-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JkoWYQI4h+q3hWPIkuABmlQ48S617AJXi+wApN0TtqNfhfufYAOqs7BjZS6lUUrY 3ISwO+3faUzkGHa3cYnyEA== 0000916641-02-002080.txt : 20021210 0000916641-02-002080.hdr.sgml : 20021210 20021210171035 ACCESSION NUMBER: 0000916641-02-002080 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20021205 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20021210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRGINIA ELECTRIC & POWER CO CENTRAL INDEX KEY: 0000103682 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 540418825 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02255 FILM NUMBER: 02853918 BUSINESS ADDRESS: STREET 1: 120 TREDEGAR ST CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047713000 MAIL ADDRESS: STREET 1: 120 TREDEGAR ST CITY: RICHMOND STATE: VA ZIP: 23219 8-K 1 d8k.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report: December 5, 2002 (Date of earliest event reported) Virginia Electric and Power Company (Exact name of registrant as specified in its charter) Virginia 1-2255 54-0418825 (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 701 East Cary Street Richmond, Virginia 23219 (804) 819-2000 (Address including zip code, and telephone number, including area code, of registrant's principal executive offices) (Former name or former address, if changed since last report.) ITEM 5. OTHER EVENTS On December 5, 2002, Virginia Electric and Power Company (the Company) entered into an underwriting agreement with Lehman Brothers Inc. for itself and as Representative for the Underwriters named therein for the sale of 1,250 Units (the Units, each Unit consisting of 1,000 shares) of Flexible Money Market Cumulative Preferred Stock 2002 Series A (Liquidation Preference $100 per Share). The Units are a portion of the $2 billion aggregate amount of securities that were registered by the Company under a registration statement on Form S-3 under Rule 415 of the Securities Act of 1933, as amended, which registration statement was declared effective on July 31, 2002 (File No. 333-96973). A copy of the underwriting agreement is filed as Exhibit 1.1 to this Form 8-K. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Exhibits 1.1 Underwriting Agreement, dated December 5, 2002, between the Company and Lehman Brothers Inc. for itself and as Representative for the Underwriters named therein. 3.1 Articles of Amendment to Restated Articles of Incorporation, as amended, of Virginia Electric and Power Company establishing Flexible Money Market Preferred Stock. 5.1 Tax Opinion of McGuireWoods LLP. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VIRGINIA ELECTRIC POWER COMPANY Registrant /s/ James P. Carney ------------------------------------ James P. Carney Assistant Treasurer Date: December 10, 2002 2 EX-1.1 3 dex11.txt UNDERWRITING AGREEMENT Exhibit 1.1 VIRGINIA ELECTRIC AND POWER COMPANY 1,250 UNITS EACH UNIT CONSISTS OF 1,000 SHARES OF FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R)) 2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE) UNDERWRITING AGREEMENT December 5, 2002 Lehman Brothers Inc. for itself and as Representative for the Underwriters named in Schedule I, attached to this Underwriting Agreement c/o Lehman Brothers Inc. 745 7th Avenue New York, New York 10019 Ladies and Gentlemen: The undersigned, Virginia Electric and Power Company (the "Company"), hereby confirms its agreement with the several Underwriters named in Schedule I hereto (the "Agreement") with respect to the issuance and sale to the several Underwriters named in Schedule I of the shares of the Company's Flexible Money Market Cumulative Preferred Stock 2002 Series A, liquidation preference $100 per Share (the "Series A Shares"). The Company confirms its agreement with the Underwriters with respect to the issuance of the Series A Shares and the sale to the several Underwriters of the number of Units, each Unit consisting of 1,000 Series A Shares (the "Units"), specified in Schedule II hereto, and the public offering thereof by the several Underwriters, upon the terms specified in Schedule II. 1. Underwriters and Representatives. The term "Underwriters" as used herein shall be deemed to mean the several persons, firms or corporations (including the Representative hereinafter mentioned) named in Schedule I hereto, and the term "Representative" as used herein shall be deemed to mean the Representative to whom this Agreement is addressed, who by signing this Agreement represents that it has been authorized by the other Underwriters to execute this Agreement on their behalf and to act for them in the manner herein provided. If there shall be only one person, firm or corporation named in Schedule I hereto, the term "Underwriters" as used herein shall mean that person, firm or corporation. All obligations of the Underwriters hereunder are several and not joint. Unless otherwise stated, any action under or in respect of this Agreement taken by the Representative will be binding upon all the Underwriters. - ---------------- (R) Registered Trademark of Lehman Brothers Inc. 2. Description of the Units. Schedule II specifies the total number of the Units, the initial public offering price of the Units and the purchase price to be paid by the Underwriters, and sets forth the date, time and manner of delivery of the Units and payment therefor. Schedule II also specifies (to the extent not set forth in Sections 4 and 5 herein, the Registration Statement and Prospectus referred to below) the terms and provisions for the purchase of such Units. 3. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Underwriters that: (a) A registration statement, No. 333-96973 on Form S-3 for the registration of the Series A Shares comprising the Units under the Securities Act of 1933, as amended (the "Securities Act"), heretofore filed with the Securities and Exchange Commission (the "Commission") has become effective. The registration statement, including all exhibits thereto, as amended through the date hereof, is hereinafter referred to as the "Registration Statement"; the prospectus relating to the preferred stock of the Company and other securities included in the Registration Statement, which prospectus is now proposed to be supplemented by a prospectus supplement relating to the Series A Shares comprising the Units to be filed with the Commission under the Securities Act, as completed and as so supplemented, is hereinafter referred to as the "Prospectus". As used herein, the terms "Registration Statement" and "Prospectus" include all documents (including any Current Report on Form 8-K) incorporated therein by reference, and shall include any documents (including any Current Report on Form 8-K) filed after the date of such Registration Statement or Prospectus and incorporated therein by reference from the date of filing of such incorporated documents (collectively, the "Incorporated Documents"). (b) No order suspending the effectiveness of the Registration Statement or otherwise preventing or suspending the use of the Prospectus has been issued by the Commission and is in effect and no proceedings for that purpose are pending before or, to the knowledge of the Company, threatened by the Commission. The Registration Statement and the Prospectus comply in all material respects with the provisions of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), and the rules, regulations and releases of the Commission thereunder (the "Rules and Regulations); neither the Registration Statement on the date it was declared effective (the Effective Date") nor the Prospectus on the date hereof contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and, on the Closing Date (as defined below), the Registration Statement and the Prospectus (including any amendments and supplements thereto), will conform in all respects to the requirements of the Securities Act and the Rules and Regulations, and neither of such documents will include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that the foregoing representations and warranties in this Section 3(b) shall not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon information furnished herein or in writing to the Company by the Underwriters or on the Underwriters' behalf through the Representative for use in the Registration Statement or Prospectus; and provided, further, that the foregoing representations and warranties are given on the basis that any -2- statement contained in an Incorporated Document shall be deemed not to be contained in the Registration Statement or Prospectus if the statement has been modified or superseded by any statement in a subsequently filed Incorporated Document or in the Registration Statement or Prospectus or in any amendment or supplement thereto. (c) Except as reflected in, or contemplated by, the Registration Statement and Prospectus (exclusive of any amendments or supplements after the date hereof), since the respective most recent dates as of which information is given in the Registration Statement and Prospectus (exclusive of any amendments or supplements after the date hereof), there has not been any material adverse change or event which would result in a material adverse effect on the condition of the Company and its subsidiaries taken as a whole, financial or otherwise (a "Material Adverse Effect"). The Company and its subsidiaries taken as a whole have no material contingent financial obligation which is not disclosed in the Registration Statement and the Prospectus. (d) Deloitte & Touche LLP, who have certified certain of the Company's financial statements filed with the Commission and incorporated by reference in the Registration Statement, are independent public accountants as required by the Securities Act and the Rules and Regulations. (e) There are no Significant Subsidiaries of the Company as such term is defined in Rule 1-02 of Regulation S-X. (f) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated in this Agreement and in the Registration Statement (including the issuance and sale of the Series A Shares comprising the Units and the use of the proceeds from the sale of the Series A Shares comprising the Units as described in the Prospectus under the caption "Use of Proceeds") and compliance by the Company with its obligations under this Agreement, do not and will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, to which the Company or any subsidiary is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary is subject (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not have a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or bylaws of the Company or any subsidiary, or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any subsidiary or any of their respective properties, assets or operations, and the Company has full power and authority to authorize, issue and sell the Series A Shares comprising the Units as contemplated by this Agreement. (g) The Series A Shares comprising the Units have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly -3- issued, fully paid and non-assessable, and the issuance of such Series A Shares comprising the Units will not be subject to any preemptive or similar rights. (h) The Company is not, and, after giving effect to the offering and sale of the Series A Shares comprising the Units and the application of the proceeds thereof as described in the Prospectus, will not be, an "investment company" or a company "controlled" by an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended. 4. Purchase and Public Offering. On the basis of the representations and warranties herein contained, but subject to the terms and conditions in this Agreement set forth, the Company agrees to sell to each of the Underwriters, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at the price, place and time hereinafter specified, the number of the Units set forth opposite the name of such Underwriter in Schedule I hereto. The Underwriters agree to make a public offering of their respective Units specified in Schedule I hereto at the initial public offering price specified in Schedule II hereto. It is understood that after such initial offering, the several Underwriters reserve the right to vary the offering price and further reserve the right to withdraw, cancel or modify any subsequent offering without notice. The Company shall not be obligated to deliver any of the Units to be delivered on the Closing Date (as hereinafter defined) except upon payment for all the Units to be purchased on such Closing Date as provided herein. 5. Time and Place of Closing. Delivery of the Units to, and payment therefor by, the Underwriters shall be made at the time, place and date specified in Schedule II or such other time, place and date as the Representative and the Company may agree upon in writing. The hour and date of such delivery and payment are herein called the "Closing Date". On the Closing Date, the Company, through the facilities of The Depository Trust Company ("DTC"), shall deliver or cause to be delivered a securities entitlement with respect to the Units to the Underwriters against payment of the purchase price by wire transfer of same-day funds to a bank account designated by the Company. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the Underwriters' obligation hereunder. Upon delivery, the Series A Shares comprising the Units shall be registered in the name of Cede & Co., as nominee for DTC. 6. Covenants of the Company. The Company agrees that: (a) If the Representative so requests, the Company, on or prior to the Closing Date, will deliver to the Representative conformed copies of the Registration Statement as originally filed, including all exhibits, any related preliminary prospectus supplement, the Prospectus and all amendments and supplements to each such document, in each case as soon as available and in such quantities as are reasonably requested by the Representative. The Representative will be deemed to have made such a request for copies for each of the several Underwriters and Troutman Sanders LLP, counsel to the Underwriters, with respect to any such documents that are not electronically available through the Commission's EDGAR filing system. -4- (b) The Company will pay all expenses in connection with (i) the preparation and filing by it of the Registration Statement and the Prospectus, (ii) the preparation, issuance and delivery of the Series A Shares comprising the Units, and (iii) the printing and delivery to the Underwriters, in reasonable quantities, of copies of the Registration Statement and the Prospectus (each as originally filed and as subsequently amended). In addition, the Company will pay the reasonable out of pocket fees and disbursements of Underwriters' outside counsel, Troutman Sanders LLP, in connection with the qualification of the Series A Shares comprising the Units under state securities or blue sky laws or investment laws (if and to the extent such qualification is required by the Underwriters or the Company). (c) If, during the time when a prospectus relating to the Series A Shares comprising the Units is required to be delivered under the Securities Act, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Securities Act, the Company promptly will (i) notify the Underwriters through the Representative to suspend solicitation of purchases of the Units and (ii) at its expense, prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. During the period specified above, the Company will continue to prepare and file with the Commission on a timely basis all documents or amendments required under the Securities Exchange Act and the applicable rules and regulations of the Commission thereunder; provided, that the Company shall not file such documents or amendments without also furnishing copies thereof to the Representative and Troutman Sanders LLP. Any such documents or amendments which are electronically available through the Commission's EDGAR filing system shall be deemed to have been furnished by the Company to the Representative and Troutman Sanders LLP. (d) The Company will advise the Representative promptly of any proposal to amend or supplement the Registration Statement or the Prospectus and will afford the Representative a reasonable opportunity to comment on any such proposed amendment or supplement prior to filing; and the Company will also advise the Representative promptly of the filing of any such amendment or supplement and of the institution by the Commission of any stop order proceedings in respect of the Registration Statement or of any part thereof and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (e) The Company will make generally available to its security holders, as soon as it is practicable to do so, an earnings statement of the Company (which need not be audited) in reasonable detail, covering a period of at least 12 months beginning within three months after the effective date of the Registration Statement, which earnings statement shall satisfy the requirements of Section 11(a) of the Securities Act. -5- (f) The Company will furnish such information as may be lawfully required and otherwise cooperate in qualifying the Series A Shares comprising the Units for offer and sale under the securities or blue sky laws of such jurisdictions as the Representative may designate; provided, however, that the Company shall not be required in any state to qualify as a foreign corporation, or to file a general consent to service of process, or to submit to any requirements which it deems unduly burdensome. (g) Fees and disbursements of Troutman Sanders LLP who is acting as counsel for the Underwriters (exclusive of fees and disbursements of such counsel which are to be paid as set forth in Section 6(b)), shall be paid by the Underwriters; provided, however, that if this Agreement is terminated in accordance with the provisions of Section 7 or 8 hereof, the Company shall reimburse the Representative for the account of the Underwriters for the amount of such fees and disbursements. 