Old Dominion Electric Cooperative Option Agreement
Exhibit 10.64
THIS AGREEMENT is between Old Dominion Electric Cooperative (the “Cooperative”) and XXXXXX X. XXXXXX (the “Optionee”), and is dated as of March 1, 2002
(the “Date of Grant”).
The Cooperative hereby grants the Optionee an option to purchase shares of
mutual funds selected by the Board, subject to the terms and conditions of this Agreement.
The grant of this
Option is made pursuant to the Old Dominion Electric Cooperative 2002 Option Plan (the “Plan”), a copy of which has been provided to the Optionee, receipt of which is hereby acknowledged. The terms of the Plan are incorporated into this
Agreement by reference. In the case of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. Any term used in this Agreement that is defined in the Plan shall have the same meaning given to that term in the
Plan.
1. Grant of Option.
(a) The Cooperative grants the Optionee a nonstatutory stock option (the “Option”) to purchase from the Cooperative option shares (the
“Shares”) listed in Appendix A to this Agreement. The price paid by the Optionee to exercise the Option shall be equal to twenty-five percent (25%) of the total vested Option Value (as defined in the Plan) as of the applicable vesting date
listed in Section 2(a). The total Option Value assigned to this Option is $408,000. The Optionee will become vested in the Option Value pursuant to Section 2 of this Agreement.
(b) The grant of this Option shall not obligate the Cooperative to pay the Optionee any particular amount of remuneration, to continue the employment of the
Optionee after the grant or to make further grants to the Optionee at any time thereafter.
2. Entitlement to Exercise Option.
(a) The Optionee must be an
employee of the Cooperative on the applicable vesting date listed below in order to become vested in his Option Value. The Optionee will become vested in the Option Value as follows:
| Vesting Date |
Vested Option Value |
Total Vested Option
Value | ||
| March 1, 2002 |
$68,000 |
$ 68,000 | ||
| January 1, 2003 |
$68,000 |
$136,000 | ||
| January 1, 2004 |
$68,000 |
$204,000 | ||
| January 1, 2005 |
$68,000 |
$272,000 | ||
| January 1, 2006 |
$68,000 |
$340,000 | ||
| January 1, 2007 |
$68,000 |
$408,000 |
This vesting schedule shall accelerate and the Option shall become fully
exercisable upon the first to occur of (i) a “Change in Control,” (ii) the Optionee’s “Disability,” or (iii) the Optionee’s death. For purposes of this Agreement, the terms “Change in Control” and
“Disability” shall have the same meaning, and shall be interpreted in the same manner, as the definition of those terms used in the Executive Severance Agreement between the Optionee and the Cooperative, dated as of January 1, 2000.
(b) Except as otherwise stated in this paragraph, the Option may be exercised on or after the date the
Optionee both (x) has attained retirement age pursuant to the Cooperative’s retirement age policy in effect as of the date the Optionee terminates employment, and (y) has terminated employment with the Cooperative.
(i) If the Optionee retires or ceases to be employed by the Cooperative for any reason, including a termination
because of his death or Disability and at a time when all or a portion of this Option was vested pursuant to paragraph (a) above, the Optionee (or his beneficiary or personal representative) may exercise any or all of his vested Option within
fifteen (15) years after the Date of Grant.
(ii) If the Optionee is terminated by the
Cooperative for Cause (as defined in the Plan), this Option will expire immediately (with respect to both the vested and unvested Option Value) as of the date of the misconduct.
(c) In no event may this Option be exercised after the fifteenth (15th) anniversary of the Date of Grant.
3. Method of Exercise and Payment.
(a) The Optionee may exercise his
Option by delivering a written notice to the Record Keeper in the form attached as Exhibit A. Exercise of the Option may be made only within the 10 business days before the end of a calendar quarter. The exercise date will be (i) in the case of
notice by mail, the date of postmark; or (ii) if delivered in person, the date of delivery. The notice must be signed and state the number of shares the Optionee has elected to purchase. The Optionee may exercise the Option in whole or in part, but
only with respect to whole shares of stock.
