SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
-----------
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
-- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-2255
VIRGINIA ELECTRIC AND POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 54-0418825
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
701 EAST CARY STREET 23219-3932
RICHMOND, VIRGINIA (ZIP CODE)
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
(804) 771-3000
(REGISTRANT'S TELEPHONE NUMBER)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
At July 31, 1999, 171,484 shares of common stock, without par value, of the
registrant were outstanding.
<PAGE>
PAGE 2
VIRGINIA ELECTRIC AND POWER COMPANY
INDEX
-----
Page
Number
------
PART I. Financial Information
Item 1.
Consolidated Financial Statements
Consolidated Statements of Income - 3
Three Months and Six Months Ended
June 30, 1999 and 1998
Consolidated Balance Sheets - 4-5
June 30, 1999 and December 31, 1998
Consolidated Statements of Cash Flows - 6
Six Months Ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of 12-19
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures About 20
Market Risk
PART II. Other Information
Item 1. Legal Proceedings 21
Item 5. Other Information 21
Regulation
Rates
Sources of Power
Future Sources of Power
Item 6. Exhibits and Reports on Form 8-K 22
<PAGE>
PAGE 3
VIRGINIA ELECTRIC AND POWER COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
(Millions) (Millions)
Revenues:
Electric service
$ 984.6 $ 820.9 $ 2,029.5 $ 1,839.6
Other 102.1 85.1 145.6 117.2
-------- -------- --------- ----------
Total 1,086.7 906.0 2,175.1 1,956.8
-------- -------- --------- ----------
Expenses:
Fuel, net 243.1 244.4 461.3 470.5
Purchased power capacity, net 198.6 203.5 408.4 384.3
Impairment of regulatory assets 158.6 158.6
Operations and maintenance 236.7 211.5 438.8 403.5
Depreciation and amortization 133.4 96.4 266.1 236.5
Amortization of terminated 8.7 7.7 17.3
construction project costs
Taxes other than income 61.0 73.0 133.4 142.6
------- -------- --------- ---------
Total 872.8 996.1 1,715.7 1,813.3
------- -------- --------- ---------
Income (loss) from operations 213.9 (90.1) 459.4 143.5
Other income 6.1 9.4 15.4 9.9
------- ------- --------- ---------
Income (loss) before interest and
income taxes 220.0 (80.7) 474.8 153.4
------- ------- --------- ---------
Interest and related charges:
Interest expense, net 67.4 84.0 139.6 159.2
Distributions - Preferred
securities of subsidiary trust 2.7 2.7 5.4 5.4
------- ------- --------- ---------
Total
70.1 86.7 145.0 164.6
------- ------- --------- ---------
Income (loss) before income taxes 149.9 (167.4) 329.8 (11.2)
Income tax expense (benefit)
51.6 (47.3) 117.1 10.3
------- ------- --------- ---------
Income (loss) before extraordinary
item 98.3 (120.1) 212.7 (21.5)
Extraordinary item (net of income
taxes of $197.1) (254.8)
------- ------- --------- ---------
Net income (loss) 98.3 (120.1) (42.1) (21.5)
Preferred dividends
8.8 8.9 17.5 17.8
------- ------- --------- --------
Balance available for Common Stock $ 89.5 $ (129.0) $ (59.6) $ (39.3)
======== ========= ========= ========
The Company had no other comprehensive income reportable in accordance with
SFAS No. 130, REPORTING COMPREHENSIVE INCOME.
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
PAGE 4
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
June 30, December 31,
1999 1998*
------- ------------
(Millions)
CURRENT ASSETS:
Cash and cash equivalents $ 31.5 $ 49.6
Accounts receivable:
Customer accounts receivable, net 894.1 777.8
Other 71.0 76.2
Materials and supplies:
Plant and general 143.3 142.0
Fossil fuel 103.3 95.0
Commodity contract assets 283.5 179.8
Other 201.9 149.9
-------- ---------
Total current assets 1,728.6 1,470.3
-------- ---------
INVESTMENTS:
Nuclear decommissioning trust funds 779.9 705.1
Other 49.6 45.6
------- --------
Total investments 829.5 750.7
------- --------
DEFERRED DEBITS AND OTHER ASSETS:
Regulatory assets 215.1 620.0
Unamortized debt issuance costs 32.1 28.5
Commodity contract assets 29.1 17.5
Other 21.3 16.0
------- --------
Total deferred debits and other assets 297.6 682.0
------- --------
PROPERTY, PLANT AND EQUIPMENT:
Generation
(includes $229.5 plant under construction
in 1999 and $154.4 in 1998) 8,135.4 8,008.7
Transmission and distribution
(includes $228.3 plant under construction
in 1999 and $234.8 in 1998) 6,862.4 6,824.6
Other
(includes $65.5 plant under construction
in 1999 and $60.1 in 1998) 421.3 374.3
-------- ---------
15,419.1 15,207.6
Less accumulated depreciation 6,563.5 6,278.8
-------- ---------
8,855.6 8,928.8
Nuclear fuel, net 132.5 153.1
-------- ---------
Net property, plant and equipment 8,988.1 9,081.9
-------- --------
Total assets $ 11,843.8 $ 11,984.9
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
* The consolidated balance sheet at December 31, 1998 has been derived from the
audited consolidated financial statements at that date.
<PAGE>
PAGE 5
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED)
June 30, December 31,
1999 1998*
-------- ------------
(Millions)
CURRENT LIABILITIES:
Securities due within one year $ 257.4 $ 321.0
Short-term debt 317.5 221.7
Accounts payable, trade 700.9 566.5
Payrolls accrued 66.2 79.0
Interest accrued 92.2 93.8
Taxes accrued 98.1 48.1
Commodity contract liabilities 338.0 265.8
Other 152.3 178.7
-------- --------
Total current liabilities 2,022.6 1,774.6
-------- --------
LONG-TERM DEBT 3,509.8 3,464.7
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income taxes 1,446.8 1,563.6
Deferred investment tax credits 155.0 221.4
Commodity contract liabilities 9.6 11.4
Other 196.9 192.5
-------- --------
Total deferred credits and other liabilities 1,808.3 1,988.9
-------- --------
COMMITMENTS AND CONTINGENCIES (See Note (c))
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUST**
135.0 135.0
-------- -------
PREFERRED STOCK:
Preferred stock subject to mandatory redemption 180.0 180.0
-------- -------
Preferred stock not subject to mandatory redemption 509.0 509.0
-------- -------
COMMON STOCKHOLDER'S EQUITY:
Common Stock 2,737.4 2,737.4
Other paid-in capital 16.9 16.9
Earnings reinvested in business
924.8 1,178.4
Total common stockholder's equity ------- -------
3,679.1 3,932.7
------- -------
Total liabilities and stockholders' equity $ 11,843.8 $ 11,984.9
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
*The consolidated balance sheet at December 31, 1998 has been derived from the
audited consolidated financial statements at that date.
** As described in Note (d) to CONSOLIDATED FINANCIAL STATEMENTS, the 8.05%
Junior Subordinated Notes totaling $139.2 million principal amount constitute
100% of the Trust's assets.
<PAGE>
PAGE 6
VIRGINIA ELECTRIC AND POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
1999 1998
---- ----
(Millions)
Cash flow from (to) operating activities:
Net loss $ (42.1) $ (21.5)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 314.8 293.6
Deferred income taxes 28.9 (100.3)
Deferred investment tax credits, net (8.5) (8.5)
Deferred fuel expenses (15.4) 13.9
Extraordinary item, net of income taxes 254.8
Impairment of regulatory assets 158.6
Provision for rate refund 186.3
Changes in:
Accounts receivable (111.1) (93.8)
Materials and supplies (9.6) (2.1)
Accounts payable, trade 134.4 115.3
Accrued expenses (18.0) 28.7
Commodity contract assets and liabilities (44.9) 24.9
Other (20.0) (10.8)
-------- -------
Net cash flow from operating activities 463.3 584.3
-------- -------
Cash flow from (to) financing activities:
Issuance (repayment) of short-term debt, net 95.7 (25.0)
Issuance of long-term debt 230.0 150.0
Repayment of long-term debt (249.0) (217.5)
Common Stock dividend payments (193.8) (191.1)
Preferred stock dividend payments (17.8) (17.8)
Distribution-preferred securities of
subsidiary trust (5.4) (5.4)
Other (4.7) (2.0)
------- -------
Net cash flow to financing activities (145.0) (308.8)
------- -------
Cash flow from (to) investing activities:
Plant expenditures (296.0) (190.4)
Nuclear fuel (20.4) (25.7)
Nuclear decommissioning contributions (16.8) (33.5)
Other (3.2) (6.9)
------- -------
Net cash flow to investing activities (336.4) (256.5)
------- -------
Increase (decrease) in cash and cash equivalents (18.1) 19.0
Cash and cash equivalents at beginning of period 49.6 36.0
Cash and cash equivalents at end of period 31.5 55.0
======= ========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
PAGE 7
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(a) Significant Accounting Policies
GENERAL
Virginia Electric and Power Company is a regulated public utility engaged in
the generation, transmission, distribution and sale of electric energy within a
30,000 square-mile area in Virginia and northeastern North Carolina. It sells
electricity to retail customers (including governmental agencies) and to
wholesale customers such as rural electric cooperatives, municipalities, power
marketers and other utilities. The Virginia service area comprises about 65
percent of Virginia's total land area, but accounts for over 80 percent of its
population. The Company engages in off-system wholesale purchases and sales of
electricity and purchases and sales of natural gas, and is developing trading
relationships beyond the geographic limits of its retail service territory.
Within this document, the terms "Virginia Power" and the "Company" shall refer
to the entirety of Virginia Electric and Power Company, including, without
limitation, its Virginia and North Carolina operations, and all of its
subsidiaries.
In the opinion of the management of Virginia Power, the accompanying
unaudited consolidated financial statements contain all adjustments, including
normal recurring accruals, necessary to present fairly the financial position as
of June 30, 1999, the results of operations for the three-month and six-month
periods ended June 30, 1999 and 1998, and the cash flows for the six-month
periods ended June 30, 1999 and 1998. Certain amounts in the 1998 consolidated
financial statements have been reclassified to conform to the 1999 presentation.
The results of operations for the interim period are not necessarily indicative
of the results to be expected for the full year.
The consolidated financial statements include the accounts of the Company
and its subsidiaries, with all significant intercompany transactions and
accounts being eliminated on consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
These financial statements should be read in conjunction with the financial
statements, and notes thereto, included in the Company's Annual Report on Form
10-K for the year ended December 31, 1998.
In the first quarter of 1999, the Company discontinued the application of
Statement of Financial Accounting Standards No. 71 (SFAS No. 71), ACCOUNTING FOR
THE EFFECTS OF CERTAIN TYPES OF REGULATION, to its generation operations upon
enactment of deregulation legislation. The effect thereof was an after-tax
charge of $254.8 million. See note (b) for further discussion. As a result of
this discontinuance, the Company is evaluating certain accounting policies,
including interest capitalization and depreciation policies. The impact of these
policy changes is not expected to be material to the Company's financial
position or results of operations.
(b) Virginia Jurisdictional Rates
In 1998, the Company negotiated a settlement with the Virginia State
Corporation Commission (Virginia Commission) that resolved then outstanding rate
proceedings. As part of the settlement, the Company agreed to a one-time rate
refund paid to customers in 1998 and a two-phased rate reduction and base rate
freeze through February 2002. For additional information, see Note P to
CONSOLIDATED FINANCIAL STATEMENTS included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
<PAGE>
PAGE 8
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In March 1999, the Governor of Virginia signed into law legislation
establishing a detailed plan to restructure the electric utility industry in
Virginia. Such legislation will deregulate generation by 2002 with the phase-in
of retail customer choice beginning at that time. Under this legislation, the
Company's base rates will remain generally unchanged until July 2007 and
recovery of generation-related costs will continue to be provided through the
capped rates. The legislation's deregulation of generation required
discontinuation of SFAS No. 71 for the Company's generation operations in the
first quarter of 1999. The Company's transmission and distribution operations
continue to meet the criteria for recognition of regulatory assets and
liabilities as defined by SFAS No. 71. In addition, fuel expense continues to be
subject to deferral accounting.
The effect of discontinuing SFAS No. 71 was an after-tax charge to earnings
of $254.8 million. The $254.8 million charge included the write-off of
generation-related assets that were not expected to be recovered during the
transition period. It also included the write-off of approximately $38 million,
after-tax, of deferred investment tax credits.
Also, in conjunction with the discontinuance of SFAS No. 71, the Company
reviewed its utility plant assets and long-term power purchase contracts for
possible impairment. No impairments were recorded based on the Company's
analyses which were highly dependent on the underlying assumptions. Significant
estimates were required in recording the effect of the deregulation legislation,
including the fair value determination for generating facilities and estimated
purchases under long-term power purchase contracts.
