<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM _____ TO _______
COMMISSION FILE NUMBER 1-3701
AVISTA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Washington 91-0462470
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1411 East Mission Avenue, Spokane, Washington 99202-2600
- ---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 509-489-0500
Web site: http://www.avistacorp.com
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Class on Which Registered
- --------------------------------------------------- ----------------------
<S> <C>
Common Stock, no par value, together with New York Stock Exchange
Preferred Share Purchase Rights appurtenant thereto Pacific Stock Exchange
7 7/8% Trust Originated Preferred Securities, Series A New York Stock Exchange
$12.40 Preferred Stock, Convertible Series L (depositary shares) New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of Class
Preferred Stock, Cumulative, Without Par Value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's outstanding Common Stock, no par
value (the only class of voting stock), held by non-affiliates is
$1,414,713,252.02, based on the last reported sale price thereof on the
consolidated tape on February 29, 2000.
At February 29, 2000, 47,058,286 shares of Registrant's Common Stock, no par
value (the only class of common stock), were outstanding.
Documents Incorporated By Reference
<TABLE>
<CAPTION>
Part of Form 10-K into Which
Document Document is Incorporated
--------------------------------------- ----------------------------
<S> <C>
Proxy Statement to be filed in Part III, Items 10, 11,
connection with the annual meeting 12 and 13
of shareholders to be held May 11, 2000
</TABLE>
<PAGE> 2
AVISTA CORPORATION
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<CAPTION>
Item Page
No. No.
- ---- ----
<S> <C> <C>
Acronyms and Terms........................................................... iv
Part I
1. Business..................................................................... 1
Company Overview........................................................... 1
Avista Utilities........................................................... 4
General.................................................................... 4
Electric Requirements...................................................... 5
Electric Resources......................................................... 5
Hydroelectric Relicensing.................................................. 6
Natural Gas Operations..................................................... 6
Natural Gas Resources...................................................... 7
Regulatory Issues.......................................................... 7
Avista Utilities Operating Statistics...................................... 9
Energy Trading and Marketing............................................... 11
Avista Energy.............................................................. 11
Avista Power............................................................... 12
Energy Trading and Marketing Operating Statistics.......................... 13
Information and Technology................................................. 14
Avista Advantage........................................................... 14
Avista Labs................................................................ 15
Avista Communications...................................................... 15
Pentzer and Other.......................................................... 16
Pentzer.................................................................... 16
Avista Development......................................................... 16
Avista Services............................................................ 16
Industry Restructuring..................................................... 17
Federal Level.............................................................. 17
State Level................................................................ 17
Experimental Programs...................................................... 18
Environmental Issues....................................................... 19
2. Properties................................................................... 20
Avista Utilities........................................................... 20
3. Legal Proceedings............................................................ 21
4. Submission of Matters to a Vote of Security Holders.......................... 21
Part II
5. Market for Registrant's Common Equity and Related Stockholder Matters........ 22
6. Selected Financial Data...................................................... 23
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................. 24
Results of Operations...................................................... 25
Liquidity and Capital Resources............................................ 30
Future Outlook............................................................. 33
7A. Quantitative and Qualitative Disclosure about Market Risk.................... 39
8. Financial Statements and Supplementary Data.................................. 39
Independent Auditors' Report............................................... 40
Financial Statements....................................................... 41
Notes to Financial Statements.............................................. 47
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................. *
</TABLE>
ii
<PAGE> 3
AVISTA CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Part III
10. Directors and Executive Officers of the Registrant........................... 72
11. Executive Compensation....................................................... 73
12. Security Ownership of Certain Beneficial Owners and Management............... 73
13. Certain Relationships and Related Transactions............................... 73
Part IV
14. Financial Statements, Financial Statement Schedules, Exhibits and Reports
on Form 8-K................................................................ 74
Signatures................................................................... 75
Independent Auditors' Consent................................................ 76
Exhibit Index................................................................ 77
</TABLE>
* = not an applicable item in the 1999 calendar year for the Company
iii
<PAGE> 4
ACRONYMS AND TERMS
(The following acronyms and terms are found in multiple
locations within the document)
<TABLE>
<CAPTION>
Acronym/Term Meaning
- ------------ -------
<S> <C>
aMW - Average Megawatt - a measure of electrical energy over time
AFUCE - Allowance for Funds Used to Conserve Energy; a carrying
charge similar to AFUDC (see below) for conservation-related
capital expenditures
AFUDC - Allowance for Funds Used During Construction; represents the
cost of both the debt and equity funds used to finance
utility plant additions during the construction period
Avista Capital - Parent company to the Company's non-regulated
businesses
Avista Corp. - Avista Corporation, the Company
BPA - Bonneville Power Administration
Capacity - a measure of the rate at which a particular generating
source produces electricity
Centralia - the coal-fired Centralia Power Plant in western Washington
State
Colstrip - the coal-fired Colstrip Generating Project in southeastern
Montana
CPUC - California Public Utilities Commission
CT - combustion turbine; a natural gas-fired unit used primarily
for peaking needs
Energy - a measure of the amount of electricity produced from a
particular generating source over time
FERC - Federal Energy Regulatory Commission
IPUC - Idaho Public Utilities Commission
KV - Kilovolt - a measure of capacity on transmission lines
KW, KWH - Kilowatt, kilowatthour, 1000 watts or 1000 watt hours
MW, MWH - Megawatt, megawatthour, 1000 KW or 1000 KWH
OPUC - Public Utility Commission of Oregon
Pentzer - Pentzer Corporation, a wholly owned subsidiary of the
Company which was the parent company to the majority of the
Company's non-energy businesses
Therm - Unit of measurement for natural gas; a therm is equal to one
hundred cubic feet (volume) or 100,000 BTUs (energy)
Watt - Unit of measurement for electricity; a watt is equal to the
rate of work represented by a current of one ampere under a
pressure of one volt
WUTC - Washington Utilities and Transportation Commission
</TABLE>
iv
<PAGE> 5
AVISTA CORPORATION
- --------------------------------------------------------------------------------
PART I
This Form 10-K contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. Forward-looking statements should be
read with the cautionary statements and important factors included in this Form
10-K at Item 7 - - "Management's Discussion and Analysis of Financial Condition
and Results of Operations - - Safe Harbor Forward-Looking Statements."
Forward-looking statements are all statements other than statements of
historical fact, including without limitation those that are identified by the
use of the words "will," "anticipates," "seeks to," "estimates," "expects,"
"intends," "plans," "predicts," and similar expressions.
ITEM 1. BUSINESS
COMPANY OVERVIEW
Avista Corporation (Avista Corp., or the Company), was incorporated in the State
of Washington in 1889, and is an energy, information and technology company with
utility and subsidiary operations located throughout North America. At December
31, 1999, the Company's employees included 1,524 people in its utility
operations and approximately 600 people in its subsidiary businesses. The
Company's corporate headquarters are in Spokane, Washington, which serves as the
Inland Northwest's center for manufacturing, transportation, health care,
education, communication, agricultural and service businesses.
Regulatory, economic and technological changes have brought about the
accelerating transformation of the utility and energy industries, creating new
opportunities to expand the Company's businesses and serve new markets. In
pursuing such opportunities, the Company's strategy is to focus on continuing
its growth as a leading provider of energy, and information and technology
services.
The Company seeks to maintain a strong, low-cost utility business as well as to
focus on growing Avista Advantage, Inc. (Avista Advantage), Avista Labs, Inc.
(Avista Labs) and Avista Communications, Inc. (Avista Communications), which are
its internet, technology and communication subsidiaries, respectively. The
Company intends to continue investing in the development of these growth
subsidiaries while continuing to search for opportunities to grow its utility
business and increase its asset and customer base. Key strengths of the Company
include its position as a leading e-commerce portal for energy/facility
management and patented web-based programming, a developer of innovative fuel
cell technology, and a regional provider of telecommunications and fiber optics
services, as well as being one of the lowest cost producers of power in the
nation.
Locally. Part of the Company's strategy for 1999 was to expand the utility
service territory through acquisitions, but the lack of economically feasible
acquisition opportunities and the uncertainty of favorable state commission
approvals led to a change in strategies. The Company decided to concentrate on
other growth avenues, such as the information and technology businesses, to
generate shareholder value. However, the Company will selectively add to its
already strong foundation of state-regulated utility assets, solidifying its
position as a leading supplier of low-cost electric and natural gas energy
services, if the right opportunities arise. The Company will also continue to
grow its rate base through customer growth and capital expenditures.
Regionally. The Company plans to concentrate on growing its telecommunications
and fiber optic business as part of its overall strategic focus on generating
shareholder value. In addition, the Company plans to add to its regulated and
non-regulated energy-related assets on a regional basis as the industry
consolidates to further optimize its assets and create greater economies of
scale. The growth is expected to be driven by the Company's significant base of
knowledge and experience in the operation of physical systems - for both
electric energy and natural gas - in the region, as well as its
relationship-focused approach to the customer.
Nationally. The Company will seek to expand its customer base through the growth
of Avista Advantage, with its Internet-based specialty billing and information
services, and Avista Labs, with its innovative fuel cell technologies, as part
of its overall strategic focus on generating shareholder value.
The Company's growth strategy exposes it to risks, including risks associated
with rapid expansion, challenges in recruiting and retaining qualified
personnel, risks associated with acquisitions and joint ventures, and increasing
competition. In addition, the energy trading and marketing business exposes the
Company to the financial and credit risks associated with commodity trading
activities. The Company believes that its extensive experience in the electric
and natural gas business, coupled with its strong management team, will allow
the Company to effectively manage its further development as a diversified
energy, information and technology company.
1
<PAGE> 6
The Company's operations are organized into four lines of business - Avista
Utilities, Energy Trading and Marketing, Information and Technology, and Pentzer
and Other. Avista Utilities, an operating division of Avista Corp., represents
the regulated utility operations that are responsible for retail electric and
natural gas distribution, electric transmission services, electric generation
and production, electric wholesale marketing, and electric commodity trading,
primarily for the purpose of optimizing system resources. Avista Capital, a
wholly owned subsidiary of Avista Corp., owns all of the subsidiary companies
engaged in the other lines of business. The Energy Trading and Marketing line of
business includes Avista Energy, Inc. (Avista Energy), Avista Power, LLC.
(Avista Power) and Avista-STEAG, LLC (Avista-STEAG). See Item 1. Business -
Energy Trading and Marketing and Notes 1, 2, 4 and 5 of Notes to Financial
Statements for additional information. The Information and Technology line of
business includes Avista Advantage, Avista Labs and Avista Communications. The
Pentzer and Other line of business includes Pentzer Corporation (Pentzer),
Avista Development, Inc. (Avista Development) and Avista Services, Inc. (Avista
Services). Pentzer's business strategy has been to acquire controlling interests
in a broad range of middle market companies, facilitate improved productivity
and growth, and ultimately sell such companies to the public or a strategic
buyer. Beginning in 2000, Pentzer will refocus its investment efforts on
emerging energy-related technology and information companies. (See Item 1.
Business - Pentzer and Other and Notes 1 and 23 of Notes to Financial Statements
for additional information.) As of December 31, 1999, the Company had common
equity investments of $163.4 million ($426.7 million including convertible
securities) and $230.1 million in Avista Utilities and Avista Capital,
respectively.
The Company changed the way it reports business segments in this Form 10-K from
the 1998 Form 10-K. In the 1998 Form 10-K and the quarterly Form 10-Q reports
for 1999, the Company reported Avista Utilities information by its two separate
lines of business - (1) Energy Delivery and (2) Generation and Resources. The
National Energy Trading and Marketing line of business included results of
Avista Energy, Avista Advantage and Avista Power. The Non-Energy line of
business included Pentzer and all of the remaining subsidiaries' activities. The
business segment presentation in this Form 10-K reflects the basis currently
used by the Company's management to analyze performance and determine the
allocation of resources. Avista Utilities' business is now managed based on the
total regulated operations, not by individual segments. The Energy Trading and
Marketing line of business changed its focus from a national emphasis to a
regional effort, but its operations are non-regulated, as opposed to Avista
Utilities' operations. The Information and Technology line of business reflects
the current efforts of the Company to grow those businesses and focus on
generating shareholder value. Pentzer and Other reports on the other non-utility
operations of various subsidiaries.
Following is a list of the major companies owned by Avista Capital:
Avista Advantage - A leading provider of Internet-based specialty billing
and information services.
Avista Labs - The developer of proton exchange membrane fuel cell
technology.
Avista Communications - A Competitive Local Exchange Carrier (CLEC) that
provides local facilities-based telecommunications
solutions, and designs, builds and manages
metropolitan area fiber optic networks. Avista Capital
owned 71% at December 31, 1999.
Avista Energy - An electricity and natural gas marketing and trading
company.
Avista Power - Created to develop and own electricity generation
and/or natural gas fuel storage assets in strategic
locations throughout the West. If Avista Power creates
projects that STEAG AG, a German independent power
producer, wants to partner with, such projects will be
done under Avista-STEAG, LLC.
Pentzer - A private investment company wholly owned by Avista
Capital.
Avista Development - Real-estate and other investments.
Avista Services - A non-regulated marketing arm of Avista Utilities,
which offers value-added products and services to
existing utility customers.
2
<PAGE> 7
The Company's lines of business, and the companies included within them, are
illustrated below:
[FLOW CHART]
[ ] - denotes a business entity.
o - denotes an operating division or line of business.
For the twelve months ended December 31, 1999, 1998 and 1997, respectively, the
Company derived operating revenues, gross margins and pre-tax income/(loss) from
operations in the following proportions:
<TABLE>
<CAPTION>
Income/(Loss) from
Operating Revenues Gross Margins Operations (pre-tax)
---------------------- ---------------------- --------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avista Utilities 14% 29% 68% 105% 89% 97% 455% 83% 94%
Energy Trading and Marketing 84% 65% 19% (5)% 11% 3% (312)% 13% 4%
Information and Technology 0% 0% 0% n/a n/a n/a (42)% (3)% (3)%
Pentzer and Other 2% 6% 13% n/a n/a n/a (1)% 7% 5%
</TABLE>
n/a - not applicable
Gross margin is calculated by subtracting resource costs from operating
revenues. (See Schedule of Information by Business Segments for further
information).
3
<PAGE> 8
AVISTA CORPORATION
- --------------------------------------------------------------------------------
AVISTA UTILITIES
GENERAL
Avista Utilities provides electricity and natural gas distribution and
transmission services in a 26,000 square mile area in eastern Washington and
northern Idaho with a population of approximately 835,000. It also provides
natural gas distribution service in a 4,000 square mile area in northeast and
southwest Oregon and in the South Lake Tahoe region of California, with the
population in these areas approximating 500,000. At the end of 1999, retail
electric service was supplied to approximately 309,000 customers in eastern
Washington and northern Idaho; retail natural gas service was supplied to
approximately 269,000 customers in parts of Washington, Idaho, Oregon and
California. Avista Utilities anticipates residential and commercial electric
load growth to average approximately 2.8% annually for the next five years
primarily due to expected increases in both population and the number of
businesses in its service territory. The number of electric customers is
expected to increase and the average annual usage by residential customers is
expected to remain steady on a weather-adjusted basis. The Company also expects
natural gas load growth, including transportation volumes, in its Washington and
Idaho service area to average approximately 2.4% annually for the next five
years. The Oregon and South Lake Tahoe, California service areas are anticipated
to realize 3.6% growth annually during that same period. The natural gas load
growth is primarily due to expected conversions from electric space and water
heating to natural gas, and increases in both population and the number of
businesses in its service territories. These electric and natural gas load
growth projections are based on purchased baseline economic forecasts, publicly
available studies, and internal analysis of company-specific data, such as
energy consumption patterns and internal business plans. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations: Results of Operations: Future Outlook for additional information.
Besides providing electricity and natural gas distribution and electric
transmission services, Avista Utilities is also responsible for electric
generation and production, electric wholesale marketing, and electric commodity
trading, primarily for the purpose of optimizing system resources. Wholesale
marketing and trading activities are primarily within the Western Systems
Coordinating Council (WSCC). Avista Utilities owns and operates eight
hydroelectric projects, a wood-waste fueled generating station and two natural
gas combustion turbine (CT) peaking units. It also owns a 17.5% and a 15% share
in two coal-fired generating facilities and leases two additional gas CT peaking
units. With this diverse energy resource portfolio, Avista Utilities remains one
of the nation's lowest-cost producers and sellers of electric energy services.
See Item 2. Properties - Generating Plants for additional information.
Avista Utilities' wholesale marketing and trading activities are a secondary,
but very important, part of Avista Utilities' overall business strategy. Since
1987, Avista Utilities has entered into a number of long-term power sales
contracts that have increased its electric wholesale revenues, and it is
continuing to pursue electric wholesale marketing business and energy trading
opportunities. Wholesale marketing includes sales and purchases under long-term
contracts with one-year and longer terms. Wholesale sales are affected by
weather and streamflow conditions and may eventually be affected by the
restructuring of the electric utility industry. Electric commodity trading
includes short-term sales and purchases, such as next hour, next day and monthly
blocks of energy, primarily for the purpose of optimizing system resources. See
Industry Restructuring for additional information.
Avista Utilities competes in the electric wholesale market with other western
utilities, federal marketing agencies and power marketers. Avista Utilities'
participation in the electric wholesale market allows it to maintain presence in
and knowledge of the market, resulting in maximum optimization of its resources.
The electric wholesale market has changed significantly over the last few years
with respect to market participants, level of activity, variability of prices,
and per-unit margins. These changes have contributed to the increased liquidity
of the market, which in turn has increased transactional volumes in the market.
It is expected that competition in the wholesale power market will remain
vigorous.
Avista Corp., through its Avista Energy subsidiary, also pursues energy trading
activities; however, Avista Energy's activities are not subject to state and
federal price regulation.
Challenges facing Avista Utilities include cost management, evolving
technologies, self-generation and fuel switching by commercial and industrial
customers, the costs of increasingly stringent environmental laws and the
potential for stranded or non-recoverable utility assets. Avista Utilities
believes it faces minimal risk for stranded utility assets resulting from
deregulation due to its low-cost generation portfolio. In a deregulated
environment, however, evolving technologies that provide alternate energy
supplies could affect the market price of power, and certain generating assets
could have capital and operating costs above the adjusted market price. See
Industry Restructuring and Note 1 of Notes to Financial Statements for
additional information.
4
<PAGE> 9
AVISTA CORPORATION
- --------------------------------------------------------------------------------
ELECTRIC REQUIREMENTS
Avista Utilities' 1999 annual peak requirements, including long-term and
short-term contractual obligations, were 4,632 MW. This peak occurred on
December 13, 1999, at which time the maximum capacity available from Avista
Utilities' generating facilities, including long-term and short-term purchases,
was 4,831 MW. The electric requirements include both retail distribution needs
and wholesale short-term and long-term commitments, which limits the amount of
excess capacity available to support its energy trading business and, therefore,
results in the need to purchase power.
ELECTRIC RESOURCES
Avista Utilities' diverse resource mix of hydroelectric projects, thermal
generating facilities, and power purchases and exchanges, combined with
strategic access to regional electric transmission systems, enables it to remain
one of the nation's lowest-cost producers and sellers of electric energy
services. At December 31, 1999, Avista Utilities' total owned resources
available were 58% hydroelectric and 42% thermal. See Avista Utilities' Electric
Operating Statistics on page 9 for Avista Utilities' energy resource statistics.
Hydroelectric Resources Hydroelectric generation is Avista Utilities' lowest
cost source of electricity and the availability of hydroelectric generation has
a significant effect on its total energy costs. Under average operating
conditions, Avista Utilities meets about one-third of its total energy
requirements (both retail and long-term wholesale) with its own hydroelectric
generation and long-term hydroelectric contracts. The streamflows to
company-owned hydroelectric projects were 112%, 93% and 169% of normal in 1999,
1998 and 1997, respectively. Total hydroelectric resources provide 618 aMW
annually.
Thermal Resources Avista Utilities has an interest in each of two twin-unit
coal-fired facilities - a 17.5% interest in the Centralia Power Plant in western
Washington and a 15% interest in Units 3 and 4 of the Colstrip Generating
Project in southeastern Montana. Avista Utilities purchased Portland General
Electric's 2.5% interest in Centralia in December 1999, adding to its previous
15% interest. This additional interest in currently being held as non-utility
property until the outcome of the pending sale is determined. In addition,
Avista Utilities owns a wood-waste-fired facility known as the Kettle Falls
Generating Station in northeastern Washington and two natural gas-fired CTs,
located in Spokane, used for peaking needs. Avista Utilities also operates and
leases two natural gas-fired CTs in northern Idaho, used for peaking needs.
Total thermal resources provide 383 aMW annually.
Centralia, which is operated by PacifiCorp, is supplied with coal under both a
fuel supply agreement in effect through December 2020 and various spot market
purchases. In 1999, 1998 and 1997, Centralia provided approximately 37%, 37% and
38%, respectively, of Avista Utilities' thermal generation. In May 1999, the
owners of the Centralia Power Plant announced an agreement to sell the plant to
TransAlta, a Canadian company. Regulatory approvals have been received from the
Washington Utilities and Transportation Commission (WUTC) and the Idaho Public
Utilities Commission (IPUC). The Company is reviewing the terms of these
approvals to determine whether to agree to the sale. Avista Utilities will
require additional generating capacity if the sale is finalized. If TransAlta
becomes the new owner, it has agreed to replace Avista Utilities' lost output
for three years through a purchase agreement. See Environmental Issues for
additional information about the pending sale.
Colstrip is supplied with fuel under coal supply and transportation agreements
in effect through December 2019 from adjacent coal reserves. The Montana Power
Company sold its interest in the Colstrip Generating Project to PP&L Global,
which is now the operator of Colstrip. In 1999, 1998 and 1997, Colstrip provided
approximately 48%, 46% and 47% of Avista Utilities' thermal generation,
respectively.
Kettle Falls' primary fuel is wood-waste generated as a by-product from forest
industry operations within one hundred miles of the plant. Natural gas may be
used as an alternate fuel. A combination of long-term contracts plus spot
purchases provides the Company the flexibility to meet expected future fuel
requirements for the plant. In 1999, 1998 and 1997, Kettle Falls provided
approximately 8%, 9% and 11% of Avista Utilities' thermal generation,
respectively.
The four CTs are natural gas-fired units, primarily used for peaking needs. Two
CTs have access to domestic and Canadian natural gas supplied through Pacific
Gas Transmission (PGT). In 1999, 1998 and 1997, these four units provided
approximately 7%, 8% and 4%, respectively, of Avista Utilities' thermal
generation.
Purchases, Exchanges and Sales In 1999, Avista Utilities had various long-term
purchase contracts with non-coincidental peak (peak that does not occur during
the same hour) equating to 682 MW, with an average remaining life of 3.6 years.
Additionally, long-term hydroelectric purchase contracts of 197 MW peak were
available with an average remaining contract life of 11.8 years. Avista
Utilities also enters into a significant number of short-term sales and
purchases with durations of up to one year. Energy purchases and exchanges for
the years 1999, 1998 and 1997 provided approximately
5
<PAGE> 10
AVISTA CORPORATION
- --------------------------------------------------------------------------------
65%, 66% and 65%, respectively, of Avista Utilities' total electric energy
requirements, which reflects increased wholesale marketing and resource
optimization trading activity.
Under the Public Utility Regulatory Policies Act of 1978 (PURPA), Avista
Utilities is required to purchase generation from qualifying facilities,
including small hydroelectric and cogeneration projects, at avoided cost rates
adopted by the WUTC and the IPUC. Avista Utilities purchased approximately
597,618 MWH, or about 2% of its total energy requirements, from these sources at
a cost of approximately $27 million in 1999. These contracts expire in
2000-2022.
HYDROELECTRIC RELICENSING
Avista Utilities is a licensee under the Federal Power Act, which regulates
certain of its generation resources and is administered by the Federal Energy
Regulatory Commission (FERC), and its licensed projects are subject to the
provisions of Part I of that Act. These provisions include payment for headwater
benefits, condemnation of licensed projects upon payment of just compensation,
and take-over of such projects after the expiration of the license upon payment
of the lesser of "net investment" or "fair value" of the project, in either case
plus severance damages. All but one of Avista Utilities' hydroelectric plants
are regulated by the FERC through project licenses issued for 30-50 year
periods. See Item 2. Properties - Avista Utilities for additional information.
The Cabinet Gorge and Noxon Rapids plants received a new 45-year operating
license from the FERC on February 23, 2000. The existing licenses were combined
into one license under the name Clark Fork Projects. The application to
relicense Cabinet Gorge and Noxon Rapids was filed with the FERC on February 18,
1999, and included the Clark Fork Settlement Agreement signed by 27 parties and
a collaboratively written environmental assessment report. The application
culminated seven years of planning and consultation with Native American Tribes,
special interest groups, resource agencies and the general public. For
hydroelectric projects of this size, it is unprecedented to have reached
settlement two years before the license expired, while preserving the projects'
economic peaking and load following operations. The collaborative process used
by Avista Utilities is nationally recognized as the model for the FERC's
alternative approach to relicensing.
As part of the Settlement Agreement, Avista Utilities committed to early
implementation of protection, mitigation and enhancement measures beginning in
March 1999. Measures in the agreement, which will cost approximately $4.7
million annually, address issues related to fisheries, water quality, wildlife,
recreation, land use, cultural resources and erosion. See Item 2. Properties -
Avista Utilities and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations: Future Outlook for additional information.
The issue of high dissolved gas levels downstream of Cabinet Gorge during spill
periods continues to be studied, as agreed to in the Settlement Agreement. To
date, intensive biological studies in the lower Clark Fork River and Lake Pend
Oreille have documented minimal biological effects of high dissolved gas levels
on free ranging fish. Under the terms of the Settlement Agreement, Avista
Utilities will develop an abatement and/or mitigation strategy by 2002.
Avista Utilities operates six hydroelectric plants on the Spokane River, and
five of these (Long Lake, Nine Mile, Upper Falls, Monroe Street and Post Falls)
are under one FERC license. Little Falls is not licensed by the FERC. The
license for the Spokane River Projects expires in August 2007, and Avista
Utilities will be required to file a notice of intent to relicense prior to
August 2002. Planning and information gathering activities are currently
underway.
NATURAL GAS OPERATIONS
Natural gas remains competitively priced compared to alternative fuel sources
for residential, commercial and industrial customers. Because of abundant
supplies and competitive markets, natural gas should sustain its market
advantage. Avista Utilities continues to advise residential and commercial
electric customers about the cost advantages of converting space and water
heating needs to natural gas. Significant growth has occurred in the natural gas
business in recent years due to increased demand for natural gas in new
construction. Avista Utilities also makes sales and provides transportation
service directly to large natural gas customers.
Most of Avista Utilities' large industrial customers purchase their own natural
gas requirements through gas marketers. For these customers, Avista Utilities
provides transportation from its pipeline interconnection to the customer's
premises. Avista Utilities has numerous special contracts for natural gas
transportation service, most of which contain negotiated rates for its
distribution service based on the customer's competitive alternatives. Seven of
Avista Utilities' largest natural gas customers are provided natural gas
transportation service by Avista Utilities under special contracts. These
negotiated contracts were entered into to retain these customers who can either
by-pass Avista Utilities' distribution system or have
6
<PAGE> 11
AVISTA CORPORATION
- --------------------------------------------------------------------------------
competitive alternative fuel capability. All special contracts are subject to
regulatory review and approval. The competitive nature of the spot natural gas
market results in savings in the cost of purchased natural gas, which encourages
large customers with fuel-switching capabilities to continue to utilize natural
gas for their energy needs. The total volume transported on behalf of
transportation customers for 1999, 1998 and 1997 was approximately 232.7, 226.1
and 245.1 million therms, which represented approximately 40%, 41% and 43% of
Avista Utilities' total system deliveries.
NATURAL GAS RESOURCES
Natural Gas Supply A diverse portfolio of resources allows Avista Utilities to
capture market opportunities that benefit its natural gas customers. Natural gas
supplies are available from both domestic and Canadian sources through both
long- and short-term, or spot market, purchases. Avista Utilities holds capacity
on six pipelines and owns natural gas storage facilities, which allows Avista
Utilities to optimize its available resources.
The Company's energy trading and marketing subsidiary, Avista Energy, is
responsible for the daily management and optimization of these resources for the
requirements of customers in the states of Washington, Idaho and Oregon under an
agreement with Avista Utilities. Under this relationship, Avista Utilities
retains ownership of its transportation, storage and long-term contracts and
Avista Energy acts as an agent to optimize these important resources. The
utility commissions of these states have approved Benchmark Incentive Mechanisms
that allow Avista Utilities and its customers to share some of the benefits of
Avista Energy's resource optimization activities. See Regulatory Issues for
additional information.
Firm natural gas supplies are purchased by Avista Utilities through negotiated
agreements having terms ranging between one month and seven years. During 1999,
approximately one-third of Avista Utilities' purchases were in the short-term
market, with contracts on a month-to-month basis. Approximately 14% of the
natural gas supply was obtained from domestic sources, with the remaining 86%
from Canadian sources. Nearly all natural gas purchased from Canadian sources is
contracted in U.S. dollar denominations, limiting any foreign currency exchange
exposure. Avista Utilities does not consider Canadian natural gas supplies to be
at greater risk of non-delivery than U.S. supplies.
Avista Utilities holds capacity on six natural gas pipelines, Northwest Pipeline
Company (NWP), PGT, Paiute Pipeline (Paiute), Tuscarora Gas Transmission Company
(Tuscarora), NOVA Pipeline, Ltd. (NOVA) and Alberta Natural Gas Co. Ltd. (ANG),
which provide it access to both domestic and Canadian natural gas supplies.
Avista Utilities contracts with NWP for three types of firm service
(transportation, liquefied natural gas storage and underground storage), with
Paiute for firm transportation and liquefied natural gas storage and with PGT,
Tuscarora, NOVA and ANG for firm transportation only.
Jackson Prairie Natural Gas Storage Project (Storage Project) Avista Utilities
owns a one-third interest in the Storage Project, an underground natural gas
storage field located near Chehalis, Washington. The role of the Storage Project
in providing flexible natural gas supplies is increasingly important to Avista
Utilities' natural gas operations. It enables Avista Utilities to place natural
gas into storage when prices are low or to meet minimum natural gas purchasing
requirements, as well as to withdraw natural gas from storage when spot prices
are high or as needed to meet high demand periods. During 1999, Avista Utilities
completed the process of increasing the capacity at the Storage Project. This
increased capacity is being operated and managed by Avista Energy for the next
ten years in order to optimize the value of this natural gas storage asset.
Avista Utilities has contracted to release some of its Storage Project capacity
to two other utilities until 2001 and 2002, with a provision under one of the
releases to partially recall the released capacity if Avista Utilities
determines additional natural gas storage is required for its own system supply.
REGULATORY ISSUES
Avista Utilities, as a regulated public utility, is currently subject to
regulation by state utility commissions with respect to prices, accounting, the
issuance of securities and other matters. The retail electric operations are
subject to the jurisdiction of the WUTC and the IPUC. The retail natural gas
operations are subject to the jurisdiction of the WUTC, the IPUC, the Oregon
Public Utility Commission (OPUC) and the California Public Utilities Commission
(CPUC). Avista Utilities is also subject to the jurisdiction of the FERC for its
wholesale natural gas rates charged for the release of capacity from the Jackson
Prairie Storage Project.
In each regulatory jurisdiction, the price Avista Utilities may charge for
retail electric and natural gas services (other than specially negotiated retail
rates for industrial or large commercial customers, which are subject to
regulatory review and approval) is currently determined on a "cost of service"
basis and is designed to provide, after recovery of allowable operating
expenses, an opportunity to earn a reasonable return on "rate base." "Rate base"
is generally determined by reference to the original cost (net of accumulated
depreciation) of utility plant in service, subject to various adjustments for
7
<PAGE> 12
AVISTA CORPORATION
- --------------------------------------------------------------------------------
deferred taxes and other items. Over time, rate base is increased by additions
to utility plant in service and reduced by depreciation of utility plant. As the
energy business is restructured, traditional "cost of service" ratemaking may
evolve into some other form of ratemaking. Rates for transmission services are
based on the "cost of service" principles and are set forth in tariffs on file
with the FERC. See Note 1 of Notes to Financial Statements for additional
information about regulation, depreciation and deferred taxes. Also see Industry
Restructuring and Legislative Issues for additional information about
deregulation.
General Rate Cases In the Company's last general electric rate case in the State
of Idaho, the IPUC granted a rate increase of $9.3 million, or 7.6%, with an
authorized 10.75% return on common equity, effective August, 1999.
On October 22, 1999, the Company filed for a general electric rate increase of
$26.3 million, or 10.40%, with the WUTC. The Company is requesting a return on
common equity of 12.25%, based on a target capital structure for the utility of
47% debt, 6% preferred securities and 47% common equity. The Company is also
requesting a Power Cost Adjustment (PCA) similar to the one in effect in Idaho.
(See below for information about the Idaho PCA.) An order is expected in the
latter part of 2000. The Company's last general electric rate case in the State
of Washington was effective in March 1987, with an allowed return on common
equity of 12.90%.
On October 22, 1999, the Company filed for a general natural gas rate increase
of $4.9 million, or 6.5%, with the WUTC. The Company is requesting a return on
common equity of 12.25%, based on a target capital structure for the utility of
47% debt, 6% preferred securities and 47% common equity. An order is expected in
the latter part of 2000. On June 27, 1997, the Company filed for a general
natural gas rate increase of $7.9 million with the WUTC. The Company's last
general natural gas rate cases involving litigated cost of capital resulted in
an allowed return on common equity of 12.90% for the State of Washington,
effective August 1990, and 12.75% for the State of Idaho, effective October
1989.
In December 1998, the OPUC approved a stipulation that settled the main issues
associated with a Staff investigation into Purchased Gas Adjustment (PGA)
related earnings issues. The Settlement requires a general earnings review in
the spring of each year. The adjusted earnings will be calculated on the prior
calendar year test year, with minor regulatory adjustments, but will not be
adjusted for weather. An earnings threshold will be determined annually by
adding 710 basis points (7.10%) to the average of the test year annual yields
reported monthly on 5-, 7- and 10-year U.S. Treasuries. For 1999, the threshold
rate was 12.70%. If adjusted earnings are above the threshold, the Company will
retain two-thirds of the earnings exceeding the threshold, and revenues
representing the remaining one-third will be shared with customers through a
temporary rate adjustment.
Power Cost Adjustment (PCA) The Company has a PCA mechanism in Idaho that tracks
changes in hydroelectric generation, secondary energy prices, related changes in
thermal generation, as well as changes in PURPA contracts, but not changes in
revenues or costs associated with other wheeling or power contracts. Rate
changes are triggered when the deferred balance reaches $2.2 million, provided
no more than two surcharges or rebates are in effect at the same time. See Note
1 of Notes to Financial Statements for additional information.
Purchased Gas Adjustment (PGA or Natural Gas Trackers) Natural gas trackers are
supplemental tariffs filed with state regulatory commissions which are designed
to pass through changes in purchased natural gas costs, and do not normally
result in any changes in net income to the Company. In November 1999, the
Company filed a natural gas tracker with the WUTC requesting a $12.1 million, or
16.2%, increase, which was approved, effective January 1, 2000. In November
1999, the OPUC approved a $4.7 million, or 9.5%, increase effective December 1,
1999. In September 1999, the Company filed a natural gas tracker with the IPUC
requesting a $2.7 million, or 8.6%, increase, which was approved, effective
November 1, 1999.
Natural Gas Benchmark Mechanism The Company received regulatory approval of its
Natural Gas Benchmark Mechanism on February 1, 1999, June 23, 1999 and August
10, 1999 by the IPUC, WUTC and OPUC, respectively. The mechanism eliminates
natural gas procurement operations within Avista Utilities and consolidates gas
procurement operations under Avista Energy, the Company's non-regulated
affiliate. The ownership of the natural gas assets remains with Avista
Utilities, but the assets are managed by Avista Energy through an Agency
Agreement. A reduced natural gas staff remains in Avista Utilities to prepare
load forecasts and analyses related to long-term resource acquisitions, to
manage the Agency Agreement with Avista Energy and to support state and federal
regulatory activities. The Natural Gas Benchmark Mechanism was implemented
September 1, 1999 and runs through March 31, 2002.
Consolidation of natural gas procurement operations under Avista Energy allows
the Company to gain synergies and better manage its risk by combining and
operating the two portfolios as one portfolio and gain efficiencies by
eliminating duplicate functions. The Natural Gas Benchmark Mechanism provides
certain guaranteed benefits to retail customers as well as provides the Company
with the opportunity to improve earnings, i.e., a performance-based mechanism.
8
<PAGE> 13
AVISTA CORPORATION
- --------------------------------------------------------------------------------
AVISTA UTILITIES OPERATING STATISTICS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
ELECTRIC OPERATIONS
ELECTRIC OPERATING REVENUES (Thousands of Dollars):
Residential ..................................... $ 158,658 $ 157,019 $ 160,411
Commercial ...................................... 152,107 149,767 144,952
Industrial ...................................... 69,559 64,662 58,391
Public street and highway lighting .............. 3,517 3,387 3,352
--------- --------- ---------
Total retail revenues ...................... 383,841 374,835 367,106
--------- --------- ---------
Long-term wholesale ............................. 134,945 102,928 138,730
Short-term wholesale ............................ 387,554 354,413 191,202
--------- --------- ---------
Total wholesale revenues ................... 522,499 457,341 329,932
--------- --------- ---------
Total energy revenues ...................... 906,340 832,176 697,038
Other ........................................... 21,824 23,898 28,845
--------- --------- ---------
Total electric operating revenues .......... $ 928,164 $ 856,074 $ 725,883
========= ========= =========
ELECTRIC ENERGY SALES (Thousands of MWhs):
Residential ..................................... 3,237 3,217 3,270
Commercial ...................................... 2,848 2,810 2,716
Industrial ...................................... 2,032 1,878 1,759
Public street and highway lighting .............. 25 24 24
--------- --------- ---------
Total retail energy sales .................. 8,142 7,929 7,769
--------- --------- ---------
Long-term wholesale ............................. 5,335 3,680 4,307
Short-term wholesale ............................ 14,443 15,535 12,103
--------- --------- ---------
Total wholesale energy sales ............... 19,778 19,215 16,410
--------- --------- ---------
Total electric energy sales ................ 27,920 27,144 24,179
========= ========= =========
ELECTRIC ENERGY RESOURCES (Thousands of MWhs):
Hydro generation (from Company facilities) ...... 4,287 3,860 4,863
Thermal generation (from Company facilities) .... 3,353 3,522 2,627
Purchased power - long-term hydro ............... 1,093 910 1,212
Purchased power - other ......................... 19,697 19,405 16,038
Power exchanges ................................. 16 26 178
--------- --------- ---------
Total power resources ...................... 28,446 27,723 24,918
Energy losses and Company use ................... (526) (579) (739)
--------- --------- ---------
Total energy resources (net of losses) ..... 27,920 27,144 24,179
========= ========= =========
NUMBER OF ELECTRIC CUSTOMERS (Average for Period):
Residential ..................................... 270,013 265,891 261,873
Commercial ...................................... 34,877 34,407 33,681
Industrial ...................................... 1,189 1,169 1,145
Public street and highway lighting .............. 389 383 371
--------- --------- ---------
Total electric retail customers ............ 306,468 301,850 297,070
Wholesale ....................................... 68 85 91
--------- --------- ---------
Total electric customers ................... 306,536 301,935 297,161
========= ========= =========
ELECTRIC RESIDENTIAL SERVICE AVERAGES:
Annual use per customer (KWh) ................... 11,990 12,099 12,489
Revenue per KWh (in cents) ...................... 4.90 4.88 4.90
Annual revenue per customer ..................... $ 587.59 $ 590.54 $ 612.55
ELECTRIC AVERAGE HOURLY LOAD (aMW) ................... 990 971 954
========= ========= =========
RESOURCE AVAILABILITY at time of system peak (MW):
Total requirements (winter) (1) ................. 4,632 4,765 4,226
Total resource availability (winter) ............ 4,831 4,991 4,684
Total requirements (summer) (2) ................. 6,008 5,093 4,345
Total resource availability (summer) ............ 6,633 5,340 4,766
</TABLE>
(1) Includes long-term contract obligations of 941 MW, 663 MW and 1,022 MW and
2,340 MW, 2,401 MW and 1,688 MW of short-term sales in 1999, 1998 and 1997,
respectively.
(2) Includes long-term contract obligations of 1,155 MW, 780 MW and 1,011 MW
and short-term sales of 3,435 MW, 2,792 MW and 1,966 MW in 1999, 1998 and
1997, respectively.
9
<PAGE> 14
AVISTA CORPORATION
- --------------------------------------------------------------------------------
AVISTA UTILITIES OPERATING STATISTICS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
NATURAL GAS OPERATIONS
NATURAL GAS OPERATING REVENUES (Thousands of Dollars):
Residential ............................................ $ 99,879 $ 92,614 $ 81,855
Commercial ............................................. 51,952 49,539 42,731
Industrial - firm ...................................... 3,695 3,685 3,563
Industrial - interruptible ............................. 1,352 1,639 512
--------- --------- ---------
Total retail natural gas revenues ................. 156,878 147,477 128,661
Non-retail sales ....................................... 15,189 24,846 19,559
Transportation ......................................... 10,784 12,100 12,678
Other revenues ......................................... 4,633 8,715 4,884
--------- --------- ---------
Total natural gas operating revenues .............. $ 187,484 $ 193,138 $ 165,782
========= ========= =========
THERMS DELIVERED (Thousands of Therms):
Residential ............................................ 200,184 187,571 182,037
Commercial ............................................. 125,611 122,263 118,494
Industrial - firm ...................................... 11,241 11,494 12,509
Industrial - interruptible ............................. 5,209 6,053 3,217
--------- --------- ---------
Total retail sales ................................ 342,245 327,381 316,257
Non-retail sales ....................................... 74,117 126,522 105,297
Transportation ......................................... 232,739 226,139 245,139
Interdepartmental sales and Company use ................ 9,801 32,647 2,087
--------- --------- ---------
Total therms delivered ............................ 658,902 712,689 668,780
========= ========= =========
SOURCES OF NATURAL GAS SUPPLY (Thousands of Therms):
Purchases .............................................. 430,698 499,983 431,646
Storage - injections ................................... (30,508) (32,023) (31,288)
Storage - withdrawals .................................. 23,972 23,140 22,183
Natural gas for transportation ......................... 232,739 226,139 245,139
Distribution system gains (losses) ..................... 2,001 (4,550) 1,100
--------- --------- ---------
Total supply ...................................... 658,902 712,689 668,780
========= ========= =========
NUMBER OF NATURAL GAS CUSTOMERS (Average for Period):
Residential ............................................ 234,844 226,165 214,927
Commercial ............................................. 29,032 28,236 27,171
Industrial - firm ...................................... 308 310 306
Industrial - interruptible ............................. 30 26 25
--------- --------- ---------
Total retail customers ............................ 264,214 254,737 242,429
Non-retail sales ....................................... 9 19 17
Transportation ......................................... 107 119 111
--------- --------- ---------
Total natural gas customers ....................... 264,330 254,875 242,557
========= ========= =========
NATURAL GAS RESIDENTIAL SERVICE AVERAGES:
Washington and Idaho
Annual use per customer (therms) .................. 887 861 927
Revenue per therm (in cents) ...................... 45.74 44.97 40.44
Annual revenue per customer ....................... $ 405.51 $ 387.17 $ 374.90
Oregon and California
Annual use per customer (therms) .................. 789 772 703
Revenue per therm (in cents) ...................... 58.59 58.32 55.71
Annual revenue per customer ....................... $ 462.21 $ 450.13 $ 391.56
NET SYSTEM MAXIMUM CAPABILITY (Thousands of Therms):
Net system maximum demand (winter) ..................... 2,077 3,284 3,134
Net system maximum firm contractual capacity (winter) .. 4,320 4,220 4,220
HEATING DEGREE DAYS: (1)
Spokane, WA
Actual ............................................ 6,408 5,951 6,510
30 year average ................................... 6,842 6,842 6,842
% of average ...................................... 94% 87% 95%
Medford, OR
Actual ............................................ 4,401 4,421 4,144
30 year average ................................... 4,611 4,611 4,611
% of average ...................................... 95% 96% 90%
</TABLE>
(1) Heating degree days are the measure of the coldness of weather experienced,
based on the extent to which the average of high and low temperatures for a
day falls below 65 degrees Fahrenheit (annual degree days below historic
average indicate warmer than average temperatures).
10
<PAGE> 15
AVISTA CORPORATION
- --------------------------------------------------------------------------------
ENERGY TRADING AND MARKETING
The Energy Trading and Marketing line of business includes Avista Energy, Avista
Power and Avista-STEAG. Avista Energy and Avista Power are wholly owned
subsidiaries of Avista Capital. Avista-STEAG is 50% owned by Avista Capital.
Avista Capital's total equity investment in this line of business was
approximately $86.0 million on December 31, 1999.
AVISTA ENERGY
Avista Energy is an electricity and natural gas marketing and trading business
focused on marketing energy in the Western United States. In 1999, Avista Energy
began conducting business on a national basis with its acquisition of Vitol Gas
& Electric, LLC (Vitol). However, in November 1999, the decision was made to
reduce Avista Energy's risk by redirecting its focus away from national energy
trading and marketing toward a more regionally-based energy marketing and
trading effort in the West backed by contracts for energy commodities and by the
output of specific facilities available under contract. The decision came as a
result of Avista Energy's inability to effectively and consistently compete on a
national basis with the larger trading and marketing companies.
Avista Energy's headquarters are currently in Boston, Massachusetts with offices
in Houston, Texas; Spokane, Washington; Portland, Oregon; and Vancouver, British
Columbia, Canada. As a result of the restructuring, Avista Energy is closing the
Boston and Houston offices and relocating headquarters back to Spokane in the
first half of 2000.
Avista Energy is in the business of buying and selling electricity and natural
gas. Avista Energy's customers include commercial and industrial end-users,
electric utilities, natural gas distribution companies and other trading
companies. Avista Energy also trades electricity and natural gas derivative
commodity instruments, including futures, options, swaps and other contractual
arrangements on national exchanges and through unregulated exchanges and brokers
from whom these commodity derivatives are available. During 1999, Avista Energy
also sold and traded coal and sulfur dioxide (SO2) allowances, but it is Avista
Energy's intent to eliminate these activities in 2000. However, that is
dependent upon finding a buyer for the coal contracts already entered into. In
1999, Avista Energy sold approximately 135.1 million MWhs of electric energy,
775.8 million dekatherms of natural gas and 1.6 million tons of coal, compared
to approximately 54.4 million MWhs of electric energy and 424.2 million
dekatherms of natural gas in 1998. No coal was sold in 1998. These volumes, and
the associated revenues, will all decline in the future as a result of the
restructuring.
Avista Energy's business is affected by many factors, including:
- the demand for and availability of energy,
- lower unit margins on new sales contracts,
- fewer long-term power contracts being entered into, resulting in a
heavier reliance on short-term power contracts which have lower
margins than long-term contracts,
- marginal fuel prices, and
- deregulation of the electric utility industry.
In April 1997, Avista Energy entered into a marketing agreement with Chelan
County Public Utility District (Chelan PUD), located in Washington State. The
agreement allows Avista Energy to market, on a "real-time" basis, a portion of
the output from Chelan PUD's hydroelectric resources and to jointly market
energy products and services to other utilities in the region. Twenty-eight
percent, or 557 megawatts, of total generated capacity from Chelan PUD's
hydroelectric resources are available for real-time scheduling and resource
optimization. Avista Energy and Chelan PUD offer a variety of products, all
designed to help smaller utilities adjust to the emerging energy market. On
October 20, 1997, a complaint for declaratory and injunctive relief was filed in
Chelan County Superior Court by James A. Brown, a taxpayer and ratepayer of the
Chelan PUD, in order to determine whether the joint marketing and real-time
scheduling efforts of Chelan PUD and Avista Energy are within Chelan PUD's
lawful authority to undertake. This lawsuit was dismissed on July 30, 1999, and
Avista Energy and Chelan PUD continue to operate under the contractual alliance.
Effective September 1, 1999, Avista Energy began managing Avista Utilities'
natural gas assets and natural gas purchasing operations. Under the agreement,
Avista Energy serves as agent for Avista Utilities, managing its pipeline
transportation and natural gas storage assets, as well as purchasing natural gas
for Avista Utilities' retail customers. The assets continue to be owned by
Avista Utilities, but they are fully integrated operationally into Avista
Energy's portfolio to optimize the value. The incentive plan allows Avista
Energy the opportunity to retain a portion of the benefits associated with asset
optimization and the efficiencies gained in purchasing natural gas for Avista
Utilities. Approvals were received from the state regulatory agencies in
Washington, Idaho and Oregon. The incentive plan began September 1, 1999 and
ends March 31, 2002. Avista Utilities may seek continuation of the plan from
regulators with six months notice prior to the end of the term.
11
<PAGE> 16
AVISTA CORPORATION
- --------------------------------------------------------------------------------
The participants in the emerging wholesale energy market are public utility
companies and, increasingly, power marketers which may or may not be affiliated
with public utility companies or other entities. The participants in this market
trade not only electricity and natural gas as commodities, but also derivative
commodity instruments such as futures, forwards, swaps, options and other
instruments. This market is largely unregulated and most transactions are
conducted on an "over-the-counter" basis, there being no central clearing
mechanism (except in the case of specific instruments traded on the commodity
exchanges). Power marketers, whether or not affiliated with other entities,
generally do not own production facilities and are not subject to net capital or
other requirements of any regulatory agency.
Avista Energy is subject to the various risks inherent in commodity trading
including, particularly, market risk and credit risk. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations:
Results of Operations: Energy Trading and Marketing Operations; Future Outlook -
Energy Trading Business; and Notes 1, 2, 4 and 5 of Notes to Financial
Statements for additional information regarding the market and credit risks
inherent in the energy trading business, fourth quarter restructuring costs,
Avista Corp.'s risk management policies and procedures, accounting practices,
and positions held by Avista Energy at December 31, 1999.
Avista Capital provides guarantees for Avista Energy's line of credit agreement
and, in the course of business, may provide guarantees to other parties with
whom Avista Energy may be doing business.
AVISTA POWER
Avista Power was formed to develop and own electricity generation and/or natural
gas fuel storage assets in strategic locations primarily throughout the West.
Avista Power's goal is to create value-added partnerships and joint ventures to
solidify market position, primarily in support of Avista Energy's operations.
Avista Power and Cogentrix Energy, Inc. have entered into an agreement to
jointly build and/or buy interests in natural gas-fired electric generation
plants in the states of Washington, Oregon and Idaho. The first project under
the new agreement is a 270 megawatt facility located in Rathdrum, Idaho, with
100% of its output contracted to Avista Energy for 25 years. The facility is
currently under construction and is expected to start up in late 2001. The total
cost of the project is estimated at $160 million; Avista Power's share of the
costs is approximately $80 million.
If Avista Power creates projects that STEAG AG, a German independent power
producer, wants to partner with, such projects will be done under Avista-STEAG,
LLC.
12
<PAGE> 17
AVISTA CORPORATION
- --------------------------------------------------------------------------------
ENERGY TRADING AND MARKETING OPERATING STATISTICS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
AVISTA ENERGY
REVENUES (Thousands of Dollars):
Electric ............................... $4,745,615 $1,665,348 $111,344
Natural gas ............................ 1,900,487 743,386 135,684
Coal ................................... 49,569 -- --
---------- ---------- --------
Total revenues .................... $6,695,671 $2,408,734 $247,028
========== ========== ========
VOLUMES:
Electricity (Thousands of MWhs) ........ 135,099 54,430 4,540
Natural gas (Thousands of dekatherms) .. 775,822 424,152 67,319
Coal (Tons) ............................ 1,637,851 -- --
</TABLE>
13
<PAGE> 18
AVISTA CORPORATION
- --------------------------------------------------------------------------------
INFORMATION AND TECHNOLOGY
The Information and Technology line of business includes Avista Advantage,
Avista Labs and Avista Communications. Avista Fiber and Avista Communications
will merge operations in 2000, so Avista Fiber's information has been
incorporated into Avista Communications. Avista Advantage and Avista Labs are
wholly owned subsidiaries of Avista Capital. As of December 31, 1999, Avista
Capital owned approximately 71% of Avista Communications.
AVISTA ADVANTAGE
Headquartered in Spokane, Avista Advantage is a leading e-commerce provider of
specialty billing and information services to commercial customers throughout
the U.S. and Canada. Avista Advantage has established itself as a leader in the
development and implementation of customer-focused, non-traditional energy
solutions.
Avista Advantage processes and presents consolidated bills on-line, and pays
utility and maintenance and repair bills for multi-site commercial and
industrial customers. Information gathered from invoices, utilities and other
customer-specific data allows Avista Advantage to provide its customers with
in-depth analytical support, real-time reporting and unbiased consulting in
regard to energy, water, waste, and maintenance and repair expenses.
As of the end of 1999, Avista Advantage's customer base was over 100 customers,
having over 40,000 committed sites throughout the U.S. and Canada. Its customers
include Starbucks, Disney Stores, Kinko's, Home Depot, CVS Drug Stores and Time
Warner.
Avista Advantage's current products and services offering includes:
Consolidated billing - Invoices are entered into the AviTrack(TM)
database, which performs a variety of tolerance tests on the data. Edits
are resolved prior to the bill being presented to the customer for
payment. The ACIS(TM) Internet portal presents consolidated bills to be
viewed and approved on-line. Customers transfer the funds necessary to pay
invoices (in aggregate) directly to Avista Advantage, which remits to all
vendors.
Resource accounting - Over 500 different reports are available based on
customer-specific information requirements delivered on-line via the
ACIS(TM) portal.
Utility usage analysis - Avista Advantage compares usage information to
similar sites across the country and helps customers design strategies to
address identified issues.
Load profiling - Energy profiles are developed for individual sites, which
is useful in forecasting future energy costs and pinpointing patterns of
irregular energy consumption for further analysis.
Maintenance and repair billing services - Scheduled maintenance, standard
and emergency repairs of infrastructure and equipment are tracked,
monitored and bills are paid. This area of service is currently under
development.
Invoice audits - Audits of invoices are performed to customer
specifications.
Task report card - A monthly task report card is prepared summarizing
specific billing issues that were identified and resolved, listing the
actual savings resulting from the analysis, and documenting additional
opportunities for savings that have been identified for further analysis.
The ongoing management of customer utility and maintenance and repair bills
provides Avista Advantage with a database of information about customers and
their facilities services history. This database will be the foundation for
offering additional products and services tailored to the needs of individual
customers. Future products and services could include:
Commodity consulting services - Using load and usage information from the
AviTrack(TM) database to help customers purchase energy on the commodity
market. The potential for this service will increase significantly as
additional states allow retail customers to choose their energy suppliers.
Procurement services - Purchasing services and equipment on behalf of
customers to address operational improvements identified through the
standard Avista Advantage product offering. This may be expanded to
include all products and services required by a facilities management
organization.
14
<PAGE> 19
AVISTA CORPORATION
- --------------------------------------------------------------------------------
Telecommunications (voice, data and video) bill processing - Expanding the
current utility bill offering to include telecommunications invoices.
Web advertising and referral fees - Utilizing the ACIS(TM) web site as a
portal through which providers and users of e-commerce products and
services can conduct business.
Avista Advantage has secured patents on its two critical business systems, the
Advantage Customer Internet Site (ACIS(TM)), which provides high value,
operational information drawn from utility bills, and the AviTrack(TM) database,
which processes and reports on information gathered through input from utilities
to ensure customers are receiving the most effective services at the proper
price. Intellectual property protection includes a wide range of business
methods and systems related to ACIS(TM) and AviTrack(TM). Avista Advantage is
not aware of any claimed or threatened infringement on any patents issued to
date. Avista will continue to expand and protect its existing patents, as well
as file additional patent applications for new products, services and process
enhancements.
AVISTA LABS
Avista Labs is in the process of developing Proton Exchange Membrane (PEM) fuel
cells for power generation at the site of the consumer. The prototype fuel cell
has a unique modular cartridge design that allows for easy operation, low cost
and simple production. Avista Labs intends to integrate a fuel processor using
natural gas and propane fuels with an existing low-cost, flexible, modular,
stationary fuel cell, establish multiple beta-testing sites within strategic
market segments and attract additional partners for development and growth.
Avista Labs has filed applications for five patents, and is in the process of
drafting two more applications. The first, and most significant, patent was
approved, and issued on February 29, 2000. This patent protects the main
attributes of the fuel cell. A second patent, involving the operation of the
fuel cell, has been approved, but has not yet been issued. Approval is expected
on all of the other patent applications by year-end.
Avista Labs selected Logan Industries, of Spokane, to manufacture, assemble and
prepare the first 200 fuel cell units for field testing. Avista Labs and UOP,
LLC, a Chicago-based company, signed a joint development agreement that will
integrate UOP's fuel processor into Avista Lab's fuel cell design. This
represents one of the most critical steps in successful commercialization of
stationary fuel cells, possibly in early 2001. Avista Labs also signed a joint
marketing/installation agreement with Black & Veatch, a global engineering and
construction company.
In October 1998, Avista Labs was awarded a two year $2.0 million technology
development contract from the Department of Commerce's National Institute of
Standards and Technology Advanced Technology Program to accelerate fuel cell
development for commercial application.
AVISTA COMMUNICATIONS
Avista Communications, formed in January 1999 upon the acquisition of One Eighty
Communications, is the newest company in the Information and Technology line of
business. At December 31, 1999, Avista Capital owned 71% of this company. Avista
Communications is a Competitive Local Exchange Carrier (CLEC), providing local,
facilities-based telecommunications solutions. During 2000, Avista
Communications and Avista Fiber, a subsidiary started in 1996, will merge
operations. Avista Communications will then be additionally responsible for
designing, building and managing metropolitan area fiber optic networks,
services formerly provided by Avista Fiber.
The focus of Avista Communications is on providing local dial tone, data
transport, internet services, voice messaging and enhanced telecommunications
solutions to business customers via an advanced fiber optic network and
state-of-the-art switching technology. Target markets include under-served
communities in the western U.S. with populations under 500,000. Avista
Communications is already providing services in Billings, Montana and Lewiston,
Idaho and expects to be providing services in at least three more Northwest
communities in 2000.
15
<PAGE> 20
AVISTA CORPORATION
- --------------------------------------------------------------------------------
PENTZER AND OTHER
Pentzer, a wholly owned subsidiary of Avista Capital, is the largest entity in
the Pentzer and Other line of business. The other subsidiaries in this line of
business are Avista Development and Avista Services. At December 31, 1999,
Avista Capital's total equity investment in this line of business was
approximately $140.3 million, of which $122.2 million related to Pentzer.
PENTZER
Pentzer, a private investment fund specializing in profitable middle market
businesses, was the parent company for a majority of Avista Corp.'s other
subsidiary businesses until 1999, when it sold two groups of its portfolio
companies. In the past, Pentzer's business strategy has been to acquire
controlling interests in a broad range of middle market companies, facilitate
improved productivity and growth, and ultimately sell such companies to the
public or a strategic buyer. Total equity investment in any one company was
generally limited to $15 million.
Beginning in 2000, Pentzer's business strategy is to invest in companies that
are positioned to be leaders in emerging technology and information businesses
that are linked to the energy business. The investments will be directly in
businesses that meet these criteria, and indirectly, through the strategic
investment in certain venture capital firms that invest in similar business
segments and where Pentzer has the opportunity to directly invest in specific
portfolio companies.
Pentzer's goal is to produce strategic growth opportunities and financial
returns for the Company's shareholders that, over the long-term, should be
higher than that of the utility operations. From time to time, a significant
portion of Pentzer's earnings contributions may be the result of transactional
gains. Transactional gains arise from a one-time event or a specific
transaction, such as the sale of an investment or company from Pentzer's
portfolio of investments. In 1999, Pentzer generated $35.9 million in after-tax
transactional gains due to sales of portfolio companies.
AVISTA DEVELOPMENT
Avista Development manages and markets the corporation's community investments,
including real-estate, tax credit housing and other assets.
AVISTA SERVICES
Avista Services, the newest subsidiary under Avista Capital, provides products
and services to existing utility customers, which includes energy consulting,
mail order merchandising and the sale of items such as Dish Network Systems,
surge protectors and generators through a third party.
See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations: Results of Operations: Pentzer and Other and Notes 1 and
23 of Notes to Financial Statements for additional information.
16
<PAGE> 21
AVISTA CORPORATION
- --------------------------------------------------------------------------------
INDUSTRY RESTRUCTURING
FEDERAL LEVEL
Industry restructuring to remove certain barriers to competition in the electric
utility industry was initially promoted by federal legislation. The Energy
Policy Act of 1992 (Energy Act) confers expanded authority upon the FERC to
issue orders requiring electric utilities to transmit power and energy to or for
wholesale purchasers and sellers, and to require electric utilities to enlarge
or construct additional transmission capacity for the purpose of providing these
services.
The FERC issued its final rule in Order No. 888 in April 1996. That order
requires public utilities operating under the Federal Power Act to provide
access to their transmission systems to third parties pursuant to the terms and
conditions of the FERC's pro-forma open access transmission tariff. FERC Order
No. 889, the companion rule to Order No. 888, requires public utilities to
establish an Open Access Same-Time Information System (OASIS) to provide
transmission customers with information about available transmission capacity
and other information by electronic means, and requires each public utility
subject to the rule to functionally separate its transmission and wholesale
power merchant functions. The FERC issued its initial order accepting the
non-rate terms and conditions of Avista Utilities' open access transmission
tariff in November 1996. Avista Utilities filed its "Procedures for Implementing
Standards of Conduct under FERC Order No. 889" with the FERC in December 1996
and adopted these Procedures effective January 3, 1997. FERC Orders No. 888 and
No. 889 have not had a significant material effect on Avista Utilities'
operating results.
On December 20, 1999, the FERC issued a final rule in Order No. 2000 regarding
the development of Regional Transmission Organizations (RTO). This final rule
requires public utilities subject to FERC regulation to file an RTO proposal, or
a description of efforts to participate in an RTO, and any existing obstacles to
RTO participation, by October 2000. Avista Utilities and various Northwest
utilities initially investigated the feasibility of transferring certain
operational responsibilities associated with a regional transmission grid to an
independent grid operator in 1997. Avista Utilities withdrew from this effort in
December 1997 because the costs to establish an independent grid operator in the
Northwest were greater than the perceived benefits. Notwithstanding the FERC's
developing policies, Avista Utilities has continued to explore other regional
transmission alternatives intended to help facilitate a competitive electric
power market, including the development of an RTO that might provide
quantifiable efficiencies in administering access to the Northwest transmission
system in a non-discriminatory fashion. In response to the FERC's Order 2000,
Avista Utilities will be submitting its response on RTO development and
participation to the FERC by October 2000.
The North American Electric Reliability Council and the WSCC have undertaken
initiatives to establish a series of security coordinators to oversee the
reliable operation of the regional transmission system. Accordingly, Avista
Utilities, in cooperation with other utilities in the Pacific Northwest, has
established the Pacific Northwest Security Coordinator (PNSC), which oversees
daily and short-term operations of the Northwest sub-regional transmission grid,
and has limited authority to direct certain actions of control area operators in
the case of a pending transmission system emergency. Avista Utilities executed
its service agreement with the PNSC in September 1998.
STATE LEVEL
Further competition may be introduced by state action. Competition for retail
customers is not generally allowed in Avista Utilities' service territory. While
the Energy Act precludes the FERC from mandating retail wheeling, state
regulators and legislators could open service territories to full competition at
the retail level. Legislative action at the state level would be required for
full retail wheeling and customer choice to occur in Washington and Idaho.
From 1995 through 1999, the legislatures and public utility commissions in
Washington and Idaho have covered a series of hearings and conducted several
studies regarding electric industry restructuring. Issues such as unbundling,
deregulation, reliability and consumer protection have been examined. Impacts on
customer service quality and system reliability (generation, transmission and
distribution) have been considered on a "macro" basis under various
restructuring scenarios. Public policy makers in Washington and Idaho continue
to examine other states' experiences with restructuring, while cognizant that
the Pacific Northwest generally benefits from the lowest electric rates in the
country.
In 1997, Governor Locke issued an executive order requiring all agencies in the
State of Washington to review their significant rules under the criterion of
need, efficiency, clarity and cost. The WUTC is in the process of examining its
electric and natural gas rules. Resulting modifications to existing rules may
include changes to customer service and reliability standards. Avista Utilities
believes that any such modifications to the WUTC's existing rules will not
materially impact operations.
17
<PAGE> 22
AVISTA CORPORATION
- --------------------------------------------------------------------------------
Avista Utilities has developed a model to offer broader customer choice. The
Portfolio Access Model (PA Model) was developed as a transition to full direct
access. Under the PA Model, large-use customers would receive direct access,
while small-use customers would be provided a menu of services priced at market
rates, such as monthly and annual pricing, as well as optional "green rates" for
renewable power. The PA Model has served as a regional proposal under discussion
by legislative committees and work groups in Washington, Idaho and Oregon. In
1999, the Oregon Legislature voted into law an electric restructuring system
similar to Avista Utilities' PA Model. More Options for Power Services II (MOPS
II) is Avista Utilities' PA Model regulatory pilot.
On January 20, 1999, the CPUC granted Avista Utilities a full exemption to the
CPUC's Affiliate Transaction Rules, provided that Avista Utilities complies with
its voluntary agreement that none of its affiliates will participate in business
activities in its South Lake Tahoe service territory. These rules require that a
utility's energy marketing affiliates follow detailed operating and reporting
protocols as well as full separation from the regulated entity for any business
activity in California. Avista Utilities also agreed to provide periodic reports
from an independent auditor verifying that its affiliates have not participated
directly or indirectly within this service territory.
EXPERIMENTAL PROGRAMS
To assess the potential impact of competition and customer choice, commencing in
1997, Avista Utilities has implemented a variety of experimental programs that
permitted its retail customers to choose other energy suppliers. The cost of
these programs to Avista Utilities, in terms of lost margin, has not been
material.
On the basis of its experience under these programs, Avista Utilities believes
that if the States of Washington and/or Idaho adopted legislation providing for
customer choice, the effect on its results of operations would not be material.
This is due largely to (1) Avista Utilities' current retail rates, which are
among the lowest in the U.S., and (2) Avista Utilities' ability to sell capacity
and energy in wholesale markets without any significant loss of margin.
18
<PAGE> 23
AVISTA CORPORATION
- --------------------------------------------------------------------------------
ENVIRONMENTAL ISSUES
The Company is subject to environmental regulation by federal, state and local
authorities. The generation, transmission, distribution, service and storage
facilities in which Avista Utilities has an ownership interest have been
designed to comply with all environmental laws presently applicable.
Furthermore, the Company conducts periodic reviews of all its facilities and
operations to anticipate emerging environmental issues. The Company's Board of
Directors has an Environmental Committee to deal specifically with these issues.
Air Quality. The most significant impact of the Clean Air Act (CAA) and the 1990
Clean Air Act Amendments (CAAA) is on the Centralia Steam Electric Plant, which
is classified as a "Phase II" coal plant under the CAAA. Construction is
underway to install limestone scrubbers on both units. The first unit will go
into operation in 2001 and the second in 2002. The scrubbers are expected to
result in a 90% reduction in sulfur dioxide (SO2) emissions. This level of
reduction exceeds the requirements of the CAA and meets the RACT (Reasonably
Available Control Technology) order by the Southwest Washington Pollution
Control Authority (SWAPCA). The plant will also install low nitrogen oxide (NOX)
burners to reduce the emission of NOX. The standards in the RACT order were
established by a collaborative decision-making group consisting of
representatives from federal and state agencies and the plant owners. Avista
Utilities and the other owners decided to take bids for the sale of the
Centralia Steam Electric Plant and have announced TransAlta of Calgary as the
selected bidder in the auction process. The sale must be approved by federal and
state regulators, as well as the city councils and directors who control the
municipal utilities and public utility districts that also have ownership
interests in the plant. Regulatory approvals have been received from the FERC
and state commissions in Washington, Idaho, Oregon and Wyoming. Commissions in
Utah and California have yet to make their decisions. The Company is reviewing
the terms of the approvals from the WUTC and the IPUC to determine whether to
agree to the sale. Obligations under the CAA would be assumed by TransAlta if
the sale of the Centralia Steam Electric Plant is completed.
Colstrip, which is also a "Phase II" coal-fired plant under the CAAA, is not
expected to be required to implement any additional SO2 mitigation in the
foreseeable future in order to continue operations.
Avista Utilities' other thermal projects also are subject to various CAAA
standards. Every five years each project requires an updated operating permit
(known as a Title V permit) which addresses, among other things, the compliance
of the plant with the CAAA. No permits are required at any of Avista Utilities'
thermal plants in 2000.
See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations: Future Outlook and Note 22 to Financial Statements for
additional information.
19
<PAGE> 24
AVISTA CORPORATION
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES
AVISTA UTILITIES
Avista Utilities' electric properties, located in the States of Washington,
Idaho and Montana, include the following:
Generating Plant
<TABLE>
<CAPTION>
Nameplate Present Year of
No. of Rating Capability FERC License
Units (MW)(1) (MW)(2) Expiration
------ --------- ---------- ------------
<S> <C> <C> <C> <C>
Hydroelectric Generating Stations (River)
Washington:
Long Lake (Spokane) 4 70.0 88.0 2007
Little Falls (Spokane) 4 32.0 36.0 n/a
Nine Mile (Spokane) 4 26.4 24.5 2007
Upper Falls (Spokane) 1 10.0 10.2 2007
Monroe Street (Spokane) 1 14.8 14.8 2007
Idaho:
Cabinet Gorge (Clark Fork) 4 221.9 236.0 2045(3)
Post Falls (Spokane) 6 14.8 18.0 2007
Montana:
Noxon Rapids (Clark Fork) 5 466.7 528.0 2045(3)
------- -------
Total Hydroelectric 856.6 955.5
Thermal Generating Stations
Washington:
Centralia(4) 2 199.5 201.0
Kettle Falls 1 50.7 49.0
Northeast (Spokane) CT(5) 2 61.2 69.0
Idaho:
Rathdrum CT(5) 2 166.5 176.0
Montana:
Colstrip (Units 3 and 4)(4) 2 233.4 222.0
------- -------
Total Thermal 711.3 717.0
Total Generation Properties 1,567.9 1,672.5
======= =======
</TABLE>
n/a not applicable.
(1) Nameplate Rating, also referred to as "installed capacity", is the
manufacturer's assigned power rating under specified conditions.
(2) Capability is the maximum generation of the plant without exceeding
approved limits of temperature, stress and environmental conditions.
(3) On February 23, 2000, the Company received a new operating license for
Cabinet Gorge and Noxon Rapids. (See Item 1. Business: Avista Utilities -
Hydroelectric Relicensing for additional information.)
(4) Jointly owned; data above refers to Avista Utilities' respective 15%
interests. The remaining 2.5% interest in Centralia, purchased by the
Company in December 1999, is currently being held as non-utility property
until the outcome of the pending sale is determined.
(5) Used primarily for peaking needs.
Electric Distribution and Transmission Plant
Avista Utilities operates approximately 12,200 miles of primary and secondary
distribution lines in its electric system in addition to a transmission system
of approximately 575 miles of 230 kV line and 1,520 miles of 115 kV line. Avista
Utilities also owns a 10% interest in 495 miles of a 500 kV line between
Colstrip, Montana and Townsend, Montana, and a 15% interest in three miles of a
500 kV line from Centralia, Washington to the nearest Bonneville Power
Administration (Bonneville) interconnection.
20
<PAGE> 25
AVISTA CORPORATION
- --------------------------------------------------------------------------------
The 230 kV lines are used to transmit power from Avista Utilities' Noxon Rapids
and Cabinet Gorge hydroelectric generating stations to major load centers in its
service area, as well as to transfer power between points of interconnection
with adjoining electric transmission systems. These lines interconnect with
Bonneville at five locations and at one location each with PacifiCorp, Montana
Power and Idaho Power Company. The Bonneville interconnections serve as points
of delivery for power from the Colstrip and Centralia generating stations, as
well as for the interchange of power with entities outside the Pacific
Northwest. The interconnection with PacifiCorp is used to integrate Mid-Columbia
hydroelectric generating facilities to Avista Utilities' loads, as well as for
the interchange of power with entities within the Pacific Northwest.
The 115 kV lines provide for transmission of energy and the integration of the
Spokane River hydroelectric and Kettle Falls wood-waste generating stations with
service-area-load centers. These lines interconnect with Bonneville at nine
locations, Grant County Public Utility District (PUD), Seattle City Light and
Tacoma City Light at two locations and one interconnection each with Chelan
County PUD, PacifiCorp and Montana Power.
Natural Gas Plant
Avista Utilities has natural gas distribution mains of approximately 3,877 miles
in Washington and Idaho and 1,794 miles in Oregon and California, as of December
31, 1999.
Avista Utilities, Northwest Pipeline and Puget Sound Energy each own a one-third
undivided interest in the Jackson Prairie Natural Gas Storage Project, which has
a total peak day deliverability of 8.8 million therms, with a total working
natural gas inventory of 190.3 million therms.
ITEM 3. LEGAL PROCEEDINGS
See Note 22 of Notes to Financial Statements for additional information.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
21
<PAGE> 26
AVISTA CORPORATION
- --------------------------------------------------------------------------------
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Outstanding shares of Common Stock are listed on the New York and Pacific Stock
Exchanges. As of February 29, 2000, there were approximately 20,726 registered
shareholders of the Company's no par value Common Stock.
See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations: Future Outlook for additional information about common
stock dividends.
For additional information, refer to Notes 1, 18 and 21 of Notes to Financial
Statements. For high and low stock price information, refer to Note 24 of Notes
to Financial Statements.
22
<PAGE> 27
AVISTA CORPORATION
- --------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(Thousands of Dollars except Per Share Data and Ratios)
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Avista Utilities * ................... $ 1,082,159 $ 1,041,772 $ 890,516 $ 798,994 $ 661,216
Energy Trading and Marketing ......... 6,695,671 2,408,734 247,028 -- --
Information and Technology ........... 4,851 1,995 1,030 813 --
Pentzer and Other .................... 122,303 231,483 163,598 145,150 93,793
----------- ----------- ----------- ----------- -----------
Total ................................ 7,904,984 3,683,984 1,302,172 944,957 755,009
Operating Income/(Loss):
Avista Utilities * ................... 142,567 143,153 178,289 173,658 176,344
Energy Trading and Marketing ......... (97,785) 22,826 6,577 (649) --
Information and Technology ........... (13,002) (5,192) (5,364) (1,443) --
Pentzer and Other .................... (423) 12,033 9,962 15,355 13,496
----------- ----------- ----------- ----------- -----------
Total ................................ 31,357 172,820 189,464 186,921 189,840
Net Income/(Loss):
Avista Utilities * ................... 59,470 56,297 100,777(4) 62,404 72,310
Energy Trading and Marketing ......... (60,740) 14,116 5,346 (414) --
Information and Technology ........... (10,156) (3,398) (3,425) (919) --
Pentzer and Other .................... 37,457 11,124 12,099 22,382 14,811
----------- ----------- ----------- ----------- -----------
Total ................................ 26,031 78,139 114,797 83,453 87,121
Preferred Stock Dividend Requirements .. 21,392(1) 8,399(1) 5,392 7,978 9,123
Income Available for Common Stock ...... 4,639 69,740 109,405(4) 75,475 77,998
Outstanding Common Stock (000s):
Weighted Average ..................... 38,213(1) 54,604(1) 55,960 55,960 55,173
Year-End ............................. 35,648(1) 40,454(1) 55,960 55,960 55,948
Book Value per Share ................... $ 11.04(1) $ 12.07(1) $ 13.36 $ 12.70 $ 12.82
Earnings per Share:
Avista Utilities ..................... 1.00 0.88 1.70(4) 0.97 1.14
Energy Trading and Marketing ......... (1.59) 0.26 0.10 (0.01) --
Information and Technology ........... (0.27) (0.06) (0.06) (0.01) --
Pentzer and Other .................... 0.98 0.20 0.22 0.40 0.27
----------- ----------- ----------- ----------- -----------
Total, Basic and Diluted ............. 0.12 1.28 1.96(4) 1.35 1.41
Adjusted Diluted ..................... 0.44(2) 1.35(2) -- -- --
Dividends Paid per Common Share ...... 0.48(3) 1.05(3) 1.24 1.24 1.24
Total Assets at Year-End:
Avista Utilities ..................... 1,976,716 2,004,935 1,926,739 1,921,429 1,869,180
Energy Trading and Marketing ......... 1,595,470 955,615 212,868 320 --
Information and Technology ........... 26,379 7,461 3,475 1,517 --
Pentzer and Other .................... 114,929 285,625 268,703 254,032 229,722
----------- ----------- ----------- ----------- -----------
Total .................................. 3,713,494 3,253,636 2,411,785 2,177,298 2,098,902
Long-term Debt at Year-End ............. 718,203 730,022 762,185 764,526 738,287
Company-Obligated Mandatorily
Redeemable Preferred Trust Securities 110,000 110,000 110,000 -- --
Preferred Stock Subject to Mandatory
Redemption at Year-End ............... 35,000 35,000 45,000 65,000 85,000
Convertible Preferred Stock ............ 263,309 269,227(1) -- -- --
Ratio of Earnings to Fixed Charges ..... 1.61 2.66 3.49 2.97 3.22
Ratio of Earnings to Fixed Charges and
Preferred Dividend Requirements ....... 1.07 2.25 3.12 2.50 2.61
</TABLE>
* Avista Utilities amounts contain the consolidating intersegment
eliminations.
