action by the Trustee or such holders. The Company is required to furnish to the Trustee annually a statement as to the performance by the Company of its obligations under the Indenture and as to any default in such 34 performance. Under certain circumstances, any declaration of acceleration with respect to the Deferrable Interest Subordinated Debentures may be rescinded and past defaults (except, unless theretofore cured, a default in the payment of principal of, or interest on, the Deferrable Interest Subordinated Debentures) may be waived by the holders of a majority in principal amount of the Deferrable Interest Subordinated Debentures then outstanding. The Indenture provides that the Trustee may withhold notice to the holders of the Deferrable Interest Subordinated Debentures of any continuing default (except in the payment of the principal of, or interest on, the Deferrable Interest Subordinated Debentures) if the Trustee considers it in the interests of holders of Deferrable Interest Subordinated Debentures to do so. Enforcement of Certain Rights by Holders of Preferred Securities So long as any Deferrable Interest Subordinated Debentures are held by Met-Ed Capital, the holders of any outstanding Preferred Securities will have the rights referred to under "Description of Preferred Securities-Voting Rights", including the right to appoint a Special Representative authorized to exercise Met-Ed Capital's right, as the holder of Deferrable Interest Subordinated Debentures, to accelerate the principal amount of the Deferrable Interest Subordinated Debentures and to enforce the Company's obligations under the Indenture and the Deferrable Interest Subordinated Debentures directly against the Company, without first proceeding against Met-Ed Capital or any other person or entity. Consolidation, Merger, Sale or Conveyance The Indenture provides that the Company may not consolidate with or merge into any other Person or sell, convey, transfer or lease all or substantially all of its properties and assets to any Person, unless (i) the successor Person shall be organized and existing under the laws of the United States or any state thereof or the District of Columbia; (ii) the successor Person shall expressly assume (x) by a supplemental indenture, all of the Company's obligations under the Deferrable Interest Subordinated Debentures and the Indenture and (y) so long as any Preferred Securities remain outstanding, the Company's obligations under the Limited Guarantee; (iii) so long as any Preferred Securities remain outstanding, the successor Person becomes or acquires the General Partner; and (iv) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, conveyance, transfer or lease and such supplemental indenture comply with the Indenture. In case of any such consolidation, merger, sale, conveyance, transfer or lease, such successor Person will succeed to and be substituted for the Company as obligor on the Deferrable Interest Subordinated Debentures, with the same effect as if it had been named in the Indenture as the issuer in place of the Company. The Indenture does not contain any other covenant which restricts the Company's ability to consolidate or merge with, or sell, convey, transfer or lease all or substantially all of its 35 assets to, any Person, firm or corporation or otherwise engage in restructuring transactions. Title The Company, the Trustee and any agent of the Company or the Trustee may treat the registered owner of any Deferrable Interest Subordinated Debenture as the absolute owner thereof (whether or not such Deferrable Interest Subordinated Debenture shall be overdue and notwithstanding any notice to the contrary) for the purpose of making payment and for all other purposes. Defeasance and Discharge Under the terms of the Indenture, the Company will be discharged from any and all obligations in respect of the Deferrable Interest Subordinated Debentures of any series (except in each case for certain obligations to register the transfer or exchange of Deferrable Interest Subordinated Debentures, replace stolen, lost or mutilated Deferrable Interest Subordinated Debentures, maintain paying agencies and hold monies for payment in trust) if the Company deposits with the Trustee, in trust, (i) money and/or (ii) U. S. Government Obligations (as defined in the Indenture) sufficient to pay all the principal of, and interest on, the Deferrable Interest Subordinated Debentures of such series on the dates such payments are due; provided that no Event of Default has occurred and is continuing. In connection with such a defeasance and discharge, the Company, among other things, will deliver to the Trustee an Opinion of Counsel to the effect that (i) the deposit and related defeasance would not cause the holders of the Deferrable Interest Subordinated Debentures of such series to recognize income, gain or loss for federal income tax purposes, or a copy of a ruling or other formal statement or action to such effect received from or published by the Internal Revenue Service; and (ii) the trust resulting from the defeasance is a valid trust and will not constitute a regulated investment company under the 1940 Act. Replacement of