The Company remains subject to numerous risks including, among others,
exposure to long-term power purchase commitment losses, environmental
contingencies, changes in tax laws, decommissioning costs, inflation, increased
capital costs, and recovery of certain other items. Management believes the
stable rates that are provided until July 2007 by the legislation present a
reasonable opportunity to recover a substantial portion of the Company's
potentially stranded costs as more fully described in our 1998 Form 10-K in
Competition--Exposure to Potentially Stranded Costs, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations. See
also Note (b) to CONSOLIDATED FINANCIAL STATEMENTS included in the Company's
Form 10-Q for the period ended March 31, 1999 for further discussion of the
impact of the discontinuation of SFAS No. 71 and impairment review.
(c) Contingencies
NUCLEAR INSURANCE
The Price-Anderson Act limits the public liability of an owner of a nuclear
power plant to $9.7 billion for a single nuclear incident. The Company is a
member of certain insurance programs that provide coverage for property damage
to members' nuclear generating plants, replacement power and liability in the
event of a nuclear incident. The Company may be subject to retrospective
premiums in the event of major incidents at nuclear units owned by covered
utilities (including the Company). For additional information, see Note C to
CONSOLIDATED FINANCIAL STATEMENTS included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
<PAGE>
PAGE 9
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
ENVIRONMENTAL MATTERS
The Environmental Protection Agency (EPA) has identified the Company and
several other entities as Potentially Responsible Parties (PRPs) at two
Superfund sites located in Kentucky and Pennsylvania. The estimated future
remediation costs for the sites are in the range of $61.8 million to $69.5
million. The Company's proportionate share of the cost is expected to be in the
range of $1.6 million to $2.2 million, based upon allocation formulas and the
volume of waste shipped to the sites. The Company has accrued a reserve of $1.7
million to meet its obligations at these two sites. Based on a financial
assessment of the PRPs involved at these sites, the Company has determined that
it is probable that the PRPs will fully pay the costs apportioned to them.
The Company generally seeks to recover its costs associated with
environmental remediation from third party insurers. At June 30, 1999, any
pending or possible claims were not recognized as an asset or offset against
such obligations of the Company.
In April 1999, the Company was notified by the Department of Justice of
alleged noncompliance with the EPA's oil spill, prevention, control and
countermeasures plans and facility response requirements at one of its power
stations. If, in a legal proceeding, such instances of noncompliance are deemed
to have occurred, the Company may be required to remedy any alleged deficiencies
and pay civil penalties. Settlement of this matter is currently in negotiation
and is not expected to be material to the Company's financial condition or
results of operations.
For additional information regarding Contingencies, see Note Q to
CONSOLIDATED FINANCIAL STATEMENTS included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
(d) Company Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust
In 1995, the Company established Virginia Power Capital Trust I (VP Capital
Trust). VP Capital Trust sold 5,400,000 shares of Preferred Securities for
$135.0 million, representing preferred beneficial interests and 97% beneficial
ownership in the assets held by VP Capital Trust.
Virginia Power issued $139.2 million of its 1995 Series A, 8.05% Junior
Subordinated Notes (the Notes) in exchange for the $135.0 million realized from
the sale of the Preferred Securities and $4.2 million of common securities of
VP Capital Trust. The common securities represent the remaining 3% beneficial
ownership interest in the assets held by VP Capital Trust. The Notes constitute
100% of VP Capital Trust's assets.
(e) Preferred Stock
As of June 30, 1999, there were 1,800,000 and 5,090,140 issued and
outstanding shares of preferred stock subject to mandatory redemption and
preferred stock not subject to mandatory redemption, respectively. There are
10,000,000 authorized shares of the Company's preferred stock.
<PAGE>
PAGE 10
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(f) Long-Term Incentives
Certain officers and key employees of Virginia Power participate in a
stock-based compensation plan sponsored by the Company's parent, Dominion
Resources, Inc. During the first six months of 1999, approximately 1.9 million
Dominion Resources common stock options were granted to these individuals and
will vest ratably over three years. No compensation expense was recognized under
the provisions of Accounting Principles Board Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES and related Interpretations. Had compensation expense
been measured based on the fair value of the options on the date of grant,
calculated under the provisions of SFAS No. 123, ACCOUNTING FOR STOCK BASED
COMPENSATION, the Company's allocated share of such compensation expense would
not have a material effect on reported net income for the three-month and
six-month periods ended June 30, 1999.
(g) Recently Issued Accounting Standards
The Financial Accounting Standards Board (FASB) recently issued SFAS No.
137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--DEFERRAL OF
THE EFFECTIVE DATE OF FASB STATEMENT NO. 133, which defers the effective date
of SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
As a result, the Company must adopt SFAS No. 133 no later than January 1, 2001.
SFAS No. 133 requires that derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at fair value. The statement requires
that changes in a derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met.
The FASB-sponsored Derivatives Implementation Group that is addressing
implementation issues related to SFAS No. 133 has tentatively concluded that
certain long-term power purchase contracts may be considered derivatives under
SFAS No. 133. The Company has not yet quantified the impacts of adopting SFAS
No. 133 and has not yet determined the timing of, or method of, adoption.
(h) Business Segments
Effective May 1, 1999, the Company began managing its operations along two
primary business lines, generation and wires. The Generation Business
encompasses the Company's generation portfolio, trading and marketing
activities, nuclear consulting services and energy services activities. The
Wires Business includes customer service, bulk power transmission, distribution
and metering services that continue to be subject to cost-based regulation.
The majority of the Company's revenues are provided through bundled rate
tariffs. Such revenues generally are allocated between the two business lines
for management reporting based on prior cost of service studies. Interest
allocations are based on internal management estimates. Income taxes are
calculated using the Company's effective rate. The Other column represents
minor inter-segment activity as well as the impact of the settlement of the
Company's 1998 Virginia jurisdictional rate proceedings recorded in the second
quarter of 1998 and the extraordinary item recorded in the first quarter of
1999. The segments are measured on their operating performance and are not held
accountable for these unusual items.
<PAGE>
PAGE 11
VIRGINIA ELECTRIC AND POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Generation Wires Consolidated
Description Business Business Other Total
-------------------------------------------------------------------------------
(Millions)
THREE MONTHS ENDED JUNE 30, 1999
Revenues $ 810.4 $ 270.4 $ 5.9 $ 1,086.7
Depreciation and
amortization 68.6 61.4 3.4 133.4
Earnings before interest
and taxes 111.1 108.9 220.0
Interest 30.3 39.8 70.1
Income taxes 27.1 24.5 51.6
Net income 53.8 44.5 98.3
Total Assets 7,253.8 4,590.0 11,843.8
Capital expenditures 61.2 84.3 145.5
THREE MONTHS ENDED JUNE 30, 1998
Revenues $ 788.9 $ 266.4 $ (149.3) $ 906.0
Depreciation and
amortization 70.7 61.0 (26.6) 105.1
Earnings before interest
and taxes 104.1 96.0 (280.8) (80.7)
Interest 35.0 41.0 10.7 86.7
Income taxes 24.5 18.7 (90.5) (47.3)
Net income 44.7 36.2 (201.0) (120.1)
Total Assets-December 31,
1998 7,389.1 4,595.8 11,984.9
Capital expenditures 39.8 83.0 122.8
SIX MONTHS ENDED JUNE 30, 1999
Revenues $ 1,612.6 $ 550.9 $ 11.6 $ 2,175.1
Depreciation and
amortization 145.0 121.3 7.5 273.8
Earnings before interest
and taxes 251.8 223.0 474.8
Interest 64.8 80.2 145.0
Income taxes 65.7 51.4 117.1
Net income 121.3 91.4 (254.8) (42.1)
Capital expenditures 151.3 165.1 316.4
SIX MONTHS ENDED JUNE 30, 1998
Revenues $ 1,562.8 538.1 $ (144.1) $ 1,956.8
Depreciation and
amortization 154.6 123.1 (23.9) 253.8
Earnings before interest
and taxes 236.4 197.8 (280.8) 153.4
Interest 70.8 83.1 10.7 164.6
Income taxes 60.1 40.7 (90.5) 10.3
Net income 105.5 74.0 (201.0) (21.5)
Capital expenditures 78.4 137.7 216.1
<PAGE>
PAGE 12
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations contains "forward-looking statements" as defined by the Private
Securities Litigation Reform Act of 1995, including (without limitation)
discussions as to expectations, beliefs, plans, objectives and future financial
performance, or assumptions underlying or concerning matters discussed in this
document. These discussions, and any other discussions, including certain
contingency matters (and their respective cautionary statements) discussed
elsewhere in this report, that are not historical facts, are forward-looking
and, accordingly, involve estimates, projections, goals, forecasts, assumptions
and uncertainties that could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements.
The business and financial condition of Virginia Power are influenced by a
number of factors including political and economic risks, market demand for
energy, inflation, capital market conditions, governmental policies, legislative
and regulatory actions (including those of the Federal Energy Regulatory
Commission (FERC), the Environmental Protection Agency, the Department of
Energy, the Nuclear Regulatory Commission, the Virginia Commission and the North
Carolina Utilities Commission), industry and rate structure and legal and
administrative proceedings. Some other important factors that could cause actual
results or outcomes to differ materially from those discussed in the
forward-looking statements include changes in and compliance with environmental
laws and policies, weather conditions and catastrophic weather-related damage,
present or prospective wholesale and retail competition, competition for new
energy development opportunities, pricing and transportation of commodities,
operation of nuclear power facilities, acquisition and disposition of assets and
facilities, recovery of the cost of purchased power, nuclear decommissioning
costs, the ability of the Company, its suppliers, and its customers to
successfully address Year 2000 readiness issues, exposure to changes in the fair
value of commodity contracts, counter-party credit risk and unanticipated
changes in operating expenses and capital expenditures. All such factors are
difficult to predict, contain uncertainties that may materially affect actual
results, and may be beyond the control of Virginia Power. New factors emerge
from time to time and it is not possible for management to predict all such
factors, nor can it assess the impact of each such factor on Virginia Power.
Any forward-looking statement speaks only as of the date on which such
statement is made, and Virginia Power undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made.
As discussed in Note (h) to CONSOLIDATED FINANCIAL STATEMENTS, effective May
1, 1999, we began managing our operations in a manner that required disclosure
of two separate segments--the Generation Business and the Wires Business.
However, the majority of our revenues are provided through bundled rate tariffs.
Such revenues are allocated between the business segments for internal reporting
purposes. Certain activities discussed in Liquidity and Capital Resources are
not managed currently at the segment level; however, specific references to
segments are made as appropriate. The following discussion of trends and
variations generally applies to the Company as a whole.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES resulted in $121 million decreased cash flow for the
six-month period ended June 30, 1999 as compared to the same period in 1998.
This decrease was primarily attributable to an increase in fuel expenses for
which recovery was not received in the first six months and to the timing of
certain payments related to normal operations. Internal generation of cash
exceeded the Company's capital requirements during the first six months of 1999
and 1998.
<PAGE>
PAGE 13
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
FINANCING ACTIVITIES for the first six months of 1999 resulted in a net cash
outflow of $145 million.
Cash flow from (to) financing activities was as follows:
Six Months Ended
June 30,
1999 1998
-------- ---------
(Millions)
Issuance (repayment) of short-term debt, net $ 95.7 $ (25.0)
Repayment of long-term debt (249.0) (217.5)
Issuance of long-term debt 230.0 150.0
Payment of dividends (211.6) (208.9)
Other (10.1) (7.4)
--------- --------
Net cash flow to financing activities $ (145.0) $ (308.8)
========== =========
In April 1999, we established a $400 million medium-term note shelf
registration (Series G) with the Securities and Exchange Commission. In June
1999, we issued $150 million in aggregate principal of unsecured Senior Notes,
Series 1999-A, with an annual coupon rate of 6.7%, due June 30, 2009; and $80
million of Medium-Term Notes, Series G, with an annual coupon rate of 6.3%, due
June 21, 2001.
During the first two quarters of 1999, the Company retired $249 million in
aggregate principal amount of mandatory debt maturities.
As of June 30, 1999, we have available for our use to meet capital
requirements $915 million of remaining principal amount under our currently
effective shelf registrations with the Securities and Exchange Commission.
We have a commercial paper program that is supported by two credit
facilities totaling $500 million. Proceeds from the sale of commercial paper are
primarily used to provide working capital. Net borrowings under the program were
$317.5 million at June 30, 1999.
INVESTING ACTIVITIES for the first six months of 1999 resulted in a net cash
outflow of $336.4 million primarily due to $296 million of construction
expenditures, $20.4 million of nuclear fuel expenditures and $16.8 million of
contributions to nuclear decommissioning trusts. Of the construction
expenditures, we spent approximately $143.5 million on Wires Business projects,
$123.6 million on Generation Business projects and $22.1 million on general
support facilities.