(1) In December 1998, the Company converted shares of common stock for
Convertible Preferred Stock, which was responsible for a number of
changes in the data in 1999 and 1998 from 1997. (See Note 15 of Notes to
Financial Statements.)
(2) Assumes the Convertible Preferred Stock was converted back to common
stock. (See Note 19 of Notes to Financial Statements.)
(3) The Company paid a common stock dividend of $0.31 per share through the
third quarter of 1998. Beginning in the fourth quarter of 1998, the
common stock dividend paid was reduced to $0.12 per share each quarter.
(4) Includes the $41.4 million after-tax effect of the income tax recovery.
(See Note 9 of Notes to Financial Statements.)
23
<PAGE> 28
AVISTA CORPORATION
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Avista Corporation (Avista Corp. or the Company) operates as an energy,
information and technology company with a regional utility operation and
subsidiary operations located throughout North America. The utility portion of
the Company, doing business as Avista Utilities, is subject to state and federal
price regulation. The national businesses are conducted under Avista Capital,
which is the parent company to the Company's subsidiaries.
Avista Utilities provides electric transmission and electric and natural gas
distribution services to retail customers. It is also responsible for the
generation and production of electric energy, electric wholesale marketing, and
electric commodity trading, primarily for the purpose of optimizing system
resources. Wholesale marketing includes sales and purchases under long-term
contracts with one-year and longer terms. Electric commodity trading includes
short-term sales and purchases, such as next hour, next day and monthly blocks
of energy. Wholesale marketing and trading activities are primarily with other
utilities and power brokers in the Western Systems Coordinating Council (WSCC).
The Energy Trading and Marketing line of business is comprised of Avista Energy,
Inc. (Avista Energy), Avista Power, Inc. (Avista Power) and Avista-STEAG, LLC
(Avista-STEAG). Avista Energy is an electricity and natural gas marketing and
trading business. In 1999, Avista Energy began conducting business on a national
basis with its acquisition of Vitol Gas & Electric, LLC (Vitol). However, market
factors changed significantly during the year, and by the end of 1999, Avista
Energy decided to reduce its risk by redirecting its focus away from national
energy trading toward a more regionally-based energy marketing and trading
effort, primarily within the Western Systems Coordinating Council (WSCC). Avista
Power was formed in December 1998 to develop and own generation assets primarily
in support of Avista Energy. Avista-STEAG was created in 1999 as a joint venture
between Avista Capital and STEAG AG, a German independent power producer, to
develop electric generating assets. See Liquidity and Capital Resources: Risk
Management.
The Information and Technology line of business is comprised of Avista
Advantage, Inc. (Avista Advantage), Avista Laboratories, Inc. (Avista Labs),
Avista Fiber, Inc. (Avista Fiber) and Avista Communications, Inc. (Avista
Communications). Avista Advantage is a business-to-business e-commerce portal
that provides a variety of energy-related products and services to commercial
and industrial customers on a national basis. Its primary product lines include
consolidated billing, resource accounting, energy analysis, load profiling and
maintenance and repair billing services. Avista Labs is in the process of
developing Proton Exchange Membrane (PEM) fuel cells for power generation at the
site of the consumer. Avista Communications is a Competitive Local Exchange
Carrier (CLEC) providing local dial tone, data transport, internet services,
voice messaging and other telecommunications services to under-served
communities in the Western United States. During 2000, Avista Fiber, a
subsidiary started in 1996, and Avista Communications will merge operations.
Avista Communications will then be additionally responsible for designing,
building and managing metropolitan area fiber optic networks, services formerly
provided by Avista Fiber.
The Pentzer and Other line of business includes Pentzer Corporation (Pentzer),
Avista Development, Inc. (Avista Development) and Avista Services, Inc. (Avista
Services). Pentzer was the parent company to the majority of the Company's other
subsidiary businesses until 1999, when it sold two groups of its portfolio
companies. Pentzer's business strategy was such that its earnings resulted from
both transactional and non-transactional earnings. Transactional gains have
arisen from one-time events or specific transactions, such as the sale of an
investment or companies from Pentzer's portfolio of investments.
Non-transactional earnings arise out of the ongoing operations of the individual
portfolio companies. Avista Development holds other community investments,
including real estate, tax credit housing and other assets. Avista Services is
the marketing arm of Avista Utilities that offers products and services to
existing utility customers, including energy consulting, mail order
merchandising and sales of items such as surge protectors and generators.
Regulatory, economic and technological changes have brought about the
accelerating transformation of the utility and energy industries, creating new
opportunities to expand the Company's businesses and serve new markets. In
pursuing such opportunities, the Company's strategy is to focus on continuing
its growth as a leading provider of energy, and information and technology
services.
The Company's growth strategy exposes it to risks, including risks associated
with rapid expansion, challenges in recruiting and retaining qualified
personnel, risks associated with acquisitions and joint ventures and increasing
competition. In addition, the energy trading and marketing business exposes the
Company to the financial and credit
24
<PAGE> 29
AVISTA CORPORATION
- --------------------------------------------------------------------------------
risks associated with commodity trading activities. The Company believes that
its extensive experience in the electric and natural gas business, coupled with
its strong management team, will allow the Company to effectively manage its
further development as a diversified energy, information and technology company.
The Company changed the way it reports business segments in this Form 10-K from
the 1998 Form 10-K. In the 1998 Form 10-K and the quarterly Form 10-Q reports
for 1999, the Company reported Avista Utilities information by its two separate
lines of business - (1) Energy Delivery and (2) Generation and Resources. The
National Energy Trading and Marketing line of business included results of
Avista Energy, Avista Advantage and Avista Power. The Non-Energy line of
business included Pentzer and all of the remaining subsidiaries' activities. The
business segment presentation in this Form 10-K reflects the basis currently
used by the Company's management to analyze performance and determine the
allocation of resources. Avista Utilities' business is now managed based on the
total regulated operations, not by individual segments. The Energy Trading and
Marketing line of business changed its focus from a national emphasis to a
regional effort, but its operations are non-regulated, as opposed to Avista
Utilities' operations. The Information and Technology line of business reflects
the current efforts of the Company to grow those businesses and focus on
generating shareholder value. Pentzer and Other reports on the other non-utility
operations of various subsidiaries.
RESULTS OF OPERATIONS
OVERALL OPERATIONS
1999 COMPARED TO 1998
Overall reported basic earnings per share for 1999 were $0.12, compared to $1.28
in 1998. In December 1998, the Company exchanged 15,404,595 shares of its common
stock for shares of Convertible Preferred Stock, Series L, which resulted in an
increase of $13.4 million in preferred stock dividend requirements in 1999 over
1998. Excluding the effects of this transaction, earnings per share would have
been $0.44 in 1999, compared to $1.35 in 1998. The primary reason for the
decrease was a $60.7 million after-tax loss recorded by the Energy Trading and
Marketing line of business, due to a $27.3 million after-tax charge recorded by
Avista Energy related to the downsizing and restructuring of the business, and
$32.1 million of after-tax operational losses due to warmer than normal weather
across the nation, soft national energy markets and a lack of volatility within
those markets. The restructuring charge includes a charge for impairment of
assets from the purchase of Vitol in February 1999 and reserves for severance
and other related expenses. In addition, the utility operations recorded charges
of approximately $5 million related to the impairment of utility assets, which
were partially offset by the reversal of certain environmental reserves. These
charges were partially offset by the $35.9 million of transactional gains
recorded by Pentzer due to the sales of two groups of portfolio companies.
Net income available for common stock decreased $65.1 million in 1999 from 1998.
Avista Utilities' income available for common stock decreased $9.8 million from
1998 due to the increased preferred stock dividend associated with the
Convertible Preferred Stock, contributing $1.00 per basic share for 1999,
compared to $0.88 in 1998. Energy Trading and Marketing's income available for
common stock decreased $74.9 million from 1998, for a loss of $1.59 per basic
share in 1999, as compared to a contribution of $0.26 per share in 1998, due
primarily to the restructuring charges and operational losses discussed above.
Information and Technology's income available for common stock decreased $6.8
million from 1998, for a loss of $0.27 per share in 1999, compared to a loss of
$0.06 in 1998, due primarily to continued start-up and expansion costs. Pentzer
and Other subsidiaries' operating income available for common stock increased
$26.3 million in 1999 and contributed $0.98 to basic earnings per share in 1999,
compared to $0.20 per share in 1998. Transactional gains recorded by Pentzer
totaled $35.9 million, or $0.94 per share, and $4.3 million, or $0.08 per share,
in 1999 and 1998, respectively.
Total revenues increased $4.22 billion in 1999 over 1998, primarily due to the
growth of Avista Energy's business as a result of its acquisition of Vitol.
Resource costs increased $4.40 billion, again primarily as a result of the
growth in Avista Energy's business. Intersegment eliminations represent the
transactions between Avista Utilities and Avista Energy for commodities and
services. The large increase in 1999 over 1998 was primarily due to an agreement
whereby Avista Energy serves as agent for Avista Utilities, managing its
pipeline transportation and natural gas storage assets, as well as purchasing
natural gas for Avista Utilities' retail customers. Gross margins for Avista
Utilities decreased $3.0 million primarily due to larger increases in purchased
power costs than in the associated wholesale revenues. Avista Energy's gross
margin decreased $66.6 million to a negative $17.9 million, primarily due to
losses on positions taken in anticipation of certain weather patterns in
particular areas of the country which did not occur as planned. Operations and
maintenance expenses decreased $74.4 million, primarily due to decreased
25
<PAGE> 30
AVISTA CORPORATION
- --------------------------------------------------------------------------------
expenses as a result of the sales of portfolio companies by Pentzer.
Administrative and general expenses decreased $1.8 million primarily due to
decreased expenses as a result of the sales of portfolio companies by Pentzer,
partially offset by increased salary expenses from the growth in Avista Energy's
business and the purchase of Vitol, which added significantly to staffing
levels, and increased start-up costs at the Information and Technology
companies.
Interest expense decreased $4.0 million in 1999, as compared to 1998, primarily
due to lower levels of outstanding debt during the year. During 1999, $108.7
million of long-term debt was issued, while $208.3 million of long-term debt
matured or was redeemed. At December 31, 1999, $118.5 million of notes payable
were outstanding, compared to no balances at December 31, 1998. Long-term debt
outstanding at December 31, 1999 was $11.8 million lower than at the end of
1998.
Income taxes decreased $26.6 million, or 61%, in 1999 from 1998, primarily due
to losses and restructuring charges incurred by the Energy Trading and Marketing
line of business, which were partially offset by higher taxes resulting from the
transactional gains from the sales of the portfolio companies by Pentzer.
Preferred stock dividend requirements increased $13.0 million in 1999 over 1998
due to the exchange of shares of common stock for shares of $12.40 Convertible
Preferred Stock, Series L, which occurred in December 1998 and the redemption of
the final $10.0 million of Preferred Stock, Series I in June 1998.
1998 COMPARED TO 1997
Overall reported earnings per share for 1998 were $1.28, compared to $1.96 in
1997. The primary factors causing the decrease from 1997 were an income tax
recovery, net of associated items, which increased 1997 earnings per share by
$0.49, and decreased operating income from Avista Utilities' wholesale electric
operations in 1998. In addition, in December 1998, the Company exchanged
15,404,595 shares of its common stock for shares of Convertible Preferred Stock
(see Notes 15 and 19 of Notes to Financial Statements for additional information
about the new Convertible Preferred Stock and earnings per share). If these
shares had been exchanged at the beginning of the year, basic and diluted
earnings per share for 1998 would have been $1.39 and $1.35, respectively.
Net income available for common stock decreased $39.7 million in 1998 from 1997.
The 1998 results primarily reflect hydroelectric generation 21% lower than 1997
and increased purchased power prices and volumes, partially offset by improved
earnings at Avista Energy. In addition, the 1997 results include the impact of
$41.4 million, after-tax, in an income tax recovery from the Internal Revenue
Service, which was partially offset by $14.0 million, after-tax, in
environmental reserves and non-recurring adjustments (see below and Note 9 of
Notes to Financial Statements for additional information about the income tax
recovery). Excluding these items, Avista Utilities' income available for common
stock decreased $20.2 million, or 30%, in 1998, contributing $0.88 to earnings
per share in 1998, compared to $1.70 in 1997. Energy Trading and Marketing
income available for common stock increased $8.8 million, contributing $0.26 to
earnings per share in 1998 as compared to $0.10 in 1997 when there were only 5
months of operations. Information and Technology companies recorded losses
totaling $0.06 per basic share in both 1998 and 1997. Pentzer and Other
subsidiaries' operating income available for common stock decreased $1.0 million
in 1998 and contributed $0.20 to earnings per share in 1998, compared to $0.22
in 1997. Transactional gains recorded by Pentzer totaled $4.3 million, or $0.08
per share, and $7.3 million, or $0.13 per share, in 1998 and 1997, respectively.
Interest expense increased $2.8 million in 1998, as compared to 1997, primarily
due to higher levels of outstanding debt during the year. During 1998, $84.0
million of long-term debt was issued, while $14.0 million of long-term debt
matured or was redeemed. At December 31, 1998, there was no short-term debt
outstanding, compared to $108.5 million at December 31, 1997. Long-term debt
outstanding at December 31, 1998 was $32.2 million lower than at the end of
1997.
Income taxes decreased $17.7 million, or 29%, in 1998 from 1997, primarily due
to higher taxes in 1997 on the interest income received as a part of the income
tax recovery, partially offset by adjustments related to revised estimates on
certain tax issues.
Preferred stock dividend requirements increased $3.0 million in 1998 over 1997
due to the exchange of shares of common stock for shares of $12.40 Convertible
Preferred Stock, Series L, which occurred in December 1998. This was partially
offset by the redemption of $10 million in Preferred Stock, Series I in June
1998.
26
<PAGE> 31
AVISTA CORPORATION
- --------------------------------------------------------------------------------
AVISTA UTILITIES
1999 COMPARED TO 1998
Avista Utilities' pre-tax income from operations decreased $0.6 million in 1999
from 1998. Operating revenues and expenses increased $66.4 million and $67.0
million, respectively, during 1999.
Retail electric revenues increased $9.0 million due to increased kWh sales of 3%
due to customer growth of 1.5% and slightly cooler weather in Avista Utilities'
service area in 1999 than in 1998. Wholesale electric revenues increased $65.2
million, primarily due to prices 11% greater and sales volumes 3% higher in 1999
over 1998. Natural gas revenues decreased $5.7 million primarily as a result of
decreased non-retail sales, partially offset by increased retail sales due to
customer growth and increased customer usage as a result of slightly cooler
weather in Avista Utilities' service area in 1999.
Non-retail sales are sales of natural gas on an off-system basis, to other
utilities and large industrial customers outside of Avista Utilities' service
territories. Revenues from these sales are offset by like increases in purchased
gas expense, and margins from these transactions are credited back to customers
through rate changes for the cost of natural gas. Non-retail sales decreased in
1999 primarily due to the agreement whereby Avista Energy serves as agent for
Avista Utilities, managing its pipeline transportation and natural gas storage
assets, as well as purchasing natural gas for Avista Utilities' customers, in
order to optimize the value of its resources. Avista Energy will make these
sales in the future, if it is optimal to managing the natural gas portfolio. The
utility commissions of Washington, Idaho and Oregon have approved Benchmark
Incentive Mechanisms that allow Avista Utilities and its customers to share some
of the benefits of Avista Energy's resource optimization activities.
Purchased power volumes increased 2% and prices were 13% higher than last year,
which resulted in a $72.9 million, or 15%, increase in purchased power expense
in 1999 over 1998. This increase accounts for the majority of the increase in
Avista Utilities' operating expenses. Operations and maintenance expenses
decreased $4.6 million in 1999 from 1998 as a result of fewer storms, resulting
in less storm damage, and realizing the benefit of preventive maintenance
programs such as cable replacement, pole test and treat, and tree trimming.
Administrative and general expenses decreased $3.3 million due to increased
expenditures during 1998 associated with the change in executive officers and
the corporate name change. Avista Utilities also recorded charges of
approximately $5 million related to impairment of assets, which primarily
included items such as deferred charges now deemed unrecoverable through rates
and a defective inventory software system.
1998 COMPARED TO 1997
Avista Utilities' pre-tax income from operations decreased $35.2 million, or
20%, in 1998 from 1997. Operating revenues and expenses increased $157.5 million
and $192.8 million, respectively, in 1998.
Wholesale electric revenues increased $127.4 million, primarily due to sales
volumes 17% higher and prices 18% higher in 1998 than 1997. Total natural gas
revenues increased $27.4 million in 1998 over 1997, primarily due to a
combination of 4.4% customer growth, increased natural gas prices approved by
the Washington Utilities and Transportation Commission (WUTC), effective in
January 1998, and an increase in non-retail sales, partially offset by decreased
customer usage as a result of weather 8% warmer in 1998 than 1997.
Resource costs account for the majority of the increase in Avista Utilities'
operating expenses. Purchased power volumes increased 17% and prices were 30%
higher in 1998 than 1997, which resulted in a $161.2 million, or 52%, increase
in purchased power expense in 1998 over 1997. Natural gas purchased costs
increased $15.3 million due to increased therm sales. Fuel for generation
increased $9.8 million due to increased generation at the thermal plants as a
result of increased wholesale electric sales.
ENERGY TRADING AND MARKETING
Energy Trading and Marketing includes the results of Avista Energy, Avista
Power, and Avista-STEAG. Avista Power and Avista-STEAG operations had little or
no impact on earnings in either 1999 or 1998. Although Avista Energy began
incurring start-up costs during 1996, it only became operational in July 1997
and began trading operations in August 1997. Avista Energy maintains a trading
portfolio that it marks to fair market value on a daily basis (mark-to-market
accounting), and which may cause earnings variability in the future.
27
<PAGE> 32
AVISTA CORPORATION
- --------------------------------------------------------------------------------
1999 COMPARED TO 1998
Energy Trading and Marketing income available for common stock for 1999 was an
after-tax loss of $60.7 million compared to earnings of $14.1 million in 1998.
The primary reason for the decrease was a $27.3 million after-tax charge
recorded by Avista Energy related to the downsizing and restructuring of the
business, and $32.1 million of after-tax operational losses due to warmer than
normal weather across the nation, soft national energy markets and a lack of
volatility within those markets. The restructuring charge consists of a $21.4
million after-tax charge for the write-off of goodwill from the purchase of
Vitol in February 1999 and a $5.9 million after-tax reserve for severance
payments and other related expenses. Avista Energy recognized losses (1) on
positions taken in anticipation of certain weather patterns in particular areas
of the country, which lost value when the expected patterns did not occur, and
(2) on options, also taken in anticipation of certain weather patterns in
particular areas of the country, which expired unexercised when the expected
patterns did not occur. See Liquidity and Capital Resources: Risk Management
for additional information about market risk and credit risk.
Since its inception in 1997, Avista Energy has developed and expanded its
business and added experienced traders and staff. This growth continued in 1999
with Avista Energy's purchase of Vitol in the first quarter. Vitol, located in
Boston, Massachusetts, was one of the top 20 energy marketing companies in the
United States. Late in the second quarter of 1999, Avista Energy added a
significant number of energy professionals in its Spokane and Houston offices.
The integration of Vitol operations into Avista Energy began during the second
quarter with the consolidation of back-office support, improvements in
accounting and trading processes and personnel, and continued enhancements in
risk management systems across Avista Energy.
In November 1999, the decision was made to reduce Avista Energy's risk by
redirecting its focus away from national energy trading toward a more
regionally-based energy marketing and trading effort in the West backed by
contracts for energy commodities and by the output of specific facilities
available under contract. The change in strategy followed significant
changes in the overall energy trading and marketing industry that created low
margins while requiring higher levels of investment, credit commitments and
value-at-risk limits. Mergers and consolidations within the industry also
created a small number of large players, and a marketplace where liquidity and
volatility were not favorable. Avista Energy is shutting down its operations in
Houston and Boston, which will eliminate approximately 80 positions. Avista
Energy sought a buyer for the Eastern book of business, and is currently in the
process of closing that transaction. The electric contracts will likely be sold
at approximately book value. To date, Avista Energy has not found a buyer for
the natural gas or coal contracts. Avista Energy already has prudency and credit
reserves recorded on its books that will likely cover any remaining risks
associated with these Eastern contracts.
During 1999, Avista Energy derived the majority of its revenues from trading
activities, rather than marketing activities. Marketing activities are defined
as structured deals with non-standard products. The contracts are usually of
one-year or longer terms, and are designed to meet the customers' specific
requirements as to timing and amounts. Customers are primarily large, end-use
customers or utilities. With the redirection in focus, Avista Energy plans to
eventually derive more revenues from marketing activities rather than trading
activities. However, due to the current portfolio of contracts in place, it will
require several years to fully accomplish this transition. Current expectations
are for losses to continue through the first three quarters of 2000 due to
contracts still in place and further expenses relating to the downsizing of the
business.
Energy Trading and Marketing's revenues and operating expenses increased $4.29
billion and $4.36 billion, respectively, in 1999 over 1998. The increase in
revenues and expenses was primarily the result of Avista Energy continuing to
grow its business. Energy Trading and Marketing's assets increased $639.9
million from December 1998 to December 1999. Avista Energy's energy commodity
assets and liabilities increased as a result of additional trading volumes,
which were partially offset by market price declines. Trade receivables and
payables increased due to additional volumes of sales and purchases.
1998 COMPARED TO 1997
Energy Trading and Marketing's income available for common stock increased $8.8
million in 1998 over 1997. (Year-to-year results are not comparable since 1998
results reflect a full year of operations at Avista Energy and 1997 only
represents five months of operations.) Energy Trading and Marketing's operating
revenues and expenses increased $2.16 billion and $2.15 billion, respectively,
during 1998 as compared to 1997.
Avista Energy provided positive results in 1998 despite the price volatility
experienced in power markets in the Midwest and East during various periods of
the year. The company was well-positioned in its market, which allowed net gains
in its portfolio during periods of high volatility. Avista Energy expected high
volatility in Eastern electric markets in the summer of 1998 based on expected
demand and the high probability of a weather-related impact on
28
<PAGE> 33
AVISTA CORPORATION
- --------------------------------------------------------------------------------
markets in the summer of 1998 based on expected demand and the high probability
of a weather-related impact on energy prices. As a result, Avista Energy
established positions in anticipation of volatile market swings, and in turn
experienced positive earnings in its portfolio during this period.
INFORMATION AND TECHNOLOGY
The Information and Technology line of business includes the results of Avista
Advantage, Avista Labs, Avista Fiber and Avista Communications. Avista
Communications began operations in early 1999. Avista Corp. has committed to
invest in the development and build-up of these information and technology
start-up businesses as part of its overall strategic focus on generating
shareholder value.
1999 COMPARED TO 1998
Information and Technology's income available for common stock for 1999 was a
loss of $10.2 million, compared to a loss of $3.4 million in 1998. Increases in
revenues and various expense categories for this line of business were primarily
due to growth in each of the individual businesses.
1998 COMPARED TO 1997
Revenues and expenses for the companies in this line of business increased in
1998 over 1997, primarily due to start-up costs in each of the businesses.
However, losses from operations totaled slightly more than $5.0 million in both
years, and income available for common stock was a loss of $3.4 million in both
1998 and 1997.
PENTZER AND OTHER
The Pentzer and Other line of business includes the results of Pentzer, Avista
Development and Avista Services.
1999 COMPARED TO 1998
Income available for common stock for 1999 from Pentzer and other subsidiaries
totaled $37.5 million, which is a $26.3 million increase over 1998. The
increased earnings resulted primarily from transactional gains recorded by
Pentzer in 1999 totaling $35.9 million, net of taxes, from the sales of two
groups of portfolio companies. Transactional gains during 1998 totaled $4.3
million, net of taxes, as a result of the sale of a portfolio company.
Non-transactional earnings totaled $1.2 million in 1999, a decrease of $6.2
million from 1998, primarily due to the loss of income resulting from the sales
of portfolio companies. Operating revenues and expenses decreased $109.2 million
and $96.7 million, respectively, primarily as a result of the sales of portfolio
companies by Pentzer.
1998 COMPARED TO 1997
Income available for common stock for 1998 from Pentzer and other subsidiaries
was $11.1 million, which was a $1.0 million decrease from 1997 earnings.
Transactional gains decreased to $4.3 million in 1998 from $7.3 million in 1997,
while non-transactional earnings from Pentzer's portfolio companies increased
$2.2 million. The non-transactional earnings included an approximate $4.4
million after-tax loss in the fourth quarter at a Pentzer operating company due
to a business repositioning and an inventory adjustment.
Income from operations totaled $12.0 million, which was a $2.1 million increase
over 1997. Operating revenues and expenses increased $67.9 million and $65.8
million, respectively, primarily as a result of acquisitions and increased
business activity from several of Pentzer's portfolio companies.
29
<PAGE> 34
AVISTA CORPORATION
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
AVISTA CORP. OVERALL OPERATIONS
Operating Activities Net cash provided by operating activities in 1999
decreased from 1998 due primarily to decreased net income in 1999 and the $143.4
million provided by the monetization of a contract in 1998 (see below and Note 1
of Notes to Financial Statements for additional information). The growth in
Avista Energy's operations resulted in the large changes in various working
capital components, such as receivables and payables.
Investing Activities Net cash used in investing activities decreased in 1999
from 1998 primarily due to the sales of portfolio companies by Pentzer in 1999.
Utility operations' capital expenditures, excluding Allowance for Funds Used
During Construction (AFUDC) and Allowance for Funds Used to Conserve Energy
(AFUCE, a carrying charge similar to AFUDC for conservation-related capital
expenditures), were $265 million for the 1997-1999 period.
Financing Activities Net cash used in financing activities totaled $116.8
million in 1999 compared to $108.7 million in 1998. In 1999, $110.5 million in
short-term notes payable were issued and $116.5 million of proceeds were
received from the issuance of long-term debt, including $25.0 million of
Medium-Term Notes (MTNs). These proceeds, plus cash provided from operating
activities, were used to retire $211.5 million of long-term debt and repurchase
$82.0 million of common stock and $5.9 million of preferred stock. In 1998,
$84.0 million of proceeds were received from the issuance of Medium-Term Notes.
These proceeds, plus cash provided from operating activities, were used to
retire $14.0 million of long-term debt, redeem $10 million of preferred stock
and pay down $108.5 million of short-term debt. During the 1997-1999 period,
$359 million of long-term debt and preferred stock matured, was mandatorily
redeemed or was optionally redeemed and refinanced at a lower cost.
In August 1998, the Company announced a dividend restructuring plan that reduced
the Company's annual common stock dividend from $1.24 per share to $0.48 per
share, a 61% reduction, which was effective with the payment of the common stock
dividend paid on December 15, 1998. At the same time, an exchange offer was made
whereby shareholders were provided the opportunity to exchange their shares of
common stock for depositary shares, also known as RECONS (Return-Enhanced
Convertible Securities). Each RECONS represented a one-tenth ownership interest
in one share of mandatorily convertible Series L Preferred Stock. Each RECONS
paid an annual dividend of $1.24 for a period of about three years and after
three years would automatically convert back to common stock, unless the Company
exercised its option to convert the Series L Preferred Stock prior to the end of
the three-year period. Shareholders who chose not to participate in the exchange
offer retained their ownership in Avista Corp. common stock. The annual savings
resulting from the dividend restructuring were approximately $30 million for the
periods that the preferred stock was outstanding, increasing to about $42
million annually after the conversion of the preferred shares back to common
stock. The savings assisted in funding a portion of the Company's capital
expenditures, maturing long-term debt and preferred stock sinking fund
requirements. See Note 15 of Notes to Financial Statements for additional
information about the convertible preferred stock.
On February 16, 2000, the Company exercised its option to convert all the
remaining outstanding shares of Series L Preferred Stock back into common stock.
The RECONS were also converted into common stock on the same conversion date,
and each of the RECONS was converted into the following: 0.7205 shares of common
stock, representing the optional conversion price; plus 0.0361 shares of common
stock, representing the optional conversion premium; plus the right to receive
$0.21 in cash, representing an amount equivalent to accumulated and unpaid
dividends up until, but excluding, the conversion date. Cash payments were made
in lieu of fractional shares.
In May 1999, the Company's Board of Directors authorized a common stock
repurchase program in which the Company may repurchase in the open market or
through privately negotiated transactions up to an aggregate of 10 percent of
its common stock and common stock equivalents over the next two years. The
repurchased shares will return to the status of authorized but unissued shares.
As of December 31, 1999, the Company had repurchased approximately 4.8 million
common shares and 322,500 shares of RECONS (which is equivalent to 32,250 shares
of Convertible Preferred Stock, Series L). The combined repurchases of these two
securities represent 9% of outstanding common stock and common stock
equivalents.
In September 1999, $83.7 million of Pollution Control Revenue Refunding Bonds
(Avista Corporation Colstrip Project), Series 1999A due 2032 and Series 1999B
due 2034 were issued by the City of Forsyth, Montana. The proceeds of the bonds
were utilized to refund the $66.7 million of 7 1/8% First Mortgage Bonds due
2013 and the $17.0 million of 7 2/5% First Mortgage Bonds due 2016. The Series
1999A and Series 1999B Bonds are backed by
30
<PAGE> 35
AVISTA CORPORATION
- --------------------------------------------------------------------------------
an insurance policy issued by AMBAC Assurance Corporation and bear interest on a
floating rate basis that is reset periodically. The initial interest rate until
February 2000 was 3.6% and is currently 3.75%.
In August 1999, the Company completed the documentation to issue $400 million of
MTNs, Series D. As of December 31, 1999, the Company had a total of $541.0
million of MTNs authorized to be issued.
The Company funds capital expenditures with a combination of
internally-generated cash and external financing. The level of cash generated
internally and the amount that is available for capital expenditures fluctuates
annually. Cash provided by operating activities remains the Company's primary
source of funds for operating needs, dividends and capital expenditures.
Capital expenditures are financed on an interim basis with notes payable. The
Company has $260 million in committed lines of credit. In addition, the Company
may currently borrow up to $100 million through other borrowing arrangements
with banks. As of December 31, 1999, $75.0 million was outstanding under the
committed lines of credit and $33.5 million was outstanding under other
short-term borrowing arrangements.
In October 1999, the Company implemented a $50.0 million commercial paper
program. As of December 31, 1999, $10.0 million of commercial paper was
outstanding.
From time to time the Company enters into sale/leaseback arrangements for
various long-term assets which provide additional sources of funds. See Note 13
of Notes to Financial Statements for additional information about leases.
The Company is restricted under various agreements as to the additional
securities it can issue. As of December 31, 1999, under its Restated Articles of
Incorporation, approximately $215.0 million of additional preferred stock could
be issued at an assumed dividend rate of 6.95%.
During 1998, the Company entered into an agreement that increased the amount of
customer accounts receivable the Company could sell from $40 million to $80
million to provide additional funds for capital expenditures, maturing long-term
debt and preferred stock sinking fund requirements. At December 31, 1999, $45.0
million in receivables had been sold pursuant to the agreement.
AVISTA UTILITIES OPERATIONS
In December 1998, Avista Utilities assigned and transferred certain rights under
a long-term power sales contract to a funding trust. In return, Avista Utilities
received approximately $143.4 million, representing the present value of the
cash flows for the majority of the remaining payments due under the long-term
sales contract, which were utilized to repay short-term bank borrowings and
other debt.
During the 2000-2002 period, utility capital expenditures are expected to be
$320 million, and $137 million will be required for long-term debt maturities
and preferred stock sinking fund requirements. During this three-year period,
the Company estimates that internally generated funds will provide all of the
funds needed for its capital expenditure program. External financing will be
required to fund a portion of maturing long-term debt and preferred stock
sinking fund requirements. Sources of funds would include, but are not
necessarily limited to, cash flows from the reduction in the Company's common
stock dividend, sales of certain assets, additional long-term debt, leasing or
issuance of other equity securities. These estimates of capital expenditures are
subject to continuing review and adjustment. Actual capital expenditures may
vary from these estimates due to factors such as changes in business conditions,
construction schedules and environmental requirements.
See Notes 3, 11, 12, 13, 14, 15, 16, 17 and 18 of Notes to Financial Statements
for additional details related to financing activities.
ENERGY TRADING AND MARKETING OPERATIONS
During 1999, the Company invested $40.0 million in the common equity of Avista
Capital. Avista Capital utilized the majority of the proceeds from this
investment to fund Avista Energy's operations. Avista Capital's total investment
in this line of business totaled $86.0 million at December 31, 1999. Avista
Energy funds its ongoing operations with a combination of internally generated
cash and a bank line of credit.
31
<PAGE> 36
AVISTA CORPORATION
- --------------------------------------------------------------------------------
Avista Energy and its subsidiary, Avista Energy Canada, Ltd., as co-borrowers,
have a credit agreement with two commercial banks in the aggregate amount of
$110 million, expiring May 31, 2000. The credit agreement may be terminated by
the banks at any time and all extensions of credit under the agreement are
payable upon demand, in either case at the banks' sole discretion. The agreement
also provides, on an uncommitted basis, for the issuance of letters of credit to
secure contractual obligations to counterparties. The facility is guaranteed by
Avista Capital and is secured by substantially all of Avista Energy's assets.
The maximum amount of credit extended by the banks for cash advances is $30
million, with availability of up to $110 million (less the amount of outstanding
cash advances, if any) for the issuance of letters of credit. At December 31,
1999 and 1998, there were no cash advances (demand notes payable) outstanding.
Letters of credit outstanding under the facility totaled approximately $75.8
million and $20.2 million at December 31, 1999 and 1998, respectively.
Capital expenditures for the Energy Trading and Marketing companies were $9.3
million for the 1997-1999 period. The 2000-2002 capital expenditures are
expected to be $293.9 million, and $0.3 million in debt maturities will also
occur. The large capital requirement projections are primarily for the
development and/or ownership of generation assets. The companies expect to seek
outside funding through partnerships or other arrangements to support these
capital requirements.
At December 31, 1999, the Energy Trading and Marketing companies had $37.2
million in cash and cash equivalents and $1.5 million in long-term debt
outstanding.
INFORMATION AND TECHNOLOGY OPERATIONS
Capital expenditures for the Information and Technology companies were $21.7
million for the 1997-1999 period. The 2000-2002 capital expenditures are
expected to be $74.9 million. These companies expect to seek outside funding
through partnerships or other arrangements to support these capital
requirements.
At December 31, 1999, the Information and Technology companies had $5.3 million
in cash and marketable securities with $3.5 million in long-term debt
outstanding.
In early 1999, Avista Labs announced the receipt of a $2 million technology
development award from the Department of Commerce's National Institute of
Standards and Technology Advanced Technology Program. The Company will
contribute another $1.22 million over a two-year period. Avista Labs is working
on technology that will increase the energy density of its fuel cell design and
develop multiple fuel processing approaches using propane, methane and methanol
as base fuels to integrate into its fuel cell subsystem.
PENTZER AND OTHER OPERATIONS
Capital expenditures for these companies were $24.4 million for the 1997-1999
period. During this period, $46.7 million of debt was repaid and capital
expenditures were partially financed by the $55.8 million in proceeds from new
long-term debt. The 2000-2002 capital expenditures are expected to be $1.9
million, and $5.9 million in debt maturities will also occur. During the next
three years, internally generated cash and other debt obligations are expected
to provide the majority of the funds for these capital expenditure requirements.
The decrease in these projected capital expenditures is primarily related to the
change in Pentzer's focus beginning in 2000.
The operations have $27.5 million in short-term borrowing arrangements ($2.5
million outstanding as of December 31, 1999) to fund corporate requirements on
an interim basis. At December 31, 1999, these companies had $8.7 million in cash
and marketable securities with $4.9 million in long-term debt outstanding.
32
<PAGE> 37
AVISTA CORPORATION
- --------------------------------------------------------------------------------
TOTAL COMPANY CASH REQUIREMENTS
(Millions of Dollars)
<TABLE>
<CAPTION>
Actual Projected
------------------------ ------------------------
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Avista Utilities operations:
Capital expenditures(1) $ 87 $ 92 $ 86 $116 $103 $101
Debt and preferred stock maturities(2) 121 24 214 45 40 52
---- ---- ---- ---- ---- ----
Total Avista Utilities 208 116 300 161 143 153
---- ---- ---- ---- ---- ----
Avista Capital operations:
Capital expenditures(3) 12 14 29 71 165 135
Investments 59 53 51 -- 41 33
Debt maturities 12 18 3 4 1 1
---- ---- ---- ---- ---- ----
Total Avista Capital 83 85 83 75 207 169
---- ---- ---- ---- ---- ----
Total Company $291 $201 $383 $236 $350 $322
==== ==== ==== ==== ==== ====
</TABLE>
(1) Capital expenditures exclude AFUDC and AFUCE.
(2) Excludes notes payable (due within one year).
(3) Represents Avista Capital's portion of projected joint projects. Some
projected capital expenditures may depend on the availability of additional
funding from other outside sources.
The Company's total common equity decreased $94.5 million to $393.5 million at
the end of 1999. The decrease was primarily due to the common stock repurchase
program and payment of dividends in excess of net income. The Company's
consolidated capital structure at December 31, 1999, was 47% debt, 27% preferred
securities (including the Preferred Trust Securities) and 26% common equity as
compared to 45% debt, 25% preferred securities (including the Preferred Trust
Securities) and 30% common equity at year-end 1998. Had the convertible
preferred stock been converted back to common stock, the Company's consolidated
capital structure at December 31, 1999, would have been 47% debt, 10% preferred
securities (including the Preferred Trust Securities) and 43% common equity as
compared to 45% debt, 9% preferred securities (including the Preferred Trust
Securities) and 46% common equity at year-end 1998.
ADDITIONAL FINANCIAL DATA
At December 31, 1999, the total long-term debt of the Company and its
consolidated subsidiaries, as shown in the Company's consolidated financial
statements, was approximately $718.2 million. Of such amount, $236.0 million
represents long-term unsecured and unsubordinated indebtedness of the Company,
and $351.2 million represents secured indebtedness of the Company. The balance
of $131.0 million includes short-term notes to be refinanced as well as
indebtedness of the subsidiaries. Consolidated long-term debt does not include
the Company's subordinated indebtedness held by the issuers of Company-obligated
preferred trust securities.
FUTURE OUTLOOK
Business Strategy
Regulatory, economic and technological changes have brought about the
accelerating transformation of the utility and energy industries, creating new
opportunities to expand the Company's businesses and serve new markets. In
pursuing such opportunities, the Company's strategy is to focus on continuing
its growth as a leading provider of energy, and information and technology
services.
The Company seeks to maintain a strong, low-cost utility business as well as to
focus on growing Avista Advantage, Avista Labs and Avista Communications. The
Company intends to continue investing in the development of these growth
subsidiaries while continuing to search for opportunities to grow its utility
business and increase its asset and customer base. Key strengths of the Company
include its position as a leading e-commerce portal for energy/facility
management and patented web-based programming, a developer of innovative fuel
cell technology, and a regional provider of telecommunications and fiber optics
services, as well as being one of the lowest cost producers of power in the
nation.
Locally. Part of the Company's strategy for 1999 was to expand the utility
service territory through acquisitions, but the lack of economically feasible
acquisition opportunities and the uncertainty of favorable state commission
approvals led to a change in strategies. The Company decided to concentrate on
other growth avenues, such as the
33
<PAGE> 38
AVISTA CORPORATION
- --------------------------------------------------------------------------------
information and technology businesses, to generate shareholder value. However,
the Company will selectively add to its already strong foundation of
state-regulated utility assets, solidifying its position as a leading supplier
of low-cost electric and natural gas energy services, if the right opportunities
arise. The Company will also continue to grow its rate base through customer
growth and capital expenditures.
Regionally. The Company plans to concentrate on growing its telecommunications
and fiber optic business as part of its overall strategic focus on generating
shareholder value. In addition, the Company plans to add to its regulated and
non-regulated energy-related assets on a regional basis as the industry
consolidates to further optimize its assets and create greater economies of
scale. The growth is expected to be driven by the Company's significant base of
knowledge and experience in the operation of physical systems - for both
electric energy and natural gas - in the region, as well as its
relationship-focused approach to the customer.
Nationally. The Company will seek to expand its customer base through the growth
of Avista Advantage, with its Internet-based specialty billing and information
services, and Avista Labs, with its innovative fuel cell technologies, as part
of its overall strategic focus on generating shareholder value.
The Company's growth strategy exposes it to risks, including risks associated
with rapid expansion, challenges in recruiting and retaining qualified
personnel, risks associated with acquisitions and joint ventures, and increasing
competition. In addition, the energy trading and marketing business exposes the
Company to the financial and credit risks associated with commodity trading
activities. The Company believes that its extensive experience in the electric
and natural gas business, coupled with its strong management team, will allow
the Company to effectively manage its further development as a diversified
energy, information and technology company.
In 1999, the Company conducted the majority of its non-energy business through
Pentzer, its wholly owned subsidiary. Pentzer's business strategy was to acquire
controlling interests in a broad range of middle market companies, facilitate
improved productivity and growth, and ultimately sell such companies to the
public or a strategic buyer. Beginning in 2000, Pentzer's business strategy is
to invest in companies that are positioned to be leaders in emerging technology
and information businesses that are linked to the energy business. The
investments will be directly in businesses that meet these criteria, and
indirectly, through the strategic investment in certain venture capital firms
that invest in similar business segments and where Pentzer has the opportunity
to directly invest in specific portfolio companies. Pentzer's goal is to produce
strategic growth opportunities and financial returns for the Company's
shareholders that, over the long-term, should be higher than that of the utility
operations.
General Competition and Business Risk
Avista Utilities continues to compete for new retail electric customers with
various rural electric cooperatives and public utility districts in and adjacent
to its service territories. Challenges facing the retail electric business
include evolving technologies that provide alternate energy supplies, the cost
of the energy supplied, the potential for retail wheeling, self-generation and
fuel switching by commercial and industrial customers and increasingly stringent
environmental laws. When electric utility companies are required to provide
retail wheeling service, Avista Utilities believes it will be in a position to
benefit since it is committed to remaining one of the country's lowest-cost
providers of electric energy. Consequently, Avista Utilities believes it faces
minimal risk for stranded generation, transmission or distribution assets due to
its low cost structure. Avista Utilities' need for new future electric resources
to serve retail loads is expected to remain very minimal.
Natural gas remains competitively priced compared to other alternative fuel
sources for residential, commercial and industrial customers and is projected to
remain so into the future due to abundant supplies and competition. Challenges
facing Avista Utilities' retail natural gas business include the potential for
customers to by-pass its natural gas system. To reduce the potential for such
by-pass, Avista Utilities prices its natural gas services, including
transportation contracts, competitively and has varying degrees of flexibility
to price its transportation and delivery rates by means of special contracts.
Avista Utilities has long-term transportation contracts with seven of its
largest industrial customers, which reduces the risks of these customers
by-passing the system in the foreseeable future.
Avista Utilities and Avista Energy continue to compete in the electric wholesale
market with other utilities, federal marketing agencies and power marketers. It
is expected that competition to sell capacity will remain vigorous, and that
prices will remain depressed for at least the next several years, due to
increased competition and surplus capacity in the western United States.
Competition related to the sale of capacity and energy is influenced by many
factors, including the availability of capacity in the western U.S., the
availability and prices of natural gas and oil, spot energy prices and
transmission access. Business challenges affecting the Avista Utilities and
Energy Trading and Marketing lines of business include competition from low-cost
generation being developed by independent power producers,
34
<PAGE> 39
AVISTA CORPORATION
- --------------------------------------------------------------------------------
declining margins due to a greater reliance on short-term sales, evolving
technologies that provide alternate energy supplies and deregulation of electric
and natural gas markets.
The Company's energy-related businesses are exposed to risks, including risks
relating to changes in certain commodity prices and counterparty performance. In
order to manage the various risks relating to these exposures, the Company
utilizes electric, natural gas and related commodity derivatives, and has
established risk management oversight for these risks for each area of the
Company's energy-related business. The Company has implemented procedures to
manage such risk and has established a comprehensive Risk Management Committee,
separate from the units that create such risk exposure and overseen by the Audit
and Finance Committee of the Company's Board of Directors, to monitor compliance
with the Company's risk management policies and procedures.
The Avista Capital subsidiaries are also subject to competition and business
risks, among other risks, as they evolve more fully, particularly the
Information and Technology companies. Competition from other companies in these
emerging industries may mean challenges for a company to be the first to market
a new product or service to gain the advantage in market share. In order to grow
these new businesses as planned, one significant challenge will be the
availability of funding and resources to meet the capital needs. Other
challenges will be rapidly advancing technologies, possibly making some of the
current technology quickly obsolete, and requiring continual research and
development for product advancement. In order for some of these subsidiaries to
succeed, they will need to reduce costs of these emerging technologies to make
them affordable to future customers.
Energy Trading Business
The participants in the wholesale energy market are public utility companies
and, increasingly, power and natural gas marketers which may or may not be
affiliated with public utility companies or other entities. The participants in
this market trade not only electricity and natural gas as commodities but also
derivative commodity instruments such as futures, forwards, swaps, options and
other instruments. This market is largely unregulated and most transactions are
conducted on an "over-the-counter" basis, there being no central clearing
mechanism (except in the case of specific instruments traded on the commodity
exchanges). Power marketers, whether or not affiliated with other entities,
generally do not own production facilities and are not subject to net capital or
other requirements of any regulatory agency.
Avista Utilities and Avista Energy are subject to the various risks inherent in
commodity trading including, particularly, market risk and credit risk.
Market risk is, in general, the risk of fluctuation in the market price of the
commodity being traded and is influenced primarily by supply (in the case of
electricity, adequacy of generating reserve margins, as well as scheduled and
unscheduled outages of generating facilities or disruptions to transmission
facilities) and demand (caused by extreme variations in the weather and other
factors). Market risk includes the risk of fluctuation in the market price of
associated derivative commodity instruments. All market risk is influenced to
the extent that the performance or non-performance by market participants of
their contractual obligations and commitments affect the supply of, or demand
for, the commodity.
Credit risk relates to the risk of loss that Avista Utilities and/or Avista
Energy would incur as a result of non-performance by counterparties of their
contractual obligations. Credit risk may be concentrated to the extent that one
or more groups of counterparties have similar economic, industry or other
characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in market or other conditions. In addition,
credit risk includes not only the risk that a counterparty may default due to
circumstances relating directly to it, but also the risk that a counterparty may
default due to circumstances which relate to other market participants which
have a direct or indirect relationship with such counterparty. Avista Utilities
and Avista Energy seek to mitigate credit risk (and concentrations thereof) by
applying specific eligibility criteria to prospective counterparties. However,
despite mitigation efforts, defaults by counterparties occur from time to time.
To date, no such default has had a material adverse effect on Avista Utilities
or Avista Energy.
Avista Capital provides guarantees for Avista Energy's line of credit agreement,
and in the course of business may provide guarantees to other parties with whom
Avista Energy may be doing business. The Company's investment in Avista Capital
totaled $230.1 million at December 31, 1999.
Risk Management
The risk management process established by the Company is designed to measure
both quantitative and qualitative risk in the business. Avista Utilities and
Avista Energy have adopted policies and procedures to manage the risks inherent
in their businesses and have established a comprehensive Risk Management
Committee, separate from the units that create the risk exposure and overseen by
the Audit and Finance Committee of the Company's Board of Directors, to monitor
compliance with the Company's risk management policies and procedures on a
regular basis. Nonetheless, adverse changes in interest rates, commodity prices
and foreign currency exchange rates may result in losses in earnings, cash flow
and/or fair values.
The forward-looking information presented below provides only estimates of what
may occur in the future, assuming certain adverse market conditions, due to
reliance on model assumptions. As a result, actual future results may differ
materially from those presented. These disclosures are not indicators of
expected future losses, but only indicators of reasonably possible losses.
Interest Rate Risk The Company is subject to the risk of fluctuating interest
rates in the normal course of business. The fair value of the Company's cash and
short-term investment portfolio and the fair value of notes payable at December
31, 1999 approximated carrying value. Given the short-term nature of these
instruments, market risk, as measured by the change in fair value resulting from
a hypothetical change in interest rates, is immaterial.
The Company manages interest rate risk by taking advantage of market conditions
when timing the issuance of long-term financings and optional debt redemptions
and through the use of fixed rate long-term debt with varying maturities. A
portion of the Company's capitalization consists of floating rate Pollution
Control Bonds, of which the interest rate resets periodically, and
Company-Obligated Mandatorily Redeemable Preferred Trust Securities, of which
the interest portion of the $50 million Series B resets on a quarterly basis,
both reflecting current market conditions. As of December 31, 1999, a
hypothetical 15% change in interest rates would result in an immaterial change
in the Company's cash flows related to the increased interest expense associated
with these floating rate securities.
Commodity Price Risk Avista Utilities and Avista Energy are exposed to market
fluctuations in the price and transportation costs of electric and natural gas
commodities and, therefore, utilize derivative commodity instruments to hedge
the impact of these fluctuations on their energy-related assets, liabilities,
and other contractual arrangements. In addition, Avista Energy trades these
instruments to take advantage of market opportunities. At times this may create
a net open position in its portfolio that could result in material losses if
prices do not move in the manner or direction anticipated. The Company and
Avista Energy's risk management program and policies are designed to manage the
risks associated with market fluctuations in the price of electricity and
natural gas commodities (see Note 4 of Notes to Financial Statements for
additional information).
Avista Energy measures the risk in its derivative commodity portfolio on a daily
basis utilizing a Value-at-Risk (VAR) model and monitors its risk in comparison
to established thresholds. VAR measures the worst expected loss
35
<PAGE> 40
AVISTA CORPORATION
- --------------------------------------------------------------------------------
over a given time interval under normal market conditions at a given confidence
level. Avista Utilities and Avista Energy also use other measures to monitor the
risk in their derivative commodity portfolios on a monthly, quarterly and annual
basis.
The VAR computations are based on an historical simulation, which utilizes price
movements over a specified period to simulate forward price curves in the energy
markets to estimate the unfavorable impact of one-day's price movement in the
existing portfolio. The quantification of market risk using VAR provides a
consistent measure of risk across diverse energy markets and products. VAR
represents an estimate of reasonably possible net losses in earnings that would
be recognized on its portfolio assuming hypothetical movements in future market
rates and is not necessarily indicative of actual results that may occur.
Avista Energy's VAR computations utilize several key assumptions, including a
95% confidence level for the resultant price movement and a one-day holding
period. The calculation includes derivative commodity instruments held for
trading purposes and excludes the effects of written and embedded physical
options in the trading portfolio.
At December 31, 1999, Avista Energy's estimated potential one-day unfavorable
impact on gross margin was $1.1 million, as measured by VAR, related to its
commodity trading and marketing business, compared to $3.3 million at December
31, 1998. The average daily VAR for 1999 was $3.7 million, compared to $3.0
million in 1998. After Avista Energy's restructuring is complete, the average
daily VAR is expected to be less than $1.0 million. Changes in markets
inconsistent with historical trends or assumptions used could cause actual
results to exceed predicted limits. Market risks associated with derivative
commodity instruments held for purposes other than trading were not material at
December 31, 1999.
In addition to commodity price risk, Avista Utilities' commodity positions are
also subject to operational and event risks including, among others, increases
in load demand, transmission or transport disruptions, fuel quality
specifications and forced outages at generating plants.
Foreign Currency Risk The Company has investments in several Canadian companies
through Avista Energy Canada, Ltd. and its acquisition of Coast Pacific
Management, Inc. (see Note 23 for additional information about this
acquisition). The Company's exposure to foreign currency risk and other foreign
operations risk was immaterial to the Company's consolidated results of
operations and financial position in 1999 and is not expected to change
materially in the near future.
Economic and Load Growth
Avista Utilities expects economic growth to continue in its eastern Washington
and northern Idaho service area. Avista Utilities, along with others in the
service area, is continuing its efforts to facilitate expansion of existing
businesses and attract new businesses to the Inland Northwest. Although
agriculture, mining and lumber were the primary industries for many years, today
health care, education, electronic and other manufacturing, tourism and the
service sectors are becoming increasingly important industries that operate in
Avista Utilities' service area. Avista Utilities also anticipates moderate
economic growth to continue in its Oregon service area.
Avista Utilities anticipates residential and commercial electric load growth to
average approximately 2.8% annually for the next five years primarily due to
increases in both population and the number of businesses in its service
territory. The number of electric customers is expected to increase and the
average annual usage by residential customers is expected to remain steady on a
weather-adjusted basis. A Public Utility Regulatory Policies Act of 1978 (PURPA)
contract with Avista Utilities' largest customer expires in 2002. The customer
is expected to self-generate at that time, which will reduce the load to this
customer by the amount Avista Utilities has been purchasing and then reselling
to them. Although it will have no material impact on loads, it will reduce
Avista Utilities' costs since the PURPA contract is at above-market prices.
Avista Utilities anticipates natural gas load growth, including transportation
volumes, in its Washington and Idaho service area to average approximately 2.4%
annually for the next five years. The Oregon and South Lake Tahoe, California
service areas are anticipated to realize 3.6% growth annually during that same
period. The anticipated natural gas load growth is primarily due to expected
conversions from electric space and water heating to natural gas, and increases
in both population and the number of businesses in its service territory.
The forward-looking projections set forth above regarding retail sales growth
are based, in part, upon purchased baseline economic forecasts and publicly
available population and demographic studies. The expectations regarding retail
sales growth are also based upon various assumptions including, without
limitation, assumptions relating to
36
<PAGE> 41
AVISTA CORPORATION
- --------------------------------------------------------------------------------
weather and economic and competitive conditions, internal analysis of
company-specific data, such as energy consumption patterns and internal business
plans, and an assumption that Avista Utilities will incur no material loss of
retail customers due to self-generation or retail wheeling. Changes in the
underlying assumptions can cause actual experience to vary significantly from
forward-looking projections.
Environmental Issues
Since December 1991, a number of species of fish in the Northwest, including the
Snake River sockeye salmon and fall chinook salmon, the Kootenai River white
sturgeon, the upper Columbia River steelhead, the upper Columbia River spring
chinook salmon and the bull trout have been listed as threatened or endangered
under the Federal Endangered Species Act (ESA). Thus far, measures which have
been adopted and implemented to save the Snake River sockeye salmon and fall
chinook salmon have not directly impacted generation levels at any of the
Company's hydroelectric dams. The Company does, however, purchase power from
four projects on the Columbia River that are being directly impacted by ongoing
mitigation measures for salmon and steelhead. The reduction in generation at
these projects is relatively minor, resulting in minimal economic impact on the
Company at this time. It is currently not possible to accurately predict the
likely economic costs to the Company resulting from all future actions.
The Company received a new FERC operating license for the Cabinet Gorge and
Noxon Rapids hydroelectric projects on February 23, 2000. The restoration of
native salmonid fish, in particular bull trout, is a principal focus for the
Company with the new license. Bull trout are native to this area and a
"threatened" listing for bull trout occurred in 1998 under the ESA. The Company,
as directed by the Clark Fork Projects' Settlement Agreement, is working closely
with the U.S. Fish and Wildlife Service, Native American tribes and the states
of Idaho and Montana to institute coordinated recovery measures on the lower
Clark Fork River. The new FERC license establishes a plan for bull trout
restoration, including annual budget estimates.
The Company continues to study the issue of high dissolved gas levels downstream
of Cabinet Gorge during spill periods, as agreed to in the Settlement Agreement
for relicensing of Cabinet Gorge. To date, intensive biological studies in the
lower Clark Fork River and Lake Pend Oreille have documented minimal biological
effects of high dissolved gas levels on free ranging fish. Under the terms of
the Settlement Agreement, the Company will develop an abatement and/or
mitigation strategy by 2002.
See Note 22 of Notes to Financial Statements for additional information.
Year 2000
Since 1997 the Company worked on a comprehensive program to address areas of
risk associated with the Year 2000. The Year 2000 project was organized around
project activity teams that were formed to identify, test and fix systems and
programs that might be affected by the rollover into the Year 2000. The Company
experienced no Year 2000-related disruptions in its systems used to deliver
electricity and natural gas commodities and services to customers, or in any of
its other desktop or business systems. Through December 31, 1999, the Company
spent $6.0 million in incremental costs for its Year 2000 project, which were
funded through operating cashflows.
37
<PAGE> 42
AVISTA CORPORATION
- --------------------------------------------------------------------------------
OTHER
On July 28, 1998, the United States District Court for the District of Idaho
issued its finding that the Coeur d' Alene Tribe of Idaho (Tribe) owns the bed
and banks of the Coeur d' Alene Lake and the St. Joe River lying within the
current boundaries of the Coeur d' Alene Reservation. The disputed bed and banks
comprise approximately the southern one-third of the Coeur d' Alene Lake. This
action had been brought by the United States on behalf of the Tribe against the
State of Idaho. While the Company is not a party to this action, which has been
appealed by the State of Idaho to the Ninth Circuit, the Company is continuing
to evaluate the impact of this decision on storage rights on the reservoir and
operation of the Company's hydroelectric facilities on the Spokane River,
downstream of the Coeur d' Alene Lake, which is the reservoir for these plants.
The Board of Directors considers the level of dividends on the Company's common
stock on a continuing basis, taking into account numerous factors including,
without limitation, the Company's results of operations and financial condition,
as well as general economic and competitive conditions. The Company's net income
available for dividends is derived from its retail electric and natural gas
utility operations.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statement in this Form 10-K to
make applicable and to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, projections
of future events or performance, and underlying assumptions (many of which are
based, in turn, upon further assumptions) and are all statements which are other
than statements of historical fact, including without limitation those that are
identified by the use of the words "anticipates," "estimates," "expects,"
"intends," "plans," "predicts," and similar expressions. From time to time, the
Company may publish or otherwise make available forward-looking statements of
this nature. All such subsequent forward-looking statements, whether written or
oral and whether made by or on behalf of the Company, are also expressly
qualified by these cautionary statements.
Forward-looking statements involve risks and uncertainties which could cause
actual results or outcomes to differ materially from those expressed. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without
limitation management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that the Company's expectations, beliefs or
projections will be achieved or accomplished. Furthermore, any forward-looking
statement speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking statement or
statements to reflect events or circumstances that occur after the date on which
such statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for management to
predict all of such factors, nor can it assess the impact of each such factor on
the Company's business or the extent to which any such factor, or
38
<PAGE> 43
AVISTA CORPORATION
- --------------------------------------------------------------------------------
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statement.
Avista Utilities' Operations -
In addition to other factors and matters discussed elsewhere herein, some
important factors that could cause actual results or outcomes for Avista
Utilities' operations to differ materially from those discussed in
forward-looking statements include prevailing legislative developments,
governmental policies and regulatory actions with respect to allowed rates of
return, financings, or industry and rate structures, weather conditions,
wholesale and retail competition (including but not limited to electric retail
wheeling and transmission cost), availability of economic supplies of natural
gas, present or prospective natural gas distribution or transmission competition
(including but not limited to prices of alternative fuels and system
deliverability costs), recovery of purchased power and purchased gas costs,
present or prospective generation, operations and construction of plant
facilities, and acquisition and disposal of assets or facilities.
Energy Trading and Marketing Operations -
In addition to other factors and matters discussed elsewhere herein, some
important factors that could cause actual results or outcomes for the Energy
Trading and Marketing operations to differ materially from those discussed in
forward-looking statements include further industry restructuring evolving from
federal and/or state legislation, regulatory actions by state utility
commissions, demand for and availability of energy throughout the country,
wholesale competition, availability of economic supplies of natural gas, margins
on purchased power, changes in market factors, the formation of additional
alliances or entities, the availability of economically feasible generating
projects and the availability of funding for new generating assets.
Information, Technology, Pentzer and Others' Operations -
Certain additional important factors which could cause actual results or
outcomes for the remaining subsidiaries' operations to differ materially from
those discussed in forward-looking statements include competition from other
companies and other technologies, obsolescence of technologies, the ability or
inability to reduce costs of the technologies down to economic levels, the
ability to obtain new customers and retain old ones, reliability of customer
orders, business acquisitions, disposal of assets, the availability of funding
from other sources, research and development findings and the availability of
economic expansion or development opportunities.
Factors Common to All Operations -
The business and profitability of the Company are also influenced by, among
other things, economic risks, changes in and compliance with environmental and
safety laws and policies, weather conditions, population growth rates and
demographic patterns, market demand for energy from plants or facilities,
changes in tax rates or policies, unanticipated project delays or changes in
project costs, unanticipated changes in operating expenses or capital
expenditures, labor negotiation or disputes, changes in credit ratings or
capital market conditions, inflation rates, inability of the various
counterparties to meet their obligations with respect to the Company's financial
instruments, changes in accounting principles and/or the application of such
principles to the Company, changes in technology and legal proceedings.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Results and Operations: Future
Outlook: General Competition and Business Risk, Energy Trading Business, and
Risk Management."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditor's Report and Financial Statements begin on the next
page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
39
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
Avista Corporation
Spokane, Washington
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Avista Corporation and subsidiaries (the Company) as of
December 31, 1999 and 1998, and the related consolidated statements of income,
comprehensive income and retained earnings, and cash flows, which include the
schedule of information by business segments for each of the three years in the
period ended December 31, 1999. These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with generally
accepted accounting principles
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington
February 4, 2000 (February 16, 2000 as to Note 15)
40
<PAGE> 45
CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS
Avista Corporation
- --------------------------------------------------------------------------------
For the Years Ended December 31
Thousands of Dollars
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES .................................................... $ 7,904,984 $ 3,683,984 $ 1,302,172
----------- ----------- -----------
OPERATING EXPENSES:
Resource costs ................................................... 7,417,940 3,021,046 717,732
Operations and maintenance ....................................... 155,176 229,620 178,526
Administrative and general ....................................... 127,958 129,771 96,611
Depreciation and amortization .................................... 76,474 70,547 69,893
Taxes other than income taxes .................................... 53,157 60,180 49,946
Asset impairment and restructuring charges ....................... 42,922 -- --
----------- ----------- -----------
Total operating expenses ...................................... 7,873,627 3,511,164 1,112,708
----------- ----------- -----------
INCOME FROM OPERATIONS ................................................ 31,357 172,820 189,464
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense ................................................. (65,076) (69,077) (66,275)
Interest on income tax recovery .................................. -- -- 47,338
Net gain on subsidiary transactions .............................. 57,531 7,937 11,218
Other income (deductions)-net .................................... 18,959 9,794 (5,873)
----------- ----------- -----------
Total other income (expense)-net .............................. 11,414 (51,346) (13,592)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES ............................................ 42,771 121,474 175,872
INCOME TAXES .......................................................... 16,740 43,335 61,075
----------- ----------- -----------
NET INCOME ............................................................ 26,031 78,139 114,797
DEDUCT-Preferred stock dividend requirements .......................... 21,392 8,399 5,392
----------- ----------- -----------
INCOME AVAILABLE FOR COMMON STOCK ..................................... $ 4,639 $ 69,740 $ 109,405
=========== =========== ===========
Average common shares outstanding, basic (thousands) ................. 38,213 54,604 55,960
EARNINGS PER SHARE OF COMMON STOCK, BASIC AND DILUTED(Note 19) ........ $ 0.12 $ 1.28 $ 1.96
Dividends paid per common share ....................................... $ 0.48 $ 1.05 $ 1.24
NET INCOME ............................................................ $ 26,031 $ 78,139 $ 114,797
----------- ----------- -----------
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Foreign currency translation adjustment .......................... 376 (366) --
Unrealized investment losses-net of reclassification adjustment .. (201) (2,052) (3,627)
----------- ----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS) ..................................... 175 (2,418) (3,627)
----------- ----------- -----------
COMPREHENSIVE INCOME .................................................. $ 26,206 $ 75,721 $ 111,170
=========== =========== ===========
RETAINED EARNINGS, JANUARY 1 .......................................... $ 120,445 $ 171,776 $ 131,301
NET INCOME ............................................................ 26,031 78,139 114,797
DIVIDENDS DECLARED:
Preferred stock .................................................. (21,402) (7,639) (5,339)
Common stock ..................................................... (18,301) (56,898) (69,390)
Transfer to Preferred Stock, Series L ................................. -- (64,844) --
Stock repurchase ...................................................... (19,315) -- --
Restricted stock ...................................................... (84) (419) --
ESOP dividend tax savings ............................................. 147 330 407
----------- ----------- -----------
RETAINED EARNINGS, DECEMBER 31 ........................................ $ 87,521 $ 120,445 $ 171,776
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
41
<PAGE> 46
CONSOLIDATED BALANCE SHEETS
Avista Corporation
- --------------------------------------------------------------------------------
At December 31
Thousands of Dollars
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents .................................. $ 40,041 $ 72,836
Temporary cash investments ................................. 7,490 5,786
Accounts and notes receivable-net .......................... 530,774 456,857
Energy commodity assets .................................... 585,913 335,224
Materials and supplies, fuel stock and natural gas stored .. 28,352 42,140
Prepayments and other ...................................... 21,499 55,753
---------- ----------
Total current assets .................................... 1,214,069 968,596
---------- ----------
UTILITY PROPERTY:
Utility plant in service-net ............................... 2,184,698 2,095,301
Construction work in progress .............................. 30,912 45,391
---------- ----------
Total ................................................... 2,215,610 2,140,692
Less: Accumulated depreciation and amortization ........... 714,773 669,750
---------- ----------
Net utility plant ....................................... 1,500,837 1,470,942
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Investment in exchange power-net ........................... 54,123 62,577
Non-utility properties and investments-net ................. 137,213 206,773
Energy commodity assets .................................... 491,799 236,644
Other-net .................................................. 31,051 26,016
---------- ----------
Total other property and investments .................... 714,186 532,010
---------- ----------
DEFERRED CHARGES:
Regulatory assets for deferred income tax .................. 166,456 171,037
Conservation programs ...................................... 44,444 49,114
Unamortized debt expense ................................... 31,122 28,414
Other-net .................................................. 42,380 33,523
---------- ----------
Total deferred charges .................................. 284,402 282,088
---------- ----------
TOTAL ................................................ $3,713,494 $3,253,636
========== ==========
LIABILITIES AND CAPITALIZATION:
CURRENT LIABILITIES:
Accounts payable ........................................... $ 522,478 $ 406,457
Energy commodity liabilities ............................... 594,065 330,957
Taxes and interest accrued ................................. 35,123 38,628
Other ...................................................... 35,313 88,151
---------- ----------
Total current liabilities ............................... 1,186,979 864,193
---------- ----------
NON-CURRENT LIABILITIES AND DEFERRED CREDITS:
Non-current liabilities .................................... 44,067 34,815
Deferred revenue (Note 1) .................................. 132,975 145,124
Energy commodity liabilities ............................... 441,372 207,948
Deferred income taxes ...................................... 377,049 357,702
Other deferred credits ..................................... 11,041 11,571
---------- ----------
Total non-current liabilities and deferred credits ...... 1,006,504 757,160
---------- ----------
CAPITALIZATION (See Consolidated Statements of Capitalization) .. 1,520,011 1,632,283
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 10, 13 and 22)
TOTAL ................................................ $3,713,494 $3,253,636
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
42
<PAGE> 47
CONSOLIDATED STATEMENTS OF CAPITALIZATION
Avista Corporation
- --------------------------------------------------------------------------------
At December 31
Thousands of Dollars
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
LONG-TERM DEBT:
First Mortgage Bonds:
Secured Medium-Term Notes:
Series A - 6.13% to 7.90% due 2000 through 2023 ................................ $ 139,400 $ 211,500
Series B - 6.20% to 8.20% due 2000 through 2010 ................................ 124,000 150,000
7 1/8% due December 1, 2013 ....................................................... -- 66,700
7 2/5% due December 1, 2016 ....................................................... -- 17,000
----------- -----------
Total first mortgage bonds ..................................................... 263,400 445,200
----------- -----------
Pollution Control Bonds:
Floating Rate, Colstrip 1999A, due 2032 ........................................... 66,700 --
Floating Rate, Colstrip 1999B, due 2034 ........................................... 17,000 --
6% Series due 2023 ................................................................ 4,100 4,100
----------- -----------
Total pollution control bonds .................................................. 87,800 4,100
----------- -----------
Unsecured Medium-Term Notes:
Series A - 7.94% to 9.57% due 2001 through 2007 ................................... 31,000 38,500
Series B - 6.75% to 8.23% due 2001 through 2023 ................................... 96,000 115,000
Series C - 5.99% to 8.02% due 2007 through 2028 ................................... 109,000 84,000
----------- -----------
Total unsecured medium-term notes .............................................. 236,000 237,500
----------- -----------
Notes payable (due within one year) to be refinanced ................................. 118,500 --
Other ................................................................................ 12,503 43,222
----------- -----------
Total long-term debt .............................................................. 718,203 730,022
----------- -----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE
PREFERRED TRUST SECURITIES:
7 7/8%, Series A, due 2037 ........................................................ 60,000 60,000
Floating Rate, Series B, due 2037 ................................................. 50,000 50,000
----------- -----------
Total company-obligated mandatorily redeemable preferred trust securities ...... 110,000 110,000
----------- -----------
PREFERRED STOCK-CUMULATIVE:
10,000,000 shares authorized:
Subject to mandatory redemption:
$6.95 Series K; 350,000 shares outstanding ($100 stated value) .................... 35,000 35,000
----------- -----------
Total subject to mandatory redemption .......................................... 35,000 35,000
----------- -----------
CONVERTIBLE PREFERRED STOCK:
Not subject to mandatory redemption:
$12.40 Convertible Series L; 1,508,210 and 1,540,460 shares outstanding ($182.80
stated value) .................................................................. 263,309 269,227
----------- -----------
Total convertible preferred stock .............................................. 263,309 269,227
----------- -----------
COMMON EQUITY:
Common stock, no par value; 200,000,000 shares authorized;
35,648,239 and 40,453,729 shares outstanding ...................................... 318,731 381,401
Note receivable from employee stock ownership plan ................................... (8,240) (9,295)
Capital stock expense and other paid in capital ...................................... (4,347) (4,176)
Other comprehensive income ........................................................... (166) (341)
Retained earnings .................................................................... 87,521 120,445
----------- -----------
Total common equity ............................................................... 393,499 488,034
----------- -----------
TOTAL CAPITALIZATION ...................................................................... $ 1,520,011 $ 1,632,283
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
43
<PAGE> 48
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Avista Corporation
- --------------------------------------------------------------------------------
For the Years Ended December 31
Thousands of Dollars
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ......................................................... $ 26,031 $ 78,139 $ 114,797
NON-CASH ITEMS INCLUDED IN NET INCOME:
Depreciation and amortization ...................................... 76,474 70,547 69,893
Provision for deferred income taxes ................................ (1,085) 10,402 37,122
Allowance for equity funds used during construction ................ (1,040) (1,283) (1,323)
Power and natural gas cost deferrals and amortizations ............. (14,906) (3,512) (16,470)
Gain on sale of subsidiary investments and other-net ............... (32,278) (6,313) (389)
Impairment of assets ............................................... (33,622) -- --
(Increase) decrease in working capital components:
Sale of customer accounts receivable-net ........................ 20,000 (15,000) --
Receivables and prepaid expense ................................. (140,348) (246,873) (39,733)
Materials & supplies, fuel stock and natural gas stored ......... 497 9,524 (8,050)
Payables and other accrued liabilities .......................... 164,908 246,208 55,163
Other ........................................................... 46,545 (17,336) 13,774
Monetization of contract ........................................... -- 143,400 --
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES ............................... 111,176 267,903 224,784
--------- --------- ---------
INVESTING ACTIVITIES:
Construction expenditures (excluding AFUDC-equity funds) ........... (87,160) (92,942) (89,016)
Other capital requirements ......................................... (29,451) (14,920) (11,696)
(Increase) decrease in other noncurrent balance sheet items-net .... (7,712) 27,266 (3,765)
Proceeds from sale of subsidiary investments ....................... 148,851 16,385 11,606
Assets acquired and investments in subsidiaries .................... (51,729) (52,780) (43,308)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES ................................... (27,201) (116,991) (136,179)
--------- --------- ---------
FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings ....................... 110,522 (108,500) 23,500
Proceeds from issuance of preferred trust securities ............... -- -- 110,000
Proceeds from issuance of long-term debt ........................... 116,516 84,000 20,000
Redemption and maturity of long-term debt .......................... (211,514) (14,000) (51,500)
Redemption of preferred stock ...................................... (5,918) (10,000) (70,000)
Repurchase of common stock ......................................... (81,985) (1,475) --
Cash dividends paid ................................................ (39,757) (64,548) (75,329)
Other-net .......................................................... (4,634) 5,854 (22,894)
--------- --------- ---------
NET CASH USED IN FINANCING ACTIVITIES ................................... (116,770) (108,669) (66,223)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS ...................... (32,795) 42,243 22,382
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................... 72,836 30,593 8,211
--------- --------- ---------
CASH & CASH EQUIVALENTS AT END OF PERIOD ................................ $ 40,041 $ 72,836 $ 30,593
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period:
Interest ........................................................ $ 63,207 $ 64,402 $ 63,608
Income taxes .................................................... 42,891 40,716 29,132
Noncash financing and investing activities:
Property purchased under capitalized leases ..................... 2,557 1,209 4,521
Net unrealized holding gains (losses) ........................... -- -- (5,050)
Notes receivable for sale of investment ......................... -- 25,000 --
Common stock and retained earnings transfer to preferred stock .. -- 276,821 --
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
44
<PAGE> 49
SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS
Avista Corporation
- --------------------------------------------------------------------------------
For the Years Ended December 31
Thousands of Dollars
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Avista Utilities ........................................... $ 1,115,647 $ 1,049,212 $ 891,665
Energy Trading and Marketing ............................... 6,695,671 2,408,734 247,028
Information and Technology ................................. 4,851 1,995 1,030
Pentzer and Other .......................................... 122,303 231,483 163,598
Intersegment eliminations .................................. (33,488) (7,440) (1,149)
----------- ----------- -----------
Total operating revenues ................................ $ 7,904,984 $ 3,683,984 $ 1,302,172
----------- ----------- -----------
RESOURCE COSTS:
Avista Utilities:
Power purchased ......................................... $ 543,477 $ 470,604 $ 309,439
Natural gas purchased for resale ........................ 101,958 109,182 93,880
Fuel for generation ..................................... 46,368 44,281 34,461
Other ................................................... 46,012 44,309 48,644
Energy Trading and Marketing:
Cost of sales ........................................... 6,713,613 2,360,110 232,389
Intersegment eliminations .................................. (33,488) (7,440) (1,081)
----------- ----------- -----------
Total resource costs (excluding non-energy businesses) .. $ 7,417,940 $ 3,021,046 $ 717,732
----------- ----------- -----------
GROSS MARGINS:
Avista Utilities ........................................... $ 377,832 $ 380,836 $ 405,241
Energy Trading and Marketing ............................... (17,942) 48,624 14,639
----------- ----------- -----------
Total gross margins (excluding non-energy businesses) ... $ 359,890 $ 429,460 $ 419,880
----------- ----------- -----------
OPERATIONS AND MAINTENANCE EXPENSES:
Avista Utilities ........................................... $ 56,291 $ 60,847 $ 59,138
Energy Trading and Marketing ............................... 370 -- --
Information and Technology ................................. 7,732 3,902 3,247
Pentzer and Other .......................................... 90,783 164,871 116,141
----------- ----------- -----------
Total operations and maintenance expenses ............... $ 155,176 $ 229,620 $ 178,526
=========== =========== ===========
ADMINISTRATIVE AND GENERAL EXPENSES:
Avista Utilities ........................................... $ 66,362 $ 69,693 $ 63,000
Energy Trading and Marketing ............................... 31,732 25,201 7,880
Information and Technology ................................. 7,351 2,607 2,816
Pentzer and Other .......................................... 22,513 32,270 22,915
----------- ----------- -----------
Total administrative and general expenses ............... $ 127,958 $ 129,771 $ 96,611
=========== =========== ===========
DEPRECIATION AND AMORTIZATION EXPENSES:
Avista Utilities ........................................... $ 62,981 $ 59,538 $ 57,915
Energy Trading and Marketing ............................... 3,692 596 136
Information and Technology ................................. 2,340 653 350
Pentzer and Other .......................................... 7,461 9,760 11,492
----------- ----------- -----------
Total depreciation and amortization expenses ............ $ 76,474 $ 70,547 $ 69,893
=========== =========== ===========
INCOME/(LOSS) FROM OPERATIONS (PRE-TAX):
Avista Utilities ........................................... $ 142,567 $ 143,153 $ 178,358
Energy Trading and Marketing ............................... (97,785) 22,826 6,577
Information and Technology ................................. (13,002) (5,192) (5,364)
Pentzer and Other .......................................... (423) 12,033 9,962
Intersegment eliminations .................................. -- -- (69)
----------- ----------- -----------
Total income from operations ............................ $ 31,357 $ 172,820 $ 189,464
=========== =========== ===========
</TABLE>
45
<PAGE> 50
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
INCOME AVAILABLE FOR COMMON STOCK:
Avista Utilities ........................................... $ 38,078 $ 47,898 $ 95,385
Energy Trading and Marketing ............................... (60,740) 14,116 5,346
Information and Technology ................................. (10,156) (3,398) (3,425)
Pentzer and Other .......................................... 37,457 11,124 12,099
----------- ----------- -----------
Total income available for common stock ................. $ 4,639 $ 69,740 $ 109,405
=========== =========== ===========
ASSETS:
Avista Utilities ........................................... $ 1,976,716 $ 2,004,935 $ 1,926,739
Energy Trading and Marketing ............................... 1,595,470 955,615 212,868
Information and Technology ................................. 26,379 7,461 3,475
Pentzer and Other .......................................... 114,929 285,625 268,703 ...