Deferrable Interest Subordinated Debentures Any mutilated Deferrable Interest Subordinated Debenture will be replaced by the Company at the expense of the holder upon its surrender to the Trustee. Deferrable Interest Subordinated Debentures that become destroyed, lost or stolen will be replaced by the Company at the expense of the holder upon delivery to the Trustee of evidence of the destruction, loss or theft thereof satisfactory to the Company and the Trustee. In the case of a destroyed, lost or stolen Deferrable Interest Subordinated Debenture, an indemnity satisfactory to the Trustee and the Company may be required at the expense of the holder of such Deferrable Interest Subordinated Debenture before a replacement Deferrable Interest Subordinated Debenture will be issued. Governing Law The Indenture and the Deferrable Interest Subordinated Debentures will be governed by and construed in accordance with the laws of the State of New York. 36 Information Concerning the Trustee Subject to the provisions of the Indenture relating to its duties, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the holders thereunder, unless such holders shall have offered to the Trustee reasonable indemnity. Subject to such provision for indemnification, the holders of a majority in principal amount of the Deferrable Interest Subordinated Debentures then outstanding thereunder will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee thereunder, or exercising any trust or power conferred on the Trustee. The Indenture contains limitations on the right of the Trustee, as a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. In addition, the Trustee may be deemed to have a conflicting interest and may be required to resign as Trustee if at the time of default under the Indenture it is a creditor of the Company. United States Trust Company of New York, the Trustee under the Indenture, has from time to time engaged in transactions with, or performed services for, the Company and its affiliates in the ordinary course of business. Miscellaneous For restrictions on certain actions of the General Partner with respect to Deferrable Interest Subordinated Debentures held by Met-Ed Capital, see "Description of Preferred Securities- Voting Rights". UNITED STATES TAXATION General This section is a summary of certain United States federal income tax considerations that may be relevant to prospective purchasers of Preferred Securities and represents the opinion of Carter, Ledyard & Milburn, special tax counsel to the Company and Met-Ed Capital, insofar as it relates to matters of law and legal conclusions. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended ("Code"), existing and proposed regulations thereunder and current administrative rulings and court decisions, all of which are subject to change. Subsequent changes may cause tax consequences to vary substantially from the consequences described below. No attempt has been made in the following discussion to comment on all United States federal income tax matters affecting purchasers of Preferred Securities. Moreover, the discussion focuses on holders of Preferred Securities who are individual citizens or residents of the United States and has only limited application to corporations, estates, trusts or non-resident aliens. Accordingly, each prospective purchaser of Preferred 37 Securities should consult, and should depend on, his or her own tax advisor in analyzing the federal, state, local and foreign tax consequences of the purchase, ownership or disposition of Preferred Securities. Income from Preferred Securities In the opinion of Carter, Ledyard & Milburn, Met-Ed Capital will be treated as a partnership for federal income tax purposes. Accordingly, each holder of Preferred Securities (a "Preferred Securityholder") will be required to include in gross income such holder's distributive share of the income of Met-Ed Capital. Such income will not exceed Dividends received on such Preferred Securities, except in limited circumstances as described below under "Potential Extension of Interest Payment Period". No portion of such income will be eligible for the dividends received deduction. Disposition of Preferred Securities Gain or loss will be recognized on a sale (including a redemption for cash) of Preferred Securities in an amount equal to the difference between the amount realized and the Preferred Securityholder's tax basis for the Preferred Securities sold. Gain or loss recognized by a Preferred Securityholder on the sale or exchange of a Preferred Security held for more than one year will generally be taxable as long-term capital gain or loss. Receipt of Deferrable Interest Subordinated Debentures Upon Liquidation of Met-Ed Capital Under certain circumstances described under the caption "Description of Preferred Securities-Special Event Redemption or Distribution", Met-Ed Capital may dissolve and cause Deferrable Interest Subordinated Debentures to be distributed to the holders of Preferred Securities in liquidation of such holders' interests in Met-Ed Capital. As described in "Description of Preferred Securities-Special Event Redemption or Distribution", in the case of a Special