(b) The exercise notice must be accompanied by payment of
the Option Price in full by cash (which shall include payment by check, bank draft or money order payable to the Cooperative). Instead of paying cash, the Optionee may agree to surrender Shares being acquired for all or part of the cash payment (for
this purpose, Shares will be valued at their Fair Market Value on the date of exercise).
4. Tax
Obligations Upon Exercise. The difference between the Fair Market Value of the shares purchased when this Option is exercised and the Option price is compensation taxable to the Optionee as ordinary income and is subject
to applicable federal and state taxes.
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By signing the Agreement, the Optionee agrees to make arrangements satisfactory to the Cooperative to comply with applicable tax withholding
requirements, if any.
5. Nontransferability. In general, this Option
shall not be transferable by the Optionee other than by will or by the laws of descent and distribution. Notwithstanding the preceding sentence and subject to federal and state securities laws, the Optionee may transfer this all or a portion of this
Option to one or more immediate family members, to a trust for the benefit of immediate family members, or to a partnership, limited liability company, or other entity the only partners, members, or interest-holders of which are among the
Optionee’s immediate family members. Consideration may not be paid for the transfer of this Option.
6. Adjustments. If the number of outstanding shares of mutual fund Shares is increased or decreased as a result of a subdivision or consolidation of shares, the payment of a stock dividend,
stock split, or any other change in capitalization, the number of unexercised Option Shares and the Option Price shall be appropriately adjusted by the Cooperative, whose determination shall be binding.
7. Employment Rights. Neither the Plan nor this Agreement confers upon the Optionee any
right to continue as an employee of the Cooperative or limits in any respect the right of the Cooperative to terminate the Optionee’s employment.
8. Limitation of Liability.
(a) The
Optionee agrees that the Cooperative and its Members’ officers, directors, employees, agents, licensors, contractors, or representatives will not be liable for any incidental, indirect, special, exemplary or consequential damages, including but
not limited to, damages or costs incurred as a result of loss of time, loss of savings, loss of data, loss of profits, or loss of goodwill, whether foreseeable or unforeseeable, that may arise out of or in connection with this Agreement, and whether
such liability is based on contract, tort, negligence, strict liability, products liability or otherwise.
(b) In no event will the collective liability of the Record Keeper and its affiliates for any damages incurred by the Optionee ever exceed the fees received by the Record Keeper under this Agreement during the twelve
months prior to the time at which the damages arose regardless of the form of action, whether based on contract, tort, negligence, strict liability, products liability or otherwise.
9. Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Virginia.
10. Acceptance of Option. This Agreement deals only with the Option the Optionee has been granted
and not its exercise. The Optionee’s acceptance of the Option places no obligation or commitment on the Optionee to exercise the Option. By signing below, the Optionee indicates acceptance of the Option and his or her agreement to the terms and
conditions set forth in this Agreement, which, together with the terms of the Plan, shall become the
3
Cooperative’s Stock Option Agreement with the Optionee. The Optionee also acknowledges receipt of a
copy of the Plan and agrees to all of the terms and conditions of the Plan.
11. Entire Agreement,
Amendment. This Agreement constitutes the entire agreement between the Optionee and the Cooperative with respect to the Option granted herein and shall be binding upon your legatees, distributees, and personal
representatives and the successors of the Cooperative. This Agreement may only be amended by a writing signed by both the Optionee and the Cooperative.
| OLD DOMINION ELECTRIC COOPERATIVE | ||
| By: |
/s/ XXXXXX X.
XXXXXXXX | |
| Xxxxxx X. Xxxxxxxx Chairman of
the Board | ||
| Date: |
March 1, 2002 | |
| XXXXXX X. XXXXXX | ||
| Signature: |
/s/ XXXXXX X. XXXXXX | |
| Date: |
March 1, 2002 | |
4
Appendix A
Option Strategy Plan
Investment Options
[ ] Understanding Your Investment Options
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Controlling your investments is an important feature of the Xxxxxx & Cay Option
Strategy Plan (PCOS). For that reason, investment alternatives with varying
degrees of risk and reward are available.