Cash flow to investing activities was as follows:
Six Months Ended
June 30,
1999 1998
------- --------
(Millions)
Plant expenditures $ (296.0) $ (190.4)
Nuclear fuel (20.4) (25.7)
Nuclear decommissioning contributions (16.8) (33.5)
Other (3.2) (6.9)
--------- ----------
Net cash flow to investing activities $ (336.4) $ (256.5)
========= ==========
<PAGE>
PAGE 14
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS
VIRGINIA POWER CONSOLIDATED
REVENUES for the three-month and six-month periods ended June 30, 1999 were
allocated between the Generation and Wires Business as follows.
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- ---------- ---------- ---------
(Millions) (Millions)
Generation $ 810.4 $ 788.9 $ 1,612.6 $ 1,562.8
Wires 270.4 266.4 550.9 538.1
REVENUES for the three-month and six-month periods ended June 30, 1999 varied
from the same periods in the prior year primarily due to the following factors
that affect both the Generation and Wires Businesses.
Three Months Ended Six Months Ended
June 30, 1999 vs. June 30, 1999 vs.
June 30, 1998 June 30, 1998
----------------------- ---------------------
(Millions) (Millions)
Revenue - Electric Service
Customer growth $ 17.3 $ 33.9
Weather (22.7) 7.4
Rate refund 153.7 153.7
Rate reduction (7.1) (31.2)
Other retail, net 20.6 5.4
-------- -------
Total retail 161.8 169.2
-------- -------
Other electric service 1.9 20.7
-------- -------
Total electric service 163.7 189.9
======== =======
ELECTRIC SERVICE REVENUE consists primarily of sales to retail customers
in our service territory at rates authorized by the Virginia and North Carolina
Commissions and sales to cooperatives and municipalities at wholesale rates
authorized by FERC. The primary factors affecting this revenue in the
three-month and six-month periods ended June 30, 1999 were customer growth,
weather and the 1998 rate settlement.
Customer growth - There were 43,927 more customer connections at June 30,
1999 as compared to the comparable period in the prior year. These
additional customers increased our revenue by $17.3 million and $33.9
million in the three-month and six-month periods ended June 30, 1999
compared to the same periods in 1998.
Weather - The cooler weather in the second quarter of 1999, as compared to
1998, caused customers to use less electricity for cooling, which decreased
retail revenue by $22.7 million. However, the cooler weather in the first
quarter of 1999, as compared to 1998, more than offset this decrease,
resulting in a net $7.4 million increase for the six months ended June 30,
1999 as compared to the same period in 1998.
<PAGE>
PAGE 15
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Heating and cooling degree-days were as follows:
Three months Ended Six months Ended
June 30, June 30,
1999 1998 Normal 1999 1998 Normal
------ ----- ------- ----- ----- -------
Heating degree-days 291 290 308 2,224 2,030 2,413
Percentage change
from prior year -- (38.0)% 9.6% (12.7)%
Cooling degree-days 365 433 444 365 463 450
Percentage change
from prior year (15.7)% 42.9% (21.2)% 49.8%
Rate refund and rate reduction -- In the second quarter of 1998, as part of
the settlement to resolve then outstanding rate proceedings, we agreed to a
one-time rate refund of approximately $150 million and a two-phased rate
reduction, $100 million effective March 1, 1998 and an additional $50
million effective March 1, 1999, with a base rate freeze through February
2002. Revenues increased approximately $150 million during the three-month
and six-month periods ended June 30, 1999 as compared to the same periods in
1998 because of the 1998 rate settlement refund. This increase was partially
offset by the additional $50 million rate reduction that was effective March
1, 1999.
IMPAIRMENT OF REGULATORY ASSETS was recorded during the three-months
ended June 30, 1998 in connection with the 1998 rate settlement. See Note (b)
to the CONSOLIDATED FINANCIAL STATEMENTS.
DEPRECIATION AND AMORTIZATION increased for the three-month and six-month
periods ended June 30, 1999, as compared to the same periods in 1998, as a
result of the 1998 rate settlement. See Note (b) in CONSOLIDATED FINANCIAL
STATEMENTS for further discussion of the 1998 rate settlement.
INTEREST EXPENSE, NET decreased for the three-month and six-month periods
ended June 30, 1999, as compared to the same period in 1998, due in part to the
interest cost associated with the rate refund in the 1998 rate settlement. See
note (b) in CONSOLIDATED FINANCIAL STATEMENTS for further discussion of the 1998
rate settlement. Also contributing to the decrease in interest expense was a
decrease in interest associated with long-term debt which was partially offset
by an increase in interest on commercial paper.
EXTRAORDINARY ITEM -DISCONTINUANCE OF SFAS NO. 71 - On March 25, 1999, the
Governor of Virginia signed into law legislation establishing a detailed plan to
restructure the electric utility industry in Virginia. See Note (b) to
CONSOLIDATED FINANCIAL STATEMENTS.
Under this legislation, our base rates will remain generally unchanged until
July 2007 providing a reasonable opportunity to recover potentially stranded
costs. The legislation's deregulation of generation is an event that requires
discontinuation of SFAS No. 71 for our generation operations although recovery
of generation-related costs continues to be provided through the capped rates
and the wires charge assessed to those customers opting for alternate suppliers.
Our transmission and distribution operations continue to meet the criteria for
recognition of regulatory assets and liabilities as defined by SFAS No. 71. In
addition, cost-based recovery of fuel expenses continues until July 2007.
Generation-related assets and liabilities that will not be recovered through the
capped rates were written off in March 1999, resulting in an after-tax charge to
earnings of $254.8 million.
<PAGE>
PAGE 16
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
GENERATION BUSINESS
Overall, our Generation Business increased net income by approximately $16
million for the six months ended June 30, 1999 as compared to the same period in
1998. The overall change was primarily attributable to favorable changes in
commodity prices in 1999 which were partially offset by the net impact of the
1998 rate settlement as it related to ongoing revenues and depreciation.
Selected financial information relevant to our Generation Business is as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------- --------- -------- ---------
(Millions) (Millions)
Revenues--electric service $ 720.0 $ 713.8 $ 1,485.6 $ 1,463.9
Revenues--other 90.4 75.1 127.0 98.9
Fuel, net 243.1 244.4 461.3 470.5
Purchased power
capacity, net 198.5 203.5 408.4 384.3
Operation and maintenance 133.4 102.7 233.6 196.2
Earnings before interest
and taxes 111.1 104.1 251.7 236.4
Net income 53.8 44.7 121.3 105.5
OTHER REVENUE includes sales of electricity beyond our service territory,
natural gas, nuclear consulting services, energy management services and other
revenue. The growth in power marketing and natural gas revenue for the
three-month and six-month periods ended June 30, 1999, as compared to the same
periods in 1998, is primarily due to favorable changes in commodity prices in
1999.
PURCHASED POWER CAPACITY, NET for the six-month period ended June 30, 1999
increased as compared to the comparable period in 1998, primarily due to
increased expenses associated with the restructuring of certain contracts and
the discontinuance of deferral accounting for such expenses. This accounting
change resulted from the 1998 rate settlement with the Virginia Commission.
See Note (b) to the CONSOLIDATED FINANCIAL STATEMENTS.
OPERATIONS AND MAINTENANCE increased by approximately $30 million for the
three-month and six-month periods ended June 30, 1999 as compared to comparable
periods in 1998, primarily as a result of increased costs for planned outages.
WIRES BUSINESS
Overall, our Wires Business generated an additional $17 million of net
income for the six months ended June 30, 1999 as compared to the same period in
1998. The overall increase was primarily due to increased revenues for electric
transmission services, increased customers and lower expenses which were
partially offset by increased storm costs and the net impact of the 1998 rate
settlement as it related to ongoing revenues and depreciation. Selected
financial information relevant to our Wires Business is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------- -------- -------- ---------
(Millions) (Millions)
Revenues--electric service $ 270.4 $ 266.4 $ 550.9 $ 538.1
Operation and maintenance 60.7 71.5 129.4 140.7
Earnings before interest
and taxes 108.9 96.0 223.0 197.8
Net income 44.5 36.2 91.4 74.0
ELECTRIC SERVICE REVENUE increased in both the three-month and six-month
periods ended June 30, 1999, as compared to the same period in 1998, due to
increased revenues for electric transmission services.
<PAGE>
PAGE 17
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
OPERATIONS AND MAINTENANCE related to the Wires Business decreased for the
three-month and six-month periods ended June 30, 1999 as compared to comparable
periods in 1998, by approximately $11 million due to an increase in construction
activity, partially offset by increased costs for storm damage.
CONTINGENCIES
For information on contingencies, see Note (c) to CONSOLIDATED FINANCIAL
STATEMENTS.
FUTURE ISSUES
COMPETITION
On March 25, 1999, the Governor of Virginia signed into law legislation
establishing a detailed plan to restructure the electric utility industry in
Virginia which will provide for customer choice beginning in 2002. Under this
legislation, our base rates will remain unchanged until July 2007 and recovery
of generation-related costs will continue to be provided through the capped
rates and the wires charge assessed to those customers opting for alternate
suppliers. In the absence of the capped rates, we would be exposed, on a pre-tax
basis, to approximately $3.2 billion of potential losses related to long-term
power purchase commitments.
The legislation's deregulation of generation is an event that requires
discontinuation of SFAS No. 71 for our generation operations. Our transmission
and distribution operations continue to meet the criteria for recognition of
regulatory assets and liabilities as defined by SFAS No. 71. In addition,
cost-based recovery of fuel expenses continues until July 2007.
We are subject to a base rate freeze at reduced revenue levels until July
2007. In addition, we remain subject to numerous risks including, among others,
exposure to long-term power purchase commitment losses, environmental
contingencies, changes in tax laws, decommissioning costs, inflation, increased
capital costs, and recovery of certain other items. We believe the stable rates
that are provided until July 2007 by the legislation present a reasonable
opportunity to recover a substantial portion of our potentially stranded costs
as more fully described in our 1998 Form 10-K. See Competition--Exposure to
Potentially Stranded Costs, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations.
For additional information, see Note (b) to CONSOLIDATED FINANCIAL
STATEMENTS.
YEAR 2000 READINESS
The systems essential to providing electricity to our 2 million customers
during the New Year rollover are year 2000 ready. On June 30, 1999, 99% of our
systems identified as critical to our operations were year 2000 ready. We
anticipate that 100% of such systems will be year 2000 ready prior to January 1,
2000. During the remainder of 1999, the project team will focus on validating
and fine-tuning contingency plans, non-critical remediation, validation of
remediated components, and validation of critical supplier readiness.
We expect year 2000 costs to be approximately $28 million to $33 million,
which is a change from our previous estimate of $30 million to $40 million. This
downward revision is largely due to the current status of the following:
o remediation and testing of critical components;
o remediation and testing of non-critical components;
o assessment of critical suppliers;
o contingency planning;
o scope of rollover activities for critical dates.
<PAGE>
PAGE 18
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Actual year 2000 costs of $21 million have been expended as of June 30,
1999. Expenses not yet incurred relate to contingency planning, communications
activities, remediation of non-critical systems and continued remediation
validation.
We have substantially completed a comprehensive assessment of the readiness
of our suppliers. Suppliers include vendors, manufacturers, material providers,
service providers, other energy providers and business partners. Based on this
assessment, we have developed appropriate contingency plans for critical
suppliers such as having extra supplies on hand.
Our year 2000 readiness efforts include evaluation of reasonably likely
worst case scenarios and the development of contingency plans to address such
scenarios, should they occur. In June 1999, we submitted our final contingency
plans to the Southeastern Electric Reliability Council, one of the ten regional
reliability councils in the North American Electric Reliability Council.
When developing our contingency plans, we took into account that the Company,
and the entire electric power industry, already have extensive contingency plans
in place for many events such as extreme heat, storms, equipment failures,
sudden loss of customer load or sudden loss of a generation unit. Year 2000
contingency planning is an extension of these existing plans. For example, one
contingency plan allows for multiple alternate means of voice communications in
the event that the public communication network fails.
Our contingency planning efforts also include developing precautionary
measures. Precautionary measures are intended to position us to be able to
mitigate the impact of any year 2000 related problem, in the unlikely event a
problem occurs. An example of these precautionary measures includes planned
additional staffing in key operational positions to facilitate quick responses
to unexpected events.
We are actively participating in industry contingency planning efforts at the
regional and national level. We successfully participated in the first
nationwide drill by electric utilities on April 9, 1999, coordinated by the
North American Electric Reliability Council (NERC). The exercise simulated the
partial failure of some primary voice and data communications to demonstrate the
ability of electric utilities to communicate operating information using backup
systems. No actual communication systems or generating units were shut down
during the exercise. Service to our customers was not affected.
We will participate in the second nationwide drill on September 8-9, 1999.