Event, Deferrable Interest Subordinated Debentures may not be distributed to the holders of Preferred Securities in connection with a dissolution of Met-Ed Capital unless Met-Ed Capital receives an opinion of counsel to the effect that the holders of the Preferred Securities will not recognize any gain or loss for federal income tax purposes as a result of such dissolution and distribution. Such a tax-free transaction would result in the holder of Preferred Securities receiving an aggregate tax basis in the Deferrable Interest Subordinated Debentures equal to such holder's aggregate tax basis in the holder's Preferred Securities. A holder's holding period in such Deferrable Interest Subordinated Debentures would include the period for which the Preferred Securities were held by such holder. Met-Ed Capital Information Returns and Audit Procedures The General Partner will furnish each Preferred Security- holder with a Schedule K-1 each year setting forth such Preferred Securityholder's allocable share of income for the prior calendar 38 year. The General Partner is required to furnish such schedules as soon as practicable following the end of the year, but in any event prior to March 31. Any person who holds Preferred Securities as a nominee for another person is required to furnish to Met-Ed Capital (a) the name, address and taxpayer identification number of the beneficial owner and the nominee; (b) information as to whether the beneficial owner is (i) a person that is not a United States person, (ii) a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing, or (iii) a tax-exempt entity; (c) the amount and description of Preferred Securities held, acquired or transferred for the beneficial owner; and (d) certain information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales. Brokers and financial institutions are required to furnish additional information, including whether they are United States persons and certain information on Preferred Securities they acquire, hold or transfer for their own accounts. A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is imposed by the Code for failure to report such information to Met-Ed Capital. The nominee is required to supply the beneficial owners of Preferred Securities with the information furnished to Met-Ed Capital. Potential Extension of Interest Payment Period Under the terms of the Indenture, the Company has the right to extend from time to time the interest payment period on the Deferrable Interest Subordinated Debentures to a period not exceeding 60 consecutive months. In the event that the Company exercises this right, the Company may not, among other things, declare dividends on any of its capital stock. Met-Ed Capital and the Company currently believe that the extension of an interest payment period is remote. In the event that the interest payment period is extended, Met-Ed Capital will continue to accrue income, on an economic accrual basis, generally equal to the amount of the interest payment due at the end of the extended interest payment period, over the length of the extended interest payment period. Accrued income will be allocated, but not distributed, to holders of record on the Business Day preceding the last day of each calendar month. As a result, holders of record during an extended interest payment period will include interest in gross income in advance of the receipt of cash, and any such holders who dispose of Preferred Securities prior to the record date for the payment of Dividends following such extended interest payment period will include interest in gross income but will not receive any cash related thereto from the Company or Met-Ed Capital. The tax basis of a Preferred Security will be increased by the amount of any interest that is included in income without a receipt of cash, and will be decreased when and if such cash is subsequently received from Met-Ed Capital. The subsequent receipt of such cash will not be includible in gross income. 39 United States Alien Holders For purposes of this discussion, a "United States Alien Holder" is any holder who or which is (i) a nonresident alien individual or (ii) a foreign corporation, partnership or estate or trust, in either case not subject to United States federal income tax on a net income basis in respect of a Preferred Security. Under current United States federal income tax law, subject to the discussion below with respect to backup withholding, and assuming satisfaction by the Company of its withholding tax obligations, if any: (i) payments by Met-Ed Capital or any of its paying agents to any holder of a Preferred Security who or which is a United States Alien Holder will not be subject to United States federal withholding tax provided that (a) the beneficial owner of the Preferred Security does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company or 10% or more of the Preferred Securities entitled to vote, (b) the beneficial owner of the Preferred Security is not a controlled foreign corporation that is related to the Company or Met-Ed Capital through stock ownership, and (c) either: (x) the beneficial owner of the Preferred Security certifies to Met-Ed Capital or its agent, under