This packet provides the information you need to make informed investment
decisions. It's important to review the performance of your investments and your
investment strategy on a regular basis.
The company provides alternative investment funds to allow you:
. To create an investment program that is responsive to your particular
financial goals and needs
. The opportunity to affect your investment return and control the risk
of loss
Keep in mind that this brochure provides general educational information; it
does not in any way constitute specific investment advice. For advice about how
to invest, contact a professional financial advisor. Also, before you invest in
any fund, you should read the prospectus and other descriptive material provided
by each fund, available through your employee benefits department.
Other Information Available to You
Contact your employee benefits department if you would like a copy of:
. Prospectuses on the Plan's investment options
. Copies of financial statements, to the extent that they are available
. Information on underlying assets
. Share value of investment alternatives
Please note that some funds may have voting rights for issues like the election
of directors and selection of auditors. These rights are exercised on behalf of
this Plan by its trustees and are not available to participants.
Changing Your Investments
You may make changes to how your account is invested, including:
. Where you invest future contributions
. How past contributions are invested, by transferring or realigning
your existing assets
If you want to make changes, contact your employee benefits department. Changes
are made as soon as administratively possible after requests are received. Check
plan highlights for how often changes are permitted.
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Xxxxxx & Cay Investment Services, Inc. 1
[ ] Your Investment Program
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Risk Versus Return
The PCOS Plan offers a broad range of investment funds selected to help you meet
your investment needs. All of the fund strategies are shown on the risk and
return graph below. You can see that the Schwab Money Market Fund has the lowest
expected return and lowest level of risk. On the other hand, the Rockland Small
Cap Growth Fund has the highest expected return and highest level of risk.
|
| Aggressive [ ] Rockland Small Cap Growth
|
|
| [ ] Artisan International
|
|
| Moderate [ ] Managers Capital Appreciation
|
|
Risk| [ ] Ameristock
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| Conservative
|
| [ ] Met West Total Return
|
| [ ] Schwab Money Market
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Reward
[ ] Fund Performance
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Information and Performance from Morningstar as of September 30, 2001
Morningstar Prospectus Morningstar Annualized Expense Mgr
Fund Name Category Objective 3 Yr Rating Month YTD 1 Year 3 Year 5 Year Ratio Tenure
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Schwab Money Market Money Market Capital - 0.24 3.20 4.75 4.97 4.99 0.75
Xxxxxxx Xxxxx Barney 3 Month Preservation
T-Xxxx Index 0.90 3.41 5.03 5.12 5.16
Metropolitan West Total Return Intermediate- Corp Bond- 5 4.01 9.42 12.15 8.13 - 0.65 4.00
Xxxxxx Brothers Aggregate term Bond General
Bond Index 4.62 8.38 12.95 6.38 8.06
Ameristock Large Value Equity Income 4 (10.10) (5.74) 0.43 11.65 17.73 0.99 6.00
Xxxxxxx 1000 Value Index (10.96) (12.08) (8.91) 5.61 11.67
Managers Capital Appreciation Large Growth Growth 3 (20.58) (41.29) (55.42) 6.76 11.48 1.30 2.00
Xxxxxxx 1000 Growth Index (19.41) (30.89) (45.64) (3.28) 6.50
Rockland Small Cap Growth Small Growth Aggressive Growth 5 (8.06) (28.92) (41.94) 27.82 - 1.53 4.00
Xxxxxxx 2000 Growth Index (28.09) (28.06) (42.59) (0.43) (1.75)
Artisan International Foreign Stock Foreign Stock 5 (14.08) (23.38) (27.17) 15.75 13.31 1.22 6.00
MSCI EAFE Index (14.00) (26.56) (28.53) (1.16) (0.14)
Note: This performance information has been prepared by Xxxxxx & Cay Investment
Services, Inc. (PCIS) from data gathered primarily from Morningstar, Inc. While
the data gathered for use are considered to be from reliable sources, PCIS
cannot guarantee its completeness or its accuracy. In addition, past performance
should not be construed as a guarantee of future performance. Anyone using this
information to determine suitability of the represented fund for investment
purposes is strongly advised to read the fund prospectus before investing.