----------- ----------- -----------
Total assets ............................................ $ 3,713,494 $ 3,253,636 $ 2,411,785
=========== =========== ===========
CAPITAL EXPENDITURES (excluding AFUDC/AFUCE):
Avista Utilities ........................................... $ 86,256 $ 92,295 $ 87,175
Energy Trading and Marketing ............................... 3,676 2,357 3,222
Information and Technology ................................. 15,506 4,120 2,047
Pentzer and Other .......................................... 10,171 7,498 6,738
----------- ----------- -----------
Total capital expenditures .............................. $ 115,609 $ 106,270 $ 99,182
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
46
<PAGE> 51
AVISTA CORPORATION
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Avista Corporation (Avista Corp. or the Company) operates as an energy,
information and technology company with a regional utility operation and
subsidiary operations located throughout North America. The utility portion of
the Company, doing business as Avista Utilities, is subject to state and federal
price regulation. The national businesses are conducted under Avista Capital,
which is the parent company to the Company's subsidiaries.
Regulatory, economic and technological changes have brought about the
accelerating transformation of the utility and energy industries, creating new
opportunities to expand the Company's businesses and serve new markets. In
pursuing such opportunities, the Company's strategy is to focus on continuing
its growth as a leading provider of energy, and information and technology
services.
The Company's growth strategy exposes the Company to risks, including risks
associated with rapid expansion, challenges in recruiting and retaining
qualified personnel, risks associated with acquisitions and joint ventures and
increasing competition. In addition, the energy trading and marketing business
exposes the Company to the financial and credit risks associated with commodity
trading activities. The Company believes that its extensive experience in the
electric and natural gas business, coupled with its strong management team, will
allow the Company to effectively manage its further development as a diversified
energy, information and technology company.
BASIS OF REPORTING
The financial statements are presented on a consolidated basis and, as such,
include the assets, liabilities, revenues and expenses of the Company and its
wholly owned subsidiaries. All material intercompany transactions have been
eliminated in the consolidation. The accompanying financial statements include
the Company's proportionate share of utility plant and related operations
resulting from its interests in jointly owned plants (See Note 7). The financial
activity of each of the Company's lines of business is reported in the "Schedule
of Information by Business Segments." Such information is an integral part of
these financial statements.
The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting principles necessarily requires management to
make estimates and assumptions that directly affect the reported amounts of
assets, liabilities, revenues and expenses.
SYSTEM OF ACCOUNTS
The accounting records of the Company's utility operations are maintained in
accordance with the uniform system of accounts prescribed by the Federal Energy
Regulatory Commission (FERC) and adopted by the appropriate state regulatory
commissions.
REGULATION
The Company is subject to state regulation in Washington, Idaho, Montana, Oregon
and California. The Company is subject to regulation by the FERC with respect to
its wholesale electric transmission rates and the natural gas rates charged for
the release of capacity from the Jackson Prairie Storage Project.
BUSINESS SEGMENTS
The Company changed the way it reports business segments in this Form 10-K from
the 1998 Form 10-K and has restated prior periods to reflect this change. In the
1998 Form 10-K and the quarterly Form 10-Q reports for 1999, the Company
reported Avista Utilities information by its two separate lines of business -
(1) Energy Delivery and (2) Generation and Resources. The National Energy
Trading and Marketing line of business included results of Avista Energy, Avista
Advantage and Avista Power. The Non-Energy line of business included Pentzer and
all of the remaining subsidiaries' activities. The business segment presentation
in this Form 10-K reflects the basis currently used by the Company's management
to analyze performance and determine the allocation of resources. Avista
Utilities' business is now managed based on the total regulated operations, not
by individual segments. The Energy Trading and Marketing line of business
changed its focus from a national emphasis to a regional effort, but its
operations are non-regulated, as opposed to Avista Utilities' operations. The
Information and Technology line of business reflects the current efforts of the
Company to grow those businesses and focus on generating shareholder value.
Pentzer and Other reports on the other non-utility operations of various
subsidiaries.
47
<PAGE> 52
AVISTA CORPORATION
- --------------------------------------------------------------------------------
OPERATING REVENUES
The Company accrues estimated unbilled revenues for electric and natural gas
sales and services provided through month-end. Avista Energy follows the
mark-to-market method of accounting for energy contracts entered into for
trading and price risk management purposes. Avista Energy recognizes revenue
based on the change in the market value of outstanding derivative commodity
sales contracts, net of future servicing costs and reserves, in addition to
revenue related to physical and financial contracts that have matured.
INTERSEGMENT ELIMINATIONS
Intersegment eliminations represent the transactions between Avista Utilities
and Avista Energy for commodities and services.
RESEARCH AND DEVELOPMENT EXPENSES
Company-sponsored research and development expenses related to present and
future products are expensed as incurred. The majority of the Company's research
and development expenses are related to subsidiary businesses. Research and
development expenses totaled approximately $3.3 million, $1.0 million and $1.0
million in 1999, 1998 and 1997, respectively.
OTHER INCOME (DEDUCTIONS)--NET
Other income (deductions)-net is composed of the following items:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
------- ------- --------
(Thousands of Dollars)
<S> <C> <C> <C>
Interest income ....................... $ 3,615 $ 9,560 $ 6,392
Capitalized interest (debt) ........... 1,001 1,592 1,549
Gain (loss) on property dispositions .. 4,071 12 (1,222)
Minority interest ..................... 2,002 296 (574)
Capitalized interest (equity) ......... 1,040 1,283 1,323
Other ................................. 7,230 (2,949) (13,341)
------- ------- --------
Total ............................ $18,959 $ 9,794 $ (5,873)
======= ======= ========
</TABLE>
EARNINGS PER SHARE
Financial Accounting Standard (FAS) No. 128, "Earnings Per Share," became
effective in the fourth quarter of 1997 and requires two presentations of
earnings per share - "basic" and "diluted." Basic earnings per share (EPS) is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if dilutive securities, such as stock
options and convertible stock, were exercised or converted into common stock
that then shared in the earnings of the Company. See Note 19 for specific
information about the Company's EPS calculations.
UTILITY PLANT
The cost of additions to utility plant, including an allowance for funds used
during construction and replacements of units of property and betterments, is
capitalized. Costs of depreciable units of property retired plus costs of
removal less salvage are charged to accumulated depreciation.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
The Allowance for Funds Used During Construction (AFUDC) represents the cost of
both the debt and equity funds used to finance utility plant additions during
the construction period. In accordance with the uniform system of accounts
prescribed by regulatory authorities, AFUDC is capitalized as a part of the cost
of utility plant and is credited currently as a noncash item to Other Income
(see Other Income above). The Company generally is permitted, under established
regulatory rate practices, to recover the capitalized AFUDC, and a fair return
thereon, through its inclusion in rate base and the provision for depreciation
after the related utility plant has been placed in service. Cash inflow related
to AFUDC does not occur until the related utility plant investment is placed in
service.
The effective AFUDC rate was 10.67% in 1999, 1998 and 1997. The Company's AFUDC
rates do not exceed the maximum allowable rates as determined in accordance with
the requirements of regulatory authorities.
DEPRECIATION
For utility operations, depreciation provisions are estimated by a method of
depreciation accounting utilizing unit rates for hydroelectric plants and
composite rates for other properties. Such rates are designed to provide for
48
<PAGE> 53
AVISTA CORPORATION
- --------------------------------------------------------------------------------
retirements of properties at the expiration of their service lives. The rates
for hydroelectric plants include annuity and interest components, in which the
interest component is 6%. For utility operations, the ratio of depreciation
provisions to average depreciable property was 2.69% in 1999, 2.60% in 1998 and
2.59% in 1997.
The average service lives and remaining average service lives, respectively, for
the following broad categories of property are: electric thermal production - 35
and 17 years; hydroelectric production - 100 and 79 years; electric transmission
- - 60 and 28 years; electric distribution - 40 and 31 years; and natural gas
distribution property - 44 and 30 years.
CASH AND CASH EQUIVALENTS
For the purposes of the Consolidated Statements of Cash Flows, the Company
considers all temporary investments with an initial maturity of three months or
less to be cash equivalents.
TEMPORARY INVESTMENTS
Investments in debt and marketable equity securities are classified as
"available for sale" and are recorded at fair value. Investments totaling $1.8
million and $7.5 million are included on the Consolidated Balance Sheets at
December 31, 1999 as other property and investments and current assets,
respectively. Investments totaling $4.3 million and $5.8 million are included on
the Consolidated Balance Sheets at December 31, 1998 as other property and
investments and current assets, respectively. Unrealized investment gains, as of
December 31, 1999 and 1998, of $(0.2) million and $0.02 million, respectively,
net of taxes, are reflected as a component of other comprehensive income on the
Consolidated Statements of Capitalization.
INVENTORY
Inventory consists primarily of materials and supplies, fuel stock and natural
gas stored. Inventory is recorded at the lower of cost or market, primarily
using the average cost method.
DEFERRED CHARGES AND CREDITS
The Company prepares its financial statements in accordance with the provisions
of FAS No. 71, "Accounting for the Effects of Certain Types of Regulation." A
regulated enterprise can prepare its financial statements in accordance with FAS
No. 71 only if (i) the enterprise's rates for regulated services are established
by or subject to approval by an independent third-party regulator, (ii) the
regulated rates are designed to recover the enterprise's cost of providing the
regulated services and (iii) in view of demand for the regulated services and
the level of competition, it is reasonable to assume that rates set at levels
that will recover the enterprise's costs can be charged to and collected from
customers. FAS No. 71 requires a cost-based, rate-regulated enterprise to
reflect the impact of regulatory decisions in its financial statements. In
certain circumstances, FAS No. 71 requires that certain costs and/or obligations
(such as incurred costs not currently recovered through rates, but expected to
be so recovered in the future) be reflected in a deferral account in the balance
sheet and not be reflected in the statement of income or loss until matching
revenues are recognized. If at some point in the future the Company determines
that it no longer meets the criteria for continued application of FAS No. 71 to
all or a portion of the Company's regulated operations, the Company could be
required to write off its regulatory assets and could be precluded from the
future deferral in the Consolidated Balance Sheet of costs not recovered through
rates at the time such costs were incurred, even if such costs were expected to
be recovered in the future.
The Company's primary regulatory assets include Investment in Exchange Power,
conservation programs, deferred income taxes, the provision for postretirement
benefits and debt issuance and redemption costs. Those items without a specific
line on the Consolidated Balance Sheets are included in Deferred Charges -
Other-net. Deferred credits include natural gas deferrals, unrecovered purchased
gas costs and the gain on the general office building sale/leaseback which is
being amortized over the life of the lease, and are included on the Consolidated
Balance Sheets as Non-current Liabilities and Deferred Credits - Other Deferred
Credits.
DEFERRED REVENUES
In December 1998, the Company received cash proceeds of $143.4 million from the
monetization of a contract in which the Company assigned and transferred certain
rights under a long-term power sales contract to a funding trust. The proceeds
were recorded as deferred revenue and are being amortized into revenues over the
16-year period of the long-term sales contract. The balance at December 31, 1999
was $133.0 million.
POWER AND NATURAL GAS COST ADJUSTMENT PROVISIONS
The Company has a power cost adjustment mechanism (PCA) in Idaho which allows
the Company to modify electric rates to recover or rebate a portion of the
difference between actual and allowed net power supply costs. The PCA
49
<PAGE> 54
AVISTA CORPORATION
- --------------------------------------------------------------------------------
tracks changes in hydroelectric generation, secondary prices, related changes in
thermal generation and Public Utility Regulatory Policies Act of 1978 (PURPA)
contracts. Rate changes are triggered when the deferred balance reaches $2.2
million. The following surcharges and rebates were in effect during the past
three years: a $2.8 million (2.5%) rebate effective August 1, 1999 scheduled to
expire July 31, 2000; a $3.1 million (2.7%) rebate effective February 1, 1999,
which expired January 31, 2000; a $2.7 million (2.4%) rebate effective June 1,
1998, which expired May 31, 1999; a $2.6 million (2.3%) rebate effective
September 1, 1997, which expired August 31, 1998; a $2.6 million (2.4%) rebate
effective June 1, 1997, which expired May 31, 1998; and a $2.5 million (2.3%)
rebate effective September 1, 1996, which expired August 31, 1997. The rebate
balances and the deferred balance are included in the Current Liabilities -
Other and Non-Current Liabilities and Deferred Credits - Other Deferred Credits
lines, respectively, on the Consolidated Balance Sheets.
Under established regulatory practices, the Company is also allowed to adjust
its natural gas rates from time to time to reflect increases or decreases in the
cost of natural gas purchased. Differences between actual natural gas costs and
the natural gas costs allowed in rates are deferred and charged or credited to
expense when regulators approve inclusion of the cost changes in rates. In
Oregon, regulatory provisions include a sharing of benefits and risks associated
with changes in natural gas prices, as well as a sharing of benefits if certain
threshold earnings levels are exceeded. The balance is included on the
Consolidated Balance Sheets as Non-current Liabilities and Deferred Credits -
Other Deferred Credits.
INCOME TAXES
The Company and its eligible subsidiaries file consolidated federal income tax
returns. Subsidiaries are charged or credited with the tax effects of their
operations on a stand-alone basis. The Company's federal income tax returns have
been examined with all issues resolved, and all payments made, through the 1996
return.
STOCK-BASED COMPENSATION
Compensation cost for stock options is measured as the excess of the quoted
market price of the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock. Restricted stock is recorded as
compensation cost over the requisite vesting periods based on the market value
on the date of grant. The Company accounts for its stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" rather than using the
fair-value-based method of accounting for stock-based employee compensation
plans as prescribed under FAS No. 123, "Accounting for Stock-Based
Compensation." However, the Company has adopted the disclosure requirements of
FAS No. 123. See Note 21 for more information about the Company's stock-based
compensation plans.
50
<PAGE> 55
AVISTA CORPORATION
- --------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted FAS No. 130, "Reporting
Comprehensive Income," which establishes new rules for the reporting and display
of comprehensive income (net income plus all other changes in net assets from
nonowner sources) and its components. The adoption had no impact on the
Company's net income or stockholders' equity. Prior year financial statements
have been reclassified to conform to these requirements. The following table
reflects the accumulated balances of other comprehensive income:
<TABLE>
<CAPTION>
Foreign
Unrealized Currency
Investment Translation Comprehensive
Gain/(Loss) Adjustment Income
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1, 1997 $ 5,704 $ $ 5,704
Unrealized investment gain/(loss), net of tax
of $810 1,504 1,504
Less: reclassification adjustment, net of
tax of $2,762 (5,131) (5,131)
------------------------------------------------------------------------------------------
Balance at December 31, 1997 2,077 2,077
Unrealized investment gain/(loss), net of tax
of $1,105 (2,052) (2,052)
Foreign currency translation adjustment (366) (366)
------------------------------------------------------------------------------------------
Balance at December 31, 1998 25 (366) (341)
Unrealized investment gain/(loss), net of tax
of $108 (201) (201)
Foreign currency translation adjustment 376 376
------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ (176) $ 10 $ (166)
------------------------------------------------------------------------------------------
</TABLE>
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Assets and liabilities of Avista Energy Canada, Ltd. are denominated in Canadian
dollars and translated to U. S. dollars at exchange rates in effect on the
balance sheet date. Revenues, costs and expenses for the company are translated
using an average rate. Cumulative translation adjustments resulting from this
process are reflected as a component of other comprehensive income in the
shareholders' equity section in the Consolidated Statements of Capitalization.
NEW ACCOUNTING STANDARDS
The FASB issued FAS No. 133, entitled "Accounting for Derivative Instruments and
Hedging Activities" which is effective for fiscal years beginning after June 15,
2000. The statement requires that all derivative financial instruments be
recognized as either assets or liabilities on a company's balance sheets at fair
value. The accounting for changes in the fair value of a derivative will depend
on the intended use of the derivative and the resulting designation. Avista
Energy currently accounts for derivative commodity instruments entered into for
trading purposes using the mark-to-market method of accounting, in compliance
with EITF 98-10, "Accounting for Energy Trading and Risk Management Activities."
The Company is in the process of determining the impact of the statement on the
Company's financial position and results of operations, and developing systems
for ongoing monitoring and measurement.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to current
statement format. These reclassifications were made for comparative purposes and
have not affected previously reported total net income or common shareholders'
equity.
NOTE 2. ASSET IMPAIRMENT AND RESTRUCTURING CHARGES
In November 1999, Avista Corp.'s Board of Directors authorized the reduction of
Avista Energy's risk by redirecting its focus away from national energy trading
toward a more regionally-based energy marketing and trading effort in the West.
The downsizing plans call for shutting down all of the operations in Houston and
Boston, which will eliminate approximately 80 positions, during the first three
to six months of 2000. In the fourth quarter of 1999, Avista Energy recorded a
pre-tax charge of $42.9 million for expenses related to this restructuring of
Avista
51
<PAGE> 56
AVISTA CORPORATION
- --------------------------------------------------------------------------------
Energy's business. The after-tax effect of these charges was $27.3 million, or
$0.71 per basic common share. The charge included $21.4 million, after taxes,
for the write-off of goodwill associated with the purchase of Vitol earlier in
1999 and $5.9 million, after taxes, for expenses related to employee
terminations, such as contract terminations and retention payments. None of the
$5.9 million for termination benefits was paid out as of December 31, 1999.
Avista Energy sought a buyer for the Eastern book of business, and is currently
in the process of closing that transaction. The electric contracts will likely
be sold at approximately book value. To date, Avista Energy has not found a
buyer for the natural gas or coal contracts.
NOTE 3. ACCOUNTS RECEIVABLE SALE
In July 1997, WWP Receivables Corp. (WWPRC) was incorporated as a wholly owned,
bankruptcy-remote subsidiary of the Company for the purpose of acquiring or
purchasing interests in certain accounts receivable, both billed and unbilled,
of the Company. Subsequently, WWPRC and the Company have entered into an
agreement whereby WWPRC can sell without recourse, on a revolving basis, up to
$80.0 million of those receivables. WWPRC is obligated to pay fees that
approximate the purchaser's cost of issuing commercial paper equal in value to
the interests in receivables sold. On a consolidated basis, the amount of such
fees is included in operating expenses of the Company. At December 31, 1999 and
1998, $45.0 million and $25.0 million, respectively, in receivables had been
sold pursuant to the agreement, which qualify as sales of assets under FAS No.
125.
NOTE 4. ENERGY COMMODITY TRADING
The Company's energy-related businesses are exposed to risks relating to changes
in certain commodity prices and counterparty performance. In order to manage the
various risks relating to these exposures, Avista Utilities utilizes electric,
natural gas and related derivative commodity instruments, such as forwards,
futures, swaps and options, and Avista Energy engages in the trading of such
instruments. Avista Utilities and Avista Energy have adopted policies and
procedures to manage the risks inherent in these activities and have established
a comprehensive Risk Management Committee, separate from the units that create
such risk exposure and overseen by the Audit and Finance Committee of the
Company's Board of Directors, to monitor compliance with the Company's risk
management policies and procedures.
AVISTA UTILITIES
Avista Utilities protects itself against price fluctuations on electric energy
and natural gas by limiting the aggregate level of net open positions which are
exposed to market price changes and through the use of electric, natural gas and
related derivative commodity instruments for hedging purposes. The net open
position is actively managed with strict policies designed to limit the exposure
to market risk and which require daily and weekly reporting to management of
potential financial exposure. The Risk Management Committee has limited the
types of commodity instruments Avista Utilities may trade to those related to
electricity and natural gas commodities and those instruments are to be used for
hedging price fluctuations associated with the management of resources.
Commodity instruments are not generally held by Avista Utilities for speculative
trading purposes. Gains and losses related to derivative commodity instruments
which qualify as hedges are recognized in the Consolidated Statements of Income
when the underlying hedged physical transaction closes (the deferral method) and
are included in the same category as the hedged item (natural gas purchased or
purchased power expense, as the case may be). At December 31, 1999 and 1998, the
Company's derivative commodity instruments outstanding were immaterial.
ENERGY TRADING AND MARKETING
Avista Energy purchases natural gas and electricity directly from producers and
other trading companies, and its customers include commercial and industrial
end-users, electric utilities, natural gas distribution companies, and other
trading companies. Avista Energy's marketing and energy risk management services
are provided through the use of a variety of derivative commodity contracts to
purchase or supply natural gas and electric energy at specified delivery points
and at specified future dates. Avista Energy also trades natural gas and
electricity derivative commodity instruments on national exchanges and through
other unregulated exchanges and brokers from whom these commodity derivatives
are available, and therefore experiences net open positions in terms of price,
volume, and specified delivery point.
52
<PAGE> 57
AVISTA CORPORATION
- --------------------------------------------------------------------------------
The open positions expose Avista Energy to the risk that fluctuating market
prices may adversely impact its financial position or results of operations.
However, the net open position is actively managed with strict policies designed
to limit the exposure to market risk and which require daily reporting to
management of potential financial exposure. These policies include statistical
risk tolerance limits using historical price movements to calculate daily
earnings at risk as well as total Value-at-Risk (VAR) measurement.
Derivative commodity instruments sold and purchased by Avista Energy include:
forward contracts, involving physical delivery of an energy commodity; futures
contracts, which involve the buying or selling of natural gas, electricity or
other energy-related commodities at a fixed price; over-the-counter swap
agreements which require Avista Energy to receive or make payments based on the
difference between a specified price and the actual price of the underlying
commodity; and options, which mitigate price risk by providing for the right,
but not the requirement, to buy or sell energy-related commodities at a fixed
price.
Foreign currency risks associated with the fair value of the energy commodity
portfolio are primarily related to Canadian currency exchange rates and are
managed using a variety of financial instruments, including forward rate
agreements.
Avista Energy's trading activities are subject to mark-to-market accounting,
under which changes in the market value of outstanding electric, natural gas and
related derivative commodity instruments are recognized as gains or losses in
the period of change. Gains and losses on electric, natural gas and related
derivative commodity instruments utilized for trading are recognized in income
on a current basis (the mark-to-market method) and are included on the
Consolidated Statements of Income in operating revenues or resource costs, as
appropriate, and on the Consolidated Balance Sheets as current or non-current
energy commodity assets or liabilities. Contracts in a receivable position, as
well as the options held, are reported as assets. Similarly, contracts in a
payable position, as well as options written, are reported as liabilities.
Cashflows are recognized during the period of settlement.
Contract Amounts and Terms. Under Avista Energy's derivative instruments, Avista
Energy either (i) as "fixed price payor," is obligated to pay a fixed price or
amount and is entitled to receive the commodity (or currency) or a fixed amount
or (ii) as "fixed price receiver," is entitled to receive a fixed price or
amount and is obligated to deliver the commodity (or currency) or pay a fixed
amount or (iii) as "index price payor," is obligated to pay an indexed price or
amount and is entitled to receive the commodity or a variable amount or (iv) as
"index price receiver," is entitled to receive an indexed price or amount and is
obligated to deliver the commodity or pay a variable amount. The contract or
notional amounts and terms of Avista Energy's derivative commodity investments
outstanding at December 31, 1999 are set forth below (volumes in thousands of
mmBTUs and MWhs, dollars in thousands):
<TABLE>
<CAPTION>
Fixed Price Fixed Price Maximum
Payor Receiver Terms in Years
----------- ----------- --------------
<S> <C> <C> <C>
Energy commodities (volumes)
Natural gas 352,021 337,056 4
Electric 202,793 189,630 20
Coal (tons) 5,276 6,364 1
Financial products
Foreign currency $426 $-- 4
</TABLE>
<TABLE>
<CAPTION>
Index Price Index Price Maximum
Payor Receiver Terms in Years
----------- ----------- --------------
<S> <C> <C> <C>
Energy commodities (volumes)
Natural gas 979,652 819,660 5
Electric 1,581 1,365 5
</TABLE>
Contract or notional amounts reflect the volume of transactions, but do not
necessarily represent the amounts exchanged by the parties to the derivative
commodity instruments. Accordingly, contract or notional amounts do not
accurately measure Avista Energy's exposure to market or credit risks. The
maximum terms in years detailed above are not indicative of likely future cash
flows as these positions may be offset in the markets at any time in response to
Avista Energy's risk management needs.
53
<PAGE> 58
AVISTA CORPORATION
- --------------------------------------------------------------------------------
Fair Value. The fair value of Avista Energy's derivative commodity instruments
outstanding at December 31, 1999, and the average fair value of those
instruments held during the year are set forth below (dollars in thousands):
<TABLE>
<CAPTION>
Fair Value Average Fair Value for the
as of December 31, 1999 year ended December 31, 1999
---------------------------------------------------- ----------------------------------------------------
Current Long-term Current Long-term Current Long-term Current Long-term
Assets Assets Liabilities Liabilities Assets Assets Liabilities Liabilities
-------- -------- ----------- ----------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Natural gas $ 75,422 $ 29,496 $ 77,181 $ 23,795 $107,333 $ 65,884 $110,635 $ 57,978
Electric 499,963 461,501 507,518 417,450 347,979 297,937 347,651 266,618
Coal 10,528 802 9,366 127 5,264 401 4,683 64
-------- -------- -------- -------- -------- -------- -------- --------
Total $585,913 $491,799 $594,065 $441,372 $460,576 $364,222 $462,969 $324,660
</TABLE>
The weighted average term of Avista Energy's natural gas and related derivative
commodity instruments as of December 31, 1999 was approximately three months.
The weighted average term of Avista Energy's electric derivative commodity
instruments at December 31, 1999 was approximately four months. The weighted
average term of Avista Energy's coal derivative commodity instruments at
December 31, 1999 was approximately eight months. The change in the fair value
position of Avista Energy's energy commodity portfolio, net of the reserves for
credit and market risk for the year ended December 31, 1999 was $0.2 million and
is included on the Consolidated Statements of Income in operating revenues.
MARKET RISK
Avista Utilities and Avista Energy manage, on a portfolio basis, the market
risks inherent in their activities subject to parameters established by the
Company's Risk Management Committee. Market risks are monitored by the Risk
Management Committee to ensure compliance with the Company's stated risk
management policies. Avista Utilities and Avista Energy measure the risk in
their portfolios on a daily basis in accordance with value-at-risk and other
risk methodologies established by the Risk Management Committee. The
quantification of market risk using value-at-risk provides a consistent measure
of risk across diverse energy markets and products.
CREDIT RISK
Avista Utilities and Avista Energy are exposed to credit risk in the event of
nonperformance by customers or counterparties of their contractual obligations.
The concentration of customers and/or counterparties may impact overall exposure
to credit risk, either positively or negatively, in that the counterparties may
be similarly affected by changes in economic, regulatory or other conditions.
However, Avista Utilities and Avista Energy maintain credit policies with regard
to their customers and counterparties that management believes significantly
minimize overall credit risk. These policies include an evaluation of potential
customers' and counterparties' financial condition and credit rating, collateral
requirements or other credit enhancements such as letters of credit or parent
company guarantees, and the use of standardized agreements which allow for the
netting or offsetting of positive and negative exposures associated with a
single counterparty. Avista Utilities and Avista Energy maintain credit reserves
that are based on management's evaluation of the credit risk of the overall
portfolios. Based on these policies, exposures and the credit reserves, the
Company does not anticipate a materially adverse effect on financial position or
results of operations as a result of customer or counterparty nonperformance.
New York Mercantile Exchange traded futures and option contracts are financially
guaranteed by the Exchange and have nominal credit risk.
Avista Energy has concentrations of suppliers and customers in the electric and
natural gas industries, including electric utilities, natural gas distribution
companies and other energy marketing and trading companies. In addition, Avista
Energy has concentrations of credit risk related to geographic location. These
concentration of counterparties and concentrations of geographic location may
impact Avista Energy's overall exposure to credit risk, either positively or
negatively, in that the counterparties may be similarly affected by changes in
economic, regulatory or other conditions.
54
<PAGE> 59
AVISTA CORPORATION
- --------------------------------------------------------------------------------
NOTE 5. ENERGY TRADING AND MARKETING EQUITY INVESTMENT
Effective November 30, 1998, Avista Energy sold its 50% ownership interest in
Howard/Avista Energy LLC to H&H Star Energy, Inc. for $25 million. Avista
Energy's initial equity investment in Howard/Avista Energy, LLC was $25 million
in August 1997. Dividends of $0.7 million were received from Howard/Avista
Energy, LLC in 1998. Avista Energy's pre-tax equity in earnings of Howard/Avista
Energy LLC were $(1.0) million and $1.8 million for the eleven months ended
November 30, 1998 and the five months ended December 31, 1997, respectively.
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
The year-end balances of the major classifications of property, plant and
equipment are detailed in the following table (thousands of dollars):
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Avista Utilities:
Electric production $ 720,409 $ 709,144
Electric transmission 272,299 265,343
Electric distribution 622,974 593,787
CWIP and other 85,648 81,435
---------- ----------
Electric total 1,701,330 1,649,709
---------- ----------
Natural gas underground storage 18,418 18,732
Natural gas transmission 3,194 3,217
Natural gas distribution 372,208 352,332
CWIP and other 49,259 47,499
---------- ----------
Natural gas total 443,079 421,780
---------- ----------
Common plant (including CWIP) 71,201 69,203
---------- ----------
Total Avista Utilities 2,215,610 2,140,692
Energy Trading and Marketing 8,304 5,579
Information and Technology 21,613 6,403
Pentzer and Other 24,027 33,071
---------- ----------
Total $2,269,554 $2,185,745
========== ==========
</TABLE>
Property, plant, and equipment under capital leases at Avista Capital's
subsidiaries totaled $11.1 million and $13.3 million and the associated
accumulated depreciation totaled $3.8 million and $2.8 million in 1999 and 1998,
respectively.
NOTE 7. JOINTLY OWNED ELECTRIC FACILITIES
The Company has investments in jointly owned generating plants. The Company
provides financing for the Company's ownership in the projects. The Company's
share of related operating and maintenance expenses for plants in service is
included in corresponding accounts in the Consolidated Statements of Income. See
Note 22 for additional information related to potential impacts of Clean Air Act
Amendments on these plants. The following table indicates the Company's
percentage ownership and the extent of the Company's investment in such plants
at December 31, 1999:
<TABLE>
<CAPTION>
COMPANY'S CURRENT SHARE OF
----------------------------------------------------------------
KW of Construction
Installed Fuel Ownership Plant in Accumulated Net Plant Work in
Project Capacity Source (%) Service Depreciation In Service Progress
- ------- -------- ------ ----------- -------- ------------ ---------- --------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C>
Centralia *................... 1,330,000 Coal 15% $ 57,898 $ 40,391 $ 17,507 $ --
Colstrip 3 & 4................ 1,556,000 Coal 15 310,804 131,328 179,476 --
</TABLE>
* The Company purchased an additional 2.5% interest in Centralia in December
1999, which is currently being held as non-utility property until the
outcome of the pending sale of Centralia is determined.
55
<PAGE> 60
AVISTA CORPORATION
- --------------------------------------------------------------------------------
NOTE 8. PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company has a pension plan covering substantially all of its regular
full-time employees. Certain of the Company's subsidiaries also participate in
this plan. Individual benefits under this plan are based upon years of service
and the employee's average compensation as specified in the Plan. The Company's
funding policy is to contribute annually an amount equal to the net periodic
pension cost, provided that such contributions are not less than the minimum
amounts required to be funded under the Employee Retirement Income Security Act,
nor more than the maximum amounts which are currently deductible for tax
purposes. Pension fund assets are invested primarily in marketable debt and
equity securities. The Company also has other plans that cover the executive
officers and key managers.
The Company provides certain health care and life insurance benefits for
substantially all of its retired employees. The Company accrues the estimated
cost of postretirement benefit payments during the years that employees provide
services. The Company elected to amortize this obligation of approximately
$34,500,000 over a period of twenty years, beginning in 1993.
The following table sets forth the pension and health care plan disclosures:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------ ----------------------
1999 1998 1999 1998
--------- --------- -------- --------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 178,589 $ 155,565 $ 32,345 $ 31,802
Service cost 5,951 4,982 696 585
Interest cost 11,915 11,247 2,178 2,100
Amendments (6,463) 5,454 -- --
Actuarial (gain)/loss (14,679) 10,088 (2,377) 108
Benefits paid (12,109) (8,747) (2,205) (2,250)
Expenses paid (1,107) -- -- --
--------- --------- -------- --------
Benefit obligation at end of year $ 162,097 $ 178,589 $ 30,637 $ 32,345
--------- --------- -------- --------
CHANGE IN PLAN ASSETS
Fair value of plan assets
at beginning of year $ 178,879 $ 166,242 $ 12,459 $ 11,098
Actual return on plan assets 19,902 21,384 3,228 1,374
Employer contributions -- -- 809 731
Benefits paid (12,109) (8,747) (688) (744)
Expenses paid (1,107) -- -- --
--------- --------- -------- --------
Fair value of plan assets at end of year $ 185,565 $ 178,879 $ 15,808 $ 12,459
--------- --------- -------- --------
Funded status $ 23,467 $ 289 $(14,829) $(19,886)
Unrecognized net actuarial gain (38,667) (19,767) (9,997) (5,626)
Unrecognized prior service cost 11,651 19,455 -- --
Unrecognized net transition
obligation/(asset) (5,929) (7,015) 19,933 21,467
--------- --------- -------- --------
Accrued benefit cost $ (9,478) $ (7,038) $ (4,893) $ (4,045)
========= ========= ======== ========
ASSUMPTIONS AS OF DECEMBER 31
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase 4.00% 4.00%
Medical cost trend - initial 5.00% 5.00%
Medical cost trend - ultimate 5.00% 5.00%
Year for ultimate medical cost trend 1999 1998
</TABLE>
56
<PAGE> 61
AVISTA CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
----------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- --------- -------- -------- --------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 5,951 $ 4,982 $ 4,762 $ 696 $ 585 $ 637
Interest cost 11,915 11,247 10,601 2,178 2,100 2,247
Expected return on plan assets (15,681) (14,768) (13,152) (1,075) (953) (973)
Transition (asset)/obligation recognition (1,086) (1,086) (1,086) 1,534 1,533 1,570
Amortization of prior service cost 1,341 1,654 1,365 -- -- 13
Net gain recognition -- (562) (265) (159) (326) (248)
Asset gain deferred -- -- -- -- -- 336
Net periodic benefit cost --------- --------- ---------- -------- -------- --------
$ 2,440 $ 1,467 $ 2,225 $ 3,174 $ 2,939 $ 3,582
--------- --------- ---------- -------- -------- --------
</TABLE>
Assumed health cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point increase in the
assumed health care cost trend rate for each year would increase the accumulated
postretirement benefit obligation as of December 31, 1999 by approximately $2.4
million and the service and interest cost by approximately $273,000. A
one-percentage-point decrease in the assumed health care cost trend rate for
each year would decrease the accumulated postretirement benefit obligation as of
December 31, 1999 by approximately $2.2 million and the service and interest
cost by approximately $246,000.
The Company also sponsors an employee savings plan that covers substantially all
employees. Employer matching contributions of $3.4 million, $2.8 million, $2.9
million were expensed in 1999, 1998 and 1997, respectively.
NOTE 9. ACCOUNTING FOR INCOME TAXES
In June 1997, the Company received $81 million from the Internal Revenue Service
(IRS) to settle an income tax claim relating to its investment in the terminated
nuclear project 3 of the Washington Public Power Supply System (WNP3). The $81
million recovery included $34 million in income taxes the Company overpaid in
prior years plus $47 million in accrued interest, which in total contributed
$41.4 million, or $0.74 per share, to net income.
The Company had claimed that it realized a loss in 1985 relating to its $195
million investment in WNP3 entitling it to current tax deductions. The IRS,
however, originally denied the Company's claim and ruled that the investment
should be written off over 32.5 years, the term of a settlement agreement
between the Company and the Bonneville Power Administration relating to WNP3.
The Company disagreed with this ruling and had been pursuing a reversal for
several years. The IRS has now agreed with the Company's position.
The Company entered into settlement agreements with the WUTC and the IPUC in
1987 and 1988 providing for the recovery through retail prices of approximately
60% of the Company's $195 million investment in WNP3. As a result of these
agreements, customers have been and will continue to receive the tax benefits
relating to the recoverable portion of WNP3 over the recovery periods specified
in the settlement agreements. The settlement agreements resulted in a write-off
of approximately $75 million of the Company's WNP3 investment, with the entire
write-off charged to shareholders. The tax recovery and related accrued interest
from the IRS will flow through to the benefit of shareholders. The cash was used
to fund new business investment, including growth opportunities in national
energy markets, and reduced the need for issuance of long-term debt during 1997.
As of December 31, 1999 and 1998, the Company had recorded net regulatory assets
of $166.5 million and $171.0 million, respectively, related to the probable
recovery of FAS No. 109, "Accounting for Income Taxes," deferred tax liabilities
from customers through future rates. Such regulatory assets will be adjusted by
amounts recovered through rates.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) tax credit
carryforwards. The net deferred federal income tax liability consists of the
following (thousands of dollars):
57
<PAGE> 62
AVISTA CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax bases
of utility plant $383,729 $375,881
Loss on reacquired debt 5,357 4,979
Other 19,774 7,462
-------- --------
Total deferred tax liabilities 408,860 388,322
-------- --------
Deferred tax assets:
Reserves not currently deductible 10,747 11,727
Contributions in aid of construction 7,878 7,159
Centralia Trust 2,897 2,325
Gain on sale of office building 1,098 1,190
Other 9,191 8,219
-------- --------
Total deferred tax assets 31,811 30,620
-------- --------
Net deferred tax liability $377,049 $357,702
======== ========
</TABLE>
A reconciliation of federal income taxes derived from statutory tax rates
applied to income from continuing operations and federal income tax as set forth
in the accompanying Consolidated Statements of Income and Retained Earnings is
as follows (the current and deferred effective tax rates are approximately the
same during all periods):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
-------- -------- --------
(Thousands of Dollars)
<S> <C> <C> <C>
Computed federal income taxes at statutory rate .. $ 14,970 $ 42,516 $ 61,555
Increase (decrease) in tax resulting from:
Accelerated tax depreciation ................ 1,869 1,431 2,589
Prior year audit adjustments ................ (1,642) (1,526) (31,458)
Reserve for WNP3 ............................ -- -- 10,402
Other ....................................... 3,687 (2,343) 13,922
-------- -------- --------
Total federal income tax expense* ................ $ 18,884 $ 40,078 $ 57,010
======== ======== ========
INCOME TAX EXPENSE CONSISTS OF THE FOLLOWING:
Federal taxes currently provided ................. $ 6,974 $ 20,094 $ 51,104
Deferred income taxes ............................ 11,910 19,984 5,906
-------- -------- --------
Total federal income tax expense ................. 18,884 40,078 57,010
State income tax expense .................... (2,144) 3,257 4,065
-------- -------- --------
Federal and state income taxes ................... $ 16,740 $ 43,335 $ 61,075
======== ======== ========
*Federal Income Tax Expense:
Utility .................................... $ 34,757 $ 28,582 $ 50,409
Energy Trading and Marketing ............... (32,680) 7,789 2,954
Information and Technology ................. (3,383) (2,010) (1,928)
Pentzer and Other .......................... 20,190 5,717 5,575
-------- -------- --------
Total Federal Income Tax Expense ................. $ 18,884 $ 40,078 $ 57,010
======== ======== ========
Federal statutory rate ........................... 35% 35% 35%
</TABLE>
NOTE 10. LONG-TERM PURCHASED POWER CONTRACTS WITH REQUIRED MINIMUM PAYMENTS
Under fixed contracts with Public Utility Districts (PUD), the Company has
agreed to purchase portions of the output of certain generating facilities.
Although the Company has no investment in such facilities, these contracts
provide that the Company pay certain minimum amounts (which are based at least
in part on the debt service requirements of the supplier) whether or not the
facility is operating. The cost of power obtained under the contracts, including
payments made when a facility is not operating, is included in operations and
maintenance expense in the Consolidated Statements of Income. Information as of
December 31, 1999, pertaining to these contracts is summarized in the following
table:
58
<PAGE> 63
AVISTA CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY'S CURRENT SHARE OF
----------------------------------------------------------
Debt Revenue Contract
Kilowatt Annual Service Bonds Expiration
Output Capability Costs(1) Costs(2) Outstanding Date
------ ---------- -------- ------- ----------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
PUD CONTRACTS:
Chelan County PUD:
Rocky Reach Project .... 2.9% 37,000 $ 1,417 $ 692 $ 7,017 2011
Grant County PUD:
Priest Rapids Project .. 6.1 55,000 1,539 830 10,317 2005
Wanapum Project ........ 8.2 75,000 2,557 1,582 15,274 2009
Douglas County PUD:
Wells Project .......... 3.7 30,000 903 591 6,767 2018
-------- ------- ------- -------
Totals ......... 197,000 $ 6,416 $ 3,695 $39,375
======== ======= ======= =======
</TABLE>
(1) The annual costs will change in proportion to the percentage of output
allocated to the Company in a particular year. Amounts represent the
operating costs for the year 1999.
(2) Included in annual costs.
Actual expenses for payments made under the above contracts for the years 1999,
1998 and 1997, were $6.4 million, $6.2 million and $5.9 million, respectively.
The estimated aggregate amounts of required minimum payments (the Company's
share of debt service costs) under the above contracts for the next five years
are $3.9 million in 2000 and $4.0 million in each year of 2001 through 2004
(minimum payments thereafter are dependent on then market conditions). In
addition, the Company will be required to pay its proportionate share of the
variable operating expenses of these projects.
NOTE 11. LONG-TERM DEBT
The annual sinking fund requirements and maturities for the next five years for
long-term debt outstanding at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SINKING FUND
DECEMBER 31 MATURITIES REQUIREMENTS TOTAL
----------- ---------- ------------ -------
(Thousands of Dollars)
<S> <C> <C> <C>
2000.................... $44,900 $2,844 $47,744
2001.................... 40,000 2,395 42,395
2002.................... 50,000 2,245 52,245
2003.................... 30,000 1,845 31,845
2004.................... 30,000 1,695 31,695
</TABLE>
The sinking fund requirements may be met by certification of property additions
at the rate of 167% of requirements. All of the utility plant is subject to the
lien of the Mortgage and Deed of Trust securing outstanding First Mortgage
Bonds.
In September 1999, $83.7 million of Pollution Control Revenue Refunding Bonds
(Avista Corporation Colstrip Project), Series 1999A due 2032 and Series 1999B
due 2034 were issued by the City of Forsyth, Montana. The proceeds of the bonds
were used to refund the $66.7 million of 7 1/8% First Mortgage Bonds due 2013
and the $17.0 million of 7 2/5% First Mortgage Bonds due 2016. The Series 1999A
and Series 1999B Bonds are backed by an insurance policy issued by AMBAC
Assurance Corporation and bear interest on a floating rate basis that is reset
periodically. The initial interest rate until February 2000 was 3.6% and is
currently 3.75%.
In 1999, $25.0 million of Unsecured Medium-Term Notes (MTNs) were issued, while
$98.1 million of Secured MTNs and $26.5 million of Unsecured MTNs matured or
were redeemed. In 1998, $84.0 million of Unsecured MTNs were issued, while $14.0
million of Unsecured MTNs matured or were redeemed. In August 1999, the
59
<PAGE> 64
AVISTA CORPORATION
- --------------------------------------------------------------------------------
Company completed the documentation to issue up to and including $400.0 million
of Unsecured MTNs, Series D. As of December 31, 1999, the Company had remaining
authorization to issue up to $541.0 million of Unsecured MTNs.
At December 31, 1999, the Company had $118.5 million in outstanding balances
under borrowing arrangements and commercial paper, which are expected to be
refinanced in 2000. See Note 12 for details of credit agreements.
Included in other long-term debt are the following items related to subsidiary
operations (thousands of dollars):
<TABLE>
<CAPTION>
OUTSTANDING AT DECEMBER 31,
---------------------------
1999 1998
------- -------
<S> <C> <C>
Notes payable ....................... $ 9,598 $50,288
Capital lease obligations ........... 6,457 7,176
------- -------
Subsidiary total debt .......... 16,055 57,464
Less: current portion ............... 6,147 15,165
------- -------
Subsidiary net long-term debt .. $ 9,908 $42,299
======= =======
</TABLE>
NOTE 12. BANK BORROWINGS
At December 31, 1999, the Company maintained lines of credit with various banks
under two separate credit agreements amounting to $260.0 million. The Company
has one revolving line of credit, expiring June 27, 2000, which provides a total
credit commitment of $135 million. The second revolving credit agreement, which
expires on June 29, 2001, provides a total credit commitment of $125 million.
The Company pays commitment fees of up to 0.11% per annum on the average daily
unused portion of each credit agreement.
In addition, under various agreements with banks, the Company can have up to
$100.0 million in loans outstanding at any one time, with the loans available at
the banks' discretion. These arrangements provide, if funds are made available,
for fixed-term loans for up to 180 days at a fixed rate of interest.
Balances and interest rates of bank borrowings under these arrangements were as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998
------- -------
(Thousands of Dollars)
<S> <C> <C>
BALANCE OUTSTANDING AT END OF PERIOD:
Fixed-term loans .......................... $33,500 $ --
Commercial paper .......................... 10,000 --
Revolving credit agreement ................ 75,000 --
MAXIMUM BALANCE DURING PERIOD:
Fixed-term loans .......................... $93,500 $94,000
Commercial paper .......................... 10,000 --
Revolving credit agreement ................ 75,000 51,000
AVERAGE DAILY BALANCE DURING PERIOD:
Fixed-term loans .......................... $29,110 $47,651
Commercial paper .......................... 2,604 --
Revolving credit agreement ................ 23,767 21,340
AVERAGE ANNUAL INTEREST RATE DURING PERIOD:
Fixed-term loans .......................... 5.48% 5.69%
Commercial paper .......................... 5.89 --
Revolving credit agreement ................ 5.87 5.80
</TABLE>
60
<PAGE> 65
AVISTA CORPORATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL INTEREST RATE AT END OF PERIOD:
Fixed-term loans .......................... 6.56% --%
Commercial paper .......................... 6.70 --
Revolving credit agreement ................ 6.71 --
</TABLE>
Avista Energy and its subsidiary, Avista Energy Canada, Ltd., as co-borrowers,
have a credit agreement with two commercial banks in the aggregate amount of
$110 million, expiring May 31, 2000. The credit agreement may be terminated by
the banks at any time and all extensions of credit under the agreement are
payable upon demand, in either case at the banks' sole discretion. The agreement
also provides, on an uncommitted basis, for the issuance of letters of credit to
secure contractual obligations to counterparts. The facility is guaranteed by
Avista Capital and is secured by substantially all of Avista Energy's assets.
The maximum amount of credit extended by the banks for cash advances is $30
million, with availability of up to $110 million (less the amount of outstanding
cash advances, if any) for the issuance of letters of credit. At December 31,
1999 and 1998, there were no cash advances (demand notes payable) outstanding.
Letters of credit outstanding under the facility totaled approximately $75.8
million and $20.2 million at December 31, 1999 and 1998, respectively.
Pentzer's operations have $27.5 million in short-term borrowing arrangements
available. At December 31, 1999 and 1998, $2.5 million and $21.4 million,
respectively, were outstanding.
NOTE 13. LEASES
The Company has entered into several lease arrangements involving various
assets, with minimum terms ranging from one to thirteen years and expiration
dates from 2000 to 2011. Certain of the lease arrangements require the Company,
upon the occurrence of specified events, to purchase the leased assets for
varying amounts over the term of the lease. The Company's management believes
that the likelihood of the occurrence of the specified events under which the
Company could be required to purchase the property is remote. Rent expense for
the years ended December 31, 1999, 1998 and 1997 was $18.7 million, $17.6
million and $16.9 million, respectively. Future minimum lease payments (in
thousands of dollars) required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1999 are estimated as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000 $ 4,366
2001 3,967
2002 3,654
2003 3,433
2004 3,255
Later years 19,063
--------
Total minimum payments required $ 37,738
========
</TABLE>
The Company also has various other cancelable operating leases, which are
charged to operating expense, consisting of the Rathdrum combustion turbines,
the Company airplane and a large number of small, relatively short-term,
renewable agreements for various items, such as office equipment and office
space.
The payments under the Avista Capital subsidiaries' capital leases for the next
five years are $2.9 million in 2000, $1.9 million in 2001, $1.3 million in 2002,
$0.7 million in 2003 and $0.4 million in 2004.
NOTE 14. PREFERRED STOCK
CUMULATIVE PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION:
In December 1998, as part of a dividend restructuring plan, the Company issued
1,540,460 shares of its $12.40 Convertible Preferred Stock, Series L (Series L
Preferred Stock). During 1999, the Company repurchased the equivalent of 32,250
shares of the Series L Preferred Stock. See Note 15 for additional information.
61
<PAGE> 66
AVISTA CORPORATION
- --------------------------------------------------------------------------------
CUMULATIVE PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION:
Redemption requirements:
$6.95, Series K - On September 15, 2002, 2003, 2004, 2005 and 2006, the
Company must redeem 17,500 shares at $100 per share plus accumulated
dividends through a mandatory sinking fund. Remaining shares must be
redeemed on September 15, 2007. The Company has the right to redeem an
additional 17,500 shares on each September 15 redemption date.
There are $5.25 million in mandatory redemption requirements during the
2000-2004 period.
In June 1998, the Company redeemed the final $10 million, or 100,000 shares, of
its $8.625 Series I.
NOTE 15. CONVERTIBLE PREFERRED STOCK
In December 1998, as part of a dividend restructuring plan, the Company issued
1,540,460 shares of its $12.40 Convertible Preferred Stock, Series L (Series L
Preferred Stock), in exchange for 15,404,595 shares of common stock, on the
basis of a one-tenth interest in one share of preferred stock for each share of
common stock. The Series L Preferred Stock had a liquidation preference of
$182.8125 per share.
During 1999, the Company repurchased the equivalent of 32,250 shares of the
Series L Preferred Stock. On February 16, 2000, the Company exercised its option
to convert all the remaining outstanding shares of Series L Preferred Stock back
into common stock. One share of Series L Preferred Stock equaled 10 depositary
shares, also known as RECONS (Return-Enhanced Convertible Securities). The
RECONS were also converted into common stock on the same conversion date.
Unless previously converted into common stock by the Company, on November 1,
2001 each share of the Series L Preferred Stock was to be converted into (1) ten
shares of common stock (subject to antidilution adjustments) and (2) the right
to receive an amount, in cash, equal to accrued and unpaid dividends.
The Series L Preferred Stock could be converted, at the option of the Company,
at any time prior to November 1, 2001, in whole but not in part, into, for each
share so converted (1) a number of shares of common stock equal to the Optional
Conversion Price then in effect, plus (2) the right to receive an amount, in
cash, equal to the accrued and unpaid dividends thereon to but excluding the
conversion date, plus (3) the right to receive the Optional Conversion Premium.
As used above,
* the "Optional Conversion Price" was, for each share of Series L
Preferred Stock so converted, a number of shares of common stock
equal to the lesser of (a) the amount of $24 divided by an amount
equal to the current market price of the common stock, multiplied by
ten and (b) one share of common stock (subject to antidilution
adjustments); and
* the "Optional Conversion Premium" was, for each share of Series L
Preferred Stock, so converted, an amount in cash, initially equal to
$20.90, declining by $0.02111 for each day following December 15,
1998 to and including the optional conversion date and equal to zero
on and after September 15, 2001; provided, however, that in lieu of
delivering such amount in cash, the Company was allowed, at its
option, to deliver a number of shares of common stock equal to the
quotient of such amount divided by an amount equal to the current
market price of the common stock.
62
<PAGE> 67
AVISTA CORPORATION
- --------------------------------------------------------------------------------
On the conversion date, each of the RECONS was converted into the following:
0.7205 shares of common stock, representing the optional conversion price; plus
0.0361 shares of common stock, representing the optional conversion premium;
plus the right to receive $0.21 in cash, representing an amount equivalent to
accumulated and unpaid dividends up until, but excluding, the conversion date.
Cash payments were made in lieu of fractional shares.
NOTE 16. COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED TRUST SECURITIES
On January 23, 1997, Avista Capital I, a business trust, issued to the public
$60,000,000 of Preferred Trust Securities having a distribution rate of 7 7/8%.
Concurrent with the issuance of the Preferred Trust Securities, the Trust issued
$1,855,675 of Common Trust Securities to the Company. The sole assets of the
Trust are the Company's 7 7/8% Junior Subordinated Deferrable Interest
Debentures, Series A, with a principal amount of $61,855,675. These debt
securities may be redeemed at the Company's option on or after January 15, 2002
and mature January 15, 2037.
On June 3, 1997, Avista Capital II, a business trust, issued to the public
$50,000,000 of Preferred Trust Securities having a floating distribution rate of
LIBOR plus 0.875%, calculated and reset quarterly (initially 6.6875%). The
distribution rate paid during 1999 ranged from 5.895% to 6.985%, which was the
rate outstanding at December 31, 1999. Concurrent with the issuance of the
Preferred Trust Securities, the Trust issued $1,547,000 of Common Trust
Securities to the Company. The sole assets of the Trust are the Company's
Floating Rate Junior Subordinated Deferrable Interest Debentures, Series B, with
a principal amount of $51,547,000. These debt securities may be redeemed at the
Company's option on or after June 1, 2007 and mature June 1, 2037.
The Company has guaranteed the payment of distributions on, and redemption price
and liquidation amount in respect of, the Preferred Trust Securities to the
extent that the Trust has funds available for such payment from the debt
securities. Upon maturity or prior redemption of such debt securities, the Trust
Securities will be mandatorily redeemed. The Company's Consolidated Statements
of Capitalization reflect only the $60 million and $50 million of Preferred
Trust Securities, accordingly all intercompany transactions have been
eliminated.
NOTE 17. FAIR VALUE OF FINANCIAL SECURITIES
The fair value of the Company's long-term debt (excluding notes payable and
other) at December 31, 1999 and 1998 is estimated to be $545.8 million, or 93%
of the carrying value and $735.5 million, or 107% of the carrying value,
respectively. The fair value of the Company's mandatorily redeemable preferred
stock at December 31, 1999 and 1998 is estimated to be $35.1 million, or 100% of
the carrying value and $38.5 million, or 110% of the carrying value,
respectively. The fair value of the Company's preferred trust securities at
December 31, 1999 and 1998 is estimated to be $94.3 million, or 86% of the
carrying value and $106.9 million, or 97% of the carrying value, respectively.
These estimates are all based on available market information. The fair value of
the Company's convertible preferred securities at December 31, 1999 and 1998 is
estimated to be $230.0 million, or 87%, of the carrying value and $301.4
million, or 112%, of the carrying value, respectively. This valuation was based
on the closing price of the securities on December 31, 1999.
NOTE 18. COMMON STOCK
In April 1990, the Company sold 1,000,000 shares of its common stock to the
Trustee of the Investment and Employee Stock Ownership Plan for Employees of the
Company (Plan) for the benefit of the participants and beneficiaries of the
Plan. In payment for the shares of Common Stock, the Trustee issued a promissory
note payable to the Company in the amount of $14,125,000. Dividends paid on the
stock held by the Trustee, plus Company contributions to the Plan, if any, are
used by the Trustee to make interest and principal payments on the promissory
note. The balance of the promissory note receivable from the Trustee ($8.2
million at December 31, 1999) is reflected as a reduction to common equity. The
shares of Common Stock are allocated to the accounts of participants in the Plan
as the note is repaid. During 1999, the cost recorded for the Plan was $5.4
million. Interest on the note payable to the Company, cash and stock
contributions to the Plan and dividends on the shares held by the Trustee were
$0.8 million, $4.0 million and $0.4 million, respectively.
63
<PAGE> 68
AVISTA CORPORATION
- --------------------------------------------------------------------------------
In May 1999, the Company's Board of Directors authorized a common stock
repurchase program in which the Company may repurchase in the open market or
through privately negotiated transactions up to an aggregate of 10 percent of
its common stock and common stock equivalents over the next two years. The
repurchased shares return to the status of authorized but unissued shares. As of
December 31, 1999, the Company had repurchased approximately 4.8 million common
shares and 322,500 shares of Return-Enhanced Convertible Securities (which is
equivalent to 32,250 shares of Convertible Preferred Stock, Series L). The
combined repurchases of these two securities represent 9% of outstanding common
stock and common stock equivalents.
In November 1999, the Company adopted a shareholder rights plan pursuant to
which holders of Common Stock outstanding on February 15, 1999, or issued
thereafter, have been granted one preferred share purchase right (Right) on each
outstanding share of Common Stock. Each Right, initially evidenced by and traded
with the shares of Common Stock, entitles the registered holder to purchase one
one-hundredth of a share of Preferred Stock of the Company, without par value,
at a purchase price of $70, subject to certain adjustments, regulatory approval
and other specified conditions. The Rights will be exercisable only if a person
or group acquires 10% or more of the outstanding shares of Common Stock or
commences a tender or exchange offer, the consummation of which would result in
the beneficial ownership by a person or group of 10% or more of the outstanding
shares of Common Stock. Upon any such acquisition, each Right will entitle its
holder to purchase, at the purchase price, that number of shares of Common Stock
or Preferred Stock of the Company (or, in the case of a merger of the Company
into another person or group, common stock of the acquiring person) which has a
market value at that time equal to twice the purchase price. In no event will
the Rights be exercisable by a person which has acquired 10% or more of the
Company's Common Stock. The Rights may be redeemed, at a redemption price of
$0.01 per Right, by the Board of Directors of the Company at any time until any
person or group has acquired 10% or more of the Common Stock. The Rights will
expire on March 31, 2009. This plan replaced a similar shareholder rights plan
that expired in February 2000.
The Company has a Dividend Reinvestment and Stock Purchase Plan under which the
Company's stockholders may automatically reinvest their dividends and make
optional cash payments for the purchase of the Company's Common Stock at current
market value.
The Company purchases stock on the open market to fulfill obligations of the
401(K) and Dividend Reinvestment Plans. Sales of Common Stock for 1999, 1998 and
1997 are summarized below (thousands of dollars):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- ----------------------
Shares Amount Shares Amount Shares Amount
----------- --------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 .................. 40,453,729 $ 381,401 55,960,360 $ 594,852 55,960,360 $594,852
----------- --------- ----------- --------- ---------- --------
Exchange for preferred stock .......... -- -- (15,404,595) (211,201) -- --
Stock repurchase plan ................. (4,788,900) (62,393) -- -- -- --
Stock options/restricted stock ........ (16,590) (277) (102,036) (2,250) -- --
----------- --------- ----------- --------- ---------- --------
Total issues (exchanges/repurchases) .. (4,805,490) (62,670) (15,506,631) (213,451) -- --
----------- --------- ----------- --------- ---------- --------
Balance at December 31 ................ 35,648,239 $ 318,731 40,453,729 $ 381,401 55,960,360 $594,852
========== ========= ========== ========= ========== ========
</TABLE>
NOTE 19. EARNINGS PER SHARE
Average common shares outstanding for basic EPS were 38,212,763, 54,603,926 and
55,960,360 in 1999, 1998 and 1997, respectively. At December 31, 1999 and 1998,
1,508,210 and 1,540,460 shares of $12.40 Convertible Preferred Stock, Series L,
which were convertible into 15,082,100 and 15,404,595 million shares of common
stock, respectively, were outstanding. All of these potential common shares were
excluded from the computation of diluted EPS for 1999 and 1998 because their
inclusion had an antidilutive effect on EPS. Basic and diluted EPS were the same
in 1997, as the Company did not have any common stock equivalents outstanding
that year.
64
<PAGE> 69
AVISTA CORPORATION
- --------------------------------------------------------------------------------
The computation of basic and diluted earnings per common share is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- --------
<S> <C> <C> <C>
Net income $26,031 $78,139 $114,797
Less: Preferred stock dividends 21,392 8,399 5,392
------- ------- --------
Income available for common stock-basic 4,639 69,740 109,405
Convertible Preferred Stock, Series L,
dividend requirements -- -- --
------- ------- --------
Income available for common stock-diluted $ 4,639 $69,740 $109,405
======= ======= ========
Weighted-average number of common shares
outstanding-basic 38,213 54,604 55,960
Conversion of Convertible Preferred Stock, Series L -- -- --
Restricted stock 112 -- --
Exercise of stock options -- 54 --
------- ------- --------
Weighted-average number of common shares
outstanding-diluted 38,325 54,658 55,960
------- ------- --------
Earnings per common share
Basic $ 0.12 $ 1.28 $ 1.96
Diluted $ 0.12 $ 1.28 $ 1.96
</TABLE>
For additional information regarding the convertible preferred stock and stock
option plans, see Notes 15 and 21, respectively.
NOTE 20. INFORMATION AND TECHNOLOGY SEGMENT INFORMATION
The Information and Technology line of business includes the results of Avista
Advantage, Avista Labs and Avista Communications. Avista Fiber and Avista
Communications will merge operations in 2000, so Avista Fiber's financial
information has been included with Avista Communications. Additional information
on each of these three separate companies is provided as follows (thousands of
dollars):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
AVISTA ADVANTAGE
Operating Revenues $ 1,518 $ 1,186 $ 618
Operating Income (pre-tax) (5,042) (2,904) (4,386)
Net Income $(3,428) $(2,052) $(2,858)
AVISTA LABS
Operating Revenues $ 748 $ 132 $ 174
Operating Income (3,924) (2,076) (1,005)
Net Income $(2,561) $(1,169) $ (597)
AVISTA COMMUNICATIONS
Operating Revenues $ 2,585 $ 677 $ 238
Operating Income (4,036) (212) 27
Net Income $(4,167) $ (177) $ 30
</TABLE>
65
<PAGE> 70
AVISTA CORPORATION
- --------------------------------------------------------------------------------
NOTE 21. STOCK COMPENSATION PLANS
AVISTA CORP.
In 1998, the Company adopted and shareholders approved an incentive compensation
plan, the Long-Term Incentive Plan (Plan). Under the Plan, certain key
employees, directors and officers of the Company and its subsidiaries may be
granted stock options, stock appreciation rights, stock awards (including
restricted stock) and other stock-based awards and dividend equivalent rights.
The Company has made available a maximum of 2.5 million shares of its common
stock for grant under the Plan. The shares issued under the Plan will be
purchased by the trustee on the open market.
The following summarizes stock options activity for 1999 and 1998 under the
Plan:
<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C>
Number of shares under stock options:
Outstanding at beginning of year 589,800 --
Granted 780,700 589,800
Canceled (10,175) --
--------- -------
Unexercised options outstanding at end of year 1,360,325 589,800
--------- -------
Exercisable options 147,200 --
========= =======
Weighted average exercise price:
Granted $17.21 $20.14
Canceled $18.63 $ --
Outstanding at end of year $18.29 $20.14
Exercisable at end of year $19.63 $ --
Weighted average fair value of options granted during the year $ 5.02 $ 4.74
Principal assumptions used in applying the Black-Scholes model:
Risk-free interest rate 5.57% - 6.33% 4.81% - 5.53%
Expected life, in years 7 7
Expected volatility 27.92% 22.19%
Expected dividend yield 3.11% 3.01%
</TABLE>
Information with respect to stock options outstanding and stock options
exercisable at December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Stock options outstanding
<S> <C>
Range of exercise prices $16.66 - $22.62
Weighted average remaining contractual life, in years 9.33
Weighted average exercise price $18.29
Stock options exercisable
Range of exercise prices $18.31 - $22.62
Number exercisable 147,200
Weighted average exercise price $19.63
</TABLE>
The Company granted 20,000 and 102,036 shares of restricted common stock under
the Plan in 1999 and 1998, respectively. Plan participants are entitled to
dividends and to vote their respective shares. The sale or transfer of
restricted stock is prohibited during the vesting period except as specified in
the award agreements. The value of restricted stock awards is established by the
average market price on the date of grant. Restricted stock awarded in 1999 and
1998 have vesting periods from 4 to 5 years.
66
<PAGE> 71
AVISTA CORPORATION
- --------------------------------------------------------------------------------
Common equity was reduced in the accompanying Consolidated Balance Sheets by the
cost of restricted shares acquired by the Plan trustee on the open market.
Accordingly, the Company is recording compensation expense ratably over the
restriction periods based on the reduction to common equity.
The Company accounts for stock based compensation using APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under this method, compensation cost
is recognized on the excess, if any, of the market price of the stock at grant
date over the exercise price of the option. As the exercise price for options
granted under the Plan was equal to the market price at grant date, no
compensation expense has been recorded by the Company in connection this the
Plan. In accordance with FAS No. 123, "Accounting for Stock-Based Compensation,"
compensation expense is determined based on the fair value of the award and
recognizes that cost over the service period. Had compensation costs for these
plans been determined based on the fair value at the grant dates with FAS No.
123, the Company's net income would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net income (in thousands):
As reported $ 26,030 $ 78,139
Pro forma $ 24,636(2) $ 76,891(2)
Basic EPS as reported $ 0.12 $ 1.28
Proforma Basic EPS $ 0.08 $ 1.25
Diluted EPS as Reported $ 0.12 $ 1.28
Proforma Diluted EPS $ 0.08 $ 1.25
</TABLE>
(2) Includes pro forma effect of subsidiary companies stock option plans.
AVISTA CAPITAL COMPANIES
Certain subsidiaries under Avista Capital have adopted employee stock incentive
plans under which key employees and directors were granted the opportunity to
purchase shares of subsidiary common stock at prices equal to the fair market
value as determined by each subsidiary's Board of Directors. Restricted shares
are subject to transfer agreements and vest over various periods as defined in
the plans. The subsidiaries record compensation expense based on the increase in
the adjusted net book value of the shares subject to the plans.
Certain subsidiaries under Avista Capital have adopted employee stock incentive
plans under which certain employees and directors of the Company and the
subsidiaries are granted options to purchase subsidiary shares at prices no less
than the fair market value on the date of grant. Options outstanding under these
plans usually become fully exercisable between three and five years from the
date granted and terminate ten years from the date granted. Upon termination of
employment, vested options may be exercised and the related subsidiary shares
may be, but are not required to be, repurchased by the applicable subsidiary at
fair value.
NOTE 22. COMMITMENTS AND CONTINGENCIES
The Company believes, based on the information presently known, the ultimate
liability for the matters discussed in this note, individually or in the
aggregate, taking into account established accruals for estimated liabilities,
will not be material to the consolidated financial position of the Company, but
could be material to results of operations or cash flows for a particular
quarter or annual period. No assurance can be given, however, as to the ultimate
outcome with respect to any particular lawsuit.
SPOKANE GAS PLANT
The Spokane Natural Gas Plant site (which was operated as a coal gasification
plant for approximately 60 years until 1948) was acquired by the Company through
a merger in 1958. The Company no longer owns the property. Initial core samples
taken from the site indicate environmental contamination at the site. On January
15, 1999, the Company received notice from the State of Washington's Department
of Ecology (DOE) that it had been designated as a potentially liable person
(PLP) with respect to any hazardous substances located on this site, stemming
from the Company's past ownership of the former Gas Plant. In its notice, the
DOE stated that it intended to complete an on-going remedial investigation of
this site, complete a feasibility study to determine the most effective means of
halting or controlling future releases of substances from the site, and
implement appropriate remedial measures.
67
<PAGE> 72
AVISTA CORPORATION
- --------------------------------------------------------------------------------
The Company responded to the DOE acknowledging its listing as a PLP, but
requested that additional parties also be listed as PLPs. In the spring of 1999,
the DOE named two other parties as additional PLPs. The Company completed
additional characterization of the site for the remedial investigation (RI).
The DOE issued a Draft Agreed Order to the Company on January 17, 2000, and
solicited public comment. The Draft Order will require the completion of an RI
and the performance of a focused Feasibility Study (FS) at the site. The work to
be performed under the proposed Order includes three major technical parts:
completion of the RI; performance of a focused FS; and, implementation of an
interim groundwater monitoring plan. Following this public comment opportunity,
the Draft Agreed Order will be finalized, incorporating any appropriate
modifications based on written comments received. Completion of the RI and
focused FS work is anticipated within approximately four months from the date
the Order is finalized.
EASTERN PACIFIC ENERGY
On October 9, 1998, Eastern Pacific Energy (Eastern Pacific), an energy
aggregator participating in the restructured retail energy market in California,
filed suit against the Company and its affiliates, Avista Advantage and Avista
Energy in the United States District Court for the Central District of
California. Eastern Pacific alleges, among other things, a breach of an oral or
implied joint venture agreement whereby the Company agreed to supply not less
than 300 megawatts of power to Eastern Pacific's California customers and that
Avista Advantage agreed to provide energy-related products and services. The
complaint seeks an unspecified amount of damages and also seeks to recover any
future profits earned from sales of the aforementioned amount of power to
California consumers.
On December 4, 1998, Avista Advantage, Avista Energy and the Company jointly
filed a motion to dismiss the complaint for failure to state a claim upon which
relief can be granted. On May 4, 1999, the Court granted the Company's and its
affiliates' motion to dismiss the case and granted the plaintiff the opportunity
to file and serve an Amended Complaint, which it did. The Company and its
affiliates renewed their motion to dismiss and on October 22, 1999, the Court
again granted the motion to dismiss, this time with prejudice. Plaintiff has
appealed this adverse determination to the Ninth Circuit Court of Appeals.
THE POWER COMPANY OF AMERICA
On June 25, 1999, the trustee (Trustee) of the PCA Liquidating Trust (Trust),
the successor of The Power Company of America, L.P. (PCA), demanded that Avista
Energy pay the Trust approximately $22.4 million. Until June 1998, Avista Energy
and PCA had entered into forward contracts for the purchase/sale of electric
power. In early July 1998, PCA defaulted on its contract obligations with Avista
Energy and numerous other counterparties. Accordingly, on July 6, 1998, Avista
Energy suspended all business dealings with PCA. On August 17, 1998, an
involuntary petition was filed against PCA in the U.S. Bankruptcy Court for the
District of Connecticut, and on January 5, 1999, the Court approved a plan of
reorganization and established the Trust. Avista Energy has filed a Proof of
Claim for approximately $2.6 million, representing the net amount owing by PCA
to Avista Energy for power delivered to or received from PCA prior to July 6,
1998.
The Trustee's primary claim is based on the allegation that Avista Energy
wrongfully terminated the forward contracts on July 6, 1998, resulting in
alleged damages to PCA of about $18.5 million, recoverable under contract and/or
bankruptcy law, in connection with those contracts in which Avista Energy was
the seller and PCA was the buyer. Avista Energy reached a settlement agreement
with the Trustee, in full settlement of all claims of the Trustee and Avista
Energy, in which Avista Energy agreed to pay the Trustee $850,000. On February
1, 2000, the Bankruptcy Court conducted a hearing, which approved the terms of
the settlement. The Bankruptcy Court also approved the settlement reached
between the Company and the Trustee, with respect to separate creditors' claims
of Avista Corp. and offsetting demands of the Trustee. Under that settlement,
all claims were effectively netted against each other, with no additional
payment owing by the Company.
OTHER CONTINGENCIES
The Company routinely assesses, based on in-depth studies, expert analyses and
legal reviews, its contingencies, obligations and commitments for remediation of
contaminated sites, including assessments of ranges and probabilities of
recoveries from other responsible parties who have and have not agreed to a
settlement and recoveries from insurance carriers. The Company's policy is to
immediately accrue and charge to current expense identified exposures related to
environmental remediation sites based on estimates of investigation, cleanup and
monitoring costs to be incurred.
68
<PAGE> 73
AVISTA CORPORATION
- --------------------------------------------------------------------------------
The Company must be in compliance with requirements under the Clean Air Act
Amendments (CAAA) at both the Colstrip and Centralia thermal generating plants,
in which the Company maintains an ownership interest. The anticipated share of
costs at Colstrip are not expected to have a major economic impact on the
Company, but estimates for limestone scrubbers at both units at Centralia are
expected to be approximately $35 million, which have been included in the
Company's projected capital expenditures. However, a proposed sale of Centralia
to TransAlta, of Calgary, is pending. A decision on the sale is expected by
mid-year. Obligations under the CAAA would be assumed by TransAlta if the sale
is completed.
The Company has potential liabilities under the Federal Endangered Species Act
(ESA) for species of fish that have either already been added to the endangered
species list, been listed as "threatened" or been petitioned for listing. Thus
far, measures that have been adopted and implemented have had minimal impact of
the Company. The new operating license for the Clark Fork Projects describes the
approach to restore bull trout populations in the project areas. Using the
concept of adaptive management, the Company will evaluate the feasibility of
fish passage, and, depending upon the results of these experimental studies,
determine the applications of funds toward continuing fish passage efforts or
other population enhancement measures.
The Company continues to study the issue of high dissolved gas levels downstream
of Cabinet Gorge during spill periods, as agreed to in the Settlement Agreement
of the new license for Cabinet Gorge. To date, intensive biological studies in
the lower Clark Fork River and Lake Pend Oreille have documented minimal
biological effects of high dissolved gas levels on free ranging fish. Under the
terms of the Settlement Agreement, the Company will develop an abatement and/or
mitigation strategy by 2002.
Under the federal licenses for its hydroelectric projects, the Company is
obligated to protect its property rights, including water rights. The State of
Montana is examining the status of all water right claims within state
boundaries, which could potentially adversely affect the generating capacity of
the Company's Cabinet Gorge and Noxon Rapids hydroelectric facilities. The
Company is participating in this extended process, which is unlikely to be
concluded in the foreseeable future.
The Company has long-term contracts related to the purchase of fuel for thermal
generation, natural gas and hydroelectric power. Terms of the natural gas
purchase contracts range from one month to five years and the majority provide
for minimum purchases at the then effective market rate. The Company also has
various agreements for the purchase, sale or exchange of electric energy with
other utilities, cogenerators, small power producers and government agencies.
As of December 31, 1999, the Company's collective bargaining agreement with the
International Brotherhood of Electrical Workers represented approximately 51% of
employees. The current agreement with the union local representing the majority
of the bargaining unit employees expires on March 25, 2002. A local agreement in
the South Lake Tahoe area, which represents 6 employees, expires on March 25,
2002.
NOTE 23. ACQUISITIONS AND DISPOSITIONS
During the first quarter of 1999, Pentzer Corporation (Pentzer) sold its
Creative Solutions Group, a group of five portfolio companies that provide
point-of-purchase displays and other merchandising and packaging services to
retailers and consumer product companies. The sale resulted in a gain of $10.1
million, net of taxes. During the third quarter of 1999, Pentzer sold its Store
Fixtures Group, a group of six portfolio companies that design, manufacture and
deliver store fixture products to major retailers. The sale resulted in a gain
of $27.6 million, net of taxes. During the first quarter of 1998, Pentzer sold
Systran Financial Services, resulting in an after-tax gain of $5.5 million. In
May 1997, Pentzer sold its interest in a portfolio company, Safety Speed Cut,
resulting in a gain of approximately $2.0 million, net of taxes.
In November 1999, Pentzer purchased the International Retail Services Group, a
company that provides backroom supplies for retail stores. In April 1998,
Pentzer completed the purchase of two new companies that produce store fixtures
- -- Universal Showcase, Ltd., in Toronto, Canada and Triangle Systems, Inc., in
New York. In October 1998, Pentzer acquired two additional store fixtures
companies -- Horizon Terra, Inc., in Indiana and Pacific Coast Showcase, Inc.,
in Washington. During 1997, Pentzer acquired three new companies: Target
Woodworks, Inc., a Florida-based company; White Plus, a California-based
company; and Proco Wood Products, a Minnesota-based company. All three companies
provide point-of-purchase and in-store merchandising services.
