Document:

ava-ex475_563.htm

Exhibit 4.75

 

 

 

 

DESCRIPTION OF COMMON STOCK

(Registered under Section 12(b) of the Securities Exchange Act of 1934, as amended)

 

 

 

General

The authorized capital stock of Avista, as set forth in its Restated Articles of Incorporation (the “Articles”), consists of 10,000,000 shares of Preferred Stock, cumulative, without nominal or par value (the “Preferred Stock”), which is issuable in series, and 200,000,000 shares of Common Stock without nominal or par value (the “Common Stock”). The Common Stock is listed on the New York Stock Exchange and is registered as a class under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Preferred Stock is registered as a class under Section 12(g) of the Exchange Act. As of December 31, 2020, no shares of preferred stock were outstanding. However, subject to the limitations set forth in the Articles and such other limitations as are provided by law, the Board of Directors has the authority to establish series of preferred stock, to determine the relative rights of series of preferred stock so established and to cause the Company to issue and sell the shares of any such series of preferred stock.

 

The following is a description of certain of the rights and privileges of the Common Stock.

 

The terms of the Common Stock include those stated in the Articles and Avista’s Bylaws (the “Bylaws”) and those made applicable thereto by the Washington Business Corporation Act (the “Washington BCA”). The following summary is not complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Articles, the Bylaws and the Washington BCA. Avista has filed the Articles and the Bylaws as exhibits to its reports filed under the Exchange Act. Whenever particular provisions of the Articles, the Bylaws or the Washington BCA are referred to, the summaries of those provisions set forth herein are qualified in their entirety by reference to the actual provisions set forth in the Articles, the Bylaws or the Washington BCA, as the case may be.

 

 

 

Dividend Rights; Rights upon Liquidation; No Pre-Emptive Rights

After full provision for all Preferred Stock dividends declared or in arrears, the holders of Common Stock are entitled to receive such dividends as may be lawfully declared from time to time by the Board of Directors.

 

In the event of any liquidation or dissolution of Avista, after satisfaction of the preferential liquidation rights of the Preferred Stock (including accumulated dividends), the holders of Common Stock would be entitled to share ratably in all assets of Avista available for distribution to shareholders.

 

No holder of Common Stock has any pre-emptive rights.

 

Voting Rights

 

General; Quorum

The holders of the Common Stock have sole voting power, except as indicated below or as otherwise provided by law. Each holder of Common Stock is entitled to one vote per share.

 

Under the Washington BCA, a majority of the votes entitled to be cast on a corporate action by a voting group constitutes a quorum of that group for that corporate action. If a quorum exists, a corporate action, other than the election of directors, is approved by the voting group if the votes cast within the voting group favoring the corporate action exceed the votes cast within the voting group opposing the corporate action.

 

Election of Directors

In an uncontested election of directors, each vote may be cast “for” or “against” one or more candidates, or a shareholder may “abstain” with respect to one or more candidates. A candidate is elected to the Board of Directors only if the number of votes “for” such candidate exceeds the number of votes “against” such candidate. Shares otherwise present at the meeting but for which there is an “abstention” or as to which no authority or direction is given or specified with respect to a candidate are not counted as votes “for” or “against”. If an incumbent director does not receive a majority of votes cast, he or she would continue to serve a term that would terminate on the date that is the earliest of (a) the date of the commencement of the term of a new director selected by the Board to fill the office held by such director, (b) the effective date of the resignation of such director and (c) the later of (i) the last day of the sixth calendar month commencing after the election and (ii) December 31 of the calendar year in which the election occurred. In a contested election — that is, an election in which the number of candidates exceeds the total number of directors to be elected — shareholders would be allowed to vote “for” one or more candidates (not to exceed the number of directors to be elected) or “withhold” votes with respect to one or more candidates. The candidates elected would be those receiving the largest number of votes (up to the number of directors to be elected). Shareholders are not allowed to cumulate their votes in any election of directors (whether or not contested).

 

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Senior Class of Stock; Major Corporate Transaction

Under the Articles, the approval of the holders of the majority of the outstanding shares of Common Stock is required to create a new class of stock, including, for example, preference stock or any other class of stock senior to the Common Stock. In addition, in any circumstance in which the Washington BCA would require the approval of shareholders to authorize (1) the merger of the Company with or into another entity or a statutory share exchange with another entity, (2) a sale, lease, exchange or other disposition of property of the Company or (3) the dissolution of the Company, the requisite shareholder approval (in addition to any required approval by the holders of Preferred Stock) is the affirmative vote of the holders of a majority of the outstanding shares of Common Stock, unless the Washington BCA requires a higher standard.