According to the NERC YEAR 2000 DRILL DEVELOPMENT GUIDE, "[t]he goal of the
drill is to simulate as realistically as is practical the implementation of
administration, operating, communications, and contingency response plans for
the Y2k transition." We are working closely with our neighboring electric
utilities and will practice communications with them in conjunction with this
exercise. This will be a simulated exercise and service to our customers will
not be affected.
We will continue to refine and validate our year 2000 contingency plans
throughout the remainder of 1999.
For additional information, see Year 2000 Compliance, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations in
our 1998 Form 10-K.
RECENTLY ISSUED ACCOUNTING STANDARDS
For information on recently issued accounting standards, see Note (g) to
CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PAGE 19
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
MARKET RISK SENSITIVE INSTRUMENTS AND RISK MANAGEMENT
COMMODITY PRICE RISK
As part of our strategy to market energy from our generation capacity and to
manage related risks, we manage a portfolio of derivative commodity contracts
held for trading purposes. These contracts are sensitive to changes in the
prices of natural gas and electricity. We employ established policies and
procedures to manage the risks associated with these price fluctuations and use
various commodity instruments, such as futures, swaps and options, to reduce
risk by creating offsetting market positions. In addition, we seek to use our
generation capacity, when not needed to serve customers in our service
territory, to satisfy commitments to sell energy.
One of the techniques commonly used to measure risk in a commodity trading
portfolio is sensitivity analysis, which determines a hypothetical change in the
fair value of the portfolio which would result from assumed changes in the
market prices of the related commodities. The fair value of the portfolio is a
function of the underlying commodity, contract prices and market prices
represented by each derivative commodity contract. For exchange-for-physical
contracts, basis swaps, fixed price forward contracts and options which require
physical delivery of the underlying commodity, market value reflects our best
estimates considering over-the-counter quotations, time value and volatility
factors of the underlying commitments. Exchange-traded futures and options are
marked to market based on closing exchange prices.
We have determined a hypothetical loss by calculating a hypothetical fair
value for each contract assuming a 10 percent unfavorable change in the market
prices of the related commodity and comparing it to the fair value of the
contracts based on market prices at June 30, 1999 and December 31, 1998. This
hypothetical 10 percent change in commodity prices would have resulted in a
hypothetical loss of approximately $8.6 million and $13.5 million in the fair
value of our commodity contracts as of June 30, 1999 and December 31, 1998,
respectively.
The sensitivity analysis does not include the price risks associated with
utility fuel requirements, since these costs are generally provided for through
our rates established by the regulatory commissions having jurisdiction over
fuel cost recovery, nor does it include risks that are either non-financial or
non-quantifiable. In addition, provisions are made in the financial statements
to address credit risk.
EQUITY PRICE RISK AND INTEREST RATE RISK
We are exposed to fluctuations in interest rates related to debt securities
and prices of marketable equity securities held in its Nuclear Decommissioning
Trusts. In addition, we are exposed to interest rate risk through our use of
fixed rate and variable rate debt and preferred securities as sources of
capital. For additional information, see Market Risk Sensitive Instruments and
Risk Management under MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS included in our Annual Report on Form 10-K
for the year ended December 31, 1998.
<PAGE>
PAGE 20
VIRGINIA ELECTRIC AND POWER COMPANY
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
See Market Risk Sensitive Instruments and Risk Management under MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
<PAGE>
PAGE 21
VIRGINIA ELECTRIC AND POWER COMPANY
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
In April 1999, the Company was notified by the Department of Justice of
alleged noncompliance with the EPA's oil spill, prevention, control and
countermeasures plans and facility response requirements at one of its power
stations. If, in a legal proceeding, such instances of noncompliance are deemed
to have occurred, the Company may be required to remedy any alleged deficiencies
and pay civil penalties. Settlement of this matter is currently in negotiation
and is not expected to be material to the Company's financial condition or
results of operations.
ITEM 5. OTHER INFORMATION
- -------------------------
REGULATION
- ----------
VIRGINIA
As previously reported, on March 20, 1998, the Virginia Commission issued
an Order instructing Virginia Power and AEP-Virginia, as the Commonwealth's two
largest investor-owned utilities, each to design and file a retail access pilot
program. We filed a report on November 2, 1998, describing the details,
objectives and characteristics of our proposed retail access pilot program. On
December 3, 1998, the Virginia Commission issued an Order setting our retail
access pilot program proposal for hearing on June 29, 1999, to consider the
remaining issues and details. On May 6, 1999 the Hearing Examiner issued a
ruling changing the hearing date to September 8, 1999. On August 6, 1999 the
Hearing Examiner issued a report on interim rules for the introduction of
electric and natural gas retail competition in Virginia. There is a 21-day
comment period on the recommendations that will require final approval by the
Virginia Commission.
FERC
On June 3, 1999, Virginia Power, together with American Electric Power
Services Corporation, Consumers Energy Company, The Detroit Edison Company, and
First Energy Corporation, on behalf of themselves and their public utility
operating company subsidiaries filed with FERC applications under Sections 205
and 203 of the Federal Power Act for approval of the proposed Alliance Regional
Transmission Organization (Alliance RTO).
The application seeks approval to create the Alliance RTO. If accepted,
the Alliance RTO would operate the transmission systems of the companies, ensure
transmission reliability and provide non-discriminatory access to the
transmission grid. The applications include a proposed Alliance RTO open access
transmission tariff that would cover service into, from and through the Alliance
RTO.
RATES
- -----
NORTH CAROLINA
As previously reported, on November 6, 1998 we filed for approval of a new
Schedule 19 which governs purchases from cogenerators and small power producers.
On July 16, 1999, the North Carolina Commission issued an order directing us to
file, on or before July 26, 1999, a long-term standard contract terms and
conditions for five, ten and fifteen year periods for qualifying hydro-electric
facilities and small power producers. We filed for a 30-day extension of time to
provide the required information which was granted by the North Carolina
Commission.
SOURCES OF POWER
- ----------------
Virginia Power established a new one-hour integrated service area summer
peak demand of 16,216 MW on July 6, 1999. Also on July 6, 1999, we established a
new system energy output record for a 24-hour period of 326,188 MWh.
FUTURE SOURCES OF POWER
- -----------------------
As previously reported, we requested approval from the Virginia Commission
to construct four gas-fired turbine generators in Virginia. On May 14, 1999 the
Virginia Commission approved the construction of the four gas-fired turbine
generators in Virginia. A Petition to Appeal the approval was filed by an
opposing party July 13, 1999, in the Virginia Supreme Court. The same party has
appealed the air permit issued to the Company by the Department of Environmental
Quality. We will participate in both of the appeals in support of upholding the
applicable order and permit. Construction of the units has begun with commercial
operation expected by mid 2000.
<PAGE>
PAGE 22
VIRGINIA ELECTRIC AND POWER COMPANY
PART II - OTHER INFORMATION
(CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits:
4 Form of Second Supplemental Indenture dated as of June 1, 1999 to the
Senior Indenture dated as of June 1, 1998 as supplemented by the First
Supplemental Indenture dated as of June 1, 1998. (Exhibit 4.2, Form 8-K
dated June 3, 1999, File No. 1-2255, incorporated by reference).
10.1* Dominion Resources, Inc. Incentive Compensation Plan, as amended and
restated effective April 16, 1999 (filed herewith).
10.2* Form of Employment Continuity Agreement for certain officers of the
Company (filed herewith).
10.3* Form of Amendment to Employment Agreement between Dominion
Resources, Inc. and Thomas. F. Farrell, II (filed herewith).
10.4* Form of Amendment to the Dominion Resources, Inc. Executive
Supplemental Retirement Plan for certain officers including Robert
E. Rigsby (filed herewith).
27 Financial Data Schedule (filed herewith).
*Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K, dated June 3, 1999, relating
to the sale of $150 million of Senior notes.
<PAGE>
PAGE 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VIRGINIA ELECTRIC AND POWER COMPANY
Registrant
August 12, 1999
-- /S/ M. S. Bolton, Jr.
----------------------------------
M. S. Bolton, Jr.
Vice President and Controller
Principal Accounting Officer
Exhibit 10.1
DOMINION RESOURCES, INC.
INCENTIVE COMPENSATION PLAN
Restated effective April 16, 1999
1. Purpose. The purpose of this Dominion Resources, Inc. Incentive
Compensation Plan is to further the long term stability and financial success of
Dominion Resources, Inc. and the Dominion Companies by attracting and retaining
employees through the use of cash and stock incentives. It is believed that
ownership of Company Stock and the use of cash incentives will stimulate the
efforts of those employees upon whose judgment and interests the Employers are
and will be largely dependent for the successful conduct of its business. It is
also believed that Incentive Awards granted to such employees under this Plan
will strengthen their desire to remain employed with the Employers and will
further the identification of those employees' interests with those of the
Dominion Resources, Inc. shareholders. The Plan is intended to operate in
compliance with the provisions of Securities and Exchange Commission Rule 16b-3.
2. Definitions. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Applicable Withholding Taxes" means the aggregate amount of federal,
state and local income and payroll taxes that an Employer is required to
withhold in connection with any Performance Grant, any lapse of restrictions on
Restricted Stock, any grant of Goal-Based Stock, or any exercise of a
Nonstatutory Stock Option or Stock Appreciation Right.
(c) "Change of Control" means the occurrence of any of the following
events:
(i) any person, including a "group" as defined in Section 13(d)(3)
of the Act becomes the owner or beneficial owner of DRI securities having 20% or
more of the combined voting power of the then outstanding DRI securities that
may be cast for the election of DRI's directors (other than as a result of an
issuance of securities initiated by DRI, or open market purchases approved by
the DRI Board, as long as the majority of the DRI Board approving the purchases
is also the majority at the time the purchases are made);
(ii) as the direct or indirect result of, or in connection with, a
cash tender or exchange offer, a merger or other business combination, a sale of
assets, a contested election, or any combination of these transactions, the
persons who were directors of DRI before such transactions cease to constitute a
majority of the DRI Board, or any successor's board, within two years of the
last of such transactions; or
(iii) with respect to a particular Participant, an event occurs with
respect to the Employer that employs that Participant such that, after the
event, the Employer is no longer a Dominion Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means, effective April 16, 1999, the Organization and
Compensation Committee of the DRI Board, provided that, if any member of the
Organization and Compensation Committee does not qualify as both an outside
director for purposes of Code section 162(m) and a non-employee director for
purposes of Rule 16b-3, the remaining members of the committee (but not less
than two members) shall be constituted as a subcommittee of the Organization and
Compensation Committee to act as the Committee for purposes of the Plan. Prior
to April 16, 1999, the Organization and Compensation Committee of Virginia
Electric and Power Company had certain functions under the Plan. Any actions
taken by that Committee prior to April 16, 1999 shall be treated as if taken by
the Committee.
1
<PAGE>
(f) "Company Stock" means common stock of DRI. In the event of a change in
the capital structure of DRI (as provided in Section 15), the shares resulting
from such a change shall be deemed to be Company Stock within the meaning of the
Plan.
(g) "Date of Grant" means the date on which the Committee grants an
Incentive Award.
(h) "Disability" or "Disabled" means, as to an Incentive Stock Option, a
Disability within the meaning of Code section 22(e)(3). As to all other
Incentive Awards, the Committee shall determine whether a Disability exists and
such determination shall be conclusive.
(i) "Dominion Company" means Virginia Electric and Power Company, Dominion
Capital, Inc., Dominion Energy, Inc., or another corporation in which DRI owns
stock possessing at least 50 percent of the combined voting power of all classes
of stock or which is in a chain of corporations with DRI in which stock
possessing at least 50% of the combined voting power of all classes of stock is
owned by one or more other corporations in the chain.
(j) "DRI" means Dominion Resources, Inc.
(k) "DRI Board" means the Board of Directors of Dominion Resources, Inc.
(l) "Employer" means DRI and each Dominion Company that employs one or
more Participants.
(m) "Fair Market Value" means the closing trading price of a share of
Company Stock, as reported in The Wall Street Journal, as of the last day on
which Company Stock is traded preceding the Date of Grant or preceding any other
date for which the value of Company Stock must be determined under the Plan.
(n) "Goal-Based Stock" means Company Stock awarded when performance goals
are achieved pursuant to an award as provided in Section 8.
(o) "Incentive Award" means, collectively, a Performance Grant or the
award of Restricted Stock, Goal-Based Stock, an Option, or a Stock Appreciation
Right under the Plan.
(p) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable federal income tax treatment under,
Code section 422.
(q) "Mature Shares" means shares of Company Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (i) has held for at least six months or (ii) has purchased on
the open market.
(r) "Nonstatutory Stock Option" means an Option that does not meet the
requirements of Code section 422, or, even if meeting the requirements of Code
section 422, is not intended to be an Incentive Stock Option and is so
designated.