7. Conditions of the Underwriters' Obligations; Termination by the Underwriters. (a) The Underwriters' obligations to purchase and pay for the Units on the Closing Date shall be subject to the following conditions: (i) No stop order suspending the effectiveness of the Registration Statement shall be in effect on the Closing Date and no proceedings for that purpose shall be pending before, or to the knowledge of the Company threatened by, the Commission on such date. The Representative shall have received, prior to payment for the Units, a certificate dated the Closing Date and signed by the President or any Vice President of the Company to the effect that no such stop order is in effect and that no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission. (ii) The relevant order or orders of the State Corporation Commission of Virginia authorizing the issuance and sale of the Series A Shares comprising the Units shall be in full force and effect. (iii) On the Closing Date the Representative shall receive, on behalf of the several Underwriters, the opinions of Troutman Sanders LLP, counsel to the Underwriters, McGuireWoods LLP, counsel to the Company, and the Company's General Counsel, substantially in the forms attached hereto as Schedules III, IV and V, respectively. (iv) The Representative shall have received from Deloitte & Touche LLP on the date of this Agreement and on the Closing Date letters addressed to the Representative containing statements and information of the type ordinarily included in accountants' SAS 72 "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus, including any pro forma financial information. -6- (v) Subsequent to the execution of this Agreement and prior to the Closing Date, (A) except as stated in the Registration Statement and the Prospectus (exclusive of amendments or supplements after the date hereof), there shall not have occurred (1) any change in the number of outstanding shares of or terms of preferred stock or long term debt of the Company (other than a decrease in the aggregate principal amount thereof outstanding), (2) any material adverse change in the general affairs, financial condition or earnings of the Company and its subsidiaries taken as a whole or (3) any material transaction entered into by the Company other than a transaction in the ordinary course of business, the effect of which in each such case in the reasonable judgment of the Representative is so material and so adverse that it makes it impracticable to proceed with the public offering or delivery of the Units on the terms and in the manner contemplated in the Prospectus and this Agreement, and (B) there shall not have occurred (1) a downgrading in the rating accorded the Company's senior unsecured notes, or securities that are pari passu to the Company's senior unsecured notes, by any "nationally recognized statistical rating organization" (as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act) and no such organization shall have given any notice of any intended or potential downgrading or of any review for a possible change with possible negative implications in its ratings of such securities, (2) any general suspension of trading in securities on the New York Stock Exchange or any limitation on prices for such trading or any restrictions on the distribution of securities established by the New York Stock Exchange or by the Commission or by any federal or state agency or by the decision of any court, (3) a suspension of trading of any securities of the Company on the New York Stock Exchange, (4) a banking moratorium declared either by federal or New York State authorities or (5) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by the United States Congress or any other substantial national or international calamity or crisis resulting in the declaration of a national emergency, or if there has occurred any material adverse change in the financial markets; provided the effect of such outbreak, escalation, declaration, calamity, crisis or material adverse change shall, in the reasonable judgment of the Representative, make it impracticable to proceed with the public offering or delivery of the Units on the terms and in the manner contemplated in the Prospectus and in this Agreement. (vi) On the Closing Date, the representations and warranties of the Company in this Agreement shall be true and correct as if made on and as of such date, and the Company shall have performed all obligations and satisfied all conditions required of it under this Agreement; and, on the Closing Date, the Representative shall have received a certificate to such effect signed by the President or any Vice President of the Company. (vii) All legal proceedings to be taken in connection with the issuance and sale of the Series A Shares comprising the Units shall have been satisfactory in form and substance to Troutman Sanders LLP. -7- (b) In case any of the conditions specified above in Section 7(a) shall not have been fulfilled, this Agreement may be terminated by the Representative upon mailing or delivering written notice thereof to the Company; provided, however, that in case the conditions specified in subsections 7(a)(v) and (vi) shall not have been fulfilled, this Agreement may not be so terminated by the Representative unless Underwriters who have agreed to purchase in the aggregate 50% or more of the total number of the Units shall have consented to such termination and the aforesaid notice shall so state. Any such termination shall be without liability of any party to any other party except as otherwise provided in Section 9 and Sections 6(b), 6(g) and 7(c) hereof. (c) If this Agreement shall be terminated by the Representative pursuant to Section 7(b) above or because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, then in any such case, the Company will reimburse the Underwriters, severally, for all out-of-pocket expenses (in addition to the fees and disbursements of their outside counsel as provided in Section 6(g)) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder and, upon such reimbursement, the Company shall be absolved from any further liability hereunder, except as provided in Section 6(b) and Section 9. 8. Conditions of the Obligation of the Company. The obligation of the Company to deliver the Series A Shares comprising the Units shall be subject to the conditions set forth in the first sentence of Section 7(a)(i) and in Section 7(a)(ii). In case such conditions shall not have been fulfilled, this Agreement may be terminated by the Company by mailing or delivering written notice thereof to the Representative. Any such termination shall be without liability of any party to any other party except as otherwise provided in Sections 6(b), 6(g), 9 and 10 hereof. 9. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, each affiliate of any Underwriter within the meaning of Rule 405 under the Securities Act and each person who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Securities Exchange Act, or any other statute or common law and to reimburse each such Underwriter and controlling person for any legal or other expenses (including, to the extent hereinafter provided, reasonable outside counsel fees) incurred by them in connection with investigating or defending any such losses, claims, damages, or liabilities, or in connection with defending any actions, insofar as such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or in either such document as amended or supplemented (if any amendments or supplements thereto shall have been furnished), or any preliminary Prospectus (if and when used prior to the date hereof), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the -8- statements therein not misleading; provided that the foregoing indemnity agreement, insofar as it relates to any preliminary Prospectus, shall not inure to the benefit of any Underwriter (or to the benefit of any affiliate of, or person who controls such Underwriter) on account of any losses, claims, damages or liabilities arising out of the sale of any of the Units by such Underwriter to any person if it shall be established that a copy of the Prospectus, excluding any documents incorporated by reference (as supplemented or amended, if the Company shall have made any supplements or amendments which have been furnished to the Representative), shall not have been sent or given by or on behalf of such Underwriter to such person at or prior to the written confirmation of the sale to such person in any case where such delivery is required by the Securities Act and the Company satisfied its obligations pursuant to Section 6(a) hereof, if the misstatement or omission leading to such loss, claim, damage or liability was corrected in the Prospectus (excluding any documents incorporated by reference) as amended or supplemented, and such correction would have cured the defect giving rise to such loss, claim, damage, or liability; and provided further, however, that the indemnity agreement contained in this Section 9(a) shall not apply to any such losses, claims, damages, liabilities, expenses or actions arising out of or based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon information furnished herein or otherwise in writing to the Company by or on behalf of any Underwriter for use in the Registration Statement or any amendment thereto, in the Prospectus or any supplement thereto, or in any preliminary Prospectus. The indemnity agreement of the Company contained in this Section 9(a) and the representations and warranties of the Company contained in Section 3 hereof shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or any such controlling person, and shall survive the delivery of the Units. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its officers and directors, and each person who controls any of the foregoing within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Securities Exchange Act, or any other statute or common law and to reimburse each of them for any legal or other expenses (including, to the extent hereinafter provided, reasonable outside counsel fees) incurred by them in connection with investigating or defending any such losses, claims, damages or liabilities or in connection with defending any actions, insofar as such losses, claims, damages, liabilities, expenses or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus, or in either such document as amended or supplemented (if any amendments or supplements thereto shall have been furnished), or any preliminary Prospectus (if and when used prior to the date hereof), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon information furnished herein or in writing to the Company by or on behalf of such Underwriter for use in the Registration Statement or the Prospectus or any amendment or supplement to either thereof, or any preliminary Prospectus. The indemnity agreement of the respective Underwriters contained in this Section 9(b) shall remain operative and in full -9- force and effect, regardless of any investigation made by or on behalf of the Company or any such controlling person, and shall survive the delivery of the Units. (c) The Company and each of the Underwriters agree that, upon the receipt of notice of the commencement of any action against the Company or any of its officers or directors, or any person controlling the Company, or against such Underwriter, its affiliates or controlling person as aforesaid, in respect of which indemnity may be sought on account of any indemnity agreement contained herein, it will promptly give written notice of the commencement thereof to the party or parties against whom indemnity shall be sought hereunder, but the omission so to notify such indemnifying party or parties of any such action shall not relieve such indemnifying party or parties from any liability which it or they may have to the indemnified party otherwise than on account of such indemnity agreement. In case such notice of any such action shall be so given, such indemnifying party shall be entitled to participate at its own expense in the defense or, if it so elects, to assume (in conjunction with any other indemnifying parties) the defense of such action, in which event such defense shall be conducted by counsel chosen by such indemnifying party (or parties) and satisfactory to the indemnified party or parties who shall be defendant or defendants in such action, and such defendant or defendants shall bear the fees and expenses of any additional outside counsel retained by them; provided that, if the defendants (including impleaded parties) in any such action include both the indemnified party and the indemnifying party (or parties) and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party (or parties), the indemnified party shall have the right to select separate counsel to assert such legal defenses and to participate otherwise in the defense of such action on behalf of such indemnified party. The indemnifying party shall bear the reasonable fees and expenses of outside counsel retained by the indemnified party if (i) the indemnified party shall have retained such counsel in connection with the assertion of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to one local counsel), representing the indemnified parties under Section 9(a) or 9(b), as the case may be, who are parties to such action), (ii) the indemnifying party shall have elected not to assume the defense of such action, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the commencement of the action, or (iv) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. Notwithstanding the foregoing sentence, an indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent (such consent not to be unreasonably withheld), but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which indemnification may be sought hereunder (whether or not the indemnified party is an actual or potential party to such a proceeding), unless such settlement (x) includes an -10- unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (y) does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in Section 9(a) or 9(b) is unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and of the Underwriters, on the other, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations, including relative benefit. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading relates to information supplied by the Company on the one hand or by the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 9(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9(d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations under this Section 9(d) to contribute are several in proportion to their respective underwriting obligations and not joint. The remedies provided for in this Section 9 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 10. Termination. If any one or more of the Underwriters shall fail or refuse to purchase the Units which it or they have agreed to purchase hereunder, and the aggregate total number of the Units which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of total number of the Units, then the other Underwriters shall be obligated severally in the proportions which the total number of the Units set forth opposite their respective names in Schedule I bears to the aggregate underwriting obligations of all non-defaulting Underwriters, or in such other proportions as the Underwriters may specify, to purchase the Units which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase. If any Underwriter or Underwriters shall so fail or refuse to purchase Units and the total number of the Units with respect to which such default occurs is more than one-tenth of the total number of the Units and arrangements satisfactory to the Underwriters and the Company for the purchase of such Units are not made within 36 hours after such default, this Agreement will terminate without -11- liability on the part of any non-defaulting Underwriter (except as provided in Section 6(g) and Section 9) or of the Company (except as provided in Section 6(b) and Section 9). In any such case not involving a termination, either the Representative or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this Section 10 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 11. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or contained in certificates of officers of the Company submitted pursuant hereto shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling person of any Underwriter, or by or on behalf of the Company, and shall survive delivery of the Units. 12. Miscellaneous. The validity and interpretation of this Agreement shall be governed by the laws of the State of New York. This Agreement shall inure to the benefit of the Company, the Underwriters and, with respect to the provisions of Section 9 hereof, each controlling person and each officer and director of the Company referred to in Section 9, and their respective successors, assigns, executors and administrators. Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. The term "successors" as used in this Agreement shall not include any purchaser, as such, of any of the Units from any of the several Underwriters. 