 

Voting Rights of Preferred Stock

Under the Articles, whenever and as often as, at any date, dividends payable on any shares of Preferred Stock shall be in arrears in an amount equal to the aggregate amount of dividends accumulated on such shares of Preferred Stock over the eighteen (18) month period ended on such date, the holders of the Preferred Stock, voting separately and as a single class, are entitled to elect a majority of the Board of Directors, and the holders of the Common Stock, voting separately and as a single class, are entitled to elect the remaining directors. Such voting rights of the holders of the Preferred Stock cease when all defaults in the payment of dividends on the Preferred Stock have been cured.

 

In addition, the consent of various proportions of the Preferred Stock at the time outstanding is required to adopt any amendment to the Articles which would authorize any new class of stock ranking prior to or on a parity with the Preferred Stock as to certain matters, to increase the authorized number of shares of the Preferred Stock, to change any of the rights or preferences of outstanding Preferred Stock or to issue additional shares of Preferred Stock unless an earnings test is satisfied.

 

Under the Washington BCA, the approval of the holders of a majority of the outstanding shares of Preferred Stock is required in connection with certain changes in the capital structure of Avista or in certain rights and preferences of the Preferred Stock, including certain of the changes referred to in the preceding paragraph. In addition, the Washington BCA requires approval of certain mergers, share exchanges and other major corporate transactions by the holders of two-thirds of the outstanding Preferred Stock.

 

Board of Directors

The Articles provide that the number of directors of the Company will be the number, not to exceed eleven, that the Board of Directors specifies from time to time in the Bylaws, subject to the rights of holders of the Preferred Stock to elect directors in certain circumstances. Both the Articles and the Bylaws provide that all directors will be elected at each annual meeting for a term that will expire at the next succeeding annual meeting.

 

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Vacancies occurring in the Board of Directors may be filled by the Board. Directors may be removed only for cause and only if the number of votes cast by holders of Common Stock for the removal of a director exceeds the number of votes cast against such removal.

 

The Articles and the Bylaws further require an affirmative vote of the holders of at least 80% of the outstanding shares of Common Stock to alter, amend or repeal the provisions relating to the Board of Directors and the filling of vacancies on, and the removal of members from, the Board of Directors.

 

Advance Notice of Shareholder Nominations for Director and Proposals of Other Business

Under the Bylaws, at an annual meeting of shareholders only such nominations of individuals for election to the Board of Directors shall be made as shall have been properly made and only such other business shall be transacted as shall be properly brought before the meeting, in accordance with the timing and information requirements set forth in the Bylaws. In general, a shareholder’s notice of intention to nominate a candidate for director or bring other business before the meeting must be delivered in writing not less than 90 nor more than 180 days prior to the first anniversary date of the preceding year’s annual meeting, and the information contained in or accompanying such notice shall be updated periodically up to the time of the meeting. Only shareholders of record (as of the date of the notice and the date of the meeting) who have complied with the procedures set forth in the Bylaws and appear at the meeting in person or by qualified representative are eligible to nominate a candidate for director or bring other business before the meeting.

 

A shareholder notice must contain information regarding the proponent, the nominee (if any) and their respective shareholdings and derivative transactions and, in addition, information as to:

		
	
 
	
 

	
•
	
persons associated, affiliated or acting in concert with, the shareholder and the nominee (if any);

	
•
	
purchases and sales by the shareholder of Avista’s stock during the 24 month period preceding the shareholder notice;

	
•
	
agreements, arrangements or understandings between or among the shareholder, any shareholder associated person or any other person that relates to the proposed business or proposal; and

	
•
	
additional information about a shareholder’s nominee, including (i) the nominee’s occupation, and (ii) any related person transactions between the nominating shareholder and shareholder associated persons, and the nominee and nominee associated persons.

 

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A shareholder proposing to nominate an individual for election as a director must submit a questionnaire (similar to Avista’s directors’ and officers’ questionnaire) completed and signed by the nominee, which also includes representations by the nominee concerning (i) the absence of certain voting commitments and compensation or indemnification arrangements and (ii) the nominee’s compliance with the applicable law and Avista’s policies.

 

Proposed business will not be transacted and proposed nominations will not be made if the shareholder (or qualified representative) does not appear at the meeting and satisfy the other requirements of the Bylaws.

 

These procedures and information requirements apply to any nomination to be made at, or other business to be brought before, a shareholder meeting, including any proposal that is to be included in Avista’s Proxy Statement pursuant to Rule 14a-8 under the Exchange Act.

 

Proxy Access

 

General

Subject to the conditions, limitations and exceptions set forth in the Bylaws, each Eligible Access Shareholder (as defined) may designate one nominee to election as a director of the Company (an “Access Nominee”) for inclusion in the proxy statement and proxy card of the Board of Directors used for each annual meeting of shareholders.

