Exhibit 1.1
VIRGINIA ELECTRIC AND POWER COMPANY
1,250 UNITS
EACH UNIT CONSISTS OF 1,000 SHARES OF
FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R))
2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE)
UNDERWRITING AGREEMENT
December 5, 2002
Lehman Brothers Inc.
for itself and as Representative for the Underwriters
named in Schedule I, attached to this Underwriting Agreement
c/o Lehman Brothers Inc.
745 7th Avenue
New York, New York 10019
Ladies and Gentlemen:
The undersigned, Virginia Electric and Power Company (the
"Company"), hereby confirms its agreement with the several Underwriters named in
Schedule I hereto (the "Agreement") with respect to the issuance and sale to the
several Underwriters named in Schedule I of the shares of the Company's Flexible
Money Market Cumulative Preferred Stock 2002 Series A, liquidation preference
$100 per Share (the "Series A Shares"). The Company confirms its agreement with
the Underwriters with respect to the issuance of the Series A Shares and the
sale to the several Underwriters of the number of Units, each Unit consisting of
1,000 Series A Shares (the "Units"), specified in Schedule II hereto, and the
public offering thereof by the several Underwriters, upon the terms specified in
Schedule II.
1. Underwriters and Representatives. The term "Underwriters" as used
herein shall be deemed to mean the several persons, firms or corporations
(including the Representative hereinafter mentioned) named in Schedule I hereto,
and the term "Representative" as used herein shall be deemed to mean the
Representative to whom this Agreement is addressed, who by signing this
Agreement represents that it has been authorized by the other Underwriters to
execute this Agreement on their behalf and to act for them in the manner herein
provided. If there shall be only one person, firm or corporation named in
Schedule I hereto, the term "Underwriters" as used herein shall mean that
person, firm or corporation. All obligations of the Underwriters hereunder are
several and not joint. Unless otherwise stated, any action under or in respect
of this Agreement taken by the Representative will be binding upon all the
Underwriters.
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(R) Registered Trademark of Lehman Brothers Inc.
2. Description of the Units. Schedule II specifies the total number of
the Units, the initial public offering price of the Units and the purchase price
to be paid by the Underwriters, and sets forth the date, time and manner of
delivery of the Units and payment therefor. Schedule II also specifies (to the
extent not set forth in Sections 4 and 5 herein, the Registration Statement and
Prospectus referred to below) the terms and provisions for the purchase of such
Units.
3. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Underwriters that:
(a) A registration statement, No. 333-96973 on Form S-3 for
the registration of the Series A Shares comprising the Units under the
Securities Act of 1933, as amended (the "Securities Act"), heretofore
filed with the Securities and Exchange Commission (the "Commission")
has become effective. The registration statement, including all
exhibits thereto, as amended through the date hereof, is hereinafter
referred to as the "Registration Statement"; the prospectus relating to
the preferred stock of the Company and other securities included in the
Registration Statement, which prospectus is now proposed to be
supplemented by a prospectus supplement relating to the Series A Shares
comprising the Units to be filed with the Commission under the
Securities Act, as completed and as so supplemented, is hereinafter
referred to as the "Prospectus". As used herein, the terms
"Registration Statement" and "Prospectus" include all documents
(including any Current Report on Form 8-K) incorporated therein by
reference, and shall include any documents (including any Current
Report on Form 8-K) filed after the date of such Registration Statement
or Prospectus and incorporated therein by reference from the date of
filing of such incorporated documents (collectively, the "Incorporated
Documents").
(b) No order suspending the effectiveness of the Registration
Statement or otherwise preventing or suspending the use of the
Prospectus has been issued by the Commission and is in effect and no
proceedings for that purpose are pending before or, to the knowledge of
the Company, threatened by the Commission. The Registration Statement
and the Prospectus comply in all material respects with the provisions
of the Securities Act, the Securities Exchange Act of 1934, as amended
(the "Securities Exchange Act"), and the rules, regulations and
releases of the Commission thereunder (the "Rules and Regulations);
neither the Registration Statement on the date it was declared
effective (the Effective Date") nor the Prospectus on the date hereof
contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, on the
Closing Date (as defined below), the Registration Statement and the
Prospectus (including any amendments and supplements thereto), will
conform in all respects to the requirements of the Securities Act and
the Rules and Regulations, and neither of such documents will include
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, that the foregoing representations
and warranties in this Section 3(b) shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon information furnished herein or in writing to the Company
by the Underwriters or on the Underwriters' behalf through the
Representative for use in the Registration Statement or Prospectus; and
provided, further, that the foregoing representations and warranties
are given on the basis that any
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statement contained in an Incorporated Document shall be deemed not to
be contained in the Registration Statement or Prospectus if the
statement has been modified or superseded by any statement in a
subsequently filed Incorporated Document or in the Registration
Statement or Prospectus or in any amendment or supplement thereto.
(c) Except as reflected in, or contemplated by, the
Registration Statement and Prospectus (exclusive of any amendments or
supplements after the date hereof), since the respective most recent
dates as of which information is given in the Registration Statement
and Prospectus (exclusive of any amendments or supplements after the
date hereof), there has not been any material adverse change or event
which would result in a material adverse effect on the condition of the
Company and its subsidiaries taken as a whole, financial or otherwise
(a "Material Adverse Effect"). The Company and its subsidiaries taken
as a whole have no material contingent financial obligation which is
not disclosed in the Registration Statement and the Prospectus.