13. Notices. All communications hereunder shall be in writing and if to the Underwriters shall be mailed, telecopied or delivered to the Representative at the address set forth on Schedule II hereto, or if to the Company shall be mailed, telecopied or delivered to it, attention of Treasurer, Virginia Electric and Power Company 120 Tredegar Street, Richmond, Virginia 23219 (facsimile number: (804) 819-2211). [The remainder of this page is left intentionally blank.] -12- Please sign and return to us a counterpart of this letter, whereupon this letter will become a binding agreement between the Company and the several Underwriters in accordance with its terms. VIRGINIA ELECTRIC AND POWER COMPANY By: G. Scott Hetzer ---------------------------------------- Name: G. Scott Hetzer Title: Senior Vice President and Treasurer -13- Agreed, this 5th day of December, 2002 Lehman Brothers Inc. Acting on behalf of itself and for the several Underwriters named herein LEHMAN BROTHERS INC. By: Greg J. Hall ------------------------------- Authorized Signatory Name: Greg J. Hall Title: Managing Director -14- SCHEDULE I Total Number of Units Underwriter to be Purchased - ----------- --------------- Lehman Brothers Inc. 1,061 BNP Paribas Securities Corp. 63 KBC Financial Products USA Inc. 63 SunTrust Capital Markets, Inc. 63 ---------- Total Units: 1,250 I-1 SCHEDULE II Total Number of Units Being Purchased: 1,250 Units (each Unit consisting of 1,000 Series A Shares) Public Offering Price per Unit: $100,000 Underwriting Commission per Unit: $1,500 Total Proceeds to Company: $123,125,000 Rate for Initial Dividend Period: 5.50% Time of Delivery: December 12, 2002, 10:00 A.M. Closing Location: One James Center 901 East Cary Street Richmond, Virginia 23219 The specimen of the Series A Shares comprising the Units will be available for your inspection at: One James Center 901 East Cary Street Richmond, Virginia 23219 Address for Notices: Lehman Brothers Inc. 745 7th Avenue New York, New York 10019 Attn: Christopher Winchenbaugh, Senior Vice President Facsimile number: 646-758-5877 with a copy of any notice pursuant to Section 9(c) also sent to: Troutman Sanders LLP 1111 East Main Street Richmond, Virginia 23219 Attn: F. Claiborne Johnston, Jr., Esquire Facsimile number: (804) 697-1339 II-1 SCHEDULE III PROPOSED FORM OF OPINION OF TROUTMAN SANDERS LLP Bank of America Center 1111 East Main Street Richmond, Virginia 23219 VIRGINIA ELECTRIC AND POWER COMPANY 1,250 UNITS (THE "UNITS") EACH UNIT CONSISTS OF 1,000 SHARES OF FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R)) 2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE) (THE "SERIES A SHARES") December 12, 2002 Lehman Brothers Inc. for itself and as Representative for the Underwriters named in Schedule I, attached to the Underwriting Agreement c/o Lehman Brothers Inc. 745 7th Avenue New York, New York 10019 Ladies and Gentlemen: We have acted as your counsel in connection with the arrangements for issuance by Virginia Electric and Power Company, a Virginia corporation (the "Company"), of the above-referenced Series A Shares comprising the Units (the "Units") of the Company pursuant to an Underwriting Agreement dated December 5, 2002 between the Company and the Underwriters listed on Schedule I attached thereto (the "Underwriting Agreement"). This letter is being delivered to you pursuant to the Underwriting Agreement. All terms not otherwise defined herein shall have the meanings set forth in the Underwriting Agreement. III-1 We have examined originals, or copies certified to our satisfaction of such corporate records of the Company, indentures, agreements and other instruments, certificates of public officials, certificates of officers and representatives of the Company, and other documents, as we have deemed necessary as a basis for the opinions hereinafter expressed. As to various questions of fact material to such opinions, we have, when relevant facts were not independently established, relied upon certifications by officers of the Company and other appropriate persons and statements contained in the Registration Statement hereinafter mentioned. All legal proceedings taken as of the date hereof in connection with the transactions contemplated by the Underwriting Agreement have been satisfactory to us. In addition, we attended the closing held today at the offices of McGuireWoods LLP, One James Center, 901 E. Cary Street, Richmond, Virginia, at which the Company satisfied the conditions contained in Section 7 of the Underwriting Agreement that are required to be satisfied as of the Closing Date. Based upon the foregoing, and having regard to legal considerations that we deem relevant, we are of the opinion that: 1. The Company is a corporation duly incorporated and existing as a corporation in good standing under the laws of Virginia, and has the corporate power to transact its business as described in the Prospectus. 2. An appropriate order of the State Corporation Commission of Virginia with respect to the sale of the Series A Shares comprising the Units has been issued, and such order remains in effect at this date and constitutes valid and sufficient authorization for the sale of the Units as contemplated by the Underwriting Agreement. No approval or consent by any public regulatory body other than those required under the Securities Act and the Rules and Regulations and the authorization by the State Corporation Commission of Virginia, all of which have been obtained, and reports to be filed with the State Corporation Commission of Virginia after issuance of the Series A Shares, is legally required in connection with the sale of the Units as contemplated by the Underwriting Agreement (except to the extent that compliance with the provisions of securities or blue sky laws of certain states may be required in connection with the sale of the Series A Shares comprising the Units in such states) and the carrying out of the provisions of the Underwriting Agreement. 3. The Underwriting Agreement has been duly authorized by all necessary corporate action and has been duly executed and delivered by the Company. 4. The Series A Shares comprising the Units have been duly authorized and are validly issued, fully paid and non-assessable; and the issuance of such Series A Shares comprising the Units is not subject to any preemptive or similar rights. 5. The Registration Statement with respect to the Series A Shares comprising the Units filed pursuant to the Securities Act, has become effective and remains in effect III-2 at this date, and the Prospectus may lawfully be used for the purposes specified in the Securities Act in connection with the offer for sale and the sale of the Series A Shares comprising the Units in the manner therein specified. 6. The Registration Statement and the Prospectus (except that we express no comment or belief with respect to any historical or pro forma financial statements and schedules and other financial or statistical information contained or incorporated by reference in the Registration Statement or Prospectus) appear on their face to be appropriately responsive in all material respects to the requirements of the Securities Act, and to the applicable rules and regulations of the Commission thereunder. 7. The statements relating to the preferred stock of the Company contained in the prospectus initially filed as part of the Registration Statement under DESCRIPTION OF PREFERRED STOCK, as all or any of them have been supplemented by the statements relating to the Series A Shares comprising the Units under DESCRIPTION OF THE 2002 SERIES A PREFERRED STOCK, are accurate and do not omit any material fact required to be stated therein or necessary to make such statements not misleading. * * * * We have not undertaken to determine independently the accuracy or completeness of the statements contained or incorporated by reference in the Registration Statement or in the Prospectus, and as to the statistical statements in the Registration Statement (which includes statistical statements in the Incorporated Documents), we have relied solely on the officers of the Company. We accordingly assume no responsibility for the accuracy or completeness of the statements made in the Registration Statement, other than with regard to the statements relating to the Series A Shares comprising the Units as described in paragraph (7). We note that the Incorporated Documents were prepared and filed by the Company without our participation. We have, however, participated in conferences with counsel for and representatives of the Company in connection with the preparation of the Registration Statement, the Prospectus as it was initially issued and as it has been supplemented or amended, and we have reviewed the Incorporated Documents and such of the corporate records of the Company as we deemed advisable. In addition, we participated in one or more due diligence conferences with representatives of the Company and attended the closing at which the Company satisfied the conditions contained in the Underwriting Agreement. None of the foregoing disclosed to the lawyers in this firm who have given substantive legal attention to representation of you in connection with the issuance and sale of the Series A Shares comprising the Units any information that gives us reason to believe that the Registration Statement contained on the date the Registration Statement became effective, or the Prospectus contained on the date it was issued or the date it was supplemented or amended, or that the Registration Statement or the Prospectus contains on the date hereof (in all cases, excepting the financial statements and schedules and other financial information contained or incorporated therein by reference and any pro forma financial information and notes thereto included or incorporated by reference therein, as to which we express no belief) any untrue statement of a material fact or omitted on said date or now to state a material fact required to be stated therein or necessary to make the statements III-3 therein not misleading. The foregoing assurance is provided on the basis that any statement contained in an Incorporated Document shall be deemed not to be contained in the Registration Statement or Prospectus if the statement has been modified or superseded by any statement in a subsequently filed Incorporated Document or in the Registration Statement or Prospectus prior to the date of the Underwriting Agreement. In rendering the opinions set forth in paragraphs (1) - (7) above and in making the statements expressed in the preceding paragraph, we do not purport to express an opinion or make any statement with respect to any laws other than those of the Commonwealth of Virginia, the State of New York and the United States of America. This letter may not be relied upon by, nor may copies be delivered to, any person without our prior written consent. Very truly yours, TROUTMAN SANDERS LLP III-4 SCHEDULE IV PROPOSED FORM OF OPINION OF MCGUIREWOODS LLP One James Center 901 East Cary Street Richmond, Virginia 23219 VIRGINIA ELECTRIC AND POWER COMPANY 1,250 UNITS (THE "UNITS") EACH UNIT CONSISTS OF 1,000 SHARES OF FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R)) 2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE) (THE "SERIES A SHARES") December 12, 2002 Lehman Brothers Inc. for itself and as Representative for the Underwriters named in Schedule I, attached to the Underwriting Agreement c/o Lehman Brothers Inc. 745 7th Avenue New York, New York 10019 Ladies and Gentlemen: We have acted as counsel to Virginia Electric and Power Company, a Virginia corporation (the "Company"), in connection with the issuance and sale by the Company of the Series A Shares comprising the above-referenced Units (the "Units") pursuant to an Underwriting Agreement dated December 5, 2002, between the Company and the Underwriters listed on Schedule I attached thereto (the "Underwriting Agreement"). This opinion is rendered pursuant to the provisions of Section 7(a)(iii) of the Underwriting Agreement, and, except as set forth herein, the terms used herein which are defined in the Underwriting Agreement have the same meanings as they have in the Underwriting Agreement. IV-1 We have examined originals, or copies certified to our satisfaction, of such corporate records of the Company, indentures, agreements, and other instruments, certificates of public officials, certificates of officers and representatives of the Company, and other documents, as we have deemed it necessary to require as a basis for the opinions hereinafter expressed. As to various questions of fact material to such opinions, we have, when relevant facts were not independently established, relied upon certifications by officers of the Company and other appropriate persons and statements contained in the Registration Statement hereinafter mentioned. All legal proceedings taken as of the date hereof in connection with the transactions contemplated by the Underwriting Agreement have been satisfactory to us. On this basis we are of the opinion that: 1. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign (other than those required under the Securities Act and the Rules and Regulations and any authorization by the State Corporation Commission of Virginia, all of which have been obtained, reports to be filed with the State Corporation Commission of Virginia after issuance of the Series A Shares, or as may be required under the securities or blue sky laws of the various states) is necessary or required in connection with the due authorization, execution and delivery of the Underwriting Agreement by the Company or for the offering, issuance, sale or delivery of the Series A Shares comprising the Units. 2. The articles of amendment with respect to the Series A Shares have been duly authorized and executed by the Company and a certificate of amendment with respect to such articles of amendment has been issued by the State Corporation Commission of Virginia. 3. The Series A Shares comprising the Units have been duly authorized and are validly issued, fully paid and non-assessable; and the issuance of such Series A Shares comprising the Units is not subject to any preemptive or similar rights. 4. The Registration Statement with respect to the Series A Shares comprising the Units filed pursuant to the Securities Act, has become effective and remains in effect at this date, and the Prospectus may lawfully be used for the purposes specified in the Securities Act in connection with the offer for sale and the sale of the Series A Shares comprising the Units in the manner therein specified. 5. The Registration Statement and the Prospectus (except the financial statements, pro forma financial information and schedules contained or incorporated by reference therein, as to which we express no opinion) appear on their face to be appropriately responsive in all material respects to the requirements of the Securities Act, and to the applicable rules and regulations of the Commission thereunder. 6. We are of the opinion that the statements relating to the preferred stock of the Company under DESCRIPTION OF PREFERRED STOCK, as all or any of them IV-2 have been supplemented by the statements relating to the Series A Shares comprising the Units under DESCRIPTION OF THE 2002 SERIES A PREFERRED STOCK, are substantially accurate and fair. We have participated in conferences with officers and other representatives of the Company and your representatives at which the contents of the Registration Statement and the Prospectus were discussed, and we have consulted with officers and other employees of the Company to inform them of the disclosure requirements of the Securities Act. We have examined various reports, records, contracts and other documents of the Company and orders and instruments of public officials, which our investigation led us to deem pertinent. In addition, we attended the due diligence meetings with representatives of the Company and the closing at which the Company satisfied the conditions contained in Section 7 of the Underwriting Agreement. We have not, however, undertaken to make any independent review of other records of the Company which our investigation did not lead us to deem pertinent. As to the statistical statements in the Registration Statement (which includes the Incorporated Documents), we have relied solely on the officers of the Company. We accordingly assume no responsibility for the accuracy or completeness of the statements made in the Registration Statement, except as stated above in the preceding paragraph in regard to the captions set forth in such preceding paragraph. But such conferences, consultation, examination and attendance disclosed to us no information with respect to such other matters that gives us reason to believe that the Registration Statement contained on the date the Registration Statement became effective, or the Prospectus contained on the date it was issued, or that the Registration Statement or the Prospectus (in each case, except with respect to the financial statements and schedules and other financial information contained or incorporated by reference in the Registration Statement or Prospectus) contains on the date hereof, any untrue statement of a material fact or omitted on such date or omits on the date hereof to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The foregoing assurance is provided on the basis that any statement contained in an Incorporated Document shall be deemed not to be contained in the Registration Statement or Prospectus if the statement has been modified or superseded by any statement in a subsequently filed Incorporated Document or in the Registration Statement or Prospectus prior to the date of the Underwriting Agreement. We do not purport to express an opinion on any laws other than those of the Commonwealth of Virginia and the United States of America. This opinion may not be relied upon by, nor may copies be delivered to, any person without our prior written consent. Yours very truly, MCGUIREWOODS LLP IV-3 SCHEDULE V PROPOSED FORM OF OPINION OF GENERAL COUNSEL OF VIRGINIA ELECTRIC AND POWER COMPANY 120 Tredegar Street Richmond, Virginia 23219 VIRGINIA ELECTRIC AND POWER COMPANY 1,250 UNITS (THE "UNITS") EACH UNIT CONSISTS OF 1,000 SHARES OF FLEXIBLE MONEY MARKET CUMULATIVE PREFERRED STOCK (FLEX MMP(R)) 2002 SERIES A (LIQUIDATION PREFERENCE $100 PER SHARE) (THE "SERIES A SHARES") December 12, 2002 To: The addressees listed on Annex A Ladies and Gentlemen: The arrangements for issuance of the Series A Shares comprising the above-referenced Units (the "Units"), of Virginia Electric and Power Company (the "Company"), pursuant to a Agreement dated December 5, 2002, by and between the Company and you (the "Underwriting Agreement"), have been taken under my supervision as Vice President and General Counsel of the Company. Terms not otherwise defined herein have the meanings set forth in the Underwriting Agreement. As Vice President and General Counsel of the Company, I have general responsibility over the attorneys within the Company's Legal Department responsible for rendering legal counsel to the Company regarding corporate, financial, securities, and other matters. I am generally familiar with the organization, business and affairs of the Company. I am also familiar with the proceedings taken and proposed to be taken by the Company in connection with the offering and sale of the Units, and I have examined such corporate records, certificates and other documents and such questions of the law as I have considered necessary or appropriate for the purposes of this opinion. In addition, I have responsibility for supervising lawyers who may have been asked by me or others to review legal matters arising in connection V-1 with the offering and sale of the Units. Accordingly, some of the matters referred to herein have not been handled personally by me, but I have been made familiar with the facts and circumstances and the applicable law, and the opinions herein expressed are my own or are opinions of others in which I concur. On this basis I am of the opinion that: 1. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Virginia, and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under the Underwriting Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect. 2. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 3. There are no actions, suits or proceedings pending or, to the best of my knowledge, threatened, to which the Company or one of its subsidiaries is a party or to which any of the Company's or any of its subsidiaries' properties is subject other than any proceedings described in the Prospectus and proceedings which I believe are not likely to have a material adverse effect on the power or ability of the Company to perform its obligations under the Underwriting Agreement or to consummate the transactions contemplated thereby or by the Prospectus. I am a member of the Bar of the Commonwealth of Virginia and I do not purport to express an opinion on any laws other than those of the Commonwealth of Virginia and the United States of America. This opinion may not be relied upon by, nor may copies be delivered to, any person without our prior written consent. I do not undertake to advise you of any changes in the opinions expressed herein resulting from matters that may hereinafter arise or that may hereinafter be brought to my attention. Yours very truly, V-2 Annex A ------- Lehman Brothers Inc. for itself and as Representative for the Underwriters named in Schedule I, attached to the Underwriting Agreement c/o Lehman Brothers Inc. 745 7th Avenue New York, New York 10019 1106833v6 V-3 EX-3.1 4 dex31.txt ARTICLES OF AMENDMENT Exhibit 3.1 VIRGINIA ELECTRIC AND POWER COMPANY ARTICLES OF AMENDMENT ESTABLISHING FLEXIBLE MONEY MARKET CUMULATIVE PEFERRED STOCK (Flex MMP(R)), 2002 SERIES A OF VIRGINIA ELECTRIC AND POWER COMPANY (LIQUIDATION PREFERENCE $100 PER SHARE) Part I 1. The name of the Company is Virginia Electric and Power Company (the "Company"). 2. The Restated Articles of Incorporation, as amended (the Articles) of the Company are hereby amended to create a series of the Company's Preferred Stock which shall be designated the Flexible Money Market Cumulative Preferred Stock (Flex MMP), 2002 Series A (hereinafter sometimes referred to as the Flex MMP). In accordance with the provisions of the Articles, the distinctive designation, preferences, limitations and relative rights of the Flex MMP are determined and fixed as follows: (a) The distinctive serial designation of the Flex MMP shall be "Flexible Money Market Cumulative Preferred Stock (Flex MMP), 2002 Series A." Shares of the Flex MMP may only be purchased or transferred in whole units of 1,000 shares each (Units) or integral multiples thereof and the shares included in the Units may not be separately purchased or transferred. (b) The shares of the Flex MMP shall not be entitled to any right of conversion or any preemptive right to acquire any other security. (c) The shares of the Flex MMP shall not be entitled to a sinking fund. (d) For the Initial Dividend Period (as defined in Part II), the dividend rate on shares of the Flex MMP shall be the Initial Dividend Rate (as defined in Part II). For each Dividend Period (as defined in Part II) thereafter, the dividend rate shall be determined according to the procedures set forth in Part II. The liquidation preference of shares of the Flex MMP shall be as set forth in Part II, and shares of the Flex MMP may be redeemed on the basis set forth in Part II. (e) There are hereby classified as the Flexible Money Market Cumulative Preferred Stock (Flex MMP), 2002 Series A, 1,250,000 shares (the "Shares") of the Preferred Stock, in 1,250 Units, with each Unit consisting of 1,000 shares of the Flex MMP; not more than 1,250,000 shares of the Flex MMP may be issued. (f) No shares of the Flex MMP redeemed, purchased or otherwise acquired by the Company shall be reissued, resold or otherwise transferred by the Company as shares of the Flex MMP. 3. The shares of the Flex MMP shall have the further relative rights, preferences and limitations set forth in Sections I through 6 of Division A of Article III of the Articles, and the rates, dates, terms and other conditions upon which distributions shall be payable thereon shall be as set forth in these Articles of Amendment. 4. The designation of the Flex MMP, as herein provided, has been duly approved, and these Articles of Amendment have been duly adopted, by the Board of Directors of the Company on December 5, 2002. No shareholder action was taken, or was required to be taken, in connection with the adoption of these Articles of Amendment. Part II 1. DEFINITIONS. ------------ (A). Unless the context or use indicates another or different meaning or intent, or a term is otherwise defined in Part I, in these Articles of Amendment the following terms have the following meanings, whether used in the singular or plural: "`AA' Composite Commercial Paper Rate," on any date of determination, means (i) the Interest Equivalent of the rate on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's or the equivalent of such rating by another nationally recognized statistical rating organization, as such rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (ii) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the Interest Equivalent of the rate on commercial paper placed on behalf of such issuers, as quoted on a discount basis or otherwise by the Commercial Paper Dealers, to the Auction Agent for the close of business on the Business Day immediately preceding such date. If the Commercial Paper Dealers do not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will be determined on the basis of the quotation or quotations furnished by any Substitute Commercial Paper Dealers. If the number of Dividend Period Days shall be (i) seven or more but fewer than 49 days, such rate shall be the Interest Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more but fewer than 70 days, such rate shall be the Interest Equivalent of the 60-day rate on such commercial paper; (iii) 70 or more days but fewer than 85 days, such rate shall be the arithmetic average of the Interest Equivalent of the 60-day and 90-day rates on such commercial paper; (iv) 85 or more days but fewer than 99 days, such rate shall be the Interest Equivalent of the 90-day rate on such commercial paper; or (v) 99 or more days but fewer than 183 days, such rate shall be determined by linear interpolation between the Interest Equivalents of the 90-day rate and the 180-day rate on such commercial paper. 2 "Affected Dividend Payment Date" has the meaning set forth in paragraph 2(e). "Affiliate" means any Person known to the Auction Agent to be controlled by, in control of, or under common control with, the Company. "Applicable Rate" means, with respect to any Shares for any Dividend Period therefor, the rate per annum at which cash dividends are payable on such Shares for such Dividend Period. "Auction" means a periodic implementation of the Auction Procedures. "Auction Agent" means a commercial bank, trust company or other financial institution selected by the Company that has entered into an agreement with the Company to follow the Auction Procedures for the purpose of determining the Applicable Rate and to act as dividend disbursing agent and/or redemption agent for the Shares. "Auction Procedures" means the procedures for conducting Auctions set forth in paragraph 5. "Beneficial ownership" or "beneficially own" shall have the meanings ascribed to them under Rule 13d-3 under the Securities Exchange Act and "beneficial owner" shall have a corollary meaning. "Board of Directors" means the Board of Directors of the Company or, to the extent permitted by applicable law, any duly authorized committee thereof or any duly authorized officer of the Company. "Broker-Dealer" means any broker-dealer, or other entity permitted by law to perform the functions required of a Broker-Dealer in paragraph 5, that has been selected by the Company and has entered into a Broker-Dealer Agreement with the Auction Agent that remains effective. "Broker-Dealer Agreement" means an agreement between the Auction Agent and one or more Broker-Dealers pursuant to which each such Broker-Dealer agrees to follow the procedures specified in paragraph 5. "Business Day" means a day on which the New York Stock Exchange, Inc. is open for trading and which is not a Saturday, Sunday or other day on which banks in Richmond, Virginia or New York, New York are authorized or obligated by law to close. "Code" means the Internal Revenue Code of 1986, as amended. "Commercial Paper Dealer" or "Commercial Paper Dealers" means such commercial paper dealer or dealers as the Company may from time to time appoint, or, in lieu of any thereof, their respective affiliates or successors. "Common Stock" means the common stock, without par value, of the Company. "Date of Original Issue" means, with respect to the Shares, the date on which the Company originally issues such Shares. 3 "Dividend Non-Payment Period" has the meaning set forth in paragraph 2(b)(iii)(B). "Dividend Payment Date," with respect to the Shares, includes each Initial Dividend Payment Date, Subsequent Dividend Payment Date and Period-End Dividend Payment Date. "Dividend Period," with respect to the Shares, includes the Initial Dividend Period and each Subsequent Dividend Period. "Dividend Period Days," with respect to any Dividend Period, means the calendar days included in such Dividend Period. "Dividends Received Percentage" means the percentage of dividends received by corporate taxpayers which may be deducted for federal income tax purposes pursuant to Section 243(a)(1) of the Code (or any successor provision). "DRD Formula" means the amount derived from the following fraction: 1 - [.35(1-.70)] 1 - [.35(1-DRP)] "DRD Gross-Up Provisions" has the meaning set forth in paragraph 2(e). "DRP," as used in computing the DRD Formula, means the Dividends Received Percentage, measured as a fraction, applicable to the dividend in question; provided, however, that DRP shall in no event be less than .50. "Existing Holder," with respect to the Shares, means a Person who is listed as such in the Share Books. "Holder" or "holder," with respect to any Shares, means the record holder thereof. "IRS" means the Internal Revenue Service. "Initial Dividend Payment Dates," with respect to the Shares, means each March 20, June 20, September 20 and December 20 of each year during the Initial Dividend Period, commencing March 20, 2003. "Initial Dividend Period," with respect to the Shares, means the period from and including the Date of Original Issue for the Shares to but excluding the Initial Period-End Dividend Payment Date for the Shares. "Initial Dividend Rate," with respect to the Shares, means $5.50 per annum for the Initial Dividend Period for the Shares. "Initial Period-End Dividend Payment Date," with respect to the Shares, means December 20, 2007. 4 "Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security. "Maximum Applicable Rate" has the meaning set forth in paragraph 5(a)(vi). "Minimum Holding Period" means, at the time of reference thereto, the minimum holding period then required for corporate taxpayers to be entitled to the dividends received deduction set forth in Section 243(a)(1) of the Code. "Moody's" means Moody's Investors Service, Inc. or its successors. "Non-Call Period," with respect to the Shares, means a specified portion or the entirety of a Special Dividend Period for the Shares during which the Shares shall not be subject to Optional Redemption, as selected by the Company pursuant to a Notice of Special Dividend Period. "Non-Payment Period" includes any Dividend Non-Payment Period and Redemption Non-Payment Period. "Non-Payment Period Rate," with respect to the Shares, means 275% of the Reference Rate applicable to such Shares. "Notice of Redemption" means a written notice of redemption given pursuant to paragraph 4. "Notice of Revocation" has the meaning set forth in paragraph 2(c)(iii). "Notice of Special Dividend Period" has the meaning set forth in paragraph 2(c)(iii). "Optional Redemption" means an optional redemption of Shares by the Company pursuant to paragraph 4(a)(i) or 4(a)(ii). "Optional Redemption Date" means the Dividend Payment Date selected by the Company for an Optional Redemption, which is at least 30 days but not more than 90 days after delivery of a Notice of Redemption with respect to such Optional Redemption. "Outstanding" means, as of any date, (i) with respect to the Shares, the Shares theretofore issued by the Company except, without duplication, (A) any Shares theretofore cancelled, or delivered to the Auction Agent for cancellation, or redeemed by the Company, or as to which a Notice of Redemption shall have been given and the full amount payable upon such redemption shall have been deposited in trust by the Company with irrevocable payment instructions given pursuant to paragraph 4(c), provided that Shares as to which a Notice of Redemption has been given by the Company shall be deemed to be not Outstanding for purposes of any Auction for such Shares held subsequent to the date of such Notice of Redemption and (B) any Shares as to which the Company or any Affiliate shall be an Existing Holder or beneficial owner and (ii) with respect to shares of other Preferred Stock, has the equivalent meaning. "Parity Preferred" means, with respect to the Shares, each other Outstanding series of Preferred Stock the holders of which, together with the Holders of the Shares, shall be entitled to 5 the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up of the Company, as the case may be, in proportion to the full respective preferential amounts to which they are entitled, without preference or priority of one over the other. "Participant" means a participant of the Securities Depository that will act on behalf of an Existing Holder, a beneficial owner, or a Potential Holder or potential beneficial owner of one or more Shares. "Period-End Dividend Payment Dates" include the Initial Period-End Dividend Payment Date and each Subsequent Period-End Dividend Payment Date. "Person" means and includes an individual, a partnership, a Company, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. "Potential Holder" means any Person who is not an Existing Holder but who may be interested in acquiring Shares, or who is an Existing Holder but who wishes to acquire additional Shares. "Preferred Stock" means any Preferred Stock of the Company, including the Shares, that the Board of Directors has authority to issue under the Articles. "Redemption Non-Payment Period" has the meaning set forth in paragraph 2(b)(iv)(C)(1). "Reference Rate" means, (i) with respect to a Dividend Period of 49 days to 183 days, the applicable "AA" Composite Commercial Paper Rate, (ii) with respect to a Dividend Period of 184 days to 364 days, the applicable U.S. Treasury Bill Rate, (iii) with respect to a Dividend Period of one year to ten years, the applicable U.S. Treasury Note Rate, and (iv) with respect to a Dividend Period in excess of ten years, the applicable U.S. Treasury Bond Rate. "Regular Dividend Period" means a Subsequent Dividend Period consisting of 49 days as the same may be adjusted from time to time pursuant to paragraph 2(b)(i) in connection with the requirement of, or a change of law altering the requirements of, the Minimum Holding Period, but in no event exceeding 98 days. "Retroactive Dividends" has the meaning set forth in Section 2(e). "S&P" means Standard & Poor's Ratings Services or its successors. "Securities Act" means the Securities Act of 1933, as amended. "Securities Depository" means The Depository Trust Company or any successor Company or other entity elected by the Company as securities depository for the Shares that agrees to follow the procedures required to be followed by such securities depository in connection with the Shares. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. 