69
<PAGE> 74
AVISTA CORPORATION
- --------------------------------------------------------------------------------
In January 1999, Avista Corp. acquired a majority ownership in One Eighty
Communications, a competitive local exchange carrier that provided local dial
tone and data services to commercial accounts in local communities. The new
company was renamed Avista Communications. It provides local high-speed
telecommunications services to under-served Northwest communities.
In December 1998, Avista Energy Canada, Ltd. acquired Coast Pacific Management,
Inc. (Coast Pacific), a natural gas marketing company based in Vancouver,
British Columbia, Canada. Coast Pacific manages and transports approximately
70,000 MMBtu of natural gas per day to some 70 large and medium size industrial
customers throughout British Columbia. Coast Pacific also acts as gas manager
for more than 40% of the large industrial market in the interior of British
Columbia.
In February 1999, Avista Energy purchased Vitol Gas & Electric, LLC (Vitol),
based in Boston, Massachusetts. Vitol was one of the top 20 energy marketing
companies in the United States. Vitol trades natural gas, electricity, coal and
SO2 allowances in markets in the eastern half of the United States. The
acquisition was funded through the issuance of additional shares of common stock
to Avista Capital.
70
<PAGE> 75
AVISTA CORPORATION
- --------------------------------------------------------------------------------
NOTE 24. SELECTED QUARTERLY INFORMATION (UNAUDITED)
The Company's energy operations are significantly affected by weather
conditions. Consequently, there can be large variances in revenues, expenses and
net income between quarters based on seasonal factors such as temperatures and
streamflow conditions. A summary of quarterly operations (in thousands of
dollars except per share amounts) for 1999 and 1998 follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
31 30 30 31
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999
Operating revenues.............................. $1,212,822 $1,411,736 $3,718,109 $1,562,317
Operating income................................ 30,363 17,380 18,197 (34,583)
Net income ..................................... 19,388 8,509 27,613 (29,479)
Income available for common stock............... 14,004 3,125 22,273 (34,763)
Outstanding common stock (000s):
Weighted average............................. 40,454 40,185 36,634 35,648
Actual....................................... 40,454 38,881 35,645 35,648
Earnings per share:
Avista Utilities............................. $0.35 $0.39 $(0.13) $0.39
Energy Trading and Marketing................. (0.18) (0.27) 0.02 (1.16)
Information and Technology................... (0.03) (0.04) (0.06) (0.14)
Pentzer and Other............................ 0.21 -- 0.78 (0.01)
---------- ---------- ---------- ----------
Earnings per share, basic.................... $0.35 $0.08 $0.61 $(0.92)
Earnings per share, diluted.................. $0.34 $0.08 $0.52 $(0.92)
Dividends paid per common share................. $0.12 $0.12 $0.12 $0.12
Trading price range per share:
High......................................... $19.563 $18.188 $18.063 $18.125
Low.......................................... $15.938 $14.625 $16.250 $15.000
1998
Operating revenues.............................. $571,678 $632,995 $1,434,055 $1,045,256
Operating income................................ 56,633 41,942 24,303 49,942
Net income ..................................... 32,232 15,643 8,707 21,557
Income available for common stock............... 31,408 14,855 8,099 15,378
Outstanding common stock (000s):
Weighted average............................. 55,960 55,960 55,960 50,669
Actual....................................... 55,960 55,960 55,960 40,454
Earnings per share:
Avista Utilities............................. $0.40 $0.17 $0.10 $0.21
Energy Trading and Marketing................. 0.04 0.08 0.01 0.13
Information and Technology................... (0.01) (0.01) (0.02) (0.02)
Pentzer and Other............................ 0.13 0.03 0.05 (0.01)
---------- ---------- ---------- ----------
Earnings per share, basic and diluted........ $0.56 $0.27 $0.14 $0.31
Dividends paid per common share................. $0.31 $0.31 $0.31 $0.12
Trading price range per share:
High......................................... $24.813 $24.875 $22.813 $20.188
Low.......................................... $21.688 $20.813 $16.250 $17.500
</TABLE>
The effects of the conversion from common stock to convertible preferred stock
are reflected in the fourth quarter 1998 results. See Notes 14 and 18.
71
<PAGE> 76
AVISTA CORPORATION
- --------------------------------------------------------------------------------
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of the Registrant has been omitted pursuant
to General Instruction G to Form 10-K. Reference is made to the Registrant's
Proxy Statement to be filed with the Securities and Exchange Commission in
connection with the Registrant's annual meeting of shareholders to be held on
May 11, 2000.
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Name Age Business Experience During Past 5 Years
- ---- --- ---------------------------------------
<S> <C> <C>
Thomas M. Matthews 56 Chairman of the Board, President and
Chief Executive Officer since October
1998; Chairman of the Board and Chief
Executive Officer July 1998 - October
1998; prior to employment with the
Registrant: President - Dynegy 1996 -
July 1998; Vice President - Texaco, Inc.
1994 - 1996.
Gary G. Ely 52 Executive Vice President since February
1999; Senior Vice President and General
Manager August 1996 - February 1999;
Vice President - Natural Gas February
1991- August 1996.
Jon E. Eliassen 53 Senior Vice President and Chief
Financial Officer since November 1998;
Senior Vice President, Chief Financial
Officer and Treasurer December 1997 -
November 1998; Senior Vice President and
Chief Financial Officer August 1996 -
December 1997; Vice President - Finance
and Chief Financial Officer February
1986 - August 1996.
David J. Meyer 46 Senior Vice President and General
Counsel since September 1998; prior to
employment with the Registrant: Attorney
- Paine Hamblen Coffin Brooke & Miller
1974 - September 1998.
David A. Brukardt 45 Vice President - Investor Relations
since July 1999; prior to employment
with the Registrant: Director - Investor
and Corporate Relations - Harnischfeger
Industries, Inc. and Vice President -
Harnischfeger Foundation July 1995 -
July 1999; Senior Vice President and
Principal - CCU, Inc. May 1998 - July
1995.
Christy M. Burmeister-Smith 43 Vice President and Controller since June
1999; Controller - Energy Delivery and
various other positions with the Company
since 1980.
Robert D. Fukai 50 Vice President - External Relations
since August 1996; Vice President -
Human Resources, Corporate Services and
Marketing January 1993 - August 1996.
JoAnn G. Matthiesen 59 Vice President - Human Resources and
Support Services since May 1999; Vice
President - Human Resources since August
1996; Vice President - Organization
Effectiveness, Public Relations and
Assistant to the Chairman January 1993 -
August 1996.
Ronald R. Peterson 47 Vice President and Treasurer since
November 1998; Vice President and
Controller February 1998 - November
1998; Controller August 1996 - February
1998; Treasurer February 1992 - August
1996.
Terry L. Syms 51 Vice President and Corporate Secretary
since February 1998; Corporate Secretary
March 1988 - February 1998.
</TABLE>
72
<PAGE> 77
<TABLE>
<S> <C> <C>
Edward H. Turner 44 Vice President and General Manager -
Energy Delivery since November 1998;
prior to employment with the Registrant:
Director of Industrial Sales and various
other positions - Houston Lighting &
Power Company and Houston Industries
Incorporated for 24 years.
Roger D. Woodworth 43 Vice President - Corporate Development
since November 1998; Director of
Corporate Development and various other
positions with the Company since 1979.
</TABLE>
All of the Company's executive officers, with the exception of Messrs. Brukardt,
Fukai and Woodworth and Mmes. Burmeister-Smith and Matthiesen were officers or
directors of one or more of the Company's subsidiaries in 1999.
Executive officers are elected annually by the Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation has been omitted pursuant to
General Instruction G to Form 10-K. Reference is made to the Registrant's Proxy
Statement to be filed with the Securities and Exchange Commission in connection
with the Registrant's annual meeting of shareholders to be held on May 11, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners (owning 5% or more of
Registrant's voting securities):
Information regarding security ownership of certain beneficial owners (owning
5% or more of Registrant's voting securities) has been omitted pursuant to
General Instruction G to Form 10-K. Reference is made to the Registrant's Proxy
Statement to be filed with the Securities and Exchange Commission in connection
with the Registrant's annual meeting of shareholders to be held on May 11, 2000.
(b) Security ownership of management:
Information regarding security ownership of management has been omitted
pursuant to General Instruction G to Form 10-K. Reference is made to the
Registrant's Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Registrant's annual meeting
of shareholders to be held on May 11, 2000.
(c) Changes in control:
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions has been
omitted pursuant to General Instruction G to Form 10-K. Reference is made to the
Registrant's Proxy Statement to be filed with the Securities and Exchange
Commission in connection with the Registrant's annual meeting of shareholders to
be held on May 11, 2000.
73
<PAGE> 78
AVISTA CORPORATION
- --------------------------------------------------------------------------------
PART IV
ITEM 14. FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements (Included in Part II of this report):
Independent Auditors' Report
Consolidated Statements of Income, Comprehensive Income and Retained
Earnings for the Years Ended December 31, 1999, 1998 and 1997
Consolidated Balance Sheets, December 31, 1999 and 1998
Consolidated Statements of Capitalization, December 31, 1999 and 1998
Consolidated Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997
Schedule of Information by Business Segments for the Years Ended
December 31, 1999, 1998 and 1997
Notes to Financial Statements
(a) 2. Financial Statement Schedules:
None
(a) 3. Exhibits:
Reference is made to the Exhibit Index commencing on page 77. The
Exhibits include the management contracts and compensatory plans or
arrangements required to be filed as exhibits to this Form 10-K by Item
601(10)(iii) of Regulation S-K.
(b) Reports on Form 8-K:
Dated January 6, 1999, regarding the Company's name change to Avista
Corporation.
Dated June 15, 1999, regarding anticipated lower second quarter
earnings.
Dated November 15, 1999, announcing the adoption of a shareholder rights
plan to replace the plan that expired on February 16, 2000.
Dated December 2, 1999, announcing a redirection of Avista Energy's
focus away from national energy trading toward a more regionally based
energy marketing and trading effort backed by physical assets.
Dated January 6, 2000, regarding lower utility revenues due to warm
weather and fourth quarter charger due to restructuring at Avista Energy
and impairment of utility assets.
Dated January 28, 2000, announcing the conversion of the Series L
Preferred Stock back into common stock.
74
<PAGE> 79
AVISTA CORPORATION
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AVISTA CORPORATION
March 17, 2000 By /s/ T. M. Matthews
- -------------------------- ------------------------------------
Date T. M. Matthews
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ T. M. Matthews Principal Executive March 17, 2000
- ------------------------------------------- Officer and Director
T. M. Matthews (Chairman of the Board,
President and Chief Executive Officer)
/s/ J. E. Eliassen Principal Financial March 17, 2000
- ------------------------------------------- and Accounting Officer
J. E. Eliassen (Senior Vice President
and Chief Financial Officer)
/s/ David A. Clack Director March 17, 2000
- -------------------------------------------
David A. Clack
/s/ Sarah M. R. Jewell Director March 17, 2000
- -------------------------------------------
Sarah M. R. Jewell
/s/ John F. Kelly Director March 17, 2000
- -------------------------------------------
John F. Kelly
/s/ Jessie J. Knight, Jr. Director March 17, 2000
- -------------------------------------------
Jessie J. Knight, Jr.
/s/ Eugene W. Meyer Director March 17, 2000
- -------------------------------------------
Eugene W. Meyer
/s/ Bobby Schmidt Director March 17, 2000
- -------------------------------------------
Bobby Schmidt
/s/ Larry A. Stanley Director March 17, 2000
- -------------------------------------------
Larry A. Stanley
/s/ R. John Taylor Director March 17, 2000
- -------------------------------------------
R. John Taylor
/s/ Daniel J. Zaloudek Director March 17, 2000
- -------------------------------------------
Daniel J. Zaloudek
</TABLE>
75
<PAGE> 80
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
2-81697, 2-94816, 33-54791, and 33-32148 on Form S-8, and in Registration
Statement Nos. 33-53655, 333-39551, 333-82165, 333-16353, and 333-16353-03 on
Form S-3 of our report dated February 4, 2000 (February 16, 2000 as to Note 15),
appearing in this Annual Report on Form 10-K of Avista Corporation for the year
ended December 31, 1999.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Seattle, Washington
March 17, 2000
76
<PAGE> 81
AVISTA CORPORATION
- --------------------------------------------------------------------------------
EXHIBIT INDEX
<TABLE>
<CAPTION>
Previously Filed*
-------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------ -------
<S> <C> <C> <C>
3(a) 1-3701 (with Restated Articles of Incorporation of Avista Corporation as
1998 Form 10-K) restated February 25, 1999.
3(b) 1-3701 (with 1999 Bylaws of Avista Corporation, as amended May 13, 1999.
2nd Quarter 10-Q)
4(a)-1 2-4077B-3 Mortgage and Deed of Trust, dated as of June 1, 1939.
4(a)-2 2-98124(c) First Supplemental Indenture, dated as of October 1, 1952.
4(a)-3 2-60728 2(b)-2 Second Supplemental Indenture, dated as of May 1, 1953.
4(a)-4 2-13421 4(b)-3 Third Supplemental Indenture, dated as of December 1, 1955.
4(a)-5 2-13421 4(b)-4 Fourth Supplemental Indenture, dated as of March 15, 1967.
4(a)-6 2-60728 2(b)-5 Fifth Supplemental Indenture, dated as of July 1, 1957.
4(a)-7 2-60728 2(b)-6 Sixth Supplemental Indenture, dated as of January 1, 1958.
4(a)-8 2-60728 2(b)-7 Seventh Supplemental Indenture, dated as of August 1, 1958.
4(a)-9 2-60728 2(b)-8 Eighth Supplemental Indenture, dated as of January 1, 1959.
4(a)-10 2-60728 2(b)-9 Ninth Supplemental Indenture, dated as of January 1, 1960.
4(a)-11 2-60728 2(b)-10 Tenth Supplemental Indenture, dated as of April 1, 1964.
4(a)-12 2-60728 2(b)-11 Eleventh Supplemental Indenture, dated as of March 1, 1965.
4(a)-13 2-60728 2(b)-12 Twelfth Supplemental Indenture, dated as of May 1, 1966.
4(a)-14 2-60728 2(b)-13 Thirteenth Supplemental Indenture, dated as of August 1, 1966.
4(a)-15 2-60728 2(b)-14 Fourteenth Supplemental Indenture, dated as of April 1, 1970.
4(a)-16 2-60728 2(b)-15 Fifteenth Supplemental Indenture, dated as of May 1, 1973.
4(a)-17 2-60728 2(b)-16 Sixteenth Supplemental Indenture, dated as of February 1, 1975.
4(a)-18 2-60728 2(b)-17 Seventeenth Supplemental Indenture, dated as of November 1, 1976.
4(a)-19 2-69080 2(b)-18 Eighteenth Supplemental Indenture, dated as of June 1, 1980.
4(a)-20 1-3701 (with 4(a)-20 Nineteenth Supplemental Indenture, dated as of January 1,
1980 Form 10-K) 1981.
4(a)-21 2-79571 4(a)-21 Twentieth Supplemental Indenture, dated as of August 1, 1982.
</TABLE>
- -----------------
*Incorporated herein by reference.
**Filed herewith.
77
<PAGE> 82
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
Previously Filed*
-------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------ -------
<S> <C> <C> <C>
4(a)-22 1-3701 (with 4(a)-22 Twenty-First Supplemental Indenture, dated as of
Form 8-K dated September 1, 1983.
September 20, 1983)
4(a)-23 2-94816 4(a)-23 Twenty-Second Supplemental Indenture, dated as of
March 1, 1984.
4(a)-24 1-3701 (with 4(a)-24 Twenty-Third Supplemental Indenture, dated as of
1986 Form 10-K) December 1, 1986.
4(a)-25 1-3701 (with 4(a)-25 Twenty-Fourth Supplemental Indenture, dated as of
1987 Form 10-K) January 1, 1988.
4(a)-26 1-3701 (with 4(a)-26 Twenty-Fifth Supplemental Indenture, dated as of
1989 Form 10-K) October 1, 1989.
4(a)-27 33-51669 4(a)-27 Twenty-Sixth Supplemental Indenture, dated as of
April 1, 1993.
4(a)-28 1-3701 (with 4(a)-28 Twenty-Seventh Supplemental Indenture, dated as of
1993 Form 10-K) January 1, 1994.
4(b)-1 ** Loan Agreement between City of Forsyth, Montana, and the
Company, dated as of September 1, 1999 (Series 1999A).
4(b)-2 ** Indenture of Trust, Pollution Control Revenue Refunding
Bonds (Series 1999A) between City of Forsyth, Montana, and
Chase Manhattan Bank and Trust Company, N.A., dated as of
September 1, 1999.
4(b)-3 ** Loan Agreement between City of Forsyth, Montana, and the
Company, dated as of September 1, 1999 (Series 1999B).
4(b)-4 ** Indenture of Trust, Pollution Control Revenue Refunding
Bonds (Series 1999B) between City of Forsyth, Montana, and
Chase Manhattan Bank and Trust Company, N.A., dated as of
September 1, 1999.
4(c)-1 1-3701 (with 4(h)-1 Indenture between the Company and Chemical Bank dated
1988 Form 10-K) as of July 1, 1988 (Series A and B Medium-Term Notes).
4(d)-1 1-3701 (with Credit Agreement between the Company and Toronto
1998 Form 10-K) Dominion (Texas), Bank of America National Trust and
Savings Association and The Bank of New York with Toronto
Dominion as the agent, dated June 30, 1998.
4(d)-2 ** Amended and Restated Credit Agreement between the Company
and Toronto Dominion (Texas), Bank of America National
Trust and Savings Association and The Bank of New York
with Toronto Dominion as the agent, dated June 29, 1999.
</TABLE>
- ------------------
*Incorporated herein by reference.
**Filed herewith.
78
<PAGE> 83
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
Previously Filed*
-------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------ -------
<S> <C> <C> <C>
4(e) 1-3701 (with Form 4 Rights Agreement, dated as of November 15, 1999, between
8-K dated November the Company and the Bank of New York as successor
15,1999) Rights Agent.
10(a)-l 2-13788 13(e) Power Sales Contract (Rocky Reach Project) with
Public Utility District No. 1 of Chelan County, Washington,
dated as of November 14, 1957.
10(a)-2 2-60728 10(b)-1 Amendment to Power Sales Contract (Rocky Reach
Project) with Public Utility District No. 1 of Chelan
County, Washington, dated as of June 1, 1968.
10(b)-1 2-13421 13(d) Power Sales Contract (Priest Rapids Project) with
Public Utility District No. 2 of Grant County,
Washington, dated as of May 22, 1956.
10(b)-2 2-60728 5(d)-1 Second Amendment to Power Sales Contract (Priest Rapids
Project) with Public Utility District No. 2 of Grant
County, Washington, dated as of December 19, 1977.
10(c)-1 2-60728 5(e) Power Sales Contract (Wanapum Project) with
Public Utility District No. 2 of Grant County,
Washington, dated as of June 22, 1959.
10(c)-2 2-60728 5(e)-1 First Amendment to Power Sales Contract (Wanapum
Project) with Public Utility District No. 2 of
Grant County, Washington, dated as of December 19, 1977.
10(d)-1 2-60728 5(g) Power Sales Contract (Wells Project) with Public Utility
District No. 1 of Douglas County, Washington, dated as
of September 18, 1963.
10(d)-2 2-60728 5(g)-1 Amendment to Power Sales Contract (Wells Project)
with Public Utility District No. 1 of Douglas County,
Washington, dated as of February 9, 1965.
10(d)-3 2-60728 5(h) Reserved Share Power Sales Contract (Wells Project)
with Public Utility District No. 1 of Douglas County,
Washington, dated as of September 18, 1963.
10(d)-4 2-60728 5(h)-1 Amendment to Reserved Share Power Sales Contract
(Wells Project) with Public Utility District No. 1 of Douglas
County, Washington, dated as of February 9, 1965.
10(e) 2-60728 5(i) Canadian Entitlement Exchange Agreement executed by
Bonneville Power Administration Columbia Storage Power
Exchange and the Company, dated as of August 13, 1964.
10(f) 2-60728 5(j) Pacific Northwest Coordination Agreement, dated as of
September 15, 1964.
</TABLE>
- ----------
*Incorporated herein by reference.
**Filed herewith.
79
<PAGE> 84
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
Previously Filed*
-------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------ -------
<S> <C> <C> <C>
10(g)-1 2-60728 5(k) Ownership Agreement between the Company, Pacific
Power & Light Company, Puget Sound Power & Light
Company, Portland General Electric Company, Seattle City
Light, Tacoma City Light and Grays Harbor and Snohomish
County Public Utility Districts as owners of the Centralia
Steam Electric Generating Plant, dated as of May 15, 1969.
10(g)-2 1-3701 (with Form 10(h)-3 Centralia Fuel Supply Agreement between PacifiCorp
10-K for 1991) Electric Operations, as the Seller, and the Company, Puget
Sound Power & Light Company, Portland General Electric
Company, Seattle City Light, Tacoma City Light and Grays
Harbor and Snohomish County Public Utility Districts,
as the Buyers of coal for the Centralia Steam Electric
Generating Plant, dated as of January 1, 1991.
10(h)-l 2-47373 13(y) Agreement between the Company, Bonneville Power
Administration and Washington Public Power Supply
System for purchase and exchange of power from the Nuclear
Project No. 1 (Hanford), dated as of January 6, 1973.
10(h)-2 2-60728 5(m)-1 Amendment No. 1 to the Agreement between the Company
between the Company, Bonneville Power Administration and
Washington Public Power Supply System for purchase and
exchange of power from the Nuclear Project No. 1 (Hanford),
dated as of May 8, 1974.
10(h)-3 1-3701 (with 10(i)-3 Agreement between Bonneville Power Administration,
Form 10-K for the Montana Power Company, Pacific Power & Light,
1986) Portland General Electric, Puget Sound Power & Light, the
Company and the Supply System for relocation costs of
Nuclear Project No. 1 (Hanford) dated as of July 9, 1986.
10(i)-1 2-60728 5(n) Ownership Agreement of Nuclear Project No. 3, sponsored
by Washington Public Power Supply System, dated as of
September 17, 1973.
10(i)-2 1-3701 (with 1 Settlement Agreement and Covenant Not to Sue executed
Form 10-Q for by the United States Department of Energy acting
quarter ended by and through the Bonneville Power Administration
September 30, and the Company, dated as of September 17, 1985,
1985) describing the settlement of Project 3 litigation.
10(i)-3 1-3701 (with 2 Agreement to Dismiss Claims and Covenant
Form 10-Q for Not to Sue between the Washington Public
quarter ended Power Supply System and the Company, dated
September 30, as of September 17, 1985, describing the settlement
1985) of Project 3 litigation with the Supply System.
</TABLE>
- -----------
*Incorporated herein by reference.
**Filed herewith.
80
<PAGE> 85
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
Previously Filed*
-------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------ -------
<S> <C> <C> <C>
10(i)-4 1-3701 (with 3 Agreement among Puget Sound Power & Light
Form 10-Q for Company, the Company, Portland General Electric
quarter ended Company and PacifiCorp, dba Pacific Power & Light
September 30, Company, agreeing to execute contemporaneously
1985) an irrevocable offer, to and for the benefit of
the Bonneville Power Administration, dated as of
September 17, 1985.
10(j)-1 2-66184 5(r) Service Agreement (Natural Gas Storage Service), dated as
of August 27, 1979, between the Company and Northwest
Pipeline Corporation.
10(j)-2 2-60728 5(s) Service Agreement (Liquefaction-Storage Natural Gas Service),
dated as of December 7, 1977, between the Company and
Northwest Pipeline Corporation.
10(j)-3 1-3701 (with 10(k)-4 Amendment dated as of January 1, 1990, to Firm
1989 Form 10-K) Transportation Agreement, dated as of June 15, 1988,
between the Company and Northwest Pipeline Corporation.
10(j)-4 1-3701 (with 10(k)-6 Firm Transportation Service Agreement, dated as of
1992 Form 10-K) April 25, 1991, between the Company and Pacific Gas
Transmission Company.
10(j)-5 1-3701 (with 10(k)-7 Service Agreement Applicable to Firm Transportation Service,
1992 Form 10-K) dated June 12, 1991, between the Company and Alberta
Natural Gas Company Ltd.
10(k)-1 1-3701 (with 13(b) Letter of Intent for the Construction and Ownership
Form 8-K for of Colstrip Units No. 3 and 4, sponsored by The
August 1976) Montana Power Company, dated as of April 16, 1974.
10(k)-2 1-3701 (with 10(s)-7 Ownership and Operation Agreement for Colstrip
1981 Form 10-K) Units No. 3 and 4, sponsored by The Montana
Power Company, dated as of May 6, 1981.
10(k)-3 1-3701 (with 10(s)-2 Coal Supply Agreement for Colstrip Units No. 3 and 4
1981 Form 10-K) between The Montana Power Company, Puget Sound
Power & Light Company, Portland General Electric Company,
Pacific Power & Light Company, Western Energy
Company and the Company, dated as of July 2, 1980.
10(k)-4 1-3701 (with 10(s)-3 Amendment No. 1 to Coal Supply Agreement for
1981 Form 10-K) Colstrip Units No. 3 and 4, dated as of July 10, 1981.
10(k)-5 1-3701 (with 10(l)-5 Amendment No. 4 to Coal Supply Agreement for Colstrip
1988 Form 10-K) Units No. 3 and 4, dated as of January 1, 1988.
10(l)-1 1-3701 (with 10(n)-2 Lease Agreement between the Company and IRE-4
1986 Form 10-K) New York, Inc., dated as of December 15, 1986,
relating to the Company's central operating facility.
</TABLE>
- ---------
* Incorporated herein by reference.
** Filed herewith.
81
<PAGE> 86
EXHIBIT INDEX (continued)
<TABLE>
<CAPTION>
Previously Filed*
-------------------------
With
Registration As
Exhibit Number Exhibit
- ------- ------ -------
<S> <C> <C> <C>
10(m) 1-3701 (with 10(v) Supplemental Agreement No. 2, Skagit/Hanford Project,
1983 Form 10-K) dated as of December 27, 1983, relating to the termination
of the Skagit/Hanford Project.
10(n) 1-3701 (with 10(p)-l Agreement for Purchase and Sale of Firm Capacity and
1986 Energy between Puget Sound Power & Light Company
Form 10-K) and the Company, dated as of August 1, 1986.
10(o) 1-3701 (with 10(q)-1 Electric Service and Purchase Agreement between
1991 Form 10-K) Potlatch Corporation and the Company, dated as of
January 3, 1991.
10(p) 1-3701 (with 10(s)-1 Agreements for Purchase and Sale of Firm Capacity
1992 Form 10-K) between the Company and Portland General Electric
Company dated March and June 1992.
10(q)-1 1-3701 (with 10(t)-8 Executive Deferral Plan of the Company. (***)
1992 Form 10-K)
10(q)-2 1-3701 (with 10(t)-10 The Company's Unfunded Supplemental
1992 Form 10-K) Executive Retirement Plan. (***)
10(q)-3 1-3701 (with 10(t)-11 The Company's Unfunded Supplemental
1992 Form 10-K) Executive Disability Plan. (***)
10(q)-4 1-3701 (with 10(t)-12 Income Continuation Plan of the Company. (***)
1992 Form 10-K)
10(q)-5 1-3701 (with Long-Term Incentive Plan. (***)
1998 Form 10-K)
10(q)-6 1-3701 (with Employment Agreement between the Company and
1998 Form 10-K) T. M. Matthews. (***)
10(q)-7 ** Employment Agreement between the Company and
David J. Meyer. (***)
12 ** Statement re computation of ratio of earnings to fixed
charges and preferred dividend requirements.
21 ** Subsidiaries of Registrant.
27 ** Financial Data Schedule.
</TABLE>
- ----------
* Incorporated herein by reference.
** Filed herewith.
*** Management contracts or compensatory plans filed as exhibits by
reference per Item 601(10)(iii) of Regulation S-K.
82
<PAGE> 1
Exhibit 4(b)-1
================================================================================
LOAN AGREEMENT
BETWEEN
CITY OF FORSYTH, MONTANA
AND
AVISTA CORPORATION
$66,700,000
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999A
================================================================================
The amounts payable to the Issuer and certain other rights of the Issuer
under this Loan Agreement (except for amounts payable to, and certain rights of,
the Issuer under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06,
Section 5.07, Section 5.08 and Section 7.05 hereof and any rights of the Issuer
to receive notices, certificates, requests, requisitions, directions and other
communications hereunder) have been pledged and assigned to Chase Manhattan Bank
and Trust Company, National Association, as Trustee under the Trust Indenture,
dated as of September 1, 1999, from the Issuer. For the purpose of perfecting
the security interest of such Trustee in such amounts payable and such rights
assigned to such Trustee under the Montana Uniform Commercial Code -- Secured
Transactions, the counterpart of this Loan Agreement actually delivered to the
Trustee shall be deemed the original thereof.
<PAGE> 2
================================================================================
LOAN AGREEMENT
BETWEEN
CITY OF FORSYTH, MONTANA
AND
AVISTA CORPORATION
$66,700,000
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999A
DATED AS OF SEPTEMBER 1, 1999
================================================================================
The amounts payable to the Issuer and certain other rights of the Issuer
under this Loan Agreement (except for amounts payable to, and certain rights of,
the Issuer under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06,
Section 5.07, Section 5.08 and Section 7.05 hereof and any rights of the Issuer
to receive notices, certificates, requests, requisitions, directions and other
communications hereunder) have been pledged and assigned to Chase Manhattan Bank
and Trust Company, National Association, as Trustee under the Trust Indenture,
dated as of September 1, 1999, from the Issuer. For the purpose of perfecting
the security interest of such Trustee in such amounts payable and such rights
assigned to such Trustee under the Montana Uniform Commercial Code -- Secured
Transactions, the counterpart of this Loan Agreement actually delivered to the
Trustee shall be deemed the original thereof.
This counterpart of the Loan Agreement has been actually delivered to
the Trustee and the Trustee acknowledges receipt thereof.
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
By
Authorized Officer
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Recitals.....................................................................................1
ARTICLE I DEFINITIONS............................................................2
ARTICLE II REPRESENTATIONS, WARRANTIES AND AGREEMENTS.............................2
Section 2.01. Representations, Warranties and Agreements of Issuer...................2
Section 2.02. Representations, Warranties and Agreements of Company..................4
ARTICLE III ISSUANCE OF THE BONDS; THE LOAN; DISPOSITION OF PROCEEDS
OF THE BONDS; THE PROJECT..............................................7
Section 3.01. Issuance of Bonds......................................................7
Section 3.02. Issuance of Other Obligations..........................................7
Section 3.03. The Loan; Disposition of Bond Proceeds and Certain Other
Moneys.............................................................7
Section 3.04. Changes to Project.....................................................7
ARTICLE IV LOAN PAYMENTS; PAYMENTS TO REMARKETING AGENT AND
TRUSTEE; OTHER OBLIGATIONS.............................................8
Section 4.01. Loan Payments..........................................................8
Section 4.02. Payments of Purchase Price.............................................8
Section 4.03. Payments Assigned; Obligation Absolute.................................8
Section 4.04. Payment of Expenses....................................................9
Section 4.05. Indemnification........................................................9
Section 4.06. Payment of Taxes and Charges in Lieu Thereof..........................10
Section 4.07. Credit Facility.......................................................10
Section 4.08. Compliance With Prior Agreement.......................................11
ARTICLE V SPECIAL COVENANTS.....................................................12
Section 5.01. Maintenance of Existence; Conditions Under Which
Exceptions Permitted..............................................12
Section 5.02. Permits or Licenses...................................................12
Section 5.03. Arbitrage Covenant....................................................13
Section 5.04. Financing Statements..................................................13
Section 5.05. Covenants With Respect to Tax-Exempt Status of the Bonds..............13
Section 5.06. Indemnification of Issuer.............................................13
Section 5.07. Records of Company; Maintenance and Operation of the
Project...........................................................14
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Section 5.08. Right of Access to the Project........................................14
Section 5.09. Remarketing Agent.....................................................15
Section 5.10. Credit Ratings........................................................15
Section 5.11. Purchases of PARS Rate Bonds..........................................15
Section 5.12. Credit Facility.......................................................15
ARTICLE VI ASSIGNMENT............................................................15
Section 6.01. Conditions............................................................15
Section 6.02. Documents Furnished to Trustee........................................16
Section 6.03. Limitation............................................................16
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES........................................16
Section 7.01. Events of Default.....................................................16
Section 7.02. Force Majeure.........................................................17
Section 7.03. Remedies..............................................................18
Section 7.04. No Remedy Exclusive...................................................18
Section 7.05. Reimbursement of Attorneys' Fees......................................18
Section 7.06. Waiver of Breach......................................................18
ARTICLE VIII PURCHASE OR REDEMPTION OF BONDS.......................................19
Section 8.01. Redemption of Bonds...................................................19
Section 8.02. Purchase of Bonds.....................................................19
Section 8.03. Obligation to Prepay..................................................19
Section 8.04. Compliance With Indenture.............................................20
ARTICLE IX MISCELLANEOUS.........................................................20
Section 9.01. Term of Agreement.....................................................20
Section 9.02. Notices...............................................................21
Section 9.03. Parties in Interest...................................................21
Section 9.04. Amendments............................................................21
Section 9.05. Counterparts..........................................................21
Section 9.06. Severability..........................................................21
Section 9.07. Governing Law.........................................................21
Signatures..................................................................................22
EXHIBIT A -- Project Description
</TABLE>
-ii-
<PAGE> 5
LOAN AGREEMENT
This LOAN AGREEMENT, dated as of September 1, 1999, is between the CITY
OF FORSYTH, MONTANA, a political subdivision duly organized and existing under
the Constitution and laws of the State (the "Issuer"), and AVISTA CORPORATION, a
corporation duly organized under the laws of the State of Washington and duly
qualified to conduct business in the State (the "Company").
RECITALS:
A. The Issuer is authorized by the provisions of the Act to issue one or
more series of its revenue bonds to finance all or part of the cost of projects
consisting of exempt facilities (as such term is used in the Code) located
within the territorial limits of the Issuer.
B. The Act provides that payment of the principal of and interest on
revenue bonds issued thereunder shall be secured by a pledge of the revenues out
of which such revenue bonds shall be payable and may be secured by a pledge of
an agreement relating to a project.
C. The Issuer has previously issued the Prior Bonds on behalf of the
Company for the purpose of refinancing a portion of the costs of acquiring and
improving the Project.
D. The Issuer is authorized by the Act to issue its revenue refunding
bonds to refund the Prior Bonds.
E. By proper action of its governing body taken pursuant to and in
accordance with the provisions of the Act, the Issuer has authorized and
undertaken to issue its Pollution Control Revenue Refunding Bonds (Avista
Corporation Colstrip Project) Series 1999A and the issuance of the Bonds to
refund the Prior Bonds is authorized by the provisions of the Act.
F. The issuance of the Bonds to refund the Prior Bonds will provide
financing on more advantageous terms for the cost of the Project financed by the
Prior Bonds.
G. The Bonds shall be issued under and pursuant to the Trust Indenture,
dated as of September 1, 1999, between the Issuer and Chase Manhattan Bank and
Trust Company, National Association, as Trustee, pursuant to which the Issuer
shall pledge and assign to the Trustee certain rights of the Issuer hereunder.
H. Pursuant to this Agreement, the Issuer will loan the proceeds of the
Bonds to the Company to provide financing for the Project, and the Company
agrees to make, or cause to be made, payments sufficient to pay when due
(whether at stated maturity, by acceleration or otherwise) the principal of and
premium, if any, and interest on the Bonds.
I. The Company agrees under this Agreement to pay, or cause to be paid,
when due, the purchase price of Bonds purchased pursuant to the terms of the
Indenture.
<PAGE> 6
J. The issuance, sale and delivery of the Bonds and the execution and
delivery of this Agreement and the Indenture have been in all respects duly and
validly authorized in accordance with the Act and the Bond Resolution.
K. The Company and Ambac Assurance Corporation, a Wisconsin stock
insurance company, as Provider of the Credit Facility, have agreed to enter into
that certain Insurance Agreement, dated as of September 1, 1999, pursuant to
which the Provider is to issue its Municipal Bond Insurance Policy to guarantee
payment of the principal of the Bonds upon the stated maturity thereof, the
redemption price of the Bonds upon certain mandatory redemption and interest on
the Bonds as the same accrues and becomes due and payable.
In consideration of the respective representations and agreements
contained in this Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
All words and terms used but not otherwise defined in this Agreement,
shall for all purposes of this Agreement have the meanings specified in Article
I of the Indenture, unless the context clearly requires otherwise. In addition,
the following words and terms shall have the following meanings when used in
this Agreement:
"Affiliate" means any entity controlling, controlled by or under common
control with the Company.
"Indenture" means the Trust Indenture, dated as of September 1, 1999,
between the Issuer and the Trustee, relating to the issuance of the Bonds as
such Trust Indenture may be supplemented and amended from time to time as
therein permitted.
The words "hereto," "hereunder" and other words of similar import refer
to this Agreement as a whole.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
SECTION 2.01. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ISSUER. The
Issuer represents, warrants and agrees that:
(a) The Issuer is a political subdivision of the State, duly
organized and validly existing under the Constitution and laws of the
State.
(b) Under the Act, the Issuer has the power to enter into the
transactions contemplated by this Agreement and the Indenture and to
carry out its obligations
-2-
<PAGE> 7
hereunder and thereunder, including the issuance and sale of the Bonds.
By proper action of its governing body, the Issuer has been duly
authorized to execute, deliver and duly perform this Agreement and the
Indenture and to issue and sell the Bonds and has made all
determinations and findings as and where required by Section 90-5-106 of
the Act.
(c) The aggregate principal amount of the Bonds authorized to be
issued under the Indenture for the purpose of refunding the Prior Bonds
does not exceed the aggregate principal amount of the Prior Bonds now
outstanding.
(d) The Prior Agreement and the Prior Indenture are each in full
force and effect and have not been amended or supplemented.
(e) The proceeds of the sale of the Bonds (i) will be deposited
with the Prior Trustee for deposit into the Prior Bond Fund to provide a
portion of the moneys necessary for the Refunding and (ii) will be
applied by the Prior Trustee to redeem the Prior Bonds pursuant to the
Prior Indenture on the Redemption Date. The Prior Bonds are now
outstanding in the principal amount of $66,700,000. Prior to the
issuance and delivery of the Bonds, the Prior Trustee will be given
irrevocable instructions and will be directed to call all of the Prior
Bonds for redemption on the Redemption Date.
(f) The Bonds are to be issued under and secured by the
Indenture, pursuant to which certain of the Issuer's right, title and
interest in this Agreement and the revenues derived by the Issuer
pursuant to this Agreement will be pledged and assigned to the Trustee
as security for payment of the principal and purchase price of, premium,
if any, and interest on the Bonds.
(g) Neither the execution and delivery of this Agreement or the
Indenture, the issuance and sale of the Bonds, the consummation of the
transactions contemplated hereby and thereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, the Tax
Certificate, the Indenture or the Bonds conflicts with or results in a
breach of the terms, conditions or provisions of any restriction or any
agreement or instrument to which the Issuer is now a party or by which
it is bound, or constitutes a default under any of the foregoing.
(h) The Issuer has not assigned or pledged and will not assign or
pledge its interest in this Agreement other than to secure the Bonds.
(i) To the knowledge of the Issuer, after due inquiry, no
litigation is pending or threatened against the Issuer to restrain or
enjoin the issuance or sale of the Bonds or in any way affecting any
authority for or the validity of the Bonds, the Indenture, this
Agreement or the existence or powers of the Issuer or the right of the
Issuer under the Act to refinance a portion of the costs of the Project
through the issuance of the Bonds.
(j) To the knowledge of the Issuer, after due inquiry, no event
has occurred and no condition exists which, upon the issuance of the
Bonds, would constitute an event of default on the part of the Issuer
under the Prior Indenture.
-3-
<PAGE> 8
(k) The Issuer will not knowingly take or omit to take any action
reasonably within its control the taking or omission of which would
adversely affect the Tax-Exempt status of the Bonds. The Issuer will
file or cause to be filed with the United States Department of Treasury
the information required by Section 149(e) of the Code.
(l) A public hearing relating to the Refunding for the Project
was held on May 4, 1999, following public notice thereof, pursuant to
Section 147(f) of the Code, and the public hearing and approval
requirements of Section 147(f) of the Code have been satisfied.
(m) Within the meaning of Sections 2-2-121 and 2-2-125, Montana
Code Annotated, as amended, no "public officer," "public employee,"
"officer" or "employee" of the Issuer is engaged as counsel, consultant,
representative, or agents of the Company, or has a substantial financial
interest in the Company. None of the officers, deputies, or employees of
the Issuer or employees having terminated their employment with the
Issuer within the six months immediately preceding this Agreement are
"interested in" this Agreement, the Indenture, the Bonds or the
transactions contemplated thereby, within the meaning of Section
2-2-201, Montana Code Annotated, as amended.
Concurrently with the initial authentication and delivery of the Bonds
under the Indenture, the Issuer shall execute and deliver a certificate
reaffirming the foregoing representations, warranties and agreements as of the
date thereof.
SECTION 2.02. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF COMPANY. The
Company represents, warrants and agrees that:
(a) It is a corporation duly organized and validly existing under
the laws of the State of Washington and duly qualified as a foreign
corporation in good standing in the State, is not in violation of any
provision of its Articles of Incorporation or its Bylaws, in each case
as the same have been amended, has full corporate power to own its
properties and conduct its business, and has the corporate power to
enter into, and by proper corporate action has duly authorized the
execution and delivery of, this Agreement and the Tax Certificate.
(b) Neither the execution and delivery of this Agreement or the
Tax Certificate, the consummation of the transactions contemplated
hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement or the Tax Certificate conflicts with or
will result in a breach of any of the terms, conditions or provisions of
any law or judgment to which the Company or its property or assets are
subject or of any corporate restriction contained in its Articles of
Incorporation or its Bylaws, in each case as the same have been amended,
or any agreement or instrument to which the Company is now a party or by
which it is bound, or constitutes, with or without the giving of notice
or lapse of time or both, a default under any of the foregoing, or
results in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of the property or assets of the Company under the
terms of any instrument or agreement.
-4-
<PAGE> 9
(c) This Agreement has been duly and validly authorized, executed
and delivered by the Company and is a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, usury or other similar laws affecting the
rights of creditors generally, equitable principles relating to the
availability of remedies and principles of public or governmental policy
limiting the enforceability of the indemnification and contribution
provisions.
(d) Other than the orders of the Washington Utilities and
Transportation Commission, the California Public Utilities Commission,
the Idaho Public Utilities Commission and the Oregon Public Utility
Commission and the approval by the Issuer, all of which orders and
approvals will have been received and be in effect prior to the initial
authentication and delivery of the Bonds, no consent, approval,
authorization or order of, or registration with, any court or
governmental or regulatory agency or body is required with respect to
the Company for the execution, delivery and performance by the Company
of this Agreement and the Tax Certificate.
(e) The Company has received an executed counterpart of the
Indenture and hereby consents to and approves of the provisions thereof.
(f) The information relating to the Project furnished by the
Company in writing to Chapman and Cutler, as Bond Counsel, in connection
with the issuance by the Issuer of the Bonds, is, to the best of the
Company's knowledge, true and correct.
(g) The Prior Agreement and the Prior Indenture are in full force
and effect and have not been amended or supplemented.
(h) To the best knowledge of the Company, no event has occurred
and is continuing under the provisions of the Prior Indenture that now
constitutes, or with the lapse of time or the giving of notice, or both,
would constitute, an event of default under the Prior Indenture.
(i) Upon the initial authentication and delivery of the Bonds,
the Company has given or will give timely notice as required by the
provisions of the Prior Agreement of the Company's intent to prepay the
amounts payable thereunder to provide for the redemption of the Prior
Bonds on the Redemption Date.
(j) The aggregate principal amount of Bonds authorized to be
issued under the Indenture does not exceed the aggregate principal
amount of the Prior Bonds now Outstanding.
(k) The Company does not, as of the date of issuance of the
Bonds, reasonably expect any use of moneys derived from the proceeds of
the Bonds or any investment or reinvestment thereof or from the sale of
the Project which would cause the Bonds to be classified as "arbitrage
bonds" within the meaning of Section 148 of the Code.
-5-
<PAGE> 10
(l) All of the proceeds of the Prior Bonds, including the
investment earnings thereon, have been disbursed in accordance with the
provisions of the Prior Indenture and the Prior Agreement and there are
no proceeds of the Prior Bonds, or investment earnings therefrom, or any
other moneys being held by the Prior Trustee under the Prior Indenture.
(m) The Pollution Control Facilities that comprise the Project
constitute Exempt Facilities and consist of those facilities described
in Exhibit A hereto (as such Exhibit A is from time to time amended or
supplemented in accordance with Section 3.04 hereof), and the Company
shall not consent to any changes in the Project which would adversely
affect the qualification of the Project as a "project" under the Act or
adversely affect the Tax-Exempt status of the Bonds.
(n) Substantially all of the proceeds of the Prior Bonds have
been expended for the purpose of acquiring, constructing and improving
the Project, which constitutes Exempt Facilities. None of the proceeds
of the Prior Bonds were used (i) to acquire land (or an interest
therein) or (ii) to acquire any property (or an interest therein) unless
the first use of such property was pursuant to such acquisition, all
within the meaning of Section 147 of the Code.
(o) The Montana Department of Health and Environmental Sciences
has certified that the pollution control facilities constituting part of
the Project, as designed, are in furtherance of the purpose of abating
or controlling atmospheric pollutants or contaminants, and water
pollution, as the case may be.
(p) No construction, reconstruction or acquisition (within the
meaning of the Code) of the Project was commenced prior to the taking of
official action by the Issuer with respect thereto and the Project has
been placed in service.
(q) The average maturity of the Bonds does not exceed 120% of the
average reasonably expected economic life of the Project.
(r) All of the Prior Bonds will be redeemed within 90 days of the
date of the initial authentication and delivery of the Bonds, and all of
the proceeds of the sale of the Bonds will be spent within 90 days of
the initial authentication and delivery of the Bonds.
(s) The Project (i) was designed to meet applicable federal,
state and local requirements for the control of pollution or the
disposal of solid waste, (ii) was and is to be used solely for purposes
contemplated by the Act, and (iii) is located within the boundaries of
Rosebud County, Montana.
(t) The representations, warranties and covenants of the Company
set forth in the Project Certificate are incorporated herein by
reference and are hereby made a part of this Agreement as if set forth
herein.
-6-
<PAGE> 11
(u) The Company will cooperate with the Issuer in filing or
causing to be filed with the United States Department of Treasury the
information required by Section 149(e) of the Code.
(v) The Company will pay the principal of and premium, if any,
and interest to the Redemption Date on all Prior Bonds that are validly
presented to the Company for payment after the Prior Trustee has paid to
the Company, in accordance with Section 4.08 of the Prior Indenture, any
moneys held in trust for the payment of the principal of and premium, if
any, and interest on the Prior Bonds.
Concurrently with the initial authentication and delivery of the Bonds
under the Indenture, the Company shall execute and deliver a certificate
reaffirming the foregoing representations, warranties and agreements as of the
date thereof.
ARTICLE III
ISSUANCE OF THE BONDS; THE LOAN;
DISPOSITION OF PROCEEDS OF THE BONDS; THE PROJECT
SECTION 3.01. ISSUANCE OF BONDS. In order to refinance a portion of the cost
of the Project by effecting the Refunding, the Issuer shall issue the Bonds
under and in accordance with the Act and pursuant to the Indenture. The Company
hereby approves the issuance of the Bonds and all terms and conditions thereof.
SECTION 3.02. ISSUANCE OF OTHER OBLIGATIONS. The Issuer and the Company
expressly reserve the right to enter into, to the extent permitted by law, an
agreement or agreements other than this Agreement with respect to the issuance
by the Issuer, under an indenture or indentures other than the Indenture, of
obligations to provide additional funds to pay costs of facilities in addition
to the Project or to provide for the refunding of all or any principal amount of
the Bonds. Such obligations will not be entitled to the benefits of the
Indenture or the Credit Facility.
SECTION 3.03. THE LOAN; DISPOSITION OF BOND PROCEEDS AND CERTAIN OTHER
MONEYS. The Issuer shall lend to the Company the proceeds of the issuance and
sale of the Bonds for the purposes specified in Section 3.01 of this Agreement.
The Issuer and the Company shall, simultaneously with the delivery of the Bonds,
cause such proceeds, other than accrued interest, if any, to be transferred to
the Prior Trustee for deposit into the Prior Bond Fund to be used to pay the
principal amount of the Prior Bonds upon their redemption on the Redemption
Date.
SECTION 3.04. CHANGES TO PROJECT. The Company may at its own expense cause
the Project to be remodeled or cause such substitutions, modifications and
improvements to be made to the Project from time to time as the Company, in its
discretion, may deem to be desirable for its uses and purposes, which
remodeling, substitutions, modifications and improvements shall be included
under the terms of this Agreement as part of the Project; provided, however,
that no such remodeling, substitutions, modifications or improvements shall
change the description of the Project set forth in Exhibit A to this Agreement
or change the function of any principal
-7-
<PAGE> 12
component of the Project described in Exhibit A to this Agreement unless, in
either case, the Trustee and the Issuer first receive a Favorable Opinion of
Bond Counsel with respect to such change. If any such supplement or amendment
affects the description of the Project, the Company and the Issuer will amend
Exhibit A to this Agreement to reflect such supplement or amendment, which
supplement or amendment will not be considered as an amendment to this Agreement
requiring the consent of any Owner, the Trustee or the Provider for the purposes
of Article XII of the Indenture.
ARTICLE IV
LOAN PAYMENTS; PAYMENTS TO REMARKETING AGENT AND TRUSTEE;
OTHER OBLIGATIONS
SECTION 4.01. LOAN PAYMENTS. (a) As and for repayment of the loan made to
the Company by the Issuer pursuant to Section 3.03 hereof, the Company shall pay
to the Trustee, for the account of the Issuer, an amount equal to the aggregate
principal amount of and the premium, if any, on the Bonds from time to time
Outstanding and, as interest on its obligation to pay such amount, an amount
equal to interest on the Bonds, such amounts to be paid in installments due on
the dates, in the amounts and in the manner provided in the Indenture for the
payment of the principal of and premium, if any, and interest on the Bonds,
whether at maturity, upon redemption, acceleration or otherwise; provided,
however, that the obligation of the Company to make any such payment hereunder
shall be reduced by the amount of any moneys held by the Trustee under the
Indenture and available for such payment.
(b) In the event the Company shall fail to make any payment required by
Section 4.01(a) hereof with respect to the principal of and premium, if any, and
interest on any Bond, the payment so in default shall continue as an obligation
of the Company until the amount in default shall have been fully paid, and the
Company will pay interest on any overdue amount with respect to principal of
such Bond and, to the extent permitted by law, on any overdue amount with
respect to premium, if any, and interest on such Bond, at the interest rate then
borne by such Bond until paid.
SECTION 4.02. PAYMENTS OF PURCHASE PRICE. The Company shall pay or cause to
be paid for its account to the Trustee amounts equal to the amounts to be paid
by the Trustee as the purchase price for such Bonds pursuant to Section 3.01 and
Section 3.02 of the Indenture in respect of Outstanding Bonds, such amounts to
be paid to the Trustee on the dates such payments are to be made pursuant to
Section 3.01 and Section 3.02 of the Indenture; provided, however, that the
obligation of the Company to make any such payment hereunder shall be reduced by
the amount of any moneys held by the Trustee under the Indenture and available
for such payment.
SECTION 4.03. PAYMENTS ASSIGNED; OBLIGATION ABSOLUTE. It is understood and
agreed that the Loan Payments are pledged and assigned by the Issuer to the
Trustee pursuant to the Indenture, and that all right, title and interest of the
Issuer hereunder (except for amounts payable to, and the rights of, the Issuer
under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06, Section 5.07,
Section 5.08 and Section 7.05 hereof and the Issuer's rights to receive notices,
-8-
<PAGE> 13
certificates, requests, requisitions, directions and other communications
hereunder) are pledged and assigned to the Trustee pursuant to the Indenture.
The Company assents to such pledge and assignment and agrees that the obligation
of the Company to make the Loan Payments and payments to the Trustee under
Section 4.02 hereof shall be absolute, irrevocable and unconditional and shall
not be subject to cancellation, termination or abatement, or to any defense
other than payment, or to any right of setoff, counterclaim or recoupment
arising out of any breach under this Agreement or the Indenture or otherwise by
the Company, the Trustee, the Remarketing Agent, the Provider, the Auction
Agent, the Broker-Dealer or any other party, and, further, that the Loan
Payments and the other payments due hereunder shall continue to be payable at
the times and in the amounts herein and therein specified whether or not the
Project, or any portion thereof, shall have been destroyed by fire or other
casualty, or title thereto, or the use thereof, shall have been taken by the
exercise of the power of eminent domain, and that there shall be no abatement of
or diminution in any such payments by reason thereof, whether or not the Project
shall be used or useful and whether or not any applicable laws, regulations or
standards shall prevent or prohibit the use of the Project or for any other
reason. The Project shall not constitute any part of the Trust Estate or any
part of the security for the Bonds.
SECTION 4.04. PAYMENT OF EXPENSES. The Company shall pay all of the
Administration Expenses of the Issuer, the Trustee, the Paying Agent, the
Registrar, the Auction Agent, the Broker Dealers, the Securities Depository,
Moody's and S&P under the Indenture and of any Remarketing Agent under a
Remarketing Agreement directly to each such entity. The Company shall also pay
all of the expenses of the Prior Trustee in connection with the Refunding and
all other reasonable fees and expenses incurred in connection with the issuance
of the Bonds, including, but not limited to, all costs associated with any
discontinuance of the book-entry system described in Section 2.16 of the
Indenture. The obligations of the Company under this Section 4.04 shall survive
the termination of this Agreement.
SECTION 4.05. INDEMNIFICATION. The Company releases the Trustee, the Paying
Agent and the Registrar and their respective officers, agents, servants and
employees from, agrees that the Trustee, the Paying Agent and the Registrar and
their respective officers, agents, servants and employees shall not be liable
for, and agrees to indemnify and hold free and harmless the Trustee, the Paying
Agent and the Registrar and their respective officers, agents, servants and
employees from and against, any liability for any loss or damage to property or
any injury to or death of any person that may be occasioned by any cause
whatsoever pertaining to the Project, except in any case as a result of the
negligence or willful misconduct of the Trustee, the Paying Agent and the
Registrar and their respective officers, agents, servants and employees.
The Company will indemnify and hold free and harmless the Trustee, the
Paying Agent and the Registrar and their respective officers, agents, servants
and employees from and against any loss, claim, damage, tax, penalty, liability,
disbursement, litigation or other expenses, attorneys' fees and expenses or
court costs arising out of, or in any way relating to, the execution or
performance of this Agreement, the Tax Certificate, the Auction Agreement, the
issuance or sale of the Bonds, the Refunding, the acceptance or administration
of the trust under the Indenture or any other cause whatsoever pertaining to
this Agreement, the Tax Certificate, the Indenture, the Auction Agreement or the
Credit Facility, except in any case as a result of the
-9-
<PAGE> 14
negligence or willful misconduct of the Trustee, the Paying Agent and the
Registrar or their respective officers, agents, servants and employees.
The obligations of the Company under this Section 4.05 shall survive the
termination of this Agreement.
SECTION 4.06. PAYMENT OF TAXES AND CHARGES IN LIEU THEREOF. (a) The Company
covenants and agrees that it will, from time to time for so long as the Company
has an ownership interest in the Project, promptly pay and discharge or cause to
be paid and discharged when due its share of all taxes, assessments, levies,
duties, imposts and governmental, utility and other charges lawfully imposed
upon the Project or any part thereof or upon income and profits thereof or any
payments hereunder. In the event that the Company sells or otherwise transfers
its interest in the Project while the Bonds are Outstanding, the Company shall
require the purchasers or transferor of the Company's interest in the Project to
assume the Company's obligations under this Section 4.06(a).
(b) The Company shall pay or cause to be satisfied and discharged or make
adequate provision to satisfy and discharge (including the provisions of
adequate bonding therefor) within 60 days after the same shall accrue, any lien
or charge upon the Loan Payments or payments under Section 4.02 hereof, and all
lawful claims or demands for labor, materials, supplies or other charges which,
if unpaid, might be or become a lien thereon.
(c) Notwithstanding subsections (a) and (b) of this Section, the Company
may, at its expense and in its own name and behalf or in the name and behalf of
the Issuer, in good faith contest any such liens, taxes, assessments and other
charges and, in the event of any such contest, may permit such liens, taxes,
assessments or other charges so contested to remain unpaid during the period of
such contest and any appeal therefrom; provided further that during such period
enforcement of such contested item is effectively stayed, unless by nonpayment
of any such items the lien of the Indenture as to the amounts payable hereunder
will be materially endangered, in which event the Company shall promptly pay and
cause to be satisfied and discharged all such unpaid items. The Issuer will
cooperate fully with the Company in any such contest. In the event that the
Company shall fail to pay any of the foregoing items required by this Section to
be paid by the Company, the Issuer may (but shall be under no obligation to) pay
the same, and any amounts so advanced therefor by the Issuer shall become an
additional obligation of the Company to the Issuer. The Company agrees to repay
the amounts so advanced, from the date thereof, together (to the extent
permitted by law) with interest thereon until paid at a rate per annum which is
one percentage point greater than the highest rate per annum then borne by any
of the Bonds.
SECTION 4.07. CREDIT FACILITY. (a) The Company may at any time provide for a
Change of Credit Facility, provided that the Company delivers to the Trustee,
any Auction Agent and any Remarketing Agent, not less than five Business Days
prior to the date on which the Trustee must notify the Owners of a Change of
Credit Facility pursuant to Section 2.18 of the Indenture and prior to the
effective date of any such Change of Credit Facility, the following:
-10-
<PAGE> 15
(1) a notice which (A) states the effective date of the Change of
Credit Facility, (B) describes the terms of the Change of Credit
Facility, and (C) directs the Trustee to give notice pursuant to Section
2.18(a) of the Indenture;
(2) a Favorable Opinion of Bond Counsel with respect to such
Change of Credit Facility and stating, in effect, that such change of
Credit Facility is authorized under this Agreement;
(3) a certificate of an Authorized Company Representative as to
whether the Bonds are then rated by either Moody's or S&P, or both; and
(4) written evidence from Moody's, if the Bonds are then rated by
Moody's, and from S&P, if the Bonds are then rated by S&P, in each case
to the effect that such rating agency has reviewed the proposed Change
of Credit Facility and that such Change of Credit Facility will not, by
itself, result in a reduction, suspension or withdrawal of its rating or
ratings of the Bonds.
(b) In lieu of satisfying the requirements of subsection (a) above, the
Company may provide for a Change of Credit Facility at any time that the Bonds
are subject to optional redemption pursuant to Section 4.02(b) of the Indenture,
provided that the Company delivers to the Trustee, any Auction Agent and any
Remarketing Agent not less than 30 days before the effective date of the Change
of Credit Facility:
(1) a notice which (A) states the effective date of the Change of
Credit Facility, (B) describes the terms of the Change of Credit
Facility, (C) directs the Trustee to give notice pursuant to Section
2.18 of the Indenture that the Bonds are subject to mandatory purchase,
in whole, on or before the effective date of the Change of Credit
Facility in accordance with Section 3.02(b) of the Indenture, and (D)
directs the Trustee to take any other action as shall be necessary for
the Trustee to take to effect the Change of the Credit Facility; and
(2) on or before the effective date of the Change of Credit
Facility, the Company shall furnish to the Trustee an opinion of Bond
Counsel satisfying the requirements of Section 4.07(a)(2) above.
(c) The Company may provide for one or more extensions of a Credit
Facility for any period commencing after its then-current expiration date
without complying with the foregoing provisions of this Section.
(d) The Company may rescind its election to make a Change of Credit
Facility at any time prior to the effective date thereof.
SECTION 4.08. COMPLIANCE WITH PRIOR AGREEMENT. The Company hereby confirms
its obligations under the Prior Agreement to furnish any moneys required to be
deposited with the Prior Trustee under the Prior Indenture in order to redeem
the Prior Bonds on the Redemption Date, to the extent that the proceeds of the
Bonds on deposit in the Prior Bond Fund, together
-11-
<PAGE> 16
with any investment earnings thereon, is less than the amount required to pay
the principal of and applicable redemption premium and interest on the Prior
Bonds upon their redemption on the Redemption Date, in accordance with the terms
and conditions of the Prior Indenture.
ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. MAINTENANCE OF EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS
PERMITTED. The Company shall maintain in good standing its corporate existence
as a corporation organized under the laws of one of the states of the United
States or the District of Columbia and will remain duly qualified to do business
in the State for so long as the Company has an ownership interest in the
Project, will not dissolve or otherwise dispose of all or substantially all of
its assets and will not consolidate with or merge into another corporation;
provided, however, that the Company may, without violating the foregoing,
undertake from time to time any one or more of the following, if, prior to the
effective date thereof, such action is approved by all public utility
commissions or similar entities that are required by law to approve such action
and there shall have been delivered to the Trustee a Favorable Opinion of Bond
Counsel with respect to the contemplated action:
(a) consolidate or merge with another corporation or sell or
otherwise transfer to another entity all or substantially all of its
assets as an entirety, provided the resulting, surviving or transferee
entity, as the case may be, shall be (i) the Company or (ii) an entity
qualified to do business in the State as a foreign corporation or
incorporated and existing under the laws of the State which shall have
assumed in writing all of the obligations of the Company hereunder and
shall deliver to the Trustee an opinion of counsel to the Company that
such consolidation or merger complies with the provisions of this
Section 5.01; or
(b) convey all or substantially all of its assets to one or more
wholly-owned subsidiaries of the Company so long as the Company shall
remain in existence and primarily liable on all of its obligations
hereunder.
SECTION 5.02. PERMITS OR LICENSES. In the event that it may be necessary for
the proper performance of this Agreement on the part of the Company or the
Issuer that any application or applications for any permit or license to do or
to perform certain things be made to any governmental or other agency by the
Company or the Issuer, the Company and the Issuer each shall, upon the request
of either, execute such application or applications.
-12-
<PAGE> 17
SECTION 5.03. ARBITRAGE COVENANT. The Issuer, to the extent it has any
control over proceeds of the Bonds, and the Company covenant and represent to
each other and to and for the benefit of the Beneficial Owners that so long as
any of the Bonds remain Outstanding, moneys on deposit in any fund in connection
with the Bonds, whether such moneys were derived from the proceeds of the sale
of the Bonds or from any other sources, will not be used in a manner which will
cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the
Code and any lawful regulations promulgated thereunder, as the same exist on
this date or may from time to time hereafter be amended, supplemented or
revised. The Company also covenants for the benefit of the Beneficial Owners to
comply with all of the provisions of the Tax Certificate. The Company reserves
the right, however, to make any investment of such moneys permitted by State
law, if, when and to the extent that said Section 148 or regulations promulgated
thereunder shall be repealed or relaxed or shall be held void by final judgment
of a court of competent jurisdiction, but only upon receipt of a Favorable
Opinion of Bond Counsel with respect to such investment.
SECTION 5.04. FINANCING STATEMENTS. The Company shall, to the extent
required by law, file and record, refile and re-record, or cause to be filed and
recorded, refiled and re-recorded, all documents or notices, including the
financing statements and continuation statements, referred to in Section 5.05 of
the Indenture. The Issuer shall cooperate fully with the Company in taking any
such action. Concurrently with the execution and delivery of the Bonds, the
Company shall cause to be delivered to the Trustee the opinion of counsel
required pursuant to Section 5.05(a) of the Indenture.
SECTION 5.05. COVENANTS WITH RESPECT TO TAX-EXEMPT STATUS OF THE BONDS. The
Company covenants for the benefit of the Owners of the Bonds and the Issuer that
it (a) has not taken, and will not take or permit to be taken on its behalf, any
action which would adversely affect the Tax-Exempt status of the Bonds and (b)
will take, or require to be taken, such actions as may, from time to time, be
required under applicable law or regulation to continue to cause the Bonds to be
Tax-Exempt.
SECTION 5.06. INDEMNIFICATION OF ISSUER. (a) The Company agrees that the
Issuer, its elected or appointed officials, officers, agents, servants and
employees, shall not be liable for, and agrees that it will at all times
indemnify and hold free and harmless the Issuer, its elected or appointed
officials, officers, agents, servants and employees from and against, and pay
all expenses of the Issuer, its elected or appointed officials, officers,
agents, servants and employees relating to, (a) any lawsuit, proceeding or claim
arising in connection with the Project or this Agreement that results from any
action taken by or on behalf of the Issuer, its elected or appointed officials,
officers, agents, servants and employees pursuant to or in accordance with this
Agreement or the Indenture that may be occasioned by any cause whatsoever,
except the negligence or willful misconduct of the Issuer, its elected or
appointed officials, officers, agents, servants or employees, or (b) any
liability for any loss or damage to property or any injury to or death of any
person that may be occasioned by any cause whatsoever pertaining to the Project,
except the negligence or willful misconduct of the Issuer, its elected or
appointed officials, officers, agents, servants or employees. In case any action
shall be brought against the Issuer in respect of which indemnity may be sought
against the Company, the Issuer shall promptly notify the Company in writing and
the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Issuer and the payment of all expenses.
-13-
<PAGE> 18
Failure by the Issuer to notify the Company shall not relieve the Company from
any liability which it may have to the Issuer otherwise than under this Section
5.06. The Issuer shall have the right to employ separate counsel in any such
action and participate in the defense thereof, such counsel shall be paid by the
Issuer unless the employment of such counsel has been authorized by the Company.
The Company shall not be liable for any settlement of any such action without
its consent, but if any such action is settled with the consent of the Company
or if there be final judgment for the plaintiff in any such action, the Company
agrees to indemnify and hold free and harmless the Issuer, its elected or
appointed officials, officers, agents, servants and employees from and against
any loss or liability by reason of such settlement or judgment. The Company will
reimburse the Issuer, its elected or appointed officials, officers, agents,
servants and employees for any action taken pursuant to Section 5.03 of the
Indenture.
(b) The obligations of the Company under this Section 5.06 shall survive
the termination of this Agreement.
(c) It is the intention of the parties that the Issuer, its elected or
appointed officials, officers, agents, servants and employees shall not incur
any pecuniary liability by reason of the terms of this Agreement or the
Indenture, or the undertakings required of the Issuer hereunder or thereunder or
by reason of the issuance of the Bonds, the execution of the Indenture or the
performance of any act required of the Issuer by this Agreement or the Indenture
or requested of the Issuer by the Company.
SECTION 5.07. RECORDS OF COMPANY; MAINTENANCE AND OPERATION OF THE PROJECT.
(a) The Trustee and the Issuer shall be permitted at all reasonable times during
the term of this Agreement to examine the books and records of the Company with
respect to the Project; provided, however, that information and data contained
in the books and records of the Company shall be considered proprietary and
shall not be voluntarily disclosed by the Trustee or the Issuer except as
required by law.
(b) The Company shall cause the Project to be maintained in good repair
and shall cause the Project to be insured in accordance with standard industry
practice and shall pay all costs thereof. All proceeds of such insurance shall
be for the account of the Company.
(c) The Company shall be entitled to the proceeds of any condemnation
award or portion thereof made for damage to or taking of any of the Project or
other property of the Company.
(d) Anything in this Agreement to the contrary notwithstanding, the
Company shall have the right at any time to cause the operation of the Plant to
be terminated if the Company shall have determined or concurred in a
determination that the continued operation of the Plant is uneconomical for any
reason.
SECTION 5.08. RIGHT OF ACCESS TO THE PROJECT. The Company agrees that the
Issuer, the Trustee and their respective duly authorized agents shall have the
right, for so long as the Company has an ownership interest in the Project and
subject to such limitations, restrictions and requirements as the Company may
reasonably prescribe for plant security and safety reasons and
-14-
<PAGE> 19
in order to preserve secret processes and formulae, at all reasonable times to
enter upon and to examine and inspect the Project; provided, however, nothing
contained herein shall entitle the Issuer or the Trustee to any information or
inspection involving confidential material of the Company. Information and data
contained in the books and records of the Company shall be considered
proprietary and shall not be voluntarily disclosed by the Issuer or the Trustee
except as required by law. In the event that the Company sells or otherwise
transfers its interest in the Project, the Company shall require the purchaser
or transferee of the Company's interest in the Project to agree that the Issuer,
the Trustee and their respective duly authorized agents shall have the same
rights, and be subject to the same limitations, as are provided in this Section
with respect to the Project.
SECTION 5.09. REMARKETING AGENT. So long as any of the Bonds are subject to
optional or mandatory purchase pursuant to the provisions of the Indenture
(except during a Term Interest Rate Period that extends to the maturity of the
Bonds), the Company shall cause a Remarketing Agent to be appointed and acting
pursuant to a Remarketing Agreement at all such times as shall be necessary in
order to provide for the remarketing of the Bonds and the establishment of
interest rates to be borne by the Bonds in accordance with the provisions of the
Indenture.
SECTION 5.10. CREDIT RATINGS. The Company shall take all reasonable action
necessary to enable at least two nationally-recognized statistical rating
organizations (as that term is used in the rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act) to provide
credit ratings for the PARS Rate Bonds.
SECTION 5.11. PURCHASES OF PARS RATE BONDS. The Company shall not purchase
or otherwise acquire PARS Rate Bonds unless the Company redeems or cancels such
PARS Rate Bonds on the day of any such purchase.
SECTION 5.12. CREDIT FACILITY. Concurrently with the initial authentication
and delivery of the Bonds, the Company shall cause the original Credit Facility
to be delivered to the Trustee. Under the Credit Facility, the Provider shall
guarantee the payment of the principal of the Bonds upon the stated maturity
thereof and upon the mandatory redemption of the Bonds pursuant to Section 4.03
of the Indenture and the payment of the interest on the Bonds as the same
accrues and becomes due and payable. The Issuer and the Company agree to be
bound by the provisions of the Indenture pertaining to the Credit Facility.
ARTICLE VI
ASSIGNMENT
SECTION 6.01. CONDITIONS. The Company's interest in this Agreement may be
assigned in whole or in part by the Company: (a) to another entity, subject,
however, to the conditions that such assignment shall not relieve (other than as
described in Section 5.01(a)(ii) hereof) the Company from primary liability for
its obligations to make the Loan Payments or to make payments to the Trustee
under Section 4.02 hereof or for any other of its obligations hereunder, or (b)
to an Affiliate in connection with the conveyance of the Plant to such
Affiliate, subject,
-15-
<PAGE> 20
however, to the conditions that (i) such Affiliate is an entity described in
Section 5.01(a)(ii) hereof (in which case the Company shall be relieved of all
obligations hereunder); (ii) such conveyance is approved by any public utility
commissions or similar entities that are required by law to approve such
conveyance; and (iii) the Company shall have delivered to the Trustee (A) an
opinion of counsel to the Company that such assignment complies with the
provisions of this Section 6.01 and (B) a Favorable Opinion of Bond Counsel with
respect to such assignment.
SECTION 6.02. DOCUMENTS FURNISHED TO TRUSTEE. The Company shall, within 30
days after the delivery thereof, furnish to the Issuer and the Trustee a true
and complete copy of the agreements or other documents effectuating any
assignment pursuant to Section 6.01 hereof. The Trustee's only duties with
respect to any such agreement or other document so furnished to it shall be to
make the same available for examination by any Owner at the Principal Office of
the Trustee upon reasonable notice.
SECTION 6.03. LIMITATION. This Agreement shall not be assigned in whole or
in part, except as provided in this Article VI or in Section 4.03 or Section
5.01 hereof.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. EVENTS OF DEFAULT. Each of the following events shall
constitute and is referred to in this Agreement as an "Event of Default":
(a) a failure by the Company to make when due any Loan Payment or
any payment required under Section 4.01 or Section 4.02 hereof, which
failure shall have resulted in an "Event of Default" under Section
9.01(a), Section 9.01(b) or Section 9.01(c) of the Indenture;
(b) a failure by the Company to pay when due any amount required
to be paid under this Agreement or to observe and perform any covenant,
condition or agreement on its part to be observed or performed under
this Agreement (other than a failure described in Section 7.01(a)
above), which failure shall continue for a period of 90 days (or such
longer period as the Issuer and the Trustee may agree to in writing)
after written notice, specifying such failure and requesting that it be
remedied, shall have been given to the Company by the Trustee or to the
Company and the Trustee by the Issuer; provided, however, that if such
failure is other than for the payment of money and is of such nature
that it cannot be corrected within the applicable period, such failure
shall not constitute an "Event of Default" so long as the Company
institutes corrective action within the applicable period and such
action is being diligently pursued;
(c) the dissolution or liquidation of the Company; or the filing
by the Company of a voluntary petition in bankruptcy; or failure by the
Company promptly to lift or bond any execution, garnishment or
attachment of such consequence as will impair its ability to make any
payments under this Agreement; or the filing of a petition or answer
proposing
-16-
<PAGE> 21
the entry of an order for relief by a court of competent jurisdiction
against the Company under Title 11 of the United States Code, as the
same may from time to time be hereafter amended, or proposing the
reorganization, arrangement or debt readjustment of the Company under
the provisions of any bankruptcy act or under any similar act which may
be hereafter enacted and the failure of said petition or answer to be
discharged or denied within ninety (90) days after the filing thereof or
the entry of an order for relief by a court of competent jurisdiction in
any proceeding for its liquidation or reorganization under the
provisions of any bankruptcy act or under any similar act which may be
hereafter enacted; or an assignment by the Company for the benefit of
its creditors; or the entry by the Company into an agreement of
composition with its creditors (the term "dissolution or liquidation of
the Company," as used in this subsection (c), shall not be construed to
include the cessation of the corporate existence of the Company
resulting either from a merger or consolidation of the Company into or
with another corporation or a dissolution or liquidation of the Company
following a transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions contained in
Section 5.01 hereto; or
(d) receipt by the Trustee of written notice from Ambac that an
Event of Default has occurred under the initial Credit Facility
Agreement or the occurrence of an event described in any subsequent
Credit Facility Agreement that is designated therein as giving rise to
an Event of Default hereunder.
SECTION 7.02. FORCE MAJEURE. The provisions of Section 7.01(b) hereof are
subject to the following limitations: if by reason of acts of God; strikes,
lockouts or other industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or the State, or any department,
agency, political subdivision, court or official of any of such State or any
other state which asserts regulatory jurisdiction over the Company; orders of
any kind of civil or military authority; insurrections; riots; epidemics;
landslides; lightning; earthquakes; volcanoes; fires; hurricanes; tornadoes;
storms; floods; washouts; droughts; arrests; restraint of government and people;
civil disturbances; explosions; breakage or accident to machinery; partial or
entire failure of utilities; or any cause or event not reasonably within the
control of the Company, the Company is unable in whole or in part to carry out
any one or more of its agreements or obligations contained herein, other than
its obligations under Section 4.01, Section 4.02, Section 4.04, Section 4.05,
Section 4.06, Section 5.01 and Section 5.06 hereof, the Company shall not be
deemed in default by reason of not carrying out said agreement or agreements or
performing said obligation or obligations during the continuance of such
inability. The Company shall make reasonable effort to remedy with all
reasonable dispatch the cause or causes preventing it from carrying out its
agreements, provided that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Company,
and the Company shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is in the judgment of the Company unfavorable
to the Company.
-17-
<PAGE> 22
SECTION 7.03. REMEDIES. (a) Upon the occurrence and continuance of any Event
of Default described in Section 7.01(a) or Section 7.01(c) hereof, and further
upon the condition that, in accordance with the terms of the Indenture, the
Bonds shall have been declared to be immediately due and payable pursuant to any
provision of the Indenture, the Loan Payments shall without further action,
become and be immediately due and payable.
(b) Any waiver of any "Event of Default" under the Indenture and a
rescission and annulment of its consequences shall constitute a waiver of the
corresponding Event or Events of Default under this Agreement and a rescission
and annulment of the consequences thereof.
(c) Upon the occurrence and continuance of any Event of Default, the
Issuer may take any action at law or in equity to collect any payments then due
and thereafter to become due hereunder or to seek injunctive relief or specific
performance of any obligation, agreement or covenant of the Company hereunder.
(d) Any amounts collected from the Company pursuant to this Section 7.03
shall be applied in accordance with the Indenture. No action taken pursuant to
this Section 7.03 shall relieve the Company from the Company's obligations
pursuant to Section 4.01 or Section 4.02 hereof.
SECTION 7.04. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved to
the Issuer hereby is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. No delay or omission to exercise any right or
power accruing upon any Event of Default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right or power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Issuer to exercise any remedy reserved to it in this Article VII, it
shall not be necessary to give any notice, other than such notice as may be
herein expressly required.