(d) Deloitte & Touche LLP, who have certified certain of the
Company's financial statements filed with the Commission and
incorporated by reference in the Registration Statement, are
independent public accountants as required by the Securities Act and
the Rules and Regulations.
(e) There are no Significant Subsidiaries of the Company as
such term is defined in Rule 1-02 of Regulation S-X.
(f) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated in this
Agreement and in the Registration Statement (including the issuance
and sale of the Series A Shares comprising the Units and the use of
the proceeds from the sale of the Series A Shares comprising the Units
as described in the Prospectus under the caption "Use of Proceeds")
and compliance by the Company with its obligations under this
Agreement, do not and will not, whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach
of, or default under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or any other agreement
or instrument, to which the Company or any subsidiary is a party or by
which it or any of them may be bound, or to which any of the property
or assets of the Company or any subsidiary is subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not have a Material Adverse Effect), nor will such action result
in any violation of the provisions of the charter or bylaws of the
Company or any subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their
respective properties, assets or operations, and the Company has full
power and authority to authorize, issue and sell the Series A Shares
comprising the Units as contemplated by this Agreement.
(g) The Series A Shares comprising the Units have been duly
authorized and, when issued and delivered in accordance with the terms
of this Agreement, will be validly
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issued, fully paid and non-assessable, and the issuance of such Series
A Shares comprising the Units will not be subject to any preemptive or
similar rights.
(h) The Company is not, and, after giving effect to the
offering and sale of the Series A Shares comprising the Units and the
application of the proceeds thereof as described in the Prospectus,
will not be, an "investment company" or a company "controlled" by an
"investment company" which is required to be registered under the
Investment Company Act of 1940, as amended.
4. Purchase and Public Offering. On the basis of the representations
and warranties herein contained, but subject to the terms and conditions in this
Agreement set forth, the Company agrees to sell to each of the Underwriters, and
each Underwriter agrees, severally and not jointly, to purchase from the
Company, at the price, place and time hereinafter specified, the number of the
Units set forth opposite the name of such Underwriter in Schedule I hereto. The
Underwriters agree to make a public offering of their respective Units specified
in Schedule I hereto at the initial public offering price specified in Schedule
II hereto. It is understood that after such initial offering, the several
Underwriters reserve the right to vary the offering price and further reserve
the right to withdraw, cancel or modify any subsequent offering without notice.
The Company shall not be obligated to deliver any of the Units
to be delivered on the Closing Date (as hereinafter defined) except upon payment
for all the Units to be purchased on such Closing Date as provided herein.
5. Time and Place of Closing. Delivery of the Units to, and payment
therefor by, the Underwriters shall be made at the time, place and date
specified in Schedule II or such other time, place and date as the
Representative and the Company may agree upon in writing. The hour and date of
such delivery and payment are herein called the "Closing Date". On the Closing
Date, the Company, through the facilities of The Depository Trust Company
("DTC"), shall deliver or cause to be delivered a securities entitlement with
respect to the Units to the Underwriters against payment of the purchase price
by wire transfer of same-day funds to a bank account designated by the Company.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of the Underwriters'
obligation hereunder. Upon delivery, the Series A Shares comprising the Units
shall be registered in the name of Cede & Co., as nominee for DTC.
6. Covenants of the Company. The Company agrees that:
(a) If the Representative so requests, the Company, on or
prior to the Closing Date, will deliver to the Representative conformed
copies of the Registration Statement as originally filed, including all
exhibits, any related preliminary prospectus supplement, the Prospectus
and all amendments and supplements to each such document, in each case
as soon as available and in such quantities as are reasonably requested
by the Representative. The Representative will be deemed to have made
such a request for copies for each of the several Underwriters and
Troutman Sanders LLP, counsel to the Underwriters, with respect to any
such documents that are not electronically available through the
Commission's EDGAR filing system.
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(b) The Company will pay all expenses in connection with (i)
the preparation and filing by it of the Registration Statement and the
Prospectus, (ii) the preparation, issuance and delivery of the Series A
Shares comprising the Units, and (iii) the printing and delivery to the
Underwriters, in reasonable quantities, of copies of the Registration
Statement and the Prospectus (each as originally filed and as
subsequently amended). In addition, the Company will pay the reasonable
out of pocket fees and disbursements of Underwriters' outside counsel,
Troutman Sanders LLP, in connection with the qualification of the
Series A Shares comprising the Units under state securities or blue sky
laws or investment laws (if and to the extent such qualification is
required by the Underwriters or the Company).
(c) If, during the time when a prospectus relating to the
Series A Shares comprising the Units is required to be delivered under
the Securities Act, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the
Securities Act, the Company promptly will (i) notify the Underwriters
through the Representative to suspend solicitation of purchases of the
Units and (ii) at its expense, prepare and file with the Commission an
amendment or supplement which will correct such statement or omission
or an amendment which will effect such compliance. During the period
specified above, the Company will continue to prepare and file with the
Commission on a timely basis all documents or amendments required under
the Securities Exchange Act and the applicable rules and regulations of
the Commission thereunder; provided, that the Company shall not file
such documents or amendments without also furnishing copies thereof to
the Representative and Troutman Sanders LLP. Any such documents or
amendments which are electronically available through the Commission's
EDGAR filing system shall be deemed to have been furnished by the
Company to the Representative and Troutman Sanders LLP.
(d) The Company will advise the Representative promptly of any
proposal to amend or supplement the Registration Statement or the
Prospectus and will afford the Representative a reasonable opportunity
to comment on any such proposed amendment or supplement prior to
filing; and the Company will also advise the Representative promptly of
the filing of any such amendment or supplement and of the institution
by the Commission of any stop order proceedings in respect of the
Registration Statement or of any part thereof and will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued.