6 "Share Books" means the books maintained by the Auction Agent setting forth at all times a current list, as determined by the Auction Agent, of Existing Holders, based on notices from the Company, from Existing Holders and from any Participant or Broker-Dealer of any Existing Holder. "Shares" means the shares of Preferred Stock, liquidation preference $100 per share, plus an amount equal to accumulated but unpaid dividends (whether or not earned or declared), designated as the "Flexible Money Market Cumulative Preferred Stock (Flex MMP), 2002 Series A" of the Company. "Special Dividend Period" means a Subsequent Dividend Period consisting of at least 49 days as selected by the Company pursuant to a Notice of Special Dividend Period, to the extent that such selection by the Company shall be available pursuant hereto and subject to adjustment from time to time pursuant to paragraph 2(b)(i) in connection with the requirements of, or a change of law altering requirements of, the Minimum Holding Period. "Subsequent Dividend Payment Date" has the meaning set forth in paragraph 2(b)(i). "Subsequent Dividend Period" has the meaning set forth in paragraph 2(c)(i). "Subsequent Period-End Dividend Payment Date," with respect to each Subsequent Dividend Period, means the Business Day immediately succeeding the last day of such Subsequent Dividend Period. "Substitute Commercial Paper Dealer" or "Substitute Commercial Paper Dealers" means such substitute Commercial Paper Dealer or substitute Commercial Paper Dealers as the Company may from time to time appoint or, in lieu of any thereof, their respective affiliates or successors. "Substitute Rating Agency" and "Substitute Rating Agencies" mean a nationally recognized statistical rating organization and two nationally recognized statistical rating organizations, respectively, each term as defined for purposes of Rule 436(g)(2) under the Securities Act, selected by the Company after consultation with each Broker-Dealer, to act as the substitute rating agency or substitute rating agencies, as the case may be, to determine the credit ratings of the Shares. "Sufficient Clearing Bids" has the meaning as defined in paragraph 5(a). "Transfer Agent" means an commercial bank, trust company, other financial institution or other Company selected by the Company that has entered into an agreement with the Company to act as transfer agent and registrar for the Shares. "U.S. Treasury Bill Rate" on any date means (i) the Interest Equivalent of the rate on the actively traded Treasury Bill with a maturity most nearly comparable to the length of the related Dividend Period, as such rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report for such Business Day, or (ii) if such yield as so calculated is not available, 7 the Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on any date means the Interest Equivalent of the yield as calculated by reference to the arithmetic average of the bid price quotations of the actively traded Treasury Bill with a maturity most nearly comparable to the length of the related Dividend Period, as determined by bid price quotations as of any time on the Business Day immediately preceding such date, obtained from at least three recognized primary U.S. Government securities dealers selected by the Auction Agent. "U.S. Treasury Bond Rate" on any date means (i) the yield as calculated by reference to the bid price quotation of the actively traded, current coupon Treasury Bond with a maturity most nearly comparable to the length of the related Dividend Period, as such bid price quotation is published on the Business Day immediately preceding such date by the Federal Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report for such Business Day, or (ii) if such yield as so calculated is not available, the Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate" on any date means the yield as calculated by reference to the arithmetic average of the bid price quotations of the actively traded, current coupon Treasury Bond with a maturity most nearly comparable to the length of the related Dividend Period, as determined by the bid price quotations as of any time on the Business Day immediately preceding such date, obtained from at least three recognized primary U.S. Government securities dealers selected by the Auction Agent. "U.S. Treasury Note Rate" on any date means (i) the yield as calculated by reference to the bid price quotation of the actively traded, current coupon Treasury Note with a maturity most nearly comparable to the length of the related Dividend Period, as such bid price quotation is published on the Business Day immediately preceding such date by the Federal Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S. Government Securities report for such Business Day, or (ii) if such yield as so calculated is not available, the Alternate Treasury Note Rate on such date. "Alternate Treasury Note Rate" on any date means the yield as calculated by reference to the arithmetic average of the bid price quotations of the actively traded, current coupon Treasury Note with a maturity most nearly comparable to the length of the related Dividend Period, as determined by the bid price quotations as of any time on the Business Day immediately preceding such date, obtained from at least three recognized primary U.S. Government securities dealers selected by the Auction Agent. 2. DIVIDENDS. ---------- (a) The holders of Shares shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, cumulative cash dividends at the Applicable Rate determined as set forth in paragraph 2(c), payable on the respective Dividend Payment Dates for the Shares. (b) (i) Dividends on Shares shall accumulate (whether or not earned or declared) at the Applicable Rate for such Shares from the Date of Original Issue and shall be payable, when, as and if declared by the Board of Directors, out of funds legally available therefor, on each Initial Dividend Payment Date for the Shares and on the Initial Period-End Dividend Payment Date for the Shares. 8 Following the Initial Period-End Dividend Payment Date for the Shares, dividends on the Shares will be payable on each Subsequent Period-End Dividend Payment Date, and in addition, (A) with respect to any Subsequent Dividend Period of 100 days to 190 days, on the 91st day, (B) with respect to any Subsequent Dividend Period of 191 days to 281 days, on the 91st and 182nd days, (C) with respect to any Subsequent Dividend Period of 282 days to 364 days, on the 91st, 182nd and 273rd days, and (D) with respect to any Subsequent Dividend Period of one year or longer, on March 20, June 20, September 20 and December 20 of each year (each such date referred to in clause (A) through (D) above being herein referred to as a "Subsequent Dividend Payment Date"). Notwithstanding the foregoing, if any Dividend Payment Date is not a Business Day then such Dividend Payment Date shall be the immediately succeeding Business Day. Notwithstanding the foregoing, if any date on which dividends on the Shares would be payable as described in the immediately preceding paragraph is a day that would result in the number of Dividend Period Days in the then current Dividend Period for the Shares not being at least equal to the then current Minimum Holding Period, then dividends with respect to such Dividend Period shall be payable on the first Business Day following such date on which dividends would be so payable that results in the number of Dividend Period Days in such Dividend Period being at least equal to the Minimum Holding Period or, if earlier, the 98th day of such Dividend Period. Moreover, notwithstanding the foregoing, in the event of a change in law altering the Minimum Holding Period, the Board of Directors shall adjust, if necessary, the number of Dividend Period Days in each Regular Dividend Period and the minimum number of days of each Special Dividend Period commencing after the date of such change in law to equal or exceed the Minimum Holding Period, provided that the number of Dividend Period Days in a Regular Dividend Period shall not exceed by more than nine days the length of the Minimum Holding Period and shall be evenly divisible by seven, as adjusted pursuant hereto, and shall in no event exceed 98 days. Upon any change in the number of Dividend Period Days in any then current Dividend Period or in the number of days in a Regular Dividend Period or the minimum duration of a Special Dividend Period as a result of a change in the Minimum Holding Period, the Company will mail notice of such change to all holders of record of Shares. Although any particular Dividend Payment Date for the Shares may not occur on the day of the week or the date originally scheduled as a Dividend Payment Date for the Shares because of the adjustments set forth above, each succeeding Dividend Payment Date for the Shares shall occur, subject to such adjustments, on the day of the week or the date originally scheduled as a Dividend Payment Date for the Shares as if each preceding Dividend Payment Date had occurred on such day of the week or date. (ii) On or prior to any Dividend Payment Date for the Shares, the Company shall pay to the Auction Agent sufficient funds for the payment in full of all accumulated dividends with respect to the Shares payable on such Dividend Payment Date. Each dividend shall be paid to the holder or holders of the Shares as they appear on the Stock Books of the Company on the record date fixed by the Company's Board of Directors prior to the applicable Dividend Payment Date. 9 Dividends in arrears in respect of Shares for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the holder or holders of record of such Shares as they appear on the Stock Books on a record date fixed by the Board of Directors. Any dividend payment made on the Shares shall be applied, without duplication, in the following order of priority: FIRST, in or toward payment of all accumulated dividends with respect to such earliest Dividend Period for such Shares for which dividends have not been paid; and SECOND, in or toward payment of all then accumulated dividends with respect to each succeeding Dividend Period for such Shares for which dividends have not been paid. (iii) If the Company fails to pay to the Auction Agent on or prior to any Period-End Dividend Payment Date for the Shares the full amount of all accumulated and unpaid dividends payable on the Shares on such Period-End Dividend Payment Date, then: (A) if such failure to pay is cured as provided below, the Applicable Rate for the Shares for the Dividend Period commencing on the period-End Dividend Payment Date on which the Company failed to pay shall be equal to the dividend rate determined on the Auction Date immediately preceding such Period-End Dividend Payment Date; and (B) if such failure to pay is not cured as provided below, then, for the period (the "Dividend Non-Payment Period") commencing on and including such Period-End Dividend Payment Date and ending on and including the Business Day on which, by 12:00 noon, New York City time, all unpaid cash dividends shall have been deposited with the Auction Agent or otherwise made available for payment to the applicable Holders in same day funds (provided that, at least two Business Days but no more than 30 days prior to such Business Day, the Company shall have given the Auction Agent, the Securities Depository and the applicable Holders written notice of such deposit or availability): (1) each Subsequent Dividend Period shall be a Regular Dividend Period (regardless of any Special Dividend Period election made by the Company) and Auctions for the Shares shall be suspended and shall not resume, in each case until all accumulated and unpaid dividends on the Shares for all past Dividend Periods shall have been paid to the Auction Agent, not later than the second Business Day immediately preceding an Auction Date for the Shares; and (2) the Applicable Rate for the Shares during such Dividend Non-Payment Period shall be equal to Non-Payment Period Rate for the Shares. (iv) If the Company fails to pay to the Auction Agent on or prior to any date set for redemption of less than all of the Shares the full amount payable upon redemption of the Shares called for redemption, then: 10 (A) Auctions for the Shares shall be suspended and shall not resume until all amounts payable upon the redemption of the Shares called for redemption shall have been paid to the Auction Agent not later than the second Business Day immediately preceding an Auction Date for the Outstanding Shares; (B) If such failure to pay is cured as provided below, the Applicable Rate for the Shares for the Dividend Period commencing after the redemption date on which the Company failed to pay shall be equal to the Maximum Applicable Rate for the Shares (as determined on the Business Day immediately preceding the first day of such Dividend Period) and such Dividend Period shall be a Regular Dividend Period (regardless of any Special Dividend Period election made by the Company), unless on the Auction Date for such Dividend Period, Auctions for the Shares may be resumed as provided in clause (A) above; and (C) If such failure to pay is not cured as provided below, then: (1) Each Subsequent Dividend Period shall be a Regular Dividend Period regardless of any Special Dividend Period election made by the Company) and the Applicable Rate for the Shares not called for redemption for each Dividend Period, commencing on the date immediately succeeding the redemption date on which the Company failed to pay, to but excluding the Dividend Period, if any, next succeeding the Auction Date on which Auctions for the Shares may be resumed as provided in clause (A) above (the "Redemption Non-Payment Period"), shall be equal to the Non-Payment Period Rate for the Shares (as determined on the Business Day immediately preceding the first day of each such Dividend Period); and (2) the Applicable Rate for the Shares called for redemption for each Dividend Period for the Shares commencing on the date immediately succeeding the redemption date on which the Company failed to pay shall be equal to the Non-Payment Period Rate for the Shares (as determined on the Business Day immediately preceding the first day of each such Dividend Period). For purposes of paragraphs 2(b)(iii) and 2(b)(iv), any such failure to pay with respect to the Shares shall be deemed cured if, not later than 12:00 noon, New York City time, on the third Business Day immediately succeeding such failure to pay, there shall have been paid to the Auction Agent (i) all accumulated and unpaid dividends on the Shares including the full amount of any dividends to be paid on the Period-End Dividend Payment Date with respect to which such failure to pay occurred but excluding amounts accumulated after such Period-End Dividend Payment Date, plus additional dividends in an amount computed by multiplying (A) the Non-Payment Period Rate for the Shares (as determined on the Business Day immediately preceding such Dividend Payment Date) by (B) a fraction, the numerator of which shall be the number of days in respect of which such failure to pay is not cured in accordance herewith (including the day such 11 failure to pay occurs and excluding the day such failure to pay is cured) and the denominator of which is 360, and multiplying the rate so obtained by the product of $100 and the number of Shares then Outstanding and (ii) the full amount payable upon redemption of the Shares called for redemption that have not been so redeemed, plus (except to the extent such amount has been paid pursuant to paragraph 2(b)(iv) above) an amount computed by multiplying (X) the Non-Payment Period Rate for the Shares (as determined on the Business Day immediately preceding the first day of the current Dividend Period), by (Y) a fraction, the numerator of which shall be the number of days for which such failure to pay is not cured in accordance herewith (including the day such failure to pay occurs and excluding the day such failure to pay is cured) and the denominator of which is 360, and multiplying the rate so obtained against the product of $100 and the number of Shares called for redemption that have not been so redeemed. If the Company fails to pay the Auction Agent on or prior to any date for redemption of all the Shares the full amount payable upon such redemption of the Shares, then the Applicable Rate for the Shares for each Dividend Period or portion thereof commencing on or after the redemption date on which the Company failed to pay shall be equal to the Non-Payment Period Rate for the Shares (as determined on the Business Day immediately preceding the first day of each such Dividend Period). (c) (i) During the Initial Dividend Period, the Applicable Rate for the Shares shall be the Initial Dividend Rate. Commencing on the Initial Period-End Dividend Payment Date for the Shares, the Applicable Rate for the Shares for the period commencing on and including the Initial Period-End Dividend Payment Date and ending on and including the calendar day immediately preceding the immediately succeeding Subsequent Period-End Dividend Payment Date and for each period thereafter commencing on and including each Subsequent Period-End Dividend Payment Date and ending on and including the calendar day immediately preceding to the immediately succeeding Subsequent Period-End Dividend Payment Date (each such period being herein referred to as a "Subsequent Dividend Period"), shall be equal to the rate per annum that results from implementation of the Auction Procedures with respect to Shares as the Auction Agent advises the Company following the conclusion of the Auction for such Shares. Each Subsequent Dividend Period shall be a Regular Dividend Period unless the Company has duly selected a Special Dividend Period with respect thereto pursuant to paragraph 2(c)(iii) and such selection is available hereunder. In the event that Sufficient Clearing Bids have not been made in any Auction under paragraph 5, then the immediately succeeding Subsequent Dividend Period shall automatically be a Regular Dividend Period regardless of whether the Company has elected a Special Dividend Period. In the event that an Auction for any Subsequent Dividend Period with respect to the Shares is not held for any reason (other than as a result of the existence and continuance 12 of a Non-Payment Period), such Subsequent Dividend Period next succeeding the originally scheduled Auction shall automatically be a Regular Dividend Period and the Applicable Rate for such Subsequent