 

In order to so designate an Access Nominee, an Eligible Access Shareholder shall comply with all requirements relating to the nomination of a candidate for election as a director and shall deliver, no later than the Access Notice Date (as defined), the notice and accompanying documentation required for the nomination of such candidate, as described above under “Advance Notice of Shareholder Nominations for Director and Proposals of Other Business.” In addition, no later than the Access Notice Date, the Eligible Access Shareholder shall deliver:

		
	
 
	
 

	
•
	
a request that the Access Nominee be included in the Board of Director’s proxy statement and proxy card, together with the written consent of such Access Nominee to be so included and to serve if elected;

	
•
	
agreements and instruments, specified in the Bylaws, containing various representations and warranties as to such Eligible Access Shareholder and such Access Nominee and various agreements on the part of each of them;

	
•
	
any statement (not to exceed 500 words) that the Eligible Access Shareholder requests to be included in such proxy statement.

 

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Number of Nominees

Each Eligible Access Shareholder (including, for this purpose, its affiliates) has the right to designate one, but no more than one, Access Nominee, except that the Board of Directors is not required to include in its proxy statement or on its proxy card more than the Maximum Number of Access Nominees. If there are more than the Maximum Number of Access Nominees for any annual meeting of shareholders, the Access Nominees will be included in the order of the number (largest to smallest) of shares of the Common Stock Owned of the Eligible Access Shareholders proposing such nominees.

 

Exceptions and Limitations

Anything in the Bylaws to the contrary notwithstanding, if, among other things:

		
	
 
	
 

	
•
	
the Company receives proper notice that any shareholder intends to nominate a candidate for director at the annual meeting and not request the inclusion of such candidate in the proxy statement of the Board of Directors;

	
•
	
the Board of Directors determines that (i) any Access Nominee’s nomination or election to the Board of Directors would result in the Company violating or failing to be in compliance with any applicable law, rule or regulation or the Articles or Bylaws or (ii) any Access Nominee would not be independent under various applicable standards, is the subject of a pending criminal proceeding or has been convicted in such a proceeding within the past ten years, or, without authorization of the Federal Energy Regulatory Commission, would upon election to the Board of Directors, be in violation of the Federal Power Act;

	
•
	
any Access Nominee was included in the proxy statement and proxy card of the Board of Directors and nominated for election to the Board of Directors at one of the Company’s two preceding annual meetings of shareholders and received a vote of less than 25% of the shares of Common Stock;

	
•
	
any of the representations or warranties made, or any of the other information provided, by any Eligible Access Shareholder or any Access Nominee in any of the documents delivered to the Company contains any misstatement or omission of a material fact or if there occurs a material breach of any of the agreements or other obligations contained in such documents; or

	
•
	
any Eligible Access Shareholder, or a qualified representative, fails to appear at the annual meeting of shareholders and nominate an Access Nominee;

	
•
	
then, in any such case, among other things,

	
•
	
the Board of Directors will not be required to include such Access Nominee (any Access Nominee in the case of the first bullet point above) in its proxy statement and proxy card;

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•
	
the nomination (if made) of such Access Nominee will be disregarded; and/or

	
•
	
in any event, such Access Nominee will not be voted on at the annual meeting of shareholders, whether or not such Access Nominee was included in the proxy statement and proxy card of the Board of Directors and whether or not proxies in respect of a vote on such Access Nominee have been solicited or received by the Board of Directors.

Anything in the Bylaws to the contrary notwithstanding, the Board of Directors may omit from its proxy statement, or may supplement or correct, any information, including all or any portion of the statement in support of any Access Nominee, if the Board of Directors determines, among other things, that such information contains misstatements or omissions of material facts or that the inclusion of such information would violate applicable law.

 

Nothing in the Bylaws limits the Company’s right to solicit against and include in its proxy statement its own statements relating to, any Access Nominee.

 

Definitions

As used in this section:

 

“Access Notice Date” means the thirtieth (30th) day following the earliest date on which a shareholder notice of a proposed nomination of a candidate for director may be made under the applicable provision of the Bylaws, as generally described above under “Advance Notice of Shareholder Nominations for Director and Proposals of Other Business.”

 

“Eligible Access Shareholder” means, subject to the specific provisions of the Bylaws, a shareholder who (1) is eligible under the Bylaws to nominate a candidate for director (or a group of not more than 20 such shareholders) and (2)(a) has continuously Owned at least the Minimum Number of shares of the Common Stock throughout the preceding three-year period and through the date of the annual meeting of shareholders and (b) otherwise satisfies the conditions and complies with the provisions of the Bylaws.

 

“Maximum Number” means, except as otherwise set forth in the Bylaws, the number of members of the Board of Directors that constitutes 20% of the total number of such members as of the Access Notice Date (rounded down to the nearest whole number); provided, however, that the Maximum Number for a particular annual meeting shall be reduced as set forth in the Bylaws.