(e) The Company will make generally available to its security
holders, as soon as it is practicable to do so, an earnings statement
of the Company (which need not be audited) in reasonable detail,
covering a period of at least 12 months beginning within three months
after the effective date of the Registration Statement, which earnings
statement shall satisfy the requirements of Section 11(a) of the
Securities Act.
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(f) The Company will furnish such information as may be
lawfully required and otherwise cooperate in qualifying the Series A
Shares comprising the Units for offer and sale under the securities or
blue sky laws of such jurisdictions as the Representative may
designate; provided, however, that the Company shall not be required in
any state to qualify as a foreign corporation, or to file a general
consent to service of process, or to submit to any requirements which
it deems unduly burdensome.
(g) Fees and disbursements of Troutman Sanders LLP who is acting
as counsel for the Underwriters (exclusive of fees and disbursements
of such counsel which are to be paid as set forth in Section 6(b)),
shall be paid by the Underwriters; provided, however, that if this
Agreement is terminated in accordance with the provisions of Section 7
or 8 hereof, the Company shall reimburse the Representative for the
account of the Underwriters for the amount of such fees and
disbursements.
7. Conditions of the Underwriters' Obligations; Termination by the
Underwriters.
(a) The Underwriters' obligations to purchase and pay for
the Units on the Closing Date shall be subject to the following
conditions:
(i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect on the Closing Date
and no proceedings for that purpose shall be pending before,
or to the knowledge of the Company threatened by, the
Commission on such date. The Representative shall have
received, prior to payment for the Units, a certificate dated
the Closing Date and signed by the President or any Vice
President of the Company to the effect that no such stop order
is in effect and that no proceedings for such purpose are
pending before or, to the knowledge of the Company, threatened
by the Commission.
(ii) The relevant order or orders of the State
Corporation Commission of Virginia authorizing the issuance
and sale of the Series A Shares comprising the Units shall be
in full force and effect.
(iii) On the Closing Date the Representative shall
receive, on behalf of the several Underwriters, the opinions
of Troutman Sanders LLP, counsel to the Underwriters,
McGuireWoods LLP, counsel to the Company, and the Company's
General Counsel, substantially in the forms attached hereto as
Schedules III, IV and V, respectively.
(iv) The Representative shall have received from
Deloitte & Touche LLP on the date of this Agreement and on the
Closing Date letters addressed to the Representative
containing statements and information of the type ordinarily
included in accountants' SAS 72 "comfort letters" to
underwriters with respect to the financial statements and
certain financial information contained in or incorporated by
reference into the Prospectus, including any pro forma
financial information.
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(v) Subsequent to the execution of this Agreement and
prior to the Closing Date, (A) except as stated in the
Registration Statement and the Prospectus (exclusive of
amendments or supplements after the date hereof), there shall
not have occurred (1) any change in the number of outstanding
shares of or terms of preferred stock or long term debt of the
Company (other than a decrease in the aggregate principal
amount thereof outstanding), (2) any material adverse change
in the general affairs, financial condition or earnings of the
Company and its subsidiaries taken as a whole or (3) any
material transaction entered into by the Company other than a
transaction in the ordinary course of business, the effect of
which in each such case in the reasonable judgment of the
Representative is so material and so adverse that it makes it
impracticable to proceed with the public offering or delivery
of the Units on the terms and in the manner contemplated in
the Prospectus and this Agreement, and (B) there shall not
have occurred (1) a downgrading in the rating accorded the
Company's senior unsecured notes, or securities that are pari
passu to the Company's senior unsecured notes, 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) and no such organization
shall have given any notice of any intended or potential
downgrading or of any review for a possible change with
possible negative implications in its ratings of such
securities, (2) any general suspension of trading in
securities on the New York Stock Exchange or any limitation on
prices for such trading or any restrictions on the
distribution of securities established by the New York Stock
Exchange or by the Commission or by any federal or state
agency or by the decision of any court, (3) a suspension of
trading of any securities of the Company on the New York Stock
Exchange, (4) a banking moratorium declared either by federal
or New York State authorities or (5) any outbreak or
escalation of major hostilities in which the United States is
involved, any declaration of war by the United States Congress
or any other substantial national or international calamity or
crisis resulting in the declaration of a national emergency,
or if there has occurred any material adverse change in the
financial markets; provided the effect of such outbreak,
escalation, declaration, calamity, crisis or material adverse
change shall, in the reasonable judgment of the
Representative, make it impracticable to proceed with the
public offering or delivery of the Units on the terms and in
the manner contemplated in the Prospectus and in this
Agreement.
(vi) On the Closing Date, the representations and
warranties of the Company in this Agreement shall be true and
correct as if made on and as of such date, and the Company
shall have performed all obligations and satisfied all
conditions required of it under this Agreement; and, on the
Closing Date, the Representative shall have received a
certificate to such effect signed by the President or any Vice
President of the Company.
(vii) All legal proceedings to be taken in connection
with the issuance and sale of the Series A Shares comprising
the Units shall have been satisfactory in form and substance
to Troutman Sanders LLP.
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(b) In case any of the conditions specified above in Section
7(a) shall not have been fulfilled, this Agreement may be terminated by
the Representative upon mailing or delivering written notice thereof to
the Company; provided, however, that in case the conditions specified
in subsections 7(a)(v) and (vi) shall not have been fulfilled, this
Agreement may not be so terminated by the Representative unless
Underwriters who have agreed to purchase in the aggregate 50% or more
of the total number of the Units shall have consented to such
termination and the aforesaid notice shall so state. Any such
termination shall be without liability of any party to any other party
except as otherwise provided in Section 9 and Sections 6(b), 6(g) and
7(c) hereof.
