SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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 1-8489
DOMINION RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
VIRGINIA 54-1229715
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
901 EAST BYRD STREET
RICHMOND, VIRGINIA 23219-4072
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(804) 775-5700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
<S> <C>
Common Stock, no par value New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE:
(TITLE OF CLASS)
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 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $6,974,930,066 at February 29, 1996, based on the closing price
of the Common Stock on such date, as reported on the composite tape by The Wall
Street Journal.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<S> <C>
CLASS OUTSTANDING AT FEBRUARY 29, 1996
Common Stock, no par value 176,580,508
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE:
(a) Portions of the 1995 Annual Report to Shareholders for the fiscal year ended
December 31, 1995 are incorporated by reference in Parts I, II and IV
hereof.
(b) Portions of the 1996 Proxy Statement, dated March 11, 1996, are incorporated
by reference in Part III hereof.
<PAGE>
DOMINION RESOURCES, INC.
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<CAPTION>
ITEM PAGE
NUMBER NUMBER
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PART I
1. Business
The Company............................................................................................... 1
Regulation................................................................................................ 2
Capital Requirements and Financing Program................................................................ 4
Capital Requirements...................................................................................... 4
Construction and Nuclear Fuel Expenditures................................................................ 4
Financing Program......................................................................................... 4
Rates..................................................................................................... 5
Virginia.................................................................................................. 5
North Carolina............................................................................................ 6
Virginia Power Sources of Power........................................................................... 7
Virginia Power Sources of Energy Used and Fuel Costs...................................................... 7
Interconnections.......................................................................................... 9
Future Sources of Power................................................................................... 9
Competition and Strategic Initiatives..................................................................... 10
Conservation and Load Management.......................................................................... 12
2. Properties................................................................................................ 12
3. Legal Proceedings......................................................................................... 12
4. Submission of Matters to a Vote of Security Holders....................................................... 13
Executive Officers of the Registrant...................................................................... 13
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters................................. 15
6. Selected Financial Data................................................................................... 15
7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 15
8. Financial Statements and Supplementary Data............................................................... 15
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................... 15
PART III
10. Directors and Executive Officers of the Registrant........................................................ 15
11. Executive Compensation.................................................................................... 15
12. Security Ownership of Certain Beneficial Owners and Management............................................ 15
13. Certain Relationships and Related Transactions............................................................ 15
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......................................... 16
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Dominion Resources, Inc. (Dominion Resources), organized in 1983, has its
principal office at 901 East Byrd Street, Richmond, Virginia 23219-4072,
telephone (804) 775-5700. The principal assets of Dominion Resources are its
investments in its subsidiaries.
At December 31, 1995, Dominion Resources owned all of the outstanding
common stock of its subsidiaries: Dominion Capital, Inc. (Dominion Capital);
Dominion Energy, Inc. (Dominion Energy) and Virginia Electric and Power Company
(Virginia Power), its largest subsidiary.
Dominion Capital, established as a subsidiary of Dominion Resources in
1985, is a diversified investment and financial services company. The principal
assets of Dominion Capital are its joint venture with Household Commercial
Financial Services, Inc., First Source Financial, LLP, a middle market
commercial lender; a 50% limited partnership interest in a Louisiana
hydroelectric project; Dominion Lands, Inc., a subsidiary involved in planned
community real estate development and management; investments in marketable
securities and fixed income instruments; and Rincon Securities, Inc., a
subsidiary which holds a diversified portfolio of preferred stocks. Dominion
Capital also has investments in affordable housing and a commercial real estate
management company.
Dominion Energy, established as a subsidiary of Dominion Resources in 1987,
is active in a number of partnerships to develop nonutility electric power
generation projects outside the territory served by Virginia Power. Dominion
Energy is involved in projects in six states, Argentina, Bolivia and Belize,
which total approximately 2,156 Mw. Projects in operation throughout 1995 in
which Dominion Energy has an interest include three gas-fueled projects totaling
990 Mw owned by Enron/Dominion Cogen Corporation, two geothermal projects in
California, a solar project in California, four small hydro-
electric projects in New York, a waste coal-fueled project in West Virginia, a
wood- and coal-fueled project in Maine, a hydroelectric and a gas-fired project
in Argentina and two gas-fired projects in California. In August 1995, Dominion
Energy acquired two hydroelectric facilities in Bolivia totaling 126 Mw. During
1991, Dominion Energy announced its plans to develop a 25 Mw run-of-river
hydroelectric project in Belize which began construction in 1992. On November 1,
1995, this facility began commercial operation. Dominion Energy also
participates in partnerships to acquire and develop natural gas reserves. In
1995, it added 57 billion cubic feet (BCFE) of natural gas reserves. Production
from company holdings in 1995 totaled 37 BCFE. By the end of 1995, Dominion
Energy held 345 BCFE in natural gas reserves.
For additional information on the nonutility businesses, see NONUTILITY
ISSUES under FUTURE ISSUES in MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
on page 25 of the 1995 Annual Report to Shareholders.
Dominion Resources is currently exempt from registration as a holding
company under the Public Utility Holding Company Act of 1935 (the 1935 Act).
Virginia Electric and Power Company, incorporated in 1909, Dominion
Resources' largest subsidiary, 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
transacts business under the name VIRGINIA POWER in Virginia and under the name
NORTH CAROLINA POWER in North Carolina. It sells electricity to retail customers
(including governmental agencies) and to wholesale customers such as rural
electric cooperatives and municipalities. The Virginia service area comprises
about 65% of Virginia's total land area but accounts for over 80% of its
population. As used herein, the term "Virginia Power" shall be deemed to refer
to the entirety of Virginia Electric and Power Company, including, without
limitation, its Virginia and North Carolina operations and all of its
subsidiaries.
Virginia Power has franchises or permits for electric operations in
substantially all cities and towns now served. It also has certificates of
convenience and necessity from the Virginia State Corporation Commission (the
Virginia Commission) for service in all territory served at retail in Virginia.
The North Carolina Utilities Commission (the North Carolina Commission) has
assigned territory to Virginia Power for substantially all of its retail service
outside certain municipalities in North Carolina.
Virginia Power strives to operate its generating facilities in accordance
with prudent utility industry practices and in conformity with applicable
statutes, rules and regulations. Like other electric utilities, Virginia Power's
generating facilities are subject to unanticipated or extended outages for
repairs, replacements or modifications of equipment or otherwise to comply with
regulatory requirements. Such outages may involve significant expenditures not
previously budgeted, including replacement energy costs.
1
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Dominion Resources and its subsidiaries had 10,592 full-time employees as
of December 31, 1995.
Except for the historical information contained herein, the matters
discussed in this annual report on Form 10-K are forward-looking statements
which involve risks and uncertainties, including but not limited to regulatory,
economic, competitive, governmental and technological factors affecting Dominion
Resources and its subsidiaries operations, rates, markets, products, services
and prices, and other factors discussed herein and in the company's other
filings with the Securities and Exchange Commission.
REGULATION
GENERAL
In a wide variety of matters in addition to rates, Virginia Power is
presently subject to regulation by the Virginia Commission and the North
Carolina Commission, the Environmental Protection Agency (EPA), Department of
Energy (DOE), Nuclear Regulatory Commission (NRC), Federal Energy Regulatory
Commission (FERC), the Army Corps of Engineers, and other federal, state and
local authorities. Compliance with numerous laws and regulations increases the
Company's operating and capital costs by requiring, among other things, changes
in the design and operation of existing facilities and changes or delays in the
location, design, construction and operation of new facilities. The commissions
regulating the Company's rates have historically permitted recovery of such
costs.
Virginia Power may not construct, or incur financial commitments for
construction of, any substantial generating facilities or large capacity
transmission lines without the prior approval of state and federal governmental
agencies having jurisdiction over various aspects of its business. Such
approvals relate to, among other things, the environmental impact of such
activities, the relationship of such activities to the need for providing
adequate utility service and the design and operation of proposed facilities.
On January 11, 1996, the Virginia Commission granted interim approval for
limited affiliate services between Virginia Power and a subsidiary, A&C Enercom,
Inc., in connection with the purchase by the subsidiary of certain assets of two
energy services businesses. On March 12, 1996, Virginia Power filed an amendment
to its application seeking approval of additional services and asset transfers
between it and the subsidiary.
The City of Falls Church, Virginia has indicated it intends to pursue the
establishment of a municipal electric system and sent Virginia Power a formal
Request for Transmission Service pursuant to Sections 211 and 213 of the Federal
Power Act on January 11, 1995. Virginia Power has approximately 4,100 customers
in the City. Megawatt-hour sales by customer class in Falls Church are:
Residential - 36,000; Commercial - 67,000; Industrial - 0; and Other - 5,000.
Virginia Power denied the request and filed a Petition for Declaratory Judgment
against the City with the Virginia Commission. The Commission has ruled that
Falls Church must seek approval from the Commission prior to implementing plans
to condemn Virginia Power facilities within the City. Revenues from retail sales
within the City of Falls Church account for less than .2% of Virginia Power's
total revenues. As a result, Virginia Power will not experience a material loss
of revenues or net income should a municipal system be created. No other
municipality has communicated to Virginia Power any interest in forming a
municipal electric system.
On September 18, 1995, the Virginia Commission established a proceeding to
review and consider its policy regarding restructuring of, and competition in,
the electric utility industry. The Commission directed its Staff to investigate
the emerging issues in the industry and prepare a report of its findings and
recommendations on or before March 29, 1996. All interested parties may file
written comments and requests for oral argument in response to the Staff Report
on or before May 30, 1996.
Various provisions of the Energy Policy Act of 1992 (the Energy Act) that
could affect Virginia Power include those provisions encouraging the development
of non-utility generation, giving FERC authority to order transmission access
for wholesale transactions, requiring higher energy efficiency and alternative
fuels use, restructuring of nuclear plant licensing procedures and requiring
state regulatory authorities to give full rate treatment for the effects of
conservation and demand management programs, including the effects of reduced
sales. While the full impact of the Energy Act on Virginia Power cannot at this
time be quantified, it is likely, over time, to be significant.
FERC
On March 29, 1995, FERC issued a Notice of Proposed Rulemaking that would
require all FERC jurisdictional utilities to provide open access to the
interstate transmission system. Crucial elements of the Commission's proposal
included the
2
<PAGE>
following: all jurisdictional utilities must file non-discriminatory open access
transmission tariffs; utilities must take service under the open access tariffs
for their own wholesale sales and purchases of electric energy; and utilities
will be allowed the opportunity to recover stranded costs. Virginia Power filed
its comments on August 7, 1995 and supported the Commission's objective of
promoting comparable open-access transmission service. However, Virginia Power
urged the Commission to reconsider its proposal to draft generic tariffs for the
electric industry. Virginia Power also challenged FERC's authority to impose
tariffs of general applicability and urged the adoption of principles of
comparability that it will apply to evaluate terms and conditions of tariffs
filed by utilities. Virginia Power urged that any pro forma tariffs included in
the final rule should provide for comparable service at rates that permit the
utility to recover all its costs of service.
See COMPETITION AND STRATEGIC INITIATIVES below and COMPETITION in UTILITY
ISSUES in FUTURE ISSUES under MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
on pages 23 and 24 of the 1995 Annual Report to Shareholders.
ENVIRONMENTAL
From time to time, Virginia Power may be identified as a potentially
responsible party (PRP) with respect to a Superfund site. EPA (or a state) can
either (a) allow such a party to conduct and pay for a remedial investigation,
feasibility study and remedial action or (b) conduct the remedial investigation
and action and then seek reimbursement from the parties. Each party can be held
jointly, severally and strictly liable for all costs, but the parties can then
bring contribution actions against each other and seek reimbursement from their
insurance companies. As a result of the Superfund Act or other laws or
regulations regarding the remediation of waste, Virginia Power may be required
to expend amounts on remedial investigations and actions. Although Virginia
Power is not currently aware of any sites or events, including those sites
currently identified likely to result in significant liabilities, such amounts,
in the future, could be significant.
Permits under the Clean Water Act and state laws have been issued for all
of Virginia Power's steam generating stations now in operation. Such permits are
subject to reissuance and continuing review.
Virginia Power is subject to the Clean Air Act (the Air Act), which
provides the statutory basis for ambient air quality standards. In order to
maintain compliance with such standards and reduce the impact of emissions on
ambient air quality, Virginia Power may be required to incur significant
additional expenditures in constructing new facilities or in modifying existing
facilities. Virginia Power has completed its compliance plan for Phase II of the
Air Act, with the exception of some additional studies concerning Phase II
nitrogen oxide (NOx) controls. The plan will involve switching to lower sulfur
coal, purchase of emission allowances and additional NOx and sulfur dioxide
(SO2) controls. Maximum flexibility and least-cost compliance will be maintained
through annual studies. Capital expenditures on the Air Act compliance over the
next five years are projected to be approximately $61 million. Changes in the
regulatory environment, availability of allowances, and emission control
technology could substantially impact the timing and magnitude of compliance
expenditures.
Virginia Power continues to work with the West Virginia Office of Air
Quality concerning opacity requirements applicable to the Mt. Storm Power
Station.
For additional information on ENVIRONMENTAL MATTERS, see Note P to NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS of the 1995 Annual Report to Shareholders.
NUCLEAR
All aspects of the operation and maintenance of Virginia Power's nuclear
power stations are regulated by the NRC. Operating licenses issued by the NRC
are subject to revocation, suspension or modification, and operation of a
nuclear unit may be suspended if the NRC determines that the public interest,
health or safety so requires.
From time to time, the NRC adopts new requirements for the operation and
maintenance of nuclear facilities. In many cases, these new regulations require
changes in the design, operation and maintenance of existing nuclear facilities.
If the NRC adopts such requirements in the future, it could result in
substantial increases in the cost of operating and maintaining Virginia Power's
nuclear generating units.
On July 18, 1995, the Virginia Commission instituted an investigation
regarding spent nuclear fuel disposal. It directed interested parties to provide
comments on legal and public policy issues related to spent nuclear fuel storage
and disposal, including, but not limited to, whether to allow utilities to
recover from ratepayers some or all money paid to the Nuclear Waste Fund
established by the Nuclear Policy Act of 1982, whether to establish an escrow
account for spent nuclear fuel storage and/or disposal, and whether utilities
should develop their own plans for storage and disposal of spent nuclear fuel.
3
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The Commission's Order Establishing Investigation recites that Virginia Power
has paid $343.6 million to the Nuclear Waste Fund through 1994, including $44.8
million in 1994, and that future payments could exceed $400 million assuming its
North Anna and Surry reactors continue to operate through the end of their
existing operating licenses. Virginia Power and others filed comments on October
31, 1995. On February 27, 1996, the Virginia Commission Staff filed its Report
recommending that adoption of a definitive policy on the spent nuclear fuel
disposal fee be delayed until (1) a ruling is forthcoming on pending litigation
which seeks to impose an obligation on the federal government to begin
acceptance of spent nuclear fuel no later than January 31, 1998, (2) the outcome
of proposed legislation which would amend the Nuclear Waste Policy Act to
require the development of a centralized interim storage facility has been
determined, and (3) a vision of the likely outcome of the electric utility
industry's restructuring efforts has been more fully conceptualized.
CAPITAL REQUIREMENTS AND FINANCING PROGRAM
CAPITAL REQUIREMENTS
See MANAGEMENT'S DISCUSSION AND ANALYSIS OF CASH FLOWS AND FINANCIAL
CONDITION on pages 29 and 30 of the 1995 Annual Report to Shareholders.
CONSTRUCTION AND NUCLEAR FUEL EXPENDITURES
Virginia Power's estimated construction and nuclear fuel expenditures,
including Allowance for Funds Used During Construction (AFC), for the three-year
period 1996-1998, total $1.6 billion. It has adopted a 1996 budget for
construction and nuclear fuel expenditures as set forth below:
<TABLE>
<CAPTION>
ESTIMATED 1996
EXPENDITURES
(MILLIONS)
<S> <C>
New Generating Facilities:
Clover Unit 2....................................................................... $ 14
Other Production:
Clean Air Act....................................................................... 19
Other............................................................................... 60
General Support Facilities............................................................ 88
Transmission.......................................................................... 42
Distribution.......................................................................... 262
Nuclear Fuel.......................................................................... 84
Total Construction Requirements and Nuclear Fuel.................................... 569
AFC.............................................................................. 5
Total Expenditures.................................................................. $574
</TABLE>
FINANCING PROGRAM
See MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS and MANAGEMENT'S
DISCUSSION AND ANALYSIS OF CASH FLOWS AND FINANCIAL CONDITION on pages 21
through 30 of the 1995 Annual Report to Shareholders.
4
<PAGE>
RATES
Virginia Power was subject to rate regulation in 1995 as follows:
<TABLE>
<CAPTION>
1995
PERCENT PERCENT
OF OF
REVENUES KWH SALES
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Virginia retail:
Non-Governmental customers.................... Virginia Commission 78% 73%
Governmental customers........................ Negotiated Agreements 10 12
North Carolina retail........................... North Carolina Commission 5 4
Wholesale:
Requirements -- Sales for Resale.............. FERC 5 7
Non-Requirements -- Sales for Resale.......... FERC 2 4
100% 100%
</TABLE>
Substantially all of Virginia Power's electric sales are subject to
recovery of changes in fuel costs either through fuel adjustment factors or
periodic adjustments to base rates, each of which requires prior regulatory
approval.
Each of these jurisdictions has the authority to disallow recovery of costs
it determines to be excessive or imprudently incurred. Various cost items may be
reviewed on occasion, including costs of constructing or modifying facilities,
on-going purchases of capacity or providing replacement power during generating
unit outages.
The principal rate proceedings in which Virginia Power was involved in 1995
are described below by jurisdiction. Rate relief obtained by Virginia Power is
frequently less than requested.
VIRGINIA
On January 13, 1995, the Supreme Court of Virginia affirmed a decision of
the Virginia Commission in Virginia Power's 1992 rate case that disallowed rate
recovery of the gross receipts tax component of certain purchased power costs.
On March 3, 1995, the Court denied the motions of Virginia Power and certain
industrial cogenerators for a rehearing, and on October 2, 1995, the United
States Supreme Court denied the Writ of Certiorari sought by those cogenerators.
On April 20, 1995, the Virginia Commission declined to approve Virginia
Power's proposed Schedule DEF -- Dispersed Energy Facility, a rate schedule that
would have allowed Virginia Power to respond to the request of an industrial or
commercial customer to build and operate a generating facility at its business
location and to sell to that customer all of the electricity and associated
steam from that facility under a long-term contract. The Commission stated that
the scope of the proposal was not an appropriate experiment under Virginia law,
and that, without a specific construction proposal before it, the Commission
could not approve the concept. The Commission stated, however, that upon a
proper record it would consider the public interest of allowing a DEF-type
facility to be constructed. Virginia Power subsequently negotiated a specific
DEF arrangement with Chesapeake Paper Products Company, and on December 18,
1995, it applied to the Virginia Commission for the approvals required for that
arrangement. (See COMPETITION AND STRATEGIC INITIATIVES below).
The Staff of the Virginia Commission has, in Virginia Power's Annual
Informational Filing proceeding for 1994, recommended that there be imputed to
Virginia Power for ratemaking purposes income reflecting (a) the estimated value
of credit support that Dominion Resources' nonutility subsidiaries allegedly
receive from Virginia Power and (b) the income earned by Dominion Resources on
the invested proceeds of its unallocated equity for which Virginia Power
provides the funds for payment of dividends. Virginia Power filed a response
opposing these recommendations. The Staff's reply agreed with Virginia Power
that no decision on these issues is required in the pending proceeding. On
February 23, 1996, the Virginia Commission issued its Order finding that
Virginia Power did not earn outside of its authorized range for the calendar
year 1994, and indicating that it will investigate the described issues further
in a subsequent proceeding. The Commission Order also approved higher collection
levels for decommissioning of nuclear plants.
On April 20, 1995, the Virginia Commission authorized Virginia Power to
implement a pilot program providing a real time pricing (RTP) option for its
industrial customers with loads in excess of 10 Mw. Under this option, all or a
portion of an industrial customer's load growth would be supplied at projected
incremental hourly production costs, adjusted for line losses
5
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and taxes, plus a margin of 0.6 cents per Kwh. Additionally, a marginal
cost-based Generation Capacity Adder and a Transmission Capacity Adder would be
applicable during those hours when the Virginia Power system is approaching its
forecasted annual peak demand. Up to 20% of an industrial customer's existing
load could be served on an RTP basis if the customer executes a five-year
contract for such service.
On September 19, 1995, Virginia Power filed an application to revise its
annual fuel factor. Virginia Power proposed that the present fuel factor be
decreased by $97.1 million. The Staff of the Virginia Commission proposed
certain adjustments, which Virginia Power did not oppose, resulting in a
recommended reduction of $107.3 million. On October 31, 1995, the Virginia
Commission approved the reduction of $107.3 million, effective November 1, 1995.
NORTH CAROLINA
On February 13, 1995, the Supreme Court of North Carolina denied Virginia
Power's motion for rehearing of the appeal of its 1992 North Carolina rate case,
which disallowed recovery of certain capacity costs paid to a cogenerator and a
portion of the compensation of certain Company officers. On May 15, 1995,
Virginia Power filed with the United States Supreme Court a Petition for a Writ
of Certiorari asking the Court to reverse the North Carolina Court's decision as
to the recovery of capacity costs. On January 22, 1996, the United States
Supreme Court denied the Writ of Certiorari sought by the Company.
On June 27, 1995, the North Carolina Commission approved a Self-Generation
Deferral Rate that is a part of an Energy Agreement between the company and
Weyerhaeuser. The agreement involves the use of a negotiated pricing structure
which will result in the deferral of the installation of additional
self-generation facilities by Weyerhaeuser. The rate to be charged must be
prefiled each year, and the company is prohibited from recovering from other
customers the difference between the new rate and the rate that Weyerhaeuser
would otherwise have been charged.
On September 15, 1995, Virginia Power filed an application with the North
Carolina Commission for approval of a $1.3 million annual increase in fuel
rates. On December 8, 1995, the Commission approved an increase of $.8 million
reflecting a disallowance of $.5 million by reason of resolution of issues
surrounding the renegotiation of a coal transportation contract with CSX
Transportation, Inc.
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VIRGINIA POWER SOURCES OF POWER
VIRGINIA POWER GENERATING UNITS
<TABLE>
<CAPTION>
TYPE SUMMER
YEARS OF CAPABILITY
NAME OF STATION, UNITS AND LOCATION INSTALLED FUEL MW
<S> <C> <C> <C>
Nuclear:
Surry Units 1 & 2, Surry, Va..................................................... 1972-73 Nuclear 1,602
North Anna Units 1 & 2, Mineral, Va.............................................. 1978-80 Nuclear 1,790(a)
Total nuclear stations........................................................ 3,392
Fossil Fuel:
Steam:
Bremo Units 3 & 4, Bremo Bluff, Va. .......................................... 1950-58 Coal 227
Chesterfield Units 3-6, Chester, Va. ......................................... 1952-69 Coal 1,250
Clover Unit 1, Clover, Va. ................................................... 1995 Coal 416(b)
Mt. Storm Units 1-3, Mt. Storm, W. Va. ....................................... 1965-73 Coal 1,587
Chesapeake Units 1-4, Chesapeake, Va. ........................................ 1953-62 Coal 595
Possum Point Units 3 & 4, Dumfries, Va. ...................................... 1955-62 Coal 322
Yorktown Units 1 & 2, Yorktown, Va. .......................................... 1957-59 Coal 326
Possum Point Units 1, 2, & 5, Dumfries, Va. .................................. 1948-75 Oil 929
Yorktown Unit 3, Yorktown, Va. ............................................... 1974 Oil & Gas 818
North Branch Unit 1, Bayard, W. Va. .......................................... 1994 Waste Coal 74(c)
Combustion Turbines:
35 units (8 locations)........................................................... 1967-90 Oil & Gas 1,019
Combined Cycle:
Chesterfield Units 7 & 8, Chester, Va. .......................................... 1990-92 Oil & Gas 397
Total fossil stations......................................................... 7,960
Hydroelectric:
Gaston Units 1-4, Roanoke Rapids, N.C. .......................................... 1963 Conventional 225
Roanoke Rapids Units 1-4, Roanoke Rapids, N.C. .................................. 1955 Conventional 96
Other............................................................................ 1930-87 Conventional 3
Bath County Units 1-6, Warm Springs, Va. ........................................ 1985 Pumped Storage 1,260(d)
Total hydro stations.......................................................... 1,584
Total Company generating unit capability...................................... 12,936
NET UTILITY PURCHASES.............................................................. 1,030
NON-UTILITY GENERATION............................................................. 3,295
Total Capability.............................................................. 17,261
</TABLE>
(a) Includes an undivided interest of 11.6 percent (208 Mw) owned by Old
Dominion Electric Cooperative (ODEC).
(b) Includes an undivided interest of 50 percent (208 Mw) owned by ODEC.
(c) Effective January 25, 1996, unit was placed in a cold reserve status.
(d) Reflects Virginia Power's 60 percent undivided ownership interest in the
2,100 Mw station. A 40 percent undivided interest in the facility is owned by
Allegheny Generating Company, a subsidiary of Allegheny Power System, Inc.
(APS).
Virginia Power's highest one-hour integrated service area summer peak
demand was 14,003 Mw on August 2, 1995, and a new all-time high one-hour
integrated winter peak demand of 14,910 Mw was reached on February 5, 1996.
VIRGINIA POWER SOURCES OF ENERGY USED AND FUEL COSTS
The average fuel cost of system energy output is shown below:
<TABLE>
<CAPTION>
MILLS PER KILOWATT-HOUR
1995 1994 1993
<S> <C> <C> <C>
Nuclear............................. 4.92 4.89 4.60
Coal................................ 14.44 14.61 14.69
Oil................................. 25.11 23.00 26.55
Purchased power, net................ 22.50 23.99 24.54
Other............................... 23.82 25.46 24.35
Average fuel cost................... 13.73 14.02 14.42
</TABLE>
7
<PAGE>
System energy output is shown below:
<TABLE>
<CAPTION>
ESTIMATED ACTUAL
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Nuclear(*).......................... 33% 32% 34% 31%
Coal(**)............................ 40 39 36 39
Oil................................. 1 1 3 3
Purchased power, net................ 23 25 23 23
Other............................... 3 3 4 4
100% 100% 100% 100%
</TABLE>
(*) Excludes ODEC's 11.6 percent ownership interest in the North Anna Power
Station
(**) Excludes ODEC's 50 percent ownership interest in the Clover Power
Station
NUCLEAR OPERATIONS AND FUEL SUPPLY
In 1995, Virginia Power's four nuclear units achieved a combined capacity
factor of 85.4 percent.
The North Anna Unit 2 steam generator replacement project was completed in
1995 at a total company cost of $96 million.
Virginia Power utilizes both long-term contracts and spot purchases to
support its needs for nuclear fuel. Virginia Power's nuclear fuel supply and
related services are expected to be adequate to support current and planned
nuclear generation requirements. Virginia Power continually evaluates worldwide
market conditions in order to obtain an adequate nuclear fuel supply. Current
agreements, inventories and market availability should support planned fuel
cycles throughout the remainder of the 1990s.
On-site spent nuclear fuel storage at the Surry Power Station is adequate
for Virginia Power's needs through 1998 when, in accordance with the Nuclear
Waste Policy Act, the DOE is to begin acceptance of spent fuel for disposal.
Should acceptance be delayed, incremental dry storage facilities will be added
under the existing storage license. North Anna Power Station will require an
interim spent fuel storage facility in the late 1990's. Virginia Power submitted
a license application to the NRC in May 1995 for such a facility at North Anna.
For details regarding nuclear insurance and certain related contingent
liabilities as well as a NRC rule that requires proceeds from certain insurance
policies to be used first to pay stabilization and decontamination expenses, see
Note P to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the 1995 Annual
Report to Shareholders.
FOSSIL OPERATIONS AND FUEL SUPPLY
The commercial operation of Clover Power Station Unit 1 began on October 7,
1995. The summer capability of Unit 1 is 416 Mw.
Virginia Power's fossil fuel mix consists of coal, oil and natural gas. In
1995, Virginia Power consumed approximately 11.0 million tons of coal. As with
nuclear fuel, Virginia Power utilizes both long-term contracts and spot
purchases to support its needs. Virginia Power presently anticipates that
sufficient coal supplies at reasonable prices will be available for the
remainder of the 1990s. Current projections for an adequate supply of oil remain
favorable, barring unusual international events or extreme weather conditions
which could affect both price and supply.
Virginia Power uses natural gas as needed throughout the year for two
combined cycle units and at several combustion turbine units. For winter usage
at the combined cycle sites, gas is purchased and stored during the summer and
fall and consumed during the colder months when gas supplies are not available
at favorable prices. Virginia Power has firm transportation contracts for the
delivery of gas to the combined cycle units. Current projections indicate gas
supplies will be available for the next several years.
PURCHASES AND SALES OF POWER
Virginia Power relies on purchases of power to meet a portion of its
capacity requirements. Virginia Power also makes economy purchases of power from
other utility systems when it is available at a cost lower than Virginia Power's
own generation costs.
8
<PAGE>
Under contracts effective January 1, 1985, Virginia Power agreed to
purchase 400 Mw of electricity annually through 1999 from Hoosier Energy Rural
Electric Cooperative, Inc. (Hoosier), and agreed to purchase 500 Mw of
electricity annually during 1987-99 from certain operating units of American
Electric Power Company, Inc. (AEP).
On November 26, 1991, Virginia Power and ODEC signed an agreement whereby
the Company will provide 100 Mw of firm capacity and associated energy until the
commercial operation of Clover Unit 2 (currently scheduled for April 1996) or
December 31, 1996, whichever occurs first.
Virginia Power has a diversity exchange agreement with APS under which APS
delivers 200 Mw to Virginia Power in the summer and Virginia Power delivers 200
Mw to APS in the winter.
Virginia Power also has 67 non-utility power purchase contracts with a
combined dependable summer capacity of 3,493 Mw. Of this amount, 3,295 Mw were
operational at the end of 1995 with the balance scheduled to come on-line
through 1998 (see VIRGINIA POWER NON-UTILITY GENERATION under FUTURE SOURCES OF
POWER and Note P to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the 1995
Annual Report to Shareholders).
Early in 1995, a wholesale power group was formed within Virginia Power.
Its sole focus is the purchase and sale of wholesale electric power in the open
market. The wholesale power group has expanded the company's trading range
beyond the geographic limits of the Virginia Power service territory, and has
recently developed trading relationships with utilities in Illinois, Missouri,
Indiana, Kentucky, Ohio, Vermont, Michigan, and Tennessee in addition to most
states in the Mid-Atlantic area.