 

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“Minimum Number” means the number of shares of the Common Stock that constitutes 3% of the total number of shares outstanding as of the most recent date prior to the Access Notice Date as of which such number is given in any document filed by the Company pursuant to the Exchange Act.

 

“Own,” with respect to shares of the Common Stock, means, except as otherwise set forth in the Bylaws, to possess both the full voting and investment rights pertaining to, and the full economic interest in, such shares; provided, however, that the number of shares so Owned shall not include, or shall be reduced by, any shares purchased or sold in an unsettled transaction, sold short, borrowed or subject to any derivative or similar agreement that reduces the holder’s voting rights in respect of such shares or hedges or offsets the economic interest otherwise attributable to such shares.

 

Special Meetings of Shareholders

The Articles provide that a special meeting of shareholders may be called by certain corporate officers and shall be called by the President at the request of the holders of two-thirds of the outstanding shares of Common Stock.

 

“Fair Price” Provision

The Articles contain a “fair price” provision which requires the affirmative vote of the holders of at least 80% of the outstanding shares of Common Stock for the consummation of certain business combinations, including mergers, consolidations, recapitalizations, certain dispositions of assets, certain issuances of securities, liquidations and dissolutions involving Avista and a person or entity who is or, under certain circumstances, was, a beneficial owner of 10% or more of the outstanding shares of Common Stock (an “Interested Shareholder”) unless

		
	
 
	
 

	
•
	
such business combination has been approved by a majority of the directors unaffiliated with the Interested Shareholder, or

	
•
	
certain minimum price and procedural requirements are met. The Articles provide that the “fair price” provision may be altered, amended or repealed only by the affirmative vote of the holders of at least 80% of the outstanding shares of Common Stock.

Statutory Limitation on “Significant Business Transactions”

 

General

The Washington BCA contains provisions that limit our ability to engage in “significant business transactions” with an “acquiring person”, each as defined below. Avista has no right to waive the applicability of these provisions.

 

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Significant Business Transactions Within Five Years of Share Acquisition Time

Subject to certain exceptions, for five years after an “acquiring person’s” “share acquisition time,” Avista may not engage in any “significant business transaction” with such “acquiring person” unless:

		
	
 
	
 

	
•
	
before such “share acquisition time”, a majority of the Board of Directors approves either:

	
•
	
such “significant business transaction”; or

	
•
	
the purchase of shares made by such “acquiring person”; or

	
•
	
at or subsequent to such “share acquisition time”, such “significant business transaction” has been approved by:

	
•
	
a majority of the Board of Directors; and

	
•
	
the holders of 2/3 of the outstanding shares of Common Stock (except shares beneficially owned by or under the voting control of the “acquiring person”).

Significant Business Transactions More Than Five Years After Share Acquisition Time

Avista may not engage in certain “significant business transactions” (including mergers, share exchanges and consolidations) with any “acquiring person” unless:

		
	
 
	
 

	
•
	
the transaction complies with certain “fair price” provisions specified in the statute; or

	
•
	
no earlier than five years after the “acquiring person’s” “share acquisition time”, the “significant business transaction” is approved at an annual or special meeting of shareholders (in which the “acquiring person’s” shares may not be counted in determining whether the “significant business transaction” has been approved).

 

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Definitions

As used in this section:

 

“Significant business transaction” means any of various specified transactions involving an “acquiring person”, including:

		
	
 
	
 

	
•
	
a merger, share exchange, or consolidation of Avista or any of its subsidiaries with an “acquiring person” or its affiliate;

	
•
	
a sale, lease, transfer or other disposition to an “acquiring person” or its affiliate of assets of Avista or any of its subsidiaries having an aggregate market value equal to 5% or more of all of the assets determined on a consolidated basis, or all the outstanding shares of Avista, or representing 5% or more of its earning power or net income determined on a consolidated basis;

	
•
	
termination, at any time over the five-year period following the “share acquisition time”, of 5% or more of the employees of Avista as a result of the “acquiring person’s” acquisition of 10% or more of the shares of Avista; and

	
•
	
the issuance or redemption by Avista or any of its subsidiaries of shares (or of options, warrants, or rights to acquire shares) of Avista or any of its subsidiaries to or beneficially owned by an “acquiring person” or its affiliate except pursuant to an offer, dividend distribution or redemption paid or made pro rata to all shareholders (or holders of options, warrants or rights).

“Acquiring person” means, with certain exceptions, a person (or group of persons) other than Avista or its subsidiaries who beneficially owns 10% or more of the outstanding Common Stock of Avista.

 

“Share acquisition time” means the time at which a person first becomes an “acquiring person” of Avista.

