Avista Corporation Performance Award Agreement 2021
Exhibit 10.22
AVISTA CORPORATION
PERFORMANCE AWARD AGREEMENT
This Performance Award Agreement (the “Agreement”) is made by and between Avista Corporation, a Washington Corporation (the “Company”) and the individual named in section 1 (the “Participant”) as designated by the Avista Corporation Compensation and Organization Committee (the “Plan Administrator”).
WHEREAS, Performance Awards are granted under the January 19, 2016 amended and restated Avista Corporation Long-Term Incentive Plan (the “Plan”). The terms and conditions of the Performance Awards are set forth below and in the Plan, which is incorporated into this Agreement by reference.
NOW, THEREFORE, in consideration of the premises contained herein and in the Plan, it is agreed as follows:
All Performance Awards and any Dividend Equivalents (as described in Section 5 below) earned by a Participant under this Agreement are subject to the Recoupment Policy adopted by the Company’s Board of Directors as amended from time to time (“Recoupment Policy”). If a Participant becomes subject to the Recoupment Policy any Performance Award and associated Dividend Equivalent may be forfeited in whole or in part and all or part of any distribution payable to a Participant or his or her beneficiary under this Agreement may be recovered by the Company pursuant to the Recoupment Policy.
11.1 Award Agreements. Performance Awards granted under the Plan shall be evidenced by a written agreement that shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan.
11.2 Continued Employment or Services; Rights in Awards. Nothing contained in this Agreement, the Plan, or any action of the Plan Administrator taken under the Plan or this Agreement shall be construed as giving any Participant or employee of the Company any right to be retained in the employ of the Company or any Subsidiary or to limit the Company’s or any Subsidiary’s right to terminate the employment or services of the Participant.
11.3 Registration. At the present time, the Company has an effective registration statement with respect to the shares. The Company intends to maintain this registration but has no obligation to do so. In the event that such registration ceases to be effective, the Participant will not receive a Performance Award settlement or payment unless exemptions from registration under federal and state securities laws are available; such exemptions from registration are very limited and might be unavailable. By accepting the Agreement, the Participant hereby acknowledges that he/she has read the section of the Plan and this Agreement entitled Registration.
11.4 No Rights as a Shareholder. No Award under this Agreement shall entitle the Participant to any dividends (except to the extent provided in an award of Dividend Equivalent Rights), voting or any other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Performance Award, are free of all applicable restrictions.
11.5 Compliance with Laws and Regulations. Notwithstanding anything in the Plan to the contrary, the Board of Directors, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants.
11.6 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity and enforceability of any other provision of this Agreement. If any provision of the Agreement is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify any Performance Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended by the Plan Administrator to conform to applicable laws, or, if the Plan Administrator determines that the provision cannot be so construed or deemed amended without materially altering the intent of the Plan or the Performance Award, such provision shall be stricken as to such jurisdiction, person or Performance Award, and the remainder of the Agreement and any such Performance Award shall remain in full force and effect.
IN WITNESS WHEREOF, the Participant has executed this Agreement, and the Company has caused these presents to be executed in its name and on its behalf, all effective as of the Grant Date.
AVISTA CORPORATION
By: Dennis Vermillion
President and Chief Executive Officer
EXHIBIT 1
Performance Award Plan
Relative Total Shareholder Return Metric and Goals
2021 - 2023 Performance Cycle
The following graph and table represent the relationship between the Company’s relative three-year Total Shareholder Return (“TSR”) commencing January 1, 2021 and ending December 31, 2023 and the target award opportunity. The number of shares delivered at the end of the three-year Performance Cycle can range from zero to 200% of the target number of units allocated under this metric. The actual issuance of shares depends on Avista’s three-year TSR performance compared to the returns of the peer companies reported in the S&P 400 Utilities Index and how we rank among them. To receive 100% of the Award allocated under this metric, Avista must perform at the 50th percentile among the companies in the S&P 400 Utilities Index. To receive 200% of the Award, Avista must rank at the 90th percentile. If Avista ranks below the 30th percentile, no stock awards or cash Dividend Equivalent Rights will be earned. Dividend Equivalent Rights are calculated and paid out in cash when and to the extent the Performance Awards are issued. The following graph demonstrates the relationship between TSR ranking and various payout factors. Performance Awards are interpolated on a straight line for performance results between the figures shown.
| TSR Percentile Ranking | Payout (% of Target) |
Maximum | 90th | 200% |
Target | 50th | 100% |
Threshold | 30th | 50% |
| <30th | 0% |
TSR is calculated using S&P’s Research Insight software and reflects share price appreciation plus the impact of dividend distributions and the reinvestment of such dividends. TSR is calculated daily based on stock price changes and dividend payments, and then accumulated over the measurement period. Dividends are calculated using ex-date dividends per share. Beginning and ending share prices for the performance period reflect the average of closing share prices on the last 20 trading days ending on December 31st for both Avista and the peers.