INTERCONNECTIONS
Virginia Power maintains major interconnections with Carolina Power and
Light Company, AEP, APS and the utilities in the Pennsylvania-New
Jersey-Maryland Power Pool. Through this major transmission network, Virginia
Power has arrangements with these utilities for coordinated planning, operation,
emergency assistance and exchanges of capacity and energy.
Virginia Power and Appalachian Power Company (Apco) (an operating unit of
AEP) have each sought approval from the Virginia Commission to construct
interconnecting transmission facilities. Apco proposes to construct 116 miles of
765 Kv line to connect with Virginia Power's proposed 102 miles of 500 Kv line.
Virginia Power does not intend to build its facility unless the Apco facility,
which requires approval in West Virginia as well as Virginia, is also approved
and built. Approval of both facilities has been recommended by a Virginia
Commission Hearing Examiner. On December 13, 1995, the Virginia Commission
issued an Interim Order in the Apco case in which it found that additional
transmission capacity is needed but directed Apco to provide further information
as to routing, mitigation of visual impact, and uses of the line.
FUTURE SOURCES OF POWER
With the expiration of long-term purchases, on December 31, 1999, with
Hoosier (400Mw) and with AEP (900 Mw) and continued system load growth, Virginia
Power presently anticipates adding 1,400 Mw of short-term (three-year) purchases
through the year 2000. Virginia Power has and will pursue capacity acquisition
plans to provide that capacity and maintain a high degree of service
reliability. This capacity may be owned and operated by others and sold to
Virginia Power or may be built by Virginia Power if it determines it can build
capacity at a lower overall cost. Virginia Power also pursues conservation and
demand-side management (see CONSERVATION AND LOAD MANAGEMENT below and CAPITAL
REQUIREMENTS under MANAGEMENT'S DISCUSSION AND ANALYSIS OF CASH FLOWS AND
FINANCIAL CONDITION on page 29 of the 1995 Annual Report to Shareholders).
In May 1990, Virginia Power entered into an agreement with ODEC, under
which Virginia Power purchased a 50 percent undivided ownership interest in a
832 Mw coal-fired power station to be constructed near Clover, Virginia in
Halifax County. Construction of Unit 1 is complete and it achieved commercial
operation on October 7, 1995. Virginia Power's 50 percent share of costs
incurred through December 31, 1995 amounted to $500.7 million. Construction of
Unit 2 is on schedule for completion in April 1996. Virginia Power expects that
completion costs for Unit 2 will total $14 million.
9
<PAGE>
In March 1995, the Virginia Supreme Court upheld the May 1994 approval by
the Virginia Commission for a 75 mile 500 Kv transmission line from the Clover
Power Station to the Carson Substation in Dinwiddie County, Virginia. The
transmission line is now under construction and is scheduled for completion in
April 1996.
VIRGINIA POWER OWNED GENERATION
Virginia Power's continuing program to meet future capacity requirements is
summarized in the following table:
VIRGINIA POWER OWNED GENERATION
<TABLE>
<CAPTION>
SUMMER
CAPABILITY EXPECTED
NAME OF UNITS MW IN-SERVICE DATE
<S> <C> <C>
Clover Power Station:
Unit 2 416* April 1996
</TABLE>
* Includes the 50 percent undivided ownership interest of ODEC.
VIRGINIA POWER NON-UTILITY GENERATION
<TABLE>
<CAPTION>
NUMBER OF
PROJECTS MW
<S> <C> <C>
Projects Operational 66 3,295
Projects Financed 1 198
Unfinanced Projects 0 0
Total Contracts 67 3,493
</TABLE>
For additional information, see Note P to the NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS in the 1995 Annual Report to Shareholders.
COMPETITION AND STRATEGIC INITIATIVES
In light of existing and potential threats and opportunities brought about
by increased competition in the wholesale and retail markets for electricity,
Virginia Power has undertaken cost-cutting measures to maintain its position as
a low-cost producer of electricity, engaged in re-engineering efforts of its
core business processes, and pursued a strategic planning initiative, called
Vision 2000, to encourage innovative approaches to serving traditional markets
and to prepare appropriate methods by which to service future markets. In
furtherance of these initiatives, Virginia Power has established separate
business units for its nuclear operations, fossil and hydroelectric operations,
commercial operations as well as its energy services business. It has gained
regulatory approval of innovative pricing proposals for industrial loads in
Virginia and North Carolina, entered into an energy partnership with a key
industrial customer, executed long term contracts with wholesale customers,
increased its presence in a broader geographic market for wholesale sales of
electricity, and acquired an existing energy services business to enhance its
national participation in that market. See Note O to the NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS in the 1995 Annual Report to Shareholders.
WHOLESALE COMPETITION
Virginia Power has established long-term contractual service arrangements
with terms of several years in length with all of its major wholesale
cooperatives and municipalities. These contracts contain multi-year notice
provisions. To date, Virginia Power has not experienced any material loss of
load revenue or net income due to competition for its traditional wholesale
customers. In 1995 a wholesale power group was formed within Virginia Power to
engage in the purchase and sale of wholesale electric power. The group has
expanded Virginia Power's trading range beyond the geographic limits of Virginia
Power's service territory and has developed trading relationships with utilities
throughout the eastern United States.
Virginia Power has filed comments in the FERC's Notice of Proposed
Rulemaking on Open Access Transmission and will be subject to the final outcome
of the rulemaking proceeding.
10
<PAGE>
RETAIL COMPETITION
At present, competition for retail customers is limited. It arises
primarily from the ability of certain business customers to relocate among
utility service territories, to substitute other energy sources for electric
power and to generate their own electricity. While the Energy Policy Act bans
federal orders of transmission service to ultimate customers, broader retail
competition that would allow customers to choose among electric suppliers is the
subject of intense debate in federal and state forums, both legislative and
regulatory.
A Retail Energy Services group was formed in July 1995 and has begun
developing non-traditional products and services to offer to customers both
inside and outside the service territory. These products and services include
fuel procurement and risk management services, electrical equipment maintenance,
power quality control, on-site turnkey industrial power plant construction, and
energy conservation systems. In December 1995, Virginia Power launched the name
EVANTAGE(SM) for the retail energy services division to establish a national
brand identity for the business.
In December 1995, Virginia Power entered into an agreement with a key
industrial customer, Chesapeake Paper
Products Company, to facilitate the design, construction, and financing of a 38
Mw cogeneration plant, in order to meet Chesapeake's energy requirements for its
industrial processes and applied to the Virginia Commission for the necessary
approval of these arrangements. To expand the offering of a range of energy
services, Virginia Power, in January 1996, acquired two divisions of A&C Enercom
of Atlanta, Georgia from Heartland Development Corporation of Madison,
Wisconsin. Virginia Power has formed a non-regulated subsidiary, A&C Enercom,
Inc., which will provide marketing, program planning and design, customer
engineering and energy services consulting to the utility industry. The new
subsidiary has approximately 230 employees in 15 offices located in 13 states.
In September 1995, the Virginia Commission launched an extensive
investigation into restructuring of and competition in the electric utility
industry. The scope of the investigation includes consideration of reliability,
continuity and stability of rates, fairness to all customers, fairness to
investors, and whether truly competitive markets that are in the public interest
can be developed. The outcome of the investigation could impact the extent to
which retail competition will exist within Virginia. In July 1995, the North
Carolina Commission declined to conduct an adversarial proceeding into the
question of whether retail competition should be allowed in North Carolina.
Instead, it is conducting an informal proceeding to gather information.
Virginia Power has initiated new programs aimed at meeting retail
customers' needs for increased flexibility and control of their electric costs.
Virginia Power has implemented a real time pricing rate experiment for a five
year period. The voluntary rate is available to industrial customers with loads
in excess of 10 Mw and allows a customer to move up to 20% of its existing load,
plus any load growth, to the hourly pricing rate. In 1995 Virginia Power also
implemented a self-generation deferral rate for a North Carolina industrial
customer, Weyerhauser. As a result of the rate being approved, Virginia Power
will serve approximately 25-30 Mw of new load through at least May 1, 1999.
The Virginia Commission entered its Final Order on November 27, 1995 in the
Company's Petition for Declaratory Judgment against the City of Falls Church.
The Petition had been filed in light of Falls Church's municipalization proposal
and request for transmission service under Sections 211 and 213 of the Federal
Power Act. The Commission ruled that it has jurisdiction over the City and that
the City must seek approval from the Commission prior to implementing plans to
condemn Company facilities within the City. No other city has communicated to
the Company any interest in forming a municipal electric system.
CORPORATE RE-ENGINEERING
The Vision 2000 strategic planning initiative has generated efforts aimed
at improving shareholder value as competitive threats intensify. Re-engineering
and remissioning efforts have included reducing the number of operating
divisions, consolidating district offices and closing business offices as work
practices have been reengineered to reduce costs and promote flexibility.
A review of Corporate Center functions has identified several activities
that were not core business functions and which were subsequently outsourced to
service providers. The Fossil and Hydroelectric Business Unit completed a
redesign effort in 1995. Re-engineering and restructuring efforts will continue
in the Corporate Center, Commercial Operations Business Unit, and Nuclear
Business Unit in an effort to improve Virginia Power's competitive capabilities.
11
<PAGE>
REGULATORY/LEGISLATIVE STRATEGY
Consistent with implementation of other Vision 2000 efforts, Virginia Power
has developed a regulatory/legislative strategy intended to establish an orderly
transition to a more competitive environment. The regulatory/legislative
proposals are aimed at achieving greater flexibility on the part of Virginia
Power and the Virginia Commission in setting overall rate levels as well as in
setting rates for individual customers.
At this time, Dominion Resources is unable to predict how changing industry
conditions may affect future results and it is possible that in order to address
changing conditions in ways that are designed to improve the ability of Dominion
Resources and Virginia Power to compete and to serve the goal of preserving and
enhancing shareholder value, it may be necessary to effect structural changes
either within Virginia Power or with respect to the holding company structure,
or both.
CONSERVATION AND LOAD MANAGEMENT
Virginia Power is committed to integrated resource planning and has
developed a detailed analysis procedure in which effective demand-side and
supply-side options are both considered in order to determine the least cost
method to satisfy the customers' needs. Demand-side programs are selected
annually at Virginia Power through an integrated resource planning process which
directly compares the stream of costs and benefits from supply-side and
demand-side options. This process ensures the ultimate selection of a
demand-side package which reduces the need for additional capacity while
efficiently using Virginia Power's existing generation facilities.
ITEM 2. PROPERTIES
Dominion Resources owns the building at One James River Plaza, Richmond,
Virginia, in which Virginia Power has its principal offices. Dominion Resources'
other assets consist primarily of its investments in its subsidiaries, which
invest in various enterprises and assets, as described in THE COMPANY under Item
1. BUSINESS above. See also VIRGINIA POWER GENERATING UNITS under VIRGINIA POWER
SOURCES OF POWER under Item 1. BUSINESS.
ITEM 3. LEGAL PROCEEDINGS
From time to time, Virginia Power may be in violation of or in default
under orders, statutes, rules or regulations relating to protection of the
environment, compliance plans imposed upon or agreed to by Virginia Power or
permits issued by various local, state and federal agencies for the construction
or operation of facilities. There may be pending from time to time
administrative proceedings involving violations of state or federal
environmental regulations that Virginia Power believes are not material with
respect to it and for which its aggregate liability for fines or penalties will
not exceed $100,000. There are no material agency enforcement actions or citizen
suits pending or, to Virginia Power's present knowledge, threatened against
Virginia Power.
Doswell Limited Partnership (Doswell) brought suit against Virginia Power
in the Circuit Court of the City of Richmond alleging breach of contract and
actual and constructive fraud and seeking damages of not less than $75 million
arising out of a disagreement on the calculation of a Fixed Fuel Transportation
Charge to be paid to Doswell under a purchased power contract. The issues of
actual and constructive fraud were dismissed with prejudice, and on March 6,
1995, the Court entered its opinion in favor of Virginia Power. On March 1,
1996, the Supreme Court of Virginia affirmed the decision of the Circuit Court.
On March 8, 1996, Doswell filed notice of its intent to seek a re-hearing.
On December 13, 1995, a civil action was instituted in the United States
District Court for the Eastern District of Virginia, Norfolk Division, against
the City of Norfolk and Virginia Power by a landowner who alleges that his
property has been contaminated by toxic pollutants originating on an adjacent
property now owned by the city and formerly owned by Virginia Power. The
plaintiff seeks compensatory damages of $10 million and punitive damages of $5
million from Virginia Power. Virginia Power and prior owners operated a gas
manufacturing plant on the property until 1968, when the plant was closed and
dismantled. Virginia Power sold the property to the city in 1970. Virginia Power
filed its answer denying liability on January 10, 1996.
In reference to the lawsuit filed by Dominion Energy and Dominion Cogen
D.C., Inc. (DCDC) and others against the District of Columbia and officials
thereof, on August 4, 1995, the court dismissed the complaint against the
individual defendants. As a result, the case is proceeding only against the
District of Columbia. On August 18, 1995, the District of Columbia served a
counterclaim consisting of six counts on Dominion Energy, DCDC and the other
plaintiffs. One count alleges damages in restitution of $2.2 million, and each
of the other counts alleges compensatory damages of $500,000 and
12
<PAGE>
punitive damages of $20 million. On September 11, 1995, Dominion Energy and DCDC
and other plaintiffs moved to dismiss all of the counterclaim. That motion has
been fully briefed by both sides and is waiting a ruling by the court. On
January 26, 1996, the defendant moved to dismiss the plaintiffs' claim that the
District of Columbia violated their constitutionally protected contract rights,
and the plaintiffs have filed a memorandum opposing this motion.
A dispute over corporate governance issues between Dominion Resources and
Virginia Power arose in 1994, and the Virginia Commission instituted a
proceeding concerning the holding company structure and the relationship between
the two companies. This proceeding was continued generally and has been inactive
since August 1994, when a related proceeding of broader scope was initiated by
the Commission. On February 20, 1995, Dominion Resources, Virginia Power and the
Commission Staff consented to an order in this proceeding under which Dominion
Resources must obtain the Commission's approval before taking steps such as
acting in the place of Virginia Power's Board of Directors or officers, removing
Virginia Power's Board members or officers or changing Virginia Power's Articles
of Incorporation or Bylaws. The order remains effective until July 2, 1996. On
April 12, 1995, the Staff of the Commission and its consultants filed a Final
Report, which contains a summary of the proceedings and numerous recommendations
by the consultants pertaining to the relationship between the two companies,
including recommendations relating to corporate governance issues, operating
relationships, including overhead allocations and financial controls, affiliate
service arrangements and transactions, compensation to Virginia Power for credit
support perceived by the consultants to flow to Dominion Resources and its other
subsidiaries, and possible regulatory tools for the Commission. In September
1995, Dominion Resources and Virginia Power each filed responses to the matters
addressed in the Final Report. The Staff is scheduled to file its final response
by March 15, 1996.
At this time, Dominion Resources is unable to predict the ultimate
resolution of these matters or their effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AND AGE BUSINESS EXPERIENCE PAST FIVE YEARS
<S> <C>
Thos. E. Capps (60) Chairman of the Board of Directors, President and Chief Executive Officer from
September 1, 1995 to date; Chairman of the Board of Directors and Chief
Executive Officer from August 16, 1994 to September 1, 1995; Chairman of the
Board of Directors, President and Chief Executive Officer of Dominion
Resources from December 30, 1992 to August 16, 1994; President and Chief
Executive Officer of Dominion Resources and Vice Chairman of the Virginia
Electric and Power Company Board of Directors prior to December 30, 1992.
James T. Rhodes (54) President and Chief Executive Officer of Virginia Electric and Power Company.
Paul J. Bonavia (44) Senior Vice President-Corporate July 1, 1995 to date; Senior Vice President
and General Counsel from January 1, 1995 to July 1, 1995; Vice President and
General Counsel of Dominion Resources from February 1, 1994 to January 1,
1995; Vice President-Regulation of Virginia Power from September 1, 1992 to
February 1, 1994; Vice President and General Counsel of Dominion Resources
from June 3, 1991 to September 1, 1992; Partner in the law firm of Steel,
Hector and Davis, Miami, Florida, prior to June 3, 1991.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE BUSINESS EXPERIENCE PAST FIVE YEARS
<S> <C>
Thomas N. Chewning (50) Senior Vice President from October 1, 1994 to date; Vice President of Dominion
Resources from November 15, 1992 to October 1, 1994; Vice President, Treasurer
and Corporate Secretary of Virginia Power from October 1, 1991 to November 15,
1992; Vice President and Treasurer, Dominion Energy, Inc.; Vice President and
Treasurer, Dominion Lands, Inc. and Vice President-Administration, Dominion
Capital, Inc., prior to October 1, 1991.
David L. Heavenridge (49) Senior Vice President of Dominion Resources from March 1, 1994 to date; Senior
Vice President and Controller of Dominion Resources from April 1, 1992 to
March 1, 1994; Vice President and Controller of Dominion Resources prior to
April 1, 1992.
Linwood R. Robertson (56) Senior Vice President-Finance, Treasurer and Corporate Secretary, January 1,
1995 to date; Vice President-Finance and Treasurer of Dominion Resources from
March 1, 1994 to January 1, 1995; Vice President, Treasurer and Assistant
Corporate Secretary of Dominion Resources prior to March 1, 1994.
Thomas F. Farrell, II (41) Vice President and General Counsel from July 1, 1995 to date; Partner in the
law firm of McGuire, Woods, Battle & Boothe, L.L.P. prior to July 1, 1995.
Donald T. Herrick, Jr. (52) Vice President of Dominion Resources.
Elizabeth A. Martin (36) Vice President-Planning and Investment Analysis of Dominion Resources from
July 1, 1995 to date; Vice President-Adminsitration of Dominion Energy from
February 1, 1994 to July 1, 1995; Counsel-Dominion Energy from July 1, 1992 to
February 1, 1994; Associate in the law firm of Hunton & Williams, Richmond,
Virginia prior to July 1, 1992.
Everard Munsey (62) Vice President Public Policy of Dominion Resources.
James L. Trueheart (44) Vice President and Controller of Dominion Resources from March 1, 1994 to
date; Assistant Controller of Dominion Resources from March 15, 1991 to March
1, 1994; Assistant Controller of Virginia Power prior to March 15, 1991.
</TABLE>
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Dominion Resources common stock is listed on the New York Stock Exchange
and at December 31, 1995 there were 233,496 registered common shareholders of
record. Quarterly information concerning stock prices and dividends is contained
on page 44 of the 1995 Annual Report to Shareholders, for the fiscal year ended
December 31, 1995, in Note Q to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
which is filed herein as Exhibit 13, is hereby incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained under the caption "Selected Consolidated
Financial Data" on page 19 of the 1995 Annual Report to Shareholders, for the
fiscal year ended December 31, 1995, filed herein as Exhibit 13, is hereby
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information is contained under the caption "Management's Discussion
and Analysis of Operations" on pages 21 through 25 and "Management's Discussion
and Analysis of Cash Flows and Financial Condition" on pages 29 and 30 of the
1995 Annual Report to Shareholders, for the fiscal year ended December 31, 1995,
filed herein as Exhibit 13, is hereby incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is contained in the CONSOLIDATED FINANCIAL STATEMENTS on
pages 20, 26 through 28. Notes to the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
on pages 31 through 45 and related report thereon of Deloitte & Touche LLP,
independent auditors, appearing on page 47 of the 1995 Annual Report to
Shareholders, for the fiscal year ended December 31, 1995, filed herein as
Exhibit 13, is hereby incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Directors of Dominion Resources contained on
pages 2 and 3 of the 1996 Proxy Statement, File No. 1-8489, dated March 11, 1996
is hereby incorporated herein by reference. The information concerning the
executive officers of Dominion Resources required by this Item is incorporated
by reference to the section in Part I hereof entitled "EXECUTIVE OFFICERS OF THE
REGISTRANT."
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive and director compensation contained on
pages 7 through 17 of the 1996 Proxy Statement is hereby incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information concerning stock ownership by directors and executive
officers contained on page 5 of the 1996 Proxy Statement is hereby incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 6 of the 1996 Proxy Statement under the
caption "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" and on
page 18 of the 1996 Proxy Statement concerning certain transactions and
relationships of Dominion Resources and its subsidiaries with its executive
officers and directors is hereby incorporated herein by reference.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. The following documents are filed as part of this Form 10-K. The
Consolidated Financial Statements are incorporated herein by reference and are
found on the pages noted.
1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1995
ANNUAL REPORT
TO SHAREHOLDERS
(PAGE)
<S> <C>
Report of Independent Auditors.............................................................. 47
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1995, 1994 and 1993...................................... 20
Consolidated Balance Sheets at December 31, 1995 and 1994................................... 26-27
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.......................................................... 28
Notes to Consolidated Financial Statements.................................................. 31-45
</TABLE>
2. EXHIBITS
<TABLE>
<S> <C> <C>
3(i) - Articles of Incorporation as in effect May 4, 1987 (Exhibit 3(i), Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-8489, incorporated by reference).
3(ii) - Bylaws as in effect on September 21, 1994 (Exhibit 3(ii), Form 10-K for the fiscal year ended December 31,
1994, File No. 1-8489, incorporated by reference).
4(i) - See Exhibit 3(i) above.
4(ii) - Indenture of Mortgage of Virginia Electric and Power Company, dated November 1, 1935, as supplemented and
modified by fifty-eight Supplemental Indentures (Exhibit 4(ii), Form 10-K for the fiscal year ended
December 31, 1985, File No. 1-2255, incorporated by reference); Fifty-Ninth Supplemental Indenture
(Exhibit 4(ii), Form 10-Q for the quarter ended March 31, 1986, File No. 1-2255, incorporated by
reference); Sixtieth Supplemental Indenture (Exhibit 4(ii), Form 10-Q for the quarter ended September 30,
1986, File No. 1-2255, incorporated by reference); Sixty-First Supplemental Indenture (Exhibit 4(ii), Form
10-Q for the quarter ended June 30, 1987, File No. 1-2255, incorporated by reference); Sixty-Second
Supplemental Indenture (Exhibit 4(ii), Form 8-K, dated November 3, 1987, File No. 1-2255, incorporated by
reference); Sixty-Third Supplemental Indenture (Exhibit 4(i), Form 8-K, dated June 8, 1988, File No.
1-2255, incorporated by reference); Sixty-Fourth Supplemental Indenture (Exhibit 4(i), Form 8-K, dated
February 8, 1989, File No. 1-2255, incorporated by reference); Sixty-Fifth Supplemental Indenture (Exhibit
4(i), Form 8-K, dated June 22, 1989, File No. 1-2255, incorporated by reference); Sixty-Sixth Supplemental
Indenture, (Exhibit 4(i), Form 8-K, dated February 27, 1990, File No. 1 -2255, incorporated by reference);
Sixty-Seventh Supplemental Indenture (Exhibit 4(i), Form 8-K, dated April 2, 1991, File No. 1-2255,
incorporated by reference); Sixty-Eighth Supplemental Indenture, (Exhibit 4(i)), Sixty-Ninth Supplemental
Indenture, (Exhibit 4(ii)) and Seventieth Supplemental Indenture, (Exhibit 4(iii), Form 8-K, dated
February 25, 1992, File No. 1-2255, incorporated by reference); Seventy-First Supplemental Indenture
(Exhibit 4(i)) and Seventy-Second Supplemental Indenture, (Exhibit 4(ii), Form 8-K, dated July 7, 1992,
File No. 1-2255, incorporated by reference); Seventy-Third Supplemental Indenture, (Exhibit 4(i), Form
8-K, dated August 6, 1992, File No. 1-2255, incorporated by reference); Seventy-Fourth Supplemental
Indenture (Exhibit 4(i), Form 8-K, dated February 10, 1993, File No. 1-2255, incorporated by reference);
Seventy-Fifth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated April 6, 1993, File No. 1-2255,
incorporated by reference); Seventy-Sixth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated April 21,
1993, File No. 1 -2255, incorporated by reference); Seventy-Seventh Supplemental Indenture, (Exhibit 4(i),
Form 8-K, dated June 8, 1993, File No. 1-2255, incorporated by reference); Seventy-Eighth Supplemental
Indenture, (Exhibit 4(i), Form 8-K, dated August 10, 1993, File No. 1-2255, incorporated by reference);
Seventy-Ninth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated August 10, 1993, File No. 1-2255,
incorporated by reference); Eightieth Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C>
October 12, 1993, File No. 1-2255, incorporated by reference); Eighty-First Supplemental Indenture,
(Exhibit 4(iii), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-2255, incorporated by
reference); Eighty-Second Supplemental Indenture, (Exhibit 4(i), Form 8-K, dated January 18, 1994, File
No. 1-2255, incorporated by reference); Eighty-Third Supplemental Indenture (Exhibit 4(i), Form 8-K, dated
October 19, 1994, File No. 1-2255, incorporated by reference) and Eighty-Fourth Supplemental Indenture
(Exhibit 4(i), Form 8-K, dated March 23, 1995, File
No. 1-2255, incorporated by reference).
4(iii) - Indenture, dated April 1, 1985, between Virginia Electric and Power Company and Crestar Bank (formerly
United Virginia Bank) (Exhibit 4(iv), Form 10-K for the fiscal year ended December 31, 1993, File No.
1-2255, incorporated by reference).
4(iv) - Indenture, dated as of June 1, 1986, between Virginia Electric and Power Company and Chemical Bank
(Exhibit 4(v), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-2255, incorporated by
reference).
4(v) - Indenture, dated April 1, 1988, between Virginia Electric and Power Company and Chemical Bank, as
supplemented and modified by a First Supplemental Indenture, dated August 1, 1989, (Exhibit 4(vi), Form
10-K for the fiscal year ended December 31, 1993, File No. 1-2255, incorporated by reference).
4(vi) - Dominion Resources agrees to furnish to the Commission upon request any other instrument with respect to
long-term debt as to which the total amount of securities authorized thereunder does not exceed 10% of
Dominion Resources' total assets.
10(i) - Operating Agreement, dated June 17, 1981, between Virginia Electric and Power Company and Monongahela
Power Company, the Potomac Edison Company, West Penn Power Company, and Allegheny Generating Company
(Exhibit 10(vi), Form 10-K for the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by
reference).
10(ii) - Purchase, Construction and Ownership Agreement, dated as of December 28, 1982 but amended and restated on
October 17, 1983, between Virginia Electric and Power Company and Old Dominion Electric Cooperative
(Exhibit 10(viii), Form 10-K for the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by
reference).
10(iii) - Interconnection and Operating Agreement, dated as of December 28, 1982 as amended and restated on October
17, 1983, between Virginia Electric and Power Company and Old Dominion Electric Cooperative (Exhibit
10(ix), Form 10-K for the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by
reference).
10(iv) - Nuclear Fuel Agreement, dated as of December 28, 1982 as amended and restated on October 17, 1983, between
Virginia Electric and Power Company and Old Dominion Electric Cooperative (Exhibit 10(x), Form 10-K for
the fiscal year ended December 31, 1983, File No. 1-8489, incorporated by reference).
10(v) - Credit Agreement, dated as of September 1, 1995, between Chemical Bank and Virginia Electric and Power
Company (filed herewith).
10(vi) - Inter-Company Credit Agreement, dated December 20, 1985, as modified on August 21, 1987, between Dominion
Resources and Dominion Capital, Inc. (Exhibit 10(vi), Form 10-K for the fiscal year ended December 31,
1993, File No. 1-8489, incorporated by reference).
10(vii) - Inter-Company Credit Agreement, dated October 1, 1987 as amended and restated as of May 1, 1988 between
Dominion Resources and Dominion Energy, Inc. (Exhibit 10(vii), Form 10-K for the fiscal year ended
December 31, 1993, File No. 1-8489, incorporated by reference).
10(viii) - Inter-Company Credit Agreement, dated as of September 1, 1988 between Dominion Resources and Dominion
Lands, Inc. (Exhibit 10(viii), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-8489,
incorporated by reference).
10(ix) - Form of Amended and Restated Articles of Partnership in Commendam of Catalyst Old River Hydroelectric
Limited Partnership, by and between Catalyst Vidalia Corporation and Dominion Capital, Inc. effective as
of August 24, 1990 (Exhibit 10(xii) Form 10-K for the fiscal year ended December 31, 1990, File No.
1-8489, incorporated by reference).
10(x) - Supplemental Funding Agreement, dated as of August 24, 1990, by and among Dominion Capital, Inc., Catalyst
Old River Hydroelectric Limited Partnership and First National Bank of Commerce
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
(Exhibit 10(xiii) Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8489, incorporated by
reference).
10(xi) - Credit Agreement, dated December 1, 1985, between Virginia Electric and Power Company and Old Dominion
Electric Cooperative (Exhibit 10(xix), Form 10-K for the fiscal year ended December 31, 1985, File No.
1-8489, incorporated by reference).
10(xii) - Agreement for Northern Virginia Services, dated as of November 1, 1985, between Potomac Electric Power
Company and Virginia Electric and Power Company (Exhibit 10(xxi), Form 10-K for the fiscal year ended
December 31, 1985, File No. 1-8489, incorporated by reference).
10(xiii) - Purchase, Construction and Ownership Agreement, dated May 31, 1990, between Virginia Electric and Power
Company and Old Dominion Electric Cooperative (Exhibit 10(xi), Form 10-K for the fiscal year ended
December 31, 1990, File No. 1 -2255, incorporated by reference).
10(xiv) - Operating Agreement, dated May 31, 1990, between Virginia Electric and Power Company and Old Dominion
Electric Cooperative (Exhibit 10(xii), Form 10-K for the fiscal year ended December 31, 1990, File No.
1-2255, incorporated by reference).
10(xv) - Coal-Fired Unit Turnkey Contract (Volume 1), dated April 6, 1989, and the United 2 Amendment (Volume 1),
dated May 31, 1990 between Virginia Electric and Power Company and Old Dominion Electric Cooperative,
Westinghouse, Black & Veatch, Combustion Engineering and H. B. Zachry (Volumes 2-11 contain technical
specifications) (Exhibit 10(xiii), Form 10-K for the fiscal year ended December 31, 1990, File No. 1-2255,
incorporated by reference).
10(xvi) - Receivables Purchase Agreement, dated as of December 11, 1991, between Virginia Electric and Power Company
and Dynamic Funding Corporation (Exhibit 10(xv), Form 10-K for the fiscal year ended December 31, 1991,
File No. 1-2255, incorporated by reference).
10(xvii) - Trust Agreement of Dominion Resources Black Warrior Trust, dated May 31, 1994, among Dominion Black
Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and Nationsbank of
Texas, N.A. (Exhibit 3.1, Amendment No. 1 to Registration Statement, File No. 33-53513, filed June 1,
1994, incorporated by reference).