SECTION 7.05. REIMBURSEMENT OF ATTORNEYS' FEES. If the Company shall default
under any of the provisions hereof and the Issuer or the Trustee shall employ
attorneys or incur other reasonable and proper expenses for the collection of
payments due hereunder or for the enforcement of performance or observance of
any obligation or agreement on the part of the Company contained herein, the
Company will on demand therefor reimburse the Issuer or the Trustee, as the case
may be, for the reasonable and proper fees of such attorneys and such other
reasonable and proper expenses so incurred.
SECTION 7.06. WAIVER OF BREACH. In the event any obligation created hereby
shall be breached by either of the parties hereto and such breach shall
thereafter be waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. In view of the assignment of certain of the Issuer's rights and
interest hereunder to the Trustee, the Issuer shall have no power to waive any
Event of Default hereunder by the Company in respect of such rights and interest
without the consent of the Trustee, and the Trustee may exercise any of the
rights of the Issuer hereunder.
-18-
<PAGE> 23
ARTICLE VIII
PURCHASE OR REDEMPTION OF BONDS
SECTION 8.01. REDEMPTION OF BONDS. The Issuer shall take or cause to be
taken the actions required by the Indenture (other than the payment of money) to
discharge the lien thereof through the redemption, or provision for payment or
redemption, of all Bonds then Outstanding, or to effect the redemption, or
provision for payment or redemption, of less than all the Bonds then
Outstanding, upon receipt by the Issuer and the Trustee from an Authorized
Company Representative of a written notice designating the principal amount of
the Bonds to be redeemed and specifying the date of redemption (which, unless
waived by the Issuer and the Trustee, shall not be less than 30 days from the
date such notice is given, or such shorter period as the Trustee and the Company
may agree from time to time) and the applicable redemption provision of the
Indenture. Unless otherwise stated therein and except with respect to a
redemption under Section 4.03 of the Indenture, such notice shall be revocable
by the Company at any time prior to the time at which the Bonds to be redeemed,
or for the payment or redemption of which provision is to be made, are first
deemed to be paid in accordance with Article VIII of the Indenture. The Company
shall furnish any moneys required by the Indenture to be deposited with the
Trustee or otherwise paid by the Issuer in connection with any of the foregoing
purposes. In connection with any redemption of the Bonds, the Company shall
provide to the Trustee the names and addresses of the Securities Depositories
and Information Services as contemplated by Section 4.05 of the Indenture.
SECTION 8.02. PURCHASE OF BONDS. The Company may at any time, and from time
to time, furnish moneys to the Trustee accompanied by a notice directing such
moneys to be applied to the purchase of Bonds in accordance with the provisions
of the Indenture delivered pursuant to the Indenture, which Bonds shall, at the
direction of the Company, be delivered in accordance with Section 3.06(a)(ii) of
the Indenture.
SECTION 8.03. OBLIGATION TO PREPAY. (a) The Company shall be obligated to
prepay in whole or in part the amounts payable hereunder upon a Determination of
Taxability (as defined below) giving rise to a mandatory redemption of the Bonds
pursuant to Section 4.03 of the Indenture, by paying an amount equal to, when
added to other funds on deposit in the Bond Fund, the aggregate principal amount
of the Bonds to be redeemed pursuant to the Indenture plus accrued interest to
the redemption date.
(b) The Company shall cause a mandatory redemption to occur within 180
days after a Determination of Taxability (as defined below) shall have occurred.
A "Determination of Taxability" shall be deemed to have occurred if, as a result
of the failure of the Company to observe any covenant, agreement or
representation in this Agreement, a final decree or judgment of any federal
court or a final action of the Internal Revenue Service determines that interest
paid or payable on any Bond is or was includible in the gross income of an Owner
of the Bonds for federal income tax purposes under the Code (other than an Owner
who is a "substantial user" or "related person" within the meaning of Section
103(b)(13) of the 1954 Code). However, no such decree or action will be
considered final for this purpose unless the Company has been given written
notice of the same, either directly or in the name of any Owner of a Bond, and,
if it so
-19-
<PAGE> 24
desires and is legally allowed, has been afforded the opportunity to contest the
same, either directly or in the name of any Owner of a Bond, and until
conclusion of any appellate review, if sought. If the Trustee receives written
notice from any Owner of a Bond stating (a) that the Owner has been notified in
writing by the Internal Revenue Service that it proposes to include the interest
on any Bond in the gross income of such Owner for the reasons described therein
or any other proceeding has been instituted against such Owner which may lead to
a final decree or action as described herein, and (b) that such Owner will
afford the Company the opportunity to contest the same, either directly or in
the name of the Owner, until a conclusion of any appellate review, if sought,
then the Trustee shall promptly give notice thereof to the Company, the Issuer,
the Provider and the Owner of each Bond then Outstanding. If a final decree or
action as described above thereafter occurs and the Trustee has received written
notice thereof as provided in Section 8.01 hereof at least 45 days prior to the
redemption date, the Trustee shall request prepayment from the Company of the
amounts payable hereunder and give notice of the redemption of the Bonds at the
earliest practical date, but not later than the date specified in this Article,
and in the manner provided by Section 4.05 of the Indenture.
At the time of any such prepayment of the amounts payable hereunder
pursuant to this Section, the prepayment amount shall be applied, together with
other available moneys in the Bond Fund, to the redemption of the Bonds on the
date specified in the notice as provided in the Indenture, whether or not such
date is an Interest Payment Date, to the Trustee's fees and expenses under the
Indenture accrued to such redemption of the Bonds, and to all sums due to the
Issuer under this Agreement.
Whenever the Company shall have given any notice of prepayment of the
amounts payable hereunder pursuant to this Article VIII, which includes a notice
for redemption of the Bonds pursuant to the Indenture, all amounts payable under
the first paragraph of this Section 8.03 shall become due and payable on the
date fixed for redemption of such Bonds.
SECTION 8.04. COMPLIANCE WITH INDENTURE. Anything in this Agreement to the
contrary notwithstanding, the Issuer and the Company shall take all actions
required by this Agreement and the Indenture in order to comply with the
provisions of Articles III and IV of the Indenture.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. TERM OF AGREEMENT. This Agreement shall remain in full force
and effect from the date of delivery hereof until the right, title and interest
of the Trustee in and to the Trust Estate shall have ceased, terminated and
become void in accordance with Article VIII of the Indenture and until all
payments required under this Agreement shall have been made. The date first
above written shall be for identification purposes only and shall not be
construed to imply that this Agreement was executed on such date.
SECTION 9.02. NOTICES. Except as otherwise provided in this Agreement, all
notices, certificates, requests, requisitions and other communications hereunder
shall be in writing and
-20-
<PAGE> 25
shall be sufficiently given and shall be deemed given when mailed by Mail or by
certified or registered mail postage prepaid, or by overnight delivery service,
addressed as follows (and, if by overnight delivery service and required by the
chosen delivery service, with then-current telephone number of the addressee):
if to the Issuer, at City Hall, Forsyth, Montana 59327, Attention: Mayor; if to
the Company, at 1411 East Mission Avenue, Spokane, Washington 99220, Attention:
Treasurer; if to the Trustee, at such address as shall be designated by it in or
pursuant to the Indenture; if to the Auction Agent, if any, at such address as
shall be designated by such party pursuant to the Auction Agreement; if to the
Provider of the Credit Facility, at such address as shall be designated by it in
or pursuant to the Indenture; and if to the Remarketing Agent, if any, at such
address as shall be designated by such party pursuant to the Remarketing
Agreement. A copy of each notice, certificate, request or other communication
given hereunder to the Issuer, the Company, the Trustee, the Auction Agent, the
Provider and the Remarketing Agent shall also be given to the others. Any of the
foregoing parties may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates, requests or other
communications shall be sent.
SECTION 9.03. PARTIES IN INTEREST. This Agreement shall inure to the benefit
of and shall be binding upon the Issuer, the Company and their respective
successors and assigns, and no other person, firm or corporation shall have any
right, remedy or claim under or by reason of this Agreement except for rights of
payment and indemnification hereunder of the Trustee and the Registrar. Section
9.05 hereof to the contrary notwithstanding, for purposes of perfecting a
security interest in this Agreement by the Trustee, only the counterpart
delivered, pledged and assigned to the Trustee shall be deemed the original. No
security interest in this Agreement may be created by the transfer of any
counterpart thereof other than the original counterpart delivered, pledged and
assigned to the Trustee.
SECTION 9.04. AMENDMENTS. This Agreement may be amended only by written
agreement of the Company and the Issuer and with the written consent of the
Trustee in accordance with the provisions of Section 12.05 or 12.06 of the
Indenture, as applicable; provided, however, that Exhibit A to this Agreement
may be amended upon compliance only with the requirements of Section 3.04
hereof.
SECTION 9.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be an
original (except as expressly provided in Section 9.03 hereof), and such
counterparts shall together constitute but one and the same Agreement.
SECTION 9.06. SEVERABILITY. If any clause, provision or Section of this
Agreement shall, for any reason, be held invalid or unenforceable by any court
of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
SECTION 9.07. GOVERNING LAW. This Agreement shall be governed exclusively by
and construed in accordance with the laws of the State.
-21-
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CITY OF FORSYTH, MONTANA
By: _____________________________________
Mayor
[SEAL]
ATTEST:
By: __________________________________
City Clerk
AVISTA CORPORATION
By: _____________________________________
Vice President & Treasurer
-22-
<PAGE> 27
EXHIBIT A
PROJECT DESCRIPTION
1. POLLUTION CONTROL EQUIPMENT
SCRUBBER SYSTEM
The air pollution control facilities employed on Units #3 and #4 consist
of a complete scrubber system, including duct work, plenums, scrubber vessels,
reheaters and induced draft fans, together with infrastructures, monitoring and
electrical controls and instrumentation therefore, for the purpose of removing
the sulfur dioxide (SO2) and particulate matter from the flue gas. The scrubber
system also includes a scrubber maintenance facility, including a machine shop
and laboratory dedicated to the scrubber system and an environmental monitoring
laboratory for the pollution control facilities. The scrubber system utilizes
the Wet Venturi Principle and consists of eight modules for each unit through
which the steam generator gases from the burned coal must pass.
The gases in the scrubber are contacted with finely atomized scrubber
slurry. Within the stated performance of the system, fly ash particulates are
removed by the slurry droplets. The sulfur dioxide reacts with the alkali
contained in the slurry which results from the mixing of water, fly ash
particulates, hydrated high calcium lime and hydrated dolomitic lime. A major
portion of the sulfur dioxide is converted to solid sulfate compounds which are
retained in the scrubber liquid and can, therefore, be piped to and deposited in
an ash pond together with the particulate.
After the flue gas passes through the venturi section, absorption sprays
and wash trays, it is processed through a demister which removes any entrained
slurry and is then reheated and discharged through the stack.
The slurry system in the Units #3 and #4 scrubber system consists of
recycle tanks, regenerators, agitators, pumps and pipelines. The slurry from the
Units #3 and #4 scrubber system is transported to an effluent holding pond and
involves the use of effluent holding tanks, agitators, pumps and pipelines. A
separate wash tray pond system is used to store the suspended solids collected
from the wash tray system. Reclaimed water from the clear water section of these
ponds is circulated back to the scrubber system.
LIME STORAGE
The sole purpose of the lime system is to supply the lie slurry
requirements of the scrubber regeneration system. There is one lime system that
serves the sixteen scrubbers for Units #3 and #4. Major components of the system
include four slakers, in which calcined high calcium lime is reacted with water
to produce a hydrated lime slurry, slurry transfer tanks, where the slurry is
diluted with water and mixed with dry hydrated dolomitic lime, slurry feed
storage tanks, where
A-1
<PAGE> 28
the slurry will be held for use by the regenerators as needed, hydrators, for
mixing calcined dolomitic lime with water, and agitators.
SCRUBBER SLUDGE DISPOSAL
Effluent slurry is pumped from the plant to the sludge disposal pond
located approximately three miles southeast of the plant. The suspended solids
settle to the pond bottom and the clear water is pumped back to the plant.
There are two phases in the development of this pond. The first phase
requires the construction of one dam 108 feet high and 1,100 feet in length. A
saddle dam must also be added. The saddle dam will vary in height with a maximum
height for this phase of 36 feet and be approximately 2,800 feet in length. The
capacity of Phase 1 will be 6,650 acre-feet and it will last approximately 10
years.
The development of the second phase will require that the original dam
be raised to 138 feet in height and increased to a length of 2,500 feet. The
saddle dam will be raised to a maximum height of 66 feet and a total length of
3,500 feet. The capacity of the second phase will be an additional 7,000
acre-feet and it will last approximately 12 years, for a total life of 22 years.
The construction of the second phase is not included in cost reported at this
time.
The sludge disposal pond design takes into account a permit requirement
for minimum seepage, by providing low permeability plastic concrete filled
trenches around the periphery of the pond constructed during the course of Phase
1 work.
COAL DUST CONTROL SYSTEM
The coal dust control system is designed to collect, store and treat
coal dust resulting from mining, crushing, handling and storing coal in the
course of normal Units #3 and #4 operations. To control coal dust air pollution
the points where coal is transferred between conveyors or placed in coal piles
have been enclosed. The coal transfer stations between conveyors are enclosed
with steel framed structures with metal siding. The structures are equipped with
vacuum filtration systems, consisting of ducts, blowers, dust removal filters
and associated equipment, to remove coal dust from exhaust air from the
structures, and are also equipped with mechanical dust collectors. The main line
45,000 ton coal storage pile is enclosed with a 340' long A-frame precast panel
concrete structure designed to contain coal dust, thereby allowing its removal
and treatment.
COOLING TOWER DRIFT CONTAINMENT CONTROL FACILITY
Operation of the cooling towers produces exhaust air emissions
containing circulating water, particulates and other pollutants generally known
as cooling tower drift. To control release of these air pollutants, the cooling
towers are provided with high efficiency drift eliminators, located at the top
of the cooling tower structures, which remove drift from the cooling tower
exhaust air.
A-2
<PAGE> 29
2. SOLID WASTE DISPOSAL
BOTTOM ASH DISPOSAL
The function of the bottom ash disposal system is to remove
accumulations of furnace bottom ash, pulverizer pyrites, economizer ash, and air
preheater fly ash by means of a water-ash slurry to a disposal pond located
approximately 2,000 feet southeast of the plant site. The system consists
generally of three sets of fly ash hoppers, (economizer, air heater, and flue
gas duct hoppers) pyrite hoppers, the bottom ash hopper, and 18,000 gallon
transfer tank, a settling pond, a clear water pond and various pumps, and
pipelines.
Clinker grinders are used to grind the bottom ash which is then mixed
with water and sluiced to the ash transfer tank.
The economizer ash collected in economizer hoppers falls by gravity to
the ash transfer tank.
The pyrites are collected in local tanks and sluiced to the ash transfer
tank.
Ash collected in the flue gas duct hoppers and air preheater hoppers is
sluiced to the ash transfer tank.
These ashes are pumped from the ash transfer tank to the bottom ash
pond. Reclaimed water is returned from the bottom ash disposal pond and
redistributed to the various sections of the bottom ash disposal system.
The solid waste disposal facilities for purposes of the issuance of the
Bonds include only so much of the bottom ash disposal system as is external to
the plant building and include piping from the building to the settling pond,
the pond itself, return water pumps and lines, a clear water pond and piping
back to the plant building.
3. WATER POLLUTION CONTROL
NORTH PLANT SEDIMENT POND
The north plant sediment pond is designed to collect and store the storm
runoff from the general north plant area. These waters are retained in the pond,
allowing natural evaporation to desiccate the pond. This prevents high
quantities of suspended solids from being discharged to Armells Creek or other
state surface waters.
NORTH PLANT AREA DRAINAGE SYSTEM
The north plant area drainage system is designed to collect and store
storm runoff from the water treatment building, fuel oil handling area and the
cooling tower area in the north plant area drain pond. The pond also serves as a
storage facility for one cooling tower basin drain,
A-3
<PAGE> 30
cooling tower overflow, water treatment filter backwash, and for the cooling
tower blowdown water not used in the flue gas scrubbing process. These waters
are potentially contaminated with oil and high suspended and dissolved solids,
and this system stores these discharges preventing any discharge to Armells
Creek or other state surface waters. The north plant area drainage system
consists of collection basins, piping, concrete culverts, yard drains, manholes
and special yard gradings (berms) which route these discharges to the north
plant area sump and north plant area drain pond. The north plant area drain pond
incorporates a hypalon liner to comply with a permit requirement for minimum
seepage. The oil separator section of the sump receives oily surface collection
drains. The oil and water are separated. The oil from the sump is then trucked
away for disposal.
The water discharges are either pumped to the scrubber effluent holding
pond via a 6" diameter pipeline, 19,000 feet in length for evaporation, to the
circulating water system, or the plant oily waste sump as appropriate. Each
discharge arrangement has its own set of sump pumps. The pumps and piping system
which discharge to the plant oily waste sump are not included in the costs
covered by this Report, nor is the circulating water system. The waters
recovered are excess to any plant requirements and recovery of the waters does
not provide any economic benefit to the plant.
CHEMICAL AND OILY WASTE SYSTEM
The chemical and oily waste system is designed to collect, store, treat
and dispose of chemical and oily wastes resulting from the normal operation of
Units #3 and #4. This system consists of drains and pipes, oil separators,
chemical waste sumps, chemical waste neutralizing tanks, neutralizing chemical
storage tanks, chemical inspection equipment, and associated mechanical and
electrical control equipment.
The chemical waste drainage system includes drains and neutralization
tanks for collection and treatment of chemical waste Chemical waste drains are
located throughout Units #3 and #4, and are used to collect and transfer
chemical waste to holding sumps and neutralization tanks. The neutralization
equipment includes chemical storage and injection equipment as well as controls
and instrumentation.
The oily waste drainage system is made up of a network of drains which
collect oily waste from throughout Units #3 and #4, and dispose of the wastes in
the Units #3 and #4 main water-oil sump. Oil separation chambers in the sump
allow for oil removal. The treated water is monitored for trace oil levels and
released. After separation, the waste oil is removed by a contractor to an
offsite disposal area.
COOLING TOWER BLOWDOWN SYSTEM
The cooling tower blowdown system consists of a 6" pipeline from the
cooling tower to the waste disposal pond where the blowdown is treated by
settlement and evaporation in accordance with water pollution control
requirements.
A-4
<PAGE> 31
GROUNDWATER MONITORING WELLS
Groundwater monitoring wells have been installed around the various
ponds associated with the plant operation. These ponds include the scrubber
effluent holding pond, the scrubber drain pond, the scrubber wash tray pond, the
bottom ash pond, and the north plant area effluent pond. These groundwater
monitoring wells provide the ability through sampling to detect and quantify
accidental discharges from the above mentioned plant storage and waste ponds.
This is necessary to show compliance with State Groundwater Standards and with
permit requirements for minimum seepage.
A-5
<PAGE> 1
EXHIBIT 4(b)-2
================================================================================
TRUST INDENTURE
BETWEEN
CITY OF FORSYTH, MONTANA
AND
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION,
AS TRUSTEE
$66,700,000
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999A
DATED AS OF SEPTEMBER 1, 1999
================================================================================
-1-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Recitals................................................................................ 1
Granting Clauses........................................................................ 1
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION............................. 2
Section 1.01. General Definitions............................................... 2
Section 1.02. PARS Rate Definitions............................................. 14
Section 1.03. Rules of Construction............................................. 20
ARTICLE II THE BONDS......................................................... 21
Section 2.01. Authorization and Terms of Bonds.................................. 21
Section 2.02. Interest Rates and Rate Periods................................... 22
Section 2.03. PARS Rates; Conversions to and from PARS Rate Periods............. 23
Section 2.04. Daily Interest Rate; Adjustment to Daily Interest Rate
Period........................................................ 25
Section 2.05. Weekly Interest Rate; Adjustment to Weekly Interest Rate
Period........................................................ 26
Section 2.06. Term Interest Rate; Adjustment to Term Interest Rate Period....... 27
Section 2.07. Flexible Interest Rate; Adjustment to Flexible Interest
Rate Period................................................... 30
Section 2.08. Rescission of Election............................................ 32
Section 2.09. Form of Bonds..................................................... 33
Section 2.10. Execution of Bonds................................................ 33
Section 2.11. Transfer and Exchange of Bonds.................................... 34
Section 2.12. Bond Register..................................................... 34
Section 2.13. Bonds Mutilated, Lost, Destroyed or Stolen........................ 35
Section 2.14. Bonds; Limited Obligations........................................ 35
Section 2.15. Disposal of Bonds................................................. 36
Section 2.16. Book-Entry System................................................. 36
Section 2.17. Payments Pursuant to the Credit Facility.......................... 38
Section 2.18. Change of Credit Facility......................................... 40
Section 2.19. CUSIP Numbers..................................................... 40
ARTICLE III PURCHASE AND REMARKETING OF BONDS................................. 40
Section 3.01. Owner's Option to Tender for Purchase............................. 40
Section 3.02. Mandatory Purchase................................................ 42
Section 3.03. Payment of Purchase Price......................................... 42
Section 3.04. Remarketing of Bonds by Remarketing Agent......................... 43
Section 3.05. Limits on Remarketing............................................. 44
Section 3.06. Delivery of Bonds; Delivery of Proceeds of Remarketing Sale....... 44
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
Section 3.07. No Remarketing Sales After Certain Events......................... 46
ARTICLE IV REDEMPTION OF BONDS............................................... 46
Section 4.01. Redemption of Bonds Generally..................................... 46
Section 4.02. Redemption Upon Optional Prepayment............................... 46
Section 4.03. Redemption Upon Mandatory Prepayment.............................. 48
Section 4.04. Selection of Bonds for Redemption................................. 48
Section 4.05. Notice of Redemption.............................................. 48
Section 4.06. Partial Redemption of Bonds....................................... 49
Section 4.07. No Partial Redemption After Default............................... 50
Section 4.08. Payment of Redemption Price....................................... 50
Section 4.09. Effect of Redemption.............................................. 50
ARTICLE V GENERAL COVENANTS................................................. 50
Section 5.01. Payment of Bonds.................................................. 50
Section 5.02. Performance of Covenants by Issuer; Authority; Due
Execution..................................................... 51
Section 5.03. Immunities and Limitations of Responsibility of Issuer;
Remedies...................................................... 52
Section 5.04. Defense of Issuer's Rights........................................ 53
Section 5.05. Recording and Filing; Further Instruments......................... 53
Section 5.06. Rights Under Agreement............................................ 53
Section 5.07. Arbitrage and Tax Covenants....................................... 54
Section 5.08. No Disposition of Trust Estate.................................... 54
Section 5.09. Access to Books................................................... 54
Section 5.10. Source of Payment of Bonds........................................ 54
Section 5.11. Credit Facility................................................... 54
ARTICLE VI DEPOSIT OF BOND PROCEEDS; FUND AND ACCOUNTS; REVENUES............. 55
Section 6.01. Creation of Bond Fund and Accounts; Rebate Fund................... 55
Section 6.02. Disposition of Bond Proceeds and Certain Other Moneys............. 55
Section 6.03. Deposits Into the Bond Fund; Use of Moneys in the Bond Fund....... 55
Section 6.04. Bonds Not Presented for Payment of Principal...................... 56
Section 6.05. Payment to the Company............................................ 56
ARTICLE VII INVESTMENTS....................................................... 56
Section 7.01. Investment of Moneys in Funds..................................... 56
Section 7.02. Conversion of Investment to Cash.................................. 57
Section 7.03. Credit for Gains and Charge for Losses............................ 57
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE VIII DEFEASANCE........................................................ 57
ARTICLE IX DEFAULTS AND REMEDIES............................................. 60
Section 9.01. Events of Default................................................. 60
Section 9.02. Acceleration; Other Remedies...................................... 61
Section 9.03. Restoration to Former Position.................................... 63
Section 9.04. Owners' Right to Direct Proceedings............................... 63
Section 9.05. Limitation on Owners' Right to Institute Proceedings.............. 63
Section 9.06. No Impairment of Right to Enforce Payment......................... 64
Section 9.07. Proceedings by Trustee Without Possession of Bonds................ 64
Section 9.08. No Remedy Exclusive............................................... 64
Section 9.09. No Waiver of Remedies............................................. 64
Section 9.10. Application of Moneys............................................. 64
Section 9.11. Severability of Remedies.......................................... 66
ARTICLE X TRUSTEE; PAYING AGENT; REGISTRAR; REMARKETING AGENT............... 66
Section 10.01. Acceptance of Trusts.............................................. 66
Section 10.02. No Responsibilities for Recitals.................................. 66
Section 10.03. Limitations on Liability.......................................... 66
Section 10.04. Compensation, Expenses and Advances............................... 67
Section 10.05. Notice of Events of Default and Determination of Taxability....... 68
Section 10.06. Action by Trustee................................................. 68
Section 10.07. Good-Faith Reliance............................................... 69
Section 10.08. Dealings in Bonds; Allowance of Interest.......................... 69
Section 10.09. Several Capacities................................................ 70
Section 10.10. Resignation of Trustee............................................ 70
Section 10.11. Removal of Trustee................................................ 70
Section 10.12. Appointment of Successor Trustee.................................. 71
Section 10.13. Qualifications of Successor Trustee............................... 71
Section 10.14. Judicial Appointment of Successor Trustee......................... 71
Section 10.15. Acceptance of Trusts by Successor Trustee......................... 72
Section 10.16. Successor by Merger or Consolidation.............................. 72
Section 10.17. Standard of Care.................................................. 72
Section 10.18. Intervention in Litigation of the Issuer.......................... 72
Section 10.19. Remarketing Agent................................................. 72
Section 10.20. Qualifications of Remarketing Agent............................... 73
Section 10.21. Registrar......................................................... 73
Section 10.22. Qualifications of Registrar; Resignation; Removal................. 74
Section 10.23. Paying Agents..................................................... 74
Section 10.24. Additional Duties of Trustee...................................... 75
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE XI EXECUTION OF INSTRUMENTS BY OWNERS AND PROOF OF OWNERSHIP
OF BONDS.......................................................... 75
ARTICLE XII MODIFICATION OF THIS INDENTURE AND THE AGREEMENT.................. 76
Section 12.01. Supplemental Indentures Without Owner Consent..................... 76
Section 12.02. Supplemental Indentures Requiring Owner Consent................... 78
Section 12.03. Effect of Supplemental Indenture.................................. 79
Section 12.04. Consent of the Company and the Provider........................... 79
Section 12.05. Amendment of Agreement Without Owner Consent...................... 79
Section 12.06. Amendment of Agreement Requiring Owner Consent.................... 80
ARTICLE XIII MISCELLANEOUS..................................................... 81
Section 13.01. Successors of the Issuer.......................................... 81
Section 13.02. Parties in Interest............................................... 81
Section 13.03. Severability...................................................... 81
Section 13.04. No Personal Liability of Issuer Officials......................... 82
Section 13.05. Bonds Owned by the Issuer or the Company.......................... 82
Section 13.06. Counterparts...................................................... 82
Section 13.07. Governing Law..................................................... 82
Section 13.08. Notices........................................................... 82
Section 13.09. Holidays.......................................................... 83
Section 13.10. Purchase of Bonds by Trustee and Remarketing Agent................ 83
Section 13.11. Notices to Moody's and S&P........................................ 83
Section 13.12. Rights of Provider................................................ 84
Signatures.............................................................................. 85
EXHIBIT A -- FORM OF BOND
EXHIBIT B -- PARS AUCTION PROCEDURES
Section 1.01. Auction Procedures................................................ B-1
Section 1.02. Orders by Existing Owners and Potential Owners.................... B-1
Section 1.03. Submission of Orders by Broker-Dealers to Auction Agent........... B-3
Section 1.04. Determination of PARS Rate........................................ B-5
Section 1.05. Allocation of the PARS Rate Bonds................................. B-6
Section 1.06. Notice of PARS Rate............................................... B-8
Section 1.07. PARS Index........................................................ B-10
Section 1.08. Miscellaneous Provisions Regarding Auctions....................... B-11
Section 1.09. Changes in Auction Period or Auction Date......................... B-12
Section 1.10. Auction Agent..................................................... B-13
Section 1.11. Qualifications of Auction Agent: Resignation; Removal............. B-13
</TABLE>
-iv-
<PAGE> 6
TRUST INDENTURE
THIS TRUST INDENTURE is made and entered into as of September 1, 1999,
between the CITY OF FORSYTH, MONTANA, a political subdivision duly organized and
existing under the Constitution and laws of the State and CHASE MANHATTAN BANK
AND TRUST COMPANY, NATIONAL ASSOCIATION, as trustee.
RECITALS
A. In furtherance of its public purposes, the Issuer has entered into a
Loan Agreement, dated as of September 1, 1999, with Avista Corporation, a
Washington corporation, providing for the issuance by the Issuer of the Bonds
for the purpose of refunding, in advance of stated maturity, the Prior Bonds.
B. The execution and delivery of this Indenture and the issuance and sale
of the Bonds have been in all respects duly and validly authorized by proper
action duly adopted by the governing authority of the Issuer.
C. The execution and delivery of the Bonds and of this Indenture have been
duly authorized and all things necessary to make the Bonds, when executed by the
Issuer and authenticated by the Trustee, valid and binding legal obligations of
the Issuer and to make this Indenture a valid and binding agreement have been
done.
NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:
GRANTING CLAUSES
The Issuer, in consideration of the premises and the acceptance by the
Trustee of the trusts hereby created and of the purchase and acceptance of the
Bonds by the Owners thereof, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, in order to secure the payment of the
principal of, and premium, if any, and interest on, the Bonds according to their
tenor and effect and to secure the performance and observance by the Issuer of
all the covenants expressed or implied herein and in the Bonds, does hereby
grant, bargain, sell convey, mortgage and warrant, and assign, pledge and grant
a security interest in, the Trust Estate to the Trustee, and its successors in
trust and assigns forever for the benefit of the Owners:
TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned
or hereafter acquired, to the Trustee and its respective successors in trust and
assigns forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the
equal and proportionate benefit, security and protection of all present and
future Owners of the Bonds issued under and secured by this Indenture without
privilege, priority or distinction as to the lien or otherwise of any of the
Bonds over any of the other Bonds;
<PAGE> 7
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of, and premium, if any,
and interest on, the Bonds due or to become due thereon, at the times and in the
manner mentioned in the Bonds and as provided in Article VIII hereof according
to the true intent and meaning thereof, and shall cause the payments to be made
as required under Article V hereof, or shall provide, as permitted hereby, for
the payment thereof in accordance with Article VIII hereof, and shall well and
truly keep, perform and observe all the covenants and conditions pursuant to the
terms of this Indenture to be kept, performed and observed by it, and shall pay,
or cause to be paid, the principal of, and premium, if any, and interest on, the
Bonds due or to become due in accordance with the terms and provisions hereof,
then and in that case this Indenture and the rights hereby granted shall cease,
terminate and be void and the Trustee shall thereupon cancel and discharge this
Indenture and execute and deliver to the Issuer and the Company such instruments
in writing as shall be requisite to evidence the discharge hereof, otherwise
this Indenture shall be and remain in full force and effect.
THIS TRUST INDENTURE FURTHER WITNESSETH, and it is expressly declared,
that all Bonds issued and secured hereunder are to be issued, authenticated and
delivered, and all of the Trust Estate is to be dealt with and disposed of,
under, upon and subject to the terms, conditions, stipulations, covenants,
agreements, trusts, uses and purposes hereinafter expressed, and the Issuer has
agreed and covenanted, and does hereby agree and covenant, with the Trustee and
with the respective Owners, from time to time, of the Bonds, or any part
thereof, as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. GENERAL DEFINITIONS. The terms defined in this Section 1.01
shall have the meanings provided herein for all purposes of this Indenture and
the Agreement, unless the context clearly requires otherwise. Additional
definitions relating to the PARS Rate are contained in Section 1.02. The two
sets of definitions contained in Sections 1.01 and 1.02 are set forth separately
for convenience of reference only.
"Act" means Sections 90-5-101 to 90-5-114, inclusive, Montana Code
Annotated, as from time to time supplemented and amended.
"Administration Expenses" means reasonable compensation and reimbursement
of reasonable expenses and advances payable to the Issuer, the Trustee, the
Registrar, the Remarketing Agent, the Paying Agent, Moody's and S&P.
"Agreement" or "Loan Agreement" means the Loan Agreement, dated as of
September 1, 1999, between the Issuer and the Company, as amended and
supplemented from time to time.
"Ambac" shall mean Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance company.
-2-
<PAGE> 8
"Authorized Company Representative" means each person at the time
designated to act on behalf of the Company by written certificate furnished to
the Issuer and the Trustee containing the specimen signature of such person and
signed on behalf of the Company by its President, any Vice President, its
Secretary, any Assistant Secretary, its Treasurer or any Assistant Treasurer.
Such certificate may designate an alternate or alternates.
"Authorized Denomination" means (i) $25,000 or any integral multiple of
$25,000 when the Bonds bear interest as a PARS Rate; (ii) $100,000 or any
integral multiple of $100,000 when the Bonds bear interest at a Daily Interest
Rate or Weekly Interest Rate; (iii) $100,000 or any integral multiple of $5,000
in excess of $100,000 when the Bonds bear interest at a Flexible Interest Rate;
and (iv) $5,000 or any integral multiple of $5,000 when the Bonds bear interest
at a Term Interest Rate.
"Beneficial Owner" has, when the Bonds are held in book-entry form, the
meaning ascribed to such term in Section 2.16 hereof
"Bond" or "Bonds" means the Issuer's Pollution Control Revenue Refunding
Bonds (Avista Corporation Colstrip Project) Series 1999A, issued pursuant to
this Indenture.
"Bond Counsel" means Chapman and Cutler or any other firm of nationally
recognized bond counsel familiar with the type of transactions contemplated
under this Indenture selected by the Company and acceptable to the Trustee.
"Bond Documents" means this Indenture, the Agreement and the Bonds.
"Bond Fund" means the trust fund by that name created pursuant to Section
6.01(a) hereof.
"Bond Payment Date" means any Interest Payment Date and any other date on
which the principal of, and premium, if any, and interest on, the Bonds is to be
paid to the Owners thereof, whether upon redemption, at maturity or upon
acceleration of maturity of the Bonds.
"Bond Purchase Contract" means the Bond Purchase Contract dated
September 8, 1999, between the Issuer and Goldman, Sachs & Co., as
Underwriter.
"Bond Resolution" means the resolution duly adopted and approved by the
City Council of the Issuer on August 23, 1999, authorizing the issuance and sale
of the Bonds and the execution of this Indenture and the Agreement.
"Business Day" means any day except a Saturday, Sunday or other day (a) on
which commercial banks located in the cities in which the Principal Office of
the Trustee, the Principal Office of the Company, the Principal Office of the
Remarketing Agent or the Principal Office of the Paying Agent are located are
required or authorized by law or regulation to remain closed or are closed, or
(b) on which The New York Stock Exchange is closed.
-3-
<PAGE> 9
"Change of Credit Facility" means (a) the delivery of a Credit Facility
(or evidence thereof) to the Trustee, (b) the termination of an existing Credit
Facility or (c) a combination of (a) and (b), in each case in accordance with
Section 4.07 of the Agreement.
"Closing" and "Closing Date" means the date of the first authentication
and delivery of fully-executed and authenticated Bonds under this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended. Each reference
to a section of the Code herein shall be deemed to include the United States
Treasury Regulations, including temporary and proposed regulations, relating to
such section which are applicable to the Bonds or the use of the proceeds
thereof.
"1954 Code" means the Internal Revenue Code of 1954, as amended. Each
reference to a section of the 1954 Code herein shall be deemed to include the
United States Treasury Regulations, including temporary and proposed
regulations, relating to such section which are applicable to the Bonds or the
use of the proceeds thereof.
"Company" means Avista Corporation, a corporation organized and existing
under the laws of the State of Washington and formerly known as The Washington
Water Power Company, or its successors and assigns pursuant to Section 5.01 of
the Agreement.
"Costs of Issuance" means any items of expense directly or indirectly
payable or reimbursable by the Company and directly or indirectly attributable
to the authorization, sale and issuance of the Bonds, including, but not limited
to, printing costs; costs of preparation and reproduction of documents; initial
fees and charges of the Trustee, the Registrar and the Paying Agent; legal fees
and charges, if any; underwriting discount or fees paid to Goldman, Sachs & Co.
in connection with the initial offering and sale of the Bonds; the Issuer fees
and direct out-of-pocket expenses incurred in issuing and paying the Bonds and
loaning the proceeds of the Bonds to the Company (but not including any overhead
or administrative costs of the Issuer relating to the Bonds); letter of credit
fees and municipal bond insurance premiums, if any, (but such fees or premiums
shall not be treated as Costs of Issuance to the extent such fees and premiums
are for the payment of the reasonable costs of a transfer of credit risk under
the Code and do not reflect indirect payment of additional Costs of Issuance);
fees and disbursements of financial advisers, consultants and professionals; and
costs of credit ratings.
"Credit Facility" means a facility provided in accordance with Section
4.07 of the Agreement to provide security or liquidity for the Bonds. The term
"Credit Facility" includes, by way of example and not of limitation, one or more
letters of credit, bond insurance policies, standby bond purchase agreements,
lines of credit, first mortgage bonds and other security instruments or
liquidity devices. A Credit Facility may have an expiration date earlier than
the maturity of the Bonds. The initial Credit Facility is the Insurance Policy.
"Credit Facility Agreement" means any agreement between the Company and
the Provider and relating to the Credit Facility then in effect. The initial
Credit Facility Agreement is that Insurance Agreement dated as of September 1,
1999 between Ambac and the Company.
-4-
<PAGE> 10
"Daily Interest Rate" means the interest rate on the Bonds established
pursuant to Section 2.04 hereof
"Daily Interest Rate Period" means each period during which a Daily
Interest Rate is in effect.
"Delivery Office of the Trustee" means the office designated as such by
the Trustee in writing to the Remarketing Agent, the Registrar, the Issuer and
the Company.
"Determination of Taxability" shall have the meaning set forth in Section
8.03 of the Agreement. The Trustee shall give notice of a Determination of
Taxability as provided in Section 10.05 hereof.
"DTC" means The Depository Trust Company and its successors and assigns.
"DTC Participants" means those brokers, securities dealers, banks, trust
companies, clearing corporations and certain other organizations from time to
time for which DTC holds Bonds as securities depository.
"DTC Representation Letter" has the meaning assigned thereto in Section
2.16(c) hereof.
"Due for Payment" has the meaning specified in the Credit Facility.
"Event of Default" means any occurrence or event specified in
Section 9.01 hereof
"Executive Officer" means the Mayor of the Issuer.
"Exempt Facilities" means facilities which qualify as "sewage or solid
waste disposal facilities" or "air or water pollution control facilities" as
defined in the 1954 Code and which qualify as a "project" under the Act.
"Favorable Opinion of Bond Counsel" means an opinion of Bond Counsel
addressed to the Issuer and the Trustee to the effect that the proposed action
is not prohibited by the Act or the Indenture or the Loan Agreement, as
applicable, and will not adversely affect the Tax-Exempt status of the Bonds.
"Flexible Interest Rate" means, with respect to any Bond, the interest
rate or rates associated with such Bond established in accordance with Section
2.07 hereof.
"Flexible Interest Rate Period" means each period comprised of Flexible
Segments during which Flexible Interest Rates are in effect.
"Flexible Segment" means, with respect to each Bond bearing interest at a
Flexible Interest Rate, the period established in accordance with Section
2.07(a) hereof.
-5-
<PAGE> 11
"Government Obligations" means direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed as to full and
timely payment by, the United States of America, which are not subject to
redemption or prepayment prior to stated maturity.
"Indenture" means this Trust Indenture between the Issuer and the Trustee
relating to issuance of the Bonds, as amended or supplemented from time to time
as permitted herein.
"Information Services" means Financial Information, Inc.'s "Daily Called
Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302,
Attention: Editor; Kenny Information Services' "Called Bond Service," 65
Broadway, 16th Floor, New York, New York 10006; Moody's "Municipal and
Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention:
Municipal News Reports; the Municipal Securities Rulemaking Board, CDI Pilot,
1640 King Street, Suite 300, Alexandria, Virginia 22314 and Standard and Poor's
"Called Bond Record," 55 Water Street, New York, New York 10041; or, in
accordance with then-current guidelines of the Securities and Exchange
Commission, such other addresses and/or such other services providing
information with respect to called bonds, or no such services, as the Company
may designate in a certificate delivered to the Trustee.
"Initial Period" means the period from and including the Closing Date
through and including February 1, 2000.
"Insurance Policy" shall mean the municipal bond insurance policy issued
by Ambac insuring the payment when due of the principal of and interest on the
Bonds as provided therein.
"Insurance Trustee" has the meaning specified in the Insurance Policy. The
Insurance Policy specifies that the United States Trust Company of New York is
initially the Insurance Trustee.
"Interest Account" means the trust account by that name established in the
Bond Fund pursuant to Section 6.01 hereof.
"Interest Coverage Rate" means the interest rate specified in a Credit
Facility as being the rate used to determine the amount of interest on the Bonds
covered by such Credit Facility.
"Interest Payment Date" means:
(a) with respect to any PARS Rate Period, the Business Day
immediately following the Initial Period and (i) when used with respect to
any Auction Period other than a daily Auction Period, the Business Day
immediately following such Auction Period and (ii) when used with respect
to a daily Auction Period, the first Business Day of the month immediately
succeeding such Auction Period,
(b) with respect to any Daily or Weekly Interest Rate Period, the
first Business Day of each calendar month,
-6-
<PAGE> 12
(c) with respect to any Term Interest Rate Period, the first day of
the sixth month following the commencement of the Term Interest Rate
Period and the first day of each sixth month thereafter, and the day
following the last day of a Term Interest Rate Period,
(d) with respect to any Flexible Segment, the Business Day next
succeeding the last day of such Flexible Segment, and
(e) with respect to any Rate Period, the day next succeeding
the last day thereof.
"Investment Securities" means any of the following obligations or
securities, to the extent permitted by law and subject to the provisions of
Article VII hereof, on which neither the Company nor any of its subsidiaries is
the obligor.
(a) Government Obligations;
(b) Obligations of any of the following federal agencies, which
obligations represent the full faith and credit of the United States of
America:
- Export-Import Bank
- Farm Credit System Financial Assistance Corporation
- Rural Economic Community Development Administration
(formerly the Farmers Home Administration)
- General Services Administration
- U.S. Maritime Administration
- Small Business Administration
- Government National Mortgage Association (GNMA)
- U.S. Department of Housing & Urban Development (PHA's)
- Federal Housing Administration
- Federal Financing Bank;
(c) Direct obligations of any of the following federal agencies
which obligations are not fully guaranteed by the full faith and credit of
the United States of America:
- Senior debt obligations rated "Aaa" by Moody's and "AAA"
by S&P issued by the Federal National Mortgage
Association (FNMA) or Federal Home Loan Mortgage
Corporation (FHLMC)
- Obligations of the Resolution Funding Corporation
(REFCORP)
- Senior debt obligations of the Federal Home Loan Bank
System
- Senior debt obligations of other government-sponsored
agencies approved by the Provider;
(d) U.S. dollar denominated deposit accounts, federal funds and
bankers' acceptances with domestic commercial banks which have a rating on
their short term
-7-
<PAGE> 13
certificates of deposit on the date of purchase of "A-1" or "A-1+" by S&P
and "P-1" by Moody's and maturing no more than 360 days after the date of
purchase. (Ratings on holding companies are not considered as the rating
of the bank.);
(e) Commercial paper which is rated at the time of purchase in the
single highest classification, "A-1+" by S&P and "P-1" by Moody's and
which matures not more than 270 days after the date of purchase;
(f) Investments in a money market fund rated "AAAm" or "AAAm-G" or
better by S&P;
(g) Pre-refunded Municipal Obligations defined as follows: Any bonds
or other obligations of any state of the United States of America or of
any agency, instrumentality or local governmental unit of any such state
which are not callable at the option of the obligor prior to maturity or
as to which irrevocable instructions have been given by the obligor to
call on the date specified in the notice; and
(1) which are rated, based on an irrevocable escrow account or
fund (the "escrow"), in the highest rating category of S&P and
Moody's or any successors thereto; or
(2) (i) which are fully secured as to principal and interest
and redemption premium, if any, by an escrow consisting only of cash
or Government Obligations, which escrow may be applied only to the
payment of such principal of and interest and redemption premium, if
any, on such bonds or other obligations on the maturity date or
dates thereof or the specified redemption date or dates pursuant to
such irrevocable instructions, as appropriate, and (ii) which escrow
is sufficient, as verified by a nationally recognized independent
certified public accountant, to pay principal of and interest and
redemption premium, if any, on the bonds or other obligations
described in this clause (g) on the maturity date or dates specified
in the irrevocable instructions referred to above, as appropriate;
(h) General obligations of states with a rating of at least "A2/A"
or higher by both Moody's and S&P;
(i) Investment agreements approved in writing by the Provider
supported by appropriate opinions of counsel with notice to S&P; and
(j) Other forms of investments (including repurchase agreements)
approved in writing by the Provider with notice to S&P.
"Issue Date" means the date of the initial authentication and delivery of
the Bonds, being September 15, 1999.
-8-
<PAGE> 14
"Issuer" means the City of Forsyth, Montana, and its successors, and any
political subdivision resulting from or surviving any consolidation or merger to
which it or its successors may be a party.
"Loan Payments" means the payments required to be made by the Company
pursuant to Section 4.01(a) of the Agreement.
"Mail" means by first-class mail postage prepaid.
"Maturity Date" means October 1, 2032.
"Maximum Interest Rate" means (a) while a Credit Facility is in effect
that specifies an Interest Coverage Rate, the lesser of 18% per annum or the
Interest Coverage Rate specified in the Credit Facility, and (b) at all other
times, 18% per annum.
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns,
and, if such corporation shall for any reason no longer perform the functions of
a securities rating agency, "Moody's" shall be deemed to refer to any other
nationally recognized rating agency designated by the Company by notice to the
Issuer, the Trustee and the Remarketing Agent.
"Outstanding" or "Bonds Outstanding" or "Outstanding Bonds" means, as of
any given date, all Bonds which have been authenticated and delivered by the
Trustee under this Indenture, except:
(a) Bonds canceled or purchased by or delivered to the Trustee for
cancellation;
(b) Bonds that have become due (at maturity or on redemption,
acceleration or otherwise) and for the payment, including premium if any,
and interest accrued to the due date, of which sufficient moneys are held
by the Trustee;
(c) Bonds deemed paid in accordance with Article VIII hereof; and
(d) Bonds in lieu of which others have been authenticated under
Section 2.11 (relating to transfer and exchange of Bonds) or Section 2.13
(relating to mutilated, lost, stolen, destroyed or undelivered Bonds) or
Bonds paid pursuant to Section 2.13;
provided, however, that if the principal of or interest due on Bonds is paid by
the Provider pursuant to the Credit Facility, such Bonds shall remain
Outstanding for all purposes of this Indenture until the Provider receives
payment therefor as contemplated by the Credit Facility.
Bonds purchased by the Trustee or the Company pursuant to Article III
hereof will continue to be Outstanding until the Company has paid or caused to
be paid to the Trustee an amount sufficient to provide for the payment of all
accrued interest on such Bonds and the Company has directed the Trustee to
cancel such Bonds. Bonds purchased pursuant to tenders
-9-
<PAGE> 15
and not delivered to the Trustee for payment are not Outstanding, but there will
be Outstanding Bonds authenticated and delivered in lieu of such undelivered
Bonds as contemplated by Section 3.03 hereof.
"Owner" or "Owners" or "Owner of Bonds" or "Owners of Bonds" means the
registered owner of any Bond; provided however, when used in the context of the
Tax-Exempt status of the Bonds, the term "Owners" shall include a Beneficial
Owner.
"PARS" and other definitions relating to PARS Rate Bonds are set forth in
Section 1.02 hereto. Reference is also hereby made to Exhibit B for certain
provisions relating to Auction Procedures for the PARS Rate Bonds.
"Paying Agent" means any paying agent appointed as provided in Section
10.23 hereof, or any successor thereto.
"Person" means one or more individuals, estates, joint ventures,
joint-stock companies, partnerships, associations, corporations, limited
liability companies, trusts or unincorporated organizations, and one or more
governments or agencies or political subdivisions thereof.
"Plant" means the Colstrip Plant Units 3 and 4 coal-fired steam electric
generating plant, located in Rosebud County, Montana.
"Pollution Control Facilities" means those items of machinery, equipment,
structures, improvements, other facilities and related property, which have been
or will be acquired, constructed and improved at the Plant and are particularly
described in Exhibit A to the Agreement, as said Exhibit A may be from time to
time amended.
"Principal Account" means the trust account by that name established
within the Bond Fund pursuant to Section 6.01 hereof.
"Principal Office of the Company" means the office of the Company
specified in or designated pursuant to Section 3.06(c) hereof.
"Principal Office of the Paying Agent" means the office designated in
writing by the Paying Agent to the Trustee, the Issuer, the Company, the
Registrar, the Provider and the Remarketing Agent.
"Principal Office of the Registrar" means the office or offices designated
as such by the Registrar in writing to the Trustee, the Company, the Issuer, the
Provider and the Remarketing Agent.
"Principal Office of the Remarketing Agent" means the office designated in
writing by the Remarketing Agent to the Trustee, the Issuer, the Company, the
Provider, the Registrar and the Paying Agent.
-10-
<PAGE> 16
"Principal Office of the Trustee" means the office designated as such by
the Trustee in writing to the Remarketing Agent, the Registrar, the Provider,
the Issuer and the Company.
"Prior Agreement" means the Loan Agreement between the Issuer and the
Company, dated as of October 1, 1989, pursuant to which the Company is obligated
to provide for payment of the Prior Bonds.
"Prior Bond Fund" means the bond fund created under Section 4.01(b) of the
Prior Indenture from which payments of principal and interest on the Prior Bonds
are made.
"Prior Bonds" means the City of Forsyth, Rosebud County, Montana,
Pollution Control Revenue Refunding Bonds (The Washington Water Power Company
Colstrip Project) Series 1989A which are being refunded pursuant to the
Refunding with the proceeds of the Bonds.
"Prior Indenture" means the Indenture of Trust between the Issuer and the
Prior Trustee, dated as of October 1, 1989, pursuant to which the Prior Bonds
were issued.
"Prior Trustee" means Chemical Bank (which is now known as The Chase
Manhattan Bank), as trustee under the Prior Indenture.
"Project" means the Company's 15% undivided interest in the Pollution
Control Facilities.
"Project Certificate" means the Company's certificate or certificates,
delivered concurrently with the initial authentication and delivery of the
Bonds, with respect to certain facts which are within the knowledge of the
Company to enable Bond Counsel to determine whether interest on the Bonds is
includible in the gross income of the Owners thereof under applicable provisions
of the Code.
"Provider" and "Provider of the Credit Facility" means the provider of
the Credit Facility. The initial Provider is Ambac.
"Provider Default" means any of the following events:
(a) the failure of the Provider to make any payment required under
the Credit Facility when the same shall become due and payable or the
Credit Facility shall for any reason cease to be in full force and effect;
(b) a decree or order for relief shall be entered by a court or
insurance regulatory authority having jurisdiction over the Provider in an
involuntary case under an applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, custodian, trustee, sequestrator (or similar official) of the
Provider or for any substantial part of the property of the Provider or
ordering the winding-up or liquidation of the affairs of the Provider, and
the continuance of any such decree or order shall be unstayed and remain
in effect for a period of 60 consecutive days thereafter; or
-11-
<PAGE> 17
(c) the Provider shall commence a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the Provider shall consent to or acquiesce
in the entry of an order for relief in an involuntary case under any such
law, or the Provider shall consent to the appointment of or taking of
possession by a receiver, liquidator, trustee, custodian, sequestrator (or
similar official) of the Provider or for any substantial part of its
property, or the Provider shall make a general assignment for the benefit
of creditors, or the Provider shall fail generally or admit in writing its
inability to pay its debts as such debts become due, or the Provider shall
take corporate action in contemplation or furtherance of any of the
foregoing.
"Rate" means any PARS Rate, Daily Interest Rate, Weekly Interest Rate,
Flexible Interest Rate or Term Interest Rate.
"Rate Period" means any PARS Rate Period, Daily Interest Rate Period,
Weekly Interest Rate Period, Flexible Interest Rate Period or Term Interest Rate
Period.
"Rating Category" means one of the generic rating categories of either
Moody's or S&P, without regard to any refinement or gradation of such rating
category by a numerical modifier or otherwise.
"Rebate Fund" means the trust fund by that name created pursuant to
Section 6.01(b) hereof.
"Record Date" means:
(a) with respect to a PARS Rate Period other than a daily Auction
Period, the second Business Day preceding an Interest Payment Date
therefor and during a daily Auction Period, the last Business Day of the
month preceding an Interest Payment Date therefor,
(b) with respect to any Interest Payment Date in respect of any
Daily Interest Rate Period, Weekly Interest Rate Period or Flexible
Segment, the Business Day next preceding such Interest Payment Date,
(c) with respect to any Interest Payment Date in respect of any Term
Interest Rate Period (except as provided in clause (d) below), the
fifteenth day of the month preceding such Interest Payment Date, and
(d) for any Interest Payment Date established pursuant to clause (e)
of the definition of "Interest Payment Date" in this Section 1.01 in
respect of a Term Interest Rate Period, the Business Day next preceding
such Interest Payment Date.
"Redemption Date" means December 1, 1999, the date upon which the Prior
Bonds are to be redeemed.
-12-
<PAGE> 18
"Refunding" means the series of transactions whereby the Prior Bonds are
refunded and cancelled with the proceeds of the Bonds and other money provided
by the Company.
"Registrar" means the Trustee or any successor Registrar appointed in
accordance with Section 10.22.
"Remarketing Agent" means any Person serving from time to time as
Remarketing Agent under this Indenture.
"Remarketing Agreement" means the remarketing agreement between the
Company and the Remarketing Agent pursuant to which the Remarketing Agent agrees
to act as Remarketing Agent for the Bonds, as such remarketing agreement may be
amended and supplemented from time to time.
"Revenues" means all moneys pledged hereunder and paid or payable to the
Trustee for the account of the Issuer in accordance with the Agreement and the
Credit Facility, and all receipts credited under the provisions of this
Indenture against such payments; provided however, that "Revenues" shall not
include moneys held by the Trustee in the Rebate Fund or to pay the purchase
price of Bonds subject to purchase pursuant to Article III hereof.
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., a corporation organized and existing under the laws
of the State of New York, its successors and assigns, and, if such corporation
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Company by notice to the Issuer, the
Trustee and the Remarketing Agent.
"Securities Depositories" means The Depository Trust Company, Call
Notification Department, 711 Stewart Avenue, Garden City, New York 11530,
Telephone: (516) 227-4070, Fax: (516) 227-4190, or, in accordance with
then-current guidelines of the Securities and Exchange Commission, such other
addresses and/or such other securities depositories, or no such depositories, as
the Company may designate in a certificate delivered to the Trustee.
"State" means the State of Montana.
"Supplemental Indenture" means any indenture supplemental to this
Indenture entered into between the Issuer and the Trustee pursuant to the
provisions of Section 12.01 or Section 12.02 hereof.
"Tax Certificate" means the Tax Exemption Certificate and Agreement
relating to the Bonds to be executed by the Company, the Issuer and the Trustee
on the date of the initial authentication and delivery of the Bonds, as amended
and supplemented from time to time.
"Tax-Exempt" means, with respect to interest on any obligations of a state
or local government, including the Bonds, that such interest is not includible
in gross income of the owners of such obligations for federal income tax
purposes, except for interest on any such
-13-
<PAGE> 19
obligations for any period during which such obligations are owned by a person
who is a "substantial user" of any facilities financed or refinanced with such
obligations or a "related person" within the meaning of Section 103(b)(13) of
the 1954 Code, whether or not such interest is includible as an item of tax
preference or otherwise includible directly or indirectly for purposes of
calculating other tax liabilities, including any alternative minimum tax or
environmental tax under the Code.
"Term Interest Rate" means the interest rate on the Bonds established in
accordance with Section 2.06 hereof.
"Term Interest Rate Period" means each period of six months or more during
which a Term Interest Rate is in effect.
"Treasury Regulations" means the United States Treasury Regulations
dealing with the tax-exempt bond provisions of the Code.
"Trustee" means Chase Manhattan Bank and Trust Company, National
Association, as trustee under this Indenture, and any successor Trustee
appointed hereunder.
"Trust Estate" means all right, title and interest of the Issuer in and to
the Agreement (except for amounts payable to, and the rights of, the Issuer
under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06, Section 5.07,
Section 5.08 and Section 7.05 thereof, and the Issuer's right to receive
notices, certificates, requests, requisitions, directions and other
communications thereunder), including, without limitation, all right, title and
interest of the Issuer in the Revenues, all moneys and other obligations which
are, from time to time, deposited or required to be deposited with or held or
required to be held by or on behalf of the Trustee in trust in the Bond Fund
under any of the provisions of this Indenture (except moneys or obligations
deposited with or paid to the Trustee for payment or redemption of Bonds that
are deemed no longer Outstanding hereunder), the Credit Facility, and all other
rights, title and interest which are subject to the lien of this Indenture;
provided, however, that the "Trust Estate" shall not include (a) moneys held by
the Trustee in the Rebate Fund or to pay the purchase price of Bonds subject to
purchase pursuant to Article III hereof or (b) the Plant, the Pollution Control
Facilities, the Project or any part thereof.
"Weekly Interest Rate" means the interest rate on the Bonds established in
accordance with Section 2.05 hereof.
"Weekly Interest Rate Period" means each period during which a Weekly
Interest Rate is in effect.
SECTION 1.02 PARS RATE DEFINITIONS. The terms defined in this Section 1.02
shall have the meanings provided herein for all purposes of this Indenture and
the Agreement, unless the context clearly requires otherwise.
"Agent Member" means a member of, or participant in, the Securities
Depository who will act on behalf of a Bidder and is identified as such in the
Bidder's Master Purchaser's Letter.
-14-
<PAGE> 20
"Auction" means each periodic implementation of the Auction Procedures.
"Auction Agent" means IBJ Whitehall Bank & Trust Company, New York, New
York, or any successor auctioneer appointed in accordance with Section 1.10 or
1.11 of Exhibit B hereto.
"Auction Agreement" means an agreement between the Auction Agent and the
Trustee pursuant to which the Auction Agent agrees to follow the procedures
specified in Exhibit B hereto, as such agreement may from time to time be
amended or supplemented.
"Auction Date" means during any period in which the Auction Procedures are
not suspended in accordance with the provisions hereof, if the PARS Rate Bonds
are in a daily Auction Period, each Business Day, and if the PARS Rate Bonds are
in any other Auction Period, the Business Day next preceding each Interest
Payment Date for such PARS Rate Bonds (whether or not an Auction shall be
conducted on such date); provided, however, that the last Auction Date with
respect to the PARS Rate Bonds in an Auction Period other than a daily Auction
Period shall be the earlier of (i) the Business Day next preceding the Interest
Payment Date next preceding the Conversion Date for the PARS Rate Bonds and (ii)
the Business Day next preceding the Interest Payment Date next preceding the
final maturity date for the PARS Rate Bonds; and provided, further, that if the
PARS Rate Bonds are in a daily Auction Period, the last Auction Date shall be
the earlier of (x) the Business Day next preceding the Conversion Date for the
PARS Rate Bonds and (y) the Business Day next preceding the final maturity date
for the PARS Rate Bonds. On the Business Day preceding the conversion from a
daily Auction Period to another Auction Period, there will be two Auctions, one
for the last daily Auction Period and one for the first Auction Period following
the conversion. The first Auction Date for the PARS Rate Bonds is February 1,
2000.
"Auction Period" means:
(i) with respect to the PARS Rate Bonds in a daily mode, a period
beginning on each Business Day and extending to but not including the next
succeeding Business Day,
(ii) with respect to the PARS Rate Bonds in a seven-day mode, a
period of generally seven days beginning on a Wednesday (or the day
following the last day of the prior Auction Period if the prior Auction
Period does not end on a Tuesday) and ending on the Tuesday thereafter
(unless such Tuesday is not a Business Day, in which case ending on the
Business Day immediately preceding such Tuesday),
(iii) with respect to the PARS Rate Bonds in a 28 day mode, a period
of generally 28 days beginning on a Wednesday (or the last day of the
prior Auction Period if the Auction Period does not end on a Tuesday) and
ending on the fourth Tuesday thereafter (unless such Tuesday is not a
Business Day, in which case on the Business Day immediately preceding such
Tuesday),
(iv) with respect to the PARS Rate Bonds in a 35 day mode, a period
of generally 35 days beginning on a Wednesday (or the last day of the
prior Auction Period if
-15-
<PAGE> 21
the Auction Period does not end on a Tuesday) and ending on the fifth
Tuesday thereafter (unless such Tuesday is not a Business Day, in which
case on the Business Day immediately preceding such Tuesday), and
(v) with respect to the PARS Rate Bonds in a semiannual mode, a
period of generally six months (or shorter period upon a conversion from
another Auction Period) beginning on the day following the last day of the
prior Auction Period and ending on the next succeeding April 1 or October
1;
provided, however, that if there is a conversion from a daily Auction Period to
a seven-day Auction Period, the next Auction Period will begin on the date of
the conversion (i.e. the Interest Payment Date for the prior Auction Period) and
will end on the next succeeding Tuesday (unless such Tuesday is not a Business
Day, in which case on the next preceding Business Day), if there is a conversion
from a daily Auction Period to a 28-day Auction Period, the next Auction Period
will begin on the date of the conversion (i.e. the Interest Payment Date for the
prior Auction Period and will end on the Tuesday (unless such Tuesday is not a
Business Day, in which case on the next preceding Business Day) which is more
than 21 days but not more than 28 days from such date of conversion, and, if
there is a conversion from a daily Auction Period to a 35-day Auction Period,
the next Auction Period will begin on the date of the conversion (i.e. the
Interest Payment Date for the prior Auction Period) and will end on the Tuesday
(unless such Tuesday is not a Business Day, in which case on the next preceding
Business Day) which is more than 28 days but no more than 35 days from such date
of conversion.
"Auction Procedures" means the procedures for conducting Auctions for the
PARS Rate Bonds during a PARS Rate Period set forth in Exhibit B hereto.
"Auction Rate" means for each Tranche of PARS for each Auction Period, (i)
if Sufficient Clearing Bids exist, the Winning Bid Rate for such Tranche,
provided, however, if all of the PARS Rate Bonds are the subject of Submitted
Hold Orders, the Minimum PARS Rate for such Tranche and (ii) if Sufficient
Clearing Bids do not exist, the Maximum PARS Rate.
"Available Bonds" means the aggregate principal amount of the PARS Rate
Bonds that are not the subject of Submitted Hold Orders.
"Bid" shall have the meaning specified in subsection (a) of Section 1.02
of Exhibit B hereto.
"Bidder" means each Existing Owner and Potential Owner who places an
Order.
"Broker-Dealer" means any entity that is permitted by law to perform the
function required of a Broker-Dealer in Exhibit B hereto that is a member of, or
a direct participant in, the Securities Depository, that has been selected by
the Company, with the consent of Goldman, Sachs & Co. as long as Goldman, Sachs
& Co. is a Broker-Dealer, and that is a party to a Broker-Dealer Agreement with
the Auction Agent.
-16-
<PAGE> 22
"Broker-Dealer Agreement" means an agreement between the Auction Agent and
a Broker Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in Exhibit B hereto, as such agreement may from to time be
amended or supplemented.
"Broker-Dealer Rate" means a rate of 0.25% with respect to Tranche I PARS
and a rate of 0.15% with respect to Tranche II PARS or such different rates as
may be established pursuant to a Broker-Dealer Agreement, provided that the
Broker-Dealer Rate must be the same in all Broker-Dealer Agreements relating to
the PARS.
"Existing Owner" means a Person who has signed a Master Purchaser's Letter
and is listed as the beneficial owner of the PARS Rate Bonds in the records of
the Auction Agent.
"Hold Order" shall have the meaning specified in subsection (a) of Section
1.02 of Exhibit B hereto.
"Master Purchaser's Letter" means a letter substantially in the form
attached to the Broker-Dealer Agreement addressed to a Broker-Dealer, among
others, in which a Person agrees, among other things, to offer to purchase, to
purchase, to offer to sell and/or to sell the PARS Rate Bonds as set forth in
Exhibit B hereto.
"Maximum PARS Rate" means, as of any Auction Date, the Maximum Interest
Rate.
"Minimum PARS Rate" means, as of any Auction Date, the lesser of the
Maximum Interest Rate and:
(a) for Tranche I PARS, a per annum rate equal to 45% of the
PARS Index in effect on such Auction Date; and
(b) for Tranche II PARS, the Minimum PARS Rate for the Tranche I
PARS plus the difference between the Broker-Dealer Rate for the Tranche I
PARS and the Broker-Dealer Rate for the Tranche II PARS.
"No Auction Rate" means for Tranche I PARS, as of any Auction Date, the
lesser of the Maximum PARS Rate and the rate determined by multiplying the
Percentage of PARS Index set forth below, based on the Prevailing Rating of the
PARS Rate Bonds in effect at the close of business on the Business Day
immediately preceding such Auction Date, by the PARS Index:
-17-
<PAGE> 23
<TABLE>
<CAPTION>
PREVAILING RATING OF PERCENTAGE OF
PARS BONDS PARS INDEX
-------------------- -------------
<S> <C>
AAA/Aaa 65%
AA/Aa 70%
A/A 85%
Below A/A 100%
</TABLE>
For Tranche II PARS, the No Auction Rate shall equal the No Auction Rate
for Tranche I PARS plus the difference between the Broker-Dealer Rate for the
Tranche I PARS and the Broker-Dealer Rate for the Tranche II PARS.
"Order" means a Hold Order, Bid or Sell Order.
"PARS" means the PARS Rate Bonds consisting of Tranche I PARS and Tranche
II PARS while they bear interest at the PARS Rates.
"PARS Index" shall have the meaning specified in Section 1.07 of Exhibit B
hereto.
"PARS Rate" means the rates of interest to be borne by the PARS Rate Bonds
during each Auction Period, not greater than the Maximum Interest Rate,
determined in accordance with Section 2.03; provided that all Tranche I PARS
shall bear the same PARS Rate, and all Tranche II PARS shall bear the same PARS
Rate, which rate for the Tranche II PARS shall be equal to the PARS Rate for
Tranche I PARS plus the difference between the Broker-Dealer Rate for Tranche I
PARS and the Broker-Dealer Rate for Tranche II PARS.
"PARS Rate Adjustment Date" means the first day of each Auction Period.
"PARS Rate Bonds" means the Bonds during any PARS Rate Period.
"PARS Rate Conversion Date" means the date on which the PARS Rate Bonds
convert from an interest rate period other than a PARS Rate Period and begin to
bear interest at a PARS Rate.
"PARS Rate Period" means each period during which a PARS Rate is in
effect.
"Payment Default" means the failure to make payment of interest on,
premium, if any, and principal of the PARS Rate Bonds when due.
"Potential Owner" means any Person, including any Existing Owner, who
shall have executed a Master Purchaser's Letter and who may be interested in
acquiring a beneficial interest in the PARS Rate Bonds in addition to the PARS
Rate Bonds currently owned by such Person, if any,
"Prevailing Rating" means:
-18-
<PAGE> 24
(a) AAA/Aaa, if the PARS Rate Bonds shall have a rating of AAA or
better by S&P and a rating of Aaa or better by Moody's';
(b) if not AAA/Aaa, AA/Aa if the PARS Rate Bonds shall have a rating
of AA- or better by S&P and a rating of Aa3 or better by Moody's;
(c) if not AAA/Aaa or AA/Aa, A/A if the PARS Rate Bonds shall have a
rating of A- or better by S&P and a rating of A3 or better by Moody's; and
(d) if not AAA/Aaa, AA/Aa or A/A, then below A/A, whether or not the
PARS Rate Bonds are rated by any securities rating agency.
For purposes of this definition, S&P's rating categories of "AAA", "AA" and "A-"
and Moody's rating categories of "Aaa," "Aa3" and "A3," shall be deemed to refer
to and include the respective rating categories correlative thereto in the event
that any such Rating Agencies shall have changed or modified their generic
rating categories or if any successor thereto appointed in accordance with the
definitions thereof shall use different rating categories. If the PARS Rate
Bonds are not rated by a Rating Agency, the requirement of a rating by such
Rating Agency shall be disregarded. If the ratings for the PARS Rate Bonds are
split between two or more of the foregoing categories, the lower rating will
determine the Prevailing Rating.
"Principal Office" means, with respect to the Auction Agent, the office
thereof designated in writing to the Issuer, the Trustee and each Broker-Dealer.
"Securities Depository" means The Depository Trust Company and its
successors and assigns or any other securities depository selected by the Issuer
which agrees to follow the procedures required to be followed by such securities
depository in connection with the PARS Rate Bonds.
"Sell Order" shall have the meaning specified in subsection (a) of Section
1.02 of Exhibit B hereto.
"Submission Deadline" means 1:00 p.m., New York, New York time, on each
Auction Date not in a daily Auction Period and 11:00 a.m., New York, New York
time, on each Auction Date in a daily Auction Period, or such other time on such
date as shall be specified from time to time by the Auction Agent pursuant to
the Auction Agreement as the time by which Broker-Dealers are required to submit
Orders to the Auction Agent.
"Submitted Bid" shall have the meaning specified in subsection (b) of
Section 1.04 of Exhibit B hereto.
"Submitted Hold Order" shall have the meaning specified in subsection (b)
of Section 1.04 of Exhibit B hereto.
"Submitted Order" shall have the meaning specified in subsection (b) of
Section 1.04 of Exhibit B hereto.
-19-
<PAGE> 25
"Submitted Sell Order" shall have the meaning specified in subsection (b)
of Section 1.04 of Exhibit B hereto.
"Sufficient Clearing Bids" means an Auction for which the aggregate
principal amount of the PARS Rate Bonds that are the subject of Submitted Bids
by Potential Owners specifying one or more rates not higher than the Maximum
PARS Rate is not less than the aggregate principal amount of the PARS Rate Bonds
that are the subject of Submitted Sell Orders and of Submitted Bids by Existing
Owners specifying rates higher than the Maximum PARS Rate.
"Tranche" means Tranche I PARS or Tranche II PARS, as the case may be.
"Tranche I PARS" means all PARS which are not Tranche II PARS.
Notwithstanding anything to the contrary herein, during a daily Auction Period,
all PARS will be Tranche I PARS.
"Tranche II PARS" means all PARS for which the amount of a Submitted Bid
equals or exceeds $5,000,000 whether or not the Potential Owner of such PARS is
allocated less than $5,000,000 of PARS pursuant to the allocation provisions of
Section 1.05 of Exhibit B hereto. Once a PARS becomes a Tranche II PARS, such
PARS shall remain a Tranche II PARS until it is sold pursuant to an Auction.
Notwithstanding anything to the contrary herein, during a daily Auction Period,
all PARS will be Tranche I PARS.
"Winning Bid Rates" means the lowest rate in any Submitted Bid for Tranche
I PARS and the lowest rate in any Submitted Bid for Tranche II PARS which, in
each case, when added to the applicable Broker-Dealer Rates would be equal to
each other and which, if selected by the Auction Agent as the PARS Rates, would
cause the aggregate principal amount of PARS Rate Bonds that are the subject of
Submitted Bids specifying rates not greater than such rates to be at least equal
to the aggregate principal amount of Available Bonds.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(a) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles;
(b) references to Articles and Sections are to the Articles and Sections
of this Indenture or the Agreement, as the case may be;
(c) words importing the singular number shall include the plural number
and vice versa and words importing the masculine shall include the feminine and
vice versa; and
(d) the headings and Table of Contents herein are solely for convenience
of reference and shall not constitute a part of this Indenture nor shall they
affect its meanings, construction or effect.
-20-
<PAGE> 26
ARTICLE II
THE BONDS
SECTION 2.01. AUTHORIZATION AND TERMS OF BONDS.
(a) There is hereby authorized and created under this Indenture an issue of
bonds designated as City of Forsyth, Montana, Pollution Control Revenue
Refunding Bonds (Avista Corporation Colstrip Project) Series 1999A. The total
aggregate principal amount of Bonds that may be issued and Outstanding under
this Indenture is expressly limited to $66,700,000 exclusive of Bonds executed
and authenticated as provided in Section 2.07 hereof; provided however, that no
Bonds shall be delivered hereunder until the Trustee receives a request and
authorization of the Issuer signed by the Executive Officer to authenticate and
deliver the principal amount of the Bonds therein specified to the purchaser or
purchasers therein identified upon payment to the Prior Trustee, for the account
of the Issuer, of the sum specified in such request and authorization.
(b) The Bonds shall be issued as registered Bonds, without coupons, in
Authorized Denominations and shall all be dated as of the Issue Date. The Bonds
shall mature, subject to prior redemption as provided in Article IV hereof, upon
the terms and conditions hereinafter set forth, on the Maturity Date. The Bonds
shall bear interest at the rate or rates determined as provided in this Article
II.
(c) The Bonds shall be numbered consecutively from 1 upward. Each Bond
shall bear interest from the Interest Payment Date next preceding the date of
registration and authentication thereof unless it is registered and
authenticated on or prior to the first Interest Payment Date, in which event it
shall bear interest from the Issue Date; provided, however, that if, as shown by
the records of the Paying Agent, interest on the Bonds shall be in default,
Bonds issued in exchange for Bonds surrendered for registration of transfer or
exchange shall bear interest from the last date to which interest has been paid
in full or duly provided for on the Bonds, or, if no interest has been paid or
duly provided for on the Bonds, from the Issue Date. Payment of the interest on
any Bond shall be made to the person appearing on the bond registration books of
the Registrar as the registered Owner thereof on the Record Date, such interest
to be paid by the Paying Agent to such registered Owner, as follows:
(1) in respect of any Bond which is registered in the
book-entry system pursuant to Section 2.16 hereof, in immediately
available funds by no later than 2:30 p.m., New York, New York time, and
(2) in respect of any Bond which is not registered in the book-entry
system pursuant to Section 2.16 hereof, (i) by bank check mailed by
first-class mail on the Interest Payment Date, to such Owner's address as
it appears on the registration books of the Registrar or at such other
address as has been furnished to the Registrar in writing by such Owner,
or (ii) during any Rate Period other than a Term Interest Rate Period, in
immediately available funds on the Interest Payment Date (by wire transfer
or by deposit to the account of the Owner of any such Bond if such account
is maintained with
-21-
<PAGE> 27
the Paying Agent), but in respect of any Owner of Bonds during a Daily
Interest Rate Period, a Weekly Interest Rate Period or a Flexible Interest
Rate Period, only to any Owner which owns Bonds in an aggregate principal
amount of at least $1,000,000 on the Record Date, according to the written
instructions given by such Owner to the Paying Agent or, if no such
instructions have been provided as of the Record Date, by bank check
mailed by first-class mail on the Interest Payment Date to the Owner at
such Owner's address as it appears as of the Record Date on the
registration books of the Registrar, except, in each case, that, if and to
the extent that there shall be a default in the payment of the interest
due on such Interest Payment Date, such defaulted interest shall be paid
to the Owners in whose name any such Bonds are registered as of a special
record date to be fixed by the Trustee, notice of which shall be given to
such Owners not less than ten (10) days prior thereto.
Both the principal of and premium, if any, on the Bonds shall be payable
upon surrender thereof in lawful money of the United States of America at the
Principal Office of the Paying Agent. Notwithstanding the foregoing, interest on
any Bond bearing a Flexible Interest Rate and not registered in the book-entry
system pursuant to Section 2.16 hereof shall be paid only upon presentation to
the Trustee of the Bond on which such payment is due.
SECTION 2.02. INTEREST RATES AND RATE PERIODS.
(a) General. The Bonds shall bear interest from and including the Issue
Date until final payment of the principal or redemption price thereof shall have
been made or provided for in accordance with the provisions hereof, whether at
maturity, upon redemption or otherwise, at the lesser of (A) the Maximum
Interest Rate or (B) the interest rate or rates determined as provided in this
Article II. Such rate or rates shall be effective for the periods set forth in
this Article II. During any Rate Period other than a PARS Rate Period or a Term
Interest Rate Period, interest on the Bonds shall be computed upon the basis of
a 365- or 366-day year, as applicable, for the number of days actually elapsed.