(s) "Option" means a right to purchase Company Stock granted under the
Plan, at a price determined in accordance with the Plan.
(t) "Participant" means any employee of DRI or a Dominion Company who
receives an Incentive Award under the Plan.
2
<PAGE>
(u) "Performance Criteria" means any of the following areas of performance
of DRI or any Dominion Company: asset growth; utility earnings; generating unit
efficiency; combined net worth; debt to equity ratio; earnings per share;
revenues; operating income; operating cash flow; net income, before or after
taxes; return on total capital, equity, revenue or assets; nonutility generation
cost exposure; power generation costs; safety measured in fatalities, lost time,
injuries and vehicle accidents; environmental protection measured in reportable
violations, notices of violations, and environmental agency required corrective
actions or enforcement actions; or economic value added (net operating profit
after tax less a charge for use of capital as determined under a methodology
approved by the Committee).
(v) "Performance Goal" means an objectively determinable performance goal
established by the Committee with respect to a given Performance Grant or grant
of Restricted Stock that relates to one or more Performance Criteria.
(w) "Performance Grant" means an Incentive Award made pursuant to Section
6.
(x) "Plan Year" means January 1 to December 31.
(y) "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in Section 7.
(z) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission promulgated under the Act. A reference in the Plan to Rule 16b-3
shall include a reference to any corresponding rule (or number redesignation) of
any amendments to Rule 16b-3 enacted after the effective date of the Plan's
adoption.
(aa) "Stock Appreciation Right" means a right to receive amounts from the
Employer granted under Section 10.
(bb) "Taxable Year" means the fiscal period used by DRI for reporting
taxes on income under the Code.
3. General. The following types of Incentive Awards may be granted under
the Plan: Performance Grants, Restricted Stock, Goal-Based Stock, Options, or
Stock Appreciation Rights. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options.
4. Stock. Subject to Section 15 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of eleven million (11,000,000) shares of
Company Stock, which shall be authorized, but unissued shares. Shares allocable
to Options, Restricted Stock or portions thereof granted under the Plan that
expire, are forfeited, or otherwise terminate unexercised may again be subjected
to an Incentive Award under the Plan. The Committee is expressly authorized to
make an Incentive Award to a Participant conditioned upon the surrender for
cancellation of an option granted under an existing Incentive Award. However,
without prior shareholder approval, the Committees are expressly prohibited from
making a new Incentive Award in the form of an Option if the exercise price of
the new Option is less than the exercise price of the Option under the existing
Incentive Award surrendered for cancellation. No more than one million five
hundred thousand (1,500,000) shares may be allocated to the Incentive Awards,
including the maximum amounts payable under a Performance Grant, that are
granted to any individual Participant during any single Taxable Year.
3
<PAGE>
5. Eligibility.
(a) All present and future employees of DRI or a Dominion Company (whether
now existing or hereafter created or acquired) whom the Committee determines to
have contributed or who can be expected to contribute significantly to DRI or a
Dominion Company shall be eligible to receive Incentive Awards under the Plan.
The Committee shall have the power and complete discretion, as provided in
Section 16, to select eligible employees to receive Incentive Awards and to
determine for each employee the nature of the award and the terms and conditions
of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate an Employer to pay
an employee any particular amount of remuneration, to continue the employment of
the employee after the grant or to make further grants to the employee at any
time thereafter.
6. Performance Grants.
(a) Each Performance Grant shall be evidenced by an agreement (a "Grant
Agreement") setting forth the Performance Goals for the award, including the
Performance Criteria, the target and maximum amounts payable and such other
terms and conditions as are applicable to the Performance Grant. Each
Performance Grant shall be granted and administered to comply with the
requirements of Code section 162(m). The aggregate maximum cash amount payable
under the Plan to any Participant in any Plan Year shall not exceed 0.5% of
DRI's consolidated operating income, before taxes and interest, as reported on
its annual financial statements for the prior Plan Year. In the event of any
conflict between a Grant Agreement and the Plan, the terms of the Plan shall
govern.
(b) The Committee shall establish the Performance Goals for Performance
Grants. The Committee shall determine the extent to which any Performance
Criteria shall be used and weighted in determining Performance Grants. The
Committee may vary the Performance Criteria, Performance Goals and weightings
from Participant to Participant, Performance Grant to Performance Grant and Plan
Year to Plan Year. The Committee may increase, but not decrease, any Performance
Goal during a Plan Year.
(c) The Committee shall establish for each Performance Grant the amount of
cash or Company Stock payable at specified levels of performance, based on the
Performance Goal for each Performance Criteria. Any Performance Grant shall be
made not later than 90 days after the start of the period for which the
Performance Grant relates and shall be made prior to the completion of 25% of
such period. All determinations regarding the achievement of any Performance
Goals will be made by the Committee. The Committee may not increase during a
Plan Year the amount of cash or Common Stock that would otherwise be payable
upon achievement of the Performance Goal or Goals but may reduce or eliminate
the payments as provided in a Performance Grant.
(d) The actual payments to a Participant under a Performance Grant will be
calculated by applying the achievement of a Performance Criteria to the
Performance Goal as established in the Grant Agreement. All calculations of
actual payments shall be made by the Committee and the Committee shall certify
in writing the extent, if any, to which the Performance Goals have been met.
(e) Performance Grants will be paid in cash, Company Stock or both, at
such time or times as are provided in the Grant Agreement. The Committee may
provide in the Grant Agreement that the Participant may make a prior election to
defer the payment under a Performance Grant subject to such terms and conditions
as the Committee may determine.
(f) Nothing contained in the Plan will be deemed in any way to limit or
restrict any Employer or the Committee from making any award or payment to any
person under any other plan, arrangement or understanding, whether now existing
or hereafter in effect.
(g) A Participant who receives a Performance Grant payable in Company
Stock shall have no rights as a shareholder until the Company Stock is issued
pursuant to the terms of the Performance Grant. The Company Stock may be issued
without cash consideration.
4
<PAGE>
(h) A Participant's interest in a Performance Grant may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(i) Whenever payments under a Performance Grant are to be made in cash,
the Employer will withhold therefrom an amount sufficient to satisfy any
Applicable Withholding Taxes. Each Participant shall agree as a condition of
receiving a Performance Grant payable in the form of Company Stock, to pay to
the Employer, or make arrangements satisfactory to the Employer regarding the
payment to the Employer of, Applicable Withholding Taxes. Until such amount has
been paid or arrangements satisfactory to the Employer have been made, no stock
certificate shall be issued to such Participant. As an alternative to making a
cash payment to the Employer to satisfy Applicable Withholding Taxes, if the
Grant Agreement so provides, the Participant may elect to (i) to deliver Mature
Shares (valued at their Fair Market Value) or (ii) to have the Employer retain
that number of shares of Company Stock (valued at their Fair Market Value) that
would satisfy all or a specified portion of the Applicable Withholding Taxes.
7. Restricted Stock Awards.
(a) The Committee may make grants of Restricted Stock to Participants.
Whenever the Committee deems it appropriate to grant Restricted Stock, notice
shall be given to the Participant stating the number of shares of Restricted
Stock granted and the terms and conditions to which the Restricted Stock is
subject. This notice, when accepted in writing by the Participant shall become
an Grant Agreement between the Employer and the Participant. Restricted Stock
may be awarded by the Committee in its discretion without cash consideration.
(b) No shares of Restricted Stock may be sold, assigned, transferred,
pledged, hypothecated, or otherwise encumbered or disposed of until the
restrictions on such shares as set forth in the Participant's Grant Agreement
have lapsed or been removed pursuant to paragraph (d) or (e) below.
(c) Upon the acceptance by a Participant of an award of Restricted Stock,
such Participant shall, subject to the restrictions set forth in paragraph (b)
above, have all the rights of a shareholder with respect to such shares of
Restricted Stock, including, but not limited to, the right to vote such shares
of Restricted Stock and the right to receive all dividends and other
distributions paid thereon. Certificates representing Restricted Stock shall be
held by DRI until the restrictions lapse and the Participant shall provide DRI
with appropriate stock powers endorsed in blank.
(d) The Committee shall establish as to each award of Restricted Stock the
terms and conditions upon which the restrictions set forth in paragraph (b)
above shall lapse. The terms and conditions may include the achievement of a
Performance Goal which shall be governed by the provisions of Section 6 to the
extent that the award is intended to comply with the requirements of Code
section 162(m). Such terms and conditions may also include, without limitation,
the lapsing of such restrictions as a result of the Disability, death or
retirement of the Participant or the occurrence of a Change of Control.
(e) Notwithstanding the provisions of paragraph (b) above, the Committee
may at any time, in its sole discretion, accelerate the time at which any or all
restrictions will lapse or remove any and all such restrictions, subject to the
restrictions of Section 6 as to any Performance Goal if the award is intended to
comply with the requirements of Code section 162(m).
(f) Each Participant shall agree at the time his or her Restricted Stock
is granted, and as a condition thereof, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
free of a legend reflecting the restrictions set forth in paragraph (b) above
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the grant so
provides, the Participant may elect to (i) to deliver Mature Shares (valued at
their Fair Market Value) or (ii) to have the Employer retain that number of
shares of Company Stock (valued at their Fair Market Value) that would satisfy
all or a specified portion of the Applicable Withholding Taxes.
5
<PAGE>
8. Goal-Based Stock Awards.
(a) The Committee may make grants of Goal-Based Stock to Participants.
Whenever the Committee deems it appropriate to grant Goal-Based Stock, notice
shall be given to the Participant stating the number of shares of Goal-Based
Stock granted and the terms and conditions to which the Goal-Based Stock is
subject. This notice, when accepted in writing by the Participant shall become a
grant agreement between the Employer and the Participant.
(b) Goal-Based Stock may be issued pursuant to the Plan from time to time
by the Committee when performance criteria established by the Committee have
been achieved and certified by the Committee.
(c) Whenever the Committee deems it appropriate, the Committee may
establish a performance criteria for an award of Goal-Based Stock and notify
Participants of their receipt of an award of Goal-Based Stock. More than one
award of Goal-Based Stock may be established by the Committee for a Participant
and the awards may operate concurrently or for varied periods of time.
Goal-Based Stock will be issued only subject to the award and the Plan and
consistent with meeting the goal or goals set by the Committee in the award. A
Participant shall have no rights as a shareholder until the Committee has
certified that the performance objectives of the Goal-Based Stock award have
been met and the Goal-Based Stock is issued. Goal-Based Stock may be issued
without cash consideration.
(d) A Participant's interest in a Goal-Based Stock award may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(e) The Committee may at any time, in its sole discretion, remove or
revise any and all performance criteria for an award of Goal-Based Stock.
(f) Each Participant shall agree at the time of receiving an award of
Goal-Based Stock, and as a condition thereof, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued to such Participant. As an alternative to making a cash payment
to the Employer to satisfy Applicable Withholding Taxes, if the grant so
provides, the Participant may elect to (i) to deliver Mature Shares (valued at
their Fair Market Value) or (ii) to have the Employer retain that number of
shares of Company Stock (valued at their Fair Market Value) that would satisfy
all or a specified portion of the Applicable Withholding Taxes.
9. Stock Options.
(a) The Committee may make grants of Options to Participants. Whenever the
Committee deems it appropriate to grant Options, notice shall be given to the
Participant stating the number of shares for which Options are granted, the
Option price per share, whether the Options are Incentive Stock Options or
Nonstatutory Stock Options, the extent to which Stock Appreciation Rights are
granted (as provided in Section 10), and the conditions to which the grant and
exercise of the Options are subject. This notice, when duly accepted in writing
by the Participant, shall become a stock option agreement.
(b) The exercise price of shares of Company Stock covered by an Option
shall be not less than 100% of the Fair Market Value of such shares on the Date
of Grant.
6
<PAGE>
(c) Options may be exercised in whole or in part at such times as may be
specified by the Committee in the Participant's stock option agreement; provided
that, the exercise provisions for Incentive Stock Options shall in all events
not be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first to
occur of (x) ten years from the Date of Grant, (y) three months following the
date of the Participant's retirement or termination of employment with all
Employers for reasons other than Disability or death, or (z) one year following
the date of the Participant's termination of employment on account of Disability
or death.
(ii) An Incentive Stock Option by its terms, shall be exercisable in
any calendar year only to the extent that the aggregate Fair Market Value
(determined at the Date of Grant) of the Company Stock with respect to which
Incentive Stock Options are exercisable for the first time during the calendar
year does not exceed $100,000 (the "Limitation Amount"). Incentive Stock Options
granted under the Plan and all other plans of any Employer shall be aggregated
for purposes of determining whether the Limitation Amount has been exceeded. The
Committee granting the Option may impose such conditions as it deems appropriate
on an Incentive Stock Option to ensure that the foregoing requirement is met. If
Incentive Stock Options that first become exercisable in a calendar year exceed
the Limitation Amount, the excess Options will be treated as Nonstatutory Stock
Options to the extent permitted by law.