 

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Regulatory Approvals Required for An Acquisition of Avista

 

General

As a public utility company, Avista is subject to the jurisdiction of the federal and state utility regulatory commissions listed below. Although there is specific statutory language in each jurisdiction that defines the transactions that would require commission approval, in general any acquisition of direct or indirect control over, or other direct or indirect transfer or acquisition of the utility facilities of, Avista by any means (any such transaction being called, for convenience, an “Acquisition”), would be subject to the approval of such commissions. The following is an outline of the primary standards for approval in each jurisdiction, but it is not a complete list of all approvals that would be required.

 

Washington

As a condition to its approval of a proposed Acquisition, the Washington Utilities and Transportation Commission would have to conclude, among other things, that the Acquisition would provide a “net benefit” to Avista’s customers and would otherwise be “consistent with the public interest.”

 

Idaho

As a condition to its approval of a proposed Acquisition, the Idaho Public Utilities Commission (the “IPUC”) would have to conclude, among other things, that the Acquisition would be “consistent with the public interest”. In addition, because any Acquisition would include hydropower water rights used in the generation of electric power, the Idaho Department of Water Resources would have to issue conditions protecting the public interest and holders of existing water rights with respect to the hydropower water rights to be transferred.

 

In addition, a separate Idaho statute, on its face, provides, subject to certain exceptions, that no interest in any electric public utility property may be transferred to or acquired by, directly or indirectly, (1) any government or governmental or political entity organized or existing under the laws of any other state, or any corporation or other organization whose capital stock or other evidence of ownership is owned or controlled, directly or indirectly, by any of the foregoing or (2) any corporation or other organization that (a) is organized under the laws of any other state and (b) is not an “electric public utility” or “electrical corporation” subject to the jurisdiction of the IPUC.

 

Montana

As a condition to its approval of a proposed Acquisition, the Public Service Commission of the State of Montana (the “MPSC”) would have to conclude, among other things, that the Acquisition would satisfy any of three standards – the “public interest” standard, the “no-harm-to-consumers” standard or the “net-benefit-to-consumers” standard. The MPSC has not enunciated a specific standard, applicable in every case, because of the variety of situations that can arise.

 

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Oregon

In addition to requiring approval by the Public Utility Commission of Oregon (the “OPUC”) of any Acquisition, Oregon law separately requires OPUC approval of any transaction whereby any person, directly or indirectly, would “acquire the power to exercise any substantial influence over the policies and actions of a public utility” if such person is, or would become, an “affiliated interest” with such public utility (defined to include a person owning or holding, directly or indirectly, 5% or more of the voting securities of a public utility). As a condition to its approval of the acquisition of such a “substantial influence”, as described above, the OPUC would have to conclude, among other things, that the proposed transaction would “serve the public utility’s customers and [be] in the public interest” (which the OPUC interprets as a “net benefits” test).

 

Alaska

Alaska law would require the approval by the Regulatory Commission of Alaska (the “RCA”) for any Acquisition since such a transaction would constitute an indirect acquisition of a controlling interest in Alaska Electric Light and Power Company, which is an indirect, wholly owned subsidiary of Avista. As a condition to its approval of a proposed Acquisition, the RCA would have to conclude, among other things, that the proposed transaction is “consistent with the public interest.”

 

Federal

As a condition to its approval of a proposed Acquisition, the Federal Energy Regulatory Commission would have to conclude, among other things, that the Acquisition would be “consistent with the public interest”, considering, among other things, the effect of the transaction on competition in wholesale electric power markets and the rates for wholesale power sales or electric transmission services.

 

Anti-Takeover Effect

Certain provisions of the Articles and the Bylaws described above under “Board of Directors”, the provisions of the Bylaws described above under “Advance Notice of Shareholder Nominations for Director and Proposals of Other Business” and the provisions of the Articles described above under “Special Meetings of Shareholders” and “‘Fair Price’ Provision”, together with the provisions of the Washington BCA described above under “Statutory Limitations on ‘Significant Business Transactions’”, considered either individually or in the aggregate, may have an “anti-takeover” effect. These provisions could discourage a future takeover attempt which is not approved by Avista’s Board of Directors, but which individual shareholders might deem to be in their best interests or in which shareholders would receive a premium for their shares over current market prices.

 

In addition, the provisions of federal and state utility law described under “Regulatory Approval Required for an Acquisition of Avista” could discourage any future takeover attempt or other business combination, even if it were approved by the Company’s Board of Directors and even if individual shareholders might deem it to be in their best interests.

 

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Miscellaneous

The outstanding shares of Common Stock are fully paid and non-assessable. The holders of shares of Common Stock are not and will not be subject to liability for further calls or assessment by, or for liabilities of, Avista.