During any PARS Rate Period, interest on the Bonds shall be computed on the
basis of a 360-day year for the actual number of days elapsed except that
interest during a six month Auction Period shall be calculated on the basis of a
360-day year composed of twelve 30-day months. During any Term Interest Rate
Period, interest on the Bonds shall be computed upon the basis of a 360-day
year, consisting of twelve 30-day months. Notwithstanding any other provision of
this Indenture, it shall not be required that all Bonds bear interest at the
same rate, provided that only one Rate Period may apply to the Bonds. Not later
than 11:15 a.m. (New York, New York time) on the Business Day immediately
following the day on which there has been a change in the rate of interest
applicable to the Bonds, the Remarketing Agent shall give notice of such change
to the Trustee by telephone, promptly confirmed in writing. The Trustee hereby
agrees to give telephonic notice to the Company, promptly confirmed in writing,
on each Record Date of the amount of interest to be due and payable on the Bonds
on the next succeeding Interest Payment Date.
(b) Rate Periods. The term of the Bonds shall be divided into consecutive
Rate Periods during which the Bonds shall bear interest at the PARS Rate, Daily
Interest Rate, Weekly Interest Rate, Term Interest Rate or at Flexible Interest
Rates. During the initial Rate Period, the Bonds shall bear interest at a PARS
Rate.
-22-
<PAGE> 28
(c) Initial Period. The Bonds shall bear interest at the PARS Rate of 3.60%
per annum for the Initial Period. Immediately following the Initial Period, the
Bonds shall bear interest at PARS Rates established for daily Auction Periods
unless, prior to the end of the Initial Period, the Company changes the length
of the Auction Periods immediately succeeding the Initial Period to a longer
Auction Period in accordance with Section 1.09 of Exhibit B hereto.
(d) Determination Conclusive. The determination of each PARS Rate by the
Auction Agent and of each Flexible Interest Rate, Daily Interest Rate, Weekly
Interest Rate and Term Interest Rate and each Flexible Segment by the
Remarketing Agent, as the case may be, shall be conclusive and binding upon such
parties, the Trustee, the Paying Agent, the Issuer, the Company, the Owners of
the Bonds and any provider of a Credit Facility.
(e) Conversions Subject to Compliance With Credit Facility Agreement. The
Bonds shall not be converted from one Rate Period to a different Rate Period
unless any applicable conditions precedent to such conversion specified in the
Credit Facility Agreement (unless a Provider Default shall have occurred and be
continuing) have been satisfied.
SECTION 2.03. PARS RATES; CONVERSIONS TO AND FROM PARS RATE PERIODS.
(a) Determination and Notice of PARS Rates. The PARS Rates to be applicable
to the PARS Rate Bonds during each Auction Period shall be determined by the
Auction Agent and notice thereof shall be given, all as provided in Exhibit B
hereto. Exhibit B hereto is hereby incorporated herein by this reference.
(b) Conversions to PARS Rate Periods. At the option of the Company and
subject to Section 2.02(e), all of the Bonds may be converted to a PARS Rate
Period from any other Rate Period as follows:
(i) In any such conversion from a Daily Interest Rate Period or a
Weekly Interest Rate Period, the PARS Rate Conversion Date shall be a
regularly scheduled Interest Payment Date on which interest is payable for
the Daily Interest Rate Period or the Weekly Interest Rate Period from
which the conversion is to be made. In any such conversion from a Term
Interest Rate Period, the PARS Rate Conversion Date shall be a regularly
scheduled Interest Payment Date on which a new Term Interest Rate Period
would otherwise have commenced, and in any such conversion from a Flexible
Interest Rate Period, the PARS Rate Conversion Date shall be the last
regularly scheduled Interest Payment Date on which interest is payable for
any Flexible Segment theretofore established for the Bonds to be
converted.
(ii) The Company shall give written notice of any such conversion to
the Auction Agent, any Remarketing Agent, the Issuer, the Trustee and any
provider of a Credit Facility not less than seven (7) Business Days prior
to the date on which the Trustee is required to notify the Owners of the
conversion pursuant to subparagraph (iii) below. Such notice shall specify
the PARS Rate Conversion Date and the length of the initial Auction
Period. Together with such notice, the Company shall file with the Issuer,
the Trustee and any provider of a Credit Facility a Favorable Opinion of
Bond Counsel.
-23-
<PAGE> 29
No such change to a PARS Rate Period shall become effective unless the
Company shall also file, with the Issuer and the Trustee, such a Favorable
Opinion of Bond Counsel dated the PARS Rate Conversion Date.
(iii) Not less than fifteen (15) days prior to the PARS Rate
Conversion Date the Trustee shall mail a written notice of the conversion
to the Owners of all Bonds to be converted; provided, however, that the
Trustee shall not mail such written notice if converting from a Flexible
Rate Period until it has received a written confirmation from the
Remarketing Agent that no Flexible Segment for the Bonds extends beyond
the PARS Rate Conversion Date. Such notice shall state that the Bonds to
be converted will be subject to mandatory purchase on the PARS Rate
Conversion Date at the purchase price determined pursuant to Section
3.02(a) and will specify the time at which Bonds are to be tendered for
purchase.
(iv) The PARS Rate for the Auction Period commencing on the PARS
Rate Conversion Date shall be determined by the Broker-Dealer before the
Conversion Date and shall be the lowest rate which, in the judgment of the
Broker-Dealer, is necessary to enable the Bonds to be remarketed at the
principal amount thereof, plus accrued interest, if any, on the PARS Rate
Conversion Date. Such determination shall be conclusive and binding upon
the Issuer, the Company, the Trustee, the Auction Agent and the Owners and
Beneficial Owners of the Bonds to which such rate will be applicable.
(v) Not later than 5:00 p.m., New York, New York time, on the date
of determination of the PARS Rate, the Broker-Dealer shall notify the
Trustee and the Company of such rate by telephone confirmed in writing.
Not later than 5:00 p.m., New York, New York time, on the next succeeding
Business Day, the Trustee shall give notice of such rate to the Issuer and
the Auction Agent.
(vi) The Company may revoke its election to effect a conversion of
the interest rate on any Bonds to a PARS Rate by giving written notice of
such revocation to the Issuer, the Trustee, the Remarketing Agent, the
Auction Agent, the Broker-Dealer and any provider of a Credit Facility at
any time prior to the setting of the PARS Rate by the Broker-Dealer.
(c) Conversions From PARS Rate Periods. At the option of the Company and
subject to Section 2.02(e), all of the Bonds may be converted from a PARS Rate
Period to a Daily Interest Rate Period, a Weekly Interest Rate Period, a Term
Interest Rate Period or a Flexible Interest Rate Period, as follows:
(i) If the PARS are in an Auction Period other than the daily
Auction Period, the conversion date shall be the second regularly
scheduled Interest Payment Date following the final Auction Date. If the
PARS are in a daily Auction Period, the conversion date shall be the next
regularly scheduled Interest Payment Date.
(ii) The Company shall give written notice of any such conversion to
the Issuer, the Trustee, the Auction Agent, the Broker-Dealer and any
provider of a Credit
-24-
<PAGE> 30
Facility not less than seven (7) Business Days prior to the date on which
the Trustee is required to notify the Owners of the conversion pursuant to
subparagraph (iii) below. Such notice shall specify the conversion date
and the Rate Period to which the conversion will be made and, if
applicable, the length of any Term Rate Period. Together with such notice,
the Company shall file with the Issuer and the Trustee a Favorable Opinion
of Bond Counsel regarding such conversion. No conversion shall become
effective unless the Company shall also file, with the Issuer, the Trustee
and any provider of a Credit Facility, such a Favorable Opinion of Bond
Counsel dated the date of such conversion.
(iii) Not less than twenty (20) days prior to the conversion date,
the Trustee shall mail a written notice of the conversion to the Owners of
all Bonds to be converted, specifying the Rate Period to which the Bonds
are being converted, stating that the Bonds to be converted will be
subject to mandatory purchase on the conversion date at the purchase price
determined pursuant to Section 3.02(a), specifying the time at which Bonds
are to be tendered for purchase, stating any conditions precedent to such
conversion and stating that, if such conditions are not satisfied, the
Bonds will continue to bear interest at PARS Rates but that the Bonds will
be subject to mandatory purchase in accordance with the last paragraph of
Section 2.08 hereof.
SECTION 2.04. DAILY INTEREST RATE; ADJUSTMENT TO DAILY INTEREST RATE PERIOD.
(a) Determination of Daily Interest Rate. During each Daily Interest Rate
Period, the Bonds shall bear interest at the Daily Interest Rate determined by
the Remarketing Agent on each Business Day for such Business Day. The Daily
Interest Rate shall be the rate determined by the Remarketing Agent (based on an
examination of Tax-Exempt obligations comparable to the Bonds known by the
Remarketing Agent to have been priced or traded under then-prevailing market
conditions) to be the lowest rate which would enable the Remarketing Agent to
sell the Bonds on the effective date of such rate at a price (without regard to
accrued interest) equal to 100% of the principal amount thereof. If the
Remarketing Agent shall not have determined a Daily Interest Rate for any day by
10:00 a.m., New York, New York time, the Daily Interest Rate for such day shall
be the same as the Daily Interest Rate for the immediately preceding day. The
Remarketing Agent shall notify the Company, the Trustee and the Paying Agent of
each Daily Interest Rate on the date of the determination thereof by written
notice communicated by electronic mail, by facsimile or by other means
acceptable to the Company, the Trustee, and the Paying Agent.
(b) Adjustment to Daily Interest Rate Period. At any time, the Company, by
written notice to the Issuer, the Trustee, the Paying Agent and the Remarketing
Agent may, subject to Section 2.02(e), elect that the Bonds shall bear interest
at a Daily Interest Rate. Such notice (A) shall specify the effective date of
such adjustment to a Daily Interest Rate, which shall be (1) a Business Day not
earlier than the fifteenth day following the fifth Business Day after the date
of receipt by the Trustee and the Paying Agent of such notice (or such shorter
period after the date of such receipt as shall be acceptable to the Trustee);
(2) in the case of an adjustment from a Term Interest Rate Period, a day on
which the Bonds would be permitted to be redeemed at the option of the Company
pursuant to Section 4.02(b)(iv) hereof or the day immediately following the last
day of the then-current Term Interest Rate Period, and (3) in the case of an
adjustment from a
-25-
<PAGE> 31
Flexible Interest Rate Period, the day immediately following the last day of the
then-current Flexible Interest Rate Period as determined in accordance with
Section 2.07(d) hereof; provided, however, that if prior to the Company's
mailing of notice of such election, any Bonds shall have been called for
redemption and such redemption shall not have theretofore been effected, the
effective date of such Daily Interest Rate Period shall not precede such
redemption date; and (B) if the adjustment is from a Term Interest Rate Period
having a duration in excess of one year, shall be accompanied by a Favorable
Opinion of Bond Counsel with respect to such adjustment.
(c) Notice of Adjustment to Daily Interest Rate Period. The Trustee shall
give notice by Mail of an adjustment to a Daily Interest Rate Period to the
Owners not less than 15 days prior to the effective date of such Daily Interest
Rate Period. Such notice shall state (A) that the interest rate on the Bonds
will be adjusted to a Daily Interest Rate (subject to the Company's ability to
rescind its election as provided in Section 2.08 hereof), (B) the effective date
of such Daily Interest Rate Period, (C) that such Bonds are subject to mandatory
purchase on such effective date, (D) the procedures for such mandatory purchase,
(E) the purchase price of such Bonds on such effective date (expressed as a
percentage of the principal amount thereof), and (F) that the Owners of such
Bonds do not have the right to retain their Bonds on such effective date.
SECTION 2.05. WEEKLY INTEREST RATE; ADJUSTMENT TO WEEKLY INTEREST RATE PERIOD.
(a) Determination of Weekly Interest Rate. During each Weekly Interest Rate
Period, the Bonds shall bear interest at the Weekly Interest Rate determined by
the Remarketing Agent no later than the first day of such Weekly Interest Rate
Period and thereafter no later than Tuesday of each week during such Weekly
Interest Rate Period, unless any such Tuesday shall not be a Business Day, in
which event the Weekly Interest Rate shall be determined by the Remarketing
Agent no later than the Business Day next preceding such Tuesday. The Weekly
Interest Rate shall be the rate determined by the Remarketing Agent (based on an
examination of Tax-Exempt obligations comparable to the Bonds known by the
Remarketing Agent to have been priced or traded under then prevailing market
conditions) to be the lowest rate which would enable the Remarketing Agent to
sell the Bonds on the effective date of such rate at a price (without regard to
accrued interest) equal to 100% of the principal amount thereof. If the
Remarketing Agent shall not have determined a Weekly Interest Rate for any
period, the Weekly Interest Rate shall be the same as the Weekly Interest Rate
in effect for the immediately preceding week. The first Weekly Interest Rate
determined for each Weekly Interest Rate Period shall apply to the period
commencing on the first day of such Weekly Interest Rate Period and ending on
the next succeeding Tuesday. Thereafter, each Weekly Interest Rate shall apply
to the period commencing on each Wednesday and ending on the next succeeding
Tuesday, unless such Weekly Interest Rate Period shall end on a day other than
Tuesday, in which event the last Weekly Interest Rate for such Weekly Interest
Rate Period shall apply to the period commencing on the Wednesday preceding the
last day of such Weekly Interest Rate Period and ending on such last day. The
Remarketing Agent shall notify the Company, the Trustee and the Paying Agent of
each Weekly Interest Rate on the date of the determination thereof by written
notice communicated by electronic mail, by facsimile or by other means
acceptable to the Company, the Trustee, and the Paying Agent.
-26-
<PAGE> 32
(b) Adjustment to Weekly Interest Rate Period. The Company, by written
notice to the Issuer, the Trustee, the Paying Agent and the Remarketing Agent
may, subject to Section 2.02(e), at any time elect that the Bonds shall bear
interest at a Weekly Interest Rate. Such notice (A) shall specify the effective
date of such adjustment to a Weekly Interest Rate, which shall be (1) a Business
Day not earlier than the fifteenth day following the fifth Business Day after
the date of receipt by the Trustee and the Paying Agent of such notice (or such
shorter period after the date of such receipt as shall be acceptable to the
Trustee); (2) in the case of an adjustment from a Term Interest Rate Period, a
day on which the Bonds would be permitted to be redeemed at the option of the
Company pursuant to Section 4.02(b)(iv) hereof or the day immediately following
the last day of the then-current Term Interest Rate Period; and (3) in the case
of an adjustment from a Flexible Interest Rate Period the day immediately
following the last day of the then-current Flexible Interest Rate Period as
determined in accordance with Section 2.07(d); provided however, that if prior
to the Company's making such election, any Bonds shall have been called for
redemption and such redemption shall not have theretofore been effected, the
effective date of such Weekly Interest Rate Period shall not precede such
redemption date; and (B) if the adjustment is from a Term Interest Rate Period
having a duration in excess of one year, shall be accompanied by a Favorable
Opinion of Bond Counsel with respect to such adjustment.
(c) Notice of Adjustment to Weekly Interest Rate Period. The Trustee shall
give notice by Mail of an adjustment to a Weekly Interest Rate Period to the
Owners not less than 15 days prior to the effective date of such Weekly Interest
Rate Period. Such notice shall state (A) that the interest rate on the Bonds
will be adjusted to a Weekly Interest Rate (subject to the Company's ability to
rescind its election as provided in Section 2.08 hereof), (B) the effective date
of such Weekly Interest Rate Period, (C) that such Bonds are subject to
mandatory purchase on such effective date, (D) the procedures for such mandatory
purchase, (E) the purchase price of such Bonds on such effective date (expressed
as a percentage of the principal amount thereof), and (F) that the Owners of
such Bonds do not have the right to retain their Bonds on such effective date.
SECTION 2.06. TERM INTEREST RATE; ADJUSTMENT TO TERM INTEREST RATE PERIOD.
(a) Determination of Term Interest Rate. During each Term Interest Rate
Period, the Bonds shall bear interest at the Term Interest Rate determined by
the Remarketing Agent on a Business Day selected by the Remarketing Agent, but
not more than 60 days prior to and not later than the effective date of such
Term Interest Rate Period. The Term Interest Rate shall be the rate determined
by the Remarketing Agent on such date as being the lowest rate (based on an
examination of Tax-Exempt obligations comparable to the Bonds known by the
Remarketing Agent to have been priced or traded under then prevailing market
conditions) which would enable the Remarketing Agent to sell the Bonds on the
effective date of such Term Interest Rate Period at a price (without regard to
accrued interest) equal to 100% of the principal amount thereof, provided
however, that if, for any reason, a Term Interest Rate for any Term Interest
Rate Period shall not be determined or become effective, then (A) in the event
the then-current Term Interest Rate Period is for one year or less, the Rate
Period for the Bonds shall automatically convert to a Daily Interest Rate Period
and (B) in the event the current Term Interest Rate Period is for more than one
year, the Rate Period for the Bonds shall automatically adjust to a Term
Interest Rate Period of one year and one day; provided, however, that if the
last day of any successive Term
-27-
<PAGE> 33
Interest Rate Period shall not be a day immediately preceding a Business Day,
then such successive Term Interest Rate Period shall end on the first day
immediately preceding the Business Day next succeeding such day or, if such Term
Interest Rate Period would end after the day prior to the final maturity date of
the Bonds, the next succeeding Rate Period shall be a Term Interest Rate Period
ending on the day prior to the final maturity date of the Bonds; provided
further that in the case of clause (B) above, if the Company delivers to the
Trustee a Favorable Opinion of Bond Counsel prior to the end of the
then-effective Term Interest Rate Period, the Rate Period for the Bonds will
adjust to a Daily Interest Rate Period. If the Daily Interest Rate for the first
day of a Daily Interest Rate Period described in clause (A) above is not
determined as provided in Section 2.04(a) hereof the Daily Interest Rate for the
first day of such Daily Interest Rate Period shall be 110% of the most recent
PSA Municipal Swap Index theretofore published in The Bond Buyer (or, if The
Bond Buyer is no longer published or no longer publishes the PSA Municipal Swap
Index, the variable rate index contained in the publication determined by the
Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined by
the Company, as the most comparable to The Bond Buyer). If a Term Interest Rate
for any such Term Interest Rate Period described in clause (B) above is not
determined as described in the first sentence of this Section 2.06(a), the Term
Interest Rate for such Term Interest Rate Period shall be 110% of the most
recent One-Year Note Index theretofore published in The Bond Buyer (or, if The
Bond Buyer is no longer published or no longer publishes the One-Year Note
Index, the one-year note index contained in the publication determined by the
Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined by
the Company, as the most comparable to The Bond Buyer). The Remarketing Agent
shall notify the Company, the Trustee and the Paying Agent of each Term Interest
Rate on the date of the determination thereof by written notice communicated by
electronic mail, by facsimile or by other means acceptable to the Company, the
Trustee, and the Paying Agent.
(b) Adjustment to or Continuation of Term Interest Rate Period. At any
time, the Company, by written notice to the Issuer, the Trustee, the Paying
Agent and the Remarketing Agent, may, subject to Section 2.02(e), elect that the
Bonds shall bear, or continue to bear, interest at a Term Interest Rate and
shall determine the duration of the Term Interest Rate Period during which such
Bonds shall bear interest at such Term Interest Rate. At the time the Company so
elects an adjustment to or continuation of a Term Interest Rate Period, the
Company may specify two or more consecutive Term Interest Rate Periods and, if
the Company so specifies, shall specify the duration of each such Term Interest
Rate Period as provided in this paragraph (b). Such notice shall specify the
effective date of each Term Interest Rate Period, which shall be (A) a Business
Day not earlier than the fifteenth day following the fifth Business Day after
the date of receipt by the Trustee and the Paying Agent of such notice (or such
shorter period after the date of such receipt as shall be acceptable to the
Trustee); (B) in the case of an adjustment from a Term Interest Period to a Term
Interest Period of a different duration or the continuation of a Term Interest
Rate Period, a day on which the Bonds would be permitted to be redeemed at the
option of the Company pursuant to Section 4.02(b)(iv) hereof or the day
immediately following the last day of the then-current Term Interest Rate
Period; and (C) in the case of an adjustment from a Flexible Interest Rate
Period the day immediately following the last day of the then-current Flexible
Interest Rate Period as determined in accordance with Section 2.07(d) hereof;
provided, however, that if prior to the Company's making such election, any
Bonds shall have been called for redemption and such redemption shall not have
theretofore been effected, the
-28-
<PAGE> 34
effective date of such Term Interest Rate Period shall not precede such
redemption date. In addition, such notice (x) shall specify the last day of such
Term Interest Rate Period (which shall be either the day preceding the date of
final maturity of the Bonds or a day which both immediately precedes a Business
Day and is at least 180 days after such effective date), and (y) unless such
Term Interest Rate Period immediately succeeds a Term Interest Rate Period of
the same duration and is subject to the same optional redemption rights under
Section 4.02(b)(iv) hereof, shall be accompanied by a Favorable Opinion of Bond
Counsel with respect to such adjustment.
If, by 15 days prior to the end of the then-current Term Interest Rate
Period, the Trustee shall not have received notice of the Company's election
that the Bonds shall bear interest at a PARS Rate, a Daily Interest Rate, a
Weekly Interest Rate, a Term Interest Rate or a Flexible Interest Rate, (A) in
the event the then-current Term Interest Rate Period is for one year or less,
the Rate Period for the Bonds shall automatically convert to a Daily Interest
Rate Period and (B) in the event the current Term Interest Rate Period is for
more than one year, the Rate Period for the Bonds shall automatically adjust to
a Term Interest Rate Period of one year and one day, provided however, that if
the last day of any successive Term Interest Rate Period shall not be a day
immediately preceding a Business Day, then such successive Term Interest Rate
Period shall end on the first day immediately preceding the Business Day next
succeeding such day or, if such Term Interest Rate Period would end after the
day prior to the Maturity Date, the next succeeding Rate Period shall be a Term
Interest Rate Period ending on the day prior to the Maturity Date; provided
however, that in the case of clause (B) above, if the Company delivers to the
Trustee a Favorable Opinion of Bond Counsel prior to the end of the
then-effective Term Interest Rate Period, the Rate Period for the Bonds will
adjust to a Daily Interest Rate Period. If the Daily Interest Rate for the first
day of a Daily Interest Rate Period described in clause (A) above is not
determined as provided in Section 2.04(a) hereof, the Daily Interest Rate for
the first day of such Daily Interest Rate Period shall be 110% of the most
recent PSA Municipal Swap Index theretofore published in The Bond Buyer (or, if
The Bond Buyer is no longer published or no longer publishes the PSA Municipal
Swap Index, the variable rate index contained in the publication determined by
the Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined
by the Company, as the most comparable to The Bond Buyer). If a Term Interest
Rate for any such Term Interest Rate Period described in clause (B) above is not
determined as described in the first sentence of this Section 2.06(a), the Term
Interest Rate for such Term Interest Rate Period shall be 110% of the most
recent One-Year Note Index theretofore published in The Bond Buyer (or, if The
Bond Buyer is no longer published or no longer publishes the One-Year Note
Index, the one-year note index contained in the publication determined by the
Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined by
the Company, as the most comparable to The Bond Buyer).
At the same time that the Company elects to have the Bonds bear interest
at a Term Interest Rate or to continue to bear interest at a Term Interest Rate,
the Company may also elect that such Term Interest Rate Period shall be
automatically renewed for successive Term Interest Rate Periods each having the
same duration as the Term Interest Rate Period so specified; provided however,
that such election must be accompanied by a Favorable Opinion of Bond Counsel
with respect to such continuing automatic renewals of such Term Interest Rate
Period. If such election is made, no Favorable Opinion of Bond Counsel shall be
required in connection
-29-
<PAGE> 35
with the commencement of each successive Term Interest Rate Period determined in
accordance with such election. Further, at the same time that the Company elects
to have the Bonds bear interest at a Term Interest Rate or continue to bear
interest at a Term Interest Rate, subject to the provisions of Section 4.02(c)
hereof the Company may also specify to the Trustee optional redemption prices
and periods different from those set out in Section 4.02 hereof during the Term
Interest Rate Period(s) with respect to which such election is made.
(c) Notice of Adjustment to or Continuation of Term Interest Rate Period.
The Trustee shall give notice by Mail of an adjustment to or continuation of a
Term Interest Rate Period to the Owners not less than 15 days prior to the
effective date of such Term Interest Rate Period. Such notice shall state (A)
that the interest rate on the Bonds will be adjusted to, or continue to be, a
Term Interest Rate (subject to the Company's ability to rescind its election as
provided in Section 2.08 hereof), (B) the effective date and the last date of
such Term Interest Rate Period, (C) that the Term Interest Rate for such Term
Interest Rate Period will be determined not later than the effective date
thereof (D) how such Term Interest Rate may be obtained from the Remarketing
Agent, (E) the Interest Payment Dates after such effective date, (F) that,
during such Term Interest Rate Period, the Owners of such Bonds will not have
the right to tender their Bonds for purchase, (G) the redemption provisions that
will apply to the Bonds during such Term Interest Rate Period, and (H) that,
except when the new Term Interest Rate Period is preceded by a Term Interest
Rate Period of the same duration, such Bonds are thereby subject to mandatory
purchase on such effective date, the procedures for such mandatory purchase, the
purchase price of such Bonds on such effective date (expressed as a percentage
of the principal amount thereof), and the Owners of such Bonds do not have the
right to retain their Bonds on such effective date.
SECTION 2.07. FLEXIBLE INTEREST RATE; ADJUSTMENT TO FLEXIBLE INTEREST RATE
PERIOD.
(a) Determination of Flexible Segments and Flexible Interest Rates. During
each Flexible Interest Rate Period, each Bond shall bear interest during each
Flexible Segment for such Bond at the Flexible Interest Rate for such Bond as
described herein. Each Flexible Segment and Flexible Interest Rate for each Bond
shall be the Flexible Segment and Flexible Interest Rate determined by the
Remarketing Agent. Each Flexible Segment for any Bond shall be a period of not
less than one nor more than 270 days (subject to any limitations set forth in
the Remarketing Agreement), determined by the Remarketing Agent to be, in its
judgment, the period which, together with all other Flexible Segments for the
Bonds then outstanding, is likely to result in the lowest overall net interest
expense on the Bonds; provided however, that (A) any such Bond purchased on
behalf of the Company and remaining unsold in the hands of the Remarketing Agent
as of the close of business on the effective date of the Flexible Segment for
such Bond shall have a Flexible Segment of one day or, if such Flexible Segment
would not end on a day immediately preceding a Business Day, a Flexible Segment
of more than one day ending on the day immediately preceding the next Business
Day and (B) each Flexible Segment shall end on a day which immediately precedes
a Business Day and no Flexible Segment shall extend beyond the final maturity
date of the Bonds.
The Flexible Interest Rate for each Flexible Segment for each Bond shall
be the rate determined by the Remarketing Agent (based on an examination of
Tax-Exempt obligations comparable to the Bonds known by the Remarketing Agent to
have been priced or traded under
-30-
<PAGE> 36
then prevailing market conditions) no later than the first day of such Flexible
Segment (and in the case of a Flexible Segment of one day, no later than 12:30
p.m. New York, New York time, on such date) to be the lowest rate which would
enable the Remarketing Agent to sell the Bonds on the effective date of such
rate at a price (without regard to accrued interest) equal to 100% of the
principal amount thereof. If a Flexible Segment or a Flexible Interest Rate for
a Flexible Segment is not determined or effective, the Flexible Segment for such
Bond shall be a Flexible Segment of one day, and the interest rate for such
Flexible Segment of one day shall be 110% of the most recent PSA Municipal Swap
Index theretofore published in The Bond Buyer (or, if The Bond Buyer is no
longer published or no longer publishes the PSA Municipal Swap Index, the
variable rate index contained in the publication determined by the Remarketing
Agent, or, if the Remarketing Agent is the Trustee, determined by the Company,
as most comparable to The Bond Buyer). The Remarketing Agent shall notify the
Company, the Trustee and the Paying Agent of each Flexible Interest Rate and
Flexible Segment on the date of the determination thereof by written notice
communicated by electronic mail, by facsimile or by other means acceptable to
the Company, the Trustee, and the Paying Agent.
(b) Adjustment to Flexible Interest Rate Period. At any time, the Company,
by written notice to the Issuer, the Trustee, the Paying Agent and the
Remarketing Agent, may, subject to Section 2.02(e), elect that the Bonds shall
bear interest at Flexible Interest Rates. Such notice (A) shall specify the
effective date of the Flexible Interest Rate Period during which such Bonds
shall bear interest at Flexible Interest Rates, which shall be (1) a Business
Day not earlier than the fifteenth day following the fifth Business Day after
the date of receipt by the Trustee and the Paying Agent of such notice (or such
shorter period after the date of such receipt as shall be acceptable to the
Trustee), and (2) in the case of an adjustment from a Term Interest Rate Period,
a day on which the Bonds would be permitted to be redeemed at the option of the
Company pursuant to Section 4.02(b)(iv) hereof or the day immediately following
the last day of the then-current Term Interest Rate Period, provided however,
that if prior to the Company's making such election any Bonds shall have been
called for redemption and such redemption shall not have theretofore been
effected, the effective date of such Flexible Interest Rate Period shall not
precede such redemption date; and (B) in the case of an adjustment from a Term
Interest Rate Period having a duration in excess of one year, shall be
accompanied by a Favorable Opinion of Bond Counsel with respect to such
adjustment. During each Flexible Interest Rate Period commencing on the date so
specified (provided that the Favorable Opinion of Bond Counsel described in
clause (B) above, if required, is reaffirmed as of such date) and ending on the
day immediately preceding the effective date of the next succeeding Rate Period,
each Bond shall bear interest at a Flexible Interest Rate during each Flexible
Segment for such Bond.
(c) Notice of Adjustment to Flexible Interest Rate Period. The Trustee
shall give notice by Mail of an adjustment to a Flexible Interest Rate Period to
the Owners not less than 15 days prior to the effective date of such Flexible
Interest Rate Period. Such notice shall state (A) that the interest rate on the
Bonds will be adjusted to Flexible Interest Rates (subject to the Company's
ability to rescind its election as provided in Section 2.08 hereof), (B) the
effective date of such Flexible Interest Rate Period, (C) that such Bonds are
thereby subject to mandatory purchase on the effective date of such Flexible
Interest Rate Period, (D) the procedures for such mandatory purchase, (E) the
purchase price of such Bonds on such effective date (expressed as a
-31-
<PAGE> 37
percentage of the principal amount thereof), and (F) that the Owners of such
Bonds do not have the right to retain their Bonds on such effective date.
(d) Adjustment From Flexible Interest Rates. At any time during a Flexible
Interest Rate Period, the Company may elect that the Bonds shall no longer bear
interest at Flexible Interest Rates and shall instead bear interest as otherwise
permitted under this Indenture. The Company shall notify the Issuer, the
Trustee, the Paying Agent and the Remarketing Agent of such election by Mail and
shall specify the Rate Period to follow with respect to such Bonds upon
cessation of the Flexible Interest Rate Period and instruct the Remarketing
Agent to determine Flexible Segments of such duration that, as soon as possible,
all Flexible Segments shall end on the same date, not earlier than the day that
would permit the notices required by Sections 2.03(b)(iii), 2.04(c), 2.05(c) or
2.06(c), as applicable, to be given, and such date shall be the last day of the
then current Flexible Interest Rate Period. Upon the establishment of such
Flexible Segments, the day next succeeding the last day of all such Flexible
Segments shall be the effective date of the Rate Period elected by the Company.
The Remarketing Agent, promptly upon the determination thereof, shall give
written notice of such last day and such effective dates to the Issuer, the
Company, the Trustee and the Paying Agent.
SECTION 2.08. RESCISSION OF ELECTION. Notwithstanding anything herein to the
contrary, the Company may rescind any election by it to adjust to or, in the
case of a Term Interest Rate Period, continue a Rate Period pursuant to Section
2.03, Section 2.04, Section 2.05, Section 2.06 or Section 2.07 hereof prior to
the effective date of such adjustment or continuation or, as provided in Section
2.03(b)(vi) hereof, prior to the setting of the PARS Rate by the Broker-Dealer,
by giving written notice thereof to the Issuer, the Trustee, the Paying Agent,
any Auction Agent and any Remarketing Agent prior to such effective date. At the
time that the Company gives notice of rescission, it may also elect in such
notice to continue the Rate Period then in effect; provided however, that if the
Rate Period then in effect is a Term Interest Rate Period, the subsequent Term
Interest Rate Period shall not be of a different duration than the Term Interest
Rate Period then in effect unless the Company provides to the Trustee a
Favorable Opinion of Bond Counsel prior to the expiration of the then-current
Term Interest Rate Period. If the Trustee receives notice of such rescission
prior to the time the Trustee has given notice to the Owners of the Bonds of the
change in or continuation of Rate Periods pursuant to Section 2.03, Section
2.04, Section 2.05, Section 2.06 or Section 2.07 hereof, then such notice of
change in or continuation of Rate Periods shall be of no force and effect and
shall not be given to the Owners. If the Trustee receives notice of such
rescission after the Trustee has given notice to the Owners of the Bonds
pursuant to Section 2.03, Section 2.04, Section 2.05, Section 2.06 or Section
2.07 hereof of an adjustment from any Rate Period other than a Term Interest
Rate Period in excess of one year or if an attempted adjustment from one Rate
Period (other than a Term Interest Rate Period in excess of one year) to another
Rate Period does not become effective for any other reason, and if the Company
does not elect to continue the Rate Period then in effect, then the Rate Period
for the Bonds shall automatically adjust to or continue in a Daily Interest Rate
Period and the Trustee shall promptly give notice thereof to the Owners of the
Bonds. If the Trustee receives notice of such rescission after the Trustee has
given notice to the Owners of the Bonds pursuant to Section 2.03, Section 2.04,
Section 2.05, Section 2.06 or Section 2.07 hereof of an adjustment from a Term
Interest Rate Period in excess of one year to another Rate Period (including a
Term Interest Rate Period of a different duration), or if an attempted
adjustment from
-32-
<PAGE> 38
a Term Interest Rate Period in excess of one year to another Rate Period
(including a Term Interest Rate Period of a different duration) does not become
effective for any reason and if the Company does not elect to continue the Rate
Period then in effect, then the Rate Period for the Bonds shall continue to be a
Term Interest Rate Period of the same duration as the immediately preceding Term
Interest Rate Period, subject to the second proviso contained in Section
2.06(a); provided that if the Company delivers to the Trustee a Favorable
Opinion of Bond Counsel prior to the end of the then-effective Term Interest
Rate Period, the Rate Period for the Bonds shall be as directed by the Company
in writing. If a Daily Interest Rate for the first day of any Daily Interest
Rate Period to which a Rate Period is adjusted under this Section 2.08 is not
determined as provided in Section 2.04(a) hereof, the Daily Interest Rate for
the first day of such Daily Interest Rate Period shall be 110% of the most
recent PSA Municipal Swap Index theretofore published in The Bond Buyer (or, if
The Bond Buyer is no longer published or no longer publishes the PSA Municipal
Swap Index, the variable rate index contained in the publication determined by
the Remarketing Agent or if the Remarketing Agent is the Trustee, determined by
the Company, as most comparable to The Bond Buyer). The Trustee shall promptly
give written notice of each such automatic adjustment to a Rate Period pursuant
to this Section 2.08 to the Owners in the form provided in Section 2.04(c)
hereof.
Notwithstanding the rescission by the Company of any notice to adjust to
or from or continue a Rate Period, if notice has been given to Owners pursuant
to Section 2.03(b)(iii), Section 2.03(c)(iii), Section 2.04(c), Section 2.05(c),
Section 2.06(c) or Section 2.07(c), the Bonds shall be subject to mandatory
purchase as specified in such notice.
SECTION 2.09. FORM OF BONDS. The Bonds and the certificate of authentication
to be executed thereon shall be in substantially the form attached hereto as
Exhibit A, with such appropriate variations, omissions and insertions as are
permitted or required by this Indenture. Upon adjustment to a Term Interest Rate
Period, the form of Bond may include a summary of the mandatory and optional
redemption provisions to apply to the Bonds during such Term Interest Rate
Period, or a statement to the effect that the Bonds will not be optionally
redeemed during such Term Interest Rate Period; provided that the Registrar
shall not authenticate such a revised Bond form prior to receiving a Favorable
Opinion of Bond Counsel that such Bond form satisfies the requirements of the
Act and of this Indenture and that authentication thereof will not adversely
affect the Tax-Exempt status of the Bonds.
SECTION 2.10. EXECUTION OF BONDS. The Bonds shall be signed in the name and on
behalf of the Issuer with the manual or facsimile signature of its Mayor and
attested by the manual or facsimile signature of the City Clerk. The Bonds shall
then be delivered to the Registrar for authentication by it. In case any officer
who shall have signed any of the Bonds shall cease to be such officer before the
Bonds so signed or attested shall have been authenticated or delivered by the
Registrar or issued by the Issuer, such Bonds may nevertheless be authenticated,
delivered and issued and, upon such authentication, delivery and issuance, shall
be as binding upon the Issuer as though those who signed and attested the same
had continued to be such officers of the Issuer. Also, any Bond may be signed on
behalf of the Issuer by such persons as on the actual date of the execution of
such Bond shall be the proper officers although on the nominal date of such Bond
any such person shall not have been such officer.
-33-
<PAGE> 39
Only such of the Bonds as shall bear thereon a certificate of
authentication in the form set forth in Exhibit A hereto, manually executed by
an authorized signatory of the Registrar, shall be valid or obligatory for any
purpose or entitled to the benefits of this Indenture, and such certificate of
the Registrar shall be conclusive evidence that the Bonds so authenticated have
been duly authenticated and delivered hereunder and are entitled to the benefits
of this Indenture.
Upon authentication of any Bond, the Registrar shall set forth on such
Bond (1) the date of such authentication and (2) in the case of a Bond bearing
interest at a Flexible Interest Rate and not registered in the book-entry system
pursuant to Section 2.16 hereof, such Flexible Interest Rate, the last day of
the applicable Flexible Segment, the number of days comprising such Flexible
Segment and the amount of interest to accrue during such Flexible Segment.
SECTION 2.11. TRANSFER AND EXCHANGE OF BONDS. Registration of any Bond may, in
accordance with the terms of this Indenture, be transferred at the Principal
Office of the Registrar, upon the books of the Registrar required to be kept
pursuant to the provisions of Section 2.12 hereof, by the Person in whose name
it is registered, in person or by its attorney duly authorized in writing, upon
surrender of such Bond for cancellation, accompanied by a written instrument of
transfer in a form approved by the Registrar, duly executed. The Registrar shall
require the payment by the Owner of the Bond requesting such transfer of any tax
or other governmental charge required to be paid and there shall be no other
charge to any Owners for any such transfer. Whenever any Bond shall be
surrendered for registration of transfer, the Issuer shall execute and the
Registrar shall authenticate and deliver a new Bond or Bonds of the same tenor
and of Authorized Denominations. Except with respect to Bonds purchased pursuant
to Sections 3.01 and 3.02 hereof, no registration of transfer of Bonds shall be
required to be made for a period of fifteen (15) days next preceding the date on
which the Trustee Mails any notice of redemption, nor shall any registration of
transfer of Bonds called for redemption be required, except the unredeemed
portion of any Bond being redeemed in part.
Bonds may be exchanged at the Principal Office of the Registrar for a like
aggregate principal amount of Bonds of the same tenor and of Authorized
Denominations. The Registrar shall require the payment by the Owner of the Bond
requesting such exchange of any tax or other governmental charge required to be
paid with respect to such exchange, and there shall be no other charge to any
Owners for any such exchange. Except with respect to Bonds purchased pursuant to
Section 3.01 and Section 3.02 hereof, no exchange of Bonds shall be required to
be made for a period of fifteen (15) days next preceding the date on which the
Trustee Mails notice of redemption, nor shall any exchange of Bonds called for
redemption be required, except the unredeemed portion of any Bond being redeemed
in part.
The Issuer, the Registrar, the Trustee and any agent of the Issuer, the
Registrar or the Trustee may treat the person in whose name the Bond is
registered as the owner thereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not the Bond be overdue, and
neither the Issuer, the Registrar, the Trustee, any paying agent nor any such
agent shall be affected by notice to the contrary.
SECTION 2.12. BOND REGISTER. The Registrar will keep or cause to be kept at
its Principal Office sufficient books for the registration and the registration
of transfer of the Bonds, which
-34-
<PAGE> 40
shall at all times, during regular business hours, be open to inspection by the
Issuer, the Trustee, the Provider, the Remarketing Agent and the Company; and,
upon presentation for such purpose, the Registrar shall under such reasonable
regulations as it may prescribe, register the transfer or cause to be registered
the transfer, on said books, Bonds as hereinbefore provided.
SECTION 2.13. BONDS MUTILATED, LOST, DESTROYED OR STOLEN. If any Bond shall
become mutilated, the Issuer, upon the request and at the expense of the Owner
of said Bond, shall execute, and the Registrar shall thereupon authenticate and
deliver, a new Bond of like tenor and number in exchange and substitution for
the Bond so mutilated, but only upon surrender to the Registrar of the Bond so
mutilated. Every mutilated Bond so surrendered to the Registrar shall be
canceled by it and delivered to the Company. If any Bond issued hereunder shall
be lost, destroyed or stolen, evidence of such loss, destruction or theft may be
submitted to the Issuer, the Company and the Registrar, and if such evidence
shall be satisfactory to them and indemnity satisfactory to them shall be given,
the Issuer, at the expense of the Owner, shall execute, and the Registrar shall
thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in
substitution for the Bond so lost, destroyed or stolen (or if any such Bond
shall have matured or shall be about to mature, instead of issuing a substitute
Bond the Registrar may pay the same without surrender thereof). The Issuer may
require payment of a reasonable fee for each new Bond issued under this Section
and payment of the expenses which may be incurred by the Issuer and the
Registrar. Any Bond issued under the provisions of this Section in lieu of any
Bond alleged to be lost, destroyed or stolen shall constitute an original
additional contractual obligation on the part of the Issuer whether or not the
Bond so alleged to be lost, destroyed or stolen be at any time enforceable by
anyone, and shall be equally and proportionately entitled to the benefits of
this Indenture with all other Bonds secured by this Indenture.
To the extent permitted by law, the provisions of this Section are
exclusive and shall preclude all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or stolen Bonds.
SECTION 2.14. BONDS; LIMITED OBLIGATIONS. The Bonds, together with premium, if
any, and interest thereon, shall be limited and not general obligations of the
Issuer not constituting or giving rise to a pecuniary liability of the Issuer
nor any charge against its general credit or taxing powers nor an indebtedness
of or a loan of credit thereof within the meaning of any provision or limitation
of the State Constitution or laws, shall be payable solely from the Revenues and
other moneys pledged therefor under this Indenture, and shall be a valid claim
of the respective Owners thereof only against the Bond Fund, the Revenues and
other moneys held by the Trustee as part of the Trust Estate. The Issuer shall
not be obligated to pay the purchase price of Bonds from any source.
THE BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT, LIABILITY OR GENERAL
OBLIGATION OF THE ISSUER, THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF, OR
A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER, THE STATE OR OF ANY SUCH
POLITICAL SUBDIVISION, BUT SHALL BE PAYABLE SOLELY FROM THE REVENUES AND
PROCEEDS PROVIDED THEREFOR. THE ISSUER SHALL NOT BE OBLIGATED TO PAY THE SAME
NOR INTEREST THEREON EXCEPT FROM THE REVENUES AND PROCEEDS PLEDGED THEREFOR, AND
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE ISSUER, THE STATE OR OF
ANY POLITICAL
-35-
<PAGE> 41
SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE
INTEREST ON THE BONDS.
No recourse shall be had for the payment of the principal of, or premium,
if any, or interest on any of the Bonds or for any claim based thereon or upon
any obligation, covenant or agreement contained in this Indenture, the Bonds,
the Agreement or any other related documents, against any past, present or
future officer, elected official agent or employee of the Issuer, or any
incorporator, officer, director or member of any successor corporation, as such,
either directly or through the Issuer or any successor corporation, under any
rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such
incorporator, officer, director or member as such is hereby expressly waived and
released as a condition of and in consideration for the execution of this
Indenture and the issuance of any of the Bonds.
SECTION 2.15. DISPOSAL OF BONDS. Upon payment of the principal of, premium, if
any, and interest represented thereby or transfer or exchange pursuant to
Section 2.11 hereof or, replacement pursuant to Section 2.13 hereof, any Bond
shall be canceled and such Bond shall be disposed of by the Registrar in
accordance with its customary procedures and the Registrar shall provide
evidence satisfactory to the Company of such cancellation and disposition.
SECTION 2.16. BOOK-ENTRY SYSTEM.
(a) Unless otherwise determined by the Issuer, the Bonds shall be issued in
the form of a single certificated fully-registered Bond, registered in the name
of Cede & Co., as nominee of DTC, or any successor nominee (the "Nominee"). The
actual owners of the Bonds (the "Beneficial Owners") will not receive physical
delivery of Bond certificates except as provided herein. Except as provided in
paragraph (d) below, all of the outstanding Bonds shall be so registered in the
registration books kept by the Registrar, and the provisions of this Section
shall apply thereto.
(b) With respect to Bonds registered on the registration books kept by the
Registrar in the name of the Nominee, the Issuer, the Company, the Paying Agent,
the Registrar, the Trustee and the Remarketing Agent shall have no
responsibility or obligation to any DTC Participant or the Beneficial Owners.
Without limiting the immediately preceding sentence, the Issuer, the Company,
the Paying Agent, the Registrar, the Trustee and the Remarketing Agent shall
have no responsibility or obligation to DTC, any DTC Participant or any
Beneficial Owner with respect to (1) the accuracy of the records of DTC, the
Nominee or any DTC Participant with respect to any ownership interest in the
Bonds, (2) the delivery by DTC or any DTC Participant of any notice with respect
to the Bonds, including any notice of redemption, or (3) the payment to any DTC
Participant or Beneficial Owner of any amount with respect to principal or
purchase price of, or premium, if any, or interest on, the Bonds. The Issuer,
the Company, the Paying Agent, the Registrar, the Trustee and the Remarketing
Agent may treat and consider the person in whose name each Bond is registered in
the registration books kept by the Registrar as the owner and absolute owner of
such Bond for the purpose of payment of principal purchase price, premium and
interest with respect to such Bond, for the purpose of giving notices of
redemption and other matters with respect to such Bond, for the purpose of
registering transfers with respect to such
-36-
<PAGE> 42
Bond, and for all other purposes whatsoever. The Paying Agent shall pay all
principal of and premium if any, and interest on, the Bonds only to or upon the
order of the respective Owners, as shown in the registration books kept by the
Registrar, or their respective attorneys duly authorized in writing, and all
such payments shall be valid and effective to fully satisfy and discharge the
Issuer's obligations with respect to payment of principal of, and premium, if
any, and interest on, the Bonds to the extent of the sum or sums so paid. No
person other than an Owner, as shown in the registration books kept by the
Registrar, shall receive a certificated Bond evidencing the obligation of the
Issuer to make payments of principal, premium, if any, and interest pursuant to
this Indenture.
(c) The Issuer, the Paying Agent, the Remarketing Agent and the Trustee
shall execute and deliver to DTC a letter of representations in customary form
with respect to the Bonds in book-entry form (the "DTC Representation Letter"),
but such DTC Representation Letter shall not in any way limit the provisions of
the foregoing paragraph (b) or in any other way impose upon the Issuer, the
Trustee or the Paying Agent any obligation whatsoever with respect to persons
having interests in the Bonds other than the Owners, as shown on the
registration books kept by the Registrar. The Trustee, the Remarketing Agent and
the Paying Agent shall take all action necessary for all representations of the
Issuer in the DTC Representation Letter with respect to the Trustee, the
Remarketing Agent and the Paying Agent to be complied with at all times,
including but not limited to, the giving of all notices required under the DTC
Representation Letter. The Trustee and Paying Agent are hereby authorized by the
Issuer to enter into the DTC Representation Letter.
(d) DTC may determine to discontinue providing its services with respect to
the Bonds at any time by giving reasonable notice to the Issuer or the Trustee
and discharging its responsibilities with respect thereto under applicable law.
The Issuer, with the consent of the Company, may terminate the services of DTC
with respect to the Bonds. Upon the discontinuance or termination of the
services of DTC with respect to the Bonds, unless a substitute securities
depository is appointed to undertake the functions of DTC hereunder, the Issuer,
at the expense of the Company, is obligated to deliver Bond certificates to the
Beneficial Owners of such Bonds, as described in this Indenture, and such Bonds
shall no longer be restricted to being registered in the registration books kept
by the Registrar in the name of the Nominee, but may be registered in whatever
name or names Owners transferring or exchanging Bonds shall designate, in
accordance with the provisions of this Indenture.
(e) Notwithstanding any other provision of this Indenture to the contrary,
so long as any Bond is registered in the name of the Nominee, all payments with
respect to principal or purchase price of or, premium if any, and interest on
such Bond and all notices with respect to such Bond shall be made and given,
respectively, in the manner provided in the DTC Representation Letter. Owners
shall have no lien or security interest in any rebate or refund paid by DTC to
the Paying Agent which arises from the payment by the Paying Agent of principal
of, or premium, if any, or interest on, the Bonds in immediately available funds
to DTC.
(f) So long as any Bond is held in book-entry form a Beneficial Owner
(through its DTC Participant) shall give notice to the Trustee to elect to have
its Bonds purchased, and shall effect delivery of such Bonds by causing such DTC
Participant to transfer its interest in the Bonds equal
-37-
<PAGE> 43
to such Beneficial Owner's interest on the records of DTC to the Trustee's
participant account with DTC. The requirement for physical delivery of the Bonds
in connection with any purchase pursuant to Section 3.01 and Section 3.02 hereof
shall be deemed satisfied when the ownership rights in the Bonds are transferred
by DTC Participants on the records of DTC to the Trustee's participant account.
SECTION 2.17. PAYMENTS PURSUANT TO THE CREDIT FACILITY. So long as the Credit
Facility shall be in effect, the Trustee, Registrar and Paying Agent shall
observe the following provisions respecting the Credit Facility:
(a) If on the Business Day prior to each Interest Payment Date and
prior to each date upon which the principal of the Bonds becomes due on
the Maturity Date or pursuant to a mandatory redemption pursuant to
Section 4.03 hereof, the Trustee has received actual notice that
sufficient amounts will not be on deposit in the Bond Fund on such
Interest Payment Date, Maturity Date or redemption date to pay the
principal of or interest on the Bonds then maturing or subject to such
mandatory redemption, or if the Trustee determines on any Interest Payment
Date or on any date upon which the principal of the Bonds becomes due on
the Maturity Date or pursuant to a mandatory redemption effected pursuant
to Section 4.03 hereof that there are not sufficient funds in the Bond
Fund to pay the principal of or interest on the Bonds coming due on such
date, the Trustee shall so notify the Provider. Such notice shall specify
the amount of the anticipated or actual deficiency, as the case may be,
the Bonds to which such deficiency is applicable and whether such Bonds
will be or are deficient as to principal or interest, or both. The
Insurance Policy provides, in effect, that if the Trustee has not so
notified the Provider at least one Business Day prior to an Interest
Payment Date or prior to any date upon which the principal of the Bonds
becomes due on the Maturity Date or pursuant to a mandatory redemption
effected pursuant to Section 4.03 hereof, the Provider will make payments
of principal or interest, or both, due on the Bonds on or before the first
Business Day next following the date on which the Provider shall have
received notice of nonpayment from the Trustee. Otherwise, such payments
shall be made on such Interest Payment Date, Maturity Date or redemption
date.
(b) The Trustee shall, after giving notice to the Provider as
provided in (a) above, make available to the Provider and, at the
Provider's direction, to the Insurance Trustee, the registration books of
the Issuer maintained by the Registrar, and all records relating to the
Bond Fund and any other funds and accounts maintained under this
Indenture.
(c) The Trustee or the Registrar shall provide the Provider and the
Insurance Trustee with a list of Owners entitled to receive principal or
interest payments from the Provider under the terms of the Credit
Facility, and shall make arrangements with the Insurance Trustee (i) to
mail checks or drafts to the Owners entitled to receive full or partial
interest payments from the Provider and (ii) to pay principal upon Bonds
surrendered or, if a book-entry system is in effect, ownership interests
in Bonds transferred to the Insurance Trustee by the Owners or Beneficial
Owners entitled to receive full or partial principal payments from the
Provider.
-38-
<PAGE> 44
(d) The Trustee shall, at the time it provides notice to the
Provider pursuant to (a) above, notify the Owners entitled to receive the
payment of principal thereof or interest thereon from the Provider (i) as
to the fact of such entitlement, (ii) that the Provider will remit to them
all or a part of the interest payments next coming due upon proof of the
entitlement of such Owners to interest payments and delivery to the
Insurance Trustee, in form satisfactory to the Insurance Trustee, of an
appropriate assignment of the Owner's right to payment, (iii) that should
they be entitled to receive full payment of principal from the Provider,
they must surrender their Bonds (along with an appropriate instrument of
assignment in form satisfactory to the Insurance Trustee to permit
ownership of such Bonds to be registered in the name of the Provider) for
payment to the Insurance Trustee, and not the Trustee or Paying Agent, and
(iv) that should they be entitled to receive partial payment of principal
from the Provider, they must surrender their Bonds for payment thereon
first to the Paying Agent, which shall note on such Bonds the portion of
the principal previously paid by the Paying Agent, and then, along with an
appropriate instrument of assignment in form satisfactory to the Insurance
Trustee, to the Insurance Trustee, which will then pay the unpaid portion
of principal thereof. At any time that there is a DTC book-entry system in
effect for the Bonds, the notice required pursuant to this Section 2.17
shall specify that, in lieu of surrendering the Bonds, the beneficial
ownership interests to receive payment of such principal or interest shall
be transferred on the records of DTC to the order of the Insurance
Trustee.
(e) In the event that the Trustee or Paying Agent has notice that
any payment of principal of or interest on a Bond which has become Due for
Payment and which is made to an Owner by or on behalf of the Issuer has
been deemed a preferential transfer and theretofore recovered from such
Owner pursuant to the United States Bankruptcy Code by a trustee in
bankruptcy in accordance with the final, nonappealable order of a court
having competent jurisdiction, the Trustee or Paying Agent shall, within
five Business Days after it has notice that such payment has been deemed a
preferential transfer, notify all Owners that in the event that any
Owner's payment is so recovered, such Owner will be entitled to payment
from the Provider to the extent of such recovery if sufficient funds are
not otherwise available, and the Paying Agent shall furnish to the
Provider its records evidencing the payments of principal of and interest
on the Bonds which have been made by the Paying Agent and subsequently
recovered from Owners and the dates on which such payments were made.
(f) In addition to those rights granted the Provider under this
Indenture, the Provider shall, to the extent it makes payment of principal
of or interest on the Bonds, become subrogated to the rights of the
recipients of such payments in accordance with the terms of the Credit
Facility, and to evidence such subrogation (i) in the case of subrogation
as to claims for past due interest, the Registrar shall note the
Provider's rights as subrogee on the registration books of the Issuer
maintained by the Registrar upon receipt from the Provider of proof of the
payment of interest thereon to the Owners, and (ii) in the case of
subrogation as to claims for past due principal, the Registrar shall note
the Provider's rights as subrogee on the registration books of the Issuer
maintained by the Registrar upon surrender of the Bonds by the Owners
thereof, together with proof of the payment of principal thereof.
-39-
<PAGE> 45
SECTION 2.18. CHANGE OF CREDIT FACILITY.
(a) The Trustee shall give notice by Mail of a proposed Change of Credit
Facility pursuant to Section 4.07(a) of the Agreement to the Owners prior to a
date upon which the Owners can give the requisite notice to tender their Bonds
on or prior to the effective date of such Change of Credit facility. Such notice
shall (a) describe the proposed Change of Credit Facility (subject to the
Company's ability to rescind its election to make such Change of Credit
Facility), (b) state the effective date of such Change of Credit Facility, and
(c) state such other matters as the Company may direct.
(b) The Trustee shall give notice by Mail of a proposed Change of Credit
Facility pursuant to Section 4.07(b) of the Agreement to the Owners not less
than 15 days prior to the effective date of such Change of Credit Facility. Such
notice shall (a) describe the proposed Change of Credit Facility (subject to the
Company's ability to rescind its election to make such Change of Credit
Facility), (b) state the effective date of such Change of Credit Facility, (c)
state that such Bonds are subject to mandatory purchase on or before such
effective date pursuant to Section 3.02(a)(iii), (d) describe the procedures for
such mandatory purchase and the date thereof, (e) state the purchase price of
such Bonds on such effective date (expressed as a percentage of the principal
amount thereof), (f) state that the Owners of such Bonds do not have the right
to retain their Bonds on such effective date, and (g) state such other matters
as the Company may direct.
SECTION 2.19. CUSIP NUMBERS. The Issuer in issuing the Bonds may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall use CUSIP
numbers in notices of redemption as a convenience to Owners; provided that any
such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Bonds or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Bonds, and any such redemption shall not be affected by
any defect in or omission of such numbers. The Issuer or the Company will
promptly notify the Trustee and the Registrar of any change in any CUSIP
number(s).
Neither the Issuer, the Registrar nor the Trustee shall have any
responsibility for any defect in the CUSIP number that appears on any Bond,
check, advice of payment or redemption notice, and any such document may contain
a statement to the effect that CUSIP numbers have been assigned by an
independent service for convenience of reference and that neither the Issuer,
the Registrar nor the Trustee shall be liable for any inaccuracy in such
matters.
ARTICLE III
PURCHASE AND REMARKETING OF BONDS
SECTION 3.01. OWNER'S OPTION TO TENDER FOR PURCHASE.
(a) Daily Interest Rate Period. During any Daily Interest Rate Period, any
Bond or portion thereof in an Authorized Denomination shall be purchased at the
option of the Owner
-40-
<PAGE> 46
thereof on any Business Day at a purchase price equal to 100% of the principal
amount thereof plus accrued interest, if any, from the Interest Payment Date
next preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the principal amount thereof), upon (i) delivery to the
Trustee at the Delivery Office of the Trustee, by no later than 11:00 a.m., New
York, New York time, on such Business Day, of an irrevocable written notice or
irrevocable notice by telephone (promptly confirmed by telecopy or other
writing) which states the principal amount and certificate number (if the Bonds
are not then held in book-entry form) of such Bond and the date on which the
same shall be purchased, and (ii) subject to Section 2.16(f) hereof and the last
paragraph of Section 3.03 hereof, delivery of such Bond tendered for purchase to
the Trustee at the Delivery Office of the Trustee, accompanied by an instrument
of transfer thereof in a form satisfactory to the Trustee, executed in blank by
the Owner thereof with the signature of such Owner guaranteed by a member or
participant in a "signature guarantee program" as provided in the form of
assignment attached to such Bond, at or prior to 1:00 p.m., New York, New York
time, on the purchase date. The Trustee shall keep a written record of each
notice described in clause (i) above.
(b) Weekly Interest Rate Period. During any Weekly Interest Rate Period,
any Bond or portion thereof in an Authorized Denomination shall be purchased at
the option of the Owner thereof on any Business Day at a purchase price equal to
100% of the principal amount thereof plus accrued interest, if any, from the
Interest Payment Date next preceding the date of purchase to the date of
purchase (unless the date of purchase shall be an Interest Payment Date, in
which case the purchase price shall be equal to the principal amount thereof),
upon (i) delivery to the Trustee at the Delivery Office of the Trustee of an
irrevocable written notice or an irrevocable notice by telephone (promptly
confirmed by telecopy or other writing), by 5:00 p.m., New York, New York time,
on any Business Day, which states the principal amount of such Bond and the
certificate number (if the Bonds are not then held in book-entry form) and the
date on which the same shall be purchased, which date shall not be prior to the
seventh day next succeeding the date of the delivery of such notice to the
Trustee, and (ii) subject to Section 2.16(f) hereof and the last paragraph of
Section 3.03 hereof, delivery of such Bond to the Trustee at the Delivery Office
of the Trustee, accompanied by an instrument of transfer thereof in a form
satisfactory to the Trustee, executed in blank by the Owner thereof with the
signature of such Owner guaranteed by a member or participant in a "signature
guarantee program" as provided in the form of assignment attached to such Bond,
at or prior to 1:00 p.m., New York, New York time, on the purchase date. The
Trustee shall keep a written record of each notice described in clause (i)
above.
(c) Term Interest Rate Period. Any Bond or portion thereof in an
Authorized Denomination shall be purchased at the option of the Owner thereof on
the first day of any Term Interest Rate Period which is preceded by a Term
Interest Rate Period of equal duration at a purchase price equal to 100% of the
principal amount thereof upon (x) delivery to the Trustee at the Delivery Office
of the Trustee of an irrevocable notice in writing by 5:00 p.m., New York, New
York time, on any Business Day not less than fifteen days before the purchase
date, which states the principal amount and certificate number (if the Bonds are
not then held in book-entry form) of such Bond to be purchased, and (y) subject
to Section 2.16(f) hereof and the last paragraph of Section 3.03 hereof delivery
of such Bond to the Trustee at the Delivery Office of
-41-
<PAGE> 47
the Trustee, accompanied by an instrument of transfer thereof in a form
satisfactory to the Trustee, executed in blank by the Owner thereof with the
signature of such Owner guaranteed by a member or participant in a "signature
guarantee program" as provided in the form of assignment attached to such Bond,
at or prior to 1:00 p.m. New York, New York time, on the purchase date. The
Trustee shall keep a written record of each notice described in clause (x)
above.
(d) If any Bond is to be purchased in part pursuant to Section 3.01(a),
Section 3.01(b) or Section 3.01(c) hereof, the amount so purchased and the
amount not so purchased must each be an Authorized Denomination.
SECTION 3.02. MANDATORY PURCHASE.
(a) The Bonds shall be subject to mandatory purchase at a purchase price
equal to 100% of the principal amount thereof, plus accrued interest, if any, to
the purchase date described below, upon the occurrence of any of the events
stated below:
(i) as to any Bond, on the effective date of any change in a Rate
Period with respect to such Bond, other than the effective date of a Term
Interest Rate Period which was preceded by a Term Interest Rate Period of
the same duration;
(ii) as to each Bond in a Flexible Interest Rate Period, on the
Business Day next succeeding the last day of any Flexible Segment with
respect to such Bond; or
(iii) as to any Bond, on the date set forth in any notice of a
Change of Credit Facility given by the Company pursuant to Section 4.07(b)
of the Agreement, which shall be a date that is on or before the effective
date of such Change of Credit Facility, provided, however, that if the
Bonds are then subject to optional redemption pursuant to Section
4.02(b)(iv), the purchase price shall include any premium that would have
been payable upon such redemption had the Bonds been redeemed.
(b) When Bonds are called for redemption pursuant to Section 4.02(b)(iv)
hereof and if the Company gives notice to the Trustee on or before the Business
Day prior to the redemption date that the Company elects to have the Bonds
purchased in lieu of redemption, all or any portion of the Bonds that the
Company elects to purchase shall be subject to mandatory purchase on such
redemption date at a purchase price equal to 100% of the principal amount
thereof plus an amount equal to any premium that would have been payable upon
such redemption had the Bonds been redeemed. If the Bonds are purchased in lieu
of redemption on or prior to the applicable Record Date, the purchase price
shall include accrued interest from the Interest Payment Date next preceding the
date of purchase to the date of purchase (unless the date of purchase shall be
an Interest Payment Date, in which case the purchase price shall be equal to the
amount specified in the preceding sentence). If the Bonds are purchased in lieu
of redemption after such Record Date, the purchase price shall not include
accrued interest.
SECTION 3.03. PAYMENT OF PURCHASE PRICE. If Bonds are to be purchased pursuant
to Section 3.01 or Section 3.02, the Trustee shall pay the purchase price of
such Bonds but solely
-42-
<PAGE> 48
from the following sources in the order of priority indicated, and the Trustee
shall not have any obligation to use funds from any other source:
(a) proceeds of the remarketing and sale of such Bonds pursuant to
Section 3.04 hereof;
(b) moneys furnished to the Trustee pursuant to Article VIII hereof,
such moneys to be applied only to the purchase of Bonds which are deemed
to be paid in accordance with Article VIII hereof; and
(c) any other moneys furnished by or on behalf of the Company to the
Trustee for purchase of the Bonds; provided, however, that funds for the
payment of the purchase price of Bonds which are deemed to be paid in
accordance with Article VIII hereof shall be derived only from the sources
described in Section 3.03(a) and Section 3.03(b), in such order of
priority.
Subject to Section 2.16 hereof, the Registrar shall register new Bonds as
directed by the Remarketing Agent and make such Bonds available for delivery on
the date of such purchase. Payment of the purchase price of any Bond shall be
made in immediately available funds for Bonds in a Flexible, Daily, Weekly or
Term Interest Rate Period (subject to Section 2.16(f) hereof) in each case only
upon presentation and surrender of such Bond to the Trustee.
If moneys sufficient to pay the purchase price of Bonds to be purchased
pursuant to Section 3.01 or Section 3.02 hereof shall be held by the Trustee on
the date such Bonds are to be purchased, such Bonds shall be deemed to have been
purchased and shall be purchased according to the terms hereof, for all purposes
of this Indenture, irrespective of whether or not such Bonds shall have been
delivered to the Trustee, and the former Owner of such Bonds shall have no claim
under this Indenture or otherwise, for any amount due with respect to such Bonds
other than the purchase price thereof.
SECTION 3.04. REMARKETING OF BONDS BY REMARKETING AGENT.
(a) Whenever any Bonds are subject to purchase pursuant to Section 3.01 or
Section 3.02 hereof, the Remarketing Agent shall offer for sale and use its best
efforts to remarket such Bonds to be so purchased, any such remarketing to be
made at a price equal to 100% of the principal amount thereof, plus accrued
interest, if any, to the purchase date. The Company may direct the Remarketing
Agent from time to time to cease and to resume sales efforts with respect to
some of or all of the Bonds.
(b) If the Remarketing Agent is remarketing the Bonds after the date notice
has been given of the redemption of such Bonds pursuant to Section 4.02 or 4.03
hereof (and prior to the redemption date thereof), the Remarketing Agent shall
provide to the Trustee the names of the Persons to whom the Bonds are being
remarketed so that the Trustee can provide the notice required by Section
3.05(a) hereof.
-43-
<PAGE> 49
(c) By 11:30 a.m., New York, New York time, on the date the Trustee
receives notice from any Owner in accordance with Section 3.01(a) hereof, and
promptly, but in no event later than 11:30 a.m., New York, New York time, on the
Business Day following the day on which the Trustee receives notice from any
Owner of its demand to have the Trustee purchase Bonds pursuant to Section
3.01(b) or Section 3.01(c) hereof, the Trustee shall give facsimile or
telephonic notice, confirmed in writing thereafter, to the Remarketing Agent
specifying the principal amount of Bonds which such Owner has demanded to have
purchased and the date on which such Bonds are demanded to be purchased.
SECTION 3.05. LIMITS ON REMARKETING. Any Bond purchased pursuant to Sections
3.01 and 3.02 hereof from the date notice is given of redemption pursuant to
Sections 4.02 and 4.03 hereof through the date of such redemption shall not be
remarketed unless the Person buying such Bonds has been given notice in writing
by the Trustee that such Bonds are to be redeemed. Furthermore, in addition to
the requirements of the preceding sentence, if the Bonds are subject to
redemption pursuant to Section 4.03 hereof, the Person buying such Bonds shall
also be given notice in writing by the Trustee that a Determination of
Taxability has occurred and that such Bonds are subject to mandatory redemption
pursuant to Section 4.03 hereof.
SECTION 3.06. DELIVERY OF BONDS; DELIVERY OF PROCEEDS OF REMARKETING Sale.
(a) DELIVERY OF BONDS.
Bonds purchased pursuant to Section 3.01 or Section 3.02 hereof shall be
delivered as follows:
(i) Delivery of Remarketed Bonds. Subject to Section 2.16 hereof,
Bonds remarketed by the Remarketing Agent pursuant to Section 3.04 hereof
shall not be delivered to any Person until it shall have paid the purchase
price therefor.
(ii) Delivery of Bonds Purchased by the Company. Bonds delivered to
the Trustee and purchased with moneys furnished by the Company shall at
the direction of the Company, be (A) held by the Trustee for the account
of the Company, (B) delivered to the Trustee for cancellation or (C)
delivered to the Company.
(iii) Delivery of Defeased Bonds. Bonds purchased by the Remarketing
Agent with moneys described in Section 3.03(b) hereof shall not be
remarketed and shall be delivered to the Trustee for cancellation.
(b) REGISTRATION OF DELIVERED BONDS. Bonds delivered as provided in this
Section 3.06 shall be registered in the manner directed by the recipient
thereof.
(c) NOTICE OF FAILED REMARKETING. In the event that any Bonds are not
remarketed, the Remarketing Agent shall notify the Company by telephone,
promptly confirmed in writing by telecopy, and the Trustee in writing (which may
be delivered by telecopy) no later than 1:30 p.m., New York, New York time, on
any day on which Bonds are delivered or deemed delivered for purchase under this
Indenture, of the aggregate principal amount of Bonds not
-44-
<PAGE> 50
remarketed on such date and the aggregate principal amount of Bonds remarketed
on such date but for which the purchase price has not been paid (which Bonds for
purposes of this Indenture shall be considered to not be remarketed), as
follows:
(i) Such notice to the Company shall be given to the Principal
Office of the Company, as follows:
Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99220
Attention: Treasurer
Telephone: (509) 495-8045
Telecopy: (509) 495-4879
The Company may, by notice given in accordance with Section 13.08 hereof
to the Remarketing Agent and the Trustee, designate any further or different
addresses to which subsequent such notices may be given.
(ii) Such notice to the Trustee shall be given to the Trustee, as
follows:
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Administration
Telephone: (415) 954-9518
Telecopy: (415) 693-8850
The Trustee may, by notice given in accordance with Section 13.08 hereof
to the Company and the Trustee, designate any further or different addresses to
which subsequent such notices may be given.
(d) PROCEEDS OF SALE HELD FOR SELLER OF BONDS. Moneys deposited with the
Trustee for the purchase of Bonds pursuant to Section 3.01 and Section 3.02
hereof shall be held uninvested in trust in one or more separate accounts and
shall be paid to the former Owners of such Bonds upon presentation thereof. The
Trustee shall notify the Company in writing within five days after the date of
purchase if the Bonds have not been delivered, and if so directed by the
Company, shall give notice by Mail to each Owner whose Bonds are deemed to have
been purchased pursuant to Section 3.01 and Section 3.02 hereof stating that
interest on such Bonds ceased to accrue on the date of purchase and that moneys
representing the purchase price of such Bonds are available against delivery
thereof at the Delivery Office of the Trustee. Bonds deemed purchased pursuant
to Section 3.01 and Section 3.02 hereof shall cease to accrue interest on the
date of purchase. The Trustee shall hold moneys deposited for the purchase of
Bonds without liability for interest thereon, for the benefit of the former
Owner of the Bond on such date of purchase, who shall thereafter be restricted
exclusively to such moneys for any claim of whatever nature on its part under
this Indenture or on, or with respect to, such Bond. Any moneys so deposited
with and held by the Trustee not so applied to the payment of Bonds within six
months
-45-
<PAGE> 51
after such date of purchase shall be paid by the Trustee to the Company upon the
written direction of the Authorized Company Representative, and thereafter the
Trustee shall have no further liability with respect to such moneys and the
former Owners shall be entitled to look only to the Company for payment, and
then only to the extent of the amount so repaid to the Company, and the Company
shall not be liable for any interest thereon and shall not be regarded as a
trustee of such money.
SECTION 3.07. NO REMARKETING SALES AFTER CERTAIN EVENTS. Anything in this
Indenture to the contrary notwithstanding, there shall be no sales of Bonds
pursuant to a remarketing in accordance with Section 3.04 hereof, if (a) there
shall have occurred and not have been cured or waived an Event of Default
described in Section 9.01(a), Section 9.01(b) or Section 9.01(c) hereof of which
an authorized officer in the Principal Office of the Remarketing Agent and an
authorized officer of the corporate trust department of the Trustee have actual
knowledge or (b) the Bonds have been declared to be immediately due and payable
pursuant to Section 9.02 hereof and such declaration has not been rescinded
pursuant to Section 9.02(d) hereof.
ARTICLE IV
REDEMPTION OF BONDS
SECTION 4.01. REDEMPTION OF BONDS GENERALLY.
(a) The Bonds are subject to redemption if and to the extent the Company is
entitled or required to make and makes a prepayment pursuant to Article VIII of
the Agreement. Except as specifically provided in Section 4.03 hereof, the
Trustee shall not give notice of any redemption under Section 4.05 hereof unless
the Company has so directed in accordance with Section 8.01 of the Agreement;
provided that the Trustee may require prepayment of Loan Payments under Section
4.01 of the Agreement in the case of mandatory redemption.
(b) If the Bonds are to be redeemed in part, they shall only be redeemed in
the principal amount of $100,000 or any integral multiple thereof unless such
redemption occurs during a Term Interest Rate Period which extends to and
includes the Maturity Date, in which case the Bonds may be redeemed in the
principal amount of $5,000 or any integral multiple thereof.
SECTION 4.02. REDEMPTION UPON OPTIONAL PREPAYMENT.
(a) The Bonds shall be redeemed in whole or in part, and if in part by lot,
at any time at a redemption price equal to 100% of the principal amount thereof
(except as otherwise provided in Section 4.02(a)(v) below) plus accrued interest
to the redemption date, upon receipt by the Trustee of a written notice from the
Company stating that any of the following events has occurred and that the
Company therefore intends to exercise its option to prepay the payments due
under the Agreement in whole or in part pursuant to Section 8.01 of the
Agreement and thereby effect the redemption of Bonds in whole or in part to the
extent of such prepayments:
-46-
<PAGE> 52
(i) the Company shall have determined or concurred in a
determination that the continued operation of the Plant is impracticable,
uneconomical or undesirable for any reason; or
(ii) all or substantially all of the Plant shall have been condemned
or taken by eminent domain;
(iii) the operation of the Plant shall have been enjoined or shall
have otherwise been prohibited by, or shall conflict with, any order,
decree, rule or regulation of any court or of any federal, state or local
regulatory body, administrative agency or other governmental body;
(iv) unreasonable burdens or excessive liabilities shall have been
imposed upon the Company in respect of all or a part of the Pollution
Control Facilities or the Plant including, without limitation, federal,
state or other ad valorem, property, income or other taxes not being
imposed on the date of the Agreement, as well as any statute or regulation
enacted or promulgated after the date of the Agreement that prevents the
Company from deducting interest in respect of the Agreement for federal
income tax purposes; or
(v) all or substantially all of the Project shall be transferred or
sold to any entity other than an affiliate of the Company; provided,
however, that in the case of a redemption under this Section 4.02(a)(v),
the redemption price of the Bonds shall be equal to 101% of the principal
amount thereof, plus accrued interest to the date of redemption, unless a
smaller or no premium would be due upon optional redemption of the Bonds
as described in Section 4.02(b) below.
(b) The Bonds shall be subject to redemption in whole, or in part by lot,
prior to their maturity, following receipt by the Issuer and the Trustee of a
written notice from the Company pursuant to Section 8.01 of the Agreement and
upon prepayment of the Loan Payments at the option of the Company, as follows:
(i) While the Bonds bear interest at a PARS Rate, the Bonds shall be
subject to such redemption on the date next succeeding the last day of any
PARS Rate Period at a redemption price equal to 100% of the principal
amount thereof plus accrued interest, if any, to the redemption date.
(ii) While the Bonds bear interest at a Flexible Interest Rate or
Rates, each Bond shall be subject to such redemption on the day next
succeeding the last day of each Flexible Segment for such Bond at a
redemption price equal to 100% of the principal amount thereof plus
accrued interest, if any, to the redemption date.
(iii) While the Bonds bear interest at a Daily Interest Rate or a
Weekly Interest Rate, the Bonds shall be subject to such redemption on any
Business Day at a redemption price equal to 100% of the principal amount
thereof plus accrued interest, if any, to the redemption date.
-47-
<PAGE> 53
(iv) While the Bonds bear interest at a Term Interest Rate, the
Bonds shall be subject to such redemption (1) on the day next succeeding
the last day of each Term Interest Rate Period at a redemption price equal
to the principal amount of the Bonds being redeemed plus accrued interest,
if any, to the redemption date and (2) either (A) on the redemption dates
and at the redemption prices specified by the Company pursuant to Section
4.02(c) hereof or (B) during the redemption periods specified below, in
each case in whole or in part, at the redemption prices (expressed as
percentages of principal amount) hereinafter indicated plus accrued
interest, if any, to the redemption date:
<TABLE>
<CAPTION>
LENGTH OF TERM
INTEREST RATE PERIOD REDEMPTION DATES AND PRICES
-------------------- ---------------------------
<S> <C>
Greater than or equal to 11 At any time on or after the first day
years of the calendar month following the
tenth anniversary of the effective date
at 102% declining 1% annually to 100%
Less than 11 years Not redeemable
</TABLE>
(c) With respect to any Term Interest Rate Period, the Company may specify
in the notice required by Section 2.06(b) hereof redemption provisions, prices
and periods other than those set forth above; provided however, that such notice
shall be accompanied by a Favorable Opinion of Bond Counsel with respect to such
changes in redemption dates and prices.