Dividend Period shall be equal to the Maximum Applicable Rate on the business Day immediately preceding the commencement of such Subsequent Dividend Period. The Applicable Rate for each Dividend Period commencing during a Non-Payment Period shall be equal to the Non-Payment Period Rate, and each Dividend Period, commencing after the first day of, and during, a Non-Payment Period shall be a Regular Dividend Period regardless of any election made by the Company for a Special Dividend Period relating thereto. (ii) During the Initial Dividend Period and any Special Dividend Period in excess of 364 days in duration, the amount of dividends accumulated and payable, if declared, on each Share for each period that begins on a Dividend Payment Date and ends on the day immediately preceding the immediately succeeding Dividend Payment Date shall be computed by (A) multiplying the Applicable Rate for such Dividend Period by 25% and (B) multiplying $100 by the rate so obtained. The amount of dividends accumulated and payable, if declared, on each Share on any Dividend Payment Date with respect to any Regular Dividend Period and any period during the Initial Dividend Period and any Special Dividend Period in excess of 364 days that is not set forth in clause (A) above will be computed by (X) multiplying the Applicable Rate for such Dividend Period by a fraction, the numerator of which is the actual number of days in the portion of such Dividend Period prior to such Dividend Payment Date as to which dividends have not been paid and the denominator of which is 360, and (Y) multiplying $100 by the rate so obtained. (iii) The Company may, at its option and to the extent permitted by law, by written notice (a "Notice of Special Dividend Period") to the Auction Agent and each Holder of the Shares, request that the next succeeding Dividend Period for the Shares be a number of days, at least as long as the Minimum Holding Period, specified in such notice, provided that such Notice of Special Dividend Period shall be null and void if Sufficient Clearing Bids have not been made in the relevant Auction and the Company may not again give a Notice of Special Dividend Period for the Shares (and any such attempted notice shall be null and void) until Sufficient Clearing Bids have been made in an Auction with respect to the Shares. Such Notice of Special Dividend Period shall be delivered or sent by the Company, by first-class mail, postage prepaid, to each Holder of the Shares, not less than 10 days nor more than 60 days prior to the Auction for the relevant Subsequent Dividend Period. A Notice of Special Dividend Period with respect to the Shares will specify (A) the Company's determination of the length of the Special Dividend Period (which shall be equal to or longer than the Minimum Holding Period), (B) in the case of any Special Dividend Period in excess of 99 days in duration, any Subsequent Dividend Payment Date or Dates other than the Subsequent Period-End Dividend Payment Date for such Special Dividend Period, (C) if the Company has elected that the Shares will be subject to a Non-Call Period during such Special Dividend Period, a statement to that effect, (D) if the Company has specified that all or any portion of the Special Dividend Period will be a Non-Call Period and has elected that the DRD 13 Gross-Up Provisions shall apply during such Special Dividend Period, a statement to that effect, and (E) if the Company has made the election specified in clause (D) and has affirmatively elected to have the right to redeem the Shares during such Special Dividend Period in accordance with paragraph 4(a)(ii), a statement to that effect. If the Company has given a Notice of Special Dividend Period, the Company may withdraw such election by giving telephonic and written notice of its revocation (a "Notice of Revocation") to each Holder of the Shares by no later than 3:00 P.M., New York City time, on the Business Day immediately preceding the date of the Auction with respect to which such Notice of Special Dividend Period and Notice of Revocation were delivered, and in such event such election by the Company of a Special Dividend Period shall be of no force and effect. The Company shall deliver, or cause to be delivered, physically, by telecopier or by other written electronic communication, copies of each Notice of Special Dividend Period and each Notice of Revocation to the Auction Agent at the same time such notices are transmitted to the Holders of the Shares. In the event that the Company has effectively revoked its election of a Special Dividend Period for the Shares as described above, the next succeeding Dividend Period for the Shares shall be a Regular Dividend Period. No defect in a Notice of Special Dividend Period or in the mailing thereof shall affect the validity of any change in any Dividend Period. (d) (i) Except as provided in these Articles of Amendment, Holders shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on any Shares, and no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on any Shares that may be in arrears. (ii) So long as any Shares are Outstanding, no dividend (other than a dividend in Common Stock and other than as provided in paragraph 2(d)(iii)) shall be declared or made upon any Parity Preferred, the Common Stock or any other shares of capital stock of the Company ranking junior to the Shares as to dividends or upon liquidation, nor shall any Parity Preferred, Common Stock or any other shares of capital stock of the Company ranking junior to the Shares as to dividends or upon liquidation, be redeemed, purchased or otherwise acquired for any consideration (nor shall any funds be paid to, or made available for, a sinking fund for the redemption of any shares of such stock) by the Company (except by conversion into or exchange for Common Stock or shares of capital stock of the Company ranking junior to the Shares as to dividends or upon liquidation) unless, in each case, the full cumulative dividends on the Outstanding Shares shall have been or contemporaneously are, paid, or declared and a sum sufficient for the payment thereof has been or is set apart for such payment. (e) If, at any time prior to the date that is 18 months after the Date of Original Issue, any amendment to the Code shall have been enacted that has the effect of changing the Dividends Received Percentage, then the Applicable Rate with respect to such Shares for the Dividend Period in which the effective date of such amendment to the Code occurs will, to the extent that such amendment applies to such Dividend Period, be adjusted on and after such effective date for the remainder of such Dividend Period by multiplying the Applicable Rate (determined before such adjustment) by the DRD Formula and rounding the result to the nearest basis point. No amendment to the Code, other than a change in the percentage of the dividends 14 received deduction set forth in Section 243(a)(1) of the Code or any successor provision which is enacted prior to 18 months after the Date of Original Issue, will give rise to an adjustment. Notwithstanding the foregoing provisions, in the event that, with respect to any such amendment, the Company shall receive either (1) an unqualified opinion of independent recognized tax counsel based upon the legislation amending or establishing the DRP or upon a published pronouncement of the IRS addressing such legislation or (2) a private letter ruling or similar form of assurance from the IRS, in either case to the effect that such an amendment would not apply to dividends payable on the Shares, then any such amendment shall not result in the adjustment provided for pursuant to the DRD Formula. The Company's calculation of the dividends payable, as so adjusted and as certified accurate as to calculation and reasonable as to method by the independent certified public accountants then regularly engaged by the Company, shall be final and not subject to review. Notwithstanding the foregoing, in no event shall the Applicable Rate for any Dividend Period, if and as adjusted from time to time as set forth above, be more than the Maximum Applicable Rate as of the Date of Original Issue of the Shares or the date of the preceding Auction, as the case may be. If any such amendment to the Code which reduces the Dividends Received Percentage is enacted and becomes effective after a dividend payable on a Dividend Payment Date has been declared but before such dividend has been paid, the amount of dividends payable on such Dividend Payment Date shall not be increased; but instead, an amount equal to the excess, if any, of (x) the product of the dividends paid by the Company on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the greater of the reduced Dividends Received Percentage or 50%) less (y) the dividends paid by the Company on such Dividend Payment Date, will be payable (if declared) on the next succeeding Dividend Payment Date to Holders of the Shares for such succeeding Dividend Payment Date, in addition to any other amounts payable on such Dividend Payment Date. If the Applicable Rate shall have been adjusted pursuant to the provisions of this paragraph 2(e) (the "DRD Gross-Up Provisions"), the Company shall send notice of such adjustment to each Holder of the Shares and the Auction Agent on or prior to the next succeeding Dividend Payment Date for the Shares. Unless otherwise required by the context, any reference in these Articles of Amendment to dividends shall mean dividends adjusted pursuant to the DRD Gross-Up Provisions. The DRD Gross-Up Provisions shall apply at any time prior to the date ending 18 months after the Date of Original Issue. After such date, the DRD Gross-Up Provisions shall not apply to any Regular Dividend Period and shall only apply to any Special Dividend Period for the Shares if so specified by the Board of Directors in the applicable Notice of Special Dividend Period. In addition, if any such amendment to the Code is enacted that reduces the Dividends Received Percentage and such reduction retroactively applies to a Dividend Payment Date as to which the Company previously paid dividends on the Shares (each, an "Affected Dividend Payment Date"), the Company will pay (if declared) additional dividends (the "Retroactive Dividends") on the immediately succeeding Dividend Payment Date (or if such amendment is enacted after the dividend payable on such Dividend Payment Date has been declared, on the second immediately succeeding Dividend Payment Date following the date of enactment), to Holders of the Shares for such succeeding Dividend Payment Date, in an amount equal to the excess, if any, of (x) the product of the dividends paid by the Company on each Affected 15 Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the greater of the reduced Dividends Received Percentage and 50%, applied to each Affected Dividend Payment Date) over (y) the dividends paid by the Company on each Affected Dividend Payment Date. Retroactive Dividends will not be paid in respect of the enactment of any amendment to the Code if such amendment would not result in an adjustment due to the Company having received either an opinion of counsel or tax ruling referred to above. The Company will only make one payment of Retroactive Dividends. No adjustments in the dividends payable by the Company will be made, and no Retroactive Dividends will be payable by the Company, because of any amendment to the Code effective at any time after 18 months following the Date of Original Issue that reduces the Dividends Received Percentage. In the event that the amount of dividends payable per share of the Shares shall be adjusted pursuant to the DRD Formula and/or Retroactive Dividends are to be paid, the Company will cause notice of each such adjustment and, if applicable, any Retroactive Dividends, to be sent to each Holder of the Shares. (f) No fractional Share shall be issued. 3. LIQUIDATION PREFERENCE. ---------------------- The amount payable upon the Shares in the event of voluntary or involuntary dissolution, liquidation or winding up of the Company shall be $100 per share ($100,000 per Unit) plus an amount equivalent to the accrued and unpaid dividends thereon, if any, to the date of such voluntary or involuntary dissolution, liquidation or winding up. 4. REDEMPTION. ---------- (a) The Shares shall be redeemable by the Company as provided below: (i) Upon giving a Notice of Redemption with respect to an Optional Redemption to the Auction Agent, the Securities Depository and each holder of record of the Shares, the Company at its option may redeem the Shares, in whole or from time to time in part, out of funds legally available therefor, at a redemption price per Share of $100, on an Optional Redemption Date; provided that the Board of Directors shall have declared and shall pay on the redemption date all accumulated and unpaid dividends in respect of such Shares through the redemption date (whether earned or declared); and provided, further, that subject to Section 5(a)(ii) below, no Share may be redeemed at the option of the Company during (A) the Initial Dividend Period for the Shares or (B) a Non-Call Period to which such Shares are subject. Pursuant to such right of Optional Redemption, the Company may elect to redeem all or less than all of the Shares without redeeming the remaining Shares. Notwithstanding the foregoing, the Company may not give a Notice of Redemption relating to, or redeem pursuant to, an Optional Redemption as described in this paragraph 4(a)(i) if any dividend on any Share is in arrears unless all Outstanding Shares are simultaneously redeemed. So long as any dividend on any Share 16 in arrears remains unpaid, the Company shall not purchase or otherwise acquire any Shares; provided that the foregoing shall not prevent the purchase or acquisition of Shares pursuant to an otherwise lawful purchase or exchange offer made on the same terms to the holders of all Outstanding Shares. (ii) If at any time prior to the date that is 18 months after the Date of Original Issue, or, during any Special Dividend Period, all or a portion of which the Company has designated as a Non-Call Period and, with respect to which (i) the DRD Gross-Up Provisions apply and (ii) the Company has affirmatively elected to have the right to redeem the shares if it is required to pay additional dividends under the DRD Gross-Up Provisions, if designated by the Company and specified in the applicable Special Dividend Period Notice, one or more amendments to the Code are enacted that reduce the Dividends Received Percentage, and, as a result, the amount of dividends on the Shares payable on any Dividend Payment Date may be adjusted upwards pursuant to paragraph 2(e) hereof, the Company at its option may redeem all, but not less than all, of the Outstanding Shares, provided that, within 60 days of the date on which an amendment to the Code is enacted that reduces the Dividends Received Percentage, the Company sends notice to the holders of the Shares of such redemption. Any redemption of the Shares pursuant to this paragraph 4(a)(ii) will take place on the date specified in the notice, which will be not less than 30 nor more than 90 days from the date such notice is sent to the holders of the Shares. Any such redemption of the Shares will be at a redemption price of $102.50 per Share ($102,500 per Unit), plus all accumulated and unpaid dividends (whether or not declared and including any increase in dividends payable due to changes in the Dividends Received Percentage). (b) In the event that less than all the Outstanding Shares are to be redeemed and there is more than one Holder, the number of Shares to be redeemed shall be determined by the Board of Directors and communicated to the Auction Agent; and, if the Securities Depository or its nominee is the Holder of all such Shares, the Securities Depository will determine the number of Shares to be redeemed from the account of each Participant. Each Participant will determine the number of Shares to be redeemed from the account of each Holder for which it acts as agent and, if neither the Securities Depository nor its nominee is the Holder of all such Shares, the particular Shares to be redeemed shall be selected by the Company ratably or by lot, provided that adjustments may be made by the Company with respect to the number of Shares to be redeemed from each Holder to avoid redemption of fractional Units. (c) Whenever Shares are to be redeemed pursuant to an Optional Redemption, the Notice of Redemption shall be delivered or mailed by first-class mail, postage prepaid, not less than 30 nor more than 90 days prior to the date fixed for such Optional Redemption, to each Holder of such Shares to be redeemed and the Auction Agent. The Notice of Redemption shall set forth (i) the redemption date, (ii) the amount of the redemption price, (iii) the aggregate number of Shares to be redeemed, (iv) the place where Shares are to be surrendered for payment of the redemption price, (v) a statement that dividends on the Shares to be redeemed shall cease to accumulate on such date that the Company pays the full amount payable upon redemption of such Shares, and (vi) the provision of these Articles of Amendment pursuant to which such redemption is being made. A Notice of Redemption, once 17 given, is irrevocable. No defect in the Notice of Redemption or in the mailing thereof shall affect the validity of the redemption proceedings, except as required by applicable law. If the Company gives or causes to be given a Notice of Redemption, timely pays to the Auction Agent a sum sufficient to redeem the Shares as to which such Notice of Redemption has been given and gives the Auction Agent irrevocable instructions and authority to pay the full amount payable on redemption of such Shares to the Holders of such Shares, then on the date of such payment, all rights of the Holders of the Shares to be redeemed, as such, will terminate (except the right of the Holders of such Shares to receive the full amount payable upon redemption thereof upon surrender of the certificate or certificates therefor, but without interest) and such Shares will no longer be deemed to be Outstanding for any purpose (including, without limitation, the right of Holders of such Shares to vote on any matter or to participate, with respect to such Shares, in any subsequent Auction for the Units). In addition, any Shares as to which a Notice of Redemption has been given by the Company will be deemed to be not Outstanding for purposes of any Auction for the Shares held subsequent to the date of such Notice of Redemption. The Company will be entitled to receive from time to time from the Auction Agent the income, if any, derived from the investment of monies or other assets paid to it (to the extent that such income is not required to pay the redemption price of the Shares to be redeemed), and the holders of any Shares to be redeemed will not have any claim to such income. (d) So long as the Shares are held of record by the nominee of the Securities Depository, the amounts payable upon an Optional Redemption shall be paid to such nominee of the Securities Depository on the Optional Redemption Date for the Shares. 