From one year to the next, if S&P drops a company out of the index and adds another, the new company will be included in the ranking and the dropped company will be excluded. When a new company is added to the index, they will be added to the ranking as if they had been in the ranking from the beginning – provided that there is pricing and dividend data at the beginning of the cycle. When a company is dropped
everything related to that company will be excluded from the ranking as if the company was never part of the ranking.
Settlement Formula Example:
Assuming that 1,000 Performance Award units were allocated under this metric at the beginning of the three-year Performance Cycle and Avista’s TSR ranked at the 45th percentile after the three-year Performance Cycle, the Participant would receive 87.5% of 1,000 or 875 shares of Avista common stock plus cash dividend equivalents.
Payout Factor (% of Target) | Target Number of Performance Awards Granted |
| Final Number of Common Stocks Issued | |
87.5% | X | 1,000 | = | 875 shares plus cash dividends |
Percentile Ranking Methodology:
The percentile rank is calculated using the PERCENTRANK function in MS Excel, initially excluding Avista from the list. The results are rounded to the nearest whole percentile after Avista has been ranked.
The calculation can be replicated by arranging the TSR data from highest to lowest for all peers except Avista. A percentile ranking is calculated for each data point assuming 100.0th percentile for the highest data point, 0.0 percentile for the lowest data point, and the corresponding percentile for every other data point with an equal difference in percentile ranking for each data point. The TSR for Avista is calculated by determining Avista’s rank in the list and interpolating between the percentile rankings for the companies immediately above and below based on the differences in TSR. An example, based on sample data is as follows:
Company Ranking | TSR | Percentile Rank |
1 | 63.6% | 100.0% |
2 | 62.8% | 92.8% |
11 (ABC Corp) | 32.0% | 28.5% |
12(XYZ Corp) | 10.0% | 21.4% |
14 | 4.4% | 7.1% |
15 | -11.6% | 0.0% |
If a company’s TSR is 29.1%, the resulting percentile ranking would be 27.6%, calculated as follows: 27.6%
= 21.4% + [(29.1% - 10.0%) / (32.0% - 10.0%) * (28.5% - 21.4%)]
Total Shareholder Return (TSR) Methodology:
For purposes of this Agreement, a methodology for calculating a total return to shareholder with dividend reinvestment was established. Returns are calculated daily based on stock price changes and dividend payments and then accumulated over the Performance Cycle. Below are additional assumptions used in Avista’s calculation for TSR.
General Assumptions:
The starting share price for the Performance Cycle is determined by averaging the closing stock price on the last 20 trading days ending on December 31st prior to the first day of Performance Cycle. The ending share price is determined by averaging the closing stock price on the last 20 trading days ending on December 31st at the end of the Performance Cycle. For demonstration purposes, the example below uses January 1, 2018 – December 31, 2020 as the Performance Cycle.
Date | Closing Price | Date | Closing Price |
12/29/2017 | 51.49 | 12/31/2020 | 40.14 |
12/28/2017 | 51.56 | 12/30/2020 | 39.66 |
12/27/2017 | 51.53 | 12/29/2020 | 39.74 |
12/26/2017 | 51.47 | 12/28/2020 | 40.42 |
12/22/2017 | 51.51 | 12/24/2020 | 39.92 |
12/21/2017 | 51.45 | 12/23/2020 | 39.68 |
12/20/2017 | 51.27 | 12/22/2020 | 39.34 |
12/19/2017 | 51.25 | 12/21/2020 | 38.3 |
12/18/2017 | 51.47 | 12/18/2020 | 38.85 |
12/15/2017 | 51.48 | 12/17/2020 | 39.52 |
12/14/2017 | 51.42 | 12/16/2020 | 39.61 |
12/13/2017 | 51.61 | 12/15/2020 | 39.78 |
12/12/2017 | 51.4 | 12/14/2020 | 39.11 |
12/11/2017 | 51.58 | 12/11/2020 | 38.96 |
12/8/2017 | 51.58 | 12/10/2020 | 38.86 |
12/7/2017 | 51.55 | 12/9/2020 | 38.57 |
12/6/2017 | 51.67 | 12/8/2020 | 37.75 |
12/5/2017 | 51.71 | 12/7/2020 | 37.8 |
12/4/2017 | 51.83 | 12/4/2020 | 37.38 |
12/1/2017 | 51.94 | 12/3/2020 | 37.42 |
Average | 51.5385 | Average | 39.0405 |
The example below reflects share price appreciation plus the impact of dividend distributions and the reinvestment of such dividends. Dividends are reinvested on a daily basis. For this example, a fictional ex- date for dividends per share is used. Daily returns are calculated over the performance cycle and added together resulting in the Cumulative TSR for the performance cycle.
