Long-Term Incentive Plan
Avista Corporation
Adopted by the Shareholders
on May 14, 1998
Amended and Restated
February 21, 2025
AVISTA CORPORATION
LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Avista Corporation Long-Term Incentive Plan (the “Plan”) is to enhance the long-term shareholder value of Avista Corporation, a Washington corporation (the “Company”), by offering opportunities to employees, directors and officers of the Company and its Subsidiaries (as defined in Section 2) to participate in the Company’s growth and success, and to encourage them to remain in the service of the Company and its Subsidiaries and to acquire and maintain stock ownership in the Company.
The Plan was initially adopted by the Company’s shareholders on May 14, 1998 and was subsequently amended and restated on May 12, 2000, January 1, 2005, November 9, 2006 May 13, 2010, January 19, 2016, and February 21, 2025.
Changes made pursuant to this amendment and restatement of the Plan shall apply to Awards (as defined below) granted on or after February 21, 2025, and Awards granted prior to February 21, 2025, shall continue to be governed by the applicable Award agreements and the terms of the Plan without giving effect to changes made pursuant to this amendment and restatement of the Plan.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth below:
2.1 Award
“Award” means an award or grant made to a Participant pursuant to the Plan, including, without limitation, awards or grants of Options, Stock Appreciation Rights, Stock Awards, Performance Awards, Other Stock-Based Awards or any combination of the foregoing (including any Dividend Equivalent Rights granted in connection with such Awards).
2.2 Board
“Board” means the Board of Directors of the Company.
2.3 Cause
“Cause” means (a) the willful and continued failure of the Holder to perform substantially the Holder’s duties with the Company or one of its Subsidiaries (other than any such failure resulting from incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Holder by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or the Chief Executive Officer believes that the Holder has not substantially performed the Holder’s duties; or (b) the willful engaging by the Holder in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the Holder, shall be considered “willful” unless it is done, or omitted to be done, by the Holder in bad faith or without reasonable belief that the Holder’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Holder in good faith and in the best interests of the Company.
2.4 Change of Control
“Change of Control” means any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either
(i) the then outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or
(ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2.4;
(b) A change in the Board so that individuals who constitute the Board (the “Incumbent Board”) as of the date of adoption of the Plan cease for any reason to constitute at least a majority of the Board after such date; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of Common Stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d) A complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, if a Change of Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is required to comply with (and is not otherwise exempt from) Section 409A of the Code, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in subsections (a), (b), (c) or (d) with respect to such Award (or portion thereof) shall only constitute a Change of Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5).
2.5 Code
“Code” means the Internal Revenue Code of 1986, as amended.
2.6 Common Stock
“Common Stock” means the common stock, no par value, of the Company.
2.7 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 salaried employees. Notwithstanding the foregoing, if a Disability constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is required to comply with (and is not otherwise exempt from) Section 409A of the Code, to the extent required to avoid the
imposition of additional taxes under Section 409A of the Code, the “disability” described in the immediately preceding sentence with respect to such Award (or portion thereof) shall only constitute a Disability for purposes of the payment timing of such Award if such disability also constitutes a “disability” as defined in Treasury Regulation Section 1.409A-3(i)(4).
2.8 Dividend Equivalent Right
“Dividend Equivalent Right” means an Award granted under Section 13.
2.9 Early Retirement
“Early Retirement” means early retirement as that term is defined by the Plan Administrator from time to time for purposes of the Plan.
2.10 Exchange Act
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.11 Fair Market Value
The “Fair Market Value” shall be the closing price per share for the applicable date for the Common Stock on the New York Stock Exchange as such price is officially quoted in the composite tape of transactions on such exchange for a single trading day. If there is no such reported price for the Common Stock for the date in question, then such price on the last preceding date for which such price exists shall be determinative of Fair Market Value.
“Good Reason” means a voluntary termination of employment by a Participant following the initial existence of any one of the following conditions arising without the consent of the Participant:
(a)a material diminution by the Company of the Participant’s authority, duties, or responsibilities, excluding for this purpose isolated and inadvertent actions not taken in bad faith and remedied by the Company promptly after the Company receives notice from the Participant; provided, however, that a change in title or reporting relationship alone shall not constitute Good Reason;
(b)a material diminution in Participant’s annual base salary or annual bonus opportunity;
(c)a material change in the geographic location at which Participant must perform the services (which, for purposes of this Plan, means relocation of the offices of the Company at which Participant is principally employed to a location more than 50 miles from the location of such offices immediately prior to such change);
(d)a material diminution in the budget over which Participant retains authority; or
(e)any action or inaction that constitutes a material breach by the Company of this Plan with respect to Participant.
Good Reason shall exist only if (i) Participant provides notice to the Company of the existence of a condition described in (a) through (e) above within 90 days of the initial existence of the condition, (ii) upon the notice of which the Company shall be provided a period of 30 days during which it may remedy the condition, and (iii) if the Company does not timely remedy such condition, Participant terminates employment after the end of such remedial period and in all events no later than 90 days following the end of such remedial period.
2.13 Grant Date
“Grant Date” means the date the Plan Administrator adopted the granting resolution or a later date designated in a resolution of the Plan Administrator as the date an Award is to be granted.
2.14 Holder
“Holder” means:
(a) a Participant who holds an outstanding Award;
(b) for a Participant who has died while holding an outstanding Award, the personal representative of the Participant’s estate, the person(s) to whom the Participant’s rights under the Award have passed by will or by the applicable laws of descent and distribution, or the beneficiary designated in accordance with Section 14; or
(c) the person(s) to whom an Award has been transferred in accordance with Section 14.
2.15 Incentive Stock Option
“Incentive Stock Option” means an Option to purchase Common Stock granted under Section 7 with the intention that such Option qualify as an “incentive stock option” as that term is defined in Section 422 of the Code.
2.16 Nonqualified Stock Option
“Nonqualified Stock Option” means an Option to purchase Common Stock granted under Section 7 other than an Incentive Stock Option.
2.17 Option
“Option” means the right to purchase Common Stock granted under Section 7.
2.18 Other Stock-Based Award
“Other Stock-Based Award” means an Award granted under Section 12.
2.19 Participant
“Participant” means an employee, officer or director of or an individual consultant or independent contractor to the Company or a Subsidiary, in any case who holds an outstanding Award, or, as the context may require, any of the foregoing individuals who has been designated by the Plan Administrator as eligible to participate in the Plan.
2.20 Performance Award
“Performance Award” means an Award granted under Section 11, the payout of which is subject to achievement through a performance period of performance goals prescribed by the Plan Administrator.
2.21 Plan Administrator
“Plan Administrator” means the Board or any committee or committees designated by the Board or any person or persons to whom the Board has delegated authority to administer the Plan under Section 3.1.
2.22 Restricted Stock
“Restricted Stock” means shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Plan Administrator.
2.23 Retirement
“Retirement” means retirement as of the individual’s normal retirement date under the Company’s retirement plan for salaried employees or other similar successor plan applicable to salaried employees.
2.24 Securities Act
“Securities Act” means the Securities Act of 1933, as amended.
2.25 Stock Appreciation Right
“Stock Appreciation Right” means an Award granted under Section 9.
2.26 Stock Award
“Stock Award” means an Award granted under Section 10.
2.27 Subsidiary
“Subsidiary,” except as provided in Section 8.3 in connection with Incentive Stock Options, means any entity that is directly or indirectly controlled by the Company or in which the Company has a
significant ownership interest, as determined by the Plan Administrator, and any entity that may become a direct or indirect parent of the Company.