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Xxxxxx & Cay Investment Services, Inc. 2
[ ] The Fund Program
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How Funds Compare
The fund or funds you choose will depend on your personal investment objectives.
The key to smart financial planning is to match your investment objectives to
the funds' investment objectives. The following chart provides a comparison of
the six options.
Investment Fund Objective Risk/Reward This Fund Invests in...
Strategy (Fund)
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Money Market Seeks current income Should provide the least amount of A short-term investment fund
(Schwab Money and capital investment risk over the short-term; invested in money market
Market) preservation however, over longer periods of time, the instruments.
investment income generated by the fund
often has been only moderately higher than
the rate of inflation.
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Bonds Seeks high current Should provide current income with some A diversified portfolio of fixed
(Metropolitan West income and long-term capital appreciation consistent with an income securities of varying
Total Return) total return actively managed bond portfolio. maturities issued by domestic and
foreign corporations and
governments. At least 80% of
assets will be invested in
investment grade securities.
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Value Equity Seeks capital Should provide more stability than growth The common stocks of primarily
(Ameristock) appreciation and funds. Emphasis on value and stability domestic large capitalization
current income could prevent the Fund from achieving high companies that pay dividends. In
returns in growth rallies. addition, maintaining a value
focus, the companies usually have
low P/E's and high dividend
yields.
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Growth Equity Seeks long-term Growth emphasis makes the Fund more The common and preferred stocks
(Managers Capital capital appreciation volatile than value equity. Should provide of medium and large domestic
Appreciation) from equity high returns during growth rallies but could companies that are expected to
securities. lag during market down turns. grow at accelerated or sustained
levels.
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International Seeks long-term More volatile than a domestic equity fund Common stocks of non-US
Equity growth with little because of currency and country risk and companies with superior earnings
(Artisan regard for current growth emphasis. Long-term performance growth in developed and emerging
International) income. should be better than domestic equity funds. countries.
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Small-Cap Equity Seeks aggressive Should provide higher long-term return than Common stocks of small
(Rockland Small long-term growth of international equity, but at more companies that have expanding
Cap Growth) capital by investing short-term risk. profit margins and whose earnings
primarily in the have far exceeded Wall Street's
common stocks of expectations. Management
small sized attempts to capitalize on market
companies. trends.
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Note: Keep in mind that returns on any fund may vary from month to month and may
include both gains and losses to your account. While the potential return on
investment is greater in the equity funds than in the bond and money market
funds, the risk is also greater. However, equity funds typically produce larger
total investment returns than bond and money market funds when the returns are
compounded over a five- to ten-year period.
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Xxxxxx & Cay Investment Services, Inc. 3
[ ] Model Portfolios
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Constructing Your Own Portfolio
You may choose from six different funds to construct your own portfolio. You may
invest your assets in multiples of any whole number totaling 100%. Following are
three different portfolio models that you may use as a guide to construct your
own portfolio. Each reflects a different investment philosophy and strategy. In
reviewing the models, please understand that the company does not suggest any of
these models are necessarily appropriate for you or any other participant.
Conservative Model Moderate Model Aggressive Model
This model is for participants who are This model is for participants who are This model is for participants who are
seeking current income, have a low seeking growth opportunities at moderate seeking strong growth opportunities and
tolerance for risk and want to preserve risk. By combining the strong growth have a higher level of risk tolerance. It
the value of their fund while still qualities of stocks with the lower risk allows investors the potential for the
maintaining the possibility for some profile of bonds and money market funds, high return generated by a diversified
growth. this model rewards investors with array of equity classes, including small-
moderate growth characteristics at cap and international.
moderate risk.