10. Stock Appreciation Rights.
(a) Whenever the Committee deems it appropriate, Stock Appreciation Rights
may be granted in connection with all or any part of an Option to a Participant
or in a separate Incentive Award.
(b) The following provisions apply to all Stock Appreciation Rights that
are granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant, upon
exercise of all or any part of the Stock Appreciation Rights, to surrender to
the Employer unexercised that portion of the underlying Option relating to the
same number of shares of Company Stock as is covered by the Stock Appreciation
Rights (or the portion of the Stock Appreciation Rights so exercised) and to
receive in exchange from the Employer an amount equal to the excess of (x) the
Fair Market Value on the date of exercise of the Company Stock covered by the
surrendered portion of the underlying Option over (y) the exercise price of the
Company Stock covered by the surrendered portion of the underlying Option. The
Committee may limit the amount that the Participant will be entitled to receive
upon exercise of Stock Appreciation Rights.
(ii) Upon the exercise of a Stock Appreciation Right and surrender
of the related portion of the underlying Option, the Option, to the extent
surrendered, shall not thereafter be exercisable.
(iii) Subject to any further conditions upon exercise imposed by the
Board, a Stock Appreciation Right shall be exercisable only to the extent that
the related Option is exercisable and a Stock Appreciation Right shall expire no
later than the date on which the related Option expires.
(iv) A Stock Appreciation Right may only be exercised at a time when
the Fair Market Value of the Company Stock covered by the Stock Appreciation
Right exceeds the exercise price of the Company Stock covered by the underlying
Option.
(c) The following provisions apply to all Stock Appreciation Rights that
are not granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant, upon
exercise of all or any part of the Stock Appreciation Rights, to receive in
exchange from the Employer an amount equal to the excess of (x) the Fair Market
Value on the date of exercise of the Company Stock covered by the surrendered
Stock Appreciation Right over (y) the price of the Company Stock on the Date of
Grant of the Stock Appreciation Right. The Committee may limit the amount that
the Participant will be entitled to receive upon exercise of Stock Appreciation
Rights.
7
<PAGE>
(ii) A Stock Appreciation Right may only be exercised at a time when
the Fair Market Value of the Company Stock covered by the Stock Appreciation
Right exceeds the Fair Market Value of the Company Stock on the Date of Grant of
the Stock Appreciation Right.
(d) The manner in which the Employer's obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be determined by the
Committee and shall be set forth in the Incentive Award. The Incentive Award may
provide for payment in Company Stock or cash, or a fixed combination of Company
Stock or cash, or the Committee may reserve the right to determine the manner of
payment at the time the Stock Appreciation Right is exercised. Shares of Company
Stock issued upon the exercise of a Stock Appreciation Right shall be valued at
their Fair Market Value on the date of exercise.
11. Method of Exercise of Options and Stock Appreciation Rights.
(a) Options and Stock Appreciation Rights may be exercised by the
Participant giving written notice of the exercise to the Employer, stating the
number of shares the Participant has elected to purchase under the Option or the
number of Stock Appreciation Rights the Participant has elected to exercise. In
the case of the purchase of shares under an Option, such notice shall be
effective only if accompanied by the exercise price in full in cash; provided,
however, that if the terms of an Option so permit, the Participant may (i)
deliver Mature Shares (valued at their Fair Market Value) in satisfaction of all
or any part of the exercise price, (ii) cause to be withheld from the Option
shares, shares of Company Stock (valued at their Fair Market Value) in
satisfaction of all or any part of the exercise price, or (iii) deliver a
properly executed exercise notice together with irrevocable instructions to a
broker to deliver promptly to the Employer, from the sale or loan proceeds with
respect to the sale of Company Stock or a loan secured by Company Stock, the
amount necessary to pay the exercise price and, if required by the terms of the
Option, Applicable Withholding Taxes.
(b) DRI may place on any certificate representing Company Stock issued
upon the exercise of an Option or a Stock Appreciation Right any legend deemed
desirable by the DRI's counsel to comply with federal or state securities laws,
and DRI may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock acquired, he or she shall possess no shareholder
rights with respect to the shares.
(c) Each Participant shall agree as a condition of the exercise of an
Option or a Stock Appreciation Right, to pay to the Employer, or make
arrangements satisfactory to the Employer regarding the payment to the Employer
of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Employer have been made, no stock certificate
shall be issued upon the exercise of an Option or cash paid upon the exercise of
a Stock Appreciation Right.
(d) As an alternative to making a cash payment to the Employer to satisfy
Applicable Withholding Taxes, if the Option or Stock Appreciation Rights
agreement so provides, the Participant may elect to (i) to deliver Mature Shares
(valued at their Fair Market Value) or (ii) to have the Employer retain that
number of shares of Company Stock (valued at their Fair Market Value) that would
satisfy all or a specified portion of the Applicable Withholding Taxes.
12. Transferability of Options and Stock Appreciation Rights. Nonstatutory
Stock Options and Stock Appreciation Rights may be transferable by a Participant
and exercisable by a person other than the Participant, but only to the extent
specifically provided in the Incentive Award. Incentive Stock Options, by their
terms, shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime, only
by the Participant.
13. Effective Date of the Plan. The effective date of the Plan is January
1, 1997. The Plan shall be submitted to the shareholders of the DRI for
approval. Until (i) the Plan has been approved by DRI's shareholders, and (ii)
the requirements of any applicable Federal or State securities laws have been
met, no Restricted Stock or Goal-Based Stock shall be awarded that is not
contingent on these events and no Option or Stock Appreciation Right granted
shall be exercisable.
8
<PAGE>
14. Termination, Modification, Change. If not sooner terminated by the DRI
Board, this Plan shall terminate at the close of business on December 31, 2006.
No Incentive Awards shall be made under the Plan after its termination. The DRI
Board may amend or terminate the Plan in such respects as it shall deem
advisable; provided that, if and to the extent required by the Code, no change
shall be made that increases the total number of shares of Company Stock
reserved for issuance pursuant to Incentive Awards granted under the Plan
(except pursuant to Section 15), materially modifies the requirements as to
eligibility for participation in the Plan, or materially increases the benefits
accruing to Participants under the Plan, unless such change is authorized by the
shareholders of DRI. Notwithstanding the foregoing, the DRI Board may
unilaterally amend the Plan and Incentive Awards with respect to Participants as
it deems appropriate to ensure compliance with Rule 16b-3 and to cause Incentive
Stock Options to meet the requirements of the Code and regulations thereunder.
Except as provided in the preceding sentence, a termination or amendment of the
Plan shall not, without the consent of the Participant, adversely affect a
Participant's rights under an Incentive Award previously granted to him or her.
15. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or merger in which DRI is the surviving corporation or
other change in DRI's capital stock (including, but not limited to, the creation
or issuance to shareholders generally of rights, options or warrants for the
purchase of common stock or preferred stock of DRI), the number and kind of
shares of stock or securities of DRI to be subject to the Plan and to Options
then outstanding or to be granted thereunder, the maximum number of shares or
securities which may be delivered under the Plan, the maximum number of shares
or securities that can be granted to an individual Participant under Section 4,
the exercise price, the terms of Incentive Awards and other relevant provisions
shall be appropriately adjusted by the Committee, whose determination shall be
binding on all persons. If the adjustment would produce fractional shares with
respect to any unexercised Option, the Committee may adjust appropriately the
number of shares covered by the Option so as to eliminate the fractional shares.
(b) If DRI is a party to a consolidation or a merger in which DRI is not
the surviving corporation, a transaction that results in the acquisition of
substantially all of DRI's outstanding stock by a single person or entity, or a
sale or transfer of substantially all of DRI's assets, the Committee may take
such actions with respect to outstanding Incentive Awards as the Committee deems
appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the Committee
may take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes.
16. Administration of the Plan.
(a) Subject to the provisions of Section 16(b), the Plan shall be
administered by the Committee. The Committee shall have general authority to
impose any limitation or condition upon an Incentive Award the Committee deems
appropriate to achieve the objectives of the Incentive Award and the Plan and,
without limitation and in addition to powers set forth elsewhere in the Plan,
shall have the power and complete discretion to determine:
9
<PAGE>
(i) which eligible employees shall receive Incentive Awards and the
nature of each Incentive Award, (ii) the terms and conditions of any Performance
Grant, (iii) whether all or any part of an Incentive Award shall be accelerated
upon a Change of Control, (iv) the number of shares of Company Stock to be
covered by each Incentive Award, (v) whether Options shall be Incentive Stock
Options or Nonstatutory Stock Options, (vi) when, whether and to what extent
Stock Appreciation Rights shall be granted, (vii) the time or times when an
Incentive Award shall be granted, (viii) whether an Incentive Award shall become
vested over a period of time and when it shall be fully vested, (ix) when
Options and Stock Appreciation Rights may be exercised, (x) whether a Disability
exists, (xi) the manner in which payment will be made upon the exercise of
Options or Stock Appreciation Rights, (xii) conditions relating to the length of
time before disposition of Company Stock received upon the exercise of Options
or Stock Appreciation Rights is permitted, (xiii) whether to authorize a
Participant (A) to deliver Mature Shares to satisfy Applicable Withholding Taxes
or (B) to have the Employer withhold from the shares to be issued upon the
exercise of a Nonstatutory Stock Option or Stock Appreciation Right the number
of shares necessary to satisfy Applicable Withholding Taxes, (xiv) the terms and
conditions applicable to Restricted Stock awards, (xv) the terms and conditions
on which restrictions upon Restricted Stock shall lapse, (xvi) whether to
accelerate the time at which any or all restrictions with respect to Restricted
Stock will lapse or be removed, (xvii) the terms and conditions applicable to
Goal-Based Stock awards, (xviii) notice provisions relating to the sale of
Company Stock acquired under the Plan, (xix) the extent to which information
shall be provided to Participants about available tax elections, and (xx) any
additional requirements relating to Incentive Awards that the Committee deems
appropriate. Notwithstanding the foregoing, no "tandem stock options" (where two
stock options are issued together and the exercise of one option affects the
right to exercise the other option) may be issued in connection with Incentive
Stock Options. The Committee shall have the power to amend the terms of
previously granted Incentive Awards that were granted by that Committee so long
as the terms as amended are consistent with the terms of the Plan and provided
that the consent of the Participant is obtained with respect to any amendment
that would be detrimental to him or her, except that such consent will not be
required if such amendment is for the purpose of complying with Rule 16b-3 or
any requirement of the Code applicable to the Incentive Award.
(b) All grants of Incentive Awards made or approved by the Committee shall
be submitted to the DRI Board for such consideration as the DRI Board deems
appropriate.
(c) The Committee may adopt rules and regulations for carrying out the
Plan with respect to Participants. The interpretation and construction of any
provision of the Plan by the Committee shall be final and conclusive as to any
Participant. The Committee may consult with counsel, who may be counsel to the
Employer, and shall not incur any liability for any action taken in good faith
in reliance upon the advice of counsel.
(d) A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by a written instrument signed by all of the
members, and any action so taken shall be fully effective as if it had been
taken at a meeting.
17. Notice. All notices and other communications required or permitted to
be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows (a) if to DRI--at the principal business address of DRI to the attention
of the Corporate Secretary of DRI; and (b) if to any Participant--at the last
address of the Participant known to the sender at the time the notice or other
communication is sent.
18. Interpretation. The terms of this Plan are subject to all present and
future regulations and rulings of the Secretary of the Treasury of the United
States or his or her delegate relating to the qualification of Incentive Stock
Options under the Code. If any provision of the Plan conflicts with any such
regulation or ruling, then that provision of the Plan shall be void and of no
effect. The terms of this Plan shall be governed by the laws of the Commonwealth
of Virginia.
19. Grants To Outside Directors. In addition to the Awards otherwise
provided under the Plan, the Plan also permits the award of Nonstatutory Stock
Options and Restricted Stock to directors on the DRI Board or the board of any
Dominion Company if such directors are not employees of DRI or a Dominion
Company ("Outside Directors"). The DRI Board shall have the power and complete
discretion to select Outside Directors of DRI or any Dominion Company to receive
Awards. The DRI Board shall have the complete discretion, under provisions
consistent with Section 12 as to Participants, to determine the terms and
conditions, the nature of the award and the number of shares to be allocated as
part of each Award for each Outside Director of DRI or a Dominion Company. The
grant of an Award shall not obligate DRI or any Dominion Company to make further
grants to the Outside Director at any time thereafter or to retain any person as
a director for any period of time.