10(xviii) - First Amendment of Trust Agreement of Dominion Resources Black Warrior Trust, dated June 27, 1994, among
Dominion Black Warrior Basin, Inc., Dominion Resources, Inc., Mellon Bank (DE) National Association and
Nationsbank of Texas, N.A. (Exhibit 10(ii), Form 10-Q for the quarter ended June 30, 1994, File No.
1-8489, incorporated by reference).
10(xix)* - Dominion Resources, Inc. Directors' Deferred Compensation Plan, effective July 1, 1986, (Exhibit 10(xx),
Form 10-K for the fiscal year end December 31, 1988, File No. 1-8489, incorporated by references.)
10(xx)* - Dominion Resources, Inc. Performance Achievement Plan, effective January 1, 1986, as amended and restated
effective February 19, 1988 (Exhibit 10(xxi), Form 10-K for the fiscal year ended December 31, 1988, File
No. 1-8489, incorporated by reference).
10(xxi)* - Dominion Resources, Inc. Executive Supplemental Retirement Plan, effective January 1, 1981 as amended and
restated effective October 22, 1988 (Exhibit 10(xxii), Form 10-K for the fiscal year ended December 31,
1988, File No. 1-8489, incorporated by reference), amended and restated June 15, 1990 (Exhibit 10(xxiv),
Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8489, incorporated by reference).
10(xxii)* - Arrangements with certain executive officers regarding additional credited years of service for retirement
and retirement life insurance purposes (Exhibit 10(xxv), Form 10-K for the fiscal year ended December 31,
1991, File No. 1-8489, incorporated by reference).
10(xxiii)* - Dominion Resources, Inc.'s Cash Incentive Plan as adopted December 20, 1991 (Exhibit 10(xxii), Form 10-K
for the fiscal year ended December 31, 1991, File No. 1-8489, incorporated by reference).
10(xxiv)* - Dominion Resources, Inc. Long-Term Incentive Plan, effective April 17, 1987 (1987 Proxy Statement, File
No. 1-8489, incorporated by reference).
10(xxv)* - Form of Employment Continuity Agreement for certain officers of Dominion Resources (Exhibit (xxvi), Form
10-K for the fiscal year ended December 31, 1994, File No. 1-8489, incorporated by reference).
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C>
10(xxvi)* - Dominion Resources, Inc. Retirement Benefit Funding Plan, effective June 29, 1990 (Exhibit 10(xxxiii),
Form 10-K for the fiscal year ended December 31, 1990, File No. 1-8489, incorporated by reference).
10(xxvii)* - Dominion Resources, Inc. Retirement Benefit Restoration Plan as adopted effective January 1, 1991 (Exhibit
10(xxvii), Form 10-K for the fiscal year ended December 31, 1992, File No. 1-8489, incorporated by
reference).
10(xxviii)* - Dominion Resources, Inc. Executives' Deferred Compensation Plan, effective January 1, 1994 (Exhibit
10(xxviii), Form 10-K for the fiscal year ended December 31, 1993, File No. 1-8489, incorporated by
reference).
10(xxix)* - Employment Agreement dated April 12, 1995 (Exhibit 10(i), Form 10-Q for the quarter ended March 31, 1995,
File No. 1-8489, incorporated by reference) and an Amendment dated September 15, 1995 between Dominion
Resources and Thos. E. Capps (Exhibit 10(i), Form 10-Q for the quarter ended September 30, 1995, File No.
1-8489, incorporated by reference).
10(xxx)* - Employment Agreement dated April 12, 1995 (Exhibit 10(i), Form 10-Q for the quarter ended March 31, 1995,
File No. 1-8489, incorporated by reference) and an Amendment dated September 15, 1995 between Virginia
Power and James T. Rhodes (Exhibit 10(i), Form 10-Q for the quarter ended September 30, 1995, File No.
1-8489, incorporated by reference).
10(xxxi)* - Form of three year Employment Agreement between Dominion Resources and Paul J. Bonavia, David L.
Heavenridge and certain other executive officers of Dominion Resources (Exhibit 10(xxxiii), Form 10-K for
the fiscal year ended December 31, 1994, File No. 1-8489, incorporated by reference).
10(xxxii)* - Form of two year Employment Agreement between Dominion Resources and certain executive officers (Exhibit
10(xxxiv), Form 10-K for the fiscal year ended December 31, 1994, File No. 1-8489, incorporated by
reference).
11 - Computation of Earnings Per Share of Common Stock Assuming Full Dilution (filed herewith).
13 - Portions of the 1995 Annual Report to Shareholders for the fiscal year ended December 31, 1995 (filed
herewith).
22 - Subsidiaries of the Registrant (filed herewith).
23(i) - Consent of Hunton & Williams (filed herewith).
23(ii) - Consent of Jackson & Kelly (filed herewith).
23(iii) - Consent of Deloitte & Touche LLP (filed herewith).
27 - Financial Data Schedule (filed herewith).
99(i) - Consent Order by the Virginia State Corporation Commission (Item 5., Form 8-K, dated February 21, 1995,
File No. 1-8489, incorporated by reference).
99(ii) - Final Report by the Staff of the Virginia State Corporation Commission (Item 5., Form 8-K, dated April 17,
1995, File No. 1-8489, incorporated by reference).
</TABLE>
* Indicates management contract or compensatory plan or arrangement.
B. Reports on Form 8-K
None
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DOMINION RESOURCES, INC.
By: THOS. E. CAPPS
(Thos. E. Capps, Chairman of the
Board of Directors,
President and Chief Executive
Officer)
Date: MARCH 12, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the 12th day of March, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
JOHN B. ADAMS, JR. Director
John B. Adams, Jr.
TYNDALL L. BAUCOM Director
Tyndall L. Baucom
JOHN B. BERNHARDT Director
John B. Bernhardt
THOS. E. CAPPS Chairman of the Board of Directors, President
(Chief Executive Officer)
Thos. E. Capps and Director
BENJAMIN J. LAMBERT, III Director
Benjamin J. Lambert, III
RICHARD L. LEATHERWOOD Director
Richard L. Leatherwood
HARVEY L. LINDSAY, JR. Director
Harvey L. Lindsay, Jr.
K. A. RANDALL Director
K. A. Randall
WILLIAM T. ROOS Director
William T. Roos
FRANK S. ROYAL Director
Frank S. Royal
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
JUDITH B. SACK Director
Judith B. Sack
S. DALLAS SIMMONS Director
S. Dallas Simmons
Director
Robert H. Spilman
LINWOOD R. ROBERTSON Senior Vice President
(Chief Financial Officer)
Linwood R. Robertson
J. L. TRUEHEART Vice President and Controller
(Principal Accounting Officer)
J. L. Trueheart
</TABLE>
21
CONFORMED COPY
_______________________________________________________________________________
CREDIT AGREEMENT
among
VIRGINIA ELECTRIC AND POWER COMPANY
The Several Lenders
from Time to Time Parties Hereto
and
CHEMICAL BANK,
as Administrative Agent
Dated as of September 1, 1995
_______________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS ....................................................... 1
1.1 Defined Terms ...................................................... 1
1.2 Other Definitional Provisions ...................................... 10
SECTION 2. AMOUNT AND TERMS OF THE CREDIT FACILITIES ......................... 11
2.1 The Commitments .................................................... 11
2.2 Procedure for Revolving Credit Borrowing ........................... 11
2.3 Facility Fee ....................................................... 11
2.4 Termination or Reduction of Commitments ............................ 12
2.5 Repayment of Loans; Evidence of Debt ............................... 12
2.6 Optional Prepayments ............................................... 13
2.7 Conversion and Continuation Options ................................ 13
2.8 Minimum Amounts and Maximum Number of Tranches ..................... 13
2.9 The Competitive Loans .............................................. 14
2.10 Procedure for and Payment of Competitive Loan Borrowing ............ 14
2.11 Interest Rates and Payment Dates ................................... 17
2.12 Computation of Interest and Fees ................................... 18
2.13 Inability to Determine Interest Rate ............................... 18
2.14 Pro Rata Treatment and Payments .................................... 19
2.15 Illegality ......................................................... 20
2.16 Additional Costs .................................................. 20
2.17 Taxes .............................................................. 21
2.18 Indemnity .......................................................... 24
2.19 Change of Lending Office ........................................... 24
2.20 Replacement of Lenders under Certain Circumstances ................. 24
SECTION 3. REPRESENTATIONS AND WARRANTIES .................................... 25
3.1 Financial Condition ................................................ 25
3.2 No Change .......................................................... 26
3.3 Corporate Existence; Compliance with Law ........................... 26
3.4 Corporate Power; No Legal Bar ...................................... 26
3.5 Authorization; Enforceability ...................................... 26
3.6 ERISA .............................................................. 26
3.7 No Material Litigation ............................................. 26
3.8 Taxes .............................................................. 27
3.9 Purpose of Loans ................................................... 27
SECTION 4. CONDITIONS PRECEDENT .............................................. 27
4.1 Conditions to Initial Loans ........................................ 27
4.2 Conditions to Each Loan ............................................ 28
SECTION 5. COVENANTS ......................................................... 28
5.1 Financial Statements ............................................... 28
5.2 Conduct of Business and Compliance ................................. 29
5.3 Books and Records .................................................. 29
5.4 Notices ............................................................ 30
5.5 Limitation on Liens ................................................ 30
5.6 Limitation on Fundamental Changes .................................. 30
5.7 Limitation on Guarantee Obligations ................................ 30
5.8 Maintenance of Net Worth ........................................... 31
SECTION 6. EVENTS OF DEFAULT ................................................. 31
SECTION 7. THE ADMINISTRATIVE AGENT .......................................... 33
7.1 Appointment ........................................................ 33
7.2 Delegation of Duties ............................................... 33
7.3 Exculpatory Provisions ............................................. 33
7.4 Reliance by Administrative Agent ................................... 34
7.5 Notice of Default .................................................. 34
7.6 Non-Reliance on Administrative Agent and Other Lenders ............. 34
7.7 Indemnification .................................................... 35
7.8 Administrative Agent in Its Individual Capacity .................... 35
7.9 Successor Administrative Agent ..................................... 35
SECTION 8. MISCELLANEOUS ..................................................... 36
8.1 Amendments and Waivers ............................................. 36
8.2 Notices ............................................................ 36
8.3 No Waiver; Cumulative Remedies ..................................... 37
8.4 Survival ........................................................... 37
8.5 Payment of Expenses ................................................ 37
8.6 Transfer Provisions ................................................ 38
8.7 Adjustments ........................................................ 39
8.8 Counterparts ....................................................... 40
8.9 Severability ....................................................... 40
8.10 Integration ........................................................ 40
8.11 GOVERNING LAW ...................................................... 40
8.12 WAIVERS OF JURY TRIAL .............................................. 40
8.13 Confidentiality .................................................... 40
SCHEDULES
I Lending Offices and Commitments
II Facility Fee/Applicable Margin
III Permitted Guarantee Obligations
</TABLE>
<PAGE>
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Competitive Loan Note
B-1 Form of Competitive Loan Confirmation
B-2 Form of Competitive Loan Offer
B-3 Form of Competitive Loan Request
C Form of Closing Certificate
D-1 Form of Legal Opinion of General Counsel of the Borrower
D-2 Form of Legal Opinion of Simpson Thacher & Bartlett
E Form of Assignment and Acceptance
<PAGE>
CREDIT AGREEMENT, dated as of September 1, 1995, among VIRGINIA
ELECTRIC AND POWER COMPANY, a Virginia public service corporation (the
"Borrower"), the several banks and other financial institutions from time to
time parties to this Agreement (the "Lenders") and Chemical Bank, a New York
banking corporation, as administrative agent for the Lenders hereunder (in such
capacity, the "Administrative Agent").
WITNESSETH:
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the ABR due to a change in the
Prime Rate or the Federal Funds Effective Rate shall be effective as of
the opening of business on the effective day of such change in the Prime
Rate or the Federal Funds Effective Rate.
"ABR Loans": Revolving Credit Loans the rate of interest applicable
to which is the ABR.
"Additional Costs": as defined in subsection 2.16(a).
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Applicable Lending Office": each Lender's lending office designated
in Schedule I or such other office of such Lender notified to the
Administrative Agent and Borrower.
"Applicable Margin": the rate per annum set forth in Schedule II
under the applicable S&P Bond Rating and Moody's Bond Rating.
"Assignee": as defined in subsection 8.6(c).
<PAGE>
"Board": the Board of Governors of the Federal Reserve System (or
any successor).
"Borrowing Date": any Business Day specified in a notice given by
the Borrower pursuant to subsection 2.2 or 2.10 as a date on which the
Loans are to be made hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close, except that, when used in connection with a LIBOR Loan or LIBOR
Competitive Loan, the term "Business Day" shall mean any Business Day on
which dealings in foreign currencies and exchange between banks may be
carried on in London, England and New York, New York.
"CD Assessment Rate": for any day as applied to any CD Rate Loan,
the annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund maintained by the Federal Deposit
Insurance Corporation (the "FDIC") classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. (S) 327.4(a) (or any
successor provision) to the FDIC (or any successor) for the FDIC's (or such
successor's) insuring time deposits at offices of such institution in the
United States.
"CD Base Rate": with respect to each day during each Interest Period
pertaining to a CD Rate Loan, the rate of interest per annum determined by
the Agent to be the rate notified to the Agent by Chemical as the average
rate bid at 9:00 A.M., New York City time, or as soon thereafter as
practicable, on the first day of such Interest Period by a total of three
certificate of deposit dealers of recognized standing selected by Chemical
for the purchase at face value from Chemical of its certificates of deposit
in an amount comparable to the CD Rate Loan of Chemical to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"CD Rate": with respect to each day during each Interest Period
pertaining to a CD Rate Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest
l/lOOth of 1%):
CD Base Rate + CD Assessment Rate
1.00 - CD Reserve Percentage
"CD Rate Loans": Loans the rate of interest applicable to which is
based upon the CD Rate.
"CD Reserve Percentage": for any day as applied to any CD Rate Loan,
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non-personal time deposits in Dollars having a maturity
comparable to the Interest Period for such CD Rate Loan.
2
<PAGE>
"Chemical": Chemical Bank.
"Closing Date": the date on which the conditions precedent set forth
in subsection 4.1 shall be satisfied or waived in accordance with
subsection 8.1.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment": as to any Lender, the obligation of such Lender to
make Revolving Credit Loans in an aggregate principal amount at any one
time outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule I, as such amount may be changed from time to time in
accordance with this Agreement.
"Commitment Percentage": as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding).
"Commitment Period": the period from and including the Closing Date
to but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414 of the
Code.
"Competitive Loan Confirmation": each confirmation by the Borrower
of its acceptance of Competitive Loan Offers, which Competitive Loan
Confirmation shall be substantially in the form of Exhibit B-l and shall be
delivered to the Administrative Agent in writing or by facsimile
transmission.
"Competitive Loan Lender": each Lender that has agreed to offer to
make Competitive Loans hereunder and each other Lender that shall hereafter
become a Competitive Loan Lender in accordance with the provisions of
subsection 8.6
"Competitive Loan Maturity Date": as to any Competitive Loan, the
date specified by the Borrower pursuant to subsection 2.10(d)(ii) in its
acceptance of the related Competitive Loan Offer.
"Competitive Loan Note": as defined in subsection 2.10(i).
"Competitive Loan Offer": each offer by a Competitive Loan Lender to
make Competitive Loans pursuant to a Competitive Loan Request, which
Competitive Loan Offer shall contain the information specified in Exhibit
B-2 and shall be delivered to the Administrative Agent by telephone,
immediately confirmed by facsimile transmission.
3
<PAGE>
"Competitive Loan Request": each request by the Borrower for
Competitive Loans, which request shall contain the information specified in
Exhibit B-3 and shall be delivered to the Administrative Agent in writing
or by facsimile transmission, or by telephone, immediately confirmed by
facsimile transmission.
"Competitive Loan": each loan made pursuant to subsection 2.9.
"Consolidated Net Worth": as of the date of determination, all items
which in conformity with GAAP would be included under stockholders' equity
on a consolidated balance sheet of the Borrower and its consolidated
Subsidiaries, if any, at such date, including preferred stock issued by the
Borrower.
"Default": any of the events specified in Section 6, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Dominion Resources": Dominion Resources, Inc., a Virginia
corporation.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
LIBOR Loan or a LIBOR Competitive Loan, as the case may be, the aggregate
(without duplication) of the rates (expressed as a decimal fraction) of
reserve requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations
of the Board or other Governmental Authority having jurisdiction with
respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of the Board) maintained by a member bank of the Federal
Reserve System.
"Event of Default": any of the events specified in Section 6,
provided that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"Facility Fee Rate": the rate per annum set forth in Schedule II
under the applicable S&P Bond Rating and Moody's Bond Rating.
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Administrative Agent from three federal funds brokers of recognized
standing selected by it.
5
<PAGE>
"First Mortgage Bond Indenture": the first mortgage bond indenture,
dated November 1, 1935, by and between the Company and Chase Manhattan Bank,
as supplemented and amended.
"Fixed Rate Competitive Loan Request": any Competitive Loan Request
requesting the Competitive Loan Lenders to offer to make Fixed Rate
Competitive Loans.
"Fixed Rate Competitive Loans": Competitive Loans the rate of
interest applicable to which is equal to a fixed percentage rate per annum
specified by the Competitive Loan Lender making such Loan in its Competitive
Loan Offer (as opposed to a rate composed of LIBOR plus or minus a margin).
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of:
(a) the guaranteeing person or
(b) another Person (including, without limitation, any bank under
any letter of credit), when the creation of such obligation was
induced by a reimbursement, counterindemnity or similar
obligation issued by the guaranteeing person,
in either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of any
other third Person (the "primary obligor") in any manner, whether directly
or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment
of any such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount equal
to the stated or determinable amount of the primary obligation in respect
of which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person
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may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum amount
for which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation shall
be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Indebtedness": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by
a note, bond, debenture or similar instrument, (c) all obligations of such
Person as lessee which are capitalized in accordance with GAAP, (d) all
obligations of such Person in respect of acceptances issued or created for
the account of such Person and (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof.
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December and the Termination Date, (b) as
to any LIBOR Loan having an Interest Period of three months or less and any
CD Rate Loan having an lnterest Period of 90 days or less, the last day of
such Interest Period, (c) as to any LIBOR Loan or CD Rate Loan having an
Interest Period longer than three months or 90 days, respectively, each day
which is three months or 90 days, respectively, or a whole multiple
thereof, after the first day of such Interest Period and the last day of
such Interest Period, (d) as to any Fixed Rate Competitive Loan, each
interest payment date specified by the Borrower for such Loan in the
related Competitive Loan Request (including, in any event, the applicable
Competitive Loan Maturity Date) and (e) as to any LIBOR Competitive Loan,
(i) the applicable Competitive Loan Maturity Date and (ii) each date (if
any) occurring prior to such Competitive Loan Maturity Date which is three
months, or a whole multiple thereof, after the Borrowing Date in respect of
such Loan
"Interest Period": (a) with respect to any LIBOR Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such LIBOR Loan and
ending one, two, three, six or, to the extent available as
determined by the Administrative Agent, nine or twelve months
thereafter, as selected by the Borrower in its notice of borrowing or
notice of conversion, as the case may be, given with respect
thereto; and
(ii) thereafter, each period commencing on the last day
of the next preceding Interest Period applicable to such LIBOR Loan
and ending one, two, three, six or, to the extent available as
determined by the Administrative Agent, nine or twelve months
thereafter, as selected by the Borrower by irrevocable
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notice to the Administrative Agent not less than three Business Days
prior to the last day of the then current Interest Period with respect
thereto;
and (b) with respect to any CD Rate Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such CD Rate Loan
and ending 30, 60, 90 or 180 days thereafter, as selected by the
Borrower in its notice of borrowing or notice of conversion, as the
case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such CD Rate Loan and
ending 30, 60, 90 or 180 days thereafter, as selected by the Borrower
by irrevocable notice to the Agent not less than three Business Days
prior to the last day of the then current Interest Period with respect
thereto;
and (c) with respect to any LIBOR Competitive Loan, the period specified in
the Competitive Loan Request for the LIBOR Competitive Loan with the
maturity date corresponding to the LIBOR Competitive Loan accepted by the
Borrower in the Competitive Loan Confirmation;
provided that, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period pertaining to a LIBOR Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(2) if any Interest Period pertaining to a CD Rate Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day;
(3) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(4) any Interest Period pertaining to a LIBOR Loan that begins
on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of a
calendar month; and
(5) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any LIBOR Loan or CD Rate Loan
during an Interest Period for such Loan.
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"LIBOR": with respect to each day during each Interest Period
pertaining to a LIBOR Loan or a LIBOR Competitive Loan, the rate per annum
equal to the rate at which Chemical is offered Dollar deposits at or about
11:00 A.M., London time, two Business Days prior to the beginning of such
Interest Period, in the London interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
LIBOR Loans are then being conducted, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of its LIBOR Loan (or, in the case of a LIBOR
Competitive Loan, an amount that would have been Chemical's portion of such
LIBOR Competitive Loan had such Loan been a LIBOR Loan) to be outstanding
during such Interest Period.
"LIBOR Competitive Loan": Competitive Loans the rate of interest
applicable to which is equal to LIBOR plus or minus a margin.
"LIBOR Competitive Loan Request": any Competitive Loan Request requesting
the Competitive Loan Lenders to offer to make LIBOR Competitive Loans.
"LIBOR Loans": Revolving Credit Loans the rate of interest applicable to
which is based upon LIBOR.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
capitalized lease obligation having substantially the same economic effect as
any of the foregoing).
"Loan": any Revolving Credit Loan or Competitive Loan made by any Lender
pursuant to this Agreement.
"Loan Documents": this Agreement and any Notes.
"Majority Lenders": at any time, Lenders the Commitment Percentages of
which aggregate more than 50%.
"Material Subsidiary": means a Subsidiary of the Borrower whose total
assets, as determined in accordance with GAAP, represent at least 20% of the
total assets of the Borrower, on a consolidated basis, as determined in
accordance with GAAP.
"Moody's Bond Rating" means for any day, the rating of the
Borrower's senior secured long-term debt or if there is no senior secured
debt, the Borrower's senior long-term unsecured debt by Moody's Investor
Service, Inc. in effect at 11:00 A.M., New York City time, on such day.
"Non-Excluded Taxes": as defined in subsection 2.17(a).
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"Notes": the collective reference to the Revolving Credit Notes and the
Competitive Loan Notes.
"Participant": as defined in subsection 8.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate": the rate of interest per annum publicly announced from time
to time by Chemical as its prime rate in effect at its principal office in
New York City (the Prime Rate not being intended to be the lowest rate of
interest charged by Chemical in connection with extensions of credit to
debtors).
"Register": as defined in subsection 8.6(d)
"Regulatory Change": shall mean, as to any Lender, any change
occurring or taking effect after the date of this Agreement in Federal,
state, local or foreign laws or regulations, or the adoption or making or
taking effect after such date of any interpretations, directives, or
requests applying to a class of lenders including the Lenders of or under any
Federal, state, local or foreign laws or regulations (whether or not having
the force of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer": the President, any Vice President, the Treasurer
or any Assistant Treasurer of the Borrower.
"Revolving Credit Loans": as defined in subsection 2.1.
"Revolving Credit Note": as defined in subsection 2.5(e).
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"S&P Bond Rating" means for any day, the rating of the Borrower's
senior secured long-term debt or if there is no senior secured debt, the
Borrower's senior long-term unsecured debt by Standard & Poor's Ratings
Group in effect at 11:00 A.M., New York City time, on such day.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.
"Termination Date": July 31, 2000.
"Tranche": the collective reference to LIBOR Loans or CD Rate Loans
the then current Interest Periods with respect to all of which begin on
the same date and end on the same later date (whether or not such Loans
shall originally have been made on the same day); Tranches may be
identified as "LIBOR Tranches" or "CD Rate Tranches", as applicable.
"Transferee": as defined in subsection 8.6(f).
"Type": (a) as to any Revolving Credit Loan, its nature as an ABR Loan, a
CD Rate Loan or a LIBOR Loan and (b) as to any Competitive Loan, its nature as a
Fixed Rate Competitive Loan or a LIBOR Competitive Loan.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto or thereto.
(b) As used herein and in the Notes and any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms relating
to the Borrower and its Subsidiaries not defined in subsection 1.1 and
accounting terms partly defined in subsection 1.1, to the extent not defined,
shall have the respective meanings given to them under GAAP, and the parties
hereto agree that upon any change to GAAP that has the effect of materially
altering any of the terms herein, the parties hereto will negotiate in good
faith to amend the terms affected thereby to place the parties in a position as
nearly equivalent as possible to what existed prior to such change to GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection Schedule and Exhibit references are to this Agreement unless
otherwise specified.
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(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF THE CREDIT FACILITIES
2.1 The Commitments. (a) Subject to the terms and conditions
hereof, each Lender severally agrees to make revolving credit loans ("Revolving
Credit Loans") to the Borrower from time to time during the Commitment Period in
an aggregate principal amount at any one time outstanding not to exceed the
amount of such Lender's Commitment. During the Commitment Period the Borrower
may use the Commitments by borrowing, prepaying the Revolving Credit Loans in
whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof, Notwithstanding anything to the contrary in this Agreement,
in no event may Revolving Credit Loans be borrowed under this Section 2 if,
after giving effect thereto, the aggregate principal amount of the Loans then
outstanding would exceed the aggregate Commitments then in effect.
(b) The Revolving Credit Loans may from time to time be (i) LIBOR
Loans, (ii) ABR Loans, (iii) CD Rate Loans or (iv) a combination thereof, as
determined by the Borrower and notified to the Agent in accordance with
subsections 2.2 and 2.7, provided that no Revolving Credit Loan shall be made as
a LIBOR Loan or a CD Rate Loan after the day that is one month or 30 days,
respectively, prior to the Termination Date.
2.2 Procedure for Revolving Credit Borrowing. The Borrower may
borrow under the Commitments during the Commitment Period on any Business Day,
provided that the Borrower shall give the Administrative Agent irrevocable
written notice, which notice must be received by the Administrative Agent prior
to (a) 12:00 P.M., New York City time, three Business Days prior to the
requested Borrowing Date, in the case of LIBOR Loans or CD Rate Loans, or (b)
10:30 A.M. New York City time, on the requested Borrowing Date, in the case of
ABR Loans. Each such notice shall specify (i) the amount to be borrowed, (ii)
the requested Borrowing Date, (iii) whether the borrowing is to be of ABR Loans,
CD Rate Loans, LIBOR Loans, or a combination thereof and (iv) if the borrowing
is to be entirely or partly of LIBOR Loans or CD Rate Loans, the respective
lengths of the initial Interest Periods therefor. Each borrowing under the
Commitments shall be in an amount equal to $10,000,000 or a whole multiple of
$1,000,000 in excess thereof. Upon receipt of any such notice from the Borrower,
the Administrative Agent shall promptly notify each Lender thereof. Each Lender
will make the amount of its pro rata share of each borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in subsection 8.2 prior to 2:00 P.M., New York
City time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent crediting the account of
the Borrower on the books of such office with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
2.3 Facility Fee. The Borrower agrees to pay to the Administrative
Agent for the account of each Lender a facility fee for the period from and
including the first day of the
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Commitment Period to the Termination Date, computed at the Facility Fee Rate on
the average daily amount of the Commitment (whether used or unused) of such
Lender during the period for which payment is made, payable quarterly in arrears
on the last day of each March, June, September and December and on the date on
which the Commitments shall terminate as provided herein, commencing on the
first of such dates to occur after the date hereof.
2.4 Termination or Reduction of Commitments. The Borrower may, upon
not less than three Business Days' written notice to the Administrative Agent,
terminate or reduce the unutilized amount of the Commitments. Any reduction of
the Commitments shall be in an amount equal to $10,000,000 or a whole multiple
of $1,000,000 in excess thereof and shall reduce permanently the Commitments
then in effect.
2.5 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Revolving Credit Loan of
such Lender on the Termination Date (or such earlier date on which the Revolving
Credit Loans become due and payable pursuant to Section 6). The Borrower hereby
further agrees to pay interest on the unpaid principal amount of the Loans from
time to time outstanding from the date hereof until payment in full thereof at
the rates per annum, and on the dates, set forth in subsection 2.11.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing indebtedness of the Borrower to such
Lender resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant
to subsection 8.6(d), and a subaccount therein for each Lender, in which shall
be recorded (i) the amount of each Loan made hereunder, the Type thereof and
each Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 2.5(b) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded: provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver to
such Lender a promissory note of the Borrower evidencing the Revolving Credit
Loans of such Lender, substantially in the form of Exhibit A-1 with appropriate
insertions as to date and principal amount (a "Revolving Credit Note").
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2.6 Optional Prepayments. The Borrower may at any time and from
time to time prepay the Revolving Credit Loans, in whole or in part, without
premium or penalty, upon at least four Business Days' irrevocable notice to the
Administrative Agent. Each such notice shall specify the date and amount of
prepayment and whether the prepayment is of ABR Loans, CD Rate Loans, LIBOR
Loans, or a combination thereof, and, if of a combination thereof, the amount
allocable to each. Upon receipt of any such notice the Administrative Agent
shall promptly notify each Lender thereof. If any such notice is given, the
amount specified in such notice shall be due and payable on the date specified
therein, together with any amounts payable pursuant to subsection 2.18. Partial
prepayments shall be in an aggregate principal amount of $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. Prepayments of the Competitive Loans
shall not be permitted.
2.7 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert LIBOR Loans or CD Rate Loans to ABR Loans, by
giving the Administrative Agent at least one Business Day's prior irrevocable
notice of such election, provided that any such conversion of LIBOR Loans or CD
Rate Loans may only be made on the last day of an Interest Period with respect
thereto. The Borrower may elect from time to time to convert ABR Loans or CD
Rate Loans to LIBOR Loans, and/or to convert LIBOR Loans or ABR Loans to CD Rate
Loans, by giving the Administrative Agent at least three Business Days' prior
irrevocable notice of such election, provided that any such conversion of LIBOR
Loans or CD Rate Loans may only be made on the last day of an Interest Period
with respect thereto. Any such notice of conversion to LIBOR Loans or CD Rate
Loans shall specify the length of the initial Interest Period or Interest
Periods therefor. Upon receipt of any such notice the Administrative Agent shall
promptly notify each Lender thereof. All or any part of outstanding LIBOR Loans,
ABR Loans and CD Rate Loans may be converted as provided herein, provided that
(i) no Loan may be converted into a LIBOR Loan or a CD Rate Loan when any Event
of Default has occurred and is continuing and the Administrative Agent has or
the Majority Lenders have determined that such a conversion is not appropriate
and (ii) no Loan may be converted into a LIBOR Loan or a CD Rate Loan after the
date that is one month or 30 days, respectively, prior to the Termination Date.