(c) If this Agreement shall be terminated by the
Representative pursuant to Section 7(b) above or because of any
failure or refusal on the part of the Company to comply with the terms
or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under
this Agreement, then in any such case, the Company will reimburse the
Underwriters, severally, for all out-of-pocket expenses (in addition
to the fees and disbursements of their outside counsel as provided in
Section 6(g)) reasonably incurred by such Underwriters in connection
with this Agreement or the offering contemplated hereunder and, upon
such reimbursement, the Company shall be absolved from any further
liability hereunder, except as provided in Section 6(b) and Section 9.
8. Conditions of the Obligation of the Company. The obligation of the
Company to deliver the Series A Shares comprising the Units shall be subject to
the conditions set forth in the first sentence of Section 7(a)(i) and in Section
7(a)(ii). In case such conditions shall not have been fulfilled, this Agreement
may be terminated by the Company by mailing or delivering written notice thereof
to the Representative. Any such termination shall be without liability of any
party to any other party except as otherwise provided in Sections 6(b), 6(g), 9
and 10 hereof.
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, each affiliate of any Underwriter within the meaning of
Rule 405 under the Securities Act and each person who controls any
Underwriter within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Securities Exchange Act, against any and all
losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Securities Act, the
Securities Exchange Act, or any other statute or common law and to
reimburse each such Underwriter and controlling person for any legal or
other expenses (including, to the extent hereinafter provided,
reasonable outside counsel fees) incurred by them in connection with
investigating or defending any such losses, claims, damages, or
liabilities, or in connection with defending any actions, insofar as
such losses, claims, damages, liabilities, expenses or actions arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
the Prospectus, or in either such document as amended or supplemented
(if any amendments or supplements thereto shall have been furnished),
or any preliminary Prospectus (if and when used prior to the date
hereof), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
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statements therein not misleading; provided that the foregoing
indemnity agreement, insofar as it relates to any preliminary
Prospectus, shall not inure to the benefit of any Underwriter (or to
the benefit of any affiliate of, or person who controls such
Underwriter) on account of any losses, claims, damages or liabilities
arising out of the sale of any of the Units by such Underwriter to any
person if it shall be established that a copy of the Prospectus,
excluding any documents incorporated by reference (as supplemented or
amended, if the Company shall have made any supplements or amendments
which have been furnished to the Representative), shall not have been
sent or given by or on behalf of such Underwriter to such person at or
prior to the written confirmation of the sale to such person in any
case where such delivery is required by the Securities Act and the
Company satisfied its obligations pursuant to Section 6(a) hereof, if
the misstatement or omission leading to such loss, claim, damage or
liability was corrected in the Prospectus (excluding any documents
incorporated by reference) as amended or supplemented, and such
correction would have cured the defect giving rise to such loss, claim,
damage, or liability; and provided further, however, that the indemnity
agreement contained in this Section 9(a) shall not apply to any such
losses, claims, damages, liabilities, expenses or actions arising out
of or based upon any such untrue statement or alleged untrue statement,
or any such omission or alleged omission, if such statement or omission
was made in reliance upon information furnished herein or otherwise in
writing to the Company by or on behalf of any Underwriter for use in
the Registration Statement or any amendment thereto, in the Prospectus
or any supplement thereto, or in any preliminary Prospectus. The
indemnity agreement of the Company contained in this Section 9(a) and
the representations and warranties of the Company contained in Section
3 hereof shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter
or any such controlling person, and shall survive the delivery of the
Units.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its officers and directors,
and each person who controls any of the foregoing within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Securities
Exchange Act, against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become
subject under the Securities Act, the Securities Exchange Act, or any
other statute or common law and to reimburse each of them for any legal
or other expenses (including, to the extent hereinafter provided,
reasonable outside counsel fees) incurred by them in connection with
investigating or defending any such losses, claims, damages or
liabilities or in connection with defending any actions, insofar as
such losses, claims, damages, liabilities, expenses or actions arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
the Prospectus, or in either such document as amended or supplemented
(if any amendments or supplements thereto shall have been furnished),
or any preliminary Prospectus (if and when used prior to the date
hereof), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon information furnished herein or in writing to the
Company by or on behalf of such Underwriter for use in the Registration
Statement or the Prospectus or any amendment or supplement to either
thereof, or any preliminary Prospectus. The indemnity agreement of the
respective Underwriters contained in this Section 9(b) shall remain
operative and in full
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force and effect, regardless of any investigation made by or
on behalf of the Company or any such controlling person, and shall
survive the delivery of the Units.