SECTION 4.03. REDEMPTION UPON MANDATORY PREPAYMENT. The Bonds shall be subject
to mandatory redemption in whole on any date from amounts which are to be
prepaid by the Company under Section 8.03 of the Agreement, at a redemption
price equal to 100% of the principal amount thereof plus interest accrued, if
any, to the redemption date within one hundred eighty (180) days following a
Determination of Taxability; provided that if, in the opinion of Bond Counsel
delivered to the Trustee, the redemption of a specified portion of the Bonds
outstanding would have the result that interest payable on the Bonds remaining
outstanding after such redemption would remain Tax-Exempt, then the Bonds shall
be redeemed in part by lot (in Authorized Denominations), in such amount as Bond
Counsel in such opinion shall have determined is necessary to accomplish that
result.
SECTION 4.04. SELECTION OF BONDS FOR REDEMPTION. If less than all of the Bonds
are called for redemption the Trustee shall select the Bonds or any given
portion thereof to be redeemed, from the outstanding Bonds or such given portion
thereof not previously called for redemption, by lot. For the purpose of any
such selection the Trustee shall (to the extent practicable) assign a separate
number for each minimum Authorized Denomination of each Bond of a denomination
of more than such minimum; provided that, following any such selection, both the
portion of such Bond to be redeemed and the portion remaining shall be in
Authorized Denominations. The Trustee shall promptly notify the Issuer and the
Company in writing of the numbers of the Bonds or portions thereof so selected
for redemption.
SECTION 4.05. NOTICE OF REDEMPTION.
-48-
<PAGE> 54
(a) The Trustee, for and on behalf of the Issuer, shall give notice of the
redemption of any Bond by Mail, postage prepaid, not less than fifteen (15) nor
more than sixty (60) days prior to the redemption date, to the Owner of such
Bond at the address shown on the registration books of the Registrar on the date
such notice is mailed and to any Auction Agent, any Remarketing Agent, any
Provider, Moody's, S&P, the Securities Depositories and one or more of the
Information Services. Notice of redemption shall also be given to DTC in
accordance with the DTC Representation Letter. Notice of redemption to the
Securities Depositories and the Information Services shall be given by
registered mail. Each notice of redemption shall state the date of such notice,
the date of issue of the Bonds to be redeemed, the redemption date, the
redemption price, the place of redemption (including the name and appropriate
address or addresses of the Paying Agent), the source of the funds to be used
for such redemption, the principal amount, the CUSIP number (if any) of the
maturity and, if less than all, the distinctive certificate numbers of the Bonds
to be redeemed and, in the case of Bonds to be redeemed in part only, the
respective portions of the principal amount thereof to be redeemed. Each such
notice shall also state that the interest on the Bonds designated for redemption
shall cease to accrue from and after such redemption date and that on said date
there will become due and payable on each of said Bonds the principal amount
thereof to be redeemed, interest accrued thereon, if any, to the redemption date
and the premium, if any, thereon (such premium to be specified) and shall
require that such Bonds be then surrendered at the address or addresses of the
Paying Agent specified in the redemption notice. Notwithstanding the foregoing,
failure by the Trustee to give notice pursuant to this Section 4.05 to any one
or more of the Information Services or Securities Depositories or the
insufficiency of any such notices shall not affect the sufficiency of the
proceedings for redemption. Failure to give any required notice of redemption as
to any particular Bond shall not affect the validity of the call for redemption
of any Bonds in respect of which no such failure has occurred.
(b) With respect to any notice of optional redemption of Bonds in
accordance with Section 4.02 hereof, unless, upon the giving of such notice,
such Bonds shall be deemed to have been paid within the meaning of Article VIII
hereof, such notice may state that such redemption is conditioned upon the
receipt by the Trustee, on or prior to the date fixed for such redemption, of
moneys sufficient to pay the principal of, and premium, if any, and interest on,
such Bonds to be redeemed. In the event such moneys are not so received, the
redemption shall not be made and the Trustee shall within a reasonable time
thereafter give notice, in the manner in which the notice of redemption was
given, that such redemption will not take place.
(c) The Trustee shall also provide the notice with respect to the Bonds to
be redeemed as required by Section 3.05(a) hereof.
SECTION 4.06. PARTIAL REDEMPTION OF BONDS. Upon surrender of any Bond redeemed
in part only, the Registrar shall exchange the Bond redeemed for a new Bond of
like tenor and in an Authorized Denomination without charge to the Owner in the
principal amount of the portion of the Bond not redeemed. In the event of any
partial redemption of a Bond which is registered in the name of Cede & Co., DTC
may elect to make a notation on the Bond certificate which reflects the date and
amount of the reduction in the principal amount of said Bond in lieu of
surrendering the Bond certificate to the Registrar for exchange. The Issuer, the
Company and the
-49-
<PAGE> 55
Trustee shall be fully released and discharged from all liability to the extent
of payment of the redemption price for such partial redemption.
SECTION 4.07. NO PARTIAL REDEMPTION AFTER DEFAULT. Anything in this Indenture
to the contrary notwithstanding, if there shall have occurred and be continuing
an Event of Default (other than an Event of Default described in Section 9.0l(d)
hereof) of which an authorized officer of the corporate trust department of the
Trustee has actual knowledge, there shall be no redemption of less than all of
the Bonds at the time Outstanding.
SECTION 4.08. PAYMENT OF REDEMPTION PRICE. For the redemption of any of the
Bonds, the Issuer shall cause to be deposited in the Bond Fund, solely out of
the Revenues and any other moneys constituting the Trust Estate, an amount
sufficient to pay the principal of, and premium, if any, and interest to become
due on, the Bonds called for redemption on the date fixed for such redemption.
The obligation of the Issuer to cause any such deposit to be made hereunder
shall be reduced by the amount of moneys in the Bond Fund or any fund in Article
VIII hereof available for and used on such redemption date for payment of the
principal of, and premium, if any, and accrued interest on, the Bonds to be
redeemed. The Trustee shall apply amounts as and when required available
therefor in the Bond Fund to pay principal of, and premium, if any, and interest
on, the Bonds.
SECTION 4.09. EFFECT OF REDEMPTION. Notice of redemption having been duly
given as aforesaid, and moneys for payment of the redemption price being held by
the Trustee if such redemption was conditioned thereon, the Bonds so called for
redemption shall, on the redemption date designated in such notice, become due
and payable at the redemption price specified in such notice, interest on the
Bonds so called for redemption shall cease to accrue, said Bonds shall cease to
be entitled to any lien, benefit or security under this Indenture, and the
Owners of said Bonds shall have no rights in respect thereof except to receive
payment of the redemption price thereof, without interest accrued on any funds
held to pay such redemption price accruing after the date of redemption.
All Bonds fully redeemed pursuant to the provisions of this Article IV
shall be canceled upon surrender thereof to the Paying Agent, which shall upon
the written request of the Issuer, deliver to the Company a certificate
evidencing such cancellation.
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. PAYMENT OF BONDS.
(a) The Issuer covenants that it will promptly pay or cause to be paid the
principal of, and premium, if any, and interest on, every Bond issued under this
Indenture at the place, on the dates and in the manner provided herein and in
the Bonds, provided that the principal, premium if any, and interest are payable
by the Issuer solely from the Revenues, and nothing in the Bonds or
-50-
<PAGE> 56
this Indenture shall be considered as assigning or pledging any other funds or
assets of the Issuer other than the Trust Estate.
(b) Each and every covenant made herein by the Issuer is predicated upon
the condition that the Issuer shall not in any event be liable for the payment
of the principal of, or premium, if any, or interest on the Bonds, or for the
payment of the purchase price of the Bonds, or the performance of any pledge,
mortgage, obligation or agreement created by or arising under this Indenture or
the Bonds from any property other than the Trust Estate; and, further, that
neither the Bonds nor any such obligation or agreement of the Issuer shall be
construed to constitute an indebtedness or a lending of credit of the Issuer
within the meaning of any constitutional or statutory provision whatsoever, or
constitute or give rise to a pecuniary liability of the Issuer or a charge
against its general credit or taxing power.
(c) For the payment of interest on the Bonds, the Issuer shall cause to be
deposited in the Interest Account on or prior to each Interest Payment Date,
solely out of Revenues and other moneys pledged therefor, an amount sufficient
to pay the interest to become due on such Interest Payment Date. The obligation
of the Issuer to cause any such deposit to be made hereunder shall be reduced by
the amount of moneys in the Interest Account available on the Interest Payment
Date for the payment of the interest on the Bonds.
(d) For payment of the principal of the Bonds upon redemption, maturity or
acceleration of maturity, the Issuer shall cause to be deposited in the
Principal Account, on or prior to the redemption date or the maturity date
(whether accelerated or not) of the Bonds, solely out of Revenues and other
moneys pledged therefor, an amount sufficient to pay the principal of the Bonds.
The obligation of the Issuer to cause any such deposit to be made hereunder
shall be reduced by the amount of moneys in the Principal Account available on
the redemption date or the maturity date (whether accelerated or not) for the
payment of the principal of the Bonds.
SECTION 5.02. PERFORMANCE OF COVENANTS BY ISSUER; AUTHORITY; DUE EXECUTION.
The Issuer covenants that it will faithfully perform at all times any and all
covenants, undertakings, stipulations and provisions contained in this
Indenture, in any and every Bond executed, authenticated and delivered hereunder
and in all of its proceedings pertaining thereto. The Issuer represents that it
is duly authorized under the Constitution and laws of the State to issue the
Bonds and to execute this Indenture, to execute and deliver the Agreement, to
assign the Agreement and amounts payable thereunder, and to pledge the amounts
hereby pledged in the manner and to the extent herein set forth. The Issuer
further represents that all action on its part for the issuance of the Bonds and
the execution and delivery of this Indenture has been duly and effectively
taken, and that the Bonds in the hands of the Owners thereof are and will be
valid and binding limited obligations of the Issuer.
The Issuer shall fully cooperate with the Trustee and with the Owners of
the Bonds to the end of fully protecting the rights and security of the Owners
of any Bonds.
The Issuer represents that it now has, and covenants that it shall use its
best efforts to maintain, complete and lawful authority and privilege to enter
into and perform its obligations under this Indenture and the Agreement, and
covenants that it will at all times use its best efforts
-51-
<PAGE> 57
to maintain its existence or provide for the assumption of its obligations under
this Indenture and the Agreement.
Except to the extent otherwise provided in this Indenture, the Issuer
shall not enter into any contract or take any action by which the rights of the
Trustee or the Owners of the Bonds may be impaired and shall, from time to time,
execute and deliver such further instruments and take such further action as may
be reasonably required to carry out the purposes of this Indenture.
SECTION 5.03. IMMUNITIES AND LIMITATIONS OF RESPONSIBILITY OF ISSUER;
REMEDIES. Without limiting the obligation of the Issuer to perform its covenants
and obligations hereunder:
(a) The Issuer shall be entitled to the advice of counsel and shall
be wholly protected as to action taken or omitted in good faith in
reliance on such advice.
(b) The Issuer may rely conclusively on any communication or other
document furnished to it hereunder and reasonably believed by it to be
genuine.
(c) The Issuer shall not be liable for any action.
(i) taken by it in good faith and reasonably believed by it to
be within its discretion or powers hereunder, or
(ii) in good faith omitted to be taken by it because such
action was reasonably believed to be beyond its discretion or powers
hereunder, or
(iii) taken by it pursuant to any direction or instruction by
which it is governed hereunder, or
(iv) omitted to be taken by it by reason of the lack of any
direction or instruction required hereby for such action; nor shall
it be responsible for the consequences of any error of judgment made
by it in good faith.
(d) The Issuer shall in no event be liable for the application or
misapplication of funds or for other acts or defaults by any person,
except its own officers and employees.
(e) When any payment or consent or other action by it is called for
hereby, it may defer such action pending receipt of such evidence (if any)
as it may require in support thereof.
(f) The Issuer shall not be required to take any remedial action
(other than the giving of notice) unless reasonable indemnity satisfactory
to it is furnished for any expense or liability to be incurred thereby.
(g) As provided herein and in the Agreement, the Issuer shall be
entitled to reimbursement from the Company for its expenses reasonably
incurred or advances
-52-
<PAGE> 58
reasonably made, with interest at a rate per annum equal to the rate of
interest then in effect and as announced by The Chase Manhattan Bank as
its prime lending rate for domestic commercial loans in New York, New
York, in the exercise of its rights or the performance of its obligations
hereunder, to the extent that it acts without previously obtaining
indemnity.
(h) No permissive right or power to act which it may have shall be
construed as a requirement to act, and no delay in the exercise of a right
or power shall affect its subsequent exercise of that right or power.
SECTION 5.04. DEFENSE OF ISSUER'S RIGHTS. The Issuer agrees that the Trustee
may defend the Issuer's rights to the payments and other amounts due under the
Agreement, for the benefit of the Owners of the Bonds, against the claims and
demands of all persons whomsoever. The Issuer covenants that it will do,
execute, acknowledge and deliver, or cause to be done, executed, acknowledged
and delivered, such indentures supplemental hereto and such further acts,
instruments and transfers as the Trustee may reasonably require for the better
assuring, transferring, pledging, assigning and confirming to the Trustee all
and singular the rights assigned hereby and the amounts pledged hereby to the
payment of the principal of, and premium, if any, and interest on, the Bonds.
The Issuer covenants and agrees that, except as herein and in the Agreement
provided, it will not sell, convey, assign, pledge, encumber or otherwise
dispose of any part of the Trust Estate.
SECTION 5.05. RECORDING AND FILING; FURTHER INSTRUMENTS.
(a) The Issuer and the Trustee shall cooperate with the Company in causing
to be filed and recorded all documents, notices and financing statements related
to this Indenture and to the Agreement which are necessary, as required by law,
in order to perfect the lien of this Indenture in the Trust Estate. Concurrently
with the execution and delivery of the Bonds and in accordance with the
requirements of Section 5.04 of the Agreement, the Company shall cause to be
delivered to the Trustee an opinion of counsel (i) stating that, in the opinion
of such counsel either (A) such action has been taken, as set forth therein,
with respect to the recording and filing of such documents, notices and
financing statements as is necessary to perfect the lien of this Indenture in
the Trust Estate, or (B) no such action is necessary to perfect such lien, and
(ii) stating the requirements for the filing of continuation statements or other
documentation or notices in order to maintain the perfection of the lien of this
Indenture in the Trust Estate.
(b) The Issuer shall upon the reasonable request of the Trustee, from time
to time execute and deliver such further instruments and take such further
action as may be reasonable (and consistent with the Bond Documents) and as may
be required to effectuate the purposes of this Indenture or any provisions
hereof, provided however, that no such instruments or actions shall pledge the
general credit or the full faith of the Issuer.
SECTION 5.06. RIGHTS UNDER AGREEMENT. The Agreement, a duly executed
counterpart, of which has been filed with the Trustee, sets forth the covenants
and obligations of the Issuer and the Company, including provisions that,
subsequent to the issuance of the Bonds and prior to the payment in full or
provision for payment thereof in accordance with the provisions hereof, the
-53-
<PAGE> 59
Agreement (except as expressly provided therein) may not be effectively amended,
changed, modified, altered or terminated without the concurring written consent
of the Trustee, as provided in Article XII hereof, and reference is hereby made
to the Agreement for a detailed statement of such covenants and obligations of
the Company, and the Issuer agrees that the Trustee in its name or (to the
extent required by law) in the name of the Issuer may enforce all rights of the
Issuer and all obligations of the Company under and pursuant to the Agreement,
whether or not the Issuer is in default hereunder. The Issuer shall cooperate
with the Trustee in enforcing the obligations of the Company to pay or cause to
be paid all amounts payable by the Company under the Agreement.
SECTION 5.07. ARBITRAGE AND TAX COVENANTS. The Issuer will not take or fail to
take any action that would impair the exclusion of interest on the Bonds from
gross income for federal income tax purposes. The Issuer further will not
knowingly act or fail to act so as to cause the proceeds of the Bonds, any
moneys derived, directly or indirectly, from the use or investment thereof and
any other moneys on deposit in any fund or account maintained in respect of the
Bonds (whether such moneys were derived from the proceeds of the sale of the
Bonds or from other sources) to be used in a manner which would cause the Bonds
to be treated as "arbitrage bonds" within the meaning of Section 148 of the
Code, or which would otherwise adversely affect the Tax-Exempt status of the
Bonds.
SECTION 5.08. NO DISPOSITION OF TRUST ESTATE. Except as permitted by this
Indenture, the Issuer shall not sell lease, pledge, assign or otherwise encumber
or dispose of its interest in the Trust Estate and will promptly pay (but only
from the Revenues) or cause to be discharged, or make adequate provision to
discharge, any lien or charge on any part thereof not permitted hereby.
SECTION 5.09. ACCESS TO BOOKS. All books and documents in the possession
of the Issuer relating to the Revenues and the Trust Estate shall at all
reasonable times be open to inspection by such accountants or other agencies
as the Trustee may from time to time designate.
SECTION 5.10. SOURCE OF PAYMENT OF BONDS. The Bonds are not general
obligations of the Issuer but are limited obligations payable solely from the
Revenues. The Revenues have been pledged and assigned as security for the equal
and ratable payment of the Bonds and shall be used for no other purpose than to
pay the principal of, and premium, if any, and interest on, the Bonds, except as
may be otherwise expressly authorized in this Indenture or the Agreement.
SECTION 5.11. CREDIT FACILITY. The Trustee and the Paying Agent shall take
action under the Credit Facility, in accordance with the terms and subject to
the coverage thereof, to the extent necessary in order to cause amounts in
respect of the principal of and interest on the Bonds to be payable by the
Provider pursuant to the Credit Facility to the Owners of the Bonds. The Trustee
shall not sell, assign, transfer or surrender the Credit Facility (a) except to
a successor Trustee hereunder or (b) except in connection with a Change of
Credit Facility.
-54-
<PAGE> 60
ARTICLE VI
DEPOSIT OF BOND PROCEEDS; FUND AND ACCOUNTS; REVENUES
SECTION 6.01. CREATION OF BOND FUND AND ACCOUNTS; REBATE FUND.
(a) There is hereby created by the Issuer and ordered established a
separate Bond Fund, to be held by the Trustee and to be designated "City of
Forsyth, Montana, Pollution Control Revenue Refunding Bonds (Avista Corporation
Colstrip Project) Series 1999A Bond Fund" and therein a Principal Account and an
Interest Account.
(b) For purposes of complying with the requirements of Section 148 of the
Code, the Rebate Fund is hereby established with the Trustee to make arbitrage
payments as contemplated by the Tax Certificate. The Trustee shall deposit such
amounts into the Rebate Fund and pay such amounts from the Rebate Fund as it
shall be directed by an Authorized Company Representative. The Trustee shall
have no responsibility for calculating the amount of arbitrage rebate with
respect to the Bonds.
SECTION 6.02. DISPOSITION OF BOND PROCEEDS AND CERTAIN OTHER MONEYS. In
accordance with the direction contained in Section 3.03 of the Agreement,
simultaneously with the initial authentication and delivery of the Bonds: (i)
there shall be deposited with the Prior Trustee in the Prior Bond Fund and used
for the purpose of the Refunding of the Prior Bonds, an amount equal to
$66,700,000, representing the principal proceeds received from the sale of the
Bonds, and (ii) there shall be deposited into the Interest Account the accrued
interest on the Bonds, if any, from the Issue Date to the date of the initial
authentication and delivery of the Bonds.
SECTION 6.03. DEPOSITS INTO THE BOND FUND; USE OF MONEYS IN THE BOND FUND.
(a) The Trustee shall deposit into the Principal Account of the Bond Fund
(i) payments made by the Company pursuant to the Agreement in respect of
principal of or premium payable on the Bonds, and (ii) any other moneys required
by this Indenture or the Agreement to be deposited into the Principal Account of
the Bond Fund.
(b) The Trustee shall deposit into the Interest Account of the Bond Fund
(i) payments made by the Company pursuant to the Agreement in respect of
interest on the Bonds, and (ii) any other moneys required by this Indenture or
the Agreement to be deposited into the Interest Account of the Bond Fund.
(c) Except as provided in Sections 6.04, 6.05, 9.10 and 10.04 and Article
VIII hereof, moneys in the Principal Account of the Bond Fund shall be used
solely for the payment of principal of and premium if any, on the Bonds as the
same shall become due and payable at maturity, upon redemption or upon
acceleration of maturity.
(d) Except as provided in Sections 6.04, 6.05, 9.10 and 10.04 and Article
VIII hereof, moneys in the Interest Account of the Bond Fund shall be used
solely to pay interest on the Bonds when due.
-55-
<PAGE> 61
SECTION 6.04. BONDS NOT PRESENTED FOR PAYMENT OF PRINCIPAL. In the event any
Bonds shall not be presented for payment when the principal thereof becomes due,
either at maturity or at the date fixed for redemption thereof or the
acceleration of maturity or in the event that any interest thereon is unclaimed,
if moneys sufficient to pay such Bonds or interest are held by the Trustee, the
Trustee shall segregate and hold such moneys in trust (but shall not invest such
moneys), without liability for interest thereon, for the benefit of Owners of
such Bonds who shall except as provided in the following paragraph, thereafter
be restricted exclusively to such fund or funds for the satisfaction of any
claim of whatever nature on their part under this Indenture or relating to said
Bonds or interest. Such Bonds which shall not have been so presented for payment
shall be deemed paid for any purposes of this Indenture.
Any moneys which the Trustee shall segregate and hold in trust for the
payment of the principal of or interest on any Bond and remaining unclaimed for
two years after such principal or interest has become due and payable shall be
paid by the Trustee to the Company upon request of an Authorized Company
Representative. After the payment of such unclaimed moneys to the Company, the
Owner of such Bond shall look only to the Company for payment, and then only to
the extent of the amount so repaid to the Company, and the Company shall not be
liable for any interest thereon and shall not be regarded as a trustee of such
money, and all liability of the Issuer and the Trustee with respect to such
moneys shall thereupon cease.
Neither the Company nor the Issuer shall have any right, title or interest
in or to any moneys held by the Trustee pursuant to this Section. The Trustee
shall not be liable to the Issuer or any Owner for interest on funds held by it
for the payment and discharge of the principal, interest, or premium on any of
the Bonds to any Owner.
SECTION 6.05. PAYMENT TO THE COMPANY. After the right, title and interest of
the Trustee in and to the Trust Estate and all covenants, agreements and other
obligations of the Issuer to the Owners shall have ceased, terminated and become
void and shall have been satisfied and discharged in accordance with Section
6.04 and Article VIII hereof, and all fees, expenses and other amounts payable
to the Registrar, the Paying Agent, the Trustee, the Remarketing Agent, the
Provider and the Issuer pursuant to any provision of this Indenture or the
Credit Facility Agreement shall have been paid, any moneys remaining in the Bond
Fund and the Rebate Fund shall be paid to the Company upon request of an
Authorized Company Representative, other than any unclaimed moneys held pursuant
to Section 6.04. The Trustee may conclusively rely on certificates of the
Remarketing Agent and the Provider as to the amount of any fees, expenses and
other amounts owing to them.
ARTICLE VII
INVESTMENTS
SECTION 7.01. INVESTMENT OF MONEYS IN FUNDS. Subject to Section 5.07 hereof
and the provisions of the Tax Certificate, moneys in the Bond Fund and the
Rebate Fund may be invested and reinvested in Investment Securities. Such
investments shall be made by the Trustee as specifically directed and designated
by the Company in a certificate of, or telephonic advice
-56-
<PAGE> 62
promptly confirmed by a certificate of, an Authorized Company Representative.
Each such certificate or telephonic advice shall contain a statement that each
investment so designated by the Company constitutes an Investment Security and
can be made without violation of any provision hereof or of the Agreement or of
the Tax Certificate. The Trustee shall be entitled to rely on each such
certificate or advice and shall incur no liability for making any such
investment so designated or for any loss, fee, tax or other charge incurred in
selling such investment or for any action taken pursuant to this Section that
causes the Bonds to be treated as "arbitrage bonds" within the meaning of
Section 148 of the Code. No investment instructions shall be given by the
Company if the investments to be made pursuant thereto would violate any
covenant set forth in Section 5.07 hereof or the provisions of the Agreement or
the Tax Certificate. The Trustee may act as principal or agent in the
acquisition or disposition of investments. The Trustee shall not be responsible
for any loss on any investment made in accordance herewith.
SECTION 7.02. CONVERSION OF INVESTMENT TO CASH. As and when any amounts so
invested may be needed for disbursements from the Bond Fund or the Rebate Fund,
the Trustee shall cause a sufficient amount of such investments to be sold or
otherwise converted into cash to the credit of such fund. As long as no Event of
Default shall have occurred and be continuing, the Company shall have the right
to designate the investments to be sold and to otherwise direct the Trustee in
the sale or conversion to cash of such investments; provided that the Trustee
shall be entitled to conclusively assume the absence of any Event of Default
unless it has notice thereof within the meaning of Section 10.05 hereof.
SECTION 7.03. CREDIT FOR GAINS AND CHARGE FOR LOSSES. Gains from
investments shall be credited to and held in and losses shall be charged to
the fund or account from which the investment is made.
ARTICLE VIII
DEFEASANCE
If the Issuer shall pay or cause to be paid to the Owner of any Bond
secured hereby the principal of, and premium, if any, and interest due and
payable, and thereafter to become due and payable, upon such Bond or any portion
of such Bond in an Authorized Denomination thereof, such Bond or portion thereof
shall cease to be entitled to any lien, benefit or security under this
Indenture.
If the Issuer shall pay or cause to be paid the principal of, and premium
if any, and interest due and payable on, all Outstanding Bonds, and thereafter
to become due and payable thereon, and shall pay or cause to be paid all other
sums payable hereunder by the Issuer, including any necessary and proper fees,
compensation and expenses of the Trustee, the Paying Agent, the Registrar, the
Provider and the Remarketing Agent, then, and in that case, the right, title and
interest of the Trustee in and to the Trust Estate shall thereupon cease,
terminate and become void. In such event, the Trustee shall assign, transfer and
turn over the Trust Estate to the Company and any surplus in the Bond Fund and
any balance remaining in any other fund created under this Indenture shall be
paid to the Company upon the request of an Authorized Company
-57-
<PAGE> 63
Representative, other than any unclaimed moneys held pursuant to Sections
3.06(d) and 6.04. The Trustee may conclusively rely on certificates of the
Remarketing Agent and the Provider as to the amount of any fees, expenses and
other amounts owing to them. Notwithstanding anything herein to the contrary, in
the event that the principal of and interest due on any Bonds shall be paid by
the Provider pursuant to the Credit Facility, such Bonds shall remain
Outstanding for all purposes, shall not be defeased or otherwise satisfied and
shall not be considered paid by the Issuer, and the assignment and pledge of the
Trust Estate and all covenants, agreements and other obligations of the Issuer
to such Owners shall continue to exist and shall run to the benefit of the
Provider and the Provider shall be subrogated to the rights of such Owners.
All or any portions of Bonds (in Authorized Denominations) shall, prior to
the maturity or redemption date thereof, be deemed to have been paid within the
meaning of this Article VIII and for all purposes of this Indenture when:
(a) in the event said Bonds or portions thereof have been selected
for redemption in accordance with Section 4.04 hereof, the Trustee shall
have given, or the Company shall have given to the Trustee in form
satisfactory to it irrevocable instructions to give, on a date in
accordance with the provisions of Section 4.05 hereof, notice of
redemption of such Bonds or portions thereof;
(b) there shall have been deposited with the Trustee moneys in an
amount sufficient (without relying on any investment income) to pay when
due the principal of, and premium, if any, and interest due and to become
due (which amount of interest to become due shall be calculated at the
Maximum Interest Rate unless the interest rate borne by all of such Bonds
is not subject to adjustment prior to the maturity or redemption thereof,
in which case the amount of interest shall be calculated at the rate borne
by such Bonds) on said Bonds or portions thereof on and prior to the
redemption date or maturity date thereof, as the case may be;
(c) in the event said Bonds or portions thereof do not mature and
are not to be redeemed within the next succeeding 60 days, the Issuer at
the direction of the Company shall have given the Trustee in form
satisfactory to it irrevocable instructions to give, as soon as
practicable in the same manner as a notice of redemption is given pursuant
to Section 4.05 hereof, a notice to the Owners of said Bonds or portions
thereof and to the Provider that the deposit required by clause (b) above
has been made with the Trustee and that said Bonds or portions thereof are
deemed to have been paid in accordance with this Article VIII and stating
the maturity or redemption date upon which moneys are to be available for
the payment of the principal of, and premium, if any, and interest on,
said Bonds or portions thereof; and
(d) the Trustee shall have received a Favorable Opinion of Bond
Counsel with respect to such deposit.
In the event the requirements of the next succeeding paragraph can be
satisfied, the preceding paragraph shall not apply, and the following two
paragraphs shall be applicable.
-58-
<PAGE> 64
Any Bond shall be deemed to be paid within the meaning of this Article
VIII and for all purposes of this Indenture when:
(a) payment of the principal of and premium if any, on such Bond,
plus interest thereon to the due date thereof (whether such due date is by
reason of maturity or acceleration or upon redemption as provided herein)
either (A) shall have been made or caused to be made in accordance with
the terms thereof or (B) shall have been provided for by irrevocably
depositing with the Trustee in trust and irrevocably set aside exclusively
for such payment (1) moneys sufficient to make such payment, and/or (2)
Government Obligations maturing as to principal and interest in such
amount and at such time as will insure, without reinvestment, the
availability of sufficient moneys to make such payment;
(b) all necessary and proper fees, compensation and expenses of the
Issuer, the Trustee, the Remarketing Agent, the Provider, the Paying Agent
and the Registrar pertaining to the Bonds with respect to which such
deposit is made shall have been paid or the payment thereof provided for
to the satisfaction of the Trustee, the Trustee being able to conclusively
rely on certificates of the Remarketing Agent and the Provider as to the
amount of any fees, compensation and expenses owing to them; and
(c) an opinion of an independent public accountant of nationally
recognized standing, selected by the Company, to the effect that such
moneys and/or Government Obligations will insure, without reinvestment,
the availability of sufficient moneys to make such payment, and a
Favorable Opinion of Bond Counsel with respect to such deposit shall have
been delivered to the Trustee. At such times as a Bond shall be deemed to
be paid hereunder, as aforesaid, such Bond shall no longer be secured by
or entitled to the benefits of this Indenture, except for the purposes of
registration and exchange of Bonds and of any such payment from such
moneys or Government Obligations.
The foregoing provisions of this paragraph shall apply only if (x) such Bond is
to mature or be called for redemption prior to the next date upon which such
Bond is subject to purchase pursuant to Section 3.01 and 3.02 hereof; and (y)
the Company has waived, to the satisfaction of the Trustee, its right to convert
the interest rate borne by such Bond.
No deposit under clause (a)(B) of the preceding paragraph shall be deemed
a payment of such Bonds as aforesaid until: (i) proper notice of redemption of
such Bonds shall have been previously given in accordance with Section 4.05
hereof, or in the event said Bonds are not to be redeemed within the next
succeeding 60 days, until the Company shall have given the Trustee on behalf of
the Issuer, in form satisfactory to the Trustee, irrevocable instructions to
notify, as soon as practicable, the Owners of the Bonds and the Provider in
accordance with Section 4.05 hereof, that the deposit required by clause (a)(B)
above has been made with the Trustee and that said Bonds are deemed to have been
paid in accordance with this Article VIII and stating the maturity or redemption
date upon which moneys are to be available for the payment of the principal of
and the applicable redemption premium, if any, on said Bonds, plus interest
thereon to the due date thereof; or (ii) the maturity of such Bonds.
-59-
<PAGE> 65
Moneys deposited with the Trustee pursuant to this Article VIII shall not
be withdrawn or used for any purpose other than, and shall be held in trust for,
the payment of the principal of, premium, if any, and interest on said Bonds or
portions thereof, or for the payment of the purchase price of Bonds in
accordance with Section 3.03 hereof; provided that such moneys, if not then
needed for such purpose, shall to the extent practicable, be invested and
reinvested in Government Obligations maturing on or prior to the earlier of (i)
the date moneys may be required for the purchase of Bonds pursuant to Section
3.03 hereof or (ii) the Interest Payment Date next succeeding the date of
investment or reinvestment, and interest earned from such investments shall be
paid over to the Company, as received by the Trustee, free and clear of any
trust, lien or pledge. If payment of less than all the Bonds is to be provided
for in the manner and with the effect provided in this Article VIII, the Trustee
shall select such Bonds or portion of such Bonds in the manner specified by
Section 4.04 hereof for selection for redemption of less than all Bonds in the
principal amount, not less than $100,000 or, to the extent permitted by Section
4.01(b) hereof, $5,000, designated to the Trustee by the Company.
Notwithstanding that all or any portion of the Bonds are deemed to be paid
within the meaning of this Article VIII, the provisions of this Indenture
relating to (i) the registration and exchange of Bonds, (ii) the delivery of
Bonds to the Trustee for purchase and the related obligations of the Trustee
with respect thereto, (iii) replacement of mutilated, lost, destroyed or stolen
Bonds, (iv) payment of the Bonds from the moneys deposited as described in this
Article and (v) payment, compensation, reimbursement and indemnification of the
Trustee, shall remain in full force and effect with respect to all Bonds until
the Maturity Date or the last date fixed for redemption of all Bonds prior to
maturity and, in the case of clause (v), until payment, compensation,
reimbursement or indemnification, as the case may be, of the Trustee.
ARTICLE IX
DEFAULTS AND REMEDIES
SECTION 9.01. EVENTS OF DEFAULT. Each of the following events shall constitute
and is referred to in this Indenture as an "Event of Default":
(a) a failure to pay the principal of or premium, if any, on any of
the Bonds when the same shall become due and payable at maturity, upon
redemption or otherwise;
(b) a failure to pay an installment of interest on any of the Bonds
for a period of (i) 30 days after the date upon which such interest has
become due and payable if the Bonds bear interest at a Term Interest Rate,
or (ii) two Business Days after the date upon which such interest has
become due and payable if the Bonds bear interest at a PARS Rate, a
Flexible Interest Rate, a Daily Interest Rate or a Weekly Interest Rate;
(c) a failure to pay an amount due in respect of the purchase price
of Bonds pursuant to Section 3.01 and Section 3.02 hereof after such
payment has become due and payable;
-60-
<PAGE> 66
(d) a failure by the Issuer to observe and perform any covenant,
condition, agreement or provision (other than as specified in Section
9.01(a), Section 9.01(b) and Section 9.01(c)) contained in the Bonds or in
this Indenture on the part of the Issuer to be observed or performed,
which failure shall continue for a period of 90 days after written notice,
specifying such failure and requesting that it be remedied, shall have
been given to the Issuer and the Company by the Trustee by registered or
certified mail which may give such notice in its discretion and shall give
such notice at the written request of the Owners of not less than 33-1/3%
in principal amount of the Bonds then Outstanding, unless the Trustee, or
the Trustee and the Owners of a principal amount of Bonds not less than
the principal amount of Bonds the Owners of which requested such notice,
as the case may be, shall agree in writing to an extension of such period
prior to its expiration; provided however, that the Trustee, or the
Trustee and the Owners of such principal amount of Bonds, as the case may
be, shall be deemed to have agreed to an extension of such period if
corrective action is initiated by the Issuer or the Company on behalf of
the Issuer within such period and is being diligently pursued; or
(e) an "Event of Default" under the Agreement.
If on the date on which payment of principal of, interest on or other
amount in any respect of the Bonds is due, sufficient moneys are not available
to make such payment, the Trustee shall promptly give telephonic notice of such
insufficiency to the Company given to the person at the telephone number
provided for in Section 3.06(c) hereof.
SECTION 9.02. ACCELERATION; OTHER REMEDIES.
(a) If an Event of Default described in Section 9.01(a), Section 9.01(b)
or Section 9.01(c) or an Event of Default described in Section 9.01(e) hereof
resulting from an "Event of Default" under Section 7.01(a) or Section 7.01(c) of
the Agreement (of which the Trustee shall be deemed to have notice pursuant to
the provisions of Section 10.05 hereof) has occurred and has not been cured or
waived, then the Trustee may, with the consent of the Provider (unless a
Provider Default shall have occurred and be continuing) or upon the written
direction of the Provider (unless a Provider Default shall have occurred and be
continuing) or upon the written request of the Owners of not less than 33-1/3%
in principal amount of the Bonds then Outstanding and with the consent of the
Provider (unless a Provider Default shall have occurred and be continuing), the
Trustee shall, by written notice by registered or certified mail to the Issuer,
the Company and the Provider, declare the Bonds to be immediately due and
payable, whereupon the Bonds shall without further action, become and be
immediately due and payable, anything in this Indenture or in the Bonds to the
contrary notwithstanding, and the Trustee shall give notice thereof by Mail to
all Owners of Outstanding Bonds.
(b) The provisions of Section 9.02(a) are subject further to the condition
that if, after the principal of the Bonds shall have been so declared to be due
and payable and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Issuer shall
cause to be deposited with the Trustee a sum sufficient to pay all matured
installments of interest upon all Bonds, any unpaid purchase price and the
principal of any and all Bonds which shall have become due otherwise than by
reason of such declaration
-61-
<PAGE> 67
(with interest upon such principal and, to the extent permissible by law, on
overdue installments of interest, at the rate per annum then borne by the Bonds)
and such amount as shall be sufficient to cover reasonable compensation and
reimbursement of expenses payable to the Trustee and all Events of Default
(other than nonpayment of the principal of Bonds which shall have become due by
said declaration) shall have been remedied, then, in every such case, such Event
of Default shall be deemed waived and such declaration and its consequences
rescinded and annulled, and the Trustee shall promptly give written notice of
such waiver, rescission or annulment to the Issuer and the Company, and shall
give notice thereof by Mail to all Owners of Outstanding Bonds; provided,
however, that no such waiver, rescission and annulment shall extend to or affect
any other Event of Default or subsequent Event of Default or impair any right,
power or remedy consequent thereon.
(c) Upon the occurrence and continuance of any Event of Default, then and
in every such case the Trustee in its discretion, with the consent of the
Provider (unless a Provider Default shall have occurred and be continuing) may,
and upon the written request of the Owners of not less than 33-1/3% in principal
amount of the Bonds then Outstanding and receipt of indemnity to its
satisfaction (except against negligence or willful misconduct) shall in its own
name and as the Trustee of an express trust:
(i) by mandamus, or other suit, action or proceeding at law or in
equity, enforce all rights of the Owners under, and require the Issuer,
the Company or the Provider to carry out any agreements with or for the
benefit of the Owners of Bonds and to perform its or their duties under,
the Act, the Agreement, this Indenture, the Credit Facility and the Credit
Facility Agreement, provided that any such remedy may be taken only to the
extent permitted under the applicable provisions of the Agreement or this
Indenture, as the case may be;
(ii) bring suit upon the Bonds;
(iii) by action or suit in equity require the Issuer to account as
if it were the trustee of an express trust for the Owners of Bonds; or
(iv) by action or suit in equity enjoin any acts or things which may
be unlawful or in violation of the rights of the Owners of Bonds.
Anything in this Indenture to the contrary notwithstanding, upon the
occurrence and continuance of an Event of Default, the Provider (unless a
Provider Default shall have occurred and be continuing) shall be entitled
(subject to Section 9.04) to control and direct the enforcement of all rights
and remedies granted to the Owners of the Bonds or the Trustee for the benefit
of such Owners under this Indenture and shall be entitled to consent to any
request or direction of the Owners as a condition to the effectiveness of any
such request or direction.
(d) The Trustee shall waive any Event of Default hereunder and its
consequences and rescind any declaration of acceleration of principal upon (i)
the written direction of the Provider (unless a Provider Default shall have
occurred and be continuing) and (ii) the written request of the Owners of (A)
more than a majority in principal amount of all Outstanding Bonds in respect
-62-
<PAGE> 68
of which default in the payment of principal or purchase price of or interest on
the Bonds exists or (B) more than a majority in principal amount of all
Outstanding Bonds in the case of any other Event of Default; provided, however,
that (x) there shall not be waived any Event of Default specified in Section
9.01(a), Section 9.01(b) or Section 9.01(c) hereof unless prior to such waiver
or rescission the Issuer shall have caused to be deposited with the Trustee a
sum sufficient to pay all matured installments of interest upon all Bonds and
the principal and purchase price of any and all Bonds which shall have become
due otherwise than by reason of such declaration of acceleration (with interest
upon such principal and, to the extent permissible by law, on overdue
installments of interest, at the rate per annum then borne by the Bonds) and (y)
no Event of Default shall be waived unless (in addition to the applicable
conditions as aforesaid) there shall have been deposited with the Trustee such
amount as shall be sufficient to cover reasonable compensation and reimbursement
of expenses payable to the Trustee. In case of any waiver or rescission
described above, or in case any proceeding taken by the Trustee on account of
any such Event of Default shall have been discontinued or concluded or
determined adversely, then and in every such case the Issuer, the Trustee and
the Owners of Bonds shall be restored to their former positions and rights
hereunder, respectively; provided further that no such waiver or rescission
shall extend to any subsequent or other Event of Default, or impair any right
consequent thereon.
SECTION 9.03. RESTORATION TO FORMER POSITION. In the event that any proceeding
taken by the Trustee to enforce any right under this Indenture shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee, then the Issuer, the Trustee and the Owners of Bonds
shall be restored to their former positions and rights hereunder, respectively,
and all rights, remedies and powers of the Trustee shall continue as though no
such proceeding had been taken.
SECTION 9.04. OWNERS' RIGHT TO DIRECT PROCEEDINGS. Anything in this Indenture
to the contrary notwithstanding, upon the occurrence and continuance of an Event
of Default, the Provider (provided that a Provider Default shall not have
occurred and be continuing) or the Owners of a majority in principal amount of
the Bonds then Outstanding, with the consent of the Provider (if no Provider
Default shall have occurred and be continuing), shall have the right, by an
instrument in writing executed and delivered to the Trustee and upon furnishing
to the Trustee indemnity satisfactory to it (except against negligence or
willful misconduct), to direct the time, method and place of conducting all
remedial proceedings available to the Trustee under this Indenture or exercising
any trust or power conferred on the Trustee by this Indenture, provided that
such direction shall not be other than in accordance with the provisions of law,
the Agreement and this Indenture and shall not result in any personal liability
of the Trustee.
SECTION 9.05. LIMITATION ON OWNERS' RIGHT TO INSTITUTE PROCEEDINGS. No Owner
shall have any right to institute any suit, action or proceeding in equity or at
law for the execution of any trust or power hereunder, or any other remedy
hereunder or in the Bonds, unless such Owner previously shall have given to the
Trustee written notice of an Event of Default as herein above provided and
unless the Owners of not less than 33-1/3% in principal amount of the Bonds then
Outstanding shall have made written request of the Trustee so to do after the
right to institute said suit, action or proceeding under Section 9.02 hereof
shall have accrued, and shall have afforded the Trustee a reasonable opportunity
to proceed to institute the same in either its or their name, and unless there
also shall have been offered to the Trustee security and indemnity satisfactory
to
-63-
<PAGE> 69
it against the costs, expenses and liabilities to be incurred therein or thereby
(except against negligence or willful misconduct), and the Trustee shall not
have complied with such request within a reasonable time; and such notification,
request and offer of indemnity are hereby declared in every such case, at the
option of the Trustee, to be conditions precedent to the institution of said
suit, action or proceeding, it being understood and intended that no one or more
of the Owners shall have any right in any manner whatever by his or their action
to affect, disturb or prejudice the security of this Indenture, or to enforce
any right hereunder or under the Bonds, except in the manner herein provided,
and that all suits, actions and proceedings at law or in equity shall be
instituted, had and maintained in the manner herein provided and for the equal
benefit of all Owners.
SECTION 9.06. NO IMPAIRMENT OF RIGHT TO ENFORCE PAYMENT. Notwithstanding any
other provision in this Indenture, the right of any Owner to receive payment of
the principal or purchase price of, and premium, if any, and interest on, its
Bond, on or after the respective due dates expressed therein, or to institute
suit for the enforcement of any such payment on or after the respective due
dates expressed therein, or to institute suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Owner.
SECTION 9.07. PROCEEDINGS BY TRUSTEE WITHOUT POSSESSION OF BONDS. All rights
of action under this Indenture or under any of the Bonds secured hereby which
are enforceable by the Trustee may be enforced by it without the possession of
any of the Bonds, or the production thereof at the trial or other proceedings
relative thereto, and any such suit, action or proceeding instituted by the
Trustee shall be brought in its name for the equal and ratable benefit of the
Owners, subject to the provisions of this Indenture.
SECTION 9.08. NO REMEDY EXCLUSIVE. Except as provided in Section 2.13, no
remedy herein conferred upon or reserved to the Trustee or to the Owners is
intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or under the Agreement, or now or hereafter existing at law or
in equity or by statute; provided, however, that any conditions set forth herein
to the taking of any remedy to enforce the provisions of this Indenture, the
Bonds or the Agreement shall also be conditions to seeking any remedies under
any of the foregoing pursuant to this Section 9.08.
SECTION 9.09. NO WAIVER OF REMEDIES. No delay or omission of the Trustee or of
any Owner to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver of any
such Event of Default, or an acquiescence therein; and every power and remedy
given by this Article IX to the Trustee and to the Owners, respectively, may be
exercised from time to time and as often as may be deemed expedient.
SECTION 9.10. APPLICATION OF MONEYS. Any moneys received by the Trustee, by
any receiver or by any Owner pursuant to any right given or action taken under
the provisions of this Article IX, after payment of the costs and expenses,
liabilities and advances incurred or made by the Trustee or its agents or
counsel (provided that moneys held for Bonds not presented for
-64-
<PAGE> 70
payment or deemed paid pursuant to Section 3.06(d), Section 6.04 or Article VIII
hereof shall not be used for purposes other than payment of such Bonds), shall
be deposited in the Bond Fund and all moneys so deposited in the Bond Fund
during the continuance of an Event of Default (other than moneys for the payment
of Bonds which had matured or otherwise become payable prior to such Event of
Default or for the payment of interest due prior to such Event of Default) shall
be applied as follows:
(a) Unless the principal of all the Bonds shall have been declared
due and payable, all such moneys shall be applied (i) first, to the
payment to the persons entitled thereto of all installments of interest
then due on each Bond, with interest on overdue installments of interest,
if lawful at the rate per annum then borne by such Bond, in the order of
maturity of the installments of such interest and, if the amount available
shall not be sufficient to pay in full any particular installment of
interest, then to the payment ratably, according to the amounts due on
such installment, and (ii) second, to the payment to the persons entitled
thereto of the unpaid principal of any of the Bonds which shall have
become due (other than Bonds called for redemption for the payment of
which money is held pursuant to the provisions of this Indenture) with
interest on each Bond at its rate from the respective dates upon which it
became due and, if the amount available shall not be sufficient to pay in
full Bonds due on any particular date, together with such interest, then
to the payment ratably, according to the amount of principal and interest
due on such date, in each case to the persons entitled thereto, without
any discrimination or privilege.
(b) If the principal of all the Bonds shall have been declared due
and payable, all such moneys shall be applied to the payment of the
principal and interest then due and unpaid upon the Bonds, with interest
on overdue interest and principal as aforesaid, without preference or
priority of principal over interest or interest over principal or of any
installment of interest over any other installment of interest, or of any
Bond over any other Bond, ratably, according to the amounts due
respectively for principal and interest, to the persons entitled thereto
without any discrimination or privilege.
(c) If the principal of all the Bonds shall have been declared due
and payable, and if such declaration shall thereafter have been rescinded
and annulled under the provisions of this Article then, subject to the
provisions of subparagraph (b) of this Section 9.10 which shall be
applicable in the event that the principal of all the Bonds shall later
become due and payable, the moneys shall be applied in accordance with the
provisions of subparagraph (a) of this Section 9.10.
Whenever moneys are to be applied pursuant to the provisions of this
Section 9.10, such moneys shall be applied at such times, and from time to time,
as the Trustee shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys becoming
available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the Bond Payment Date upon which such application is to
commence and upon such Bond Payment Date interest on the amounts of principal
and interest to be paid on such Bond Payment Date shall cease to accrue. The
Trustee shall give notice of the deposit with it of any such moneys and of the
fixing of any such Bond Payment Date by Mail to the Provider and all Owners of
Outstanding Bonds and shall not be required to make payment to
-65-
<PAGE> 71
any Owner until such Bond shall be presented to the Trustee for appropriate
endorsement or cancellation if fully paid.
SECTION 9.11. SEVERABILITY OF REMEDIES. It is the purpose and intention of
this Article IX to provide rights and remedies to the Trustee and the Owners
which may be lawfully granted under the provisions of the Act, but should any
right or remedy herein granted be held to be unlawful the Trustee and the Owners
shall be entitled, as above set forth, to every other right and remedy provided
in this Indenture and by law.
ARTICLE X
TRUSTEE; PAYING AGENT; REGISTRAR; REMARKETING AGENT
SECTION 10.01. ACCEPTANCE OF TRUSTS. The Issuer initially appoints Chase
Manhattan Bank and Trust Company, National Association, as Trustee and Paying
Agent. The Trustee hereby accepts and agrees to execute the trusts hereby
created, but only upon the additional terms set forth in this Article X, to all
of which the Issuer agrees and the respective Owners agree by their acceptance
of delivery of any of the Bonds. The Trustee, prior to the occurrence of an
Event of Default and after the curing of all Events of Default, undertakes to
perform such duties and only such duties as are specifically set forth herein
and no implied covenant shall be read into this Indenture.
SECTION 10.02. NO RESPONSIBILITIES FOR RECITALS. The recitals, statements
and representations contained in this Indenture or in the Bonds, save only the
Trustee's authentication upon the Bonds, shall not be taken and construed as
made by or on the part of the Trustee, and the Trustee does not assume, and
shall not have, any responsibility or obligation for the correctness of any
thereof or for the validity, sufficiency or priority of this Indenture or the
Agreement, or the perfection or the maintenance of the perfection of any
security interest granted hereby.
SECTION 10.03. LIMITATIONS ON LIABILITY. The Trustee may execute any of the
trusts or powers hereof and perform the duties required of it hereunder by or
through attorneys, agents, receivers or employees, and shall be entitled to
advice of counsel concerning all matters of trust and its duties hereunder and
shall not be answerable for the conduct of any such attorney, agent, receiver or
employee if appointed by the Trustee with reasonable care, and the advice of any
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted hereunder in good faith and reliance
thereon. The Trustee shall not be answerable for the exercise of any discretion
or power under this Indenture or for anything whatsoever in connection with the
trusts created hereby, except only for its own negligence or willful misconduct.
The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Provider or the Owners of a majority in aggregate principal amount of the Bonds
Outstanding relating to the time, method and place of
-66-
<PAGE> 72
conducting any proceeding or any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this Indenture.
No provision of this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers.
The permissive rights of the Trustee to do things enumerated in this Trust
Indenture shall not be construed as a duty unless so specified herein.
The Trustee shall not be liable for any error of judgment made in good
faith by an officer, director or employee unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts.
The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request, order or direction of any
of the Provider or the Owners pursuant to the provisions of this Trust Indenture
unless such Owners shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
Whether or not expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of the Trustee shall be
subject to the provisions of this Article X and shall extend to the Registrar,
Paying Agents, and employees and agents of the Trustee.
SECTION 10.04. COMPENSATION, EXPENSES AND ADVANCES. The Trustee, the Paying
Agent and the Registrar shall be entitled to such compensation as shall be
agreed in writing with the Company for their services rendered hereunder (not
limited by any provision of law in regard to the compensation of the trustee of
an express trust) and to reimbursement for their actual out-of-pocket expenses
(including reasonable counsel fees and expenses) reasonably incurred in
connection therewith except as a result of their negligence or willful
misconduct. If the Issuer shall fail to perform any of the covenants or
agreements contained in this Indenture, the Trustee may, in its uncontrolled
discretion and without notice to the Owners, at any time and from time to time,
make advances to effect performance of the same on behalf of the Issuer, but the
Trustee shall be under no obligation so to do; and any and all such advances
shall bear interest at a rate per annum equal to the lesser of the Maximum
Interest Rate and the rate of interest then in effect and as announced by The
Chase Manhattan Bank as its prime lending rate for domestic commercial loans in
New York, New York; but no such advance shall operate to relieve the Issuer from
any Event of Default. In no event shall the Trustee be liable for any claims
resulting from any decision on its part not to advance funds as permitted in the
immediately preceding sentence. In the Agreement, the Company has agreed that it
will pay to the Trustee, the Paying Agent, and the Registrar compensation and
reimbursement of expenses and advances and certain indemnitees, but the Company
may, without creating an Event of Default, contest in good faith the
reasonableness of any such expenses and advances. If the Company shall have
failed to make any payment to the Trustee, the Paying Agent or the Registrar
under the Agreement, then each of the Trustee, the Paying Agent and the
Registrar shall have, in addition to any other rights hereunder, a claim, prior
to the claim of the Owners, for the payment of their compensation and
-67-
<PAGE> 73
indemnitees and the reimbursement of their expenses and any advances made by
them, as provided in this Section 10.04, upon the moneys and obligations in the
Bond Fund, except for moneys or obligations deposited with or paid to the
Trustee for the redemption or payment of Bonds which are deemed to have been
paid in accordance with Article VIII hereof, or funds held pursuant to Section
6.04 hereof.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 7.01(c) of the
Agreement, the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section 10.04 shall survive the termination of this
Indenture.
SECTION 10.05. NOTICE OF EVENTS OF DEFAULT AND DETERMINATION OF TAXABILITY.
The Trustee shall not be required to take notice, or be deemed to have notice of
any default or Event of Default, other than an Event of Default under Section
9.01(a), Section 9.01(b) or Section 9.01(c) hereof or any Provider Default,
unless the Trustee shall have been specifically notified in writing at the
Principal Office of the Trustee, Attention: Corporate Trust Administration, of
such Event of Default or Provider Default by the Owners of at least 25% in
principal amount of the Bonds then Outstanding, the Issuer, the Company, the
Provider or the Remarketing Agent. The Trustee may, however, at any time, in its
discretion, require of the Issuer full information and cooperation as to the
performance of any of the covenants, conditions and agreements contained herein.
Such inquiry shall not for the purposes of this Section 10.05 constitute notice
of any Event of Default. The Issuer shall not be required to take notice, or be
deemed to have notice, of any Event of Default, other than an Event of Default
of which it shall have actual knowledge. If an Event of Default occurs after the
Trustee has notice of the same as provided in this Section 10.05, or if a
Determination of Taxability occurs of which the Trustee has actual knowledge,
then the Trustee shall give notice thereof by Mail to the Provider, the
Remarketing Agent and the Owners of Outstanding Bonds.
SECTION 10.06. ACTION BY TRUSTEE. Except as provided in Section 3.03, Section
9.02 and Section 9.04 hereof and except for the payment of principal of, and
premium, if any, and interest on, the Bonds when due from moneys held by the
Trustee as part of the Trust Estate, the Trustee shall be under no obligation to
take any action in respect of any Event of Default or toward the execution or
enforcement of any of the trusts hereby created, or to institute, appear in or
defend any suit or other proceeding in connection therewith, unless requested in
writing so to do by the Owners of at least 33-1/3% in principal amount of the
Bonds then Outstanding and, if in its opinion such action may tend to involve it
in expense or liability, unless furnished, from time to time as often as it may
require, with security and indemnity satisfactory to it (except against
negligence or willful misconduct); but the foregoing provisions are intended
only for the protection of the Trustee, and shall not affect any discretion or
power given by any provisions of this Indenture to the Trustee to take action in
respect of any Event of Default without such notice or request from the Owners,
or without such security or indemnity.
-68-
<PAGE> 74
Notwithstanding any other provision of this Indenture, in determining
whether the rights of the Owners will be adversely affected by any action taken
pursuant to the terms and provisions of this Indenture, the Trustee shall
consider the effect on the Owners as if there were no Credit Facility.
SECTION 10.07. GOOD-FAITH RELIANCE. The Trustee, the Registrar, the Provider
and the Remarketing Agent, shall be protected and shall incur no liability in
acting or proceeding in good faith upon any resolution, notice, telegram, telex
or facsimile transmission, request, consent, waiver, certificate, statement,
affidavit, voucher, bond, requisition or other paper or document which it shall
in good faith believe to be genuine and to have been passed or signed by the
proper board, body or person or to have been prepared and furnished pursuant to
any of the provisions of this Indenture or the Agreement, or upon the written
opinion of any attorney, engineer, accountant or other expert believed, without
independent investigation, by the Trustee, the Registrar or the Remarketing
Agent, as the case may be, to be qualified in relation to the subject matter.
The Trustee, the Registrar, the Provider and the Remarketing Agent, shall be
under no duty to make any investigation or inquiry as to any statements
contained or matters referred to in any such instrument, but may accept and rely
upon the same as conclusive evidence of the truth and accuracy of such
statements; provided, however, that the Trustee may, in its discretion, make
such further inquiry or investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such further inquiry or
investigation it shall be entitled to examine the books, records and premises of
the Company personally or by agent or attorney. Neither the Trustee, the
Registrar, the Provider nor the Remarketing Agent shall be bound to recognize
any person as an Owner or to take any action at such person's request unless
satisfactory evidence of the ownership of such Bond shall be furnished to such
entity.
Whenever in the administration of this Indenture the Trustee shall deem it
desirable that a matter be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of negligence or bad faith on its
part, request and conclusively rely upon a certificate of an Authorized Company
Representative or an Executive Officer.
The Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys and
the Trustee shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder.
Notwithstanding anything elsewhere in this Indenture contained, the
Trustee shall have the right, but shall not be required, to demand, in respect
of the authentication of any Bonds or the taking of any other action whatsoever
within the purview of this Indenture or the Agreement, any showings,
certificates, opinions or other information, or corporate action or evidence
thereof, in addition to those by the terms hereof or thereof required as a
condition of such action which are reasonably deemed desirable by the Trustee
for the purpose of establishing the right of the Issuer or the Company to
request the taking of such action by the Trustee.
SECTION 10.08. DEALINGS IN BONDS; ALLOWANCE OF INTEREST. The Trustee, the
Registrar, the Provider, or the Remarketing Agent, in its individual capacity,
may in good faith buy, sell own,
-69-
<PAGE> 75
hold and deal in any of the Bonds issued hereunder and may join in any action
which any Owner may be entitled to take with like effect as if it did not act in
any capacity hereunder. The Trustee, the Registrar, the Provider, or the
Remarketing Agent, in its individual capacity, either as principal or agent, may
also engage in or be interested in any financial or other transaction with the
Issuer or the Company, and may act as depositary, trustee or agent for any
committee or body of Owners secured hereby or other obligations of the Issuer or
the Company as freely as if it did not act in any capacity hereunder.
All moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any moneys received
hereunder except such as it may agree with the Company to pay thereon.
SECTION 10.09. SEVERAL CAPACITIES. Anything in this Indenture to the contrary
notwithstanding, the same entity may serve hereunder as the Trustee, the
Registrar, the Paying Agent and the Remarketing Agent and in any other
combination of such capacities, to the extent permitted by law. For purposes of
this Trust Indenture, the Remarketing Agent shall not be deemed to be an agent
or representative of the Trustee.
SECTION 10.10. RESIGNATION OF TRUSTEE. The Trustee may resign and be
discharged of the trusts created by this Indenture by executing any instrument
in writing resigning such trust and specifying the date when such resignation
shall take effect, and filing the same with the Issuer, the Company, the
Registrar, the Provider, and the Remarketing Agent not less than 45 days before
the date specified in such instrument when such resignation shall take effect,
and by giving notice of such resignation by Mail not less than three weeks prior
to such resignation date, to all Owners of Bonds. Such resignation shall take
effect on the day specified in such instrument and notice, unless previously a
successor Trustee shall have been appointed as hereinafter provided, in which
event such resignation shall take effect immediately upon the appointment of
such successor Trustee, but in no event shall a resignation take effect earlier
than the date on which a successor Trustee has been appointed and has accepted
its appointment.
SECTION 10.11. REMOVAL OF TRUSTEE.
(a) The Trustee may be removed at any time by filing with the Trustee so
removed and with the Issuer, the Company, the Registrar, the Provider, and the
Remarketing Agent, an instrument or instruments in writing executed by (i) the
Provider, if no Provider Default or Event of Default shall have occurred and be
continuing and if the Trustee has acted or failed to act hereunder in a manner
that is contrary to the standard of care of the Trustee provided for herein, or
(ii) the Owners of not less than a majority in principal amount of the Bonds
then Outstanding and, if no Provider Default shall have occurred and be
continuing, the Provider.
(b) The Issuer may, and, so long as no default or Event of Default is then
existing under Section 7.01 of the Agreement or Section 9.01(a), (b) or (c) of
this Indenture, at the request of the Company will, remove the Trustee if (i)
the Trustee fails to comply with Section 10.13(a), (b), (c) or (e) hereof, (ii)
the Trustee is adjudged a bankrupt or an insolvent, (iii) a receiver or other
-70-
<PAGE> 76
public officer takes charge of the Trustee or its property or (iv) the Trustee
otherwise becomes incapable of acting.
(c) In no event shall a removal take effect earlier than the date on which
a successor Trustee has been appointed and has accepted its appointment.
SECTION 10.12. APPOINTMENT OF SUCCESSOR TRUSTEE. In case at any time the
Trustee shall be removed, or be dissolved, or if its property or affairs shall
be taken under the control of any state or federal court or administrative body
because of insolvency or bankruptcy, or for any other reason, then a vacancy
shall forthwith and ipso facto exist in the office of Trustee and a successor
may be appointed, and in case at any time the Trustee shall resign, then a
successor may be appointed by filing with the Issuer, the Company, the Registrar
and the Remarketing Agent an instrument in writing executed by (i) the Provider,
if no Provider Default shall have occurred and be continuing, or (ii) the Owners
of not less than a majority in principal amount of the Bonds then Outstanding
and, if no Provider Default shall have occurred and be continuing, the Provider,
or (iii) the Company if no default or Event of Default is then existing under
Section 7.01 of the Agreement or Section 9.01(a), (b) or (c) of this Indenture.
Copies of such instrument shall be promptly delivered by the Issuer to the
predecessor Trustee and to the Trustee so appointed.
Until a successor Trustee shall be appointed by the Provider, the Owners
or by the Company as herein authorized, the Issuer, by an instrument authorized
by the governing body of the Issuer, shall appoint a successor Trustee
acceptable to the Company and the Provider. After any appointment by the Issuer,
it shall cause notice of such appointment to be given to the Remarketing Agent
and the Registrar and to be given by Mail to all Owners of Bonds. Any new
Trustee so appointed by the Issuer shall immediately and without farther act be
superseded by a Trustee appointed by the Owners in the manner above provided.
SECTION 10.13. QUALIFICATIONS OF SUCCESSOR TRUSTEE. Every successor Trustee
(a) shall be a national or state bank or trust company that is authorized by law
to perform all the duties imposed upon it by this Indenture, (b) shall have (or,
in the case of a corporation included in a bank holding company system, the
related bank holding company shall have) a combined capital and surplus of at
least $50,000,000 as set forth in its (or its related bank holding company's)
most recent published annual report of condition, (c) shall be permitted under
the Act to perform the duties of Trustee, (d) shall be acceptable to the
Provider, and (e) so long as the Bonds are subject to optional or mandatory
purchase pursuant to the provisions of this Indenture and no book-entry system
for the Bonds is in effect pursuant to Section 2.16 hereof, shall have an office
or agency located in New York, New York, if there can be located, with
reasonable effort, such an institution willing and able to accept the trust on
reasonable and customary terms.
SECTION 10.14. JUDICIAL APPOINTMENT OF SUCCESSOR TRUSTEE. In case at any time
the Trustee shall resign and no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this Article X prior to the date
specified in the notice of resignation as the date when such resignation is to
take effect, the resigning Trustee may forthwith apply to a court of competent
jurisdiction for the appointment of a successor Trustee. If no appointment of a
successor Trustee shall be made pursuant to the foregoing provisions of this
Article X within six months after a vacancy shall have occurred in the office of
Trustee, any Owner may apply to any
-71-
<PAGE> 77
court of competent Jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
SECTION 10.15. ACCEPTANCE OF TRUSTS BY SUCCESSOR TRUSTEE. Any successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer
an instrument accepting such appointment hereunder, and thereupon such successor
Trustee, without any further act, deed or conveyance, shall become duly vested
with all the estates, property rights, powers, trusts, duties and obligations of
its predecessor in the trust hereunder, with like effect as if originally named
Trustee herein. Upon request of such Trustee, such predecessor Trustee and the
Issuer shall execute and deliver an instrument transferring to such successor
Trustee all the estates, property, rights, powers and trusts hereunder of such
predecessor Trustee and, subject to the provisions of Section 10.04 hereof, such
predecessor Trustee shall pay over to the successor Trustee all moneys and other
assets at the time held by it hereunder.
SECTION 10.16. SUCCESSOR BY MERGER OR CONSOLIDATION. Any corporation into
which any Trustee hereunder may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which any Trustee hereunder shall be a party, or to which all or substantially
all of its corporate trust business shall be transferred, shall be the successor
Trustee under this Indenture, without the execution or filing of any paper or
any further act on the part of the parties hereto, anything in this Indenture to
the contrary notwithstanding, provided, however, if such successor corporation
is not a trust company or state or national bank that has trust powers, the
Trustee shall resign from the trusts hereby created prior to such merger,
transfer or consolidation or the successor corporation shall resign from such
trusts as soon as practicable after such merger, transfer or consolidation.
SECTION 10.17. STANDARD OF CARE. Notwithstanding any other provisions of this
Article X, the Trustee shall, during the existence and prior to the curing of an
Event of Default of which the Trustee has notice as provided in Section 10.05
hereof, exercise such of the rights and powers vested in it by this Indenture
and use the same degree of skill and care in their exercise as a prudent person
would use and exercise under the circumstances in the conduct of his own
affairs.
SECTION 10.18. INTERVENTION IN LITIGATION OF THE ISSUER. In any judicial
proceeding to which the Issuer is a party and which in the opinion of the
Trustee and its counsel has a substantial bearing on the interests of the Owners
of the Bonds, the Trustee may and shall upon receipt of indemnity satisfactory
to it (except against negligence or willful misconduct) at the written request
of the Owners of at least 25% in principal amount of the Bonds then Outstanding
and if permitted by the court having jurisdiction in the premises, intervene in
such judicial proceeding.
SECTION 10.19. REMARKETING AGENT. The Company has covenanted in the Agreement
that at all times while any of the Bonds are Outstanding and are subject to
optional or mandatory purchase pursuant to the provisions hereof there shall be
a Remarketing Agent for the Bonds appointed and acting pursuant to the
provisions of this Indenture. The Remarketing Agent shall designate its
Principal Office to the Trustee, the Company, the Registrar and the Issuer.
-72-
<PAGE> 78
The Issuer shall cooperate with the Trustee, the Registrar and the Company
to cause the necessary arrangements to be made and to be thereafter continued
whereby funds from the sources specified herein and in the Agreement will be
made available for the purchase of Bonds presented at the Delivery Office of the
Trustee and whereby Bonds, executed by the Issuer and authenticated by the
Trustee, shall be made available to the Remarketing Agent to the extent
necessary for delivery pursuant to Section 3.06 hereof.
SECTION 10.20. QUALIFICATIONS OF REMARKETING AGENT. The Remarketing Agent
shall have a capitalization of at least $50,000,000 and be authorized by law to
perform all the duties contemplated by this Indenture to be performed by the
Remarketing Agent and agrees to take all actions required of it under the DTC
Representation Letter while a book-entry system is in effect for the Bonds. The
Remarketing Agent may at any time resign and be discharged of the duties and
obligations contemplated by this Indenture by giving at least 30 days' notice to
the Issuer, the Company, the Registrar and the Trustee. The Remarketing Agent
may be removed at any time, at the direction of the Company, by an instrument,
signed by the Authorized Company Representative, filed with the Issuer, the
Remarketing Agent, the Registrar and the Trustee at least 30 days prior to the
effective date of such removal. Upon the resignation or removal of the
Remarketing Agent, the Company may appoint a new Remarketing Agent.
In the event of the resignation or removal of the Remarketing Agent, the
Remarketing Agent shall pay over, assign and deliver any moneys held by it in
such capacity to its successor or, if there be no successor, to the Trustee.
In the event that the Company shall fail to appoint a Remarketing Agent
hereunder, or in the event that the Remarketing Agent shall resign or be
removed, or be dissolved, or if the property or affairs of the Remarketing Agent
shall be taken under the control of any state or federal court or administrative
body because of bankruptcy or insolvency, or for any other reason, and the
Company shall not have appointed a successor Remarketing Agent, the Trustee,
notwithstanding the provisions of the first paragraph of this Section 10.20,
shall ipso facto be deemed to be the Remarketing Agent for all purposes of this
Indenture until the appointment by the Company of the Remarketing Agent or
successor Remarketing Agent, as the case may be; provided, however, that the
Trustee, in its capacity as Remarketing Agent, shall not be required to sell
Bonds or determine the interest rate on the Bonds pursuant to Article II hereof
on the basis of an examination of Tax-Exempt obligations comparable to the Bonds
but shall determine any applicable alternate interest rate if so required by the
applicable provisions of Article II hereof.
SECTION 10.21. REGISTRAR. Pursuant to the provisions hereof the Trustee is the
initial Registrar for the Bonds. By its execution of this Indenture, the Trustee
signifies its acceptance of the duties of Registrar hereunder. Any successor
Registrar shall designate to the Issuer, the Company and the Remarketing Agent
its office where the registration books shall be kept and signify its acceptance
of the duties imposed upon it hereunder by a written instrument of acceptance
delivered to the Issuer and the Trustee under which such Registrar will agree,
particularly, to keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available for inspection by
the Issuer, the Trustee, the Company, the Provider and the Remarketing Agent at
all reasonable times. So long as the Bonds are subject to optional or mandatory
purchase pursuant to the provisions of this Indenture and no
-73-
<PAGE> 79
book-entry system for the Bonds is in effect pursuant to Section 2.16 hereof,
the Registrar shall maintain in New York, New York, an office or agency for the
exchange, registration and registration of transfer of the Bonds.
The Issuer shall cooperate with the Trustee, the Remarketing Agent and the
Company to cause the necessary arrangements to be made and to be thereafter
continued whereby Bonds, executed by the Issuer and authenticated by the
Registrar, shall be made available for exchange, registration and registration
of transfer at the Principal Office of the Registrar. The Issuer shall cooperate
with the Trustee, the Registrar, the Company and the Remarketing Agent to cause
the necessary arrangements to be made and thereafter continued whereby the
Trustee and the Remarketing Agent shall be furnished such records and other
information, at such times, as shall be required to enable the Trustee and the
Remarketing Agent to perform the duties and obligations imposed upon them
hereunder.
SECTION 10.22. QUALIFICATIONS OF REGISTRAR; RESIGNATION; REMOVAL. The
Registrar shall be a corporation duly organized under the laws of the United
States of America or any state or territory thereof, having a combined capital
surplus and retained earnings of at least $10,000,000 and authorized by law to
perform all the duties imposed upon it by this Indenture. The Registrar may at
any time resign and be discharged of the duties and obligations created by this
Indenture by giving at least 45 days' notice to the Issuer, the Trustee, the
Remarketing Agent and the Company. The Registrar may be removed at any time by
an instrument signed by the Authorized Company Representative and filed with the
Issuer, the Registrar, the Trustee, and the Remarketing Agent. Upon the
resignation or removal of the Registrar, the Company shall appoint a new
Registrar.
In the event of the resignation or removal of the Registrar, the Registrar
shall deliver any Bonds held by it in such capacity to its successor or, if
there be no successor, to the Trustee.
In the event that the Company shall fail to appoint a Registrar hereunder,
or in the event that the Registrar shall resign or be removed, or be dissolved,
or if the property or affairs of the Registrar shall be taken under the control
of any state or federal court or administrative body because of bankruptcy or
insolvency, or for any other reason, and the Company shall not have appointed
its successor as Registrar, the Trustee shall ipso facto be deemed to be the
Registrar for all purposes of this Indenture until the appointment by the
Company of the Registrar or successor Registrar, as the case may be.
SECTION 10.23. PAYING AGENTS. The Company, with the written approval of the
Trustee and the Issuer, may appoint and at all times have one or more paying
agents in such place or places as the Company may designate, for the payment of
the principal of, and premium, if any, and the interest on, the Bonds. Each such
paying agent shall have the power to hold moneys in trust. It shall be the duty
of the Trustee to make such arrangements with any such paying agent as may be
necessary to assure, to the extent of the moneys held by the Trustee for such
payment, the prompt payment of the principal of, and premium, if any, and
interest on, the Bonds presented at either place of payment. The Paying Agent
initially appointed hereunder is the Trustee, and the place of payment shall be
the Delivery Office of the Trustee.
-74-
<PAGE> 80
SECTION 10.24. ADDITIONAL DUTIES OF TRUSTEE. The Trustee shall:
(a) hold all Bonds delivered to it hereunder for the account of and
for the benefit of the respective Owners which shall have so delivered
such Bonds pursuant to Section 3.01 or Section 3.02 until moneys
representing the purchase price of such Bonds shall have been delivered to
or for the account of or to the order of such Owners;
(b) hold all moneys delivered to it hereunder for the purchase of
Bonds for the benefit of the person or entity which shall have so
delivered such moneys until the Bonds purchased with such moneys shall
have been delivered to or for the account of such person or entity;
(c) keep such books and records with respect to the Bonds as shall
be consistent with prudent industry practice and to make such books and
records available for inspection by the Issuer, any Paying Agent, the
Company and the Remarketing Agent at all reasonable times; and
(d) as long as a book-entry system is in effect for the Bonds, the
Trustee will comply with the DTC Representation Letter and perform all
duties required of it thereunder.
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS
AND PROOF OF OWNERSHIP OF BONDS
Any request, direction, consent or other instrument in writing required or
permitted by this Indenture to be signed or executed by the Owners or on their
behalf by an attorney-in-fact may be in any number of concurrent instruments of
similar tenor and may be signed or executed by the Owners in person or by an
agent or attorney-in-fact appointed by an instrument in writing or as provided
in the Bonds. Proof of the execution of any such instrument and of the ownership
of Bonds shall be sufficient for any purpose of this Indenture and shall be
conclusive in favor of the Trustee with regard to any action taken by it under
such instrument if made in the following manner:
(a) The fact and date of the execution by any person of any such
instrument may be proved by the certificate of any officer in any
jurisdiction who, by the laws thereof, has power to take acknowledgments
within such Jurisdiction, to the effect that the person signing such
instrument acknowledged before him the execution thereof, or by an
affidavit of a witness to such execution.
(b) The ownership of Bonds shall be proved by the registration books
kept under the provisions of Section 2.12 hereof.
-75-
<PAGE> 81
Nothing contained in this Article XI shall be construed as limiting the
Trustee to such proof, it being intended that the Trustee may accept any other
evidence of matters herein stated which it may deem sufficient. Any request by
or consent of any Owner shall bind every future Owner of the same Bond or any
Bond or Bonds issued in lieu thereof or upon registration of transfer thereof in
respect of anything done by the Trustee or the Issuer in pursuance of such
request or consent.
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE AGREEMENT
SECTION 12.01. SUPPLEMENTAL INDENTURES WITHOUT OWNER CONSENT. The Issuer and
the Trustee may, from time to time and at any time, without the consent of the
Owners, enter into a Supplemental Indenture as follows:
(a) to cure any formal defect, omission, inconsistency or ambiguity
in this Indenture;
(b) to add to the covenants and agreements of the Issuer contained
in this Indenture or of the Company or of the Provider contained in any
document, other covenants or agreements thereafter to be observed, or to
assign or pledge additional security for any of the Bonds, or to surrender
any right or power reserved or conferred upon the Issuer or the Company,
which in the judgment of the Trustee is not materially adverse to the
Owners of the Bonds;
(c) to confirm as further assurance, any pledge of or lien on the
Revenues or any other moneys, securities or funds subject or to be
subjected to the lien of this Indenture;
(d) to comply with the requirements of the Trust Indenture Act of
1939, as from time to time amended, if applicable to this Indenture;
(e) to modify, alter, amend or supplement this Indenture or any
Supplemental Indenture in any other respect which in the judgment of the
Trustee is not materially adverse to the Owners of the Bonds;
(f) to implement a conversion of the interest rate on the Bonds;
(g) to provide for a Change of Credit Facility;
(h) to provide for a depository to accept Bonds in lieu of the
Trustee;
(i) to modify or eliminate the book-entry registration system for
any of the Bonds;
-76-
<PAGE> 82
(j) to provide for uncertificated Bonds or for the issuance of
coupons and bearer Bonds or Bonds registered only as to principal but only
to the extent that such would not adversely affect the Tax-Exempt status
of the Bonds;
(k) to secure or maintain ratings on the Bonds from Moody's and/or
S&P;
(1) to provide demand purchase obligations to cause the Bonds to be
authorized purchases for investment companies;
(m) to provide for the appointment of a Remarketing Agent or a
successor Trustee, Registrar, Paying Agent or Remarketing Agent;
(n) to provide the procedures required to permit any Owner to
separate the right to receive interest on the Bonds from the right to
receive principal thereof and to sell or dispose of such right as
contemplated by Section 1286 of the Code (or similar successor provision);
(o) to provide for any additional procedures, covenants or
agreements necessary to maintain the Tax-Exempt status of the Bonds; and
(p) to modify, alter, amend or supplement this Indenture in any
other respect, including amendments which would otherwise be described in
Section 12.02 hereof, if the effective date of such supplement or
amendment is a date on which all Bonds affected thereby are subject to
mandatory purchase pursuant to Section 3.02 hereof or if notice by Mail of
the Proposed amendment or supplement is given to Owners of the Bonds at
least thirty (30) days before the effective date thereof and, on or before
such effective date, such Owners have the right to require purchase of
their Bonds pursuant to Section 3.01 hereof.