(b) Any LIBOR Loans or CD Rate Loans may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Loans,
provided that no LIBOR Loan or CD Rate Loan may be continued as such (i) when
any Event of Default has occurred and is continuing and the Agent has or the
Majority Lenders have determined that such a continuation is not appropriate or
(ii) after the date that is one month or 30 days prior to, respectively, the
Termination Date and provided, further, that if the Borrower shall fail to give
such notice or if such continuation is not permitted such Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
2.8 Minimum Amounts and Maximum Number of Tranches. All borrowings,
prepayments, conversions and continuations of Loans hereunder and all selections
of Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections so that, after giving effect thereto, the aggregate principal
amount of the Loans comprising each LIBOR
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Tranche or each CD Rate Tranche shall be equal to $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. In no event shall there be more than 5
LIBOR Tranches or 5 CD Rate Tranches outstanding at any time.
2.9 The Competitive Loans. Subject to the terms and conditions of
this Agreement, the Borrower may borrow Competitive Loans in Dollars from time
to time on any Business Day during the period from the date hereof through the
date 14 days prior to the Termination Date; provided, that in no event may
Competitive Loans be borrowed hereunder if, after giving effect thereto the
aggregate principal amount of Loans then outstanding would exceed the aggregate
Commitments then in effect. Within the limits and on the conditions herein set
forth with respect to Competitive Loans, the Borrower from time to time may
borrow, repay and reborrow Competitive Loans.
2.10 Procedure for and Payment of Competitive Loan Borrowing. (a)
The Borrower shall request Competitive Loans by delivering a Competitive Loan
Request to the Administrative Agent, not later than 2:00 P.M. (New York City
time) four Business Days prior to the proposed Borrowing Date (in the case of a
LIBOR Competitive Loan Request), and not later than 1:00.P.M. (New York City
time) one Business Day prior to the proposed Borrowing Date (in the case of a
Fixed Rate Competitive Loan Request). Each Competitive Loan Request may solicit
bids for Competitive Loans in an aggregate principal amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and having not more than three
alternative maturity dates. The maturity date for each Fixed Rate Competitive
Loan shall be not less than 14 days nor more than 180 days after the Borrowing
Date therefor and the maturity date for each LIBOR Competitive Loan shall be not
less than one month nor more than six months after the Borrowing Date therefor,
and in any event shall be not later than the Termination Date. The
Administrative Agent shall notify each Competitive Loan Lender promptly by
facsimile transmission of the contents of each Competitive Loan Request received
by the Administrative Agent.
(b) In the case of a LIBOR Competitive Loan Request, upon receipt
of notice from the Administrative Agent of the contents of such Competitive Loan
Request, each Competitive Loan Lender may elect, in its sole discretion, to
offer irrevocably, subject to Section 4, to make one or more Competitive Loans
at LIBOR plus or minus a margin determined by such Competitive Loan Lender in
its sole discretion for each such Competitive Loan. Any such irrevocable offer
shall be made by delivering a Competitive Loan Offer to the Administrative
Agent, before 10:30 A.M. (New York City time) on the day that is three Business
Days before the proposed Borrowing Date, setting forth:
(i) the maximum amount of Competitive Loans for each maturity
date and the aggregate maximum amount of Competitive Loans for all maturity
dates which such Competitive Loan Lender would be willing to make (which
amounts may, subject to subsection 2.9, exceed such Competitive Loan
Lender's Commitment); and
(ii) the margin above or below LIBOR at which such Competitive
Loan Lender is willing to make each such Competitive Loan.
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The Administrative Agent shall advise the Borrower before 11:00 A.M. (New York
City time) on the date which is three Business Days before the proposed
Borrowing Date of the contents of each such Competitive Loan Offer received by
it. If the Administrative Agent, in its capacity as a Competitive Loan Lender,
shall elect, in its sole discretion, to make any such Competitive Loan Offer, it
shall advise the Borrower of the contents of its Competitive Loan Offer before
10:15 A.M. (New York City time) on the date which is three Business Days before
the proposed Borrowing Date.
(c) In the case of a Fixed Rate Competitive Loan Request upon
receipt of notice from the Administrative Agent of the contents of such
Competitive Loan Request, each Competitive Loan Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 4, to make one or more
Competitive Loans at a rate of interest determined by such Competitive Loan
Lender in its sole discretion for each such Competitive Loan. Any such
irrevocable offer shall be made by delivering a Competitive Loan Offer to the
Administrative Agent before 9:30 A.M. (New York City time) on the proposed
Borrowing Date, setting forth:
(i) the maximum amount of Competitive Loans for each maturity
date, and the aggregate maximum amount for all maturity dates, which such
Competitive Loan Lender would be willing to make (which amounts may,
subject to subsection 2.9, exceed such Competitive Loan Lender's Revolving
Credit Commitment); and
(ii) the rate of interest at which such Competitive Loan Lender
is willing to make each such Competitive Loan.
The Administrative Agent shall advise the Borrower before 10:00 A.M. (New York
City time) on the proposed Borrowing Date of the contents of each such
Competitive Loan Offer received by it. If the Administrative Agent, in its
capacity as a Competitive Loan Lender, shall elect, in its sole discretion, to
make any such Competitive Loan Offer, it shall advise the Borrower of the
contents of its Competitive Loan Offer before 9:15 A.M. (New York City time) on
the proposed Borrowing Date.
(d) Before 12:00 P.M. (New York City time) three Business Days
before the proposed Borrowing Date (in the case of LIBOR Competitive Loans) and
before 10:30 A.M. (New York City time) on the proposed Borrowing Date (in the
case of Fixed Rate Competitive Loans), the Borrower, in its absolute discretion,
shall:
(i) cancel such Competitive Loan Request by giving the
Administrative Agent telephone notice to that effect, or
(ii) by giving telephone notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a
Competitive Loan Confirmation in writing or by facsimile transmission) (1)
subject to the provisions of subsection 2.10(e), accept one or more of the
offers made by any Competitive Loan Lender or Competitive Loan Lenders of
the amount of Competitive Loans for each relevant maturity date and (2)
reject any remaining offers made by Competitive Loan Lenders.
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(e) The Borrower's acceptance of Competitive Loans in response to
any Competitive Loan Request shall be subject to the following limitations:
(i) The amount of Competitive Loans accepted for each maturity
date specified by any Competitive Loan Lender in its Competitive Loan Offer
shall not exceed the maximum amount for such maturity date specified in
such Competitive Loan Offer;
(ii) the aggregate amount of Competitive Loans accepted for all
maturity dates specified by any Competitive Loan Lender in its Competitive
Loan Offer shall not exceed the aggregate maximum amount specified in such
Competitive Loan Offer for all such maturity dates;
(iii) the Borrower may not accept offers for Competitive Loans
for any maturity date in an aggregate principal amount in excess of the
maximum principal amount requested in the related Competitive Loan Request;
and
(iv) if the Borrower accepts any of such offers, (1) it must
accept such offers based solely upon the lowest pricing for such relevant
maturity date (including any amounts which shall be payable to the relevant
Competitive Loan Lender in respect of the relevant Competitive Loans
pursuant to subsection 2.17) and upon no other criteria whatsoever and (2)
if (x) two or more Competitive Loan Lenders submit offers for any maturity
date at identical pricing and the Borrower accepts any of such offers but
does not wish to (or by reason of the limitations set forth in subsection
2.9 or in this subsection 2.10, cannot) borrow the total amount offered by
such Competitive Loan Lenders with such identical pricing, the Borrower
shall accept offers from all of such Competitive Loan Lenders in amounts
allocated among them pro rata according to the amounts offered by such
Competitive Loan Lenders (or as nearly pro rata as shall be practicable
after giving effect to the requirement that Competitive Loans made by a
Competitive Loan Lender on a Borrowing Date for each relevant maturity date
shall be in a principal amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof) or (y) a Competitive Loan Lender submits
offers for multiple maturity dates specifying a maximum aggregate principal
amount for all maturity dates, and the Borrower accepts offers from such
Competitive Loan Lender for more than one maturity date, then the Borrower
shall instruct the Administrative Agent how to apportion the Borrower's
acceptances among such offers for different maturity dates to the extent,
if any, necessary to provide for acceptance of offers from such Competitive
Loan Lender equal to but not exceeding such specified maximum aggregate
amount.
(f) If the Borrower notifies the Administrative Agent that a
Competitive Loan Request is cancelled pursuant to subsection 2.10(d)(i), the
Administrative Agent shall give prompt telephone notice thereof to the
Competitive Loan Lenders.
(g) If the Borrower accepts pursuant to subsection 2.10(d)(ii) one
or more of the offers made by any one or more Competitive Loan Lenders, the
Administrative Agent promptly shall notify each Competitive Loan Lender which
has made such a Competitive Loan Offer of (i) the aggregate amount of such
Competitive Loans to be made on such Borrowing Date for each
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maturity date, (ii) the acceptance or rejection of any offers to make such
Competitive Loans made by such Competitive Loan Lender and (iii) in the case of
LIBOR Competitive Loans, LIBOR in respect thereof. Before 12:30 P.M. (New York
City time) on the Borrowing Date specified in the applicable Competitive Loan
Request, each Competitive Loan Lender whose Competitive Loan Offer has been
accepted shall make available to the Administrative Agent at its office set
forth in subsection 8.2 the amount of Competitive Loans to be made by such
Competitive Loan Lender, in immediately available funds. The Administrative
Agent will make such funds available to the Borrower as soon as practicable on
such date at the Administrative Agent's aforesaid address. As soon as
practicable after each Borrowing Date, the Administrative Agent shall notify
each Competitive Loan Lender of the aggregate amount of Competitive Loans
advanced on such Borrowing Date, the respective maturity dates thereof and the
respective interest rates applicable thereto.
(h) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Competitive Loan Lender the then
unpaid principal amount of each Competitive Loan of such Competitive Loan Lender
on the applicable Competitive Loan Maturity Date. The Borrower hereby further
agrees to pay interest on the unpaid principal amount of the Competitive Loans
from time to time outstanding from the date hereof until payment in full thereof
at the rates per annum, and on the dates, set forth in subsection 2.11. Each
Competitive Loan Lender shall maintain accounts and the Administrative Agent
shall maintain the Register with respect to Competitive Loans as provided in
subsections 2.5(b), (c) and (d).
(i) The Borrower agrees that, upon the request to the
Administrative Agent by any Competitive Loan Lender, the Borrower will execute
and deliver to such Competitive Loan Lender a promissory note of the Borrower
evidencing the Competitive Loans of such Competitive Loan Lender, substantially
in the form of Exhibit A-2 with appropriate insertions as to date and principal
amount (a "Competitive Loan Note").
2.11 Interest Rates and Payment Dates. (a) Each LIBOR Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to LIBOR determined for such day plus the Applicable
Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR plus the Applicable Margin.
(c) Each CD Rate Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to the CD Rate
determined for such day plus the Applicable Margin.
(d) Each Competitive Loan shall bear interest for each day from the
applicable Borrowing Date to (but excluding) the applicable Competitive Loan
Maturity Date at the rate of interest specified in the Competitive Loan Offer
accepted by the Borrower in connection with such Competitive Loan.
(e) If all or a portion of (i) the principal amount of any Loan,
(ii) any interest payable thereon or (iii) any fee or other amount payable
hereunder shall not be paid when due
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(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall, to the extent permitted by applicable law, bear interest at a rate
per annum which is (x) in the case of overdue principal (except as otherwise
provided in clause (y) below), the rate that would otherwise be applicable
thereto pursuant to the foregoing provisions of this subsection 2.11 plus 2% or
(y) in the case of principal of any Competitive Loan which remains overdue past
the applicable Competitive Loan Maturity Date, or any overdue interest, fee or
other amount, the rate described in subsection 2.11(b) plus 2%, in each case
from the date of such non-payment until such overdue principal, interest, fee or
other amount is paid in full (as well after as before judgment).
(f) lnterest shall accrue from and including the first day of an
Interest Period to but excluding the last day of such Interest Period. Interest
shall be payable in arrears on each Interest Payment Date, provided that
interest accruing pursuant to paragraph (e) of this subsection shall be payable
from time to time on demand.
2.12 Computation of Interest and Fees. (a) Facility fees and,
whenever it is calculated on the basis of the ABR, interest shall be calculated
on the basis of a 365- (or 366-, as the case may be) day year for the actual
days elapsed; and, otherwise, interest shall be calculated on the basis of a
360-day year for the actual days elapsed. The Administrative Agent shall as soon
as practicable notify the Borrower and the Lenders of each determination of
LIBOR or of a CD Rate. Any change in the interest rate on a Loan resulting from
a change in the CD Assessment Rate or the CD Reserve Percentage shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower upon request a statement showing the quotations used by the
Administrative Agent in determining any interest rate pursuant to subsection 2.1
I(c).
2.13 Inability to Determine Interest Rate. If prior to the first
day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining LIBOR or the CD Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Lenders that LIBOR or the CD Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost
to such Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Loans during such Interest Period,
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the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any LIBOR Loans, CD Rate Loans or LIBOR Competitive Loans, as the case
may be, requested to be made on the first day of such Interest Period shall be
made as ABR Loans, (y) any Loans that were to have been converted on the first
day of such Interest Period to LIBOR Loans or CD Rate Loans, as the case may be,
shall be converted to or continued as ABR Loans and (z) any outstanding LIBOR
Loans or CD Rate Loans, as the case may be, shall be converted, on the first day
of such Interest Period, to ABR Loans. Until such notice has been withdrawn by
the Administrative Agent, no further LIBOR Loans, CD Rate Loans or LIBOR
Competitive Loans, as the case may be, shall be made or continued as such, nor
shall the Borrower have the right to convert Loans to LIBOR Loans or CD Rate
Loans, as the case may be.
2.14 Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower from the Lenders of a Revolving Credit Loan, each payment by the
Borrower on account of any facility fee hereunder and any reduction of the
Commitments of the Lenders shall be made pro rata according to the respective
Commitment Percentages of the Lenders. Each payment (including each prepayment)
by the Borrower on account of principal of and interest on the Loans shall be
made pro rata according to the respective outstanding principal amounts of the
Loans for which such payment is being made. All payments (including prepayments)
to be made by the Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set off or counterclaim and shall be
made prior to 2:00 P.M., New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders, at the Administrative
Agent's office specified in subsection 8.2, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error. If such Lender's share of such borrowing is not made
available to the Administrative Agent by such Lender within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
ABR Loans hereunder, on demand, from the Borrower.
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2.15 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
LIBOR Loans or LIBOR Competitive Loans as contemplated by this Agreement (a)
such Lender shall promptly give notice thereof to the Borrower and the
Administrative Agent, (b) the commitment of such Lender hereunder to make LIBOR
Loans, continue LIBOR Loans as such and convert ABR Loans or CD Rate Loans to
LIBOR Loans shall forthwith be cancelled, (c) such Lender's outstanding LIBOR
Loans, if any, shall be converted automatically to ABR Loans on the respective
last days of the then current Interest Periods with respect to such Loans or
within such earlier period as required by law and (d) the Borrower shall, with
respect to any LIBOR Competitive Loan of such Lender, take such action as such
Lender may reasonably request. If any such conversion of a LIBOR Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 2.18.
2.16 Additional Costs. (a) If, as a result of any Regulatory
Change:
(i) the basis of taxation of payments to any Lender of the
principal of or interest on any LIBOR Loans, any CD Rate Loans or LIBOR
Competitive Loans or any other amounts payable under this Agreement in
respect thereof (other than Non-Excluded Taxes covered by subsection 2.17
and taxes imposed on the overall net income of any Lender) is changed;
(ii) any reserve, special deposit, or capital adequacy, or similar
requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, any Lender are imposed,
modified, or deemed applicable; or
(iii) any other condition affecting this Agreement or any LIBOR
Loans, any CD Rate Loans or LIBOR Competitive Loans is imposed on any
Lender after the date hereof; and
any Lender determines that, by reason thereof, the cost (or in the case of
clause (i) above, the actually incurred cost) to such Lender of making or
maintaining its Commitment or any of its LIBOR Loans, CD Rate Loans or LIBOR
Competitive Rate Loans to the Borrower is increased or any amount receivable by
such Lender hereunder in respect of any of such Loans is reduced, in each case
by an amount reasonably deemed by such Lender to be material (such increases in
cost and reductions in amounts receivable being herein called "Additional
Costs"), then the Borrower shall pay to such Lender upon its request the
additional amount or amounts as will compensate such Lender for such Additional
Costs within 15 Business Days after such written notice is received; provided,
however, that if all or any such Additional Costs would not have been payable
or incurred but for such Lender's voluntary decision to designate a new
Applicable Lending Office, the Borrower shall have no obligation under this
subsection 2.16 to compensate such Lender for such amount relating to such
Lender's decision; provided, further, that the Borrower shall not be required
to make any payments to such Lender for Additional Costs resulting from capital
adequacy requirements unless (A) such Lender has given at least 60 days' prior
written notice of its intent to request such payments and (B) such payments are
with respect
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to Additional Costs which accrued and were incurred after the expiration of such
60-day notice period. Each Lender will notify the Borrower and the
Administrative Agent of any Regulatory Change occurring after the date of this
Agreement which will entitle such Lender to compensation pursuant to this
subsection 2.16(a) as promptly as practicable after it obtains knowledge thereof
and determines to request such compensation. If such Lender requests
compensation under this subsection 2.16(a) in respect of any Regulatory Change,
the Borrower may, by notice to such Lender, require that such Lender forward to
the Borrower a statement setting forth the basis for requesting such
compensation and the method for determining the amount thereof.
(b) Without limiting the effect of the provisions of subsection
2.16(a) (but without duplication thereof), the Borrower will pay to any Lender,
within 15 Business Days of receipt by the Borrower of notice from such Lender,
for each day such Lender is required to maintain reserves against "Eurocurrency
liabilities" under Regulation D of the Board as in effect on the date of this
Agreement, an additional amount determined by such Lender equal to the product
of the following:
(i) the principal amount of the LIBOR Loan or LIBOR Competitive
Loan, as the case may be;
(ii) the remainder of (x) a fraction the numerator of which is
LlBOR for such LIBOR Loan or LIBOR Competitive Loan, as the case may be,
and the denominator of which is one minus the rate at which such reserve
requirements are imposed on such Lender on such day minus (y) such
numerator; and
(iii) 1/360.
Such Lender shall request payment under this subsection 2.16(b) by giving
notice to the Borrower as of the last day of each Interest Period for each LIBOR
Loan and LIBOR Competitive Loan, as the case may be (and, if such Interest
Period exceeds three months' duration, also as of three months, or a whole
multiple thereof, after the first day of such Interest Period). Such notice
shall specify the basis for requesting such compensation and the method for
determining the amount thereof. Such Lender shall provide any evidence of such
requirement to maintain reserves as the Borrower may reasonably request.
(c) Determinations by any Lender for purposes of this subsection
2.16 of the effect of any Regulatory Change shall be conclusive, provided that
such determinations are made absent manifest error. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
2.17 Taxes. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent, any Lender or
any
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Applicable Lending Office as a result of a present or former connection between
the Administrative Agent, such Lender or Applicable Lending Office and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Administrative Agent or such Lender having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any Note). If any such non-excluded taxes, levies,
imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes")
are required to be withheld from any amounts payable to the Administrative Agent
or any Lender hereunder or under any Note, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
so that the amount received by the Administrative Agent or such Lender (after
payment of all Non-Excluded Taxes) shall be equal to the interest or any such
other amounts it would have received had no such withholding been required,
provided, however, that the Borrower shall not be required to increase any such
amounts payable to any Lender that is not organized under the laws of the United
States of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by the Borrower, as promptly as practicable thereafter the
Borrower shall send to the Administrative Agent for its own account or for the
account of such Lender, as the case may be, evidence reasonably satisfactory to
the Administrative Agent or such Lender, as the case may be, of such payment. If
the Borrower fails to pay any Non-Excluded Taxes payable by the Borrower when
due to the appropriate taxing authority or fails to remit to the Administrative
Agent the receipts therefor or other required documentary evidence, the Borrower
shall indemnify the Administrative Agent and the Lenders for any incremental
taxes, interest or penalties that may become payable by the Administrative Agent
or any Lender as a result of any such failure. The agreements in this subsection
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue Service Form 1001
or 4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form, as
the case may be;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the Borrower
or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from
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duly completing and delivering any such form with respect to it and such Lender
so advises the Borrower and the Administrative Agent. Such Lender shall certify
(i) in the case of a Form 1001 or 4224, that it is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from United States backup withholding tax. Each Person
that shall become a Lender or a Participant pursuant to subsection 8.6 shall, no
later than the effectiveness of the related transfer, be required to provide all
of the forms and statements required pursuant to this subsection, provided that
in the case of a Participant such Participant shall furnish all such required
forms and statements to the Lender from which the related participation shall
have been purchased.
(c) Any Lender claiming any amount pursuant to this subsection 2.17
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to file any certificate or document reasonably requested by the Borrower if such
a filing would avoid the need for or reduce the amount payable by the Borrower
under this subsection 2.17 and would not, in the good faith determination of
such Lender, be otherwise disadvantageous to such Lender.
(d) Refunds. If a Lender or the Administrative Agent (as the case
may be) shall become aware that it is entitled to claim a refund (or a refund in
the form of a credit) (each, a "Refund") from a Governmental Authority (as a
result of any error in the amount of Non-Excluded Taxes paid to such
Governmental Authority) of Non-Excluded Taxes which the Borrower has paid, or
with respect to which the Borrower has paid additional amounts, pursuant to this
subsection 2.17, it shall promptly notify the Borrower of the availability of
such Refund and shall, within 30 days after receipt of written notice by the
Borrower, make a claim to such Governmental Authority for such Refund at the
Borrower's expense if, in the judgment of such Lender or the Administrative
Agent (as the case may be), the making of such claim will not be otherwise
disadvantageous to it; provided that nothing in this subsection 2.17(d) shall be
construed to require any Lender or the Administrative Agent to institute any
administrative proceeding (other than the filing of a claim for any such Refund)
or judicial proceeding to obtain such Refund. If a Lender or the Administrative
Agent (as the case may be) receives a Refund from a Governmental Authority (as a
result of any error in the amount of Non-Excluded Taxes paid to such
Governmental Authority) of any Non-Excluded Taxes which have been paid by the
Borrower, or with respect to which the Borrower has paid additional amounts
pursuant to this subsection 2.17, it shall promptly pay to the Borrower the
amount so received (but only to the extent of payments made, or additional
amounts paid, by the Borrower under this subsection 2.17 with respect to
Non-Excluded Taxes giving rise to such Refund), net of all reasonable
out-of-pocket expenses (including the net amount of taxes, if any, imposed on
such Lender or the Administrative Agent with respect to such Refund) of such
Lender or the Administrative Agent, and without interest (other than interest
paid by the relevant Governmental Authority with respect to such Refund);
provided, however, that the Borrower, upon the request of such Lender or the
Administrative Agent, agrees to repay the amount paid over to the Borrower (plus
penalties, interest or other charges) to such Lender or the Administrative Agent
in the event such Lender or the Administrative Agent is required to repay such
Refund to such Governmental Authority. Nothing contained in this subsection 2.1
7(d) shall require any Lender or the Administrative Agent to make available any
of its tax returns (or any other information that it deems to be confidential or
proprietary).
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(e) For purposes of this subsection 2.17, the term "Lender"
includes (i) an "Assignee" within the meaning of, and after compliance with the
requirements of, subsection 8.6(c), and (ii) a "Participant" within the meaning
of subsection 8.6(b); provided that such Participant shall have complied with
the requirements of subsection 2.17(c) to the extent applicable and provided,
further, that such Participant shall not be entitled to receive any greater
amount pursuant to this subsection 2.17 than the transferor Lender would have
been entitled to receive had no such transfer occurred.
2.18 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of LIBOR Loans, CD Rate Loans or Competitive Loans, or in the conversion into or
continuation of LIBOR Loans or CD Rate Loans, after the Borrower has given a
notice requesting or accepting the same in accordance with the provisions of
this Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement, or (c) the making of a prepayment of LIBOR Loans, CD Rate Loans or
Competitive Loans on a day which is not the last day of an Interest Period or
the applicable Competitive Loan Maturity Date, as the case may be, with respect
thereto. Such indemnification may include an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the relevant Interest Period (or proposed Interest Period) or, in the case of
Competitive Loans, the applicable Competitive Loan Maturity Date (or proposed
Competitive Loan Maturity Date), in each case at the applicable rate of interest
for such Loans provided for herein (excluding, however, the Applicable Margin or
any positive margin applicable to LIBOR Competitive Loans included therein, if
any) over (ii) the amount of interest (as reasonably determined by such Lender)
which would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
2.19 Change of Lending Office. Each Lender agrees that if it makes
any demand for payment under subsection 2.16 or 2.17(a), or if any adoption or
change of the type described in subsection 2.15 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different Applicable Lending Office if the making of such a designation would
reduce or obviate the need for the Borrower to make payments under subsection
2.16 or 2.17(a), or would eliminate or reduce the effect of any adoption or
change described in subsection 2.15.
2.20 Replacement of Lenders under Certain Circumstances. The
Borrower shall be permitted to replace any Lender which (a) requests
reimbursement for amounts owing pursuant to subsection 2.16 or 2.17 (other than
with respect to LIBOR Competitive Loans), (b) is affected in the manner
described in subsection 2.15 (other than with respect to LIBOR Competitive
Loans) and as a result thereof any of the actions described in said subsection
is required to be taken or (c) defaults in its obligation to make Revolving
Credit Loans hereunder, with a
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replacement bank or other financial institution; provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) the Borrower shall repay (or the replacement bank or institution shall
purchase, at par) all Loans and other amounts owing to such replaced Lender
prior to the date of replacement, (iv) the Borrower shall be liable to such
replaced Lender under subsection 2.18 if any LIBOR Loan owing to such replaced
Lender shall be prepaid (or purchased) other than on the last day of the
Interest Period relating thereto or any Competitive Loan owing to such replaced
Lender shall be paid other than on the relevant Competitive Loan Maturity Date,
(v) the replacement bank or institution, if not already a Lender, shall be
reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
subsection 8.6 (provided that the Borrower shall be obligated to pay the
registration and processing fee referred to therein), (vii) until such time as
such replacement shall be consummated, the Borrower shall pay all additional
amounts (if any) required pursuant to subsection 2.16 or 2.17, as the case may
be, and (viii) any such replacement shall not be deemed to be a waiver of any
rights which the Borrower, the Administrative Agent or any other Lender shall
have against the replaced Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into
this Agreement and to make the Loans, the Borrower hereby represents and
warrants to the Administrative Agent and each Lender that:
3.1 Financial Condition. The balance sheets of the Borrower as at
December 31, 1994 and the related statements of income, earnings reinvested in
business, and cash flows for the fiscal year then ended on such date, reported
on by Deloitte & Touche LLP, copies of which have heretofore been furnished to
each Lender, present fairly the financial condition of the Borrower as at such
date, and the results of its operations and its cash flows for the fiscal year
then ended. The unaudited balance sheet of the Borrower as at March 31, 1995 and
the related unaudited statements of income, earnings reinvested in business, and
cash flows for the three-month period ended on such date, certified by a
Responsible Officer, copies of which have heretofore been furnished to each
Lender, are complete and correct and present fairly the financial condition of
the Borrower as at such date, and the results of its operations and its cash
flows for the three-month period then ended (subject to normal year-end audit
adjustments) All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). During the
period from December 31, 1994 to and including the date hereof there has been no
sale, transfer or other disposition by the Borrower of any material part of its
business or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the financial condition of the Borrower at December 31, 1994.
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3.2 No Change. From December 31, 1994 through the date hereof there
has been no development or event which has had or could reasonably be expected
to have a material adverse effect on the financial position or business
operations of the Borrower.
3.3 Corporate Existence; Compliance with Law. Each of the Borrower
and its Material Subsidiaries, if any, (a) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has the corporate power and authority, and the legal right, to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification other than in such jurisdictions where the failure
so to qualify would not, individually or in the aggregate, have a material
adverse effect on the financial position or business operations of the Borrower
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, have a material
adverse effect on the financial position or business operations of the Borrower.
3.4 Corporate Power; No Legal Bar. The execution, delivery, and
performance by the Borrower of this Agreement and any Note are within its
corporate powers, have been duly authorized by all necessary corporate action,
and do not violate any provision of law or any agreement, indenture, note, or
other instrument binding upon or affecting it or its charter or by-laws or give
cause for acceleration of any of its Indebtedness.
3.5 Authorization; Enforceability. All authorizations, approvals,
and other actions by, and notices to and filings with all Governmental
Authorities required for the due execution, delivery and performance of this
Agreement and any Note have been obtained or made and are in full force and
effect. Each of this Agreement and each Note executed in connection herewith is
a legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
3.6 ERISA. No "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code) or "accumulated funding deficiency" (as
defined in Section 022 of ERISA) or "reportable event" (herein defined as any of
the events set forth in Section 4043(b) of ERlSA or the regulations thereunder)
has occurred since July 1, 1974 with respect to any Plan which would materially
and adversely affect the financial condition of the Borrower. The present value
of all benefits vested under all Plans maintained by the Borrower or any
Commonly Controlled Entity (based on those assumptions used to fund the Plans)
did not, as of the last annual valuation date, exceed the value of the assets of
the Plan allocable to such vested benefits.
3.7 No Material Litigation. As of the date hereof, except as
heretofore disclosed pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, there are no legal or arbitral proceedings or any proceedings
by or before any governmental or regulatory authority or agency, now pending or,
to the knowledge of the Borrower, threatened against the Borrower
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or any of its Material Subsidiaries, which the Borrower would be required to
disclose pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended.
3.8 Taxes. The Borrower (or Dominion Resources for years in which
the Borrower filed a consolidated return with Dominion Resources) and its
Material Subsidiaries have filed all United States Federal income tax returns
and all other tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received by
the Borrower or any such Material Subsidiary. The charges, accruals and reserves
on the books of the Borrower and such Material Subsidiaries in respect of taxes
and other governmental charges are, in the opinion of the Borrower, adequate.
3.9 Purpose of Loans. The proceeds of the Loans shall be used by
the Borrower for general corporate purposes, including commercial paper back-up,
and no part of the proceeds of any Loans will be used in violation of
Regulations G, U or X of the Board as now and from time to time hereafter in
effect.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The effectiveness of this
Agreement is subject to the satisfaction of the following conditions precedent
on or prior to September 1, 1995:
(a) Execution of Agreement. (i) This Agreement shall have been
executed and delivered by a duly authorized officer of each of the
Borrower and the Administrative Agent and (ii) the Administrative Agent
shall have received an executed counterpart hereof (or a copy thereof by
facsimile transmission) from each Lender listed on Schedule I.