(c) The Company and each of the Underwriters agree that, upon
the receipt of notice of the commencement of any action against the
Company or any of its officers or directors, or any person controlling
the Company, or against such Underwriter, its affiliates or controlling
person as aforesaid, in respect of which indemnity may be sought on
account of any indemnity agreement contained herein, it will promptly
give written notice of the commencement thereof to the party or parties
against whom indemnity shall be sought hereunder, but the omission so
to notify such indemnifying party or parties of any such action shall
not relieve such indemnifying party or parties from any liability which
it or they may have to the indemnified party otherwise than on account
of such indemnity agreement. In case such notice of any such action
shall be so given, such indemnifying party shall be entitled to
participate at its own expense in the defense or, if it so elects, to
assume (in conjunction with any other indemnifying parties) the defense
of such action, in which event such defense shall be conducted by
counsel chosen by such indemnifying party (or parties) and satisfactory
to the indemnified party or parties who shall be defendant or
defendants in such action, and such defendant or defendants shall bear
the fees and expenses of any additional outside counsel retained by
them; provided that, if the defendants (including impleaded parties) in
any such action include both the indemnified party and the indemnifying
party (or parties) and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party (or parties), the indemnified party
shall have the right to select separate counsel to assert such legal
defenses and to participate otherwise in the defense of such action on
behalf of such indemnified party. The indemnifying party shall bear the
reasonable fees and expenses of outside counsel retained by the
indemnified party if (i) the indemnified party shall have retained such
counsel in connection with the assertion of legal defenses in
accordance with the proviso to the preceding sentence (it being
understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to one
local counsel), representing the indemnified parties under Section 9(a)
or 9(b), as the case may be, who are parties to such action), (ii) the
indemnifying party shall have elected not to assume the defense of such
action, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the commencement of the
action, or (iv) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying
party. Notwithstanding the foregoing sentence, an indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent (such consent not to be unreasonably
withheld), but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party from and against any loss or liability by reason
of such settlement or judgment. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which
indemnification may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such a proceeding), unless
such settlement (x) includes an
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unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding and
(y) does not include a statement as to or an admission of fault,
culpability or failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in Section 9(a) or
9(b) is unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company, on the one
hand, and of the Underwriters, on the other, in connection with the
statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations, including relative benefit. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact required to
be stated therein or necessary in order to make the statements therein
not misleading relates to information supplied by the Company on the
one hand or by the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant
to this Section 9(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 9(d). The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to
above in this Section 9(d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations under this Section
9(d) to contribute are several in proportion to their respective
underwriting obligations and not joint. The remedies provided for in
this Section 9 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at
law or in equity.
10. Termination. If any one or more of the Underwriters shall fail or
refuse to purchase the Units which it or they have agreed to purchase hereunder,
and the aggregate total number of the Units which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of total number of the Units, then the other Underwriters shall be obligated
severally in the proportions which the total number of the Units set forth
opposite their respective names in Schedule I bears to the aggregate
underwriting obligations of all non-defaulting Underwriters, or in such other
proportions as the Underwriters may specify, to purchase the Units which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase.
If any Underwriter or Underwriters shall so fail or refuse to purchase Units and
the total number of the Units with respect to which such default occurs is more
than one-tenth of the total number of the Units and arrangements satisfactory to
the Underwriters and the Company for the purchase of such Units are not made
within 36 hours after such default, this Agreement will terminate without
-11-
liability on the part of any non-defaulting Underwriter (except as provided in
Section 6(g) and Section 9) or of the Company (except as provided in Section
6(b) and Section 9). In any such case not involving a termination, either the
Representative or the Company shall have the right to postpone the Closing Date,
but in no event for longer than seven days, in order that the required changes,
if any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken under this Section
10 shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
11. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any controlling person
of any Underwriter, or by or on behalf of the Company, and shall survive
delivery of the Units.
12. Miscellaneous. The validity and interpretation of this Agreement
shall be governed by the laws of the State of New York. This Agreement shall
inure to the benefit of the Company, the Underwriters and, with respect to the
provisions of Section 9 hereof, each controlling person and each officer and
director of the Company referred to in Section 9, and their respective
successors, assigns, executors and administrators. Nothing in this Agreement is
intended or shall be construed to give to any other person, firm or corporation
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained. The term "successors" as used in
this Agreement shall not include any purchaser, as such, of any of the Units
from any of the several Underwriters.
13. Notices. All communications hereunder shall be in writing and if
to the Underwriters shall be mailed, telecopied or delivered to the
Representative at the address set forth on Schedule II hereto, or if to the
Company shall be mailed, telecopied or delivered to it, attention of Treasurer,
Virginia Electric and Power Company 120 Tredegar Street, Richmond, Virginia
23219 (facsimile number: (804) 819-2211).
[The remainder of this page is left intentionally blank.]
-12-
Please sign and return to us a counterpart of this letter, whereupon
this letter will become a binding agreement between the Company and the several
Underwriters in accordance with its terms.
VIRGINIA ELECTRIC AND POWER COMPANY
By: G. Scott Hetzer
----------------------------------------
Name: G. Scott Hetzer
Title: Senior Vice President and Treasurer
-13-
Agreed, this 5th day of December, 2002
Lehman Brothers Inc.
Acting on behalf of itself and for the
several Underwriters named herein
LEHMAN BROTHERS INC.
By: Greg J. Hall
-------------------------------
Authorized Signatory
Name: Greg J. Hall
Title: Managing Director
-14-
SCHEDULE I
Total Number
of Units
Underwriter to be Purchased
- ----------- ---------------
Lehman Brothers Inc. 1,061
BNP Paribas Securities Corp. 63
KBC Financial Products USA Inc. 63
SunTrust Capital Markets, Inc. 63
----------
Total Units: 1,250
I-1
SCHEDULE II
Total Number of Units Being Purchased: 1,250 Units (each Unit consisting of
1,000 Series A Shares)
Public Offering Price per Unit: $100,000
Underwriting Commission per Unit: $1,500
Total Proceeds to Company: $123,125,000
Rate for Initial Dividend Period: 5.50%
Time of Delivery: December 12, 2002, 10:00 A.M.