5. AUCTION PROCEDURES. ------------------ (a) CERTAIN DEFINITIONS. -------------------- As used in this paragraph 5, the following terms shall have the following meanings, unless the context otherwise requires: (i) "Auction Date" means the last Business Day preceding the first day of each Subsequent Dividend Period. (ii) "Available Units" has the meaning specified in paragraph 5(d)(i) below. (iii) "Bid" has the meaning specified in paragraph 5(b)(i) below. (iv) "Bidder" has the meaning specified in paragraph 5(b)(i) below. (v) "Hold Order" has the meaning specified in paragraph 5(b)(i) below. (vi) "Maximum Applicable Rate" for any Subsequent Dividend Period will be the Applicable Percentage of the Reference Rate. The "Applicable Percentage" will be determined based on the lower of the credit rating or ratings assigned on such date to 18 the Shares by Moody's and S&P (or if Moody's or S&P, or both, shall not make such a rating available, the equivalent of either or both of such ratings by a Substitute Rating Agency or two Substitute Rating Agencies or, in the event that only one such rating shall be available, such rating) as follows: Credit Ratings - --------------------------- -------------------------- ------------------------- Moody's S&P Applicable Percentage of Reference Rate - --------------------------- -------------------------- ------------------------- "Aa3" or above AA- or above 150% - --------------------------- -------------------------- ------------------------- "A3" to "A1" A- to A+ 200% - --------------------------- -------------------------- ------------------------- "Baa3 to "Baa1" BBB- to BBB+ 250% - --------------------------- -------------------------- ------------------------- Below "Baa3" Below BBB- 275% - --------------------------- -------------------------- ------------------------- provided, however, that, if at 9:00 A.M., New York City time, on any Auction Date, (i) the rating of any Shares by Moody's shall be on the "Corporate Credit Watch List" of Moody's with a designation of "downgrade" or "uncertain," (ii) the rating of any Shares by S&P shall be on the "Credit Watch" of S&P with a designation of "negative implications" or "developing" or (iii) if Moody's or S&P, or both, shall not make such a rating available, the rating of any Shares by any Substitute Rating Agency shall be on the substantial equivalent of clause (i) or (ii) above, then the Maximum Applicable Rate for the Shares to which such Auction Date relates will be determined pursuant to an Applicable Percentage based on the credit rating that is one level lower in the above table (for example, from "A3" to "Baa1" for Moody's, or from "BBB+" to "BBB" for S&P). The Company shall take all reasonable action necessary to enable Moody's and S&P (and, as appropriate, any Substitute Rating Agency or Substitute Rating Agencies) to provide a rating for the Shares. If neither S&P nor Moody's shall make such a rating available, the Company, after consultation with the Broker-Dealers or their affiliates and successors, shall select a nationally recognized statistical rating organization or two nationally recognized statistical rating organizations to act as a Substitute Rating Agency or Substitute Rating Agencies, as the case may be. If a Substitute Rating Agency or Substitute Rating Agencies are not available, the applicable rating shall be the highest rating last published by Moody's, S&P or such Substitute Rating Agency or Substitute Rating Agencies. (vii) "Order" has the meaning specified in paragraph 5(b)(i) below. (viii) "Sell Order" has the meaning specified in paragraph 5(b)(i) below. (ix) "Submission Deadline" means 1:00 P.M., New York City time, on any Auction Date or such other time on the Auction Date as may be specified by the Auction Agent from time to time as the time by which each Broker-Dealer must submit to the Auction Agent in writing all Orders obtained by it for the Auction to be conducted on such Auction Date. 19 (x) "Submitted Bid" has the meaning specified in paragraph 5(d)(i) below. (xi) "Submitted Hold Order" has the meaning specified in paragraph 5(d)(i) below. (xii) "Submitted Order" has the meaning specified in paragraph 5(d)(i) below. (xiii) "Submitted Sell Order" has the meaning specified in paragraph 5(d)(i) below. (xiv) "Sufficient Clearing Bids" has the meaning specified in paragraph 5(d)(i) below. (xv) "Winning Bid Rate" has the meaning specified in paragraph 5(d)(i) below. (b) ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS. ------------------------------------------------- (i) Beneficial owners and potential beneficial owners may only participate in Auctions through their Broker-Dealers. Broker-Dealers will submit the Orders of their respective customers who are beneficial owners and potential beneficial owners to the Auction Agent, designating themselves (unless otherwise permitted by the Company) as Existing Holders in respect of Units subject to Orders submitted or deemed submitted to them by beneficial owners and as Potential Holders in respect of Units subject to Orders submitted to them by potential beneficial owners. A Broker-Dealer may also hold Units in its own account as a beneficial owner or wish to purchase Units for its own account as a potential beneficial owner. A Broker-Dealer may thus submit Orders to the Auction Agent as a beneficial owner or a potential beneficial owner and therefore participate in an Auction as an Existing Holder or Potential Holder on behalf of both itself and its customers. Prior to the Submission Deadline on each Auction Date: (A) each Existing Holder may submit to its Broker-Dealer information by telephone or otherwise as to: (1) the number of Units, if any, held by such Existing Holder which such Existing Holder desires to continue to hold without regard to the Applicable Rate for the next succeeding Subsequent Dividend Period; (2) the number of Units, if any, held by such Existing Holder which such Existing Holder desires to continue to hold, provided that the Applicable Rate for the next succeeding Subsequent Dividend Period shall not be less than the rate per annum specified by such Existing Holder; and/or 20 (3) the number of Units if any, held by such Existing Holder which such Existing Holder offers to sell without regard to the Applicable Rate for the next succeeding Subsequent Dividend Period; and (B) each Broker-Dealer will contact Potential Holders by telephone or otherwise to determine whether such Potential Holders desire to submit Bids in which such Potential Holders will indicate the number of Units, if any, which each such Potential Holder offers to purchase, provided that the Applicable Rate for the next succeeding Subsequent Dividend Period shall not be less than the rate per annum specified in such Bids. For the purposes hereof, the communication by an Existing Holder pursuant to clause (A) above or by a Potential Holder pursuant to clause (B) above to a Broker-Dealer, or the communication by a Broker-Dealer acting for its own account to the Auction Agent, of information referred to in clause (A) or (B) of this paragraph 5(b)(i) is hereinafter referred to as an "Order" and each Existing Holder and each Potential Holder placing an Order, including a Broker-Dealer acting in such capacity for its own account, is hereinafter referred to as a "Bidder"; an Order containing the information referred to in clause (A)(1) of this paragraph 5(b)(i) is hereinafter referred to as a "Hold Order"; an Order containing the information referred to in clause (A)(2) or (B) of this paragraph 5(b)(i) is hereinafter referred to as a "Bid"; and an Order containing the information referred to in clause (A)(3) of this paragraph 5(b)(i) is hereinafter referred to as a "Sell Order". Inasmuch as a Broker-Dealer participates in an Auction as an Existing Holder or a Potential Holder only to represent the interests of its customers or itself, the provisions herein relating to the consequences of an Auction for Existing Holders and Potential Holders also apply to the underlying beneficial ownership interests represented thereby. (ii) (A) A Bid by an Existing Holder shall constitute an irrevocable offer to sell: (1) the number of Units specified in such Bid if the Applicable Rate determined on such Auction Date shall be less than the rate per annum specified in such Bid; or (2) such number or a lesser number of Units to be determined as set forth in paragraph 5(e)(i)(D) if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum specified therein; or (3) a lesser number of Units to be determined as set forth in paragraph 5(e)(ii)(C) if such specified rate per annum shall be higher than the Maximum Applicable Rate and Sufficient Clearing Bids do not exist. (B) A Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (1) the number of Units specified in such Sell Order; or (2) such number or a lesser number of Units to be determined as set forth in paragraph 5(e)(ii)(C) if Sufficient Clearing Bids do not exist. 21 (C) A Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (1) the number of Units specified in such Bid if the Applicable Rate determined on such Auction Date shall be higher than the rate per annum specified in such Bid; or (2) such number or a lesser number of Units to be determined as set forth in paragraph 5(e)(i)(E) if the Applicable Rate determined on such Auction Date shall be equal to the rate per annum specified therein. (c) SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT. -------------------------------------------------------- (i) Each Broker-Dealer shall submit in writing or through the Auction Agent's auction processing system to the Auction Agent prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer for the Auction to be conducted on such Auction Date, designating itself (unless otherwise permitted by the Company) as an Existing Holder or a Potential Holder in respect of Units subject to such Orders, and specifying with respect to each Order: (A) the name of the Bidder placing each Order (which shall be the Broker-Dealer unless otherwise permitted by the Company); (B) the aggregate number of Units that are the subject of such Order; (C) to the extent that such Bidder is an Existing Holder: (1) the number of Units, if any, subject to any Hold Order placed by such Existing Holder; (2) the number of Units, if any, subject to any Bid placed by such Existing Holder and the rate per annum specified in such Bid; and (3) the number of Units, if any, subject to any Sell Order placed by such Existing Holder; and (D) to the extent such Bidder is a Potential Holder, the rate per annum specified in such Potential Holder's Bid. (ii) If any rate per annum specified in any Bid contains more than three figures to the right of the decimal point, the Auction Agent shall round such rate up to the next highest one-thousandth (.001) of 1%. (iii) If an Order or Orders covering in the aggregate all of the Units held by an Existing Holder are not submitted to the Auction Agent prior to the Submission Deadline for any reason (including the failure of a Broker-Dealer to contact any Existing Holder or to submit an Order covering such Existing Holder's Order or Orders), the Auction Agent shall deem a Hold Order (in the 22 case of an Auction relating to a Regular Dividend Period) or a Sell Order (in the case of an Auction relating to a Special Dividend Period) to have been submitted on behalf of such Existing Holder covering the number of Units held by such Existing Holder and not subject to Orders submitted to the Auction Agent. (iv) If one or more Orders on behalf of an Existing Holder covering in the aggregate more than the number of Units held by such Existing Holder are submitted to the Auction Agent, such Order shall be considered valid as follows and in the following order of priority: (A) any Hold Order submitted on behalf of such Existing Holder shall be considered valid up to and including the number of Units held by such Existing Holder; provided that if more than one Hold Order is submitted on behalf of such Existing Holder and the number of Units subject to such Hold Orders exceeds the number of Units held by such Existing Holder, the number of Units subject to each of such Hold Orders shall be reduced pro rata so that such Hold Orders, in the aggregate, will cover exactly the number of Units held by such Existing Holder; (B) (I) any Bids submitted on behalf of such Existing Holder shall be considered valid up to and including the excess of the number of Units held by such Existing Holder over the number of Units subject to any Hold Order referred to in paragraph 5(c)(iv)(A) above; (II) if more than one Bid submitted on behalf of such Existing Holder specifies the same rate per annum and together they cover more than the remaining number of Units that can be the subject of valid Bids after application of paragraph 5(c)(iv)(A) above and of subclause (I) of this paragraph 5(c)(iv)(B) to any Bid or Bids specifying a lower rate or rates per annum, the number of Units subject to each of such Bids shall be reduced pro rata so that such Bids, in the aggregate, cover exactly such remaining number of Units; and (III) subject to subclauses (I) and (II) above, if more than one Bid submitted on behalf of such Existing Holder specifies different rates per annum, such Bids shall be considered valid in the ascending order of their respective rates per annum and in any such event the number of Units, if any, subject to Bids not valid under this paragraph 5(c)(iv)(B) shall be treated as the subject of a Bid by a Potential Holder; and (C) any Sell Order shall be considered valid up to and including the excess of the number of Units held by such Existing Holder over the number of Units subject to Hold Orders referred to in paragraph 5(c)(iv)(A) and valid Bids referred to in paragraph 5(c)(iv)(B); provided that if more than one Sell Order is submitted on behalf of any Existing Holder and the number of Units subject to such Sell Orders is greater than such excess, the number of Units subject to each of such Sell Orders shall be reduced pro rata so that such Sell Orders, in the aggregate, cover exactly the number of Units equal to such excess. (v) If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate per annum and number of Units specified. 