2.28 Successor Corporation
“Successor Corporation” has the meaning set forth under Section 15.2.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of the Board. If and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in selecting the Plan Administrator and the membership of any committee acting as Plan Administrator, with respect to any persons subject or likely to become subject to Section 16 of the Exchange Act, the provisions regarding (a) “nonemployee directors” as contemplated by Rule 16b-3 under the Exchange Act; and (b) “independent directors” as contemplated by Section 303A.02 of the New York Stock Exchange Listed Company Manual. The Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible Participants to different committees consisting of two or more members of the Board, subject to such limitations as the Board or the Plan Administrator deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. To the extent consistent with applicable law, the Board may authorize one or more senior executive officers of the Company to grant Awards to designated classes of eligible employees within the limits prescribed by the Board.
3.2 Administration and Interpretation by the Plan Administrator
Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Awards under the Plan or necessary or advisable in the administration of the Plan, including to (a) select individuals to be granted Awards, (b) determine the type of Awards to be granted, (c) determine the number of shares of Common Stock subject to an Award, (d) determine all terms, conditions, restrictions and limitations, if any, of an Award and the terms of any instrument that evidences the Award, (e) construe and interpret the Plan and Award agreements, (f) correct any defect, supply any omission and reconcile any inconsistency in the Plan or any Award agreement, (g) adopt, revise or rescind rules and regulations of general application for the Plan’s administration, and (h) exercise discretion to make any and all other determinations and to take such actions that it determines to be necessary or advisable for the administration of the Plan. The Plan Administrator’s interpretation of the Plan and Award agreements and the Plan’s rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. Subject to applicable law and any applicable listing rules, the Plan Administrator may delegate administrative duties to such of the Company’s officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 15.1, a maximum of 7,715,000 shares of Common Stock (which represents the sum of: (i) 6,135,000 shares that were previously authorized; and (ii) 1,580,000 shares newly authorized by shareholders with this restatement shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company or may be purchased on the open market.
4.2 Limitations
(a) Subject to adjustment from time to time as provided in Section 15.1, to the extent consistent with Section 424 of the Code, not more than an aggregate of 80,000 shares may be issued under Incentive Stock Options.
(b) Subject to adjustment from time to time as provided in Section 15.1, shares of common stock made subject to Awards under the Plan to any non-employee director who is a Participant may not exceed $750,000 in value at the time of issuance in any given calendar year.
4.3 Reuse of Shares
Any shares of Common Stock that have been made subject to an Award that cease to be subject to the Award (other than by reason of exercise or payment of the Award to the extent it is exercised for or settled in shares or by reason of holding back shares to cover taxes on the Holder associated with exercise or payment of the Award) shall again be available for issuance in connection with future grants of Awards under the Plan. Shares that are subject to tandem Awards shall be counted only once.
SECTION 5. ELIGIBILITY
Except as otherwise set forth herein, Awards may be granted under the Plan to those officers, directors and employees of and individual consultants and independent contractors to the Company and its Subsidiaries as the Plan Administrator from time to time selects.
SECTION 6. AWARDS
6.1 Form and Grant of Awards
The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be made under the Plan. Such Awards may include, but are not limited to, Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Stock Awards, Performance Awards, Other Stock-Based Awards and Dividend Equivalent Rights. Awards may be granted singly, in combination or in tandem so that the settlement or payment of one automatically reduces or cancels the other. Awards may also be made in combination or in tandem
with, as alternatives to, or as the payment form for, grants or rights under any other compensation or benefit plan of the Company or of a Subsidiary.
6.2 Acquired Company Awards
Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other acquired entities (“Acquired Entities”) (or the parent of the Acquired Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or of stock, reorganization or liquidation (the “Acquisition Transaction”); provided, however, any substitution of a new Option pursuant to a corporate transaction for an outstanding option or the assumption of an outstanding option shall meet the requirements of Treasury Regulation section 1.424-1. The preceding sentence shall apply to “incentive stock options” as that term is defined in Section 422 of the Code and nonqualified stock options. In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such Awards shall be deemed to be Participants and Holders.
6.3 No Repricing
Other than in connection with a change in the Company’s capitalization as described in Section 15.1 of the Plan, the exercise price of an Option or Stock Appreciation Right may not be reduced without shareholder approval. In addition, other than in connection with a change in the Company’s capitalization as described in Section 15.1 of the Plan or in accordance with Section 15.2 of the plan, the exchange of Option or Stock Appreciation Rights, prior to exercise, for cash or other awards may not be made without shareholder approval.
6.4 Recoupment of Awards
Awards granted under the Plan shall be subject to any and all policies, guidelines, codes of conduct, or other agreement or arrangement adopted by the Board or Compensation Committee thereof with respect to the recoupment, recovery or clawback of compensation (collectively, the “Recoupment Policy”) and/or to any provisions set forth in the applicable Award agreement under which the Company may recover from current and former Participants or Holders any amounts paid or shares of Common Stock transferred in connection with an Award and any proceeds therefrom under such circumstances as the Plan Administrator determines appropriate. The Plan Administrator may apply the Recoupment Policy to Awards granted before the policy is adopted to the extent required by applicable law or rule of any securities exchange or market on which shares of Common Stock are listed or admitted for trading, as determined by the Plan Administrator in its sole discretion.
SECTION 7. AWARDS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock Options, which shall be appropriately designated.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as determined by the Plan Administrator, but shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date.
7.3 Term of Options
The term of each Option shall be as established by the Plan Administrator or, if not so established, shall be 10 years from the Grant Date.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which or the installments in which the Option shall vest and become exercisable, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will vest and become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:
|
|
Period of Participant’s Continuous Employment or Service With the Company or Its Subsidiaries From the Option Grant Date |
Percent of Total Option That Is Vested and Exercisable |
After 1 year |
25 % |
After 2 years |
50 % |
After 3 years |
75 % |
After 4 years |
100 % |
Notwithstanding the provisions of Section 7.4 above or of Section 7.6, any unvested portion of the Option shall vest and become exercisable in full immediately upon termination of employment for reasons of Disability or death.
To the extent that the right to purchase shares has accrued thereunder, an Option may be exercised from time to time by written notice to the Company, in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised and accompanied by payment in full as described in Section 7.5. The Plan Administrator may determine at any time that an Option may not be exercised as to less than 100 shares at any one time (or the lesser number of remaining shares covered by the Option).
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid in cash or by check, or, unless the Plan Administrator in its sole discretion determines otherwise, either at the time the Option is granted or at any time before it is exercised, a combination of cash and/or check (if any) and one or both of the following alternative forms:
(a) tendering (either actually or, if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) Common Stock already owned by the Holder for at least six months (or any shorter period necessary to avoid a charge to the Company’s earnings for financial reporting purposes) having a Fair Market Value on the day prior to the exercise date equal to the aggregate Option exercise price; or
(b) if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent not prohibited by applicable law, including Section 402 of the Sarbanes-Oxley Act of 2002, as amended, delivery of a properly executed exercise notice, together with irrevocable instructions, to:
(i) a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly to such brokerage firm, all in accordance with the regulations of the Federal Reserve Board.
In addition, the price for shares purchased under an Option may be paid, either singly or in combination with one or more of the alternative forms of payment authorized by this Section 7.5 by such other consideration as the Plan Administrator may permit.
7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option will continue to be exercisable, and the terms and conditions of such exercise, if a Participant ceases to be employed by, or to provide services to, the Company or its Subsidiaries, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option will be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time.