penalties of perjury, that it is a United States Alien Holder and provides its name and address or (y) the holder of the Preferred Security is a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution"), and such holder certifies to Met-Ed Capital or its agent, under penalties of perjury, that such statement has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes Met-Ed Capital or its agent with a copy thereof; and (ii) a United States Alien Holder of a Preferred Security will generally not be subject to United States federal withholding tax on any gain realized on the sale or exchange of a Preferred Security unless such holder is present in the United States for 183 days or more in the taxable year of sale and either has a "tax home" in the United States or certain other requirements are met. Backup Withholding and Information Reporting In general, information reporting requirements will apply to payments of the proceeds of the sale of Preferred Securities within the United States to noncorporate United States holders, and "backup withholding" at a rate of 31% will apply to such payments if the United States holder fails to provide an accurate taxpayer identification number. 40 Payments of the proceeds from the sale by a United States Alien Holder of Preferred Securities made to or through a foreign office of a broker will not be subject to information reporting or backup withholding, except that, if the broker is a United States person, a controlled foreign corporation for United States tax purposes or a foreign person 50% or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting may apply to such payments. Payments of the proceeds from the sale of Preferred Securities to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder or beneficial owner certifies as to its non-United States status or otherwise establishes an exemption from information reporting and backup withholding. PLAN OF DISTRIBUTION Met-Ed Capital may offer or sell Preferred Securities to one or more underwriters for public offering and sale by them. Met- Ed Capital may sell Preferred Securities as soon as practicable after effectiveness of the Registration Statement, provided that favorable market conditions exist. Any such underwriter involved in the offer and sale of the Preferred Securities will be named in an applicable Prospectus Supplement. Underwriters may offer and sell the Preferred Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of Preferred Securities, underwriters may be deemed to have received compensation from the Company and/or Met-Ed Capital in the form of underwriting discounts or commissions. Underwriters may sell Preferred Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters. Any underwriting compensation paid by the Company and/or Met-Ed Capital to underwriters in connection with the offering of Preferred Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be set forth in an applicable Prospectus Supplement. Underwriters and dealers participating in the distribution of the Preferred Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Preferred Securities may be deemed to be underwriting discounts and commissions, under the Securities Act. Underwriters and dealers may be entitled, under agreement with the Company and/or Met-Ed Capital, to indemnification against and contribution toward certain liabilities, including liabilities under the Securities Act, and to reimbursement by the Company and/or Met-Ed Capital for certain expenses. Underwriters and dealers may engage in transactions with, or perform services for, the Company and/or Met-Ed Capital and/or any of their affiliates in the ordinary course of business. 41 Each series of Preferred Securities will be a new issue of securities and will have no established trading market. Any underwriters to whom Preferred Securities are sold by Met-Ed Capital for public offering and sale may make a market in such Preferred Securities, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. The Preferred Securities may or may not be listed on a national securities exchange. No assurance can be given as to the liquidity of or the trading markets for any Preferred Securities. LEGAL OPINIONS Certain legal matters will be passed upon for the Company and Met-Ed Capital by Berlack, Israels & Liberman, New York, New York, and Ryan, Russell, Ogden & Seltzer, Reading, Pennsylvania, and for any underwriters by Reid & Priest, New York, New York. Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to Met-Ed Capital. Berlack, Israels & Liberman and Reid & Priest may rely on the opinion of Ryan, Russell, Ogden & Seltzer as to matters of Pennsylvania law, and Berlack, Israels & Liberman, Ryan, Russell, Ogden & Seltzer and Reid & Priest may rely on the opinion of Richards, Layton & Finger, P.A., as to matters of Delaware law. Members and attorneys of Berlack, Israels & Liberman own an aggregate of 12,091 shares of the Common Stock of the Company's parent, GPU. In addition, one such member holds 986 such shares as custodian for his children. Members and attorneys of Ryan, Russell, Ogden & Seltzer own an aggregate of 2,000 shares of the Common Stock of GPU. EXPERTS The financial statements and financial statement schedules included in the Company's Annual Report on Form 10-K for the year ended December 31, 1993 are incorporated herein by reference in reliance on the report of Coopers & Lybrand, independent accountants, given on the authority of said firm as experts in auditing and accounting. The report of Coopers & Lybrand, included in the Company's Annual Report on Form 10-K for the year ended December 31, 1993 incorporated herein by reference, contains explanatory paragraphs related to a contingency which has resulted from the accident at Unit 2 of the Three Mile Island nuclear generating station and the change in the method of accounting for unbilled revenues in 1991. 