23 (vi) Any Order submitted by a Existing Holder or a Potential Holder to its Broker-Dealer, and any Order submitted by a Broker-Dealer to the Auction Agent, prior to the Submission Deadline on any Auction Date, shall be irrevocable. (d) DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND APPLICABLE RATE. ------------------------ (i) Not earlier than the Submission Deadline on each Auction Date, the Auction Agent shall assemble all Orders submitted or deemed submitted by the Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order", a "Submitted Bid" or a "Submitted Sell Order", as the case may be, or as a "Submitted Order") and shall determine: (A) the excess of the total number of Units over the number of Units that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Units"); (B) from the Submitted Orders whether the number of Units that are the subject of Submitted Bids by Potential Holders specifying one or more rates per annum equal to or lower than the Maximum Applicable Rate exceeds or is equal to the sum of: (1) the number of Units that is the subject of Submitted Bids by Existing Holders specifying one or more rates per annum higher than the Maximum Applicable Rate, and (2) the number of Units that is subject to Submitted Sell Orders (if such excess or such equality exists (other than because the number of Units in clause (1) above and this clause (2) are each zero because all of the Units are the subject of Submitted Hold Orders), such Submitted Bids by Potential Holders being hereinafter referred to collectively as "Sufficient Clearing Bids"); and (C) if Sufficient Clearing Bids exist, the lowest rate per annum specified in the Submitted Bids (the "Winning Bid Rate") that, if: (1) each Submitted Bid from Existing Holders specifying the Winning Bid Rate and all other Submitted Bids from Existing Holders specifying lower rates per annum were rejected, thus entitling such Existing Holders to continue to hold the Units that are the subject of such Submitted Bids, and (2) each Submitted Bid from Potential Holders specifying the Winning Bid Rate and all other Submitted Bids from Potential Holders specifying lower rates per annum were accepted, thus entitling the Potential Holders to purchase the Units that are the subject of such Submitted Bids, 24 would result in the number of Units subject to all Submitted Bids specifying the Winning Bid Rate or a lower rate per annum being at least equal to the Available Units. (ii) Promptly after the Auction Agent has made the determinations pursuant to paragraph 5(d)(i), the Auction Agent shall advise the Company of the Maximum Applicable Rate and, based on such determinations, the Applicable Rate for the next succeeding Dividend Period as follows: (A) if Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Subsequent Dividend Period shall be equal to the Winning Bid Rate; (B) if Sufficient Clearing Bids do not exist (other than because all of the Units are the subject of Submitted Hold Orders), that the Subsequent Dividend Period next succeeding the Auction shall automatically be a Regular Dividend Period and the Applicable Rate for such next succeeding Subsequent Dividend Period shall be equal to the Maximum Applicable Rate; or (C) if all of the Units are the subject of Submitted Hold Orders, that the Subsequent Dividend Period next succeeding the Auction shall automatically be a Regular Dividend Period and the Applicable Rate for such next succeeding Subsequent Dividend Period shall be equal to 59% of the Reference Rate in effect on the date of such Auction. (e) ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND ALLOCATION OF UNITS. ------------------------------------ Based on the determinations made pursuant to paragraph 5(d)(i) the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent shall take such other action as set forth below: (i) If Sufficient Clearing Bids have been made, subject to the provisions of paragraph 5(e)(iii) and paragraph 5(e)(iv), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected: (A) the Submitted Sell Orders of Existing Holders shall be accepted and the Submitted Bid of each of the Existing Holders specifying any rate per annum that is higher than the Winning Bid Rate shall be accepted, thus requiring each such Existing Holder to sell the Units that are the subject of such Submitted Sell Order or Submitted Bid; (B) the Submitted Bid of each of the Existing Holders specifying any rate per annum that is lower than the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Units that are the subject of such Submitted Bid; 25 (C) the Submitted Bid of each of the Potential Holders specifying any rate per annum that is lower than the Winning Bid Rate shall be accepted, thus requiring each such Potential Holder to purchase the Units subject to such Submitted Bid; (D) the Submitted Bid of each of the Existing Holders specifying a rate per annum that is equal to the Winning Bid Rate shall be rejected, thus entitling each such Existing Holder to continue to hold the Units that are the subject of such Submitted Bid, unless the number of Units subject to all such Submitted Bids shall be greater than the excess (the "Remaining Excess") of the Available Units over the number of Units subject to Submitted Bids described in paragraph 5(e)(i)(B) and paragraph 5(e)(i)(C), in which event the Submitted Bids of each such Existing Holder shall be accepted, and each such Existing Holder shall be required to sell Units, but only in an amount equal to the difference between (1) the number of Units then held by such Existing Holder subject to such Submitted Bid and (2) the number of Units obtained by multiplying (x) the number of Remaining Excess of the Available Units by (y) a fraction the numerator of which shall be the number of Units held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Units subject to such Submitted Bids made by all such Existing Holders that specified a rate per annum equal to the Winning Bid Rate; and (E) the Submitted Bid of each of the Potential Holders specifying a rate per annum that is equal to the Winning Bid Rate shall be accepted but only in an amount equal to the number of Units obtained by multiplying (x) the difference between the Available Units and the number of Units subject to Submitted Bids described in paragraph 5(e)(i)(B), paragraph 5(e)(i)(C) and paragraph 5(e)(i)(D) by (y) a fraction the numerator of which shall be the number of Units subject to such Submitted Bid and the denominator of which shall be the sum of the number of Units subject to such Submitted Bids made by all such Potential Holders that specified rates per annum equal to the Winning Bid Rate. (ii) If Sufficient Clearing Bids have not been made (other than because all of the Units are subject to Submitted Hold Orders), subject to the provisions of paragraph 5(e)(iii), Submitted Orders shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be rejected: (A) the Submitted Bid of each Existing Holder specifying any rate per annum that is equal to or lower than the Maximum Applicable Rate shall be rejected, thus entitling such Existing Holder to continue to hold the Units that are the subject of such Submitted Bid; (B) the Submitted Bid of each Potential Holder specifying any rate per annum that is equal to or lower than the Maximum Applicable Rate shall be accepted, thus requiring such Potential Holder to purchase the Units that are the subject of such Submitted Bid; and (C) the Submitted Bids of each Existing Holder specifying any rate per annum that is higher than the Maximum Applicable Rate shall be accepted and the Submitted Sell Orders of each Existing Holder shall be accepted, in both cases only in an amount 26 equal to the difference between (1) the number of Units then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (2) the number of Units obtained by multiplying (x) the difference between the Available Units and the aggregate number of Units subject to Submitted Bids described in paragraph 5(e)(ii)(A) and paragraph 5(e)(ii)(B) by (y) a fraction the numerator of which shall be the number of Units held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the number of Units subject to all such Submitted Bids and Submitted Sell Orders. (iii) If, as a result of the procedures described in paragraph 5(e)(i) or paragraph 5(e)(ii), any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a Unit on any Auction Date, the Auction Agent shall, in such manner as it shall determine in its sole discretion, round up or down the number of Units to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date so that each Unit purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be a whole Unit. (iv) If, as a result of the procedures described in paragraph 5(e)(i), any Potential Holder would be entitled or required to purchase less than a whole Unit on any Auction Date, the Auction Agent shall, in such manner as in its sole discretion it shall determine, allocate Units for purchase among Potential Holders so that only whole Units are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing any Units on such Auction Date. (v) Based on the results of each Auction, the Auction Agent shall determine, with respect to each Broker-Dealer that submitted Bids or Sell Orders on behalf of Existing Holders or Potential Holders, the aggregate number of Units to be purchased and the aggregate number of the Units to be sold by such Potential Holders and Existing Holders and, to the extent that such aggregate number of Units to be purchased and such aggregate number of Units to be sold differ, the Auction Agent shall determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Units. (f) SUSPENSION OF AUCTION DURING NON-PAYMENT PERIOD. ------------------------------------------------ Upon occurrence and during the continuance of a Non-Payment Period with respect to the Shares that has not been duly cured by the Company pursuant to paragraph 2(b), Auctions of the Units shall be suspended and shall not resume in each case until (A) in the case of a Dividend Non-Payment Period, all accumulated and unpaid dividends on such Shares for all past Dividend Periods shall have been paid to the Auction Agent, or (B) in the case of a Redemption Non-Payment Period in connection with an Optional Redemption of less than all of the Shares, all amounts payable upon such Optional Redemption of such Shares shall have been paid to the Auction Agent, in each case by 12:00 noon, New York City time, on the relevant Auction Date with respect to the Units, provided that, at least two Business Days but no more than 30 days prior to such Auction 27 Date, the Company shall have given the Auction Agent, the Securities Depository and the applicable holders of record written notice of such deposit or availability. (g) MISCELLANEOUS. -------------- The Company may interpret the provisions of this paragraph 5 to resolve any inconsistency or ambiguity, remedy any formal defect or make any other change or modification that does not substantially adversely affect the rights of Existing Holders of Shares. An Existing Holder (A) may sell, transfer or otherwise dispose of Shares only pursuant to a Bid or Sell Order in accordance with the procedures described in this paragraph 5 through a Broker-Dealer, except that transfers of Shares may also be effected through means other than pursuant to Auctions provided that each such transfer shall be in a minimum quantity of one Unit or in multiples thereof and shall be valid and accepted by the Auction Agent only if such Existing Holder or its Broker-Dealer or Participant, as applicable, shall have advised the Auction Agent in writing of such transfer by 3:00 P.M. on the Business Day next preceding the Auction Date with respect to the Units, and (B) except as otherwise required by law, shall have the ownership of the Shares held by it maintained in book-entry form by the Securities Depository in the account of its Participant, which in turn will maintain records of such Existing Holder's beneficial ownership. Neither the Company nor any Affiliate shall submit an Order in any Auction. Any Existing Holder that is an Affiliate shall not sell, transfer or otherwise dispose of Shares to any Person other than the Company. All of the Outstanding Shares shall be represented by one or more certificates registered in the name of the nominee of the Securities Depository unless otherwise required by law or unless there is no Securities Depository. If there is no Securities Depository, at the Company's option and upon its receipt of such documents as it deems appropriate, such Shares may be registered in the stock register in the name of the Existing Holder thereof and such Existing Holder thereupon will be entitled to receive certificates therefor and required to deliver certificates therefor upon transfer or exchange thereof. 6. MISCELLANEOUS. -------------- The Board of Directors may interpret the provisions hereof to resolve any inconsistency or ambiguity which may arise or be revealed and if such inconsistency or ambiguity reflects an inaccurate provision hereof, the Board of Directors may, in appropriate circumstances, authorize the filing of an instrument to correct or resolve such inaccurate provision. 7. NOTICES. -------- All notices or communications to the Company, unless otherwise specified in the Bylaws of the Company or these Articles of Amendment, shall be sufficiently given if in writing and delivered or mailed by first-class mail, postage prepaid, to Dominion Virginia Power, 120 Tredegar Street, Pump House, 2nd Floor, Richmond, Virginia 23219, attention: Treasury Department. Notice to the Company shall be deemed given on the earlier of the date received or the date seven days after such notice is mailed. 28 8. SECURITIES DEPOSITORY; STOCK CERTIFICATES. ------------------------------------------- (a) If there is a Securities Depository, one or more certificates for all of the Shares shall be issued to the Securities Depository and registered in the name of the Securities Depository or its nominee. Additional certificates may be issued as necessary to represent Shares. All such certificates shall bear a legend to the effect that such certificates are issued subject to the provisions restricting the transfer of Shares contained in these Articles of Amendment. Except as provided in paragraph (b) below, the Securities Depository or its nominee will be the holder, and no Existing Holder shall receive certificates representing its ownership interest in such Shares. (b) If the Applicable Rate applicable to the Shares shall be the Non-Payment Period Rate or there is no Securities Depository, the Company may at its option issue one or more new certificates with respect to such Shares (without the legend referred to in paragraph (a) above) registered in the names of the Existing Holders or their nominees. 29 Dated: December 6, 2002 VIRGINIA ELECTRIC AND POWER COMPANY By: s/G. Scott Hetzer ----------------------------------- Senior Vice President and Treasurer 30 EX-5.1 5 dex51.txt TAX OPINION OF MCGUIREWOODS LLP Exhibit 5.1 December 9, 2002 Virginia Electric and Power Company 120 Tredegar Street Richmond, Virginia 23219 1,250 Units, Each Consisting of 1,000 Shares of Virginia Electric and Power Company Flexible Money Market Cumulative Preferred Stock (Flex MMP(R)), 2002 Series A (Liquidation Preference $100 Per Share) Ladies and Gentlemen: We have acted as counsel to Virginia Electric and Power Company (the "Company") in connection with the Company's issuance of 1,250 units of its Flexible Money Market Cumulative Preferred Stock (Flex MMP(R)), 2002 Series A (Liquidation Preference $100 Per Share), each unit consisting of 1,000 shares (the "Preferred Stock"), as described in the Company's prospectus supplement dated December 5, 2002 (the Prospectus Supplement"). Capitalized terms not otherwise defined in this opinion have the meanings ascribed to them in the Prospectus Supplement. You have asked that we render this opinion to you regarding certain United States federal income tax matters pertaining to the Preferred Stock. In rendering this opinion, we have examined, and with your permission have relied on, the factual statements contained in the Prospectus Supplement and on such other instruments and documents, including records of the Company and certificates of public officials and authorized representatives of the Company, as we have deemed necessary or appropriate as a basis for the opinions expressed herein (collectively, the "Opinion Documents"). With your permission, we have not undertaken any independent investigation or verification of any factual matter set forth in the Opinion Documents, and we have assumed the factual statements set forth therein to be true, accurate and complete. We have also examined the Company's articles of incorporation, as amended to date and as proposed to be amended in the form attached to a Current Report on Form 8-K to which this opinion is an exhibit (the "Articles"). With your permission, we have assumed for purposes of this opinion that the Articles will be amended as proposed, and that the Preferred Stock will be issued, and the rights and obligations thereunder performed, in compliance with the terms and requirements set forth in the Prospectus Supplement and the Articles. Virginia Electric and Power Company December 9, 2002 Page 2 This opinion is based on the current provisions of the Internal Revenue Code of 1986, as amended (the "Code") and Treasury Regulations promulgated thereunder, published rulings and administrative pronouncements issued by the Internal Revenue Service, judicial decisions rendered by courts of competent jurisdiction, and such other authorities as we have considered relevant. These authorities are subject to change at any time, possibly with retroactive effect, and any such change may affect the continuing validity of the opinions set forth herein. This opinion will not be updated for subsequent changes or modifications to the law and regulations or to the judicial and administrative interpretations thereof unless we are specifically engaged to do so. Our opinion neither relates to nor purports to cover the laws, regulations, or other legal authorities of any state, local, or foreign governmental authority, nor any tax or other governmental charge, other than the United States federal income tax matters expressly herein addressed. Based on the foregoing, and subject to the assumptions, exceptions, limitations, and qualifications set forth herein, it is our opinion that: (1) the Preferred Stock will be classified as stock of the Company for United States federal income tax purposes; (2) dividends declared and paid by the Company on the Preferred Stock will be treated as dividends for United States federal income tax purposes to the extent paid out of current or accumulated earnings and profits of the Company, as determined for United States federal income tax purposes; (3) a corporate holder of the Preferred Stock that generally is entitled to the dividends received deduction under Section 243(a)(1) of the Code will be allowed that deduction with respect to dividends received on the Preferred Stock, provided that the holder satisfies the minimum holding period and other requirements applicable to the dividends received deduction; and (4) the discussion set forth in the Prospectus Supplement under the caption "Certain United States Federal Income Tax Consequences" is accurate in all material respects. No ruling has or will be sought or obtained from the Internal Revenue Service regarding any of the matters on which we have opined. Moreover, this opinion is not binding upon the Internal Revenue Service or the courts and as such does not provide a guarantee of result. Thus, no assurance can be given that the Internal Revenue Service will not take positions contrary to those stated herein or that a court would not uphold such contrary positions, potentially with adverse tax consequences. We express no opinions other than those expressed in this opinion. We hereby consent to the filing of this opinion as an exhibit to the Company's Current Report on Form 8-K and to references to our firm under the captions "Material United States Federal Income Tax Consequences" and "Legal Matters" in the Prospectus Supplement. In giving this consent, we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act of 1933. Very truly yours, s/McGuireWoods LLP -----END PRIVACY-ENHANCED MESSAGE-----