(b) Closing Certificate. The Administrative Agent shall have
received a certificate of the Borrower, dated the Closing Date,
substantially in the form of Exhibit C, executed by any Assistant
Treasurer and the Secretary or any Assistant Secretary of the Borrower,
and attaching the documents referred to in subsections 4.1(c), (d) and
(e).
(c) Corporate Proceedings. The Administrative Agent shall have
received a copy of the resolutions, in form and substance satisfactory to
the Administrative Agent, of the Board of Directors of the Borrower (or a
duly authorized committee thereof) authorizing (i) the execution, delivery
and performance of this Agreement and (ii) the borrowings contemplated
hereunder.
(d) Corporate Documents. The Administrative Agent shall have
received a copy of the articles of incorporation and by-laws of the
Borrower.
(e) Regulatory Approvals. The Administrative Agent shall have
received copies of any required orders of the Virginia State Corporation
Commission or any other state utilities commission approving the
Borrower's execution, delivery and performance of this Agreement and the
borrowings hereunder.
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(f) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions, with a copy for each Lender:
(i) the executed legal opinion of Hunton & Williams, counsel to
the Borrower, substantially in the form of Exhibit D-l; and
(ii) the executed legal opinion of Simpson Thacher & Bartlett,
special counsel to the Administrative Agent, substantially in the
form of Exhibit D-2.
(g) Representations and Warranties; No Default. Each of the
representations and warranties made by the Borrower in or pursuant to the
Loan Documents shall be true and correct in all material respects on and
as of such date as if made on and as of such date and no Default or Event
of Default shall have occurred and be continuing on such date.
4.2 Conditions to Each Loan. The agreement of each Lender to make
any Loan requested to be made by it on any date (including, without limitation,
its initial Loan) is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower in or pursuant to the Loan Documents shall
be true and correct in all material respects on and as of such date as if
made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans
requested to be made on such date.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date thereof that the conditions contained in
this subsection 4.2 have been satisfied.
SECTION 5. COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain
in effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document:
5.1 Financial Statements. The Borrower shall furnish to the
Administrative Agent, who shall forward to each Lender:
(a) as soon as practicable, but in any event within 120 days after
the end of each fiscal year of the Borrower, a copy of the consolidated
balance sheet of the Borrower and its consolidated Subsidiaries, if any,
as at the end of such year and the related consolidated statements of
income, earnings reinvested in business, and cash flows for such year,
setting forth in each case in comparative form the figures for the
previous year,
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reported on, by Deloitte & Touche LLP or other independent certified public
accountants of nationally recognized standing; and
(b) as soon as practicable, but in any event not later than 60 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries, if any, as at the end of such
quarter and the related unaudited consolidated statements of income,
earnings reinvested in business, and cash flows for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous year
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments);
(c) within fourteen days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its
stockholders generally, and within fourteen days after the same are filed,
copies of all financial statements and reports which the Borrower may make
to, or file with, the Securities and Exchange Commission or any successor
or analogous Governmental Authority; and
(d) promptly, such additional financial and other information as the
Administrative Agent, or any Lender through the Administrative Agent, may
from time to time reasonably request.
All such financial statements in (a) and (b) shall be (i) complete
and correct in all material respects, (ii) prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein) and (iii) accompanied by a
compliance certificate signed by a Responsible Officer of the Borrower setting
forth the Consolidated Net Worth of the Borrower as of the date of such
financial statements.
Unless accompanied by a statement of a Responsible Officer setting
forth the details of each Default which has occurred and is continuing and the
steps which the Borrower proposes to take to remedy such Default, each delivery
of financial statements pursuant to clauses (a) and (b) of this subsection 5.1
shall be deemed to constitute a certification by the Borrower that no Default
has occurred and is continuing.
5.2 Conduct of Business and Compliance. The Borrower will continue
to engage in business of the same general type as now conducted by it, and the
Borrower will, and will cause each of its Subsidiaries, if any, to comply with
all Requirements of Law except to the extent that failure to comply therewith
would not materially and adversely affect the ability of the Borrower to perform
its obligations hereunder.
5.3 Books and Records. The Borrower will, and will cause each of
its Material Subsidiaries, if any, to, keep proper books of records and account
in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities.
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5.4 Notices. The Borrower shall promptly give notice to the
Administrative Agent, and the Administrative Agent shall in turn give notice to
each Lender, of:
(a) the occurrence of any Default or Event of Default, which such
notice shall state that such notice is a "notice of default";
(b) the existence or imposition of any judgements against the
Borrower or any of its Material Subsidiaries in an amount in excess of
$25,000,000;
(c) the failure of the Borrower or any of its Material Subsidiaries
to pay any principal or interest in an aggregate amount of $25,000,000 or
more on any Indebtedness; and
(d) promptly following the Borrower's receipt, any change in the
Moody's Bond Rating or the S&P Bond Rating.
Each notice pursuant to clause (a) shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action the Borrower proposes to take with
respect thereto.
5.5 Limitation on Liens. The Borrower shall not, nor shall it
permit any of its Material Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for (i) Liens permitted by the First Mortgage Bond
Indenture and (ii) Liens created in the ordinary course of business.
5.6 Limitation on Fundamental Changes. The Borrower will not enter
into any merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, a material part of its
property, business or assets, except the Borrower may be merged or consolidated
with another Person that is a corporation duly organized and existing under the
laws of any state in the United States provided that (i) the survivor shall
continue to use and operate the Borrower's public utility business, (ii) the
survivor shall assume the Borrower's obligations hereunder in accordance with
documentation acceptable to the Administrative Agent and the Majority Lenders
and (iii) after giving effect to such merger or consolidation no Default or
Event of Default shall have occurred or be continuing.
5.7 Limitation on Guarantee Obligations. The Borrower shall not
create, incur, assume or suffer to exist any Guarantee Obligation except for (a)
Guarantee Obligations in existence on the date hereof and listed on Schedule
III; (b) Guarantee Obligations made in the ordinary course of its business by
the Borrower of obligations of any of its Subsidiaries; and (c) Guarantee
Obligations guaranteeing securities issued by a corporation, partnership or
trust formed at the direction of the Borrower, provided that (i) the proceeds
from the issuance of such securities (other than to cover offering expenses)
were used solely by such corporation, partnership or trust to purchase from the
Borrower securities issued by the Borrower and (ii) the
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Guarantee Obligations exist only so long as and only to the extent that such
corporation, partnership or trust holds such securities issued by the Borrower.
5.8 Maintenance of Net Worth. The Borrower will not permit
Consolidated Net Worth to be less than $3.75 billion.
SECTION 6. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms hereof, or to pay any interest on any Loan, or
any other amount payable hereunder, within 5 Business Days after any such
amount becomes due in accordance with the terms hereof;
(b) Any representation or warranty made to the Administrative Agent
or any Lender in connection with the execution and delivery of this
Agreement or the making of Loans hereunder proves to have been incorrect in
any material respect when made, and the future financial position or
business operations of the Borrower could reasonably be expected to be
materially and adversely affected from what would be the case had such
representation and warranty not been incorrect;
(c) The Borrower shall default in the performance of any other term,
covenant, or provision contained in this Agreement (other than as provided
in paragraphs (a) and (b) of this Section) and such default shall continue
unremedied for 30 days;
(d) The Borrower or any of its Material Subsidiaries shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of all or a
substantial part of its property, (ii) admit in writing its inability, or
be generally unable, to pay its debts as such debts become due, (iii) make
a general assignment for the benefit of its creditors, (iv) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (v) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (vi) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against the Borrower or any of its Material Subsidiaries in an involuntary
case under such federal laws, or (vii) take any corporate action for the
purpose of affecting any of the foregoing;
(e) A case or other proceeding shall be commenced (including
commencement of such case or proceeding by way of service of process on the
Borrower or any of its Material Subsidiaries), in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of debts of the Borrower or
any of its Material Subsidiaries, (ii) the appointment of a trustee,
receiver, custodian, liquidator, or the like of the Borrower or any of its
Material Subsidiaries or of all or any substantial part of their respective
assets, (iii) similar relief
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in respect of the Borrower or any of its Material Subsidiaries under any
law relating to bankruptcy, insolvency, reorganization, winding up, or
composition or readjustment of debts, or a warrant of attachment,
execution, or similar process shall be issued against a substantial part of
the property of the Borrower or any of its Material Subsidiaries and such
case, proceeding, warrant, or process shall continue undismissed or
unstayed and in effect for a period of 45 days, or an order, judgment, or
decree approving or ordering any of the foregoing shall be entered in an
involuntary case under such federal bankruptcy laws;
(f) A trustee shall be appointed to administer any Plan under Section
4042 of ERISA, or the PBGC shall institute proceedings to terminate, or to
have a trustee appointed to administer any Plan and such proceedings shall
continue undismissed or unstayed and in effect for a period of 30 days, and
any such event shall result in any liability which is material in relation
to the consolidated financial condition of the Borrower and its
consolidated Subsidiaries, if any;
(g) The Borrower or any of its Material Subsidiaries shall (i)
default in any payment of principal or interest in an aggregate amount of
$25,000,000 or more (or in the payment of any guarantee thereof) beyond
the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or guarantee thereof was created or (ii)
default beyond any applicable grace period in the observance or
performance of any other agreement or condition relating to any
Indebtedness in an aggregate amount of $25,000,000 or more or any guarantee
thereof or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity; provided, however, if such default shall be cured by the
Borrower or any Material Subsidiary or waived by the holders of such
Indebtedness and any acceleration of maturity having resulted from such
default shall be rescinded or annulled, in each case in accordance with
the terms of such agreement or instrument, without (i) any modification of
the terms of such Indebtedness requiring the Borrower or any such
Material Subsidiary to furnish additional or other security therefor,
reducing the average life to maturity thereof or increasing the principal
amount thereof or (ii) any agreement by the Borrower or any such Material
Subsidiary to furnish additional or other security therefor or to issue
in lieu thereof Indebtedness secured by additional or other collateral or
with a shorter average life to maturity or in a greater principal amount,
then any default hereunder by reason thereof shall be deemed likewise to
have been thereupon cured or waived; or
(h) There shall have been entered by a court of competent
jurisdiction within the United States and shall not have been vacated,
discharged or stayed within sixty (60) days from the entry thereof (or such
longer period as may be provided by law) one or more final judgments or
final decrees for payment of money against the Borrower or any of its
Material Subsidiaries involving in the aggregate a liability (to the extent
not paid or covered by insurance) in excess of $25,000,000;
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then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (d) or (e) of this Section with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement shall immediately become due and payable, and (B) if such event is any
other Event of Default, either or both of the following actions may be taken:
(i) with the consent of the Majority Lenders, the Administrative Agent may, or
upon the request of the Majority Lenders, the Administrative Agent shall, by
notice to the Borrower declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and (ii) with the consent
of the Majority Lenders, the Administrative Agent may, or upon the request of
the Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement to be due and payable forthwith, whereupon
the same shall immediately become due and payable. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of any
kind are hereby expressly waived.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents;
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
7.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
7.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity,
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effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower.
7.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Majority Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.
7.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Majority Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
7.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own
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appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the Borrower which
may come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
7.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought (or, if indemnification is sought after
the date upon which the Commitments shall have terminated and the Loans shall
have been paid in full, ratably in accordance with their Commitment Percentages
immediately prior to such date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Administrative Agent's gross negligence or willful misconduct. The agreements in
this subsection shall survive the payment of the Loans and all other amounts
payable hereunder.
7.8 Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it, the Administrative
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
7.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative gent under this Agreement
and the other Loan Documents, then the
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Majority Lenders shall appoint from among the Lenders a successor agent for the
Lenders, which successor agent shall be approved by the Borrower, whereupon such
successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 7 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents,
SECTION 8. MISCELLANEOUS
8.1 Amendments and Waivers. The Majority Lenders may, or, with the
written consent of the Majority Lenders, the Administrative Agent may, from time
to time, enter into with the Borrower written amendments, supplements,
modifications or waivers hereto and to the other Loan Documents provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) reduce the amount or extend the scheduled date of maturity of any
Loan, or reduce the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof or increase the amount or
extend the expiration date of any Lender's Commitment, in each case without the
consent of each Lender affected thereby, or (ii) amend, modify or waive any
provision of this subsection, the provision of Section 8.6(a) requiring the
written consent of each Lender for the assignment or transfer by the Borrower of
its rights and obligations under this Agreement, or reduce the percentage
specified in the definition of Majority Lenders, in each case without the
written consent of all the Lenders, or (iii) amend, modify or waive any
provision of Section 7 without the written consent of the then Administrative
Agent.
8.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless: otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, 5 days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Borrower and the Administrative Agent, and as set
forth in Schedule I in the case of the other parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto:
The Borrower: Treasurer
Virginia Electric and Power Company
701 E. Cary Street
P.O. Box 26666
Richmond, VA 23261
Fax: (804) 771-4066
37
<PAGE>
The Administrative Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Delia Marin
Fax: (212) 270-4711
Chemical Bank Agency Services
140 East 45th Street
New York, New York 10017
Attention: Lynette Lang
Fax: (212) 622-0136
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7, 2.10 or 2.14 shall not
be effective until received.
8.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
8.4 Survival. All representations and warranties made hereunder, in
the other Loan Documents and in any document, certificate or statement delivered
pursuant hereto or in connection herewith or therewith shall survive the
execution and delivery of this Agreement and the making of the Loans hereunder.
8.5 Payment of Expenses. The Borrower agrees (a) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents including, without limitation, the reasonable fees
and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement or the other Loan Documents including, without
limitation, the fees and disbursements of counsel (and the allocated fees and
expenses of in-house counsel) to each Lender and of counsel to the
Administrative Agent and (c) to pay, indemnify, and hold each Lender and the
Administrative Agent harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement and the other Loan Documents (all the foregoing in this clause (c),
collectively, the "indemnified liabilities"), provided, that the Borrower shall
have no obligation hereunder to the Administrative Agent or any Lender with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of the Administrative Agent or any such Lender or the failure of the
Administrative Agent or any such Lender to comply with this
38
<PAGE>
Agreement. The agreements in this subsection shall survive repayment of the
Loans and all other amounts payable hereunder.
8.6 Transfer Provisions. (a) Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the Borrower, the Lenders, the
Administrative Agent and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Participations. Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents.
(c) Assignments. Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
and from time to time assign to any Lender or any affiliate thereof or, with the
consent of the Borrower and the Administrative Agent (which in each case shall
not be unreasonably withheld), to an additional bank or financial institution
("an Assignee") all or any part of its rights and obligations under this
Agreement and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit E, executed by such Assignee, such
assigning Lender (and, in the case of an Assignee that is not then a Lender or
an affiliate thereof, by the Borrower and the Administrative Agent) and
delivered to the Administrative Agent for its acceptance and recording in the
Register, provided that, (i) in the case of any such assignment to an additional
bank or financial institution, the sum of the aggregate principal amount of the
Commitment being assigned shall not be less than $10,000,000 (or such lesser
amount as may be agreed to by the Borrower and the Administrative Agent) and
(ii) any such assignment may, but need not, include rights of the assigning
Lender in respect of Competitive Loans. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder with a Commitment as set forth
therein, and (y) the assigning Lender thereunder shall, to the extent provided
in such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and obligations under this
Agreement, such assigning Lender shall cease to be a party hereto).
(d) The Register. The Administrative Agent, on behalf of the
Borrower, shall maintain at the address of the Administrative Agent referred to
in subsection 8.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of
39
<PAGE>
the names and addresses of the Lenders and the Commitment of, and principal
amounts of the Loans owing to, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders may (and, in the case of any
Loan or other obligation hereunder not evidenced by a Note, shall) treat each
Person whose name is recorded in the Register as the owner of a Loan or other
obligation hereunder as the owner thereof for all purposes of this Agreement and
the other Loan Documents, notwithstanding any notice to the contrary. Any
assignment of any Loan or other obligation hereunder not evidenced by a Note
shall be effective only upon appropriate entries with respect thereto being made
in the Register. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Recordation. Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the case of an Assignee
that is not then a Lender or an affiliate thereof, by the Borrower and the
Administrative Agent) together with payment by the Assignee or the Assignor (or,
in the event of a replacement of a Lender pursuant to subsection 2.20, the
replacement Lender) to the Administrative Agent of a registration and processing
fee of $1,500, the Administrative Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) on the effective date determined pursuant
thereto record the information contained therein in the Register and give notice
of such acceptance and recordation to the Lenders and the Borrower.
(f) Disclosure. The Borrower authorizes each Lender to disclose to
any Participant or Assignee (each, a "Transferee") and any prospective
Transferee, any and all financial information in such Lender's possession
concerning the Borrower and its Subsidiaries, which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Borrower in connection with
such Lender's credit evaluation of the Borrower and its Subsidiaries prior to
becoming a party to this Agreement.
(g) Pledges. For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
8.7 Adjustments. If any Lender (a "benefitted Lender") shall at any
time receive any payment of all or part of its Loans, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred to in
Section 6(d) or (e), or otherwise), in a greater proportion than any such
payment to or collateral received by any other Lender, if any, in respect of
such other Lender's Loans that are then due and payable, or interest thereon,
such benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loans, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided,
40
<PAGE>
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
8.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
8.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.10 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT.
8.13 Confidentiality. Each Lender agrees to keep confidential any
written or oral information (a) provided to it by or on behalf of the Borrower
pursuant to or in connection with this Agreement or (b) obtained by such Lender
based on a review of the books and records of the Borrower; provided that
nothing herein shall prevent any Lender from disclosing any such information (i)
to its affiliates, the Administrative Agent or any other Lender, (ii) to any
Transferee which agrees to comply with the provisions of this subsection, (iii)
to its employees, directors, agents, attorneys, accountants and other
professional advisors, (iv) upon the request or demand of any Governmental
Authority having jurisdiction over such Lender, (v) in response to
41
<PAGE>
any order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (vi) which has been publicly
disclosed other than in breach of this Agreement, or (vii) in connection with
the exercise of any remedy hereunder. In the event that a Lender determines to
disclose information pursuant to clause (v) of this subsection 8.13, such Lender
will, to the extent permitted by applicable law, notify the Borrower prior to
disclosing such information.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
VIRGINIA ELECTRIC AND POWER COMPANY
By: /s/ J. Kennerly Davis. Jr.
Name: J. Kennerly Davis, Jr.
Title: Vice President Treasurer and Corporate
Secretary
CHEMICAL BANK,
as Administrative Agent and as a Lender
By: /s/ Jane Ritchie
Name: Jane Ritchie
Title: Vice President
FIRST UNION NATIONAL BANK OF VIRGINIA,
as a Lender
By: /s/ Douglas T. Davis
Name: Douglas T. Davis
Title: Vice President
THE FUJI BANK, LIMITED,
as a Lender
By: /s/ Gina M. Kearns
Name: Gina M. Kearns
Title: Vice President & Manager
J.P. MORGAN DELAWARE,
as a Lender
By: /s/ Philip S. Detjens
Name: Philip S. Detjens
Title: Vice President
43
<PAGE>
NATIONS BANK, N.A. (CAROLINAS),
as a Lender
By: /s/ Brenda R. Tate
Name: Brenda R. Tate
Title: Vice President
ABN AMRO BANK N.V. (NEW YORK
BRANCH), as a Lender
By: /s/ John W. Deegan
Name: John W. Deegan
Title: Vice President
By: /s/ George M. Dugan
Name: George M. Dugan
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender
By: /s/ Paul C. Friedland
Name: Paul C. Friedland
Title: Senior Managing Director
THE MISTUBISHI BANK, LIMITED,
as a Lender
By: /s/ J. Bruce Meredith
Name: J. Bruce Meredith
Title: Senior Vice President and Manager
44
<PAGE>
THE SUMITOMO BANK, LIMITED,
as a Lender
By: /s/ S. Higashi
Name: S. Higashi
Title: Joint General Manager
TORONTO DOMINION (NEW YORK), INC.,
as a Lender
By: /s/ Debbie A. Greene
Name: Debbie A. Greene
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA,
as a Lender
By: /s/ F. Richard Redden III
Name: F. Richard Redden, III
Title: Corporate Banking Officer
THE BANK OF NEW YORK,
as a Lender
By: /s/ Ian K. Stewart
Name: Ian K. Stewart
Title: Senior Vice President
CRESTAR BANK,
as a Lender
By: /s/ Christopher B. Werner
Name: Christopher B. Werner
Title: Vice President
<PAGE>
SCHEDULE I
ADDRESSES AND COMMITMENTS
Name and Address of Lender Amount of Commitment
CHEMICAL BANK $36,000,000.00
270 Park Avenue
New York, New York 10017
Attention: Jane Ritchie
Facsimile: (212) 270-7138
FIRST UNION NATIONAL BANK OF VIRGINIA $30,000,000.00
901 East Cary Street, 2nd Floor
Richmond, VA 23219
Attention: Martin Rust
Facsimile: (804)-788-9673
THE FUJI BANK, LIMITED $28,000,000.00
Two World Trade Center, 79th Floor
New York, NY 10048
Attention: Gina Kearns
Facsimile: (212)-912-0516
J.P. MORGAN SERVICES, INC. $28,000,000.00
500 Stanton-Christiana Road
Newark, DE 19713
Attention: Loan Department
Facsimile: (303)-634-1093
NATIONSBANK, N.A. (CAROLINAS) $28,000,000.00
100 North Tryon, 8th Floor
Charlotte, NC 28255
Attention: Brenda Tate
Facsimile: (704)-386-1270
ABN AMRO BANK N.V. $20,000,000.00
500 Park Avenue
New York, NY 10022
Attention: Pam Delvecchio
Facsimile: (212)-832-7129
THE FIRST NATIONAL BANK OF CHICAGO $20,000,000.00
One First National Plaza
Chicago, IL 60670
Attention: Richard H. Waldman
Facsimile: (312)-732-3055
<PAGE>
THE MISTUBISHI BANK, LIMITED $20,000,000.00
191 Peachtree Street, Suite 1170
Atlanta, GA 30303
Attention: Randy Glass
Facsimile: (404)-730-9014
THE SUMITOMO BANK, LIMITED $20,000,000.00
277 Park Avenue
New York, NY 10172
Attention: Harry Oashi
Facsmile: (212)-224-5188
TORONTO DOMINION (NEW YORK), INC. $20,000,000.00
909 Fannin Street
Houston, TX 77010
Attention: Neva Nesbitt
Facsimile: (713)-951-9921
WACHOVIA BANK OF NORTH CAROLINA $20,000,000.00
301 North Main Street
Winston Salem, NC 27150
Attention: F. Richard Redden III
Facsimile: (910)-761-6458
THE BANK OF NEW YORK $15,000,000.00
One Wall Street, 19th Floor
New York, NY 10286
Attention: Dennis Pidherny
Facsimile: (212)-635-7923
CRESTAR BANK $ 15,000,000.00
9l9 East Main Street
Richmond, VA 23219
Attention: Christopher Werner
Facsimile: (804)-782-5413
SCHEDULE II
FACILITY FEE/APPLICABLE MARGIN
<TABLE>
<CAPTION>
Level I Level 2 Level 3 Level 4 Level 5
<S> <C> <C> <C> <C> <C>
Senior Secured A/A2 or BBB or BBB-/Baa2
Ratings S&P/Moody's higher A-/A3 BBB+/Baal or Baa3 BBB-/Baa3 or Lower
Facility Fee Rate*
Applicable Margins*
LIBOR
CD Rate
ABR
</TABLE>
* In the event such ratings fall within different Levels, the foregoing will
be based on the Level with the highest rating (i.e., the lower Level
number), except that in the event that the lower of such ratings is more
than one Level below the higher of such ratings, the Facility Fee
Rate and the Applicable Margin will be determined based on the Level one
Level above the lower of such ratings. In the event that there is no
Moody's Bond Rating or S&P Bond Rating available (other than due to both
Moody's Investor Services, Inc. and Standard & Poor's Ratings Group
ceasing to be engaged in the business of rating corporate debt
securities), then the Facility Fee Rate and the Applicable Margin will be
determined based on Level 5. In the event that both Moody's Investor
Services, Inc. and Standard & Poor's Ratings Group cease to be engaged
in the business of rating corporate debt securities, the parties
hereto agree to negotiate in good faith to establish on an equitable basis
new Facility Fee Rates and Applicable Margins.
SCHEDULE III
PERMITTED GUARANTEE OBLIGATIONS
1. Guarantee Agreement between Virginia Electric and Power Company and Chemical
Bank dated August 31, 1995
EXHIBIT 11
Dominion Resources, Inc.
Computation of Earnings Per Share of Common Stock
Assuming Full Dilution
<TABLE>
Years
(Million, Except Per Share Amounts)
1995 1994 1993
<S> <C> <C> <C>
Consolidated net income (1) $425.0 $478.2 $516.6
====== ====== ======
Adjustments to average common shares:
Shares of common stock -average shares
outstanding 173.8 170.3 165.7
Plus: Additional shares assuming conversion
of installments received on Stock Purchase
Plan for Customers of Virginia Power at
average market value (2) .5 .6 .6
------ ------ ------
Adjusted average common shares 174.3 170.9 166.3
====== ====== ======
Earnings per share $2.44 $ 2.80 $ 3.11
===== ======= =======
Notes: (1) See the Consolidated Statements of Income.
(2) Based on the following date:
1995 1994 1993
Installments received on Stock Purchase
Plan for Customers of Virginia Power at
year-end $17.81 $ 22.4 $ 26.8
Average market per common share $38.25 $ 40.13 $ 43.88
</TABLE>
DOMINION RESOURCES, INC.
FINANCIAL SECTION
OF THE
1995
ANNUAL REPORT
TO
SHAREHOLDERS
(Incorporated by Reference)
<PAGE>
19
Selected Consolidated Financial Data
<TABLE>
<CAPTION>
(millions, except per share amounts and percentages) 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Revenues and other income $ 4,651.7 $ 4,491.1 $ 4,433.9 $ 3,791.1 $ 3,785.7 $ 3,532.5
Income before cumulative effect of
a change in accounting principle $ 425.0 $ 478.2 $ 516.6 $ 428.9 $ 459.9 $ 445.7
Cumulative effect on prior
years of changing the method
of accounting for income taxes 15.6
Net income $ 425.0 $ 478.2 $ 516.6 $ 444.5 $ 459.9 $ 445.7
Total assets $ 13,903.3 $ 13,562.2 $ 13,349.5 $ 12,615.1 $ 11,201.4 $ 10,990.9
Long-term debt, preferred stock subject to
mandatory redemption and preferred
securities of a subsidiary trust $ 4,926.9 $ 4,934.2 $ 4,976.7 $ 4,667.4 $ 4,668.2 $ 4,697.3
Common stock data:
Earnings per share before
cumulative effect of a change in
accounting principle $ 2.45 $ 2.81 $ 3.12 $ 2.66 $ 2.94 $ 2.92
Cumulative effect on prior
years of changing the method
of accounting for income taxes .10
Earnings per share $ 2.45 $ 2.81 $ 3.12 $ 2.76 $ 2.94 $ 2.92
Dividends paid per share $ 2.58 $ 2.55 $ 2.48 $ 2.40 $ 2.32 $ 2.23
Market value per share at year-end 41.25 36.00 45.38 39.50 38.00 31.25
Book value per share at year-end 26.88 26.60 26.38 25.21 24.41 23.41
Return on equity--average 9.2% 10.6% 12.2% 11.2% 12.4% 12.6%
Payout ratio 105.3% 90.7% 79.5% 87.0% 78.9% 76.4%
Price/earnings ratio at year-end 16.8 12.8 14.5 14.3 12.9 10.7
Outstanding shares of common stock
--average 173.8 170.3 165.7 161.1 156.5 152.5
--actual (year-end) 176.4 172.4 168.1 163.8 158.8 154.8
Capitalization:*
Long-term debt $ 4,348.9 $ 4,384.1 $ 4,219.5 $ 4,111.8 $ 4,025.6 $ 4,105.2
Preferred securities 135.0
Preferred stock 689.0 816.1 819.5 845.6 761.7 775.9
Common equity 4,742.0 4,586.1 4,435.9 4,131.3 3,877.8 3,623.9
Total capitalization $ 9,914.9 $ 9,786.3 $ 9,474.9 $ 9,088.7 $ 8,665.1 $ 8,505.0
*Capitalization excludes:
Nonrecourse-nonutility
financing $ 684.7 $ 727.1 $ 726.8 $ 593.4 $ 545.7 $ 494.8
Short-term debt $ 237.3 $ 146.0 $ 262.8 $ 125.2 $ 154.0 $ 142.4
Property, plant and equipment:
Electric utility $ 14,201.6 $ 13,896.6 $ 13,376.1 $ 12,930.6 $ 12,397.7 $ 11,822.4
Nuclear fuel 836.0 817.2 814.1 754.6 766.4 732.9
Other 939.8 701.6 724.5 451.4 213.4 108.8
Total 15,977.4 15,415.4 14,914.7 14,136.6 13,377.5 12,664.1
Less accumulated depreciation,
depletion and amortization 5,655.1 5,170.0 4,802.1 4,459.5 4,110.5 3,725.5
Net property, plant and equipment $ 10,322.3 $ 10,245.4 $ 10,112.6 $ 9,677.1 $ 9,267.0 $ 8,938.6
CWIP included in property,
plant and equipment $ 512.1 $ 828.2 $ 913.1 $ 840.9 $ 736.1 $ 691.7
</TABLE>
<PAGE>
20
Consolidated Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
For The Years Ended December 31, 1995 1994 1993
(millions, except per share amounts)
<S> <C> <C> <C>
Operating revenues and income:
Electric utility $ 4,350.4 $ 4,170.8 $ 4,187.3
Nonutility 301.3 320.3 246.6
Total operating revenues and income 4,651.7 4,491.1 4,433.9
Operating expenses:
Fuel, net 1,006.9 973.0 959.5
Purchased power capacity, net 688.4 669.4 646.1
Restructuring 121.5
Other operation 724.0 739.6 647.8
Maintenance 260.5 263.2 279.5
Depreciation, depletion and amortization 551.0 533.1 509.5
Other taxes 273.8 274.6 264.2
Total operating expenses 3,626.1 3,452.9 3,306.6
Operating income 1,025.6 1,038.2 1,127.3
Other income 7.3 13.5 15.1
Income before fixed charges and
federal income taxes 1,032.9 1,051.7 1,142.4
Fixed charges:
Interest charges, net 381.7 360.3 373.5
Preferred dividends of Virginia Power 44.1 42.2 42.1
Total fixed charges 425.8 402.5 415.6
Income before provision for
federal income taxes 607.1 649.2 726.8
Provision for federal income taxes 182.1 171.0 210.2
Net income $ 425.0 $ 478.2 $ 516.6
Retained earnings, January 1 1,455.2 1,417.8 1,319.1
Common dividends and other deductions:
Dividends (448.7) (434.7) (411.2)
Other deductions (3.9) (6.1) (6.7)
Retained earnings, December 31 $ 1,427.6 $ 1,455.2 $ 1,417.8
Earnings per common share $ 2.45 $ 2.81 $ 3.12
Dividends paid per common share $ 2.58 $ 2.55 $ 2.48
Average common shares outstanding 173.8 170.3 165.7
</TABLE>
The accompanying notes are an integral part of the Consolidated
Financial Statements.