In case of termination of the Participant’s employment or services other than by reason of death or Cause, the Option shall be exercisable, to the extent of the number of shares purchasable by the Participant at the date of such termination, only
(a) within one year if the termination of the Participant’s employment or services is coincident with Retirement, Early Retirement in connection with a Company program offering early retirement or Disability; or
(b) within three months after the date the Participant ceases employment with or services to the Company or a Subsidiary if termination of the Participant’s employment or services is for any reason other than Retirement, Early Retirement in connection with a Company program offering early retirement or Disability, but in no event later than the remaining term of the Option. Any Option exercisable at the time of the Participant’s death may be exercised, to the extent of the number of shares purchasable by the Participant at the date of the Participant’s death, by the personal representative of the Participant’s estate, the person(s) to whom the Participant’s rights under the Award have passed by will or the applicable laws of descent and distribution or the beneficiary designated pursuant to Section 14 at any time or from time to time within one year after the date of death, but in no event later than the remaining term of the Option. Any portion of an Option that is not exercisable on the date of termination of the Participant’s employment or services shall terminate on such date, unless the Plan Administrator determines otherwise. In case of termination of the Participant’s employment or services for Cause, the Option shall automatically terminate upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise. If a Participant’s employment or services with the Company are suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant’s rights under any Option likewise shall be suspended during the period of investigation, provided the the maximum term of the Option shall not be extended beyond its original end date.
A transfer of employment or services between or among the Company and its Subsidiaries shall not be considered a termination of employment or services for purposes of this Section 7.6. The effect of a Company-approved leave of absence on the terms and conditions of an Option shall be determined by the Plan Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options shall be subject to the following additional terms and conditions:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.
8.2 10% Shareholders
If a Participant owns more than 10% of the total voting power of all classes of the Company’s stock, then the exercise price per share of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option term shall not exceed five years. The determination of 10% ownership shall be made in accordance with Section 422 of the Code.
8.3 Eligible Employees
Only employees of the Company or of one of its parent corporations or subsidiary corporations may be granted Incentive Stock Options. For purposes of this Section 8.3, “parent corporation” and “subsidiary corporation” shall have the meanings attributed to those terms for purposes of Section 422 of the Code.
8.4 Term
The term of an Incentive Stock Option shall not exceed 10 years.
8.5 Exercisability
To qualify for Incentive Stock Option tax treatment, an Option designated as an Incentive Stock Option must be exercised within three months after termination of employment for reasons other than death, except that, in the case of termination of employment due to total disability, such Option must be exercised within one year after such termination. Employment shall not be deemed to continue beyond the first 3 months of a leave of absence unless the Participant’s reemployment rights are provided by statute or contract. For purposes of this Section 8.5, “total disability” shall mean a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable, in the opinion of the Company and two independent physicians, to perform his or her duties for the Company and to be engaged in any substantial gainful activity. Total disability shall be deemed to have occurred on the first day after the Company and the two independent physicians have furnished their opinion of total disability to the Plan Administrator.
8.6 Taxation of Incentive Stock Options
In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares issued upon the exercise of an Incentive Stock Option for two years after the Grant Date of the Incentive Stock Option and one year from the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Plan Administrator may require a Participant to give the Company prompt notice of any disposition of shares acquired by the exercise of an Incentive Stock Option prior to the expiration of such holding periods.
SECTION 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights
To the extent permitted by Section 6.1, the Plan Administrator may grant a Stock Appreciation Right separately or in tandem with a related Option.
9.2 Tandem Stock Appreciation Rights
A Stock Appreciation Right granted in tandem with a related Option will give the Holder the right to surrender to the Company all or a portion of the related Option and to receive an appreciation distribution (in shares of Common Stock or cash or any combination of shares and cash, as the Plan Administrator, in its sole discretion, shall determine at any time) in an amount equal to the excess of the Fair Market Value for the date the Stock Appreciation Right is exercised over the exercise price per share of the right, which shall be the same as the exercise price of the related Option. A tandem Stock Appreciation Right will have the same other terms and provisions as the related Option. Upon and to the extent a tandem Stock Appreciation Right is exercised, the related Option will terminate.
9.3 Stand-Alone Stock Appreciation Rights
A Stock Appreciation Right granted separately and not in tandem with an Option will give the Holder the right to receive an appreciation distribution (in shares of Common Stock or cash or any combination of shares and cash, as the Plan Administrator, in its sole discretion, shall determine at any time) in an amount equal to the excess of the Fair Market Value for the date the Stock Appreciation Right is exercised over the exercise price per share of the right.
A stand-alone Stock Appreciation Right will have such terms as the Plan Administrator may determine, except that the exercise price per share of the right must be at least equal to 100% of the Fair Market Value on the Grant Date and the term of the right, if not otherwise established by the Plan Administrator, shall be 10 years from the Grant Date.
9.4 Exercise of Stock Appreciation Rights
Unless otherwise provided by the Plan Administrator in the instrument that evidences the Stock Appreciation Right, the provisions of Section 7.6 relating to the termination of a Participant’s employment or services shall apply equally, to the extent applicable, to the Holder of a Stock Appreciation Right.
SECTION 10. STOCK AWARDS
10.1 Grant of Stock Awards
To the extent permitted by Section 6.1, the Plan Administrator is authorized to make Awards of Common Stock to Participants on such terms and conditions and subject to such restrictions, if any (which may be based on continuous service with the Company or the achievement of performance goals related to earnings, earnings per share, profits, profit growth, profit-related return ratios, cost management, dividend payout ratios, economic value added, cash flow or total shareholder return, where such goals may be stated in absolute terms or relative to comparison companies), as the Plan Administrator shall determine, in its sole discretion, which terms, conditions and restrictions shall
be set forth in the instrument evidencing the Award. The terms, conditions and restrictions that the Plan Administrator shall have the power to determine shall include, without limitation, the manner in which shares subject to Stock Awards are held during the periods they are subject to restrictions and the circumstances under which forfeiture of Restricted Stock shall occur by reason of termination of the Participant’s services.
10.2 Issuance of Shares
Upon the satisfaction of any terms, conditions and restrictions prescribed in respect to a Stock Award, or upon the Participant’s release from any terms, conditions and restrictions of a Stock Award, as determined by the Plan Administrator, the Company shall release, as soon as practicable, to the Holder or, in the case of the Holder’s death, to the personal representative of the Holder’s estate or as the appropriate court directs, the appropriate number of shares of Common Stock.
10.3 Waiver of Restrictions
Notwithstanding any other provisions of the Plan, the Plan Administrator may, in its sole discretion, waive the forfeiture period and any other terms, conditions or restrictions on any Restricted Stock under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.
SECTION 11. PERFORMANCE AWARDS
11.1 Plan Administrator Authority
Performance Awards may be denominated in cash, shares of Common Stock or any combination thereof. To the extent permitted by Section 6.1, the Plan Administrator is authorized to grant Performance Awards and shall determine the nature, length and starting date of the performance period for each Performance Award and the performance objectives to be used in valuing Performance Awards and determining the extent to which such Performance Awards have been earned. Performance objectives and other terms may vary from Participant to Participant and between groups of Participants. Performance objectives may be based on, among other criteria, earnings, earnings per share, profits, profit growth, profit-related return ratios, cost management, dividend payout ratios, economic value added, cash flow or total shareholder return, where such goals may be stated in absolute terms relative to comparison companies or otherwise, as the Plan Administrator shall determine, in its sole discretion. Performance periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different performance periods and different performance factors and criteria.
The Plan Administrator shall determine for each Performance Award the range of dollar values or number of shares of Common Stock (which may, but need not, be shares of Restricted Stock pursuant to Section 10), or a combination thereof, to be received by the Participant at the end of the performance period if and to the extent that the relevant measures of performance for such Performance Awards are met. The earned portion of a Performance Award may be paid currently or on a deferred basis with such interest or earnings equivalent as may be determined by the Plan Administrator. Payment shall be made in the form of cash, whole shares of Common Stock (which
may, but need not, be shares of Restricted Stock pursuant to Section 10), Options or any combination thereof, either in a single payment or in annual installments, all as the Plan Administrator shall determine.