[Graph appears here] [Graph appears here] [Graph appears here]
Allocation by fund: Allocation by fund: Allocation by fund:
Ameristock 10% Ameristock 20% Ameristock 25%
Managers Capital Appreciation 10% Managers Capital Appreciation 20% Managers Capital Appreciation 25%
Rockland Small Cap Growth 5% Rockland Small Cap Growth 10% Rockland Small Cap Growth 15%
Artisan International 5% Artisan International 10% Artisan International 15%
Metropolitan West Total Return 30% Metropolitan West Total Return 30% Metropolitan West Total Return 15%
Schwab Money Market 40% Schwab Money Market 10% Schwab Money Market 5%
Allocation by style: Allocation by style: Allocation by style:
Equities Equities Equities
-------- -------- --------
Large Value 10% Large Value 20% Large Value 25%
Large Growth 10% Large Growth 20% Large Growth 25%
Small Cap Growth 5% Small Cap Growth 10% Small Cap Growth 15%
International 5% International 10% International 15%
Fixed Income Fixed Income Fixed Income
------------ ------------ ------------
Core 30% Core 30% Core 15%
Cash 40% Cash 10% Cash 5%
Allocation by asset class: Allocation by asset class: Allocation by asset class:
Money market instruments 40% Stocks 60% Stocks 100%
Stocks 30% Money market instruments 10%
Bonds 30% Bonds 30%
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Xxxxxx & Cay Investment Services, Inc. 4
Old Dominion Electric Cooperative
Executive Option Plan Enrollment Form
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Participant Information
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Participant: SSN:
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Address: City: State / ZIP:
----------------------------------- --------- -----------
Option Grant Number: Work Phone:
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As a Participant of the Executive Option Plan, I elect to allocate the
underlying investment in the following securities. I understand that I may
reallocate my investments under this Plan on a quarterly basis and I agree to
not hold Old Dominion Electric Cooperative liable for market fluctuations
resulting in loss of principal and interest.
Fund Allocation Selection
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Investment Allocation
Fund Name Ticker Strategy Percentage
(In 10% Increments)
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Metropolitan West Total Return MWTRX Conservative %
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Schwab Money Market SWMXX Conservative %
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Ameristock AMTX Moderate %
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Managers Capital Appreciation MGCAX Moderate %
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Artisan International ARTIX Aggressive %
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Rockland Small Cap Growth RKGRX Aggressive %
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100%
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Participants Signature: _____________________________ Date: ________________
By signing this enrollment form, I have acknowledged receipt of prospectuses for
each of the above funds.
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Xxxxxx & Cay Investment Services, Inc. 5
Exhibit A
[XXXXXX & CAY LOGO]
OLD DOMINION ELECTRIC COOPERATIVE
2002 Option Plan Exercise Form
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Personal Information
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Company Name: Work Phone:
------------------------------------------------- -------------------------------------
Participant's Name: Home Phone:
------------------------------------------- -------------------------------------
Number of Options to be exercised: Grant Number: Option Price:
------------------- --------------- ----------------
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COMPLETE ONE OF THE FOLLOWING TWO BOXES
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Exercise Method - Cashless
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|_| Check here if you wish to use the cashless method to settle exercise cost
and applicable tax.
Complete Cash-out - All private options will be exercised and shares immediately
sold on the market. You will receive the net proceeds in cash less the amount to
cover the exercise price and the applicable federal, state and FICA taxes.
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OR
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Exercise Method - Cash
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|_| Check here if you wish to use the cash method to settle exercise cost and
applicable taxes.
A check, made payable to _______________, for the exercise price of the private
options must accompany this form.
|_| Check - Immediately following the exercise, you will be notified of an
additional amount needed to cover the applicable federal, state and
FICA taxes. A check is immediately due upon notification. If the check
is not received within 30 days, taxes will be taken from your next
paycheck.
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Participant's Signature: _____________________ Date: ______________________
Administrator's Confirmation: ________________ Date: ______________________
NOTE: Exercise date will be deemed to be the Participant Signature Date.
However, market values of underlying mutual funds are likely to fluctuate from
the exercise date to the date of sale. By signing above, the Participant agrees
the Old Dominion Electric Cooperative shall not be held responsible for those
market fluctuations.