42 No person has been authorized to give any information or to make any 4,000,000 Preferred representations other than those Securities contained in this Prospectus Supplement or the Prospectus, and, if given or Met-Ed Capital made, such information or representations must not be relied upon % Cumulative as having been authorized. This Monthly Income Prospectus Supplement and the Prospectus Preferred Securities, do not constitute an offer to sell or a Series A solicitation of an offer to buy any securities other than the securities described in this Prospectus Supplement guaranteed to the or an offer to sell or the solicitation extent the issuer of an offer to buy such securities in has funds as set any circumstances in which such offer forth herein by or solicitation is unlawful. Neither the delivery of this Prospectus METROPOLITAN Supplement or the Prospectus nor any EDISON sale made hereunder or thereunder COMPANY shall, under any circumstances, create any implication that the information contained herein or therein is correct as of any time subsequent to the date of such information. ___________________ PROSPECTUS SUPPLEMENT TABLE OF CONTENTS Prospectus Supplement Page Met-Ed Capital . . . . . . . . . . . Metropolitan Edison Company . . . . . Certain Investment Considerations . . Use of Proceeds . . . . . . . . . . . Certain Terms of the Series A Preferred Securities . . . . . . . Certain Terms of the Series A Deferrable Interest Subordinated Debentures . . . . . . . . . . . . Underwriting . . . . . . . . . . . . Legal Opinions . . . . . . . . . . . Prospectus Available Information . . . . . . . . Incorporation of Certain Documents by Reference . . . . . . . . . . . Metropolitan Edison Company . . . . . Recent Developments. . . . . . . . . . Financing Program . . . . . . . . . . Certain Company Consolidated Financial Information . . . . . . . . . . . GOLDMAN, SACHS & CO. Company Coverage Ratios . . . . . . . DEAN WITTER REYNOLDS INC. Use of Proceeds . . . . . . . . . . . A.G. EDWARDS & SONS, INC. Met-Ed Capital . . . . . . . . . . . KIDDER, PEABODY & CO. Description of Preferred Securities . INCORPORATED Description of the Limited Guarantee MORGAN STANLEY & CO. Description of the Deferrable Interest INCORPORATED Subordinated Debentures . . . . . PAINEWEBBER INCORPORATED United States Taxation . . . . . . . PRUDENTIAL SECURITIES Plan of Distribution . . . . . . . . INCORPORATED Legal Opinions . . . . . . . . . . . Representatives of the Experts . . . . . . . . . . . . . . . Underwriters 44 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. Filing fees - Securities and Exchange Commission $ 45,104 Printing and engraving 40,000* New York Stock Exchange listing fee 15,000* Legal fees: Berlack, Israels & Liberman 135,000* Ryan, Russell, Ogden & Seltzer 45,000* Carter, Ledyard & Milburn 55,000* Richards, Layton & Finger, P.A. 25,500* Blue Sky fees and expenses 15,000* Accounting fees: Coopers & Lybrand 15,000* Indenture Trustee fees and expenses 20,000* Rating agencies fees and expenses 48,125* Miscellaneous 21,271* Total $480,000* _________________ *Estimated Item 16. Exhibits: Exhibit No. Description 12-A - Statement Showing Computation of Ratio of Earnings to Fixed Charges and Statement Showing Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to its registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Reading, Commonwealth of Pennsylvania, on the 10th day of August, 1994. METROPOLITAN EDISON COMPANY By: * F.D. Hafer, President Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following persons in the capacities with respect to Metropolitan Edison Company and on the dates indicated. Signature Title Date * Chairman (Principal August 10, 1994 (J.R. Leva) Executive Officer) and Director * President and Director August 10, 1994 (F.D. Hafer) * Vice President August 10, 1994 (J.G. Graham) (Principal Financial Officer) and Director * Comptroller (Principal August 10, 1994 (D.L. O'Brien) Accounting Officer) 2 * Vice President and August 10, 1994 (G.R. Repko) Director * Vice President and August 10, 1994 (R.S. Zechman) Director * Vice President and August 10, 1994 (J.F. Furst) Director * Vice President and August 10, 1994 (R.C. Arnold) Director *By: /s/ Don W. Myers Don W. Myers, Attorney-in fact 3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to its registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Reading, Commonwealth of Pennsylvania on the 10th day of August, 1994. MET-ED CAPITAL, L.P. By: Met-Ed Preferred Capital, Inc. its general partner By:________________________________ F.D. Hafer, President Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed below by the following person in the capacity on behalf of Met-Ed Preferred Capital, Inc., as the general partner of Met-Ed Capital, L.P., and on the date indicated. Signature Title Date President and August 10, 1994 (F.D. Hafer) Director 4 EX-99 2 EXHIBIT INDEX TO FORM S-3 EXHIBITS TO BE FILED BY EDGAR Exhibit No. 12-A - Statement Showing Computation of Ratio of Earnings to Fixed Charges and Statement Showing Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 5 EX-99 3 EXHIBIT 12-A TO FORM S-3 Exhibit 12-A Page 1 of 3 METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503 (Dollars In Thousands)