10
Exhibit 10.2
FORM OF
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT dated as of __________________, 1999 (the "Agreement
Date") is made by and between Virginia Power, a Virginia corporation, Dominion
Resources, Inc. ("DRI"), a Virginia corporation, (and together with Virginia
Power, the "Company") and ______________________ (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of Virginia Power (the "Board") has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of DRI. The Board believes that
this objective may be achieved by giving key management employees assurances of
financial security in case of a pending or threatened change in control, so that
they will not be distracted by personal risks and will continue to devote their
full time and best efforts to the performance of their duties. The Board also
wants to provide the Executive with compensation and benefits arrangements upon
a Change in Control which are competitive with those of similarly situated
corporations.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement
Date and ending on the third anniversary of the Agreement Date. Commencing on
the third anniversary of the Agreement Date and each subsequent anniversary of
the Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation" See Section 5.4(a).
2.3 "Annual Base Salary" See Section 3.1(a).
2.4 "Annual Bonus" See Section 3.1(b).
2.5 "Bonus Plan" See Section 3.2(b).
<PAGE>
2.6 "Cause" See Section 4.3.
2.7 "Change in Control" means:
(a) any person, including a "group" as defined in Section
13(d)(3) of the Act becomes the owner or beneficial owner of DRI securities
having 20% or more of the combined voting power of the then outstanding DRI
securities that may be cast for the election of DRI's directors (other than as
a result of an issuance of securities initiated by DRI, or open market purchases
approved by the DRI Board, as long as the majority of the DRI Board approving
the purchases is also the majority at the time the purchases are made); or
(b) as the direct or indirect result of, or in connection
with, a cash tender or exchange offer, a merger or other business combination, a
sale of assets, a contested election, or any combination of these transactions,
the persons who were directors of DRI before such transactions cease to
constitute a majority of the DRI Board, or any successor's board, within two
years of the last of such transactions.
2.8 "Code" means the Internal Revenue Code of 1986, as amended.
2.9 "Company Certificate" See Section 6.1.
2.10 "Disability" See Section 4.1.
2.11 "Disability Effective Date" See Section 4.1
2.12 "Effective Date" means the first date during the Agreement Term
on which a Change in Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change in Control occurs and the Executive's employment
with the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a) was at the request of a third party who has taken
steps reasonably calculated to effect a Change in Control, or (b) otherwise
arose in connection with or in anticipation of a Change in Control, then for all
purposes of this Agreement, the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
2.13 "Employment Period" means the period commencing on the Effective
Date and ending on the third anniversary of such date.
2.14 "Excise Taxes" See Section 6.1(a).
2.15 "Gross-up Payment" See Section 6.1(a).
2.16 "Performance Period" See Section 3.2(b).
2.17 "Plans" See Section 3.2(c).
2
<PAGE>
2.18 "Potential Parachute Payments" See Section 6.1(a).
2.19 "Severance Incentive" means the greater of (i) the target annual
incentive under an Incentive Plan applicable to the Executive for the
Performance Period in which the Termination Date occurs, or (ii) the highest
actual annual incentives paid (or payable, to the extent not previously paid) to
the Executive under the Incentive Plan during the three calendar years preceding
the calendar year in which the Termination Date occurs.
2.20 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1(a)).
2.21 "Welfare Plans" See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will devote his
knowledge, skill and best efforts on a full-time basis to performing his duties
and obligations to the Company (with the exception of absences on account of
illness or vacation in accordance with the Company's policies and civic and
charitable commitments not involving a conflict with the Company's business),
and (ii) will comply with the directions and orders of the Board of Directors,
the Chief Executive Officer or other superior officer of the Company with
respect to the performance of his duties.
3.2 Compensation.
(a) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and, thereafter, at least annually, and shall be
increased at any time and from time to time as shall be substantially consistent
with increases in base salary awarded to other peer executives of the Company.
Annual Base Salary shall not be reduced after any such increase unless such
reduction is part of a policy, program or arrangement applicable to peer
executives of the Company and of any successor entity, and the term Annual Base
Salary as used in this Agreement shall refer to Annual Base Salary as so
adjusted.
3
<PAGE>
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall make or cause to be made to the Executive an incentive award (the
"Annual Bonus") for each Performance Period which ends during the Employment
Period. "Performance Period" means each period of time designated in accordance
with any annual incentive award arrangement ("Bonus Plan") which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect at any time in the three-year period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer executives of the Company.
(e) Other Employee Benefits. During the Employment Period,
the Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a company car, parking benefits and financial planning.
4
<PAGE>
(f) Stock Incentives. At the Effective Date, the Executive
shall become fully vested in any and all stock incentive awards granted to the
Executive under the Dominion Resources, Inc. Incentive Compensation Plan or any
other plan or arrangement ("Incentive Plans") which have not become exercisable
as the Effective Date. All forfeiture conditions that as of the Effective Date
are applicable to any deferred stock unit, restricted stock or restricted share
units awarded to the Executive by the Company pursuant to any Incentive Plan or
otherwise shall lapse immediately at the Effective Date.
(g) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of DRI, the references
to the Company contained in Sections 3.2(a) through 3.2(f) and the other
Sections of this Agreement referring to benefits to which the Executive may be
entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Agreement Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Agreement Term.
4.3 Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
means (a) fraud or material misappropriation with respect to the business or
assets of the Company, (b) persistent refusal or willful failure of the
Executive to perform substantially his duties and responsibilities to the
Company, which continues after the Executive receives notice of such refusal or
failure, (c) conviction of a felony or crime involving moral turpitude, or (d)
the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
5
<PAGE>
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of the
Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) a reduction of the Executive's Annual Base Salary in
violation of Section 3.2(a) or a reduction in the Executive's Annual Bonus in
violation of Section 3.2(b);
(d) a failure by the Company to provide the Executive with
increase in Annual Base Salary or participation in Bonus Plans or Incentive
Plans comparable to peer executives of the Company;
(e) the failure of any successor to the Company to assume this
Agreement;
(f) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are
the Executive's workplace), in each case without the consent of the Executive;
or
(g) any failure by the Company to comply with Section 3.2(f).
An act or omission shall not constitute Constructive Termination
unless (1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described in subsection (a)-(g)
above, or within 60 days after the last in a series of such events, and (3) the
Company has failed to remedy the event described in subsection (a)-(g) above as
the case may be, within 30 days after receiving the Executive's written notice.
If the Company remedies the event described in subsection (a)-(g), as the case
may be, within 30 days after receiving the Executive's written notice, the
Executive may not terminate employment under this Section 4.4 on account of the
event specified in the Executive's notice.
6
<PAGE>
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the
Company Other Than for Cause or Disability. If, during the Employment Period,
the Company shall terminate the Executive's employment other than for Cause or
Disability, or if the Executive shall terminate employment for Constructive
Termination, the Company's obligations to the Executive shall be as follows:
(a) The Company shall, within thirty business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual Base
Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the Annual Bonus
(as defined in Section 3.2(b)) for the Performance Period in which the
Termination Date occurs multiplied by (ii) a fraction, the numerator of which
is the number of days actually worked during such Performance Period, and the
denominator of which is 365; or, if greater, the amount of any Annual
Incentive paid or payable to the Executive with respect to the Performance
Period for the year in which the Termination Date occurs;
(iii) all amounts previously deferred by the Executive
under any nonqualified deferred compensation plan sponsored by the Company,
together with any accrued earnings thereon, and not yet paid by the Company;
and
(b) The Company shall, within thirty business days of such
termination of employment, pay the Executive a cash payment equal to three (3)
times the sum of the Executive's Annual Base Salary and the Severance Incentive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock incentive awards granted to the Executive under any
Plan which have not become exercisable as of the Termination Date and all stock
options (including options vested as of the Termination Date) shall remain
exercisable until the applicable option expiration date. All forfeiture
conditions that as of the Termination Date are applicable to any deferred stock
unit, restricted stock or restricted share units awarded to the Executive by the
Company pursuant to the LTIP, a successor plan or otherwise shall lapse
immediately.
(d) Except as provided in subsections (e) and (f), during the
Employment Period (or until such later date as any Welfare Plan of the Company
may specify), the Company shall continue to provide to the Executive and the
Executive's family welfare benefits (including, without limitation, disability,
individual life and group life insurance benefits, but excluding medical or
other health plans) which are at least as favorable as those provided under the
most favorable Welfare Plans of the Company applicable (i) with respect to the
Executive and his family during the 90-day period immediately preceding the
Termination Date, or (ii) with respect to other peer executives and their
families during the Employment Period. In determining benefits under such
Welfare Plans, the Executive's annual compensation attributable to base salary
and incentives for any plan year or calendar year, as applicable, shall be
deemed to be not less than the Executive's Annual Base Salary and Annual
Incentive. The cost of the welfare benefits provided under this Section 5.1(d)
shall not exceed the cost of such benefits to the Executive immediately before
the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans.
7
<PAGE>
(e) If the Executive elects to convert any group term life
insurance to an individual policy, the Company shall pay all premiums for 12
months and the Executive shall cease to participate in the Company's group term
life insurance.
(f) The Executive's eligibility for any retiree medical
coverage shall be determined under the relevant plan, with additional age or
service credited provided in the Executive's employment agreement, if any. The
Executive's rights under this Section shall be in addition to and not in lieu of
any post-termination continuation coverage or conversion rights the Executive
may have pursuant to applicable law, including, without limitation, continuation
coverage required by Section 4980B of the Code ("COBRA Continuation Coverage").
If the Executive is not eligible for retiree medical coverage and elects to
receive COBRA Continuation Coverage, the Company shall pay all of the required
premiums for the Executive and/or the Executive's family for 12 months after the
Termination Date. For purposes of determining eligibility for and the time of
commencement of retiree benefits under any Welfare Plans of the Company, the
Executive's credited service shall be the Executive's credited service at the
Termination Date plus five years and the Executive's age shall be deemed to be
the Executive's age at the Termination Date plus five years. If the Executive is
eligible for additional credited service or deemed age under an employment
agreement or other contract with the Company, the additional service and age
provided by this Section 5.1(f) shall be in addition to any service and/or age
credit provided under an employment agreement or contract.
(g) The Executive shall be fully vested in the Company's
Executive Supplemental Retirement Plan and Benefit Restoration Plan or any
successor or replacement plans (the "Supplemental Plans"). For purposes of the
Supplemental Plans, the Executive's credited service shall be the Executive's
credited service at the Termination Date plus five years and the Executive's age
shall be deemed to be the Executive's age at the Termination Date plus five
years. The amount payable under Section 5.1(b) of this Agreement shall be taken
into account for purposes of determining the amount of benefits to which the
Executive is entitled under the Supplemental Plans as though the amount was
earned equally over the Employment Period. If the Executive is eligible for
additional credited service or deemed age under an employment agreement or other
contract with the Company, the additional service and age provided by this
Section 5.1(g) shall be in addition to any service and/or age credit provided
under an employment agreement or contract.
8
<PAGE>
(h) The Company shall, at its sole expense, as incurred, pay
on behalf of Executive up to $25,000 in fees and costs charged by a nationally
recognized outplacement firm selected by the Executive to provide outplacement
service for one year after the Termination Date.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than the obligation immediately to pay the Executive in cash the
Executive's Annual Base Salary through the Termination Date, plus any accrued
paid time off, in each case to the extent not previously paid.
5.3 If by the Executive Other Than for Constructive Termination. If
the Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company, other than the obligation immediately
to pay the Executive in cash the Executive's Annual Base Salary through the
Termination Date, plus any accrued paid time off, in each case to the extent not
previously paid.
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
(b) the Executive shall be fully vested in the Company's
Supplemental Plans and shall be entitled to immediate payment of any benefits
under the Supplemental Plans; and
(c) the Executive's right after the Disability Effective Date
to receive disability and other benefits at least equal to the greater of (1)
those provided under the most favorable disability Plans applicable to disabled
peer executives of the Company in effect immediately before the Termination
Date, or (2) those provided under the most favorable disability Plans of the
Company in effect at any time during the 90-day period immediately before the
Effective Date.
9
<PAGE>
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than the obligation immediately to
pay the Executive's estate or beneficiary in cash all Accrued Obligations (as
defined in Section 5.4(a)) and to provide the benefits as stated in Section
5.4(b). In addition, the Executive's family shall be entitled to receive death
benefits at least equal to the most favorable death benefits provided under
Plans and Welfare Plans of the Company to the surviving families of peer
executives of the Company, but in no event shall such Plans and Welfare Plans
provide benefits which in each case are less favorable, in the aggregate, than
the most favorable of those provided by the Company to the Executive under such
Plans in effect at any time during the 90-day period immediately before the
Effective Date.
ARTICLE VI
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
6.1 Gross-up for Certain Taxes.
(a) If the Company determines that any benefit received or
deemed received by the Executive from the Company pursuant to this Agreement
or otherwise, whether or not in connection with a Change in Control (such
monetary or other benefits collectively, the "Potential Parachute Payments") is
or will become subject to any excise tax under Section 4999 of the Code or any
similar tax payable under any United States federal, state, local or other law
(such excise tax and all such similar taxes collectively, "Excise Taxes"), then
the Company shall, within 30 business days after such determination, pay the
Executive an amount (the "Gross-up Payment") equal to the product of:
(i) the amount of such Excise Taxes multiplied by
(ii) the Gross-up Multiple (as defined in Section 6.3).