<PAGE>
21
Management's Discussion and Analysis of Operations:
(Unaudited)
Overview
Dominion Resources achieved earnings of $425.0 million in 1995 or $2.45 per
average common share, compared with earnings of $478.2 million in 1994 or $2.81
per share. Virginia Power contributed $2.24 per share in 1995, down 14 cents
from $2.38 per share in 1994. Dominion Resources' nonutility businesses
contributed 21 cents per share in 1995, down 22 cents from 43 cents per share in
1994.
EPS 1995 Change 1994 Change 1993
Virginia Power $ 2.24 (5.9)% $ 2.38 (15.6)% $ 2.82
Nonutility 0.21 (51.2)% 0.43 43.3% 0.30
Consolidated $ 2.45 (12.8)% $ 2.81 (9.9)% $ 3.12
Net Income 1995 Change 1994 Change 1993
(millions)
Net income $ 425.0 (11.1)% $ 478.2 (7.4)% $ 516.6
Shares 173.8 2.1% 170.3 2.8% 165.7
ROE 9.2% 10.6% 12.2%
The 1995 results were affected by a number of factors described below:
Virginia Power
Earnings Impacts Included:
- - --increase in kilowatt-hour (kwh) sales from both retail and wholesale
customers; and
- - --increase in operating expenses attributable to restructuring costs, which
reduced earnings by 44 cents per share (see Note O).
Nonutility Businesses
Earnings Impacts Included:
- - --decrease in income from Dominion Energy attributable to the sale of the Black
Warrior Trust units, which increased earnings by 17 cents per share in 1994.
- - --increase in Dominion Resources' holding company expenses attributable to
restructuring costs and other charges, which reduced earnings by 5 cents per
share in 1995.
Virginia Power
Virginia Power's Operating Results
As part of the Vision 2000 program, Virginia Power recorded $117.9 million of
restructuring charges in 1995 (see Note O). Restructuring charges included
severance costs, purchased power contract cancellation and negotiated settlement
costs, capital project cancellation costs and other costs. Without restructuring
costs, balance available for common stock in 1995 would have increased by $76.6
million.
Virginia Power will incur additional restructuring charges in 1996.
However, the amount of restructuring charges yet to be incurred is not known at
this time. Savings to be realized will be reflected in lower construction
expenditures, as well as lower operation and maintenance expenses.
Virginia Power in 1994 recognized a net cost of $41.6 million associated
with voluntary separation and early retirement packages accepted by about 1,400
employees. In addition, lower base revenues when compared with 1993 contributed
to a decrease in the balance available for common stock in 1994.
1995 Change 1994 Change 1993
(millions)
Revenues $4,350.4 4.3% $4,170.8 (0.4)% $4,187.3
Operating expenses 3,375.8 5.0% 3,216.4 3.1% 3,120.4
Balance available for
common stock 388.7 (4.0)% 404.9 (13.3)% 466.9
Virginia Power's Operating Revenues
In 1995 Virginia Power's revenues increased primarily due to the weather
experienced in the last six months of 1995, increased customer growth and
increased sales to wholesale customers.
Revenues decreased in 1994 primarily because of lower base revenues for
Virginia jurisdictional and County and Municipal customers. In February 1994,
Virginia Power received a final order from the Virginia Commission in its 1992
base rate case that lowered the allowed return on equity to 11.4%.
Operating Revenues
Increase (decrease)
from prior year
1995 1994
(millions)
Customer growth $ 76.2 $ 22.5
Weather 81.6 (8.8)
Change in base revenues 6.3 (35.0)
Fuel cost recovery (8.9) (7.9)
Other 24.4 12.7
Total $179.6 $(16.5)
During 1995, Virginia Power had 44,955 new connections to its system compared to
46,741 in 1994.
Kilowatt-Hour Sales
1995 Change 1994 Change 1993
(millions)
Residential 22,512 4.1% 21,621 (1.0)% 21,846
Commercial 19,486 3.6% 18,801 1.5% 18,526
Industrial 10,606 3.6% 10,235 4.0% 9,840
Other 8,261 3.9% 7,950 (0.3)% 7,971
Total retail 60,865 3.9% 58,607 0.7% 58,183
Wholesale 08,088 13.4% 07,134 4.1% 06,853
Total sales 68,953 4.9% 65,741 1.1% 65,036
<PAGE>
22
Degree-Days 1995 1994 Normal
Cooling degree days 1,667 1,613 1,534
Percentage change compared
to prior year 3.3% (5.2)%
Heating degree days 3,790 3,515 3,662
Percentage change compared
to prior year 7.8% (8.3)%
The increase in kilowatt-hour sales in 1995 as compared to 1994 reflects
increased customer growth and the weather experienced in the last six months of
1995, partially offset by the milder weather experienced in the first six months
of 1995.
The increase in kilowatt-hour sales in 1994 as compared to 1993 reflects
the extreme weather experienced in January 1994, partially offset by lower sales
during the second half of 1994 because of milder weather.
The increase in sales to wholesale customers in 1995, as compared to 1994,
was primarily due to weather experienced in surrounding regions by other
utilities during the last six months of 1995 and increased marketing efforts by
Virginia Power.
Virginia Power's Operating Expenses
(excluding federal income taxes)
1995 Change 1994 Change 1993
Fuel, net $1,006.9 3.5% $ 973.0 1.4% $ 959.5
Purchased power
capacity, net 688.4 2.8% 669.4 3.6% 646.1
Other operation 543.8 (5.8) 577.4 9.8% 525.7
Maintenance 260.5 (1.0) 263.2 (5.8) 279.5
Restructuring 117.9
Depreciation and
amortization 503.5 4.7% 480.7 3.8% 462.9
Taxes, other
than income $ 254.8 0.8% $ 252.7 2.4% $ 246.7
Total $3,375.8 5.0% $3,216.4 3.1% $3,120.4
Other operation and maintenance expenses decreased in 1995 as compared to 1994.
Expenses during 1994 included payroll and voluntary separation costs for
those employees who elected to terminate service with Virginia Power under the
1994 Early Retirement and Voluntary Separation Programs, offset in part by
recognition of insurance policyholder distributions. Expenses in 1995 reflected
a decrease in payroll costs due to reduced staffing levels and weather-related
overtime offset by 1995 salary increases and the impact of employees being
reassigned from capital to operation and maintenance activities. In addition,
1995 expenses include expenses associated with the North Branch Power Station,
increased obsolete inventory costs, increased accruals for employee benefits,
and increased nuclear outage costs.
[place chart here]
Virginia Power
1995 System
Energy Output
Nuclear 32%
Coal 39%
Oil 1%
Purchased Power 25%
Other 3%
Nonutility
Nonutility Operating Results
The nonutility net income decreased in 1995 as compared to 1994 because of the
sale of the Black Warrior Trust units. The sale of the units, which hold royalty
interests in proven, developed natural gas properties, provided a net gain of
$28.9 million in the second quarter of 1994.
Dominion Resources also recorded $3.6 million in restructuring expenses and
$8.8 million in other charges in the fourth quarter of 1995. These expenses
included restructuring costs at the holding company as well as litigation and
other costs. All outstanding shareholder claims that were made in 1994 have been
resolved.
Without restructuring costs, net income in 1995 would have increased by
$2.3 million and without other charges, net income in 1995 would have increased
by $5.8 million.
The nonutility companies increased net income in 1994 as compared to 1993
by 47.7% because of Dominion Energy's sale of the Black Warrior Trust units.
1995 Change 1994 Change 1993
(millions)
Revenues $301.3 (5.9)% $320.3 29.9% $246.6
Operating expenses 244.6 4.8% 233.4 28.7% 181.4
Net income 36.3 (50.5)% 73.4 47.7% 49.7
Nonutility Operating Revenues
Nonutility revenues decreased in 1995 because of the sale of the Black Warrior
Trust units in 1994, partially offset by revenues at Dominion Capital's
financial services company, First Source Financial, which began operating in
April, 1995.
The $8.3 million gain from the sale of the remaining Black Warrior Trust
units in 1995 also partially offset the decrease in nonutility revenues.
The 1994 revenue increase was attributable to the sale of the Black Warrior
Trust units, partially offset by lower revenues from the Vidalia hydroelectric
plant when compared with extraordinary water flows experienced in 1993.
Nonutility Operating Expenses
Operating expenses increased in 1995 because of restructuring and other charges
which were incurred by Dominion Resources' holding company.
The increase in 1994 operating expenses was consistent with revenue
increases.
<PAGE>
23
Consolidated Non-operating Items
Income Taxes
Income taxes increased in 1995 compared to 1994 primarily because of decreases
in nonconventional fuel credits and other tax benefits. The nonutility companies
recorded tax credits of $33.0 million in 1995. They were primarily generated
from investments in low-income housing projects and natural gas production
activities.
Income taxes decreased in 1994 compared to 1993 primarily because of
decreased pre-tax book income from the utility. This was partially offset by a
tax increase from the nonutility companies because of the sale of the Black
Warrior Trust units. The nonutility companies recorded tax credits of $36.6
million in 1994.
Interest Charges
Interest charges increased in 1995 as compared to 1994 primarily as a result of
higher interest rates on the utility's First and Refunding Mortgage Bonds and
Pollution Control Notes and as a result of a reduction of $10.6 million in the
interest accrued for prior years on certain tax obligations in 1994.
Interest charges decreased in 1994 as compared to 1993 as a result of the
utility's reduction of $10.6 million in the interest accrued for prior years on
certain tax obligations, and the utility's refinancing activities in current and
prior years.
Future Issues
Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which must be
adopted by the company by January 1, 1996. This statement requires the company
to review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable and requires rate-regulated companies to write-off regulatory assets
against earnings whenever those assets no longer meet the criteria for
recognition of a regulatory asset as defined by SFAS No. 71.
Based on the company's current operating environment, adoption of SFAS 121
is not expected to have a material impact. However, the Virginia Commission has
established a proceeding to examine the issue of competition and the regulatory
framework in Virginia. In addition, the Federal Energy Regulatory Commission
(FERC) has initiated proceedings to address open-access transmission policy. If
future regulatory reform should provide for a departure from cost-based
regulation, regulators, electric utilities and other parties involved in the
restructuring of the electric industry would face significant issues. One such
issue is concerned with potential "stranded investment." Stranded investment
represents costs incurred or commitments made by utilities under traditional
cost-based regulation based on an obligation to serve supported by an implicit
promise to recover prudently incurred costs that may not be reasonably expected
to be recovered. Regulatory assets recognized under SFAS 71, unrecovered
investment in power plants and commitments such as long-term purchased power
contracts are items that may become stranded investment if prices for electric
services are based on market rather than the cost of providing that service.
Virginia Power expects to continue to operate under regulation and to
recover its cost of providing traditional electric service. However, the form of
cost-based rate regulation, under which the Company operates, may evolve in the
future to accommodate changes in the industry and to address issues such as
recovery of potential stranded investment. At this time, company management can
predict neither the ultimate outcome of the regulatory reform initiatives in the
electric utility industry nor the impact such changes would have on the company.
In 1995, the Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock Based Compensation." The company has decided to continue
to apply Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," for recognition and measurement purposes.
Utility Issues
Regulatory Policy: Regulatory policy continues to be of fundamental importance
to Virginia Power. The cost of purchased capacity constitutes a large category
of cost incurred in Virginia Power's operations. The Virginia Commission has
authorized rates providing for the current recovery of the ongoing levels of
capacity payments. Moreover, the Commission has established and reaffirmed
deferral accounting that is intended to ensure dollar for dollar recovery of
reasonably incurred capacity costs.
Competition: In light of existing and potential threats and opportunities
brought about by increased competition in the wholesale and retail markets for
electricity, Virginia Power has undertaken cost-cutting measures to maintain its
position as a low-cost producer of electricity, engaged in re-engineering
efforts of its core business processes, and pursued a strategic planning
initiative called Vision 2000 to encourage innovative approaches to serving
traditional markets and to prepare appropriate methods by which to service
future markets. In furtherance of these initiatives, Virginia Power has
established separate business units for its nuclear operations, fossil and
hydroelectric operations, commercial operations, as well as its energy services
business. It has gained regulatory approval of innovative pricing proposals for
industrial loads in Virginia and North Carolina, entered into an energy
partnership with a key industrial customer, and in January 1996, acquired two
energy services divisions of A & C Enercom of Atlanta, Georgia, which Virginia
Power formed into a non-regulated subsidiary, A & C Enercom, Inc.
As part of its Vision 2000 program, Virginia Power has developed a
regulatory/legislative strategy intended to establish an orderly transition to a
more competitive environment.
<PAGE>
24
It supports a number of legislative proposals that have been introduced during
the 1996 session of the Virginia General Assembly that are aimed at achieving
greater flexibility for both the Virginia Commission and Virginia Power.
Virginia Power will continue to be affected by the developing competitive
market in wholesale power. Under the Energy Policy Act of 1992, any participant
in the wholesale market can obtain a FERC order to provide transmission
services, under certain conditions.
In 1995 a wholesale power group was formed within Virginia Power to engage
in the purchase and sale of whole sale electric power. The group has already
developed trading relationships beyond the geographic limits of Virginia Power's
retail service territory.
In 1995, FERC issued a Notice of Proposed Rulemaking (NOPR) regarding
open-access transmission service and a NOPR regarding real-time information
networks and standards of conduct. The real-time information network would
provide transmission users data concerning the availability of transmission
service on a same-time basis. Virginia Power filed comments in both proceedings
supporting FERC's objective to promote comparable open-access transmission
service, however, the company urged FERC to rethink its suggestion of functional
unbundling to insure the continued reliability of the transmission system.
At present, competition for retail customers is limited. It arises
primarily from the ability of certain business customers to relocate among
utility service territories, to substitute other energy sources for electric
power and to generate their own electricity. While the Energy Policy Act bans
federal orders of transmission service to ultimate customers, broader retail
competition that would allow customers to choose among electric suppliers is the
subject of intense debate, both legislative and regulatory. If such competition
were to develop, it would have the potential to shift costs among customer
classes and to create significant transitional costs.
Potential competition also exists for Virginia Power's sales to its
wholesale cooperative and municipal customers. However, nearly all of this
service is under contracts with multi-year notice provisions. To date, Virginia
Power has not experienced any material loss of load, revenues or net income due
to competition for its wholesale customers. The utility believes it has a strong
capability to meet future competition.
The City of Falls Church, Virginia, has indicated that it intends to pursue
the establishment of a municipal electric system. In response to a Virginia
Power petition, the Commission has ruled that it has jurisdiction over the City
and that the City must seek approval from the Commission prior to implementing
plans to condemn Virginia Power facilities within the City. Revenues from retail
sales within the City of Falls Church account for less than 0.2% of Virginia
Power's total revenues. As a result, Virginia Power will not experience a
material loss of revenues or net income should a municipal electric system be
created. No other city has communicated to Virginia Power any interest in
forming a municipal electric system.
In accordance with SFAS No. 71, "Accounting for the Effects of Certain
Types of Regulation," the company's financial statements reflect assets and
costs based on current cost- based ratemaking regulations. Continued accounting
under SFAS No. 71 requires that the following criteria be met:
a) A utility's rates for regulated services provided to its customers are
established by, or are subject to approval by, an independent third-party
regulator;
b) The regulated rates are designed to recover specific costs of providing
the regulated services or products; and
c) In view of the demand for the regulated services and the level of
competition, direct and indirect, it is reasonable to assume that rates set at
levels that will recover a utility's costs can be charged to and collected from
customers. This criterion requires consideration of anticipated changes in
levels of demand or competition during the recovery period for any capitalized
costs.
A utility's operations or portion of operations can cease to meet these
criteria for various reasons, including a change in the method of regulation or
a change in the competitive environment for regulated services. A utility whose
operations or portion of operations cease to meet these criteria should
discontinue application of SFAS No. 71 and write-off any regulatory assets and
liabilities for those operations that no longer meet the requirements of SFAS
No. 71. The company's operations currently satisfy the SFAS No. 71 criteria.
However, if events or circumstances should change so that those criteria are no
longer satisfied, management believes that a material adverse effect on the
Company's results of operations and financial position may result.
Environmental Matters: Virginia Power is subject to rising costs resulting
from a steadily increasing number of federal, state and local laws and
regulations designed to protect human health and the environment. These laws and
regulations affect future planning and existing operations. They can result in
increased capital, operating and other costs as a result of compliance,
remediation, containment, and monitoring obligations of Virginia Power. These
costs have been historically recovered through the ratemaking process; however,
should material costs be incurred and not recovered through rates, Virginia
Power's results of operations and financial condition could be adversely
impacted.
Virginia Power incurred expenses of $68.3 million, $67.3 million and $72.2
million (including depreciation) during 1995, 1994 and 1993, respectively, for
environmental protection facilities and expects these expenses to be
approximately $68.3 million in 1996. In addition, capital expenditures to limit
or monitor hazardous substances were $23.4 million, $47.3 million and $94.4
million for 1995, 1994 and 1993, respectively. The amount estimated for 1996 for
these expenditures is $24.5 million.
The Clean Air Act, as amended in 1990, requires Virginia Power to reduce
its emissions of sulfur dioxide and nitrogen oxides. Beginning in 1995, the
sulfur dioxide reduction pro gram is based on the issuance of a limited number
of sulfur dioxide emission allowances, each of which may be used as a
<PAGE>
25
permit to emit one ton of sulfur dioxide into the atmosphere or may be sold to
someone else. The program is administered by the Environmental Protection Agency
(EPA). Virginia Power has installed sulfur dioxide (SO2) control equipment on
Unit 3 at Mt. Storm Power Station. The SO2 control equipment began operation on
October 31, 1994. The cost of this and related equipment was $147 million.
Virginia Power has completed its compliance plan for Phase II of the Clean Air
Act, with the exception of some additional studies concerning Phase II nitrogen
oxide (NOx) controls. The plan will involve switching to lower sulfur coal,
purchase of emission allowances and addi tional NOx and SO2 controls. Maximum
flexibility and least- cost compliance will be maintained through annual
studies. Capital expenditures on Clean Air Act compliance over the next 5 years
are projected to be approximately $61 million.
Electromagnetic Fields: The possibility that exposure to electromagnetic
fields (EMFs) emanating from power lines, household appliances and other
electric sources may result in adverse health effects has been a subject of
increased public, governmental and media attention. A considerable amount of
scientific research has been conducted on this topic without definitive results.
Research is continuing to resolve scientific uncertainties. It is too soon to
tell what, if any, impact EMFs may have on the company's financial condition.
Nuclear Operations: Three normal refueling outages are currently scheduled
for 1996. Refueling outages typically occur every 18 months and last for
approximately 48 days. Virginia Power's goal is to reduce refueling outages from
an average of 48 days to 35 days. When nuclear units are refueled, Virginia
Power replaces the nuclear-generated power with other more expensive sources. A
reduction in the length of the outage should result in increased availability of
low-cost nuclear generation, thereby lowering generation expenses.
The Nuclear Regulatory Commission revised the nuclear power plant license
renewal rules issued in 1991. Virginia Power intends to work with industry
groups on license renewal programs and to apply for renewal of the current
40-year licenses by 1999.
Nonutility Issues
Independent Power: The major emphasis in expanding Dominion Energy's core
independent power business is international. With investments in Argentina,
Bolivia and Belize and growing interest elsewhere, the related risks include
currency fluctuations, developments in national markets, and governmental
actions. Dominion Energy is managing these risks by limiting its investments to
stable countries and by avoiding over-commitment to one country or region. In
the United States, the continuing industry trend toward deregulation will offer
opportunities to acquire existing assets.
Dominion Energy's U.S. independent power contracts generally are not
variable based on current market prices. To date, none of the company's
contractual purchasers have sought to modify the terms of any of the company's
independent power contracts. If any of these contracts were to be challenged and
unfavorably modified there could be a significant impact on the company's
results of operations. Although, in the future, there could be challenges to the
enforceability of these power sales contracts, management has evaluated all of
its significant independent power contracts and concluded that the terms of such
contracts are enforceable.
Natural Gas: Natural gas operations are now making a significant
contribution to Dominion Energy's earnings and are expected to continue to do
so. Since Dominion Energy has acquired and developed primarily proven and/or
producing reserves, the trend of financial performance will depend largely on
the market price of natural gas. The market price of any commodity is influenced
by many factors outside of the control of Dominion Energy. However, because of
the advantageous cost basis of Dominion Energy's reserves and the related tax
credits, the natural gas operations are profitable at today's market prices.
Since the majority of the reserves have associated tax credits based on
production, future profitability could be impacted adversely by federal
legislation that would eliminate the tax credit before its current expiration in
2002.
Real Estate Investments: Dominion Capital's investments in real estate have
historically been a relatively minor part of the nonutility business.
Residential property development primarily targets the middle- to upper-price
market. The critical risk to financial performance in this market is the
regional economy, which affects both market price and the rate at which the
market absorbs the developed product.
Commercial Lending: Dominion Capital's joint venture, First Source
Financial LLP, lends to middle-market companies. First Source serves the
nation's demand for loans to businesses which need funds for expansion,
recapitalization and acquisition. The critical risk to financial performance of
First Source is a decline in the general economy and competitive forces
affecting individual borrowers. This risk is reduced through a policy of
diversification of the lending portfolio. First Source has assembled a proven
management team, identified a specific market and established a strategic plan
for growth in the commercial lending arena.
Corporate Issues
Dominion Resources is unable to predict how changing industry conditions may
affect future results and that it is possible that in order to address changing
conditions in ways that are designed to improve the ability of Dominion
Resources and Virginia Power to compete and to serve the goal of preserving and
enhancing shareholder value, it may be necessary to effect structural changes
either within Virginia Power or with respect to the holding company structure.
During 1995, in a proceeding instituted by the Virginia Commission in 1994
into the relationship between Dominion Resources and Virginia Power, the
Commission Staff filed a Final Report, making numerous recommendations on
corporate governance, intercompany relationships and regulatory tools for the
Commission, and the Commission entered a con sent order, effective until July 2,
1996, requiring Commission approval before Dominion Resources may take certain
corporate actions involving Virginia Power. The two companies have responded to
the Final Report. The Staff's final response is due March 15, 1996. Dominion
Resources is unable to predict the outcome of these matters.
<PAGE>
26
Consolidated Balance Sheets
Assets
At December 31, 1995 1994
(millions)
Current assets:
Cash and cash equivalents $ 66.7 $ 146.7
Trading securitie 10.8 110.8
Customer accounts receivable, net 362.6 202.7
Other accounts receivable 104.2 83.2
Accrued unbilled revenues 179.5 97.4
Materials and supplies at average cost or less:
Plant and general 160.2 186.6
Fossil fuel 71.2 122.9
Other 141.5 136.2
1,096.7 1,086.5
Investments:
Investments in affiliates 436.2 282.8
Available-for-sale-securities 285.5 286.5
Nuclear decommissioning trust funds 351.4 260.9
Investments in real estate 133.0 107.5
Other 236.6 222.4
1,442.7 1,160.1
Property, plant and equipment:
(includes plant under construction of
$512.1 [1994-$828.2]) 15,977.4 15,415.4
Less accumulated depreciation, depletion
and amortization 5,655.1 5,170.0
10,322.3 10,245.4
Deferred charges and other assets:
Regulatory assets 816.4 871.0
Other 225.2 199.2
1,041.6 1,070.2
Total assets $13,903.3 $13,562.2
The accompanying notes are an integral part of the Consolidated
Financial Statements.
<PAGE>
27
Liabilities and Shareholders' Equity
At December 31, 1995 1994
(millions)
Current liabilities:
Securities due within one year $ 420.8 $ 399.1
Short-term debt 236.6 146.0
Accounts payable, trade 336.7 343.5
Accrued interest 110.5 106.3
Accrued payroll 77.7 59.5
Severance costs accrued 42.5
Customer deposits 55.4 55.0
Other 114.0 128.0
1,394.2 1,237.4
Long-term debt:
Utility 3,889.4 3,910.4
Nonrecourse-nonutility 523.5 640.2
Other 199.0 160.0
4,611.9 4,710.6
Deferred credits and other liabilities:
Deferred income taxes 1,661.1 1,613.6
Investment tax credits 272.2 289.2
Deferred fuel expenses 57.7 51.5
Other 340.2 257.7
2,331.2 2,212.0
Total liabilities 8,337.3 8,160.0
Commitments and contingencies
Virginia Power obligated mandatorily redeemable
preferred securities of subsidiary trust* 135.0
Preferred stock:
Virginia Power stock subject to
mandatory redemption 180.0 222.1
Virginia Power stock not subject to
mandatory redemption 509.0 594.0
Common shareholders' equity:
Common stock--no par authorized 300,000,000 shares,
outstanding--176,414,110 shares at 1995 and
172,405,049 shares at 1994 3,303.5 3,157.6
Retained earnings 1,427.6 1,455.2
Allowance on available-for-sale securities (6.7) (47.8)
Other paid-in capital 17.6 21.1
4,742.0 4,586.1
Total liabilities and shareholders' equit $13,903.3 $13,562.2
*As described in Note L, the 8.05% Junior Subordinated Notes totaling $139.2
million principal amount constitute 100% of the Trust's assets.
<PAGE>
28
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For The Years Ended December 31, 1995 1994 1993
(millions)
<S> <C> <C> <C>
Cash flows from (to) operating activities:
Net income $ 425.0 $ 478.2 $ 516.6
Adjustments to reconcile net income
to net cash:
Depreciation, depletion and amortization 633.5 610.7 593.9
Deferred income taxe 26.4 68.2 34.7
Investment tax credits, net (16.9) (17.1) (19.2)
Allowance for other funds used
during construction (6.7) (6.4) (5.1)
Deferred fuel expense 6.2 (2.6) (36.1)
Deferred capacity expense 6.4 26.5 72.8
Restructuring expenses 96.2
Non-cash return on terminated construction
project costs--pre-tax (8.4) (10.3) (11.9)
Gain on sale of trust units (8.7) (49.0)
Changes in current assets and liabilities:
Accounts receivable (38.7) 19.1 (56.6)
Accrued unbilled revenue (27.7) 11.9 (6.3)
Materials and supplies 61.1 (6.5) 27.4
Accounts payable, trade (37.6) 32.6 26.5
Accrued interest and taxes 33.6 (46.5) 31.1
Provision for rate refunds (12.2) (89.5) (87.6)
Other changes 39.8 (27.5) 16.8
Net cash flows from operating activities 1,171.3 991.8 1,097.0
Cash flows from (to) financing activities:
Issuance of common stock 161.7 186.7 196.6
Issuance of preferred stock 150.0
Preferred securities of subsidiary trust 135.0
Issuance of long-term debt:
Utility 240.0 464.0 1,035.0
Nonrecourse-nonutility 54.3 18.7 288.4
Issuance (repayment) of short-term debt 101.1 (117.0) 133.4
Repayment of long-term debt and
preferred stock (553.0) (349.6) (1,241.6)
Common dividend payments (448.7) (434.7) (411.2)
Other (20.5) (8.0) (8.8)
Net cash flows from (to) financing activities (330.1) (239.9) 141.8
Cash flows from (used in) investing activities:
Utility capital expenditures
(excluding AFC-equity funds) (577.5) (660.9) (712.8)
Acquisition of natural gas and
independent power properties (128.5) (316.8)
Sale of accounts receivable, net (160.0)
Sale of trust unit 16.4 128.4
Other investments (71.6) (74.3) (189.6)
Net cash flows used in investing activities (921.2) (707.2)
Increase (decrease) in cash
and cash equivalents $ (80.0) $ 44.7 $ 19.6
Cash and cash equivalents at beginning
of the year 146.7 102.0 82.4
Cash and cash equivalents at end of the year $ 66.7 $ 146.7 $ 102.0
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE>
29
Management's Discussion and Analysis of Cash Flows and Financial Condition:
(Unaudited)
Consolidated
Financing Activity
Each of Dominion Resources' subsidiaries--Virginia Power, Dominion Capital, and
Dominion Energy--obtains capital primarily through cash from operations,
financings and equity contributed by the parent. The utility and nonutility
companies obtain financing based on their individual credit profiles and ability
to repay the debt. In no way are the other companies contingently liable for
each other's indebtedness.
Commercial Paper
To finance working capital for operations, proceeds from the sale of Dominion
Resources commercial paper in regional and national markets are made available
to its nonutility subsidiaries under the terms of intercompany credit
agreements. To support these borrowings, Dominion Resources had available bank
lines of credit totaling $300.8 million at the end of 1995. Amounts borrowed by
the subsidiaries are repaid to Dominion Resources through cash flows from
operations and through proceeds from permanent financings.
Common Equity
Dominion Resources made no underwritten public offerings of common stock in
1995, but did raise capital from sales of common stock through an Automatic
Dividend Reinvestment and Stock Purchase Plan, a Customer Stock Purchase Plan,
and an Employee Savings Plan. Dominion Resources will continue to raise capital
through these plans in 1996. Proceeds from these plans were (in millions):
1995-$136.9; 1994-$166; and 1993-$196.6. Reflected in the amounts of proceeds
from these plans were the repurchases of 685,500 shares of common stock in 1995
for an aggregate price of $24.8 million, and 566,000 shares in 1994 for an
aggregate price of $20.7 million. Dominion Resources is authorized to repurchase
up to 5 million shares of its common stock.
Virginia Power
Liquidity and Capital Resources
Liquidity is important to Virginia Power because of the capital intensive nature
of its business, which requires large investments in long-lived assets. Cash
from operations has accounted for, on average, 72 percent of Virginia Power's
cash requirements during the past three years. Virginia Power's major external
sources of financing during 1995 were the issuances of $200 million of First and
Refunding Mortgage Bonds, $135 million of preferred securities of a subsidiary
trust, and $40 million of unsecured medium term notes. The proceeds from these
financings were used for redemptions of various series of Dividend Preferred
Stock having an aggre gate principal value of $126.7 million, and payment of a
portion of Virginia Power's mandatory debt maturities and capital requirements.
During the year, Virginia Power retired $312.3 million of securities through
mandatory debt maturities.