Date | Closing Price | Dividend | Daily TSR |
11/19/2019 | 47.03 | 0 | NA |
11/20/2019 | 46.92 | 0.388 | 0.5911%* |
11/21/2019 | 46.65 | 0 | (0.5609%) |
11/22/2019 | 46.41 | 0 | (0.5190%) |
11/25/2019 | 46.80 | 0 | 0.8392% |
11/26/2019 | 46.91 | 0 | 0.2427% |
Cumulative TSR 11/19/2019 to 11/26/2019 | 0.5978% |
* [(46.92 + 0.388) / 47.03] -1
EXHIBIT 2
Performance Award Plan
Cumulative Earnings Per Share Metric and Goals
–2021-2023 Performance Period
The following graph and table represent the relationship between the Company’s Cumulative Earnings Per Share (“CEPS”) commencing January 1, 2021 and ending December 31, 2023 and the target award opportunity. The number of shares delivered at the end of the three-year Performance Cycle can range from zero to 200% of the target number of units allocated under this metric. The actual issuance of shares depends on Avista’s CEPS over the three-year Performance Cycle. To receive 100% of the Performance Award allocated under this metric, Avista must achieve CEPS $6.87 over the three-year cycle. To receive 200% of the Award, Avista must achieve CEPS of $7.42. If Avista’s CEPS is less than $6.35, no stock awards or cash Dividend Equivalent Rights will be earned. Dividend Equivalent Rights are calculated and paid out in cash when and to the extent the Performance Awards are issued. The following graph demonstrates the relationship between CEPS and various payout factors. Performance Awards are interpolated on a straight line for performance results between the figures shown.
| 3-Year CEPS | Payout Factor |
Maximum | $7.52 | 200% |
Target | $6.87 | 100% |
Threshold | $6.35 | 40% |
| <$6.35 | 0% |
Performance is tracked over a three-year Performance Cycle thereby focusing on sustainability.
Cumulative EPS is fully diluted earnings per share determined in accordance with generally accepted accounting principles, and may be adjusted to remove the effects of such items as regulatory charges, income tax legislative changes and/or items of a non-routine or items of an extraordinary nature as determined by the Plan Administrator.
Settlement Formula Example:
Assuming that 1,000 Performance Award units were allocated under this metric at the beginning of the Performance Cycle and Avista’s cumulative EPS was $7.03 over three years, the Participant would receive 125% of 1,000 or 1,250 shares of Avista common stock plus dividend equivalents in cash.
Payout Factor (% of Target) | Target Number of Performance Awards Granted |
| Number of Common Stocks Issued | |
125% | X | 1,000 | = | 1,250 shares plus cash dividends |
Using the example formulas in Exhibit 1 and Exhibit 2, the Participant would receive in total 106.3% of 2,000 (total target # of Performance Awards granted) or 2,125 Shares of Common Stock plus cash dividend equivalents.
| Payout Factor (% of Target) | Target Number of Performance Awards Granted |
| Number of Common Stocks Issued | |
TSR | 87.5% | X | 1,000 | = | 875 |
CEPS | 125% | X | 1,000 | = | 1,250 |
Total | 106.3% | X | 2,000 | = | 2,125 |
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the state of , accept the Performance Award described in this Agreement and in the Plan, and acknowledge that I have received a copy of this Agreement and the Plan. I have read and understand the Plan, and I hereby make the representations, warranties and acknowledgments, and undertake the indemnity and other obligations, therein specified.
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| Signature of Employee |
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