11.2 Adjustment of Awards
The Plan Administrator may adjust the performance goals and measurements applicable to Performance Awards to take into account changes in law and accounting and tax rules and to make such adjustments as the Plan Administrator deems necessary or appropriate to reflect the inclusion or exclusion of the impact of extraordinary or unusual items, events or circumstances. The Plan Administrator also may adjust the performance goals and measurements applicable to Performance Awards and thereby reduce the amount to be received by any Participant pursuant to such Awards if and to the extent that the Plan Administrator deems it appropriate.
11.3 Payout Upon Termination
The Plan Administrator shall establish and set forth in each instrument that evidences a Performance Award whether the Award will be payable, and the terms and conditions of such payment, if a Participant ceases to be employed by, or to provide services to, the Company or its Subsidiaries, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Performance Award, the Award will be payable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time. If during a performance period a Participant’s employment or services with the Company terminate by reason of the Participant’s Retirement, Early Retirement at the Company’s request, Disability or death, such Participant shall be entitled to a payment with respect to each outstanding Performance Award at the end of the applicable performance period (a) based, to the extent relevant under the terms of the Award, on the Participant’s performance for the portion of such performance period ending on the date of termination and (b) prorated for the portion of the performance period during which the Participant was employed by the Company, all as determined by the Plan Administrator. The Plan Administrator may provide for an earlier payment in settlement of such Performance Award discounted at a reasonable interest rate and otherwise in such amount and under such terms and conditions as the Plan Administrator deems appropriate.
Except as otherwise provided in Section 15 or in the instrument evidencing the Performance Award, if during a performance period a Participant’s employment or services with the Company terminate other than by reason of the Participant’s Retirement, Early Retirement at the Company’s request, Disability or death, then such Participant shall not be entitled to any payment with respect to the Performance Awards relating to such performance period, unless the Plan Administrator shall otherwise determine. The provisions of Section 7.6 regarding leaves of absence and termination for Cause shall apply to Performance Awards.
SECTION 12. OTHER STOCK-BASED AWARDS
To the extent permitted by Section 6.1, the Plan Administrator may grant other Awards under the Plan pursuant to which shares of Common Stock (which may, but need not, be shares of Restricted Stock pursuant to Section 10) are or may in the future be acquired, or Awards denominated in
stock units, including ones valued using measures other than market value. Such Other Stock-Based Awards may be granted alone or in addition to or in tandem with any Award of any type granted under the Plan and must be consistent with the Plan’s purpose.
SECTION 13. DIVIDEND EQUIVALENT RIGHTS
To the extent permitted by Section 6.1, any Awards under the Plan may, in the Plan Administrator’s discretion, earn Dividend Equivalent Rights. In respect of any Award that is outstanding on the dividend record date for Common Stock, the Participant may be credited with an amount equal to the cash or stock dividends or other 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. The Plan Administrator shall establish such rules and procedures governing the crediting of Dividend Equivalent Rights, including the timing, form of payment and payment contingencies of such Dividend Equivalent Rights, as it deems are appropriate or necessary.
SECTION 14. ASSIGNABILITY
No Award granted under the Plan may be assigned or transferred by the Holder other than by will or by the applicable laws of descent and distribution, and, during the Holder’s lifetime, such Awards may be exercised only by the Holder or a permitted assignee or transferee of the Holder (as provided below). Notwithstanding the foregoing, and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit such assignment, transfer and exercisability and may permit a Holder of such Awards to designate a beneficiary who may exercise the Award or receive compensation under the Award after the Holder’s death; provided, however, that any Award so assigned or transferred shall be subject to all the same terms and conditions contained in the instrument evidencing the Award.
SECTION 15. ADJUSTMENTS
15.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend or other change in the Company’s corporate or capital structure results in (a) the outstanding shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of securities of the Company or of any other corporation or (b) new, different or additional securities of the Company or of any other corporation being received by the holders of shares of Common Stock of the Company, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities subject to the Plan as set forth in Section 4.1, (ii) the maximum number and kind of securities that may be made subject to Stock Awards and to Awards to any individual Participant as set forth in Section 4.2, and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor; provided, however, any substitution of a new Option pursuant to a corporate transaction for an outstanding Option or the assumption of an outstanding Option shall meet the requirements of Treasury Regulation §1.424-1. The preceding sentence shall
apply to “incentive stock options” as that term is defined in Section 422 of the Code and nonqualified stock options. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.
15.2 Change of Control
Except as otherwise provided in the instrument that evidences the Award, in the event of any Change of Control, each Award that is at the time outstanding shall automatically accelerate so that each such Award shall, immediately prior to the specified effective date for the Change of Control, become 100% vested and exercisable; provided, however, that with respect to Performance Awards, the performance objectives with respect thereto shall be deemed to be met at the target level or determined based on actual performance through the date of the Change of Control as if the performance period ended on such date, whichever is higher. Such Award shall not so accelerate, however, if and to the extent that such Award is, in connection with the Change of Control, either to be assumed by the successor corporation or parent thereof (the “Successor Corporation”) or to be replaced with a comparable award for the purchase of shares of the capital stock of the Successor Corporation. The determination of Award comparability in the immediately preceding sentence shall be made by the Plan Administrator, and its determination shall be conclusive and binding. All such Awards shall terminate and cease to remain outstanding immediately following the consummation of the Change of Control, except to the extent assumed by the Successor Corporation. In the event an Option or Stock Appreciation Right is cancelled pursuant to this Section 15.2 in exchange for a payment based on the amount by which the Fair Market Value of Common Stock exceeds the exercise price for such Option or Stock Appreciation Right, any Option or Stock Appreciation Right with an exercise price equal to or greater than the Fair Market Value of Common Stock may be cancelled for no consideration. Any Awards that are assumed or replaced in the Change of Control and do not otherwise accelerate at that time shall be accelerated in the event that the Participant’s employment or services should subsequently terminate within 24 months following such Change of Control, unless such employment or services are terminated by the Successor Corporation for Cause or by the Participant voluntarily without Good Reason.
15.3 Further Adjustment of Awards
Subject to Sections 15.2 and 17.3, and subject to the limitations set forth in Section 11, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or other corporate transaction, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable, and fair and equitable to Participants, with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, payment or settlement or lifting restrictions, differing methods for calculating payments or settlements, alternate forms and amounts of payments and settlements and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants; provided that any cancellation or termination of Options or Stock Appreciation Rights with an exercise price that is less than the Fair Market Value of a share of Common Stock on the date of such cancellation or termination may be made without payment of any consideration therefor. The Plan Administrator may take
such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation or Change of Control that is the reason for such action.
15.4 Limitations
The grant of Awards will in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
SECTION 16. WITHHOLDING
The Company may require the Holder to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to the grant, exercise, payment or settlement of any Award. Subject to the Plan and applicable law and unless the Plan Administrator determines otherwise, the Holder may satisfy withholding obligations, in whole or in part, by paying cash, by electing to have the Company withhold shares of Common Stock (up to the employer’s minimum required tax withholding rate) or by transferring shares of Common Stock to the Company (already owned by the Participant for the period necessary to avoid a charge to the Company’s earnings for financial reporting purposes), in such amounts as are equivalent to the Fair Market Value of the withholding obligation. The Company shall have the right to withhold from any Award or any shares of Common Stock issuable pursuant to an Award or from any cash amounts otherwise due or to become due from the Company to the Participant an amount equal to such taxes.