Cash Flows
1995 1994 1993
(millions)
Sources of cash:
Cash from operations $1,125.4 $1,018.3 $1,022.9
Common stock 75.0 50.0
Preferred securities of a
subsidiary trust 135.0
Preferred stock 150.0
Long-term debt 240.0 464.0 1,035.0
Other 177.4 6.9 76.2
$1,677.8 $1,564.2 $2,334.1
Uses of cash:
Utility plant $ 519.9 $ 580.9 $ 644.9
Nuclear fuel 57.6 80.0 67.9
Repayment of long-term debt
and preferred stock 439.0 334.3 1,072.1
Dividends 438.6 438.2 421.1
Nuclear decommissioning
contributions 28.5 24.5 24.4
Other 194.2 106.3 103.7
$1,677.8 $1,564.2 $2,334.1
These transactions, among other factors, had the effect of raising Virginia
Power's embedded cost of debt from 7.65 percent to 7.73 percent in 1995.
Virginia Power's common equity portion of its capitaliza tion was 43.8
percent at December 31, 1995.
Virginia Power's commercial paper program is supported by a $300 million
revolving credit facility. The program's debt limit is $300 million. Proceeds
from the sale of commercial paper are primarily used to finance working capital
for operations. Net borrowings under the commercial paper program were $169
million at the end of 1995.
In 1995, Virginia Power paid common stock and preferred stock dividends of
$394.3 million and $44.3 million, respectively.
Capital Requirements
Virginia Power presently anticipates that kilowatt-hour sales will grow
approximately two percent a year through 2010. Capacity needed to support this
growth will be provided through a combination of generating units constructed by
Virginia Power and purchases from nonutility generators and other utility
generators. Each of these options plays an important role in Virginia Power's
overall plan to meet capacity needs. After 1996, no new base load generation is
expected to be needed until the end of the next decade. From 2000 until 2009,
Virginia Power will need to add peaking or intermediate units to meet
anticipated demand.
<PAGE>
30
[place graph here]
Virginia Power
Capital Expenditures
(Millions of Dollars)
93 713
94 661
95 578
96 569
97 530
98 531
Construction continues on the Clover project in which Virginia Power has a
50 percent ownership interest. Virginia Power's share of construction costs is
estimated to be $514.7 million. As of December 31, 1995, Virginia Power had
incurred $500.7 million in construction expenditures. Clover Unit 1 began
commercial operation in October 1995 and Clover Unit 2 is expected to be in
service by April 1996.
In 1995, with the near completion of the 832 megawatt coal- fired power
station near Clover, Virginia, Virginia Power began a period in which internal
cash generation will exceed con struction expenditures.
The internal generation of cash in 1994 and 1993 provided 88 percent and 84
percent, respectively, of the funds required for Virginia Power's capital
requirements.
Virginia Power will require $259.6 million to meet long-term debt
maturities in 1996. Virginia Power presently estimates that, for 1996, all of
its construction expenditures, including nuclear fuel expenditures, will be met
through cash flow from operations. Other capital requirements will be met
through a combination of sales of securities and short-term borrowings.
Projected construction and nuclear fuel expenditures for the next three
years are expected to total approximately $1.6 billion, including allowance for
funds used during construction (AFC).
Nonutility
Liquidity and Capital Resources
Current capital requirements for nonutility operations are funded from:
internally generated funds; intercompany credit agreements with Dominion
Resources; a $200 million medium-term note facility; $185 million in bank
revolving credit agreements and a $90 million commercial paper program. In 1995,
net borrowings decreased by $121.5 million, primarily due to the cash inflow
from the equity contributions of Dominion Resources. In 1994, net borrowings
decreased by $33.7 million, primarily due to the cash inflow from the sale of
the Black Warrior Trust units. Net borrowings increased by $264.2 million during
1993. These funds were borrowed principally for investments in marketable
securities, natural gas acquisitions, land acquisitions and independent power
projects.
Cash Flows
1995 1994 1993
(millions)
Sources of cash:
Cash from operations $ 91.5 $ 48.1 $116.9
Issuance of debt 48.7 81.3 415.5
Sale of trust units 16.4 128.4
Contribution from parent 299.3 4.9 35.0
Other 13.6 55.9 91.9
$469.5 $318.6 $659.3
Uses of cash:
Investments $ 52.8 $ 39.8 $ 61.7
Independent power properties 60.2 214.1
Natural gas properties 68.3 60.4 102.7
Land and land development 11.7 0.6
Repayment of debt 170.2 115.0 151.3
Dividends 54.3 39.1 32.9
Other 52.0 64.3 96.0
$469.5 $318.6 $659.3
In 1995 Dominion Capital and Dominion Energy received $150 million and $149.3
million, respectively, from Dominion Resources to finance operations.
Nonutility capital requirements in 1996 are expected to be funded primarily
by equity contributions and cash flows from operations.
Financial Position
1995 1994 1993
(millions)
Marketable securities $ 296.3 $ 397.3 $ 436.9
Hydroelectric project 129.6 123.5 116.6
Enron/Dominion Cogen Corp. 91.6 86.2 90.0
Energy partnerships 120.5 124.0 125.6
Venture partnership 97.5
Financing partnership 59.0
Real estate partnerships 15.8 11.2 10.3
Other 155.6 140.3 102.4
Total investments $ 965.9 $ 882.5 $ 881.8
Land and land development 122.2 97.2 104.7
Independent power properties 370.8 240.0 243.1
Natural gas properties 314.7 279.3 326.7
Other assets 337.8 472.1 303.0
Total assets $2,111.4 $1,971.1 $1,859.3
Total long-term debt $ 523.5 $ 640.2 $ 700.6
<PAGE>
31
Notes to Consolidated Financial Statements
Note A Significant Accounting Policies
General: Dominion Resources, Inc. is a holding company headquartered in
Richmond, Virginia. Its primary business is Virginia Electric and Power Company,
which 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 and municipalities. 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 also operates business subsidiaries active in independent power
production; the acquisition and sale of natural gas reserves; in financial
services, and in real estate. Some of the independent power and natural gas
projects are located in foreign countries. Net assets of approximately $200
million are involved in independent power production operations in Latin
America.
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 duringthe reporting period. Actual
results could differ from those estimates.
Dominion Resources is currently exempt from regulation as a registered
holding company under the Public Utility Holding Company Act of 1935.
Accounting for the utility business conforms with generally accepted
accounting principles as applied to regulated public utilities and as prescribed
by federal agencies and the com missions of the states in which the utility
business operates.
Consolidation: The Consolidated Financial Statements include the accounts
of Dominion Resources and its subsidiaries. In consolidation, all significant
inter-company trans actions and accounts have been eliminated.
Operating Revenues and Income: Utility revenues are recorded on the basis
of service rendered. Dividend income on securities owned is recognized on the
ex-dividend date. Investments in common stocks of affiliates representing 20
percent to 50 percent ownership, and joint ventures and partnerships
representing generally 50 percent or less ownership interests, are accounted
for under the equity method.
Property, Plant and Equipment: Utility plant is recorded at original cost, which
includes labor, materials, services, AFC (where permitted by regulators), and
other indirect costs.
The cost of acquisition, exploration and development of natural resource
properties is accounted for under the successful efforts method.
Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's estimated useful life. In 1995,
1994 and 1993, $14.1 million, $13.8 million, and $11.1 million of interest cost
was capitalized, respectively. Capitalized interest includes AFC- other funds
for certain regulatory jurisdictions of $6.7 million, $6.4 million and $5.1
million for the years ended December 31, 1995, 1994 and 1993, respectively.
Major classes of property, plant and equipment and their respective balances
are:
At December 31, 1995 1994
(millions)
Utility:
Production $7,340.0 $6,916.6
Transmission 1,316.1 1,301.2
Distribution 4,215.7 3,989.8
Other electric 817.7 860.8
Construction work-in-progress 512.1 828.2
Nuclear fuel 836.0 817.2
Total utility 15,037.6 14,713.8
Nonutility:
Natural gas properties 395.7 331.6
Independent power properties 462.7 253.0
Construction work-in-progress 45.6
Other 81.4 71.4
Total nonutility 939.8 701.6
Total property, plant
and equipment $15,977.4 $15,415.4
Depreciation, Depletion and Amortization: Depreciation of utility plant (other
than nuclear fuel) is computed using the straight- line method based on
projected useful service lives. The cost of depreciable utility plant retired
and the cost of removal, less salvage, are charged to accumulated depreciation.
The provi sion for depreciation on utility plant was based on weighted average
depreciable plant using a rate of 3.2 percent for 1995, 1994, and 1993.
Owned nuclear fuel is amortized on a unit-of-production basis sufficient to
amortize fully, over the estimated service life, the cost of the fuel plus
permanent storage and disposal costs.
Costs in excess of net assets acquired from equity investments are
amortized over periods not to exceed 40 years.
Nuclear Decommissioning: Nuclear plant decommissioning costs are accrued
and recovered through rates over the expected service lives of Virginia Power's
nuclear generating units. The amounts collected from customers are being placed
in trusts, which, with the accumulated earnings thereon, will be utilized solely
to fund future decommissioning obligations.
North Anna Surry
Unit 1 Unit 2 Unit 1 Unit 2
NRC license expiration year 2018 2020 2012 2013
Method of decommissioning DECON DECON DECON DECON
(millions)
Current cost estimate (1994)
dollars $247.0 $253.6 $272.4 $274.0
External trusts balance at
December 31, 1995 84.1 78.9 96.2 92.2
1995 contribution to external
trusts 6.1 5.7 8.0 8.7
<PAGE>
32
Approximately every four years, site-specific studies are prepared to
determine the decommissioning cost estimate for Virginia Power's four nuclear
units. The current cost estimate is based on the DECON method, which assumes the
activities associated with the decontamination or prompt removal of radioactive
contaminants will begin shortly after cessation of operations so that the
property may be released for unre stricted use.
The accumulated provision for decommissioning of $351.4 million and $260.9
million is included in accumulated depreciation, depletion and amortization at
December 31, 1995 and 1994, respectively. Provisions for decommissioning of
$28.5 million, $24.5 million and $24.4 million applicable to 1995, 1994 and
1993, respectively, are included in depreciation, depletion and amortization
expense. The net unrealized gain of $40.7 million and a net unrealized loss of
$5.2 million associated with securities held by Virginia Power's Nuclear
Decommissioning trust at December 31, 1995 and 1994, respectively, are included
in the accumulated provision for decommissioning.
Earnings of the trust funds were $15.9 million, $15.2 million and $16.3
million for 1995, 1994 and 1993, respectively, and are included in other income
in the Consolidated Financial Statements.
The accretion of the accumulated provision for decom missioning, equal to
the earnings of the trust funds, is also recorded in other income.
The Financial Accounting Standards Board (FASB) is reviewing the accounting
for nuclear plant decommissioning. If current electric utility industry
practices for such decom missioning are changed, annual provisions for
decommissioning could increase. FASB has tentatively determined that the
estimated cost of decommissioning should be reported as a liability rather than
as accumulated depreciation and that a substantial portion of the
decommissioning obligation should be recognized earlier in the operating life of
the nuclear plant.
During its deliberations, FASB has expanded the scope of this project to
include similar unavoidable obligations to per form closure and post-closure
activities incurred as a condition to operate assets other than nuclear power
plants. Whether this position, if adopted, would impact other assets of Virginia
Power cannot be determined at this time. Furthermore, the FASB has tentatively
determined that it would be inappropriate to account for cost of removal as
negative salvage; thus, any forthcoming standard may also cause changes in
industry plant depreciation practices.
Federal Income Taxes: Dominion Resources and its subsidi aries file a
consolidated federal income tax return.
Dominion Resources adopted SFAS No. 109, "Accounting for Income Taxes" in
1992 which requires companies to measure and record deferred tax assets and
liabilities for all temporary differences. Temporary differences occur when
events and transactions recognized for financial reporting result in taxable or
tax-deductible amounts in future periods. The regulatory treatment of temporary
differences can differ from the requirements of SFAS No. 109. Accordingly,
Virginia Power recognizes a regulatory asset if it is probable that future
revenues will be provided for the payment of those deferred tax liabilities.
Similarly, in the event a deferred tax liability is reduced to reflect changes
in tax rates, a regulatory liability is established if it is probable that a
future reduction in revenue will result.
Due to regulatory requirements, Virginia Power accounts for investment tax
credits under the "deferral method" which provides for the amortization of these
credits over the service lives of the property giving rise to the credits.
Allowance for Funds Used During Construction: The applicable regulatory
Uniform System of Accounts defines AFC as the cost during the construction
period of borrowed funds used for construction purposes and a reasonable rate on
other funds when so used.
The pre-tax AFC rates for 1995, 1994 and 1993 were 8.9, 8.9 and 9.4
percent, respectively. Approximately 83 percent of Virginia Power's construction
work in progress (CWIP) is now included in rate base and a cash return is
collected currently thereon.
Deferred Capacity and Fuel Expenses: Approximately 90 percent of fuel
expenses and 80 percent of capacity expenses are subject to deferral accounting.
Under this method, the difference between reasonably incurred actual expenses
and the level of expenses included in current rates is deferred and matched
against future revenues.
Amortization of Debt Issuance Costs: Dominion Resources defers and
amortizes any expenses incurred in the issuance of long-term debt including
premiums and discounts associated with such debt over the lives of the
respective issues. Any gains or losses resulting from the refinancing of
Virginia Power debt are also deferred and amortized over the lives of the new
issues of long-term debt as permitted by the appropriate regulatory commission.
At Virginia Power, gains or losses resulting from the redemption of debt without
refinancing are amortized over the remaining lives of the redeemed issues.
Marketable Securities: Dominion Resources adopted, effective January 1,
1994, SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." The standard requires companies to account for and classify
investments in equity securities that have readily determinable fair values and
for all investments in debt securities based on management's intent. The
investments are to be classified into three categories and accounted for in the
following manner.
Debt securities which are intended to be held to maturity are classified as
held-to-maturity securities and reported at amortized cost. Debt and equity
securities purchased and held with the intent of selling them in the current
period are classified as trading securities. They are reported at fair value and
unrealized gains and losses are included in earnings. Debt and
<PAGE>
33
equity securities that are neither held-to-maturity or trading are classified as
available-for-sale securities. These are reported at fair value with unrealized
gains and losses reported in shareholders' equity, net of tax.
This standard is to be applied on a prospective basis effective with fiscal
years after December 15, 1993 and can not be applied retroactively to the prior
year's financial statements.
Nonrecourse-Nonutility Financings: Dominion Resources' non-utility
subsidiaries issue debt to finance their operations and obtain financings that
generally are secured by the assets of the nonutility subsidiaries. However,
Dominion Resources may be required to provide contingent equity support or to
maintain a minimum net worth at the nonutility subsidiaries. These financings
have been segregated on the accompanying financial statements to distinguish
their nonrecourse nature.
Cash: Current banking arrangements generally do not require checks to be
funded until actually presented for payment. At December 31, 1995 and 1994, the
company's accounts payable included the net effect of checks outstanding but not
yet presented for payment of $70.1 million and $72.2 million, respectively.
For purposes of the Consolidated Statements of Cash Flows, Dominion
Resources considers cash and cash equivalents to include cash on hand and
temporary investments purchased with a maturity of three months or less.
Supplementary Cash Flows Information:
1995 1994 1993
(millions)
Cash paid during the year for:
Interest (reduced for net costs
of borrowed funds capitalized) $376.0 $355.9 $375.8
Federal income taxes 159.6 154.2 187.8
Non-cash transactions from
investing and financing activities:
Exchange of long-term marketable
securities 12.3 11.8 169.8
Assumption of obligations and
acquisition of utility property 26.3
Other 3.1 (0.4)
Reclassification: Certain amounts in the 1994 and 1993 Consolidated Financial
Statements have been reclassified to conform to the 1995 presentation.
Note B Sale of Receivables:
Virginia Power has an agreement to sell, with limited recourse, certain accounts
receivable including unbilled amounts, up to a maximum of $200 million.
Additional receivables are continually sold, at Virginia Power's discretion, to
replace those collected up to the limit. At December 31, 1995 no amount was
outstanding; however, at December 31, 1994, $160 million of receivables had been
sold and were outstanding under this agreement. The limited recourse is provided
by Virginia Power's assignment of an additional undivided interest in accounts
receivable to cover any potential losses to the purchaser due to uncollectible
accounts. Virginia Power has provided for the estimated amount of such losses in
its accounts.
Note C Taxes
1995 1994 1993
(millions, except percentages)
Taxes other than federal income tax:
Real estate and property $91.2 $83.9 $84.8
State and local gross receipts 104.8 104.9 100.8
Payroll 31.1 33.9 31.3
Other 46.7 51.9 47.3
$273.8 $274.6 $264.2
Provision for federal income taxes:
Included in operating expenses:
Current $179.8 $120.8 $197.2
Tax effects of temporary/
timing differences:
Liberalized depreciation 56.6 61.3 50.6
Indirect construction cost (13.8) (21.5) (23.2)
Other plant related items 12.1 4.0 19.9
Deferred fuel (2.2) 0.8 11.8
Deferred capacity (3.8) (9.0) (24.7)
Separation costs (12.4)
Customer accounts reserve 36.8 (34.9)
Intangible drilling costs 3.6 4.1 15.3
Other, net (20.9) (9.2) 17.4
19.2 67.3 32.2
Net deferred investment tax
credits--amortization (16.9) (17.1) (19.2)
Total provision for federal
income tax expense $182.1 $171.0 $210.2
Computation of provision for federal
income tax:
Pre-tax income $607.1 $649.2 $726.8
Tax at statutory federal income
tax rate of 35% applied to
pre-tax income $212.5 $227.2 $254.4
Changes in federal income taxes
resulting from:
Preferred dividends of
Virginia Power 15.4 14.8 14.8
Amortization of investment tax
credits (16.9) (17.1) (16.1)
Nonconventional fuel credit (28.2) (32.0) (30.5)
Other, net (0.7) (21.9) (12.4)
Total provision for federal
income tax expense $182.1 $171.0 $210.2
Effective tax rate 30% 26.3% 28.9%
<PAGE>
34
Dominion Resources net noncurrent deferred tax liability is
attributable to:
1995 1994
(millions)
Assets:
Deferred investment tax credits $ (96.4) $ (102.4)
Liabilities:
Depreciation method and plant
basis differences $1,403.5 $1,349.7
Income taxes recoverable through future rates 171.6 172.9
Partnership basis differences 111.5 104.3
Other 70.9 89.1
Total deferred income tax liability 1,757.5 1,716.0
Net deferred income tax liability $1,661.1 $1,613.6
Note D Regulatory Assets:
Certain expenses normally reflected in income are deferred on the balance sheet
as regulatory assets and are recognized in income as the related amounts are
included in rates and recovered from customers. The company's regulatory assets
included the following:
At December 31, 1995 1994
(millions)
Income taxes recoverable through
future rates $484.5 $488.2
Cost of decommissioning DOE uranium
enrichment facilities 78.5 83.7
Deferred losses (gains) on
reacquired debt, net 99.3 107.0
North Anna Unit 3 project termination costs 101.8 128.5
Other 52.3 63.6
Total $816.4 $871.0
Income taxes recoverable through future rates represent principally the tax
effect of depreciation differences not normalized. These amounts are amortized
as the related temporary differences reverse.
The costs of decommissioning Department of Energy's (DOE) uranium
enrichment facilities have been deferred and represent the unamortized portion
of Virginia Power's required contributions to a fund for decommissioning and
decontaminating the DOE's uranium enrichment facilities. Virginia Power is
making such contributions over a 15-year period with escalation for inflation.
These costs are being recovered in fuel rates.
Losses or gains on reacquired debt are deferred and amortized over the
lives of the new issues of long-term debt. Gains or losses resulting from the
redemption of debt without refinancing are amortized over the remaining lives of
the redeemed issues.
The construction of North Anna 3 was terminated in November 1982. All
retail jurisdictions have permitted recovery of the incurred costs. For Virginia
and FERC jurisdictional customers, the amounts deferred are being amortized from
the date termination costs were first includible in rates.
The incurred costs underlying these regulatory assets may represent
expenditures by Virginia Power or may represent the recognition of liabilities
that ultimately will be settled at some time in the future. For some of those
regulatory assets representing past expenditures that are not included in
Virginia Power's rate base or used to adjust Virginia Power's capital structure,
Virginia Power is not allowed to earn a return on the unrecovered balance. Of
the $816.4 million of regulatory assets at December 31, 1995, approximately $123
million represent past expenditures that are effectively excluded from the rate
base by the Virginia State Corporation Commission that has primary jurisdiction
over Virginia Power's rates. However, of that amount $101.8 million represent
the present value of amounts to be recovered through future rates for North Anna
Unit 3 project termination costs, and thus reflect a reduction in the actual
dollars to be recovered through future rates for the time value of money.
Virginia Power does not earn a return on the remaining $21.2 million of
regulatory assets, effectively excluded from rate base, to be recovered over
various recovery periods up to 23 years, depending on the nature of the deferred
costs.
Notes E Jointly Owned Plants:
The following information relates to Virginia Power's proportionate share of
jointly owned plants at December 31, 1995:
Bath County
Pumped North Anna Clover
Storage Station Power Station Power Station
Ownership interest 60.0% 88.4% 50.0%
(millions)
Utility plant in service $1,074.8 $1,798.5 $289.6
Accumulated depreciation 188.6 635.7 1.5
Nuclear fuel 405.1
Accumulated amortization
of nuclear fuel 387.3
CWIP 0.7 110.9 211.1
The co-owners are obligated to pay their share of all future construction
expenditures and operating costs of the jointly owned facilities in the same
proportions as their respective ownership interest. Virginia Power's share of
operating costs is classified in the appropriate expense category in the con
solidated statements of income.
<PAGE>
35
Note F Short-Term Debt:
Dominion Resources and its subsidiaries have credit agreements with various
expiration dates. These agreements provided for maximum borrowings of $885.8
million and $705.8 million at December 31, 1995 and 1994, respectively. At
December 31, 1995 and 1994, $48.6 million and $135.2 million, respectively, was
borrowed under such agreements and classified as long-term debt.
Dominion Resources credit agreements supported $199 million and $224
million of Dominion Resources commercial paper at December 31, 1995 and 1994,
respectively.
Virginia Power credit agreements, which in September 1995 replaced the
intercompany credit agreement with Dominion Resources, supported $169 million of
Virginia Power commercial paper at December 31, 1995. No Virginia Power
commercial paper was outstanding at December 31, 1994.
A subsidiary of Dominion Capital also had $91 million and $90.7 million of
nonrecourse commercial paper outstanding at December 31, 1995 and 1994,
respectively. A total of $289 million and $250 million of the commercial paper
was classified as long-term debt at December 31, 1995 and 1994, respectively.
The commercial paper is supported by revolving credit agreements that have
expiration dates extending beyond one year. Dominion Resources and its
subsidiaries pay fees in lieu of compensating balances in connection with these
credit agreements. A summary of short-term debt outstanding at December 31
follows:
Amount Weighted Average
Outstanding Interest Rate
(millions, except percentages)
1995
Commercial paper $169.0 5.79%
Term-notes 67.6 11.7%
Total $236.6
1994
Commercial paper $64.0 6.08%
Term-notes 82.0 7.38%
Total $146.0
Notes G Marketable Securities:
Effective January 1, 1994, Dominion Resources adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS No. 115). The
standard prescribes how companies are to account for and report investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. This standard is effective for fiscal years
beginning after December 15, 1993.
Securities classified as available-for-sale as of December 31 follow:
Gross Gross
Unrealized Unrealized
Security Holding Holding Aggregate
Type Cost Gains Losses Fair Value
(millions)
1995
Equity $288.3 $8.0 $16.5 $279.8
Debt 5.8 0.1 5.7
1994
Equity $334.5 $1.3 $54.2 $281.6
Debt 5.5 0.6 4.9
Maturities of debt securities classified as available-for-sale as of December
31, 1995:
Aggregate
Security Type Cost Fair Value
(millions)
Tax exempt obligations:
0-5 years $0.3 $0.3
After five years 5.1 5.0
Temporary investments and deposits:
0-5 years $0.1 $0.1
After five years 0.3 0.3
For the years ended December 31, 1995 and 1994, the proceeds from the sales of
available-for-sale securities were $49.4 million and $35.8 million,
respectively. The gross realized gains and losses were $10.4 million and $0.1
million for 1995 and $0.4 million and $1.6 million for 1994, respectively. The
basis on which the cost of these securities was determined is specific
identification. For 1994, the gross gains included in earnings from transfers of
securities from the available-for-sale category into the trading category was
$0.8 million. The changes in net unrealized holding gain or loss on
available-for-sale securities has resulted in an increase in the separate
component of shareholders equity during the year ended December 31, 1995 of
$41.1 million, net of tax, and a decrease of $47.2 million, net of tax, for the
year ended December 31, 1994. The changes in net realized holding gain or loss
on trading securities increased earnings during the year ended December 31, 1995
by $2.1 million and decreased earnings by $10 million for the year ended
December 31, 1994.
In 1993, the company accounted for marketable securities as prescribed in
SFAS No. 12, "Accounting for Certain Marketable Securities." A net realized gain
of $12.5 million on the sale of marketable securities was included in net income
for the year ended December 31, 1993.
<PAGE>
36
Note H Fair Value of Financial Instruments:
The fair value amounts of the company's financial instruments have been
determined using available market information and valuation methodologies deemed
appropriate in the opinion of management. However, considerable judgment is
required to interpret market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the company could realize in a current market exchange. The use
of different market assumptions and/or estimation assumptions may have a
material effect on the estimated fair value amounts.
Carrying Amount Estimated Fair Value
December 31, 1995 1994 1995 1994
(millions)
Assets:
Cash and cash equivalents $66.7 $146.7 $66.7 $146.7
Trading securities 10.8 110.8 10.8 110.8
Available-for-sale securities 285.5 286.5 285.5 286.5
Pollution control project funds 11.9 20.3 11.9 20.3
Notes receivable 43.1 17.1 43.7 17.1
Nuclear decommissioning trust funds 351.4 260.9 351.4 260.9
Liabilities:
Short-term debt $236.6 $146.0 $236.6 $146.0
Long-term debt 5,058.8 5,134.4 5,322.4 4,951.9
Preferred securities of a
subsidiary trust $135.0 $140.4
Preferred stock $180.0 $222.1 $190.9 $201.5
Cash and Cash Equivalents: The carrying amount of these items is a
reasonable estimate of their fair value.
Marketable Securities and Nuclear Decommissioning Trust Funds: The
estimated fair value is determined based on quoted market prices, dealer quotes,
and prices obtained from inde pendent pricing sources.
Notes Receivable: The carrying value approximates fair value due to the
variable rate or term structure of the notes receivable.
Short Term Debt and Long-Term Debt: Market values are used to determine the
fair value for debt securities for which a market exists. For debt issues that
are not quoted on an exchange, interest rates currently available to the company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value. The carrying amount of debt issues with short-term
maturities and variable rates that are refinanced at current market rates is a
reasonable estimate of their fair value.
Preferred Securities of Subsidiary Trust: The fair value is based on market
quotations.
Preferred Stock: The fair value of the fixed-rate preferred stock subject
to mandatory redemption was estimated by discounting the dividend and principal
payments for a representative issue of each series over the average remaining
life of the series.
<PAGE>
37
Note I Long-Term Debt:
At December 31, 1995 1994
(millions)
Virginia Power First and Refunding Mortgage Bonds(1):
1992 Series A, 6.375%, due 1995 $180.0
Series T, 4.5%, due 1995 56.6
Series U, 5.125%, due 1997 $49.3 49.3
1992 Series B, 7.25%, due 1997 250.0 250.0
1988 Series A, 9.375%, due 1998 150.0 150.0
1992 Series F, 6.25%, due 1998 75.0 75.0
1989 Series B, 8.875%, due 1999 100.0 100.0
1993 Series C, 5.875%, due 2000 135.0 135.0
1992 Series D, 7.625%, due 2007 215.0 215.0
Various series, 6.0-8%, due 2001-2004 805.0 805.0
Various series, 5.45%-8.75%, due 2020-2025 1,144.5 944.5
Total First and Refunding Mortgage Bonds 2,923.8 2,960.4
Other long-term debt:
Virginia Power:
Bank loans, notes and term loans, 6.15%-10.8%,
due 1995-2003 762.7 798.2
Pollution control financings(2):
Money market municipals, due 2008-2027(3) 488.6 488.6
Dominion Resources:
Commercial paper(4) 199.0 160.0
Total other long-term debt 1,450.3 1,446.8
Nonrecourse--Nonutility Debt:
Dominion Resources:
Bank loans, 9.25%, due 2008 21.7 22.5
Dominion Capital:
Senior notes, fixed rate, 6.12%-11.875%,
due 1996-2005(5) 102.0 102.0
Term notes, fixed rate, 4.6%-12.48%, due 1994-2020 204.0 206.0
Revolving credit agreements, due 1994-1998(6) 34.6 61.7
Commercial paper(7) 90.0 90.0
Dominion Energy:
Term loan, 7.22% (1993-10.13%), due 1996(8) 68.6 71.3
Revolving credit agreements, due 1996(9) 14.0 69.5
Term loan, 5.445%, due 1998 55.0 75.0
Bank loans, 9.70-13.20%, due 2005 35.0 28.8
Bank loans, 4.5%-6.43%, due 1996-2024 59.8 0.3
Total nonrecourse--nonutility debt 684.7 727.1
Less amounts due within one year:
First and refunding mortgage bonds 236.6
Bank loans, notes and term loans 259.6 75.6
Sinking fund obligations
Nonrecourse--nonutility 161.2 86.9
Total amount due within one year 420.8 399.1
Less unamortized discount, net of premium 26.1 24.6
Total long-term debt $4,611.9 $4,710.6
(1) Substantially all of Virginia Power's property is subject to the lien of
the mortgage securing its First and Refunding Mortgage Bonds.
(2) Certain pollution control equipment at Virginia Power's generating
facilities has been pledged or conveyed to secure these financings.
(3) Interest rates vary based on short-term tax-exempt market rates. The
weighted average daily interest rates were 3.89% and 2.96% for 1995 and
1994, respectively.
(4) See Note F to the Consolidated Financial Statements.
(5) The Rincon Securities common stock owned by Dominion Capital is pledged as
collateral to secure the loan.
(6) The weighted average interest rates during 1995 and 1994 were 6.76% and
5.19%, respectively.
(7) The weighted average interest rates during 1995 and 1994 were 5.91% and
4.27%, respectively.
(8) The Enron/Dominion Cogen Corp. common stock owned by Dominion Energy is
pledged as collateral to secure the loan.
(9) The weighted average interest rates during 1995 and 1994 were 6.04% and
4.72%, respectively.