 

The outstanding shares of Common Stock are listed on the New York Stock Exchange under the symbol “AVA.” Any new shares of Common Stock will also be listed on that Exchange subject to official notice of issuance.

 

The Transfer Agent and Registrar for the Common Stock is Computershare Shareowner Services LLC, 480 Washington Boulevard, 29th Floor, Jersey City, New Jersey 07310.

 

13ava-ex1022_562.htm

Exhibit 10.22

 

RRAVISTA 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:

 

1. Terms of Performance Awards. The terms of the Performance Awards are set forth as follows:

 

	
 
	
(a)
	
The "Participant" is (Participant’s Name)

 

	
 
	
(b)
	
The "Grant Date” is February 5, 2020.

 

	
 
	
(c)
	
The total target number of eligible "Performance Awards" shall be (# of) units.  “Performance Awards” granted under this Agreement are units that will be reflected in a book account maintained by the Company or a third party administrator during the Performance Cycle, and that will be settled in cash or shares of Avista Corporation Common Stock (“Common Stock”) to the extent provided in this Agreement and the Plan.

 

	
 
	
(d)
	
The "Performance Cycle" is the period beginning on January 1, 2020 and ending on December 31, 2022.

 

2. Conditions to Award. Pursuant to this Award, the number of Performance Awards earned will depend upon the Company’s performance against specific performance metrics. The performance metrics are (i) Relative Total Shareholder Return, which accounts for (# of) units of the total target award as set forth in section 1(c), and (ii) Cumulative Earnings Per Share (“CEPS”) which accounts for (# of) units of the total target award set forth in section 1(c). The total number of shares of Stock that will be issued in the settlement of this Award, based upon the Company’s satisfaction of the metrics, will be determined by multiplying the Target Number of units allocated for each metric set forth in this section 2 by the applicable Payout Factor in accordance with the provisions of Exhibit 1 and Exhibit 2, which is attached to and forms a part of this Agreement.

 

3.Settlement of Performance Awards. The Company shall deliver to the Participant one share of Common Stock (or cash equal to the Fair Market Value of one share of Common Stock) for each 

Page 1 of 11

 

 

 

Performance Award earned by the Participant, as determined in accordance with the provisions of Exhibit 1 and Exhibit 2, which is attached to and forms a part of this Agreement.  The earned Performance Award payable to the Participant shall be paid in shares of Common Stock or in cash (based on the Fair Market Value of the Common Stock as of the date the Plan Administrator certifies the attainment of the performance goals), or in a combination of the two, as determined by the Plan Administrator in its sole discretion, except that cash may be distributed in lieu of any fractional share of Common Stock.

 

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.

 

4.Time of Payment. Except as otherwise provided in this Agreement, payment of Performance Awards earned will be delivered as soon as feasible after the end of the Performance Cycle and after the Plan Administrator certifies the attainment of the performance goals.

 

5. Dividend Equivalent Rights. Any Performance Awards may, in the Plan Administrator’s discretion, earn Dividend Equivalent Rights.  In respect of any Performance Award that is outstanding on the dividend record date for Common Stock, the Participant may be credited with an amount equal to the cash distributions that would have been paid on the shares of Common Stock covered by such Award had such covered shares been issued and outstanding on such dividend record date.  Dividend Equivalent Rights are to be paid in cash based on the total number of Performance Awards earned at the end of the Performance Cycle and delivered as soon as feasible after the Performance Cycle and after the Plan Administrator certifies the attainment of the performance goals.  Dividend Equivalent Rights are subject to all applicable taxes, which are the responsibility of the Participant. The Dividend Equivalent Rights in respect of any Performance Awards that are not earned as of the end of a Performance Cycle, shall be forfeited as of the end of the Performance Cycle.

 

6. Termination of Employment during Performance Cycle. Except as otherwise provided in section 7, this section 6 shall apply if the Participant’s employment terminates during a Performance Cycle. If the Participant’s employment with the Company and/or Subsidiaries terminates during the Performance Cycle because of Retirement, Disability, or Death, the Participant shall be entitled to a prorated value of the Performance Award earned in accordance with Exhibit 1 and Exhibit 2, determined at the end of the Performance Cycle, and based on the ratio of the number of whole months the Participant was employed during the Performance Cycle to the total number of months in the Performance Cycle (36).  If a Participant's employment or services with the Company and/or Subsidiaries terminate on or as of the last day of a Performance Cycle, such Participant will be deemed to have terminated after the end of such Performance Cycle.  If the Participant’s employment with the Company and/or Subsidiaries terminates during the Performance Cycle for any reason other than Retirement, Disability, or Death, the Performance Award granted under this Agreement will be forfeited on the Date of Termination (as defined in section 9(b)); provided, however, that in such circumstances, the Plan Administrator, in its sole discretion, may determine that the Participant will be entitled to receive a prorated or other portion of the Performance Award.  In case of termination for Cause, the Performance Award granted shall automatically terminate upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise.  If a Participant’s employment with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant’s rights under any Award likewise shall be suspended during the period of investigation.  The effect of a Company-approved leave of absence on the terms and conditions of an Award shall be determined by the Plan Administrator, in its sole discretion.