Closing Location: One James Center
901 East Cary Street
Richmond, Virginia 23219
The specimen of the Series A Shares comprising the Units will be available for
your inspection at:
One James Center
901 East Cary Street
Richmond, Virginia 23219
Address for Notices:
Lehman Brothers Inc.
745 7th Avenue
New York, New York 10019
Attn: Christopher Winchenbaugh, Senior Vice President
Facsimile number: 646-758-5877
with a copy of any notice pursuant to Section 9(c) also sent to:
Troutman Sanders LLP
1111 East Main Street
Richmond, Virginia 23219
Attn: F. Claiborne Johnston, Jr., Esquire
Facsimile number: (804) 697-1339
II-1
SCHEDULE III
PROPOSED FORM OF OPINION
OF
TROUTMAN SANDERS LLP
Bank of America Center
1111 East Main Street
Richmond, Virginia 23219
VIRGINIA ELECTRIC AND POWER COMPANY
1,250 UNITS (THE "UNITS")
EACH UNIT CONSISTS OF 1,000 SHARES OF
FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R))
2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE) (THE "SERIES A SHARES")
December 12, 2002
Lehman Brothers Inc.
for itself and as Representative for the Underwriters
named in Schedule I, attached to the Underwriting Agreement
c/o Lehman Brothers Inc.
745 7th Avenue
New York, New York 10019
Ladies and Gentlemen:
We have acted as your counsel in connection with the arrangements for
issuance by Virginia Electric and Power Company, a Virginia corporation (the
"Company"), of the above-referenced Series A Shares comprising the Units (the
"Units") of the Company pursuant to an Underwriting Agreement dated December 5,
2002 between the Company and the Underwriters listed on Schedule I attached
thereto (the "Underwriting Agreement"). This letter is being delivered to you
pursuant to the Underwriting Agreement. All terms not otherwise defined herein
shall have the meanings set forth in the Underwriting Agreement.
III-1
We have examined originals, or copies certified to our satisfaction of
such corporate records of the Company, indentures, agreements and other
instruments, certificates of public officials, certificates of officers and
representatives of the Company, and other documents, as we have deemed necessary
as a basis for the opinions hereinafter expressed. As to various questions of
fact material to such opinions, we have, when relevant facts were not
independently established, relied upon certifications by officers of the Company
and other appropriate persons and statements contained in the Registration
Statement hereinafter mentioned. All legal proceedings taken as of the date
hereof in connection with the transactions contemplated by the Underwriting
Agreement have been satisfactory to us.
In addition, we attended the closing held today at the offices of
McGuireWoods LLP, One James Center, 901 E. Cary Street, Richmond, Virginia, at
which the Company satisfied the conditions contained in Section 7 of the
Underwriting Agreement that are required to be satisfied as of the Closing Date.
Based upon the foregoing, and having regard to legal considerations
that we deem relevant, we are of the opinion that:
1. The Company is a corporation duly incorporated and existing
as a corporation in good standing under the laws of Virginia, and has
the corporate power to transact its business as described in the
Prospectus.
2. An appropriate order of the State Corporation Commission of
Virginia with respect to the sale of the Series A Shares comprising the
Units has been issued, and such order remains in effect at this date
and constitutes valid and sufficient authorization for the sale of the
Units as contemplated by the Underwriting Agreement. No approval or
consent by any public regulatory body other than those required under
the Securities Act and the Rules and Regulations and the authorization
by the State Corporation Commission of Virginia, all of which have been
obtained, and reports to be filed with the State Corporation Commission
of Virginia after issuance of the Series A Shares, is legally required
in connection with the sale of the Units as contemplated by the
Underwriting Agreement (except to the extent that compliance with the
provisions of securities or blue sky laws of certain states may be
required in connection with the sale of the Series A Shares comprising
the Units in such states) and the carrying out of the provisions of the
Underwriting Agreement.
3. The Underwriting Agreement has been duly authorized by
all necessary corporate action and has been duly executed and
delivered by the Company.
4. The Series A Shares comprising the Units have been duly
authorized and are validly issued, fully paid and non-assessable; and
the issuance of such Series A Shares comprising the Units is not
subject to any preemptive or similar rights.
5. The Registration Statement with respect to the Series A
Shares comprising the Units filed pursuant to the Securities Act, has
become effective and remains in effect
III-2
at this date, and the Prospectus may lawfully be used for the
purposes specified in the Securities Act in connection with the offer
for sale and the sale of the Series A Shares comprising the Units in
the manner therein specified.
6. The Registration Statement and the Prospectus (except that
we express no comment or belief with respect to any historical or pro
forma financial statements and schedules and other financial or
statistical information contained or incorporated by reference in the
Registration Statement or Prospectus) appear on their face to be
appropriately responsive in all material respects to the requirements
of the Securities Act, and to the applicable rules and regulations of
the Commission thereunder.
7. The statements relating to the preferred stock of the
Company contained in the prospectus initially filed as part of the
Registration Statement under DESCRIPTION OF PREFERRED STOCK, as all or
any of them have been supplemented by the statements relating to the
Series A Shares comprising the Units under DESCRIPTION OF THE 2002
SERIES A PREFERRED STOCK, are accurate and do not omit any material
fact required to be stated therein or necessary to make such statements
not misleading.