SECTION 17. AMENDMENT AND TERMINATION OF PLAN
17.1 Amendment of Plan
The Plan may be amended only by the Board as it shall deem advisable; provided, however, to the extent required for compliance with Section 422 of the Code or any other applicable law, rule or regulation, shareholder approval will be required for any amendment that will (a) increase the total number of shares as to which Options may be granted or that may be used in payment of Stock Appreciation Rights, Performance Awards, Other Stock-Based Awards or Dividend Equivalent Rights under the Plan or that may be issued as Stock Awards, (b) modify the class of persons eligible to receive Options, (c) result in a “material revision” of the Plan as contemplated by Section 303A.08 of the New York Stock Exchange Listed Company Manual, or (d) otherwise require shareholder approval under any applicable law, rule or regulation.
17.2 Termination of Plan
The Board may suspend or terminate the Plan at any time. The Plan will have no fixed expiration date; provided, however, that no Incentive Stock Options may be granted more than 10 years after the earlier of the Plan’s adoption by the Board and approval by the shareholders. In accordance with Treasury Regulations sections 1.422-2(b)(iii) and 1.422-2(c), the amendment and restatement of the Plan effective February 21, 2025, constitutes a new plan for purposes of the Incentive Stock Option rules. As a result, Incentive Stock Options may be granted within ten years from the earlier
of the date the amended and restated plan is adopted by the Board or the date such plan is approved by shareholders.
17.3 Consent of Holder
The amendment or termination of the Plan shall not, without the consent of the Holder of any Award under the Plan, impair or diminish any rights or obligations under any Award theretofore granted under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Holder, be made in a manner so as to constitute a “modification” that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option.
17.4 Correction of Errors
Notwithstanding anything in this Plan or an Award agreement to the contrary, the Plan Administrator may amend an Award, to take effective retroactively or otherwise, as deemed necessary or advisable for the purpose of correcting errors occurring in connection with the grant or documentation of an Award, including rescinding an Award erroneously granted, including, but not limited to, an Award erroneously granted to an individual who is not eligible to receive on an Award on the date of grant of the Award. By accepting an Award under the Plan, each Participant agrees to any amendment made pursuant to this Section 17.4 to any Award made under the Plan without further consideration or action.
SECTION 18. GENERAL
18.1 Award Agreements
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. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
18.2 No Employment Rights; No Right to Award
Nothing contained in the Plan or any Award agreement shall confer upon any individual any right with respect to the continuation of employment by or provision of services to the Company or any Subsidiary or interfere in any way with the right of the Company or applicable Subsidiary, subject to the terms of any separate agreement to the contrary, at any time to terminate such employment or service or to increase or decrease the compensation or benefits of such individual. No individual shall have any claim or right to receive an Award hereunder. The Plan Administrator’s granting of an Award to a Participant at any time shall neither require the Plan Administrator to grant any other Award to such Participant or other individual at any time nor preclude the Plan Administrator from making subsequent grants to such Participant or any other individual.
18.3 Registration
The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under state securities laws, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to such restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary or desirable for compliance by the Company with federal and state securities laws.
Inability of the Company to obtain, from any regulatory body having jurisdiction, the authority deemed by the Company’s counsel to be necessary for the lawful issuance and sale of any shares hereunder or the unavailability of an exemption from registration for the issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the nonissuance or sale of such shares as to which such requisite authority shall not have been obtained.
18.4 No Rights as a Shareholder
No Award shall entitle the Holder to any cash dividend (except to the extent provided in an Award of Restricted Stock or of Dividend Equivalent Rights), voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award, free of all applicable restrictions except as otherwise required with respect to a transfer of Restricted Stock.
18.4 Section 409A of the Code
The Plan and Award agreements as well as payments and benefits thereunder are intended to be exempt from, or to the extent subject thereto, to comply with Section 409A of the Code, and, accordingly, to the maximum extent permitted, the Plan and Award agreements shall be interpreted in accordance therewith. Notwithstanding anything contained herein to the contrary, if payments or benefits under the Plan are payable upon a termination of employment or other service (or words of similar import), a Participant shall not be considered to have experienced such a termination for purposes of the Plan and no payment or benefit shall be due to such Participant under the Plan or any Award until such Participant is considered to have experienced a “separation from service” from the Company within the meaning of Section 409A of the Code. Any payments or benefits described in the Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent that any Awards are payable upon a separation from service and the Participant is a “specified employee” as defined in Section 409A of the Code, the settlement and payment of such Awards shall instead be made (without interest) on the Company’s first regular payroll date that is at least six (6) months following such separation from service (or death, if earlier). Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code.
18.5 No Guarantee of Tax Consequences
None of the Company, its Subsidiaries, the Board, the Plan Administrator or any officer, employee, agent, affilaite or representative of any of the foregoing makes any commitment or guarantee with respect to the Plan or any Award granted hereunder that any particular tax treatment will (or will not) apply with respect to any Participant (or any party claiming through or on behalf of any Participant), including any tax consequences under Section 409A of the Code, or assumes any liability or responsibility with respect thereto.
18.5 Compliance With Laws and Regulations
Notwithstanding anything in the Plan to the contrary, the Board, 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. Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an “incentive stock option” within the meaning of Section 422 of the Code.
18.6 Unfunded Plan
The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.
18.7 Severability
If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator’s determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
18.8 Captions.
The captions of this Plan are not part of the provisions hereof and shall have no force or effect.
SECTION 19. EFFECTIVE DATE
The Plan’s effective date is the date on which it is adopted by the Board, so long as it is approved by the Company’s shareholders at any time within 12 months of such adoption.
RRRAVISTA CORPORATION
PERFORMANCE AWARD AGREEMENT
This Performance Award Agreement (the “Agreement”) is made by and between Avista Corporation, a Washington Corporation (the “Company”) and PARTICIPANT NAME (the “Participant”) as designated by the Avista Corporation Compensation and Organization Committee (the “Plan Administrator”).
WHEREAS, Performance Awards are defined and granted under the February 21, 2025 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. All current and future grants will be made subject to the terms of this Agreement.
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:.
The "Performance Cycle" is the period notated in the annual performance award metrics and goals (the “Performance Metrics”), as approved each year by Avista’s Board of Directors.
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 and (ii) Cumulative Earnings Per Share (“CEPS”). 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 by the applicable Payout Factor in accordance with the provisions of the Performance Metrics.
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 Performance Award earned by the Participant, as determined in accordance with the provisions of the approved Performance Metrics. 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 the Performance Metrics , 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 the Performance Metrics , determined as of the date of the 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 the Performance Metrics 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 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.
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,
AVISTA CORPORATION
|
|
|
By: |
|
/s/ Heather Rosentrater |
|
|
Heather Rosentrater |
|
|
Chief Executive Officer |
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 |
AVISTA CORPORATION
PERFORMANCE AWARD AGREEMENT - PERFORMANCE METRICS
Performance Award Plan
Relative Total Shareholder Return Metric and Goals
2025 - 2027 Performance Cycle
The following graph and table represent the relationship between the Company’s relative three-year Total Shareholder Return (“TSR”) commencing January 1, 2025 and ending December 31, 2027 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 75th percentile. If Avista ranks below the 25th 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. The final performance cycle result is certified by our third-party compensation consultant.
|
|
|
|
TSR Percentile Ranking |
Payout (% of Target) |
Maximum |
75th |
200% |
Target |
50th |
100% |
Threshold |
25th |
50% |
|
<25th |
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.
The peer companies reported in the S&P 400 Utilities Index to be used in the ranking will be captured at the performance award grant date and will remain unchanged throughout the performance cycle. If S&P drops a company out of the index and/or adds another, the new company will not be included in the ranking and the
dropped company will remain included in the ranking, as long as it remains a publicly traded company. If a company becomes no longer publicly traded, it will be removed from the comparison group.
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 75th percentile after the three-year Performance Cycle, the Participant would receive 200% of 1,000 or 2,000 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 |
200% |
X |
1,000 |
= |
2,000 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.