The Gross-up Payment is intended to compensate the Executive for all
Excise Taxes payable by the Executive with respect to the Potential Parachute
Payments and any federal, state, local or other income or other taxes or Excise
Taxes payable by the Executive with respect to the Gross-up Payment.
(b) The determination of the Company described in Section
6.1(a), including the detailed calculations of the amounts of the Potential
Parachute Payments, Excise Taxes and Gross-Up Payment and the assumptions
relating thereto, shall be set forth in a written certificate of the Company's
independent auditors (the "Company Certificate") delivered to the Executive. The
Executive may at any time request the preparation and delivery to the Executive
of a Company Certificate. The Company shall cause the Company Certificate to be
delivered to the Executive as soon as reasonably possible after such request.
10
<PAGE>
6.2 Additional Gross-up Amounts. If for any reason it is later
determined pursuant to a final judgment of a court of competent jurisdiction or
a determination by the Company that the amount of Excise Taxes payable by the
Executive is greater than the amount determined by the Company pursuant to
Section 6.1, then the Company shall pay the Executive an amount (which shall
also be deemed a Gross-up Payment) equal to the product of:
(a) the sum of (i) such additional Excise Taxes and (ii) any
interest, fines, penalties, expenses or other costs incurred by the Executive
as a result of having taken a position in accordance with a determination made
pursuant to Section 6.1 multiplied by
(b) the Gross-up Multiple.
6.3 Gross-up Multiple. The Gross-up Multiple shall equal a fraction,
the numerator of which is one (1.0), and the denominator of which is one (1.0)
minus the sum, expressed as a decimal fraction, of the effective after-tax
marginal rates of all federal, state, local and other income and other taxes and
any Excise Taxes applicable to the Gross-up Payment. If different rates of tax
are applicable to various portions of a Gross-up Payment, the weighted average
of such rates shall be used.
6.4 Amount Increased or Contested.
(a) The Executive shall notify the Company in writing (an
"Executive's Notice") of any claim by the IRS or other taxing authority (an
"IRS Claim") that, if successful, would require the payment by the Executive of
Excise Taxes in respect of Potential Parachute Payments in an amount in excess
of the amount of such Excise Taxes determined in accordance with Section 6.1.
Such Executive's Notice shall include a copy of all notices and other documents
or correspondence received by the Executive in respect of such IRS Claim. The
Executive shall give the Executive's Notice as soon as practicable. If before
the deadline for a response to the IRS ("IRS Claim Deadline"), the Company shall
(i) deliver to the Executive a Company Certificate to the
effect that the IRS Claim has been reviewed by the Company and,
notwithstanding the IRS Claim, the amount of Excise Taxes, interest and
penalties payable by the Executive is either zero or an amount less than
the amount specified in the IRS Claim,
(ii) pay to the Executive an amount (which shall also be
deemed a Gross-Up Payment) equal to the positive difference between (A) the
product of the amount of Excise Taxes, interest and penalties specified in
the Company Certificate, if any, multiplied by the Gross-Up Multiple, and
(B) the portion of such product, if any, previously paid to Executive by
the Company, and
11
<PAGE>
(iii) direct the Executive pursuant to Section 6.4(d) to
contest the balance of the IRS Claim,
then the Executive shall pay only the amount, if any, of Excise
Taxes, interest and penalties specified in the Company Certificate. In no event
shall the Executive pay an IRS Claim earlier than 30 days after having given an
Executive's Notice to the Company (or, if sooner, the IRS Claim Deadline).
(b) At any time after the payment by the Executive of any
amount of Excise Taxes or related interest or penalties in respect of Potential
Parachute Payments, the Company may in its discretion require the Executive to
pursue a claim for a refund (a "Refund Claim") of all or any portion of such
Excise Taxes, interest or penalties as the Company may specify by written notice
to the Executive.
(c) If the Company notifies the Executive in writing that the
Company desires the Executive to contest an IRS Claim or to pursue a Refund
Claim, the Executive shall:
(i) give the Company all information that it reasonably
requests in writing from time to time relating to such IRS Claim or Refund
Claim, as applicable,
(ii) take such action in connection with such IRS Claim o
Refund Claim (as applicable) as the Company reasonably requests in writing
from time to time, including accepting legal representation with respect
thereto by an attorney selected by the Company, subject to the approval of
the Executive (which approval shall not be unreasonably withheld or
delayed),
(iii) cooperate with the Company in good faith to contest
such IRS Claim or pursue such Refund Claim, as applicable,
(iv) permit the Company to participate in any proceedings
relating to such IRS Claim or Refund Claim, as applicable, and
(v) contest such IRS Claim or prosecute such Refund
Claim (as applicable) to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company may from time to time determine in its discretion.
The Company shall control all proceedings in connection with such IRS
Claim or Refund Claim (as applicable) and in its discretion may cause the
Executive to pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the IRS or other taxing authority in respect of
such IRS Claim or Refund Claim (as applicable); provided that (i) any extension
of the statute of limitations relating to payment of taxes for the taxable year
of the Executive relating to the IRS Claim is limited solely to such IRS Claim,
(ii) the Company's control of the IRS Claim or Refund Claim (as applicable)
shall be limited to issues with respect to which a Gross-Up Payment would be
payable, and (iii) the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the IRS or other taxing authority.
12
<PAGE>
(d) The Company may at any time in its discretion direct the
Executive to (i) contest the IRS Claim in any lawful manner or (ii) pay the
amount specified in an IRS Claim and pursue a Refund Claim; provided, however,
that if the Company directs the Executive to pay an IRS Claim and pursue a
Refund Claim, the Company shall advance the amount of such payment to the
Executive on an interest-free basis and shall indemnify the Executive, on an
after-tax basis, for any income or other applicable taxes or Excise Tax, and any
related interest or penalties imposed with respect to such advance.
(e) The Company shall pay directly all legal, accounting and
other costs and expenses (including additional interest and penalties) incurred
by the Company or the Executive in connection with any IRS Claim or Refund
Claim, as applicable, and shall indemnify the Executive, on an after-tax basis,
for any income or other applicable taxes, Excise Tax and related interest and
penalties imposed on the Executive as a result of such payment of costs and
expenses.
6.5 Refunds. If, after the receipt by the Executive of any payment or
advance of Excise Taxes advanced by the Company pursuant to Section 6.4, the
Executive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 6.4)
promptly pay the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company pursuant to Section 6.4, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such determination within 30 days after the
Company receives written notice of such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-up Payment
required to be paid. Any contest of a denial of refund shall be controlled by
Section 6.4.
ARTICLE VII
EXPENSES AND INTEREST
7.1 Legal Fees and Other Expenses. The Company will pay all
reasonable fees and expenses, if any, (including, without limitation, legal fees
and expenses) that are incurred by the Executive to enforce this Agreement and
that result from a breach of this Agreement by the Company.
7.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
13
<PAGE>
ARTICLE VIII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
DRI Board, to enable the Company to account for a merger, consolidation or
similar transaction as a pooling of interests; provided that (i) the DRI Board
shall have exercised such judgment and given the Executive written notice
thereof prior to the Effective Date and (ii) the determination of the DRI Board
shall be supported by a written certificate of the Company's independent
auditors, a copy of which shall be provided to the Executive before the
Effective Date.
ARTICLE IX
NO SET-OFF OR MITIGATION
9.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
9.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE X
NON-EXCLUSIVITY OF RIGHTS
10.1 Waiver of Other Severance Rights. To the extent that payments
are made to the Executive pursuant to Section 5.1 of this Agreement, the
Executive hereby waives the right to receive benefits under any plan or
agreement (including an offer of employment or employment contract) of the
Company or its subsidiaries which provides for severance benefits (except as
provided in Section 5.1(b).
10.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan of the Company or any of its subsidiaries and any other payment
or benefit required by law at or after the Termination Date shall be payable in
accordance with such Plan or applicable law except as expressly modified by this
Agreement.
14
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may
not be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement. The Executive will for all
purposes be a general creditor of the Company. The interest of the Executive
under the Agreement cannot be assigned, anticipated, sold, encumbered or pledged
and will not be subject to the claims of the Executive's creditors.
11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. The Executive and the Company agree that,
effective as of the execution of this Agreement, any prior Employment Continuity
Agreement between the Executive and the Company is null and void. This
instrument contains the entire agreement of the parties. To the extent not
governed by federal law, this Agreement will be construed in accordance with the
laws of the Commonwealth of Virginia, without reference to its conflict of laws
rules. No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and the
writing is signed by the Executive and the Company. A waiver of any breach of or
compliance with any provision or condition of this Agreement is not a waiver of
similar or dissimilar provisions or conditions. The invalidity or
unenforceability of any provision of this Agreement will not affect the validity
or enforceability of any other provision of this Agreement, which will remain in
full force and effect. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement.
15
<PAGE>
11.6 Tax Withholding. The Company may withhold from any amounts
payable under this Agreement any federal, state or local taxes that are required
to be withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
___________________________
Executive
VIRGINIA POWER
By:________________________ Title:_______________________
DOMINION RESOURCES, INC.
By:________________________ Title:_______________________
16
Exhibit 10.3
FORM OF AMENDMENT TO
EMPLOYMENT AGREEMENT
This Amendment is made to the Employment Agreement (the "Agreement")
between _______________(the "Executive") and Dominion Resources, Inc. (the
"Company") dated __________, 19__.
The Company and the Executive desire to modify the Agreement and
therefore agree as follows:
If the Company terminates the Executive's employment, other than for
Cause (as defined in the Agreement), during the term of the Agreement, the
Executive will be entitled to receive the following additional benefits stated
in paragraphs 1 and 2 below.
1. The Executive shall become fully vested in any and all stock
options granted to the Executive under any Company plan which have
not become exercisable as of the Executive's termination of
employment.
2. All of the Executive's stock options (including options
vested under paragraph 1) shall remain exercisable until the
applicable option expiration date.
If the Company terminates the Executive's employment, other than for
Cause, during the term of the Agreement under circumstances in which the
Executive is entitled to benefits similar to the benefits that would have been
payable if the Company had terminated the Executive's employment other than for
Cause, the Executive will be entitled to receive the additional benefits stated
in paragraphs 1 and 2 above.
In all other respects, the Agreement shall continue in effect.
WITNESS the following signatures.
Dominion Resources, Inc.
Dated:_________________ By:________________________
Executive2
Dated:_________________ By:________________________
Executive
Exhibit 10.4
Form of Amendment to
Dominion Resources, Inc.
Executive Supplemental
Retirement Plan
[Date}
[Name]
[Address]
Dear [Name]:
In recognition of your outstanding service to Dominion Resources and as an
inducement for you to continue your excellent performance and remain in the
employ of the company the Board of Directors has approved your eligibility for a
lifetime benefit under the Dominion Resource Inc. Executive Supplemental
Retirement Plan ("ESRP"), if your employment as an officer continues through the
date of your _____birthday.
The ESRP benefit will be computed as an equal periodic payment for 120 months
according to the ESRP document. However, this periodic payment will be payable
for your lifetime (or for 120 payments, if longer), or in a lump sum at
retirement.
Please return your signed acknowledgement of this letter.
Dominion Resources, Inc.
By:_______________________ _________________
Executive [Date]
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8,988
<OTHER-PROPERTY-AND-INVEST> 829
<TOTAL-CURRENT-ASSETS> 1,729
<TOTAL-DEFERRED-CHARGES> 298
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 11,844
<COMMON> 2,737
<CAPITAL-SURPLUS-PAID-IN> 17
<RETAINED-EARNINGS> 925
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,679
315
509
<LONG-TERM-DEBT-NET> 3,510
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 318
<LONG-TERM-DEBT-CURRENT-PORT> 257
0
<CAPITAL-LEASE-OBLIGATIONS> 22
<LEASES-CURRENT> 9
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,225
<TOT-CAPITALIZATION-AND-LIAB> 11,844
<GROSS-OPERATING-REVENUE> 2,175
<INCOME-TAX-EXPENSE> 117
<OTHER-OPERATING-EXPENSES> 1,716
<TOTAL-OPERATING-EXPENSES> 1,833
<OPERATING-INCOME-LOSS> 342
<OTHER-INCOME-NET> 15
<INCOME-BEFORE-INTEREST-EXPEN> 357
<TOTAL-INTEREST-EXPENSE> 145
<NET-INCOME> (42)
18
<EARNINGS-AVAILABLE-FOR-COMM> (60)
<COMMON-STOCK-DIVIDENDS> 194
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 463
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