* * * *
We have not undertaken to determine independently the accuracy or
completeness of the statements contained or incorporated by reference in the
Registration Statement or in the Prospectus, and as to the statistical
statements in the Registration Statement (which includes statistical statements
in the Incorporated Documents), we have relied solely on the officers of the
Company. We accordingly assume no responsibility for the accuracy or
completeness of the statements made in the Registration Statement, other than
with regard to the statements relating to the Series A Shares comprising the
Units as described in paragraph (7). We note that the Incorporated Documents
were prepared and filed by the Company without our participation. We have,
however, participated in conferences with counsel for and representatives of the
Company in connection with the preparation of the Registration Statement, the
Prospectus as it was initially issued and as it has been supplemented or
amended, and we have reviewed the Incorporated Documents and such of the
corporate records of the Company as we deemed advisable. In addition, we
participated in one or more due diligence conferences with representatives of
the Company and attended the closing at which the Company satisfied the
conditions contained in the Underwriting Agreement. None of the foregoing
disclosed to the lawyers in this firm who have given substantive legal attention
to representation of you in connection with the issuance and sale of the Series
A Shares comprising the Units any information that gives us reason to believe
that the Registration Statement contained on the date the Registration Statement
became effective, or the Prospectus contained on the date it was issued or the
date it was supplemented or amended, or that the Registration Statement or the
Prospectus contains on the date hereof (in all cases, excepting the financial
statements and schedules and other financial information contained or
incorporated therein by reference and any pro forma financial information and
notes thereto included or incorporated by reference therein, as to which we
express no belief) any untrue statement of a material fact or omitted on said
date or now to state a material fact required to be stated therein or necessary
to make the statements
III-3
therein not misleading. The foregoing assurance is provided on the basis that
any statement contained in an Incorporated Document shall be deemed not to be
contained in the Registration Statement or Prospectus if the statement has been
modified or superseded by any statement in a subsequently filed Incorporated
Document or in the Registration Statement or Prospectus prior to the date of the
Underwriting Agreement.
In rendering the opinions set forth in paragraphs (1) - (7) above and
in making the statements expressed in the preceding paragraph, we do not purport
to express an opinion or make any statement with respect to any laws other than
those of the Commonwealth of Virginia, the State of New York and the United
States of America. This letter may not be relied upon by, nor may copies be
delivered to, any person without our prior written consent.
Very truly yours,
TROUTMAN SANDERS LLP
III-4
SCHEDULE IV
PROPOSED FORM OF OPINION
OF
MCGUIREWOODS LLP
One James Center
901 East Cary Street
Richmond, Virginia 23219
VIRGINIA ELECTRIC AND POWER COMPANY
1,250 UNITS (THE "UNITS")
EACH UNIT CONSISTS OF 1,000 SHARES OF
FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R))
2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE) (THE "SERIES A SHARES")
December 12, 2002
Lehman Brothers Inc.
for itself and as Representative for the Underwriters
named in Schedule I, attached to the Underwriting Agreement
c/o Lehman Brothers Inc.
745 7th Avenue
New York, New York 10019
Ladies and Gentlemen:
We have acted as counsel to Virginia Electric and Power Company, a
Virginia corporation (the "Company"), in connection with the issuance and sale
by the Company of the Series A Shares comprising the above-referenced Units (the
"Units") pursuant to an Underwriting Agreement dated December 5, 2002, between
the Company and the Underwriters listed on Schedule I attached thereto (the
"Underwriting Agreement"). This opinion is rendered pursuant to the provisions
of Section 7(a)(iii) of the Underwriting Agreement, and, except as set forth
herein, the terms used herein which are defined in the Underwriting Agreement
have the same meanings as they have in the Underwriting Agreement.
IV-1
We have examined originals, or copies certified to our satisfaction, of
such corporate records of the Company, indentures, agreements, and other
instruments, certificates of public officials, certificates of officers and
representatives of the Company, and other documents, as we have deemed it
necessary to require as a basis for the opinions hereinafter expressed. As to
various questions of fact material to such opinions, we have, when relevant
facts were not independently established, relied upon certifications by officers
of the Company and other appropriate persons and statements contained in the
Registration Statement hereinafter mentioned. All legal proceedings taken as of
the date hereof in connection with the transactions contemplated by the
Underwriting Agreement have been satisfactory to us.
On this basis we are of the opinion that:
1. No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than those
required under the Securities Act and the Rules and Regulations and any
authorization by the State Corporation Commission of Virginia, all of
which have been obtained, reports to be filed with the State
Corporation Commission of Virginia after issuance of the Series A
Shares, or as may be required under the securities or blue sky laws of
the various states) is necessary or required in connection with the due
authorization, execution and delivery of the Underwriting Agreement by
the Company or for the offering, issuance, sale or delivery of the
Series A Shares comprising the Units.
2. The articles of amendment with respect to the Series A
Shares have been duly authorized and executed by the Company and a
certificate of amendment with respect to such articles of amendment has
been issued by the State Corporation Commission of Virginia.
3. The Series A Shares comprising the Units have been duly
authorized and are validly issued, fully paid and non-assessable; and
the issuance of such Series A Shares comprising the Units is not
subject to any preemptive or similar rights.
4. The Registration Statement with respect to the Series A
Shares comprising the Units filed pursuant to the Securities Act, has
become effective and remains in effect at this date, and the Prospectus
may lawfully be used for the purposes specified in the Securities Act
in connection with the offer for sale and the sale of the Series A
Shares comprising the Units in the manner therein specified.
5. The Registration Statement and the Prospectus (except the
financial statements, pro forma financial information and schedules
contained or incorporated by reference therein, as to which we express
no opinion) appear on their face to be appropriately responsive in all
material respects to the requirements of the Securities Act, and to the
applicable rules and regulations of the Commission thereunder.