Performance Award Plan
Cumulative Earnings Per Share Metric and Goals
2025-2027 Performance Period
The following graph and table represent the relationship between the Company’s Cumulative Earnings Per Share (“CEPS”) commencing January 1, 2025 and ending December 31, 2027 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 $7.99 over the three-year cycle. To receive 200% of the Award, Avista must achieve CEPS of $8.30. If Avista’s CEPS is less than $7.68, 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 |
$8.30 |
200% |
Target |
$7.99 |
100% |
Threshold |
$7.68 |
50% |
|
<$7.68 |
0% |
Performance is tracked over a three-year Performance Cycle thereby focusing on sustainability.
Cumulative EPS (CEPS) is fully diluted earnings per share for Avista Utilities and Alaska Electric Light and Power Company excluding the impact of the Energy Recovery Mechanism in Washington. CEPS 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 $8.07 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 |
2025 SENIOR LEADER
ANNUAL CASH INCENTIVE PLAN
PLAN PROVISIONS
Approved by Board
Purpose: The Senior Leader Annual Cash Incentive Plan (Plan) is designed to align the interests of our senior leaders with both shareholder and customer interests to achieve overall positive financial and operational performance for the Company. The Plan is an important element of the overall compensation of our senior leaders which provides compensation that is competitive with compensation paid to comparable leaders of companies within the energy/utility industry and ensures the Company can attract and retain quality employees in key positions to lead the Company.
Plan Year: January 1, 2025 – December 31, 2025
Note: If Dec 31 falls on a non-working day, the previous business working day (M-F) will be considered the last day of the plan year.
Eligibility:
•All executive officers (“officers”) hired prior to October 1st and actively employed on the last day of the plan year, are eligible to participate.
•All Directors and Senior Legal Counsel employees (“non-officers”) currently participating in the company’s Long-Term Incentive (LTI) plan are eligible to participate.
· Past-officer part-time advisors employed during the plan year are also eligible to participate.
· Subsidiary officers are not eligible to participate.
· Other details available in section Exceptions to Eligibility and Circumstances for Proration
Performance Measurements: The Plan focuses on shareholders and customers by creating value through sound financial performance and controlling costs through driving efficiencies while paying close attention to our customers’ voices regarding the products and services we provide. The Plan incorporates Utility Earnings Per Share (Utility EPS) and Operating & Maintenance Cost per Customer (O&M CPC) as financial performance measurements. There are also four non-financial measurements: Customer Satisfaction Rating (Customer Satisfaction), Reliability Index (Reliability), Dispatched Gas Emergency Response Time (Response Time), and Strategy Scorecard (Strategy Scorecard). These performance goals help increase shareholder value, gain financial strength, support long-term strategy, and maintain safe and reliable cost-effective service levels essential for our customers and for the long-term success of the Company. With the exception of the Utility EPS and Strategy Scorecard, performance metrics are identical to those used in the Company’s annual cash incentive plan for non-senior leader employees. The Compensation Committee believes that having similar metrics for both the senior leader plan and the non-senior leader plan encourages employees at all levels of the organization to focus on common objectives.
Utility EPS - This metric reflects the financial strength and alignment of interests
between officers and shareholders. Utility EPS includes Avista Utilities and Alaska Electric Light & Power (AEL&P),and excludes other.
O&M CPC - The O&M CPC is a measure that focuses on controlling costs and driving efficiencies to keep our costs reasonable for our customers. The metric is based on targeted O&M expense and number of customers. These components are combined to create the O&M CPC metric.
Strategy Scorecard – This is a measure that supports Avista’s Strategic Plan and ensures alignment with the organization’s strategic goals to drive performance in these areas. The metric is based on achieving a set of activity-based milestones.
Customer Satisfaction - This measure is derived from a Voice of the Customer survey, which is conducted each quarter by an independent agency. The rating measures the customer’s overall satisfaction with the service they received during a recent contact with the Company’s contact center and/or service center.
Reliability - This measure tracks how quickly the Company restores outages, how frequently customers are affected by outages and what percent of customers experience more than three sustained outages per year. The Company combined three common industry indices to balance our focus.
Response Time - This measure tracks how quickly the Company responds to dispatched natural gas emergency calls. The primary objective is customer and public safety while consistently treating customers the same throughout our service territory.
Award Opportunity: The Plan has six independent metrics, each having their own goal to achieve. Each piece or component makes up a portion of the employee’s total incentive award opportunity as represented in the graph. Specific metric weightings differ for officers and non-officers and are shown in Figure 1 and in the Incentive Targets table below:
Figure 1
Non-financial metrics: Three of the four non-financial pieces of the award (customer satisfaction, reliability, and response time) are all-or-nothing goals. If the Company meets or exceeds the target goal for any one of the metrics, employees receive 100% of the incentive award percentage related to the metric. If the Company fails to meet the target, employees will receive no award related to the metric. For example, if the Company achieves Customer Satisfaction with a 90% or better rating, employees will receive 8% of their total incentive award opportunity. If the Company achieves 88% which is below the target, employees will receive no award related to the metric. This works the same for Reliability and Response Time. The maximum amount an employee could receive related to the non-financial metrics is 8% for customer satisfaction, 8% reliability, and 4% response time. The fourth non-financial metric, Strategy Scorecard, is on a sliding scale; if three out of the five milestones are completed, employees will receive threshold or 70% of total for that metric. For employees to receive 100% of their award related to this metric, the company must achieve target, or four out of five milestones. For employees to earn a maximum of 130%, five out of five milestones must be achieved. The Strategy Scorecard makes up 10% of the total Senior Leader award.
Financial metrics: The Utility EPS and O&M CPC metrics work a little differently due to the various performance levels that can be met. Depending on the Company’s level of performance under each metric, employees may earn more or less than 100% of the award percentage related to each financial metric. Increasing levels of performance are established between threshold and maximum by using a sliding scale. For employees to receive at least 50% of their award percentage related to the metric, the Company must achieve or surpass the minimum or threshold level of performance. The better the Company performs, the more employees may earn. For employees to receive 100% of their award percentage related to a financial metric, the Company must achieve the level of performance selected for target. If the Company performs above target level, employees may earn up to a maximum of 175% (rounded up) for Utility EPS, and
147.5% for officers / 164% for non-officers for O&M CPC. Performance below threshold results in no award payment for the related metric.
For ease of communication and display purposes performance levels may be rounded using the accounting rules such as to the nearest whole number or up to two decimals. To calculate actual payments and to ensure no overpayments occur the performance levels within the sliding scale actually extend out six (6) decimal places (ex. 166.666666%) for Utility EPS and four (4) decimals (ex. 149.9430%) for Cost per Customer. See Calculation of Awards section for more details on how payments are calculated.
Establish Targets: The Compensation and Organization Committee of the Board (Committee) in conjunction with management reviews and reestablishes the targets for each measurement on an annual basis. The computations for this Plan are described below:
Utility EPS: To determine the Utility EPS goal for the Plan, the Committee, in conjunction with the Finance Committee of the Board and management, consider and set the EPS target range. The earnings guidance for the Utility EPS excludes the earnings impact associated with changes in the Energy Recovery Mechanism (ERM). The target in the Plan is Diluted Earnings per Share and includes executive incentive payout/accrual-pro-forma and net of taxes. Occasionally, adjustments to actual results may be deemed necessary. Since the portion of the incentive related to EPS indirectly benefits the customer, it is charged below the line. The Company’s original 2025 guidance for Utility EPS is shown below in the incentive targets table.
O&M CPC: For this measurement, the Company uses the total budget for O&M expense (numerator) and customer count (denominator).