Twelve Months Ended December 31, December 31, December 31, December 31, 1989 1990 1991 1992 OPERATING REVENUES $680 458 $719 387 $788 462 $821 823 OPERATING EXPENSES (excluding taxes based on income) 521 027 559 701 687 439 660 497 Interest portion of rentals (A) 6 583 6 830 5 574 5 817 Net expense 514 444 552 871 681 865 654 680 OTHER INCOME: Allowance for funds used during construction 3 529 3 912 2 330 2 858 Other income, net 21 566 17 833 15 531 3 229 Total other income 25 095 21 745 17 861 6 087 EARNINGS AVAILABLE FOR FIXED CHARGES $191 109 $188 261 $124 458 $173 230 FIXED CHARGES: Interest on funded indebtedness $ 32 049 $ 33 512 $ 36 413 $ 38 882 Other interest 10 615 11 121 9 028 6 039 Interest portion of rentals (A) 6 583 6 830 5 574 5 817 Total fixed charges $ 49 247 $ 51 463 $ 51 015 $ 50 738 RATIO OF EARNINGS TO FIXED CHARGES 3.88 3.66 2.44 3.41 Preferred stock dividend requirements $ 10 289 $ 10 289 $ 10 289 $ 10 289 Ratio of income before provision for income taxes to net income(B) 157.3% 146.8% 154.9% 167.6% Preferred stock dividend requirement on a pre- tax basis 16 184 15 104 15 937 17 244 Fixed charges, as above 49 247 51 463 51 015 50 738 Total fixed charges and preferred stock dividends $ 65 431 $ 66 567 $ 66 952 $ 67 982 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS 2.92 2.83 1.86 2.55 Exhibit 12-A Page 2 of 3 METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503 (Dollars In Thousands) Twelve Months Ended Proforma December 31, June 30, June 30, 1993 1994 1994 (c) OPERATING REVENUES $801 487 $807 148 $807 148 OPERATING EXPENSES (excluding taxes based on income) 624 025 663 188 663 188 Interest portion of rentals (A) 4 932 4 687 4 687 Net expense 619 093 658 501 658 501 OTHER INCOME: Allowance for funds used during construction 2 919 2 456 2 456 Other income, net (5 581) (105 240) (105 240) Total other income (2 662) (102 784) (102 784) EARNINGS AVAILABLE FOR FIXED CHARGES $179 732 $ 45 863 $ 45 863 FIXED CHARGES: Interest on funded indebtedness $ 42 887 $ 42 727 $ 42 727 Other interest 6 990 13 557 24 807 Interest portion of rentals (A) 4 932 4 687 4 687 Total fixed charges $ 54 809 $ 60 971 $ 72 221 RATIO OF EARNINGS TO FIXED CHARGES 3.28 .75(D) .64(D) Preferred stock dividend requirements $ 6 960 $ 3 632 $ 3 632 Ratio of income before provision for income taxes to net income(B) 160.4% 389.9% 256.1% Preferred stock dividend requirement on a pre- tax basis 11 164 14 161 9 302 Fixed charges, as above 54 809 60 971 72 221 Total fixed charges and preferred stock dividends $ 65 973 $ 75 132 $ 81 523 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS 2.72 .61(D) .56(D) Exhibit 12-A Page 3 of 3 METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANY STATEMENTS SHOWING COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS BASED ON SEC REGULATION S-K, ITEM 503 (Dollars In Thousands) NOTES: (A) The Company included the equivalent of the interest portion of all rentals charged to income as fixed charges for this statement and has excluded such components from Operating Expenses. (B) Represents income before provision for income taxes of $141,862, $136,798, $73,443, $122,492, $124,923, $(15,108) and $(26,358) for the years 1989 through 1993, twelve months ended June 30, 1994 and proforma twelve months ended June 30, 1994, respectively, divided by income before cumulative effect of accounting change of $90,164, $93,191, $47,400, $73,077, $77,875, $(3,875) and $(10,292), respectively. (C) Gives effect to the issuance of $125,000 aggregate stated liquidation preference of Preferred Securities and the use of the proceeds thereof to purchase the Company's Subordinated Debentures at an assumed rate of 9%. (D) Pre-tax earnings for the twelve months ended June 30, 1994 and proforma twelve months ended June 30, 1994 are inadequate to cover both fixed charges and combined fixed charges and preferred stock dividends. The deficiency in pre-tax earnings for the ratio of earnings to fixed charges and the combined fixed charges and preferred stock dividends for the twelve months ended June 30, 1994 is $15,108 and $29,269, respectively, which represents additional pre-tax earnings needed to reach a one-to- one ratio. The deficiency in pre-tax earnings for the ratio of earnings to fixed charges and the combined fixed charges and preferred stock dividends for the proforma twelve months ended June 30, 1994 is $26,358 and $35,660, respectively.
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