6. We are of the opinion that the statements relating to the
preferred stock of the Company under DESCRIPTION OF PREFERRED STOCK,
as all or any of them
IV-2
have been supplemented by the statements relating to the
Series A Shares comprising the Units under DESCRIPTION OF THE 2002
SERIES A PREFERRED STOCK, are substantially accurate and fair.
We have participated in conferences with officers and other
representatives of the Company and your representatives at which the contents of
the Registration Statement and the Prospectus were discussed, and we have
consulted with officers and other employees of the Company to inform them of the
disclosure requirements of the Securities Act. We have examined various reports,
records, contracts and other documents of the Company and orders and instruments
of public officials, which our investigation led us to deem pertinent. In
addition, we attended the due diligence meetings with representatives of the
Company and the closing at which the Company satisfied the conditions contained
in Section 7 of the Underwriting Agreement. We have not, however, undertaken to
make any independent review of other records of the Company which our
investigation did not lead us to deem pertinent. As to the statistical
statements in the Registration Statement (which includes the Incorporated
Documents), we have relied solely on the officers of the Company. We accordingly
assume no responsibility for the accuracy or completeness of the statements made
in the Registration Statement, except as stated above in the preceding paragraph
in regard to the captions set forth in such preceding paragraph. But such
conferences, consultation, examination and attendance disclosed to us no
information with respect to such other matters that gives us reason to believe
that the Registration Statement contained on the date the Registration Statement
became effective, or the Prospectus contained on the date it was issued, or that
the Registration Statement or the Prospectus (in each case, except with respect
to the financial statements and schedules and other financial information
contained or incorporated by reference in the Registration Statement or
Prospectus) contains on the date hereof, any untrue statement of a material fact
or omitted on such date or omits on the date hereof to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The foregoing assurance is provided on the basis that any statement
contained in an Incorporated Document shall be deemed not to be contained in the
Registration Statement or Prospectus if the statement has been modified or
superseded by any statement in a subsequently filed Incorporated Document or in
the Registration Statement or Prospectus prior to the date of the Underwriting
Agreement.
We do not purport to express an opinion on any laws other than those of
the Commonwealth of Virginia and the United States of America. This opinion may
not be relied upon by, nor may copies be delivered to, any person without our
prior written consent.
Yours very truly,
MCGUIREWOODS LLP
IV-3
SCHEDULE V
PROPOSED FORM OF OPINION
OF
GENERAL COUNSEL OF
VIRGINIA ELECTRIC AND POWER COMPANY
120 Tredegar Street
Richmond, Virginia 23219
VIRGINIA ELECTRIC AND POWER COMPANY
1,250 UNITS (THE "UNITS")
EACH UNIT CONSISTS OF 1,000 SHARES OF
FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R))
2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE) (THE "SERIES A SHARES")
December 12, 2002
To: The addressees listed on Annex A
Ladies and Gentlemen:
The arrangements for issuance of the Series A Shares
comprising the above-referenced Units (the "Units"), of Virginia Electric and
Power Company (the "Company"), pursuant to a Agreement dated December 5, 2002,
by and between the Company and you (the "Underwriting Agreement"), have been
taken under my supervision as Vice President and General Counsel of the Company.
Terms not otherwise defined herein have the meanings set forth in the
Underwriting Agreement.
As Vice President and General Counsel of the Company, I have
general responsibility over the attorneys within the Company's Legal Department
responsible for rendering legal counsel to the Company regarding corporate,
financial, securities, and other matters. I am generally familiar with the
organization, business and affairs of the Company. I am also familiar with the
proceedings taken and proposed to be taken by the Company in connection with the
offering and sale of the Units, and I have examined such corporate records,
certificates and other documents and such questions of the law as I have
considered necessary or appropriate for the purposes of this opinion. In
addition, I have responsibility for supervising lawyers who may have been asked
by me or others to review legal matters arising in connection
V-1
with the offering and sale of the Units. Accordingly, some of the matters
referred to herein have not been handled personally by me, but I have been made
familiar with the facts and circumstances and the applicable law, and the
opinions herein expressed are my own or are opinions of others in which I
concur.
On this basis I am of the opinion that:
1. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Virginia,
and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus
and to enter into and perform its obligations under the Underwriting
Agreement; and the Company is duly qualified as a foreign corporation
to transact business and is in good standing in each other jurisdiction
in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure to so qualify or to be in good standing would not
result in a Material Adverse Effect.
2. The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
3. There are no actions, suits or proceedings pending or, to
the best of my knowledge, threatened, to which the Company or one of
its subsidiaries is a party or to which any of the Company's or any of
its subsidiaries' properties is subject other than any proceedings
described in the Prospectus and proceedings which I believe are not
likely to have a material adverse effect on the power or ability of the
Company to perform its obligations under the Underwriting Agreement or
to consummate the transactions contemplated thereby or by the
Prospectus.
I am a member of the Bar of the Commonwealth of Virginia and I
do not purport to express an opinion on any laws other than those of the
Commonwealth of Virginia and the United States of America. This opinion may not
be relied upon by, nor may copies be delivered to, any person without our prior
written consent. I do not undertake to advise you of any changes in the opinions
expressed herein resulting from matters that may hereinafter arise or that may
hereinafter be brought to my attention.
Yours very truly,
V-2
Annex A
-------
Lehman Brothers Inc.
for itself and as Representative for the Underwriters
named in Schedule I, attached to the Underwriting Agreement
c/o Lehman Brothers Inc.
745 7th Avenue
New York, New York 10019
1106833v6
V-3