Numerator: The numerator of the formula is derived from the Company’s total budget for O&M expense. Certain items are excluded from the total O&M budget such as Pacesetters and certain accounting adjustments. For each performance level, the Company estimates the potential payout for the incentive which includes payroll taxes and subtracts the result from the total O&M budget. The estimation is based on budgeted labor costs, employee job levels and the corresponding individual target award opportunities.
To establish the performance levels between threshold and target, the Company assumes a 1:1 ratio between O&M spend and threshold to target. Cost sharing occurs once we exceed target at 100%. Performance levels between target and maximum assumes a 2:1 ratio between O&M spend and target to maximum.
Denominator: The target uses a net customer count of 805,233. This number is based upon the count at the beginning of the performance year and will not change in the calculation for the entire plan year.
Strategy Scorecard: The purpose of this metric is to align senior leaders with Avista’s strategic goals. In this plan, outlined objectives and key results (OKRs) will ensure alignment with the organization’s strategic goals and drive performance in these areas. The target is set at achieving four out of the five specific milestones, or 80%
achievement, to meet this metric. The measurable action is listed in the yearly plan document.
Customer Satisfaction: For this measure, the Company uses the ratings from question three of the Voice of the Customer survey which measures the customer’s Overall Satisfaction with the service they received in a recent contact through the Avista contact center and/or service center. The Overall Satisfaction question from surveys such as this is widely used in the industry for external reporting purposes. Rather than using the standard “satisfied” rating, which is typically used in the industry, the Company uses the average of the combined “satisfied” and “very satisfied” ratings. By combining these two ratings the target is more difficult to achieve and more emphasis is placed on serving the customer. In this Plan, the target is set at 90%very satisfied/satisfied for the customer’s Overall Satisfaction rating.
Reliability: This index combines Customer Average Interruption Duration Index (CAIDI), System Average Interruption Frequency Index (SAIFI) and Customer Experiencing Multiple Interruptions (CEMI3). CEMI3 measures the percentage of customers that experience more than three sustained outages in the year. The Company chose this level of outages over others because industry data received from JD Power’s customer service surveys indicate that customers are more apt to be dissatisfied after three outages. Providing safe and reliable energy to our customers is the backbone of our business, therefore, it makes good sense to focus on service levels for our customers. By focusing on these measurements, it enables the Company to direct our resources appropriately and efficiently to contain costs and plan for future infrastructure upgrades that will benefit the customer.
To determine the target for the Reliability portion of the Plan, the Company sets a separate target for each metric, weighs them equally and combines them into one metric (see the formula below). In this Plan the target is set at 1.00.
Index = CAIDI Target / CAIDI Actual + SAIFI Target / SAIFI Actual + CEMI3 Target / CEMI3 Actual
3 3 3
The formula used to set the target for each metric is described below:
•Customer Average Interruption Duration Index (CAIDI): outage duration multiplied by the number of customers affected for all sustained outages (> 5 minutes), divided by the number of customers which had sustained outages. Per industry practice Major Event Days (MEDs) are excluded from this metric. In this Plan the Company uses a 5-year average with a standard deviation of 0.72 (76% probability) to set the target which is 2 hours and 32 minutes restoration time.
•System Average Interruption Frequency Index (SAIFI): the number of customers which had sustained outages (> 5 minutes), divided by the number of customers served. Per industry practice MEDs are excluded from this metric. In this Plan the Company uses a 5-year average and a standard deviation of 0.72 (76% probability) to set the target which is 1.07 outages per customer.
•Customers Experiencing Multiple Sustained Interruptions more than 3 (CEMI3): the total number of customers that experience more than 3 sustained outages per year, divided by total number of customers served. To be consistent with the other two indices, MEDs are excluded from this
metric. In this Plan the Company uses a 5-year average with a standard deviation of 0.72 (76% probability) to set the target at 6.32% of our customers.
Response Time: This metric measures how quickly the Company responds to natural gas system emergency calls. The Company tracks the average response time between the receipt of the emergency call to the time our crew or service worker arrives on-site, assesses the situation, and reports back to dispatch. The Company wants crews and/or the service worker to respond within the targeted response time goal. To be consistent with other service metrics, response times in excess of 24 hours are excluded from the metric. A “natural gas system emergency” is defined as an event when there is a natural gas explosion or fire, fire in the vicinity of natural gas facilities, police or fire are standing by, leads identified in the field as “Grade 1”, high or low gas pressure problems identified by alarms or customer calls, natural gas system emergency alarms, carbon monoxide calls, natural gas odor calls, runaway furnace calls, or delayed ignition calls. In this Plan the Company aligns the response time with the Service Reliability Target negotiated with the Washington Utility Commission and set the target goal to respond within an average of, and not to exceed, 55 minutes.
Incentive Targets for 2025:
|
|
|
|
|
|
|
|
Utility Earnings Per Share |
O&M Cost per Customer |
Customer Satisfaction Rating |
Reliability Index |
Average Response Time Minutes |
Strategy Scorecard |
Officers % of Total Opportunity |
50% |
20% |
8% |
8% |
4% |
10% |
Non-Officers* % of Total Opportunity |
20% |
50% |
8% |
8% |
4% |
10% |
Threshold EPS 50% O&M CPC 50%
Strategy 70% |
$2.61 |
$508.97 |
|
|
|
3/5 milestones achieved |
Target 100% |
$2.74 |
$502.24 |
90% |
1.00 |
<55 Min |
4/5 milestones achieved |
Maximum 175% |
$2.84 |
|
|
|
|
|
Maximum Officer 147.5%
Non-Officer - 164% |
|
$488.78 |
|
|
|
|
Maximum 130% |
|
|
|
|
|
5/5 milestones achieved |
*Director and senior legal counsel roles
Values are rounded for display or communication purposes only
Individual Target Award Opportunities: During the February Board meeting, the Committee and the Chief Executive Officer (CEO) jointly review and approve the individual target award opportunities for the participants of the Plan. Each eligible employee has an incentive target award opportunity expressed as
a percentage of their base salary. Target opportunities range from 20% to 100% of base salary and are assigned based on position. Actual award payments are calculated based on the employee’s target award opportunity in effect as of the last day of the plan year and year-end regular earnings unless otherwise noted in the Plan document (see provisions under Exceptions to Eligibility and Circumstances for Proration section).
|
|
|
|
|
|
Individual Target Award Opportunity % of Base Pay by Position Type |
CEO |
EVP |
Senior VP |
VP |
Past Officer PT Advisor |
Director & Senior Legal Counsel |
100% |
65% |
60% |
40% |
40% |
20% |
Distribution of Awards: If earned, incentive award payments will be distributed as soon as feasible usually in March after the filing of the Company’s Form 10-K with the SEC, and Compensation Committee of the Board certifies and approves the achievement of the performance goals.
Calculation of Awards: In most instances actual amounts will be calculated using the participant’s regular year-end earnings (as defined in the provisions section of the Plan), individual target award opportunity and employment status in effect as of the last working day of the Plan year. See the section Exceptions to Eligibility and Circumstances for Proration for definitions and exceptions.
For purposes of calculating the actual payments and ensure no overpayments or underpayments occur, the final performance results will be extended out six decimal places (ex. 166.666666%) for Utility EPS and four decimals (ex. 149.9323%) for Cost per Customer and rounded based on accounting rules. The following table shows how an overpayment can occur if the final performance level is rounded to two decimals and used to calculate the final payment.
|
|
|
|
|
|
|
|
Metric |
Target Opportunity |
Metric Allocation |
Maximum Results |
Maximum % Allowed |
Maximum Dollar Value |
Maximum |
Net Income |
$ 152,248.39 |
60% |
166.666666% |
100.000000% |
$ 152,248.39 |
Over Payment |
Net Income |
$ 152,248.39 |
60% |
166.670000% |
100.002000% |
$ 152,251.43 |
Since the non-financial metrics have only two performance levels, 0% or 100%, rounding the final results is not an issue.