 

7. Change in Control. If a Change in Control occurs during the Performance Cycle, and the Participant’s Date of Termination (as defined in section 9(b)) does not occur before the Change in Control date, the Participant shall be entitled to a prorated value of the Performance Award that would have been earned by the Participant in accordance with Exhibit 1 and Exhibit 2, determined as of the date of the 

02/05/2020 Page 2 of 11

 

 

Change in Control, prorated based on the ratio of the number of whole months the Participant is employed during the Performance Cycle through the date of the Change in Control, to the total number of months in the Performance Cycle; provided, however, that a Payout Factor of at least 100% as set forth in Exhibit 1 and Exhibit 2 for the Performance Cycle shall be deemed to have been achieved as of the date of the Change in Control.  Notwithstanding the provisions of sections 3 (with the exception of the application of the Recoupment Policy), 4, and 5, the value of the Performance Award, and any Dividend Equivalent Right, earned in accordance with the foregoing provisions of this section shall be delivered to the Participant in a lump sum cash payment as soon as feasible after the occurrence of a Change in Control, with the value of a Performance Award equal to the Fair Market Value of a share of Common Stock determined under the provision of section 3 as of the date of the Change in Control. Distributions to the Participant under sections 3 and 5 shall not be affected by payments under this section, except that the number of Performance Awards and Dividend Equivalent Rights earned by and payable to the Participant shall be reduced by the number of Performance Awards and Dividend Equivalent Rights with respect to which payment was made to the Participant under this section.

 

8. Taxes. The Participant is liable for any and all taxes, including withholding taxes, arising out of the grant, vesting, payment or settlement of any Performance Awards and Dividend Equivalent Rights.  The Company shall have the right to require the Participant to remit to the Company, or to withhold awarded shares of Common Stock, or from any Dividend Equivalent Rights or other amounts due to the Participant, as compensation or otherwise, an amount sufficient to satisfy all federal, state and local withholding tax requirements.

 

9. Definitions. For purposes of this Agreement, the terms used in this Agreement shall be subject to the following:

 

	
 
	
(a)
	
Change in Control. The term "Change in Control" is defined in section 2.4 of the amended and restated Avista Corp. Long Term Incentive Plan.

 

	
 
	
(b)
	
Date of Termination. The Participant’s "Date of Termination" shall be the first day occurring on or after the Grant Date on which the Participant is not employed by the Company or any Subsidiary, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries; and further provided that the Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant’s employer.  If, as a result of a sale or other transaction, the Participant’s employer ceases to be a Subsidiary (and the Participant’s employer is or becomes an entity that is separate from the Company), and the Participant is not, at the end of the 30-day period following the transaction, employed by the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the Participant’s Date of Termination caused by the Participant being discharged by the employer.

 

	
 
	
(c)
	
Disability. ‘‘Disability’’ means ‘‘disability’’ as that term is defined for purposes of the Company’s Long Term Disability Plan or other similar successor plan applicable to employees.

 

	
 
	
(d)
	
Retirement. "Retirement" of the Participant shall mean retirement as of the individual’s retirement date under the Retirement Plan for Employees of Avista Corporation or other similar successor plan applicable to employees.

 

10. Assignability. No Performance Award or Dividend Equivalent Right granted or awarded under the Plan may be assigned or transferred by the Participant other than by will or by the applicable laws of descent and distribution, and, during the Participant’s lifetime, settlements of such Awards may be payable only to the Participant or a permitted assignee or transferee of the Participant (as provided below).  Notwithstanding the foregoing, the Plan Administrator, in its sole discretion, may permit such assignment or transfer and 

02/05/2020 Page 3 of 11

 

 

may permit a Participant of such Performance Awards or Dividend Equivalent Rights to designate a beneficiary who may receive compensation settlement under the Performance Award after the Participant’s death; provided, however, that any amount so assigned or transferred shall be subject to all the same terms and conditions contained in this Agreement.

 

11. General.

 

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.

 

12. Administration. The authority to manage and control the operation and administration of this Agreement shall be vested in the Plan Administrator, and the Plan Administrator shall have all powers with respect to this Agreement as it has with respect to the Plan.  Any interpretation of the Agreement by the Plan Administrator and any decision made by it with respect to the Agreement are final and binding.