<PAGE>
38
On February 8, 1996, Dominion Energy established a $400 million revolving
credit facility through ABN AMRO North America, Inc. The interest rate is
variable and is presently set at LIBOR plus 1/4. Proceeds from the revolver were
used to retire a $55 million term loan on February 15, 1996. In addition, a $100
million revolving credit agreement was canceled by the company on February 8,
1996.
Maturities (including cash sinking fund obligations) through 2000 are as
follows (in millions): 1996-$420.8; 1997-$459.1; 1998-$481.2; 1999-$275.3; and
2000-$260.4.
Note J Common stock:
During 1995 the company purchased on the open market and retired 685,500 shares
of common stock for an aggregate price of $24.8 million. From 1993 through 1995,
the following changes in common stock occurred:
<TABLE>
<CAPTION>
1995 1994 1993
Shares Shares Shares
Outstanding Amount Outstanding Amount Outstanding Amount
(millions)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 172.4 $3,157.6 168.1 $2,991.0 163.8 $2,796.3
Changes due to:
Automatic Dividend
Reinvestment and
Stock Purchase Plan 2.9 107.6 2.9 112.2 2.6 115.3
Stock Purchase Plan
for Customers of
Virginia Power 1.4 45.8 1.3 51.3 1.0 51.6
Employee Savings Plan .2 8.3 .6 23.2 .7 29.7
Stock repurchase and
retirement (.7) (24.8) (.6) (20.7)
Other .2 9.0 .1 .6 (1.9)
Balance at December 31 176.4 $3,303.5 172.4 $3,157.6 168.1 $2,991.0
</TABLE>
Note K Long-term incentive plan:
A long-term incentive plan (the Plan) provides for the granting of nonqualified
stock options and restricted stock to certain employees of Dominion Resources
and its affiliates. The aggregate number of shares of common stock that may be
issued pursuant to the Plan is 3,750,000. The changes in share and option awards
under the Plan were as follows:
<TABLE>
<CAPTION>
Restricted Price Stock Option Shares
Shares Per Share Options Price Excercisable
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 17,024 14,706 14,706
Awards granted--1993 19,457 $41.875-$42.75
Exercised/distributed (9,582) (2,242) $27.75-$29.625
Balance at December 31, 1993 26,899 12,464 12,464
Awards granted--199 19,842 $40.625-$40.875
Exercised/distributed (5,555) (1,388) $29.625
Balance at December 31, 1994 41,186 11,076 11,076
Awards granted--1995 25,320 $37.625
Exercised/distributed (21,576)
Balance at December 31, 1995 44,930 11,076 11,076
</TABLE>
<PAGE>
39
Note L Virginia Power Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust
In 1995, Virginia Power established Virginia Power Capital Trust I (VP Capital
Trust). VP Capital Trust sold 5,400,000 shares of Preferred Securities for $135
million, representing preferred beneficial interests and 97 percent beneficial
owner ship in the assets held by VP Capital Trust.
Virginia Power issued $139.2 million of its 1995 Series A, 8.05 percent
Junior Subordinated Notes (the Notes) in exchange for the $135 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 percent
beneficial ownership interest in the assets held by VP Capital Trust. The Notes
constitute 100 percent of VP Capital Trust's assets.
The Notes are due September 30, 2025, but may be extended up to an
additional ten years, subject to satisfying certain conditions. However,
Virginia Power may redeem the Notes on or after September 30, 2000, under
certain circumstances. The Preferred Securities are subject to mandatory
redemption upon repayment of the Notes at maturity or earlier redemption. At
redemption, each Preferred Security shall be entitled to receive a liquidation
amount of $25 plus accrued and unpaid distributions, including any interest
thereon.
Note M Preferred Stock:
Dominion Resources is authorized to issue up to 20,000,000 shares of preferred
stock; however, no such shares are issued and outstanding.
Virginia Power has authorized 10,000,000 shares of preferred stock, $100
liquidation preference. Upon voluntary liquidation, each share is entitled to
receive $100 plus accrued dividends. Dividends are cumulative. Virginia Power
preferred stock subject to mandatory redemption at December 31, 1995 was as
follows:
Shares
Series Outstanding
$5.58 400,000(1)(2)
$6.35 1,400,000(1)(3)
Total 1,800,000(1)(2)
(1) Shares are non-callable prior to redemption.
(2) All shares to be redeemed on 3/1/00.
(3) All shares to be redeemed on 9/1/00.
During the years 1993 through 1995, the following shares were redeemed:
Year Dividend Shares
1995 $7.30 417,319
1994 7.30 37,681
1993 7.30 30,000
1993 7.58 480,000
1993 7.325 400,419
At December 31, 1995 Virginia Power preferred stock not subject to mandatory
redemption, $100 liquidation preference, is listed in the table below.
Issued and Entitled Per
Outstanding Share Upon
Dividend Shares Redemption
$5.00 106,677 $112.50
$4.04 12,926 102.27
$4.20 14,797 102.50
$4.12 32,534 103.73
$4.80 73,206 101.00
$7.05 500,000 105.00(1)
$6.98 600,000 105.00(2)
MMP 1/87 series(3) 500,000 100.00
MMP 6/87 series(3) 750,000 100.00
MMP 10/88 series(3) 750,000 100.00
MMP 6/89 series(3) 750,000 100.00
MMP 9/92A(3) 500,000 100.00
MMP 9/92B(3) 500,000 100.00
Total 5,090,140
(1) Through 7/31/03 and thereafter to amounts declining in steps to $100.00
after 7/31/13.
(2) Through 8/31/03 and thereafter to amounts declining in steps to $100.00
after 8/31/13.
(3) Money Market Preferred (MMP) dividend rates are variable and are set every
49 days via an auction. The weighted average rates for these series in
1995, 1994 and 1993, including fees for broker/dealer agreements, were
4.93%, 3.75%, and 3.01%, respectively.
During the years 1993 through 1995, the following shares were redeemed:
Year Dividend Shares
1995 $7.45 400,000
1995 7.20 450,000
1993 7.72 350,000
1993 (1972 series) 7.72 500,000
<PAGE>
40
Note N Retirement Plan, Postretirement Benefits and Other Benefits
Retirement Plan: Dominion Resources' Retirement Plan (the Plan) covers virtually
all employees of Dominion Resources and its subsidiaries. The benefits are based
on years of service and the employee's compensation. Dominion Resources' funding
policy is to contribute annually an amount that is in accordance with the
provisions of the Employment Retirement Income Security Act of 1974.
The components of the provision for net periodic pension expense were as
follows:
1995 1994 1993
(millions)
Service cost--benefits earned
during the year $23.4 $24.6 $21.9
Interest cost on projected
benefit obligation 54.9 46.3 46.3
Actual return on plan
assets (56.7) (51.3) (49.3)
Net amortization and deferral (0.7) 0.1 (2.6)
Net periodic pension cost $20.9 $19.7 $16.3
The following table sets forth the Plan's funded status:
1995 1994
(millions)
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefit of 1995-$540.2 and
1994-$480.9 $607.4 $577.5
Projected benefit obligation
for service rendered to date $767.0 $678.4
Plan assets at fair value, primarily
listed stocks and U.S. bonds 763.6 588.1
Plan assets in excess of projected
benefit obligation (3.4) (90.3)
Unrecognized net loss from past
experience different from that
assumed and effects of changes in
assumptions 35.7 102.8
Unrecognized prior service cost 5.3 5.9
Unrecognized net asset at January 1,
being recognized over
16 years beginning in 1986 (25.1) (28.5)
Prepaid (accrued) pension cost included in
other assets (liabilities) $12.5 $(10.1)
Significant assumptions used in determining net periodic pension cost and the
projected benefit obligation were:
As of December 31, 1995 1994
Discount rates 8.00% 8.25%
Rates of increase in
compensation levels 5% 5%
Expected long-term
rate of return 9.5% 9.5%
Postretirement Benefits: Dominion Resources and its subsidiaries provide retiree
health care and life insurance benefits through insurance companies with annual
premiums based on benefits paid during the year. From time to time in the past,
Dominion Resources and its subsidiaries have changed benefits. Some of these
changes have reduced benefits. Under the terms of their benefits plans, the
companies reserve the right to change, modify or terminate the plans.
Net periodic postretirement benefit expense for 1995 and 1994 was as
follows:
Year ending December 31, 1995 1994
(millions)
Service cost $8.9 $11.2
Interest cost 21.9 21.8
Return on plan assets (6.1 0.9
Amortization of transition obligation 12.1 12.1
Net amortization and deferra 0.1 (4.1)
Net periodic postretirement benefit expense $36.9 $41.9
The following table sets forth the funded status of the plan:
December 31, 1995 1994
(millions)
Fair value of plan assets $96.3 $59.7
Accumulated postretirement
benefit obligation:
Retirees $211.4 $208.7
Active plan participants 99.2 93.9
Accumulated postretirement
benefit obligation 310.6 302.6
Accumulated postretirement
benefit obligation in excess of plan assets (214.3) (242.9)
Unrecognized transition obligation 206.2 218.3
Unrecognized net experience gain 8.6 16.9
Prepaid (accrued) postretirement benefit cost $0.5 $(7.7)
<PAGE>
41
A one percent increase in the health care cost trend rate would result in an
increase of $3.5 million in the service and interest cost components and a $37.2
million increase in the accumulated postretirement benefit obligation.
Significant assumptions used in determining the postretirement benefit
obligation were:
1995 1994
Discount rates 8.0% 8.25%
Assumed return on plan assets 9.0% 9.0%
Medical cost trend rate 9% for first year 10% for first year
8% for second year 9% for second year
Scaling down to Scaling down to
4.75% beginning in 4.75% beginning in
the year 2001 the year 2001
Virginia Power is recovering these costs in rates on an accrual basis in all
material respects, in all jurisdictions. Current and future rate recoveries of
OPEB accruals are expected to collect sufficient amounts to provide for the
unfunded accumulated postretirement obligation over time.
The funds being collected for OPEB accrual in rates, in excess of OPEB
benefits actually paid during the year, are contributed to external benefit
trusts under Virginia Power's current funding policy.
Other Benefits: In 1994, Virginia Power offered an early retirement program
to employees aged 50 or older and offered a voluntary separation program to all
regular full-time employees. Approximately 1,400 employees accepted offers under
these programs. The costs associated with these programs were $90.1 million.
Virginia Power capitalized $25.9 million based upon regulatory precedent and
expensed $64.2 million.
Note O Restructuring
In March 1995, Virginia Power announced the implementation phase of its Vision
2000 program. During this phase, Virginia Power began reviewing operations with
the objective of out sourcing services where economical and appropriate, and re-
engineering the remaining functions to streamline operations. The re-engineering
process is resulting in outsourcing, decentralization, reorganization and
downsizing for portions of Virginia Power's operations. As part of this process,
Virginia Power is reevaluating its utilization of capital resources in its
operations to identify further opportunities for operational efficiencies
through outsourcing or re-engineering of its processes.
In 1995, restructuring charges of $121.5 million contains $117.9 million of
Virginia Power's restructuring charges which included severance costs, purchased
power contract cancellation and negotiated settlement costs, capital project
cancellation costs, and other costs incurred directly as a result of the Vision
2000 initiatives. The Vision 2000 review of operations is expected to continue
through 1996. At this time, Virginia Power management cannot estimate the
restructuring costs yet to be incurred.
In May 1995, Virginia Power established a comprehensive involuntary
severance package for salaried employees who lose their positions as a result of
these initiatives. Virginia Power is recognizing the cost associated with
employee termi nations in accordance with Emerging Issues Task Force Consensus
No. 94-3 as management identifies the positions to be eliminated. Severance
payments will be made over a period not to exceed twenty months. Through
December 31, 1995, management had decided to eliminate 1,018 positions. The
recognition of severance costs resulted in a charge to operations in 1995 of
$51.2 million. At December 31, 1995, 507 employees have been terminated and
severance payments totaling $8.7 million have been paid. Virginia Power
estimates that these staffing reductions will result in annual savings, net of
outsourcing costs, in the range of $50 million to $60 million. These savings
will be reflected in lower construction expenditures as well as lower operation
and maintenance expenses.
In an effort to minimize its exposure to potential stranded investment,
Virginia Power is evaluating its long-term purchased power contracts and
negotiating modifications to their terms, including cancellations, where it is
determined to be
<PAGE>
42
economically advantageous to do so. Virginia Power also negotiated settlements
with several other parties to terminate their rights to sell power to Virginia
Power. The cost of contract cancellations and negotiated settlements was $8.1
million in 1995. Based on contract terms and estimated quantities of power that
would have otherwise been delivered, the cancellation of these contracts and
rights to sell power to Virginia Power has the effect of reducing Virginia
Power's future purchased power costs, including energy payments, by up to $214
million annually. The cost of alternative sources of power that might ultimately
be required as a result of these settlements are expected to be significantly
less than $214 million.
Restructuring charges reported in 1995 included $37.3 million for the
cancellation of a project to construct a facility to handle low level
radioactive waste at Virginia Power's North Anna Power Station. As a result of
reevaluating the handling of low level radioactive waste, Virginia Power
concluded that the facility should not be completed due to the additional
capital investment required, decreased Virginia Power volumes of low level
radioactive waste resulting from improvements in station procedures and the
availability of more economical offsite processing.
As a regulated utility, Virginia Power provides service to its customers at
rates based on its cost of operations and an opportunity to earn a return on its
shareholder's investment. From time to time, Virginia Power reviews its cost of
providing regulated services and files such information with certain regulatory
commissions having jurisdiction. Virginia Power or the regulatory commissions
may initiate proceedings to review rates charged to Virginia Power
jurisdictional customers. The incurrence of restructuring charges and the
savings resulting therefrom in subsequent periods are elements of Virginia
Power's cost of operations. Accordingly, Vision 2000 costs and related savings
will be considered in any future review of Virginia Power's overall regulatory
cost of service.
Note P Commitments and Contingecies
As the result of issues generated in the course of daily business, the company
is involved in legal, tax and regulatory proceedings before various courts,
regulatory commissions and governmental agencies. While some of the proceedings
involve substantial amounts of money, management believes that the final
disposition of these proceedings will not have an adverse material effect on
operations or the financial position of the company.
Virginia Power
Federal Energy Regulatory Commission Audit: The Federal Energy Regulatory
Commission (FERC) has recently conducted a compliance audit of Virginia Power's
financial statements for the years 1990 to 1994. Virginia Power has received a
preliminary draft of the audit report from the FERC, in which certain compliance
exceptions were noted. Virginia Power has supplied information to the FERC staff
relating to these preliminary exceptions, but no final audit report has been
issued. Based on information available at this time, the disposition of these
issues is not expected to have a significant effect on Virginia Power's
financial position or results of operations.
Construction Program: Virginia Power has made substantial commitments in
connection with its construction program and nuclear fuel expenditures, which
are estimated to total $569.3 million (excluding AFC) for 1996. Additional
financing is contemplated in connection with this program.
Purchased Power Contracts: Since 1984, Virginia Power has entered into
contracts for the long-term purchase of capacity and energy from other
utilities, qualifying facilities and independent power producers. As of December
31, 1995, there were 67 nonutility generating facilities under contract to
provide Virginia Power 3,493 megawatts of dependable summer capacity. Of these,
66 projects (aggregating 3,295 megawatts) were operational at the end of 1995,
with the remaining project to become operational before 1998. The following
table shows the minimum payments expected to be made under these contracts. The
totals include payments for capacity, which are subject to generating
performance as provided by the contracts, and payments for the minimum amounts
of energy Virginia Power is obligated to buy and the producers provide.
Commitment
(millions) Capacity Other
1996 $738.3 $207.4
1997 784.7 213.2
1998 788.8 219.8
1999 791.6 224.2
2000 707.4 163.6
After 2000 11,106.3 1,200.9
Total $14,917.1 $2,229.1
Present value of the total $6,860.7 $1,243.4
<PAGE>
43
In addition to the commitments listed above, under some contracts, Virginia
Power may purchase, at its option, additional power as needed. Payments for
purchased power (including economy, emergency, limited-term, short-term, and
long-term purchases) for the years 1995, 1994 and 1993 were $1,093 million,
$1,025 million and $958 million, respectively.
Fuel Purchase Commitments: Virginia Power's estimated fuel purchase
commitments for the next five years for system generation are as follows:
1996-$348 million; 1997-$319 million; 1998-$205 million; 1999-$137 million; and
2000-$151 million.
Environmental Matters: Environmental costs have been historically recovered
through the ratemaking process; however, should material costs be incurred and
not recovered through rates, Virginia Power's results of operations and
financial condition could be adversely impacted.
The EPA has identified Virginia Power 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 $46.5 million to $134.6 million. Virginia Power's pro
portionate share of the costs is expected to be in the range of $0.5 million to
$6.7 million, based upon allocation formulas and the volume of waste shipped to
the sites. As of December 31, 1995, Virginia Power accrued a reserve of $1.4
million to meet its obligations at these two sites.
Based on a financial assessment of the PRPs involved at these sites,
Virginia Power has determined that it is probable that the PRPs will fully pay
the costs apportioned to them. Virginia Power and Dominion Resources along with
Consolidated Natural Gas have remedial action responsibilities remaining at two
coal tar sites. Virginia Power and Dominion Resources have accrued a $2 million
reserve to meet their estimated liability based on site studies and
investigations performed at these sites. In addition, on December 13, 1995, a
civil action was instituted against the City of Norfolk and Virginia Power by a
landowner who alleges that his property has been contaminated by toxic
pollutants originating from one of these sites, which is now owned by the City
of Norfolk. The plaintiff seeks compensatory damages of $10 million and punitive
damages of $5 million from Virginia Power. The Company filed its answer denying
liability on January 10, 1996.
Virginia Power generally seeks to recover its costs associated with
environmental remediation from third party insurers. At December 31, 1995
pending claims were not recognized as an asset or offset against recorded
obligations.
Nuclear Insurance: The Price-Anderson Act limits the public liability of an
owner of a nuclear power plant to $8.9 billion for a single nuclear incident.
The Price Anderson Amendments Act of 1988 allows for an inflationary provision
adjustment every five years. Virginia Power has purchased $200 million of
coverage from commercial insurance pools with the remainder provided through a
mandatory industry risk- sharing program. In the event of a nuclear incident at
any licensed nuclear reactor in the United States, Virginia Power could be
assessed up to $81.7 million (including a 3 percent insurance premium tax for
Virginia) for each of its four licensed reactors not to exceed $10.3 million
(including a 3 percent insurance premium tax for Virginia) per year per reactor.
There is no limit to the number of incidents for which this retrospective
premium can be assessed.
Nuclear liability coverage for claims made by nuclear workers first hired
on or after January 1, 1988, except those arising out of an extraordinary
nuclear occurrence, is provided under the Master Worker insurance program.
(Those first hired into the nuclear industry prior to January 1, 1988 are
covered by the policy discussed above.) The aggregate limit of coverage for the
industry is $400 million ($200 million policy limit with automatic
reinstatements of an additional $200 million). Virginia Power's maximum
retrospective assessment is approximately $12.5 million (including a 3 percent
insurance premium tax for Virginia).
Virginia Power's current level of property insurance coverage ($2.55
billion for North Anna and $2.4 billion for Surry) exceeds the NRC's minimum
requirement for nuclear power plant licensees of $1.06 billion per reactor site,
and includes coverage for premature decommissioning and functional total
<PAGE>
44
loss. The NRC requires that the proceeds from this insurance be used first to
return the reactor to and maintain it in a safe and stable condition, and second
to decontaminate the reactor and station site in accordance with a plan approved
by the NRC. Virginia Power's nuclear property insurance is provided by Nuclear
Mutual Limited (NML) and Nuclear Electric Insurance Limited (NEIL), two mutual
insurance companies, and is subject to retrospective premium assessments in any
policy year in which losses exceed the funds available to these insurance
companies. The maximum assessment at the first incident of the current policy
period is $42.7 million. The maximum assessment related to a second incident is
an additional $15.4 million. Based on the severity of the incident, the boards
of directors of Virginia Power's nuclear insurers have the discretion to lower
the maximum retrospective premium assessment or eliminate either or both
completely. For any losses that exceed the limits, or for which insurance
proceeds are not available because they must first be used for stabilization and
decontamination, Virginia Power has the financial responsibility.
Virginia Power purchases insurance from NEIL to cover the cost of
replacement power during the prolonged outage of a nuclear unit due to direct
physical damage of the unit. Under this program, Virginia Power is subject to a
retrospective premium assessment for any policy year in which losses exceed
funds available to NEIL. The current policy period's maximum assessment is $9
million.
As a joint owner of the North Anna Power Station, ODEC is responsible for
its proportionate share (11.6 percent) of the insurance premiums applicable to
that station, including any retrospective premium assessments and any losses not
covered by insurance.
Dominion Resources
Under the terms of an investment agreement, Dominion Resources must
provide contingent equity support to Dominion Energy in the amount of $56.5
million. Management believes the possibility of such support to Dominion
Energy is remote.
Dominion Energy
Dominion Energy has general partnership interests in certain of its energy
ventures. Accordingly, Dominion Energy may be called upon to fund future
operation of these investments to the extent operating cash flow is
insufficient.
Note Q Quarterly Financial and Common Stock Data (Unaudited)
The following amounts reflect all adjustments, consisting of only normal
recurring accruals (except as disclosed below), necessary in the opinion of
Dominion Resources' management for a fair statement of the results for the
interim periods.
Quarterly Financial and Common Stock Data--Unaudited
1995 1994
(in millions, except per share amounts)
Revenues
First Quarter $1,129.3 $1,167.0
Second Quarter 1,042.8 1,109.7
Third Quarter 1,345.0 1,209.8
Fourth Quarter 1,134.6 1,004.6
Year $4,651.7 $4,491.1
Income before provision
for Federal Income Taxes
First Quarter $151.9 $197.5
Second Quarter 107.3 188.9
Third Quarter 295.1 234.5
Fourth Quarter 52.8 28.3
Year $607.1 $649.2
Net Income
First Quarter $108.5 $141.4
Second Quarter 78.1 136.2
Third Quarter 197.9 161.3
Fourth Quarter 40.5 39.3
Year $425.0 $478.2
Earnings Per Share
First Quarter $0.63 $0.84
Second Quarter 0.45 0.80
Third Quarter 1.14 0.94
Fourth Quarter 0.23 0.23
Year $2.45 $2.81
Dividends Per Share
First Quarter $0.645 $0.635
Second Quarter 0.645 0.635
Third Quarter 0.645 0.635
Fourth Quarter 0.645 0.645
Year $2.580 $2.550
Stock Price Range
First Quarter 39-1/4-35-1/2 45-3/8-39-5/8
Second Quarter 38-5/8-35-7/8 42-1/2-35-7/8
Third Quarter 37-7/8-34-7/8 38-3/8-34-7/8
Fourth Quarter 41-5/8-37-5/8 38-1/8-35-1/8
Year 41-5/8-34-7/8 45-3/8-34-7/8
<PAGE>
45
As part of the Vision 2000 program (see Note O), Virginia Power recorded $117.9
million of restructuring charges in 1995. Restructuring charges included
severance costs, purchase power contract cancellation and negotiated settlement
costs, capital project cancellation costs, and other costs incurred directly as
a result of the Vision 2000 initiatives. Virginia Power expensed $3.5 million,
$1.8 million, $30.6 million and $82 million during the first, second, third and
fourth quarters, respectively. The impact of the write-off reduced net income by
$2.3 million, $1.1 million, $19.9 million and $53.3 million for the first,
second, third, and fourth quarters, respectively.
In the fourth quarter of 1995, Dominion Resources incurred at the holding
company restructuring expenses amounting to $3.6 million and other charges
amounting to $8.8 million. The other charges included litigation costs which
were incurred to resolve the shareholder claims made in 1994. The impact of the
restructuring expenses reduced net income by $2.3 million and the other charges
reduced net income by $5.8 million.
During December 1995, Dominion Energy settled certain outstanding disputes
with a supplier and renegotiated the terms of related long term supply
contracts. As a result, the fourth quarter earnings include gains from these
changes which total $6.2 million, net of tax.
In June 1995, Dominion Resources Black Warrior Trust units were sold to
third parties amounting to a gain of $5.4 million, net of tax. These were the
remaining ownership units of a trust established in June 1994 when Dominion
Energy transferred from Dominion Black Warrior Basin to Dominion Resources Black
Warrior Trust a 65 percent overriding royalty interest in coal seam gas
properties.
In 1994, Virginia Power offered an early retirement program to employees
aged 50 or older and offered a voluntary separation program to all regular
full-time employees. Approximately 1,400 employees accepted offers under these
programs. The costs associated with these programs were $90.1 million. Virginia
Power capitalized $25.9 million to construction work in progress based upon
regulatory precedent and expensed $2.8 million, $10.4 million and $51 million
during the second, third and fourth quarters, respectively. The impact of the
write-off was to reduce net income by $1.8 million, $6.7 million and $33.1
million for the second, third and fourth quarters, respectively.
On June 28, 1994, Dominion Energy transferred a 65% overriding royalty
interest in coal seam gas properties then owned by Dominion Black Warrior Basin,
a wholly owned subsidiary of Dominion Energy, to Dominion Resources Black
Warrior Trust, which is sponsored by Dominion Resources. Units in the trust were
sold in the second quarter to third parties, culminating in a gain of $28.9
million, net of tax. Total federal and state taxes for this transaction amounted
to $20.1 million.
<PAGE>
46
Report of Management's Responsibilities
The management of Dominion Resources, Inc. is responsible for all
information and representations contained in the Consolidated Financial
Statements and other sections of the annual report. The Consolidated Financial
Statements, which include amounts based on estimates and judgments of
management, have been prepared in conformity with generally accepted accounting
principles. Other financial information in the annual report is consistent with
that in the Consolidated Financial Statements.
Management maintains a system of internal accounting controls designed to
provide reasonable assurance, at a reasonable cost, that Dominion Resources' and
its subsidiaries' assets are safeguarded against loss from unauthorized use or
disposition and that transactions are executed and recorded in accordance with
established procedures. Management recognizes the inherent limitations of any
system of internal accounting control, and therefore cannot provide absolute
assurance that the objectives of the established internal accounting controls
will be met.
This system includes written policies, an organizational structure designed
to ensure appropriate segregation of responsibilities, careful selection and
training of qualified personnel, and internal audits. Management believes that
during 1995 the system of internal control was adequate to accomplish the
intended objectives.
The Consolidated Financial Statements have been audited by Deloitte &
Touche LLP, independent auditors, whose designation by the Board of Directors
was ratified by the shareholders. Their audits were conducted in accordance with
generally accepted auditing standards and include a review of Dominion
Resources' and its subsidiaries' accounting systems, procedures and internal
controls, and the performance of tests and other auditing procedures sufficient
to provide reasonable assurance that the Consolidated Financial Statements are
not materially misleading and do not contain material errors.
The Audit Committees of the Boards of Directors, composed entirely of
directors who are not officers or employees of Dominion Resources or its
subsidiaries, meet periodically with independent auditors, the internal auditors
and management to discuss auditing, internal accounting control and financial
reporting matters and to ensure that each is properly discharged. Both
independent auditors and the internal auditors periodically meet alone with the
Audit Committees and have free access to the Committees at any time.
Management recognizes its responsibility for fostering a strong ethical
climate so that Dominion Resources' affairs are conducted according to the
highest standards of personal corporate conduct. This responsibility is
characterized and reflected in Dominion Resources' Code of Ethics, which
addresses potential conflicts of interest, compliance with all domestic and
foreign laws, the confidentiality of proprietary information, and full
disclosure of public information.
Dominion Resources, Inc.
/S/THOS. E. CAPPS /S/JAMES L. TRUEHEART
Thos. E. Capps James L. Trueheart
Chairman, President and Vice President and Controller
Chief Executive Officer
<PAGE>
47
Report of Independent Auditors
To the Shareholders and Board of Directors of Dominion Resources, Inc.
We have audited the accompanying consolidated balance sheets of Dominion
Resources, Inc. and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of income and retained earnings and of cash
flows for each of the three years in the period ended December 31, 1995. These
Consolidated Financial Statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these Consolidated
Financial Statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such Consolidated Financial Statements present fairly, in
all material respects, the consolidated financial position of Dominion
Resources, Inc. and subsidiaries as of December 31, 1995 and 1994 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/S/DELOITTE & TOUCHE LLP
Richmond, Virginia
February 2, 1996
[Deloitte & Touche LLP logo]
DOMINION RESOURCES, INC.
SUBSIDIARIES OF THE REGISTRANT
JURISDICTION OF NAME UNDER WHICH
NAME INCORPORATION BUSINESS IS CONDUCTED
Virgina Power in Virginia
Virginia Electric and and North Carolina Power
Power Company Virginia in North Carolina
Dominion Energy, Inc. Virginia Dominion Energy, Inc.
Dominion Capital, Inc. Virginia Dominion Capital, Inc.
EXHIBIT 23(i)
[Hunton & Williams Letterhead]
951 East Byrd Street
Richmond, Virginia 23219-4074
March 12, 1996
Dominion Resources, Inc.
Richmond, Virginia 23261
Dominion Resources, Inc.
Form 10-K
Gentlemen:
We consent to the incorporation by reference into the registration
statements of Dominion Resources, Inc. on Form S-3 (File No. 33-58219
and File No. 33-60673) of the statements, included in this Annual Report on Form
10-K, made in regard to our firm that relate to franchises, title to properties,
rate, environmental and other regulatory matters and litigation.
Sincerely,
/s/ HUNTON & WILLIAMS
HUNTON & WILLIAMS
EXHIBIT 23(ii)
[Jackson & Kelly Letterhead]
P.O. Box 553
Charleston, West Virginia 25322
March 12, 1996
Dominion Resources, Inc.
Richmond, Virginia 23261
Re: Dominion Resources, Inc.
Form 10-K
Gentlemen:
We consent to the incorporation by reference into the registration
statements of Dominion Resources, Inc., on Form S-3 (File No. 33-58219 and File
No. 33-60673) of the statements, included in this Annual Report on Form 10-K,
made in regard to our firm that are governed by the laws of West Virginia and
that relate to franchises, title to properties, rate and other regulatory
matters, and litigation.
Sincerely yours,
/s/ JACKSON & KELLY
JACKSON & KELLY
EXHIBIT 23(iii)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement File
No. 33-58219 and File No. 33-60673 of Dominion Resources, Inc. on Form S-3 and
Registration Statement File No. 33-55403 and File No. 33-62705 of Dominion
Resources, Inc. on Form S-8 of our report dated February 2, 1996, appearing
in an incorporated by reference in the Annual Report on Form 10-K of Dominion
Resources, Inc., for the year ended December 31, 1995.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Richmond, Virginia
March 12, 1996
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