Once the total incentive amount is calculated, all cash payments will be rounded to the nearest penny based on accounting rules.
Communication: When communicating the results of the financial metrics and the payout, the Company will round results to the nearest 100th percent based on accounting rules. For example, if the O&M CPC result is 148.6468%, the Company will communicate the results using 148.65%.
When communicating the results of the non-financial metrics, the Company will round results to the nearest whole number or, in the case of reliability, out two decimal points based on accounting rules. For example, customer satisfaction would be rounded to 93% from 92.8% and reliability would be 1.23 from 1.232.
Recoupment Policy: All incentive awards earned by officers under this Plan are subject to the Recoupment Policies adopted by the Company’s Board of Directors as amended from time to time (“Recoupment Policies”). If a participant becomes subject to the Recoupment Policies any award 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 Plan may be recovered by the Company pursuant to the Recoupment Policies.
Administration of Plan: The Committee is responsible for administering the Plan and may delegate specific administrative tasks to corporate staff, as appropriate. The Committee has the authority to:
•Terminate, amend, or modify this Plan in whole or in part for any reason at any time without prior notice to participants
•Modify or adjust financial targets due to extraordinary occurrences and/or significant reorganizations
•Grant discretionary awards up to 15% of the individual officer target award opportunity
•May pay incentive amounts in excess of 100% (up to 150%) of an individual’s target opportunity in the form of non-cash equivalents
Participation in this Plan should in no way be construed as a contract or promise of employment and/or compensation.
Exceptions to Eligibility and Circumstances for Proration:
Pay Periods: There are 26 pay periods and pay dates during the Plan year. A pay period (pp) is made up of two pay weeks. Each pay week typically starts 12:00am Monday and ends 11:59pm Sunday. Employees are paid on the pay date on the following Friday, after the end of the pay period. The first pay period of the year consists of the date range 12/16/2024 – 12/29/2024 which is paid on pay date 1/3/2025. Changes effective during this pay period will count towards the 2025 plan since the earnings and pay date are part of 2025. Changes effective during the dates 12/15/2025 – 12/28/2025 are not included in the 2025 Plan because the earnings and pay date are part of 2026.
Pay Period Schedule for 2025:
|
|
|
|
|
|
Pay Period |
Date Range |
Pay Date |
Pay Period |
Date Range |
Pay Date |
1 |
12/16/24 - 12/29/24 |
1/3/2025 |
14 |
6/16 - 6/29 |
7/4 |
2 |
12/30 - 1/12 |
1/17 |
15 |
6/30 - 7/13 |
7/18 |
3 |
1/13 - 1/26 |
1/31 |
16 |
7/14 - 7/27 |
8/1 |
4 |
1/27 - 2/09 |
2/14 |
17 |
7/28 - 8/10 |
8/15 |
5 |
2/10 - 2/23 |
2/28 |
18 |
8/11 - 8/24 |
8/29 |
6 |
2/24 - 3/09 |
3/14 |
19 |
8/25 - 9/07 |
9/12 |
7 |
3/10 - 3/23 |
3/28 |
20 |
9/08 - 9/21 |
9/26 |
8 |
3/24 - 4/06 |
4/11 |
21 |
9/22 - 10/05 |
10/10 |
9 |
4/07 - 4/20 |
4/25 |
22 |
10/06 - 10/19 |
10/24 |
10 |
4/21 - 5/04 |
5/9 |
23 |
10/20 - 11/02 |
11/7 |
11 |
5/05 - 5/18 |
5/23 |
24 |
11/03 - 11/16 |
11/21 |
12 |
5/19 - 6/01 |
6/6 |
25 |
11/17 - 11/30 |
12/5 |
13 |
6/02 - 6/15 |
6/20 |
26 |
12/01 - 12/14 |
12/19 |
Proration: Prorating an employee’s award is based on the number of pay dates associated with a change. Each change of status (COS) has an effective date. The date determines which pay period and pay date is to be counted as part of the proration.
Use the Pay Period Schedule above to count the pay dates. Using the effective date from the COS, search through the date ranges to find the pay period and pay date associated with it. Count the pay
dates to the end of the Plan year or to the next COS effective date whichever comes first. The employee receives 1 pay period credit for each pay date counted.
Regular Earnings: Regular earnings will be used in calculating the final awards. The earnings to be used and their associated codes are as follows:
|
|
Earnings Type |
Earnings Codes |
Regular |
01, 01R, 02, 32, 32B, 58 |
1.5x Overtime |
04, 04R, 21, 23, 71, 76, 78, 83 |
Light Duty |
29 |
Swing Shift |
31 |
Alternative/dual |
20 |
Relief Pay |
08 |
Retro Pay |
70, 70A, 70B |
One Leave/PTO/Paid Leave |
10, 14, 14B, 15, 16, 16PFM, 16 PLO, 34B, 34C, 34D, 61, 73 |
Short-term Disability 100% & 60% |
18, 80 |
Workers Compensation |
19, 19A, 85, 85C, 86, 87, 88 |
Holiday |
25, 25P, 26, 63E, 63F, 75 |
Jury Duty |
35 |
Military Pay |
36, 36C |
New Hires: Employees hired on or after October 1st will not be eligible for an award under this Plan. Employees hired prior to October 1st will have their awards calculated based on the provisions detailed above.
Leave of Absence: Eligible employees on approved unpaid leave of absence must have at least 6 full pay periods of active service during the Plan year to receive an award. Awards will be calculated based on the provisions detailed above. Short-term disability leave does not affect an eligible employee’s award and is excluded from this provision.
Resignation/Termination: Any eligible employee who resigns or is terminated for reasons other than retirement, disability, or death prior to the last day of the plan year will not be eligible to receive an award under this Plan. Eligible employees who terminate after the Plan year may receive an award at the time of distribution unless reason for termination is due to poor performance or for cause, see section on Discipline or Poor Performance below.
Death, Long-term Disability & Retirement: In the case of death, total disability (as defined under the Company’s Long-term Disability Plan) or retirement as a participant in Avista’s pension or 401(k) plan (employees must be age 55 and have 15 years of service to qualify), an eligible employee or estate must have at least 6 pay periods of active service within the Plan year to be eligible to receive an award. Awards will be calculated based on the provisions detailed above.
Discipline or Poor Performance: Employees who receive a fails to meet performance rating for the Plan year or a Last Chance Agreement under the Company’s formal discipline program and effective as of the last working day of the plan year are not eligible to receive an award under this Plan. Any employee who is terminated for poor performance or for cause by the Company after the last day of the plan year and up to the time of distribution, will not be eligible to receive an award under this Plan.
Transfers from Subsidiaries to Corp/Utilities: Eligible employees who transfer from a subsidiary will be treated as a new hire to the Company and all Plan criteria apply as is. Prorated awards are at the discretion of the Committee and CEO.
Senior Leader Promotions: If an officer or senior leader is promoted to a new position type (e.g. VP to SVP or director to VP), the officer’s individual award opportunity will be prorated based upon earnings before and after date of promotion, using our Proration methodology noted above.
Other Company Short-term Incentive Plans: Employees can only participate under one formal incentive plan at a time. If the employee becomes eligible for a different plan during the year, their earnings will be prorated between the appropriate plan before and after the promotion. For example, if an employee participates in the employee plan, and is promoted to a senior leader on June 1st, their earnings and incentive opportunity will be calculated based upon the employee plan through pay period 12. The remainder of their earnings in periods 13-26 will be calculated based upon the senior leader plan and incentive opportunity of that plan, using the Proration methodology noted above. Similarly, if a senior leader demotes to a position covered by the Employee plan during the year, their earnings will be prorated between the appropriate plans before and after the transfer following the above methodology.