 

13. Construction. This Agreement is subject to and shall be construed in accordance with the Plan, the terms of which are explicitly made applicable hereto.  Unless otherwise defined herein, capitalized terms in this Agreement shall have the same definitions as set forth in the Plan.  In the event of any conflict between the provisions hereof and those of the Plan, the provisions of the Plan shall govern.

02/05/2020 Page 4 of 11

 

 

 

14. Amendment. This Agreement may be amended by written agreement of the Participant and the Company, without the consent of any other person.

 

15. Governing Law. The validity, construction, interpretation and enforceability of this Agreement shall be determined and governed by the laws of the State of Washington without giving effect to the principles of conflicts of laws.  For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction in Washington State and agree that such litigation shall be conducted in the courts of Spokane County, Washington or the federal courts of the United States for the eastern district of Washington.

 

16.Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company) to agree in writing to assume the Company’s obligations under this Agreement and to perform such obligations in the same manner and to the same extent that the Company is required to perform them.  As used in this Agreement, “Company” shall mean the Company and any successor to its business and/or assets that assumes and agrees to perform the Company’s obligations under the Agreement by operation of law or otherwise.

 

 

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

 

02/05/2020 Page 5 of 11

 

 

EXHIBIT 1

 

Performance Award Plan

Relative Total Shareholder Return Metric and Goals

2020 - 2022 Performance Cycle

 

The following graph and table represent the relationship between the Company’s relative three-year Total Shareholder Return (“TSR”) commencing January 1, 2020 and ending December 31, 2022 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 

02/05/2020 Page 6 of 11

 

 

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, 2014 – December 31, 2016 as the Performance Cycle.

 

				
	
Date
	
Closing Price
	
Date
	
Closing Price

	
12/31/2013
	
28.19
	
12/30/2016
	
39.99

	
12/30/2013
	
28.13
	
12/29/2016
	
40.18

	
12/27/2013
	
28.15
	
12/28/2016
	
39.47

	
12/26/2013
	
28.08
	
12/27/2016
	
39.99

02/05/2020 Page 7 of 11

 

 

				
	
12/24/2013
	
28.14
	
12/23/2016
	
39.71

	
12/23/2013
	
28.03
	
12/22/2016
	
39.49

	
12/20/2013
	
28.34
	
12/21/2016
	
39.67

	
12/19/2013
	
27.83
	
12/20/2016
	
40.05

	
12/18/2013
	
28.03
	
12/19/2016
	
40.23

	
12/17/2013
	
27.64
	
12/16/2016
	
40.77

	
12/16/2013
	
27.58
	
12/15/2016
	
42.17

	
12/13/2013
	
27.26
	
12/14/2016
	
41.63

	
12/12/2013
	
27.21
	
12/13/2016
	
42.63

	
12/11/2013
	
26.89
	
12/12/2016
	
42.48

	
12/10/2013
	
27.16
	
12/9/2016
	
42.08

	
12/9/2013
	
27.44
	
12/8/2016
	
41.73

	
12/6/2013
	
27.61
	
12/7/2016
	
41.17

	
12/5/2013
	
27.09
	
12/6/2016
	
40.73

	
12/4/2013
	
27.09
	
12/5/2016
	
40.61

	
12/3/2013
	
27
	
12/4/2016
	
40.55

	
Average
	
27.6445
	
Average
	
40.7665

 

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

	
11/21/2014
	
33.90
	
0
	
NA

	
11/24/2014
	
33.80
	
0
	
(0.2950%)

	
11/25/2014
	
34.06
	
0.3175
	
1.7086%*

	
11/26/2014
	
34.29
	
0
	
0.6753%

	
11/27/2014
	
34.29
	
0
	
0.00%

	
11/28/2014
	
34.45
	
0
	
0.4666%

	
Cumulative TSR 11/21/2014 to 11/28/2014
	
2.5555%

* [(34.06 + 0.3175) / 33.80] -1

 

02/05/2020 Page 8 of 11

 

 

EXHIBIT 2

 

Performance Award Plan

Cumulative Earnings Per Share Metric and Goals

2020-2022 Performance Period

 

The following graph and table represent the relationship between the Company’s Cumulative Earnings Per Share (“CEPS”) commencing January 1, 2020 and ending December 31, 2022 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 $6.78 over the three-year cycle.  To receive 200% of the Award, Avista must achieve CEPS of $7.21. 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
	
 
	
$7.21
	
 
	
200%

	
Target
	
 
	
$6.78
	
 
	
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.

02/05/2020 Page 9 of 11

 

 

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 $6.89 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 88% of 1,455 (total target # of Performance Awards granted) or 1,286 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

 

02/05/2020 Page 10 of 11

 

 

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.

 

 

 

Dated:________________

 

 

_________________________________Signature of Employee

 

 

_________________________________

Printed Name

 

 

02/05/2020 Page 11 of 11

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