Before the Issuer and the Trustee shall enter into any Supplemental
Indenture pursuant to this Section 12.01, (1) in the case of a Supplemental
Indenture entered into pursuant to clauses (l), (n) or (p) of this Section and
provided that no Provider Default shall have occurred and be continuing, there
shall have been delivered to the Trustee and the Company, the written consent of
the Provider, and (2) in all cases, there shall have been delivered to the
Trustee, the Provider and the Company, a Favorable Opinion of Bond Counsel with
respect to such Supplemental Indenture and further stating that such
Supplemental Indenture is authorized or permitted by this Indenture and will,
upon the execution and delivery thereof, be valid and binding upon the Issuer in
accordance with its terms. Neither the Issuer nor the Trustee will be obligated
to enter into any such Supplemental Indenture that would materially alter their
respective rights, duties or immunities under this Indenture, under the
Agreement or otherwise.
The Trustee shall provide written notice of any Supplemental Indenture
described in this Section 12.01 to Moody's, S&P, the Provider, the Remarketing
Agent and the Owners of all Bonds then Outstanding at least 15 days prior to the
effective date of such Supplemental Indenture. Such notice shall state the
effective date of such Supplemental Indenture and shall briefly describe the
nature of such Supplemental Indenture and shall state that a copy thereof is on
-77-
<PAGE> 83
file at the Principal Office of the Trustee for inspection by the parties
mentioned in the preceding sentence.
SECTION 12.02. SUPPLEMENTAL INDENTURES REQUIRING OWNER CONSENT.
(a) Except for any Supplemental Indenture entered into pursuant to Section
12.01 hereof, subject to the terms and provisions contained in this Section
12.02 and not otherwise, the Provider (unless a Provider Default shall have
occurred and be continuing), together with the Owners of not less than 60% in
aggregate principal amount of the Bonds then Outstanding shall have the right
from time to time to consent to and approve the execution and delivery by the
Issuer and the Trustee of any Supplemental Indenture deemed necessary or
desirable by the Issuer for the purposes of modifying, altering, amending,
supplementing or rescinding, in any particular, any of the terms or provisions
contained in this Indenture; provided however, that, unless approved in writing
by the Provider (unless a Provider Default shall have occurred and be
continuing) and the Owners of all the Bonds then affected thereby, nothing
herein contained shall permit, or be construed as permitting, (i) a change in
the times, amounts or currency of payment of the principal of, or premium if
any, or interest on, any Outstanding Bond, a change in the terms of the purchase
thereof by the Trustee, or a reduction in the principal amount or redemption
price of any Outstanding Bond or the rate of interest thereon, or (ii) the
creation of a claim or lien upon, or a pledge of, the Revenues ranking prior to
or on a parity with the claim, lien or pledge created by this Indenture (except
as referred to in Section 10.04 hereof), or (iii) a reduction in the aggregate
principal amount of Bonds the consent of the Owners of which is required for any
such Supplemental Indenture or which is required, under Section 12.06 hereof,
for any modification, alteration, amendment or supplement to the Agreement.
(b) If at any time the Issuer shall request the Trustee to enter into any
Supplemental Indenture for any of the purposes of this Section 12.02, the
Trustee shall cause notice of the proposed Supplemental Indenture to be given by
Mail to Moody's, S&P, the Provider, the Remarketing Agent and all Owners of
Outstanding Bonds. Such notice shall briefly set forth the nature of the
proposed Supplemental Indenture and shall state that a copy thereof is on file
at the Principal Office of the Trustee for inspection by the Owners, Moody's,
S&P, the Provider and the Remarketing Agent.
(c) Within two years after the date of the mailing of such notice, the
Issuer and the Trustee may enter into such Supplemental Indenture in
substantially the form described in such notice, but only if there shall have
first been delivered to the Trustee (i) the required consents, in writing, of
the Owners and the Provider and (ii) a Favorable Opinion of Bond Counsel with
respect to such Supplemental Indenture and further stating that such
Supplemental Indenture is authorized or permitted by this Indenture and will,
upon the execution and delivery thereof, be valid and binding upon the Issuer in
accordance with its terms. Neither the Issuer nor the Trustee will be obligated
to enter into any such Supplemental Indenture that would materially alter their
respective rights, duties or immunities under this Indenture, under the
Agreement or otherwise.
(d) If Owners of not less than the percentage of Bonds required by this
Section 12.02 shall have consented to and approved the execution and delivery of
a Supplemental Indenture as herein provided, no Owner shall have any right to
object to the execution and delivery of such
-78-
<PAGE> 84
Supplemental Indenture, or to object to any of the terms and provisions
contained therein or the operation thereof, or in any manner to question the
propriety of the execution and delivery thereof, or to enjoin or restrain the
Issuer or the Trustee from executing and delivering the same or from taking any
action pursuant to the provisions thereof.
SECTION 12.03. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution and
delivery of any Supplemental Indenture pursuant to the provisions of this
Article XII, this Indenture shall be, and be deemed to be, modified and amended
in accordance therewith, and the respective rights, duties and obligations under
this Indenture shall thereafter be determined, exercised and enforced under this
Indenture subject in all respects to such modifications and amendments.
SECTION 12.04. CONSENT OF THE COMPANY AND THE PROVIDER. No Supplemental
Indenture under this Article XII and no amendment of the Agreement shall become
effective unless the Company shall have consented thereto in writing.
Any provision of this Indenture expressly recognizing or granting rights
in or to the Provider may not be amended in any manner which affects the rights
of the Provider hereunder without the prior written consent of the Provider.
SECTION 12.05. AMENDMENT OF AGREEMENT WITHOUT OWNER CONSENT. Without the
consent of or notice to the Owners, the Issuer and the Company may, with the
consent of the Provider (unless a Provider Default shall have occurred and be
continuing) modify, alter, amend or supplement the Agreement, and the Trustee
may consent thereto, as may be required:
(a) by the provisions of the Agreement and this Indenture;
(b) for the purpose of curing any formal defect, omission,
inconsistency or ambiguity therein;
(c) in connection with any other change therein which in the
judgment of the Trustee is not materially adverse to the Owners;
(d) to secure or maintain ratings on the Bonds from Moody's and/or
S&P;
(e) to add to the covenants and agreements of the Issuer contained
in the Agreement or of the Company or of the Provider contained in any
document, other covenants or agreements thereafter to be observed, or to
assign or pledge additional security for any of the Bonds, or to surrender
any right or power reserved or conferred upon the Issuer or the Company,
which shall not materially adversely affect the interest of the Owners of
the Bonds;
(f) to provide demand purchase obligations to cause the Bonds to be
authorized purchases for investment companies;
(g) to provide the procedures required to permit any Owner to
separate the right to receive interest on the Bonds from the right to
receive principal thereof and to sell
-79-
<PAGE> 85
or dispose of such right as contemplated by Section 1286 of the Code (or
similar successor provision);
(h) to provide for any additional procedures, covenants or
agreements necessary to maintain the Tax-Exempt status of interest on the
Bonds;
(i) to implement a conversion of the interest rate on the Bonds or
in connection with the appointment of a Remarketing Agent;
(j) to provide for a Change of Credit Facility; and
(k) to modify, alter, amend or supplement the Agreement in any other
respect, including amendments which would otherwise be described in
Section 12.06 hereof, if the effective date of such supplement or
amendment is a date on which all Bonds affected thereby are subject to
mandatory purchase pursuant to Section 3.02 hereof or if notice by Mail of
the proposed amendment or supplement is given to Owners of the Bonds at
least thirty (30) days before the effective date thereof and, on or before
such effective date-, such Owners have the right to demand purchase of
their Bonds pursuant to Section 3.01 hereof.
A revision of Exhibit A to the Agreement in accordance with Section 3.04
of the Agreement shall not be deemed a modification, alteration, amendment or
supplement to the Agreement, or to this Indenture, for any purpose of this
Indenture.
Before the Issuer shall enter into, and the Trustee shall consent to, any
modification, alteration, amendment or supplement to the Agreement pursuant to
this Section 12.05, there shall have been delivered to the Issuer, the Provider
and the Trustee a Favorable Opinion of Bond Counsel with respect to such
modification, alteration, amendment or supplement and further stating that such
modification, alteration, amendment or supplement is authorized or permitted by
the Agreement or this Indenture and will, upon the execution and delivery
thereof, be valid and binding upon the Issuer in accordance with its terms.
Neither the Issuer nor the Trustee will be obligated to enter into or consent to
any such modifications, alterations, amendments or supplements to the Agreement
that would materially alter their respective rights, duties or immunities under
this Indenture, under the Agreement or otherwise.
SECTION 12.06. AMENDMENT OF AGREEMENT REQUIRING OWNER CONSENT. Except in the
case of modifications, alterations, amendments or supplements referred to in
Section 12.05 hereof, the Issuer shall not enter into, and the Trustee shall not
consent to, any amendment, change or modification of the Agreement without the
written approval or consent of the Provider (unless a Provider Default shall
have occurred and be continuing) and the Owners of not less than 60% in
aggregate principal amount of the Bonds then Outstanding, given and procured as
provided in Section 12.02 hereof, provided, however, that, unless approved in
writing by the Provider (unless a Provider Default shall have occurred and be
continuing) and the Owners of all Bonds affected thereby, nothing herein
contained shall permit, or be construed as permitting, a change in the
obligations of the Company under Section 4.01 and Section 4.02 of the Agreement.
If at any time the Issuer or the Company shall request the consent of the
Trustee to any such proposed
-80-
<PAGE> 86
modification, alteration, amendment or supplement permitted under this Section
12.06, the Trustee shall cause notice thereof to be given in the same manner as
provided by Section 12.02 hereof with respect to Supplemental Indentures. Such
notice shall briefly set forth the nature of such proposed modification,
alteration, amendment or supplement and shall state that copies of the
instrument embodying the same are on file at the Principal Office of the Trustee
for inspection by all Owners. The Issuer may enter into, and the Trustee may
consent to, any such proposed modification, alteration, amendment or supplement
subject to the same conditions and with the same effect as provided in Section
12.02 hereof with respect to Supplemental Indentures.
Before the Issuer shall enter into, and the Trustee shall consent to, any
modification, alteration, amendment or supplement to the Agreement pursuant to
this Section 12.06, there shall have been delivered to the Issuer, the Provider
and the Trustee a Favorable Opinion of Bond Counsel with respect to such
modification, alteration, amendment or supplement and further stating that such
modification, alteration, amendment or supplement is authorized or permitted by
the Agreement or this Indenture and will, upon the execution and delivery
thereof, be valid and binding upon the Issuer in accordance with its terms.
Neither the Issuer nor the Trustee will be obligated to enter into any such
modifications, alterations, amendments or supplements to the Agreement that
would materially alter their respective rights, duties or immunities under this
Indenture, under the Agreement or otherwise.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. SUCCESSORS OF THE ISSUER. In the event of the dissolution of
the Issuer, all the covenants, stipulations, promises and agreements in this
Indenture contained, by or on behalf of, or for the benefit of the Issuer, shall
bind or inure to the benefit of the successors of the Issuer from time to time
and any entity, officer, board, commission, agency or instrumentality to whom or
to which any power or duty of the Issuer shall be transferred.
SECTION 13.02. PARTIES IN INTEREST. Except as herein otherwise specifically
provided, nothing in this Indenture expressed or implied is intended or shall be
construed to confer upon any person, firm or corporation other than the Issuer,
the Remarketing Agent, the Registrar, the Paying Agent, the Company, the
Trustee, the Provider and the Owners of Bonds any right, remedy or claim under
or by reason of this Indenture, this Indenture being intended to be for the sole
and exclusive benefit of the Issuer, the Remarketing Agent, the Registrar, the
Paying Agent, the Company, the Trustee, the Provider and the Owners of Bonds.
The Trustee shall have no fiduciary duty to any entity other than the Owner of
any Bond as such and only in accordance with, into the extent of, the terms and
provisions hereunder.
SECTION 13.03. SEVERABILITY. In case any one or more of the provisions of
this Indenture or of the Agreement or of the Bonds shall for any reason, be held
to be illegal or invalid, such illegality or invalidity shall not affect any
other provisions of this Indenture, the Agreement, or of the Bonds, and this
Indenture, the Agreement and the Bonds shall be construed and enforced as if
such illegal or invalid provisions had not been contained herein or therein.
-81-
<PAGE> 87
SECTION 13.04. NO PERSONAL LIABILITY OF ISSUER OFFICIALS. No representation,
warranty, covenant or agreement contained in the Bonds or in this Indenture or
in any of the documents or certificates related thereto shall be deemed to be
the representation, warranty, covenant or agreement of any official, officer,
agent, counsel or employee of the Issuer in his or her individual capacity, and
neither the members of the Issuer nor any official executing the Bonds shall be
liable personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof.
SECTION 13.05. BONDS OWNED BY THE ISSUER OR THE COMPANY. In determining
whether the Owners of the requisite aggregate principal amount of the Bonds have
concurred in any direction, consent or waiver under this Indenture, Bonds which
are owned by the Issuer or the Company or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company (unless the Issuer, the Company or such person owns all Bonds which are
then Outstanding, determined without regard to this Section 13.05) shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver, only
Bonds which the Trustee actually knows are so owned shall be so disregarded.
Bonds so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Bonds and that the pledgee is not
the Issuer or the Company or any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. In
case of a dispute as to such right, any decision by the Trustee taken upon the
advice of counsel shall be full protection to the Trustee.
SECTION 13.06. COUNTERPARTS. This Indenture may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be an
original; but such counterparts shall together constitute but one and the same
Indenture.
SECTION 13.07. GOVERNING LAW. This Indenture shall be governed by and
construed in accordance with the laws of the State; provided, however, that the
rights, protections and immunities of the Trustee shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 13.08. NOTICES. Except as otherwise provided in this Indenture, all
notices, certificates, requests, requisitions, directions or other
communications by the Issuer, the Company, the Trustee, the Registrar, the
Paying Agent, the Provider or the Remarketing Agent, pursuant to this Indenture
shall be in writing and shall be sufficiently given and shall be deemed given
when mailed by Mail or by certified or registered mail postage prepaid, or by
overnight delivery service, addressed as follows (and, if by overnight delivery
service and required by the chosen delivery service, with then-current telephone
numbers of the addressees):
if to the Issuer, to: City of Forsyth, Montana
City Hall
Forsyth, Montana 59327
Attention: Mayor
-82-
<PAGE> 88
if to the Trustee, to: Chase Manhattan Bank and Trust Company,
National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Administration
if to the Company, to: Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99220
Attention: Treasurer
if to the Provider, to: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
if to the Registrar or the Paying Agent, to such address as is designated in
writing by it to the Trustee and the Issuer; if to any Auction Agent, at the
address specified in the Auction Agreement; and if to any Remarketing Agent, at
the address specified in the Remarketing Agreement. Any of the foregoing may, by
notice given hereunder to each of the others, designate any further or different
addresses to which subsequent notices, certificates, requests or other
communications shall be sent hereunder. Any communications required to be given
hereunder by the Company shall be given by an Authorized Company Representative.
SECTION 13.09. HOLIDAYS. If the date for making any payment or the last
date for performance of any act or the exercising of any right, as provided
in this Indenture, shall not be a Business Day, such payment may, unless
otherwise provided in this Indenture or the Agreement, be made or act
performed or right exercised on the next succeeding Business Day with the
same force and effect as if done on the nominal date provided in this
Indenture, and no interest shall accrue for the period after such nominal
date.
SECTION 13.10. PURCHASE OF BONDS BY TRUSTEE AND REMARKETING AGENT. The
Trustee and the Issuer agree that in connection with the purchase of any
Bonds pursuant to this Indenture, the Trustee and the Remarketing Agent are
acting solely on behalf of the Company.
SECTION 13.11. NOTICES TO MOODY'S AND S&P. The Trustee shall provide prior
written notice to Moody's (if the Bonds are then rated by Moody's) and to S&P
(if the Bonds are then rated by S&P) of (a) the payment of the principal of all
of the Bonds, (b) the resignation or removal of the Trustee or the Remarketing
Agent, (c) any modifications, alterations, amendments or supplements of this
Indenture, the Agreement and the Remarketing Agreement, and (d) the conversion
under Article II hereof of the method by which interest on the Bonds is
determined.
The agreement of the Trustee herein to give notices to Moody's and S&P has
been made as a matter of courtesy and accommodation only and the Trustee shall
not be liable to any Person for any failure to give any such notice.
-83-
<PAGE> 89
SECTION 13.12. RIGHTS OF PROVIDER. Upon a Change of Credit Facility, all
rights provided herein to a Provider other than its right of subrogation
pursuant to Section 2.17(f) shall be of no force and effect with respect to the
Provider and Credit Facility which has been replaced and shall apply only to the
new Provider and Credit Facility.
-84-
<PAGE> 90
IN WITNESS WHEREOF, CITY OF FORSYTH, MONTANA, has caused this Indenture to
be signed in its name and behalf by the Mayor, and its official seal to be
hereunto affixed and attested by the City Clerk-Treasurer and to evidence its
acceptance of the trusts hereby created the Trustee has caused this Indenture to
be signed in its name and behalf by one of its Assistant Vice Presidents, all as
of September 1, 1999.
CITY OF FORSYTH, MONTANA
By:
-------------------------------------
Mayor
[SEAL]
ATTEST:
- --------------------------------
City Clerk-Treasurer
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:
-------------------------------------
Assistant Vice President
-85-
<PAGE> 91
EXHIBIT A
[FORM OF BOND]
STATEMENT OF INSURANCE
Municipal Bond Insurance Policy No. __________ (the "Policy") with respect
to payments due for principal of and interest on this bond has been issued by
Ambac Assurance Corporation ("Ambac Assurance"). The Policy has been delivered
to the United States Trust Company of New York, New York, New York, as the
Insurance Trustee under said Policy and will be held by such Insurance Trustee
or any successor insurance trustee. The Policy is on file and available for
inspection at the principal office of the Insurance Trustee and a copy thereof
may be secured from Ambac Assurance or the Insurance Trustee. All payments
required to be made under the Policy shall be made in accordance with the
provisions thereof. The owner of this bond acknowledges and consents to the
subrogation rights of Ambac Assurance as more fully set forth in the Policy.
REGISTERED REGISTERED
No. R-__ $_________
UNITED STATES OF AMERICA
STATE OF MONTANA
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999A
MATURITY DATE ISSUE DATE CUSIP NO.
October 1, 2032 September ___, 1999 ____________
[FLEXIBLE INTEREST RATE: ________________________________
LAST DAY OF FLEXIBLE SEGMENT: ___________________________
NUMBER OF DAYS IN FLEXIBLE SEGMENT: _____________________
AMOUNT OF INTEREST TO ACCRUE DURING FLEXIBLE SEGMENT: ___]*
- --------
* To be included only in Bonds bearing interest at a Flexible Interest Rate and
not registered in the book-entry system pursuant to Section 2.16 of the
Indenture.
A-1
<PAGE> 92
Registered Owner: ______________________________________
Principal Amount: -----------------------------DOLLARS-------------------------
CITY OF FORSYTH, MONTANA (the "Issuer"), a political subdivision duly
organized and existing under the Constitution and laws of the State of Montana,
for value received, hereby promises to pay (but only out of the source
hereinafter provided) to the registered owner identified above, or registered
assigns, on October 1, 2032, the principal amount set forth above and to pay
(but only out of the sources hereinafter provided) interest on the balance of
said principal amount from time to time remaining unpaid from the Interest
Payment Date (as defined in the Indenture) next preceding the date of
registration and authentication hereof unless this Bond (as hereinafter defined)
is registered and authenticated after a Record Date (as defined in the
Indenture) and on or prior to the related Interest Payment Date, in which event
this Bond shall bear interest from such Interest Payment Date, or unless this
Bond is registered and authenticated before the Record Date for the first
Interest Payment Date, in which event this Bond shall bear interest from the
Issue Date set forth above (the "Issue Date"); provided, however, that if, as
shown by the records of the Paying Agent (as hereinafter defined), interest on
the Bonds (as hereinafter defined) shall be in default, Bonds issued in exchange
for Bonds surrendered for registration of transfer or exchange shall bear
interest from the last date to which interest has been paid in full or duly
provided for on the Bonds, or, if no interest has been paid or duly provided for
on the Bonds, from the Issue Date, until payment of said principal amount has
been made or duly provided for, at the rates and on the dates determined as
described herein and in the Indenture (as hereinafter defined), and to pay (but
only out of the sources hereinafter provided) interest on overdue principal and,
to the extent permitted by law, on overdue interest at the rate then borne by
this Bond, except as the provisions hereinafter set forth with respect to
redemption, purchase or acceleration prior to maturity may become applicable
hereto. The principal of and premium, if any, on this Bond are payable in lawful
money of the United States of America at the principal corporate trust office in
San Francisco, California, of Chase Manhattan Bank and Trust Company, National
Association, or its successors and assigns, as Paying Agent (the "Paying
Agent"). Interest payments on this Bond shall be made by the Paying Agent to the
registered owner hereof as of the close of business on the Record Date with
respect to each Interest Payment Date and shall be paid:
(a) in respect of any Bond that is registered in the book-entry system,
pursuant to the Indenture, in immediately available funds by no later than 2:30
p.m., New York, New York time, and
(b) in respect of any Bond that is not registered in the book-entry
system,
(i) by bank check mailed by first-class mail on the Interest Payment
Date to the registered owner hereof at its address as it appears on the
registration books of Chase Manhattan Bank and Trust Company, National
Association, as registrar (the "Registrar") or at such other address as is
furnished in writing by such registered owner to the Registrar, or
A-2
<PAGE> 93
(ii) during any Rate Period (as defined in the Indenture) other than
a Term Interest Rate Period (as defined in the Indenture), in immediately
available funds on the Interest Payment Date (by wire transfer or by
deposit to the account of the registered owner of this Bond if such
account is maintained with the Paying Agent),
but in respect of any registered owner of any Bond or Bonds in a PARS Rate
Period (as defined in the Indenture) or a Daily Interest Rate Period (as defined
in the Indenture) or a Weekly Interest Rate Period (as defined in the Indenture)
or a Flexible Interest Rate Period (as defined in the Indenture), only to any
registered owner that owns Bonds in an aggregate principal amount of at least
$1,000,000 on such Record Date, according to the written instructions given by
the registered owner hereof to the Paying Agent or, if no such instructions have
been provided as of the Record Date, by bank check mailed by first-class mail on
the Interest Payment Date to the registered owner at such registered owner's
address as it appears as of the Record Date on the registration books of the
Registrar. Notwithstanding the foregoing, interest in respect of any Bond
bearing a Flexible Rate (as defined in the Indenture) shall be paid only upon
presentation to Chase Manhattan Bank and Trust Company, National Association, as
Trustee (the "Trustee") of the Bond on which such payment is due.
THIS BOND AND ALL OTHER BONDS OF THE ISSUE OF WHICH IT FORMS A PART SHALL
BE A LIMITED OBLIGATION OF THE ISSUER, SHALL NOT CONSTITUTE NOR GIVE RISE TO A
GENERAL OBLIGATION OR LIABILITY OF THE ISSUER OR A CHARGE AGAINST ITS GENERAL
CREDIT OR TAXING POWERS, AND SHALL NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER
OR OF THE STATE OF MONTANA, OR A LOAN OF CREDIT THEREOF WITHIN THE MEANING OF
ANY CONSTITUTIONAL OR STATUTORY PROVISION.
This Bond is one of the duly authorized Pollution Control Revenue
Refunding Bonds (Avista Corporation Colstrip Project) Series 1999A of the
Issuer, originally issued in the aggregate principal amount of $66,700,000 (the
"Bonds"), issued pursuant to proper action duly adopted by the Issuer on May 11,
1999 and May 18, 1999, and the applicable provisions of Sections 90-5-101 to
90-5-114, inclusive, Montana Code Annotated, as amended (the "Act"), and
executed under a Trust Indenture, dated as of September 1, 1999 (the
"Indenture"), between the Issuer and Chase Manhattan Bank and Trust Company,
National Association, as trustee (the "Trustee," which term shall include any
successor Trustee), for the purpose of providing the funds necessary for the
refunding of certain pollution control revenue bonds previously issued by the
Issuer to finance certain pollution control facilities owned by Avista
Corporation, a Washington corporation (the "Company"). Pursuant to the Loan
Agreement, dated as of September 1, 1999 (the "Loan Agreement"), between the
Issuer and the Company, the proceeds of the Bonds have been loaned to the
Company.
This Bond and all other Bonds of the issue of which it forms a part are
issued pursuant to and in full compliance with the Constitution and laws of the
State of Montana, particularly the Act, and pursuant to further proceedings
adopted by the governing authority of the Issuer, which proceedings authorize
the execution and delivery of the Indenture. This Bond and the issue of which it
forms a part are limited and not general obligations of the Issuer payable
solely from the Revenues (as defined in the Indenture) and amounts derived under
the Loan Agreement and pledged under the Indenture consisting of all amounts
payable from time to time by the Company
A-3
<PAGE> 94
in respect of the indebtedness under the Loan Agreement and all receipts of the
Trustee credited under the provisions of the Indenture against said amounts
payable. No Owner of any Bond issued under the Act has the right to compel any
exercise of the taxing power of the Issuer to pay the Bonds, or the interest or
premium if any, thereon. The Bonds shall not constitute an indebtedness or a
general obligation of the Issuer or a loan of credit thereof within the meaning
of any constitutional or statutory provision, nor shall any of the Bonds
constitute or give rise to a pecuniary liability of the Issuer or a charge
against its general credit or taxing powers.
Any term used herein as a defined term but not defined herein shall be
defined as in the Indenture.
In the manner hereinafter provided and subject to the provisions of the
Indenture, the term of the Bonds will be divided into consecutive Rate Periods
during each of which the Bonds shall bear interest at the lesser of (a) Maximum
Interest Rate (as defined in the Indenture) or (b) either the PARS Rate (the
"PARS Rate Period"), the Daily Interest Rate (the "Daily Interest Rate Period"),
the Weekly Interest Rate (the "Weekly Interest Rate Period"), the Term Interest
Rate (the "Term Interest Rate Period") or the Flexible Interest Rate (the
"Flexible Interest Rate Period"). Rate Periods for this Bond shall be determined
in accordance with the Indenture.
This Bond shall bear interest from the Interest Payment Date next
preceding the date of registration and authentication hereof unless it is
registered and authenticated after a Record Date and on or prior to the related
Interest Payment Date, in which event this Bond shall bear interest from such
Interest Payment Date, or unless this Bond is registered and authenticated
before the Record Date for the first Interest Payment Date, in which event this
Bond shall bear interest from the Issue Date; provided, however, that if, as
shown by the records of the Paying Agent, interest on the Bonds shall be in
default, Bonds issued in exchange for Bonds surrendered for transfer or exchange
shall bear interest from the last date to which interest has been paid in full
or duly provided for on the Bonds, or, if no interest has been paid or duly
provided for on the Bonds, from the Issue Date. Interest shall be computed, (a)
in the case of a PARS Rate Period, on the basis of a 360-day year for the actual
number of days elapsed except that interest during a six-month Auction Period
shall be calculated on the basis of a 360-day year composed of twelve 30-day
months, (b) in the case of a Term Interest Rate Period, on the basis of a
360-day year consisting of twelve 30-day months, and (c) in the case of any
other Rate Period, on the basis of a 365 or 366 day year, as appropriate, for
the actual number of days elapsed. The term "Interest Payment Date" means (i)
with respect to any PARS Rate Period, the Business Day immediately following the
Initial Period and (y) when used with respect to any Auction Period other than a
daily Auction Period, the Business Day immediately following such Auction Period
and (z) when used with respect to a daily Auction Period, the first Business Day
of the month immediately succeeding such Auction Period, (ii) with respect to
any Daily or Weekly Interest Rate Period, the first Business Day of each
calendar month, (iii) with respect to any Term Interest Rate Period, the first
day of the sixth month following the commencement of the Term Interest Rate
Period and the first day of each sixth month thereafter, and the day following
the last day of a Term Interest Rate Period, (iv) with respect to any Flexible
Segment, the Business Day next succeeding the last day thereof, and (v) with
respect to any Rate Period, the day next succeeding the last day thereof. The
term "Business Day" means any day except a Saturday, Sunday or other day (a) on
which commercial banks located in the cities in which the Principal Office of
the Trustee, the Principal
A-4
<PAGE> 95
Office of the Company, the Principal Office of the Remarketing Agent or the
Principal Office of the Paying Agent are located are required or authorized by
law to remain closed or are closed, or (b) on which The New York Stock Exchange
is closed.
The Bonds shall be deliverable in the form of registered Bonds without
coupons in the following denominations: (i) $25,000 or any integral multiple of
$25,000 when the Bonds bear interest at a PARS Rate; (ii) $100,000 or any
integral multiple of $100,000 when the Bonds bear interest at a Daily or Weekly
Interest Rate; (iii) $100,000 or any integral multiple of $5,000 in excess of
$100,000 when the Bonds bear interest at a Flexible Interest Rate; and (iv)
$5,000 or integral multiples of $5,000 when the Bonds bear interest at a Term
Interest Rate (such denominations being referred to herein as ("Authorized
Denominations").
As provided in the Loan Agreement, the Company may, at its option, provide
for a Change of Credit Facility (as defined in the Indenture), which includes
the delivery or termination (or a combination thereof) of one or more letters of
credit, bond insurance policies, standby bond purchase agreements, lines of
credit, first mortgage bonds or other security instruments or liquidity devices.
During each PARS Rate Period, the Bonds shall bear interest, determined in
accordance with the provisions of the Indenture, by the Auction Agent for each
Auction Period.
During each Daily Interest Rate Period, the Bonds shall bear interest at a
Daily Interest Rate, determined in accordance with the provisions of the
Indenture by the Remarketing Agent on each Business Day for such Business Day.
If the Remarketing Agent shall not have determined a Daily Interest Rate for any
day by 10:00 a.m., New York, New York time, the Daily Interest Rate for such day
shall be the same as the Daily Interest Rate for the immediately preceding day.
During each Weekly Interest Rate Period, the Bonds shall bear interest at
a Weekly Rate, determined in accordance with the provisions of the Indenture by
the Remarketing Agent no later than the first day of such Weekly Interest Rate
Period and thereafter no later than Tuesday of each week during such Weekly
Interest Rate Period, unless any such Tuesday shall not be a Business Day, in
which event the Weekly Interest Rate shall be determined by the Remarketing
Agent no later than the Business Day next preceding such Tuesday.
During each Term Interest Rate Period, the Bonds shall bear interest at
the Term Interest Rate, determined in accordance with the provisions of the
Indenture by the Remarketing Agent on a Business Day selected by the Remarketing
Agent but no more than 60 days prior to and not later than the effective date of
such Term Interest Rate Period.
During each Flexible Interest Rate Period, each Bond shall bear interest
during each Flexible Segment for such Bond at the Flexible Interest Rate for
such Bond as described in the Indenture. Each Flexible Segment and Flexible
Interest Rate shall be determined in accordance with the provisions of the
Indenture by the Remarketing Agent. Each Flexible Segment shall be a period of
not less than one nor more than 270 days.
A-5
<PAGE> 96
At the times and subject to the conditions set forth in the Indenture, the
Company may elect that the Bonds shall bear interest at an interest rate, and
for a period, different from those then applicable. The Trustee shall give
notice of any such adjustment to the owners of the Bonds not less than 15 days
prior to the effective date of such adjustment.
During any Daily Interest Rate Period, any Bond or portion thereof in an
Authorized Denomination shall be purchased at the option of the Owner thereof on
any Business Day at a purchase price equal to 100% of the principal amount
thereof plus accrued interest, if any, from the Interest Payment Date next
preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the principal amount thereof) upon (a) delivery to the Trustee
at the Delivery Office of the Trustee, by not later than 11:00 a.m., New York,
New York time, on such Business Day, of an irrevocable written notice or
irrevocable notice by telephone, which states the principal amount and the
certificate number (if the Bonds are not then held in book entry form) of such
Bond and the date on which the same shall be purchased, and (b) except when a
book-entry system is in effect for the Bonds, delivery of such Bond to the
Trustee at the Delivery Office of the Trustee, accompanied by an instrument of
transfer thereof, in a form satisfactory to the Trustee, executed in blank by
the owner thereof with the signature of such owner guaranteed by a member or
participant in a "signature guarantee program" as provided in the form of
assignment attached to such Bond, at or prior to 1:00 p.m., New York, New York
time, on the date specified in such notice.
During any Weekly Interest Rate Period, any Bond or portion thereof in an
Authorized Denomination shall be purchased at the option of the Owner thereof on
any Business Day at a purchase price equal to 100% of the principal amount
thereof plus accrued interest, if any, from the Interest Payment Date next
preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the principal amount thereof), upon (a) delivery to the
Trustee at the Delivery Office of the Trustee of an irrevocable written notice
or an irrevocable notice by telephone (promptly confined by telecopy or other
writing), by 5:00 p.m., New York, New York time, on any Business Day, which
states the principal amount of such Bond and the certificate number (if the
Bonds are not held in book-entry form) and the date on which the same shall be
purchased, which date shall not be prior to the seventh day next succeeding the
date of the delivery of such notice to the Trustee, and (b) except when a
book-entry system is in effect for the Bonds, delivery of such Bond to the
Trustee at the Delivery Office of the Trustee, accompanied by an instrument of
transfer thereof, in a form satisfactory to the Trustee, executed in blank by
the Owner thereof with the signature of such Owner guaranteed by a member or
participant in a "signature guarantee program" as provided in the form of
assignment attached to such Bond, at or prior to 1:00 p.m., New York, New York
time, on the date specified in such notice.
Any bond or portion thereof in an Authorized Denomination shall be
purchased at the option of the Owner thereof on the first day of any Term
Interest Rate Period which is preceded by a Term Interest Rate Period of equal
duration at a purchase price equal to 100% of the principal amount thereof, upon
(i) delivery to the Trustee at the Delivery Office of the Trustee accompanied by
an instrument of transfer thereof in a form satisfactory to the Trustee of an
irrevocable notice in writing by 5:00 p.m., New York, New York time, on any
Business Day not
A-6
<PAGE> 97
less than fifteen days before the purchase date, which states the principal
amount and certificate number (if the Bonds are not then held in book-entry
form) of such Bond to be purchased and (ii) except when a book-entry system is
in effect for the Bonds, delivery of such Bond to the Trustee at the Delivery
Office of the Trustee, accompanied by an instrument of transfer thereof, in a
form satisfactory to the Trustee, executed in blank by the Owner thereof with
the signature of such Owner guaranteed by a member or participant in a
"signature guarantee program" as provided in the form of assignment attached to
such Bond, at or prior to 1:00 p.m., New York, New York time, on the purchase
date.
"Record Date" means (a) with respect to a PARS Rate Period other than a
daily Auction Period, the second Business Day preceding an Interest Payment Date
therefor and during a daily Auction Period, the last Business Day of the month
preceding an Interest Payment Date therefor, (b) with respect to any Interest
Payment Date in respect of any Daily Interest Rate Period, Weekly Interest Rate
Period or Flexible Segment, the Business Day next preceding such Interest
Payment Date, (c) with respect to any Interest Payment Date in respect of any
Term Interest Rate Period, the fifteenth day of the month preceding such
Interest Payment Date (except as provided in the following clause (d); and (d)
for any Interest Payment Date established pursuant to clause (e) of the
definition of "Interest Payment Date" in Section 1.01 of the Indenture in
respect of a Term Interest Rate Period, the Business Day next preceding such
Interest Payment Date.
In each case in which a portion of a Bond is purchased, both the portion
so purchased and the portion of such Bond not so purchased shall be in
Authorized Denominations.
This Bond shall be subject to mandatory purchase at a purchase price equal
to 100% of the principal amount thereof to the purchase date plus accrued
interest, if any, to the purchase date: (a) on the effective date of any change
in a Rate Period with respect to this Bond other than the effective date of a
Term Interest Rate Period which was preceded by a Term Interest Rate Period of
the same duration; (b) during any Flexible Interest Rate Period, on the day next
succeeding the last day of any Flexible Segment thereof; and (c) in connection
with a Change of Credit Facility, as provided in Section 3.02(a)(iii) of the
Indenture.
The Bonds are also subject to mandatory purchase during any Term Interest
Rate Period on a day that the Bonds would be subject to optional redemption
pursuant to Section 4.02(b)(iv) of the Indenture, at a purchase price equal to
100% the principal amount thereof plus an amount equal to any premium which
would have been payable on such redemption date had the Bonds been redeemed if
the Company gives notice to the Trustee on or before the Business Day prior to
the redemption date that it elects to have the Bonds purchased in lieu of
redemption. If the Bonds are purchased on or prior to the Record Date, the
purchase price shall include accrued interest from the Interest Payment Date
next preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the amount specified in the preceding sentence). If the Bonds
are purchased after the Record Date, the purchase price shall not include
accrued interest.
BY ACCEPTANCE OF THIS BOND, THE REGISTERED OWNER HEREBY AGREES THAT, IF
THIS BOND IS TO BE PURCHASED AND IF MONEYS SUFFICIENT TO PAY THE PURCHASE PRICE
SHALL BE HELD BY THE TRUSTEE ON THE DATE THIS BOND IS TO BE PURCHASED, THIS BOND
A-7
<PAGE> 98
SHALL BE DEEMED TO HAVE BEEN PURCHASED AND SHALL BE PURCHASED ACCORDING OF THE
INDENTURE, WHETHER OR NOT THIS BOND SHALL HAVE BEEN DELIVERED TO THE TRUSTEE,
AND THE OWNER OF THIS BOND SHALL HAVE NO CLAIM HEREON, UNDER THE INDENTURE OR
OTHERWISE, FOR ANY AMOUNT OTHER THAN THE PURCHASE PRICE HEREOF.
The Bonds shall be redeemed in whole or in part, and if in part by lot, at
any time at a redemption price equal to the principal amount thereof plus
accrued interest to the redemption date upon receipt by the Trustee of a written
notice from the Company stating that any of the following events has occurred
and that the Company therefore intends to exercise its option to prepay the
payments due under the Loan Agreement in whole or in part and thereby effect the
redemption of Bonds in whole or in part to the extent of such prepayments: (a)
the Company shall have determined or concurred in a determination that the
continued operation of the Plant is impracticable, uneconomical or undesirable
for any reason; (b) all or substantially all of the Plant shall have been
condemned or taken by eminent domain; (c) the operation of the Plant shall have
been enjoined or shall have otherwise been prohibited by, or shall conflict
with, any order, decree, rule or regulation of any court or of any federal,
state or local regulatory body, administrative agency or other governmental
body; (d) unreasonable burdens or excessive liabilities shall have been imposed
upon the Company in respect of all or a part of the Pollution Control Facilities
or the Plant including, without limitation, federal, state or other ad valorem,
property, income or other taxes not being imposed on the date of the Loan
Agreement, as well as any statute or regulation enacted or promulgated after the
date of the Loan Agreement that prevents the Company from deducting interest in
respect of the Agreement for federal income tax purposes; or (e) all or
substantially all of the Project shall be transferred or sold to any entity
other than an affiliate of the Company; provided, however, that in the case of a
redemption under this paragraph, the redemption price of the Bonds shall be
equal to 101% of the principal amount thereof, plus accrued interest to the date
of redemption, unless a smaller or no premium would be due upon optional
redemption of the Bonds as described in the following paragraph.
The Bonds shall be subject to redemption upon prepayment of the Loan
Payments at the option of the Company, in whole, or in part by lot, prior to
their maturity, as follows:
(a) While the Bonds bear interest at a PARS Rate, the Bonds shall be
subject to such redemption on the date next succeeding the last day of any
PARS Rate Period at a redemption price equal to 100% of the principal
amount thereof plus accrued interest, if any, to the redemption date.
(b) While the Bonds bear interest at a Flexible Interest Rate or
Rates, each Bond shall be subject to such redemption on the day next
succeeding the last day of each Flexible Segment for such Bond at a
redemption price equal to 100% of the principal amount thereof.
(c) While the Bonds bear interest at a Daily Interest Rate or a
Weekly Interest Rate, the Bonds shall be subject to such redemption on any
Business Day at a redemption price equal to 100% of the principal amount
thereof, plus accrued interest, if any, to the redemption date.
A-8
<PAGE> 99
(d) While the Bonds bear interest at a Term Interest Rate, the Bonds
shall be subject to such redemption (1) on the day next succeeding the
last day of each Term Interest Rate Period at a redemption price equal to
the principal amount of the Bonds being redeemed plus accrued interest, if
any, to the redemption date and (2) either (i) on the redemption dates and
at the redemption prices specified by the Company pursuant to the next
succeeding paragraph or (ii) during the redemption periods specified
below, in each case in whole or in part, at the redemption prices
(expressed as percentages of principal amount) hereinafter indicated plus
accrued interest, if any, to the redemption date:
<TABLE>
<CAPTION>
LENGTH OF TERM
INTEREST RATE PERIOD REDEMPTION DATES AND PRICES
-------------------- ---------------------------
<S> <C>
Greater than or equal to 11 At any time on or after the first day of
years the calendar month following the tenth
anniversary of the effective date at
102% declining 1% annually to 100%
Less than 11 years Not redeemable
</TABLE>
With respect to any Term Interest Rate Period, the Company may specify in
a notice given to the Trustee redemption provisions, prices and periods other
than those set forth above; provided, however, that such notice shall be
accompanied by a Favorable Opinion of Bond Counsel to the effect that the
proposed action is not prohibited by the laws of the State and the Indenture and
will not adversely affect the Tax-Exempt status of the Bonds.
The Bonds shall be redeemed in whole on any date from amounts which are to
be prepaid by the Company under the Loan Agreement, at a redemption price equal
to 100% of the principal amount thereof plus interest accrued, if any, to the
redemption date within 180 days after the occurrence of a Determination of
Taxability; provided that if, in the Favorable Opinion of Bond Counsel delivered
to the Trustee, the redemption of a specified portion of the Bonds outstanding
would have the result that interest payable on the Bonds remaining outstanding
after such redemption would remain Tax-Exempt, then the Bonds shall be redeemed
in part by lot (in Authorized Denominations), in such amount as Bond Counsel in
such opinion shall have determined is necessary to accomplish that result.
A "Determination of Taxability" shall be deemed to have occurred if as a
result of the Company's failure to observe any covenant, agreement or
representation in the Loan Agreement, a final decree or judgment of any federal
court or a final action of the Internal Revenue Service determines that interest
paid or payable on any Bond is or was includible in the gross income of an Owner
of the Bonds for federal income tax purposes under the Code (other than an Owner
who is a "substantial user" or "related person" within the meaning of Section
103(b)(13) of the 1954 Code. However, no such decree or action will be
considered final for this purpose unless the Company has been given written
notice and, if it is so desired and is legally allowed, has been afforded the
opportunity to contest the same, either directly or in the name of any Owner of
a Bond, and until conclusion of any appellate review, if sought.
A-9
<PAGE> 100
Notice of any optional or mandatory redemption shall be given by
first-class mail not less than 15 days nor more than 60 days prior to the date
fixed for redemption to the Owners of Bonds at the address shown on the
registration books of the Registrar on the date such notice is mailed. If less
than all of the Bonds are called for redemption, the Trustee shall select the
Bonds or any given portion thereof from the outstanding Bonds or such given
portion thereof not previously called for redemption, by lot. For the purpose of
any such selection the Trustee shall assign a separate number for each minimum
Authorized Denomination of each Bond of a denomination of more than such
minimum; provided that, following any such selection, both the portion of such
Bond to be redeemed and the portion remaining shall be in Authorized
Denominations.
Subject to the limitations and upon payment of the charges, if any,
provided in the Indenture, Bonds may be exchanged at the Principal Office of the
Registrar for a like aggregate principal amount of Bonds of the same tenor and
of Authorized Denominations.
This Bond is transferable by the person in whose name it is registered, in
person, or by its attorney duly authorized in writing, at the Principal Office
of the Registrar, but only in the manner, subject to the limitations and upon
payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond accompanied by a written instrument of transfer in a
form approved by the Registrar, duly executed. Upon such transfer a new fully
registered Bond or Bonds in Authorized Denominations, for the same aggregate
principal amount, will be issued to the transferee in exchange therefor.
The Issuer, the Registrar, the Trustee and any agent of the Issuer, the
Registrar or the Trustee may treat the person in whose name this Bond is
registered as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Bond be overdue, and
neither the Issuer, the Registrar, the Trustee, any paying agent nor any such
agent shall be affected by notice to the contrary.
The Bonds are equally and ratably secured, to the extent provided in the
Indenture, by the pledge thereunder of the "Revenues," which term is used herein
as defined in the Indenture and which as therein defined means all moneys paid
or payable to the Trustee for the account of the Issuer in accordance with the
Loan Agreement and all receipts credited under the provisions of the Indenture
against such payments; provided, however, that "Revenues" shall not include
moneys held by the Trustee to pay the purchase price of Bonds subject to
purchase pursuant to the Indenture. The Issuer has also pledged and assigned to
the Trustee as security for the Bonds all other rights and interests of the
Issuer under the Loan Agreement (other than its rights to indemnification and
certain administrative expenses and certain other rights).
The Owner of this Bond shall have no right to enforce the provisions of
the Indenture, or to institute action to enforce the covenants therein, or to
take any action with respect to any Event of Default under the Indenture, or to
institute, appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture.
With certain exceptions as provided therein, the Indenture and the Loan
Agreement may be modified or amended only with the consent of the Provider
(unless a Provider Default as
A-10
<PAGE> 101
specified in the Indenture shall have occurred and be continuing) and the Owners
of not less than 60% in aggregate principal amount of all Bonds then Outstanding
under the Indenture.
Reference is hereby made to the Indenture, the Loan Agreement, the Credit
Facility and the Tax Certificate, copies of which are on file with the Trustee,
for the provisions, among others, with respect to the nature and extent of the
rights, duties and obligations of the Issuer, the Company, the Trustee, the
Registrar, the Remarketing Agent and the Owners of the Bonds. The Owner of this
Bond, by the acceptance hereof, is deemed to have agreed and consented to and to
be bound by the terms and provisions of the indenture, the Loan Agreement and
the Tax Certificate.
The Indenture prescribes the manner in which it may be discharged,
including (a) a provision that the Bonds shall be deemed to be paid if moneys
sufficient to pay the principal of, premium, if any, and interest on the Bonds
and all necessary and proper fees, compensation and expenses of the Trustee, the
Registrar, the Provider and the Remarketing Agent, shall have been deposited
with the Trustee, after which the Bonds shall no longer be secured by or
entitled to the benefits of the Indenture, except for the purposes of
registration and exchange of Bonds and of delivery of the Bonds to the Trustee
for purchase, and (b) a provision that, if the Bonds mature or are called for
redemption prior to the next date upon which the Bonds are subject to purchase
pursuant to the Indenture, and if the Company waives its right to convert the
interest rate borne by the Bonds, the Bonds shall be deemed to be paid if
Government Obligations, as defined therein, maturing as to principal and
interest in such amounts and at such times as to insure the availability of
sufficient moneys to pay the principal of, premium, if any, and interest on the
Bonds and all necessary and proper fees, compensation and expenses of the
Trustee and the Registrar, shall have been deposited with the Trustee, after
which the Bonds shall no longer be secured by or entitled to the benefits of the
Indenture, except for the purposes of registration and exchange of Bonds and of
such payment.
No recourse shall be had for the payment of the principal of, premium, if
any, or interest on any of the Bonds or for any claim based thereon or upon any
obligation, covenant or agreement in the Indenture contained, against any past,
present or future officer, elected official agent or employee of the Issuer, or
any incorporator, officer, director or member of any successor corporation, as
such, either directly or through the Issuer or any successor corporation, under
any rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such
incorporator, officer, director or member is hereby expressly waived and
released as a condition of and in consideration for the execution of the
Indenture and the issuance of any of the Bonds.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required to exist, happen and be performed precedent to and in the
execution and delivery of the Indenture and the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required
by law, and that the issuance of this Bond and the issue of which it forms a
part, together with all other obligations of the Issuer, does not exceed or
violate any constitutional or statutory limitation of indebtedness.
A-11
<PAGE> 102
This Bond shall not be entitled to any security or benefit under the
Indenture, or be valid or become obligatory for any purpose, until this Bond
shall have been authenticated by the execution by the Registrar of the
certificate of authentication inscribed hereon.
IN WITNESS WHEREOF, CITY OF FORSYTH, MONTANA, has caused this Bond to be
executed in its name with the signature of its Mayor and attested by the
signature of its City Clerk-Treasurer, all as of the Issue Date specified above.
CITY OF FORSYTH, MONTANA
By:
--------------------------------------
Mayor
[SEAL]
ATTEST:
- ----------------------------------
City Clerk-Treasurer
A-12
<PAGE> 103
[FORM OF TRUSTEE'S CERTIFICATE]
CERTIFICATE OF AUTHENTICATION
This is to certify that this Bond is one of the Bonds of the Series
described in the within-mentioned Indenture.
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION,
as Registrar
By:
--------------------------------------
Authorized Signatory
Date of registration and authentication: ___________________________
A-13
<PAGE> 104
[FORM OF ASSIGNMENT]
The following abbreviations, when used in the inscription on the face the
within Bond shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT--
TEN ENT -- as tenants by the entirety _______ Custodian _______
JT TEN -- as joint tenants with (Cust) (Minor)
right of survivorship and under Uniform Gifts to Minors Act
not as tenants in common of _______________________________
(State)
Additional abbreviations may also be used though not in the list above.
For value received _____________________________________________ hereby
sells, assigns and transfers unto
INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
________________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
the within Bond of the CITY OF FORSYTH, MONTANA, and hereby irrevocably
constitutes and appoints ____________________________________ attorney to
register the transfer of said Bond on the books kept for registration thereof
with full power of substitution in the premises.
Dated: _____________________________Signature: ______________________________
SIGNATURE GUARANTEED:
_____________________________________
NOTICE: Signature(s) must be guaranteed by an "eligible guarantor
institution" that is a member of or a participant in a "signature guarantee
program" (e.g., the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion
Signature Program).
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without alteration
or enlargement or any change whatever.
A-14
<PAGE> 105
EXHIBIT B
PARS AUCTION PROCEDURES
SECTION 1.01. AUCTION PROCEDURES. While the Bonds bear interest at the PARS
Rate, Auctions shall be conducted on each Auction Date (other than the Auction
Date immediately preceding (i) each Rate Period commencing after the ownership
of the Auction Rate Bonds is no longer maintained in the Book-Entry System; (ii)
each Rate Period commencing after the occurrence and during the continuance of a
Payment Default; or (iii) any Rate Period commencing less than two Business Days
after the cure of a Payment Default). If there is an Auction Agent on such
Auction Date, Auctions shall be conducted in the manner set forth in this
Exhibit B.
SECTION 1.02. ORDERS BY EXISTING OWNERS AND POTENTIAL OWNERS.
(a) Prior to the Submission Deadline on each Auction Date:
(i) each Existing Owner may submit to a Broker-Dealer, in writing or
by such other method as shall be reasonably acceptable to such
Broker-Dealer, information as to:
(A) the principal amount of the PARS Rate Bonds, if any, held
by such Existing Owner which such Existing Owner irrevocably commits
to continue to hold for the next succeeding Auction Period without
regard to the rate determined by the Auction Procedures for such
Auction Period,
(B) the principal amount of the PARS Rate Bonds, if any, held
by such Existing Owner which such Existing Owner irrevocably commits
to continue to hold for the next succeeding Auction Period if the
rate determined by the Auction Procedures for such Auction Period
shall not be less than the rate per annum then specified by such
Existing Owner (and which such Existing Owner irrevocably offers to
sell on the next succeeding Interest Payment Date (or the same day
in the case of a daily Auction Period) if the rate determined by the
Auction Procedures for the next succeeding Auction Period shall be
less than the rate per annum then specified by such Existing Owner),
and/or
(C) the principal amount of the PARS Rate Bonds, if any, held
by such Existing Owner which such Existing Owner irrevocably offers
to sell on the next succeeding Interest Payment Date (or on the same
day in the case of a daily Auction Period) without regard to the
rate determined by the Auction Procedures for the next succeeding
Auction Period; and
(ii) for the purpose of implementing the Auctions and thereby to
achieve the lowest possible interest rate on the PARS Rate Bonds, the
Broker-Dealers shall contact Potential Owners, including Persons that are
Existing Owners, to determine the principal amount of the PARS Rate Bonds,
if any, which each such Potential Owner irrevocably
B-1
<PAGE> 106
offers to purchase if the rate determined by the Auction Procedures for
the next succeeding Auction Period is not less than the rate per annum
then specified by such Potential Owner.
For the purposes hereof, an Order containing the information referred to
in clause (i)(A) of this subsection (a) is herein referred to as a "Hold Order",
an Order containing the information referred to in clause (i)(B) or (ii) of this
subsection (a) is herein referred to as a "Bid", and an Order containing the
information referred to in clause (i)(C) of this subsection (a) is herein
referred to as a "Sell Order."
(b) (i) A Bid by an Existing Owner shall constitute an irrevocable offer
to sell:
(A) the principal amount of the PARS Rate Bonds specified in
such Bid if the rate determined by the Auction Procedures on such
Auction Date shall be less than the rate specified therein; or
(B) such principal amount or a lesser principal amount of the
PARS Rate Bonds to be determined as set forth in subsection (a)(v)
of Section 1.05 hereof if the rate determined by the Auction
Procedures on such Auction Date shall be equal to such specified
rate; or
(C) a lesser principal amount of the PARS Rate Bonds to be
determined as set forth in subsection (b)(iv) of Section 1.05 hereof
if such specified rate shall be higher than the Maximum PARS Rate
and Sufficient Clearing Bids do not exist.
(ii) A Sell Order by an Existing Owner shall constitute an
irrevocable offer to sell:
(A) the principal amount of the PARS Rate Bonds specified in
such Sell Order; or
(B) such principal amount or a lesser principal amount of the
PARS Rate Bonds as set forth in subsection (b)(iv) of Section 1.05
hereof if Sufficient Clearing Bids do not exist.
(iii) A Bid by a Potential Owner shall constitute an irrevocable
offer to purchase:
(A) the principal amount of the PARS Rate Bonds specified in
such Bid if the rate determined by the Auction Procedures on such
Auction Date shall be higher than the rate specified therein; or
(B) such principal amount or a lesser principal amount of the
PARS Rate Bonds as set forth in subsection (a)(vi) of Section 1.05
hereof if the rate determined by the Auction Procedures on such
Auction Date shall be equal to such specified rate.
B-2
<PAGE> 107
(c) Anything herein to the contrary notwithstanding:
(i) for purposes of any Auction, any Order which specifies the PARS
Rate Bonds to be held, purchased or sold in a principal amount which is
not $25,000 or an integral multiple thereof shall be rounded down to the
nearest $25,000, and the Auction Agent shall conduct the Auction
Procedures as if such Order had been submitted in such lower amount;
(ii) for purposes of any Auction other than during a daily Auction
Period, any portion of an Order of an Existing Owner which relates to a
PARS Rate Bond which has been called for redemption on or prior to the
Interest Payment Date next succeeding such Auction shall be invalid with
respect to such portion and the Auction Agent shall conduct the Auction
Procedures as if such portion of such Order had not been submitted;
(iii) for purposes of any Auction other than during a daily Auction
Period, no portion of a PARS Rate Bond which has been called for
redemption on or prior to the Interest Payment Date next succeeding such
Auction shall be included in the calculation of Available Bonds for such
Auction;
(iv) the Auction Procedures shall be suspended during the period
commencing on the date of the Auction Agent's receipt of notice from the
Trustee or the Issuer of the occurrence of an Event of Default resulting
from a failure to pay principal, premium or interest on any PARS Rate Bond
when due (provided however that for purposes of this provision only
payment by the Provider of the Credit Facility shall be deemed to cure
such Event of Default and no such suspension of the Auction Procedures
shall occur) but shall resume two Business Days after the date on which
the Auction Agent receives notice from the Trustee that such Event of
Default has been waived or cured, with the next Auction to occur on the
next regularly scheduled Auction Date occurring thereafter; and
(v) while the PARS Rate Bonds are in a PARS daily Auction Period,
all PARS will be Tranche I PARS.
SECTION 1.03. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(a) Each Broker-Dealer shall submit to the Auction Agent in writing or by
such other method as shall be reasonably acceptable to the Auction Agent, prior
to the Submission Deadline on each Auction Date, all Orders obtained by such
Broker-Dealer and specifying with respect to each Order:
(i) the name of the Bidder placing such Order;
(ii) the aggregate principal amount of the PARS Rate Bonds that are
the subject of such Order;
(iii) to the extent that such Bidder is an Existing Owner:
B-3
<PAGE> 108
(A) the principal amount of the PARS Rate Bonds, if any,
subject to any Hold Order placed by such Existing Owner;
(B) the principal amount of the PARS Rate Bonds, if any,
subject to any Bid placed by such Existing Owner and the rate
specified in such Bid; and
(C) the principal amount of the PARS Rate Bonds, if any,
subject to any Sell Order placed by such Existing Owner; and
(iv) to the extent such Bidder is a Potential Owner, the rate
specified in such Bid.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth of one percent (0.001%).
(c) If an Order or Orders covering all of the PARS Rate Bonds held by an
Existing Owner is not submitted to the Auction Agent prior to the Submission
Deadline, the Auction Agent shall deem a Hold Order to have been submitted on
behalf of such Existing Owner covering the principal amount of the PARS Rate
Bonds held by such Existing Owner and not subject to Orders submitted to the
Auction Agent; provided, however, that if there is a conversion from one Auction
Period to another Auction Period and Orders have not been submitted to the
Auction Agent prior to the Submission Deadline covering the aggregate principal
amount of the PARS Rate Bonds held by such Existing Owner, the Auction Agent
shall deem a Sell Order to have been submitted on behalf of such Existing Owner
covering the principal amount of the PARS Rate Bonds held by such Existing Owner
not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders covering in the aggregate more than the principal
amount of the Outstanding PARS Rate Bonds held by any Existing Owner are
submitted to the Auction Agent, such Orders shall be considered valid as
follows:
(i) all Hold Orders shall be considered Hold Orders, but only up to
and including in the aggregate the principal amount of the PARS Rate Bonds
held by such Existing Owner;
(ii) (A) any Bid of an Existing Owner shall be considered valid as a
Bid of an Existing Owner up to and including the excess of the principal
amount of the PARS Rate Bonds held by such Existing Owner over the
principal amount of the PARS Rate Bonds subject to Hold Orders referred to
in paragraph (i) above;
(B) subject to clause (A), all Bids of an Existing Owner with
the same rate shall be aggregated and considered a single Bid of an
Existing Owner up to and including the excess of the principal
amount of the PARS Rate Bonds held by such Existing Owner over the
principal amount of the PARS Rate Bonds held by such Existing Owner
subject to Hold Orders referred to in paragraph (i) above,
B-4
<PAGE> 109
(C) subject to clause (A), if more than one Bid with different
rates is submitted on behalf of such Existing Owner, such Bids shall
be considered Bids of an Existing Owner in the ascending order of
their respective rates up to the amount of the excess of the
principal amount of the PARS Rate Bonds held by such Existing Owner
over the principal amount of the PARS Rate Bonds held by such
Existing Owner subject to Hold Orders referred to in paragraph (i)
above, and
(D) the principal amount, if any, of such PARS Rate Bonds
subject to Bids not considered to be Bids of an Existing Owner under
this paragraph (ii) shall be treated as the subject of a Bid by a
Potential Owner; and
(iii) all Sell Orders shall be considered Sell Orders, but only up to
and including a principal amount of the PARS Rate Bonds equal to the
excess of the principal amount of the PARS Rate Bonds held by such
Existing Owner over the sum of the principal amount of the PARS Rate Bonds
considered to be subject to Hold Orders pursuant to paragraph (i) above
and the principal amount of the PARS Rate Bonds considered to be subject
to Bids of such Existing Owner pursuant to paragraph (ii) above.
(e) If more than one Bid is submitted on behalf of any Potential Owner,
each Bid submitted with the same rate shall be aggregated and considered a
single Bid and each Bid submitted with a different rate shall be considered a
separate Bid with the rate and the principal amount of the PARS Rate Bonds
specified therein.
(f) Any Bid submitted by an Existing Owner or a Potential Owner specifying
a rate lower than the Minimum PARS Rate shall be treated as a Bid specifying the
Minimum PARS Rate.
(g) Neither the Company, the Issuer, the Trustee nor the Auction Agent
shall be responsible for the failure of any Broker-Dealer to submit an Order to
the Auction Agent on behalf of any Existing Owner or Potential Owner.
SECTION 1.04. DETERMINATION OF PARS RATE.
(a) Not later than 9:30 a.m., New York, New York time, on each Auction
Date, the Auction Agent shall advise the Broker-Dealers and the Trustee by
telephone of the Minimum PARS Rate, the Maximum PARS Rate and the PARS Index.
(b) Promptly after the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to as a "Submitted Hold Order," a
"Submitted Bid" or a "Submitted Sell Order," as the case may be, and
collectively as a "Submitted Order") and shall determine (i) the Available
Bonds, (ii) whether there are Sufficient Clearing Bids, and (iii) the Auction
Rates.
B-5
<PAGE> 110
(c) Promptly after the Auction Agent has made the determinations pursuant
to subsection (b) above, the Auction Agent shall advise the Trustee by telephone
(promptly confirmed in writing), telex or facsimile transmission of the Auction
Rates and the aggregate principal amount of each Tranche for the next succeeding
Auction Period.
(d) In the event the Auction Agent shall fail to calculate, or for any
reason fail to timely provide the Auction Rates for any Auction Period, the PARS
Rate for such Auction Period shall be the applicable No Auction Rate provided,
however, that if the Auction Procedures are suspended pursuant to Section
1.02(iv), the PARS Rates for the next succeeding Auction Period shall be the
Maximum PARS Rate.
(e) In the event of a failed conversion to a Daily Interest Rate Period, a
Weekly Interest Rate Period, a Flexible Interest Rate Period or a Term Interest
Rate Period or in the event of a failure to change the length of the current
Auction Period due to the lack of Sufficient Clearing Bids at the Auction on the
Auction Date for the first new Auction Period, the PARS Rate for the next
Auction Period shall be the Maximum PARS Rate and the Auction Period shall be a
seven-day Auction Period.
SECTION 1.05. ALLOCATION OF THE PARS RATE BONDS.
(a) In the event of Sufficient Clearing Bids, subject to the further
provisions of subsections (c) and (d) below, Submitted Orders shall be accepted
or rejected as follows in the following order of priority:
(i) the Submitted Hold Order of each Existing Owner shall be
accepted, thus requiring each such Existing Owner to continue to hold the
PARS Rate Bonds that are the subject of such Submitted Hold Order;
(ii) the Submitted Sell Order of each Existing Owner shall be
accepted and the Submitted Bid of each Existing Owner specifying any rate
that is higher than the Winning Bid Rate shall be rejected, thus requiring
each such Existing Owner to sell the PARS Rate Bonds that are the subject
of such Submitted Sell Order or Submitted Bid;
(iii) the Submitted Bid of each Existing Owner specifying any rate
that is lower than the Winning Bid Rate shall be accepted, thus requiring
each such Existing Owner to continue to hold the PARS Rate Bonds that are
the subject of such Submitted Bid;
(iv) the Submitted Bid of each Potential Owner specifying any rate
that is lower than the Winning Bid Rate shall be accepted, thus requiring
each such Potential Owner to purchase the PARS Rate Bonds that are the
subject of such Submitted Bid;
(v) the Submitted Bid of each Existing Owner specifying a rate that
is equal to the Winning Bid Rate shall be accepted, thus requiring each
such Existing Owner to continue to hold the PARS Rate Bonds that are the
subject of such Submitted Bid, but only up to and including the principal
amount of the PARS Rate Bonds obtained by multiplying (A) the aggregate
principal amount of the Outstanding PARS Rate Bonds
B-6
<PAGE> 111
which are not the subject of Submitted Hold Orders described in paragraph
(i) above or of Submitted Bids described in paragraphs (iii) or (iv) above
by (B) a fraction the numerator of which shall be the principal amount of
the Outstanding PARS Rate Bonds held by such Existing Owner subject to
such Submitted Bid and the denominator of which shall be the aggregate
principal amount of the Outstanding PARS Rate Bonds subject to such
Submitted Bids made by all such Existing Owners that specified a rate
equal to the Winning Bid Rate, and the remainder, if any, of such
Submitted Bid shall be rejected, thus requiring each such Existing Owner
to sell any excess amount of the PARS Rate Bonds;
(vi) the Submitted Bid of each Potential Owner specifying a rate
that is equal to the Winning Bid Rate shall be accepted, thus requiring
each such Potential Owner to purchase the PARS Rate Bonds that are the
subject of such Submitted Bid, but only in an amount equal to the
principal amount of the PARS Rate Bonds obtained by multiplying (A) the
aggregate principal amount of the Outstanding PARS Rate Bonds which are
not the subject of Submitted Hold Orders described in paragraph (i) above
or of Submitted Bids described in paragraphs (iii), (iv) or (v) above by
(B) a fraction the numerator of which shall be the principal amount of the
Outstanding PARS Rate Bonds subject to such Submitted Bid and the
denominator of which shall be the sum of the aggregate principal amount of
the Outstanding PARS Rate Bonds subject to such Submitted Bids made by all
such Potential Owners that specified a rate equal to the Winning Bid Rate,
and the remainder of such Submitted Bid shall be rejected; and
(vii) the Submitted Bid of each Potential Owner specifying any rate
that is higher than the Winning Bid Rate shall be rejected.
(b) In the event there are not Sufficient Clearing Bids, subject to the
further provisions of subsections (c) and (d) below, Submitted Orders shall be
accepted or rejected as follows in the following order of priority:
(i) the Submitted Hold Order of each Existing Owner shall be
accepted, thus requiring each such Existing Owner to continue to hold the
PARS Rate Bonds that are the subject of such Submitted Hold Order;
(ii) the Submitted Bid of each Existing Owner specifying any rate
that is not higher than the Maximum PARS Rate shall be accepted, thus
requiring each such Existing Owner to continue to hold the PARS Rate Bonds
that are the subject of such Submitted Bid;
(iii) the Submitted Bid of each Potential Owner specifying any rate
that is not higher than the Maximum PARS Rate shall be accepted, thus
requiring each such Potential Owner to purchase the PARS Rate Bonds that
are the subject of such Submitted Bid;
(iv) the Submitted Sell Orders of each Existing Owner shall be
accepted as Submitted Sell Orders and the Submitted Bids of each Existing
Owner specifying any rate that is higher than the Maximum PARS Rate shall
be deemed to be and shall be accepted as Submitted Sell Orders, in both
cases only up to and including the principal amount of
B-7
<PAGE> 112
the PARS Rate Bonds obtained by multiplying (A) the aggregate principal
amount of the PARS Rate Bonds subject to Submitted Bids described in
paragraph (iii) of this subsection (b) by (B) a fraction the numerator of
which shall be the principal amount of the Outstanding PARS Rate Bonds
held by such Existing Owner subject to such Submitted Sell Order or such
Submitted Bid deemed to be a Submitted Sell Order and the denominator of
which shall be the principal amount of the Outstanding PARS Rate Bonds
subject to all such Submitted Sell Orders and such Submitted Bids deemed
to be Submitted Sell Orders, and the remainder of each such Submitted Sell
Order or Submitted Bid shall be deemed to be and shall be accepted as a
Hold Order and each such Existing Owner shall be required to continue to
hold such excess amount of the PARS Rate Bonds; and
(v) the Submitted Bid of each Potential Owner specifying any rate
that is higher than the Maximum PARS Rate shall be rejected.
(c) If, as a result of the procedures described in subsection (a) or (b)
above, any Existing Owner or Potential Owner would be required to purchase or
sell an aggregate principal amount of the PARS Rate Bonds which is not an
integral multiple of $25,000 on any Auction Date, the Auction Agent shall by
lot, in such manner as it shall determine in its sole discretion, round up or
down the principal amount of the PARS Rate Bonds to be purchased or sold by any
Existing Owner or Potential Owner on such Auction Date so that the aggregate
principal amount of the PARS Rate Bonds purchased or sold by each Existing Owner
or Potential Owner on such Auction Date shall be an integral multiple of
$25,000, even if such allocation results in one or more of such Existing Owners
or Potential Owners not purchasing or selling any the PARS Rate Bonds on such
Auction Date.
(d) If, as a result of the procedures described in subsection (a) above,
any Potential Owner would be required to purchase less than $25,000 in principal
amount of the PARS Rate Bonds on any Auction Date, the Auction Agent shall by
lot, in such manner as it shall determine in its sole discretion, allocate the
PARS Rate Bonds for purchase among Potential Owners so that the principal amount
of PARS purchased on such Auction Date by any Potential Owner shall be an
integral multiple of $25,000, even if such allocation results in one or more of
such Potential Owners not purchasing the PARS Rate Bonds on such Auction Date.
SECTION 1.06. NOTICE OF PARS RATE.
(a) On each Auction Date, the Auction Agent shall notify by telephone each
Broker-Dealer that participated in the Auction held on such Auction Date and
submitted an Order on behalf of any Existing Owner or Potential Owner of:
(i) the PARS Rate fixed for the succeeding Auction Period or, in the
case of PARS Rate Bonds in a daily Auction Period, the PARS Rate on the
PARS Rate Bonds fixed for the current Auction Period;
(ii) whether Sufficient Clearing Bids existed for the determination
of the Winning Bid Rate;
B-8
<PAGE> 113
(iii) if such Broker-Dealer submitted a Bid or a Sell Order on behalf
of an Existing Owner, whether such Bid or Sell Order was accepted or
rejected, in whole or in part, and the principal amount of the PARS Rate
Bonds, if any, to be sold by such Existing Owner;
(iv) if such Broker-Dealer submitted a Bid on behalf of a Potential
Owner, whether such Bid was accepted or rejected, in whole or in part, and
the principal amount of the PARS Rate Bonds, if any, to be purchased by
such Potential Owner;
(v) if the aggregate principal amount of the PARS Rate Bonds to be
sold by all Existing Owners on whose behalf such Broker-Dealer submitted
Bids or Sell Orders is different from the aggregate principal amount of
the PARS Rate Bonds to be purchased by all Potential Owners on whose
behalf such Broker-Dealer submitted a Bid, the name or names of one or
more Broker-Dealers (and the Agent Member, if any, of each such other
Broker-Dealer) and the principal amount of the PARS Rate Bonds to be (A)
purchased from one or more Existing Owners on whose behalf such other
Broker-Dealers submitted Bids or Sell Orders or (B) sold to one or more
Potential Owners on whose behalf such Broker-Dealer submitted Bids; and
(vi) the immediately succeeding Auction Date.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Owner or Potential Owner shall:
(i) advise each Existing Owner and Potential Owner on whose behalf
such Broker-Dealer submitted a Bid or Sell Order whether such Bid or Sell
Order was accepted or rejected, in whole or in part;
(ii) instruct each Potential Owner on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part, to
instruct such Potential Owner's Agent Member to pay to such Broker-Dealer
(or its Agent Member) through the Securities Depository the amount
necessary to purchase the principal amount of the PARS Rate Bonds to be
purchased pursuant to such Bid (including, with respect to the PARS Rate
Bonds in a daily Auction Period, accrued interest if the purchase date is
not an Interest Payment Date for such PARS Rate Bond) against receipt of
such the PARS Rate Bonds;
(iii) instruct each Existing Owner on whose behalf such
Broker-Dealer submitted a Sell Order that was accepted or a Bid that was
rejected, in whole or in part, to instruct such Existing Owner's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through the
Securities Depository the principal amount of the PARS Rate Bonds to be
sold pursuant to such Bid or Sell Order against payment therefor;
(iv) advise each Existing Owner on whose behalf such Broker-Dealer
submitted an Order and each Potential Owner on whose behalf such
Broker-Dealer submitted a Bid of the PARS Rate for the next succeeding
Auction Period;
B-9
<PAGE> 114
(v) advise each Existing Owner on whose behalf such Broker-Dealer
submitted an Order of the Auction Date of the next succeeding Auction or,
in the case of PARS Rate Bonds in a daily Auction Period, the PARS Rate
for the current Auction Period; and
(vi) advise each Potential Owner on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction
Date of the next succeeding Auction.
(c) On the basis of the information provided to it pursuant to paragraph
(a) above, each Broker-Dealer that submitted a Bid or Sell Order shall allocate
any funds received by it pursuant to subparagraph (b)(ii) above, and any PARS
Rate Bonds received by it pursuant to (b)(iii) above, among the Potential
Owners, if any, on whose behalf such Broker-Dealer submitted Bids, the Existing
Owners, if any, on whose behalf such Broker-Dealer submitted Bids or Sell
Orders, and any Broker-Dealer identified to it by the Auction Agent pursuant to
subparagraph (a)(v) above.
(d) On the Business Day after the Auction Date or, in the case of PARS Rate
Bonds in a daily Auction Period, on such Auction Date, the Securities Depository
shall execute the transactions described above, debiting and crediting the
accounts of the respective Agent Members as necessary to effect the purchase and
sale of PARS Rate Bonds as determined in the Auction.
SECTION 1.07. PARS INDEX.
(a) the PARS Index on any Auction Date with respect to the PARS Rate Bonds
in any Auction Period other than a six-month Auction Period shall be the
Seven-Day "AA" Composite Commercial Paper Rate on such date. The PARS Index
respect to the PARS Rate Bonds in a six-month Auction Period shall be the
Six-Month Treasury Bill Rate, as last published in The Bond Buyer. If either
rate is unavailable, the PARS Index shall be a rate agreed to by all
Broker-Dealers and consented to by the Issuer.
"Seven-Day `AA' Composite Commercial Paper Rate" on any date of
determination, means the interest equivalent of the seven-day rate on commercial
paper placed on behalf of issuers whose corporate bonds are rated AA by S&P, or
the equivalent of such rating by S&P, as made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date of determination, or (B) if the Federal Reserve
Bank of New York does not make available any such rate, then the arithmetic
average of such rates, as quoted on a discount basis or otherwise, by Goldman,
Sachs & Co., Lehman Commercial Paper Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof, their respective affiliates or
successors which are commercial paper dealers (the "Commercial Paper Dealers"),
to the Auction Agent for the close of business on the Business Day immediately
preceding such date of determination.
For purposes of the definitions of Seven-Day "AA" Composite Commercial
Paper Rate, the "interest equivalent" means the equivalent yield on a 360-day
basis of a discount-basis security to an interest-bearing security. If any
Commercial Paper Dealer does not quote a commercial paper rate required to
determine the Seven-Day "AA" Composite Commercial Paper Rate, the
B-10
<PAGE> 115
Seven-Day "AA" Composite Commercial Paper Rate shall be determined on the basis
of the quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any substitute commercial paper dealer
not included within the definition of Commercial Paper Dealer above, which may
be CS First Boston Corporation or Morgan Stanley Dean Witter or their respective
affiliates or successors which are commercial paper dealers (a "Substitute
Commercial Paper Dealer") selected by the Trustee (who shall be under no
liability for such selection) to provide such commercial paper rate or rates not
being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as
the case may be, or if the Trustee does not select any such substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining
Commercial Paper Dealer or Commercial Paper Dealers.
(b) If for any reason on any Auction Date the PARS Index shall not be
determined as hereinabove provided in this Section, the PARS Index shall be the
PARS Index for the Auction Period ending on such Auction Date.
(c) The determination of the PARS Index as provided herein shall be
conclusive and binding upon the Issuer, the Company, the Trustee, the
Broker-Dealers, the Auction Agent and the Owners and Beneficial Owners of the
PARS Rate Bonds.
SECTION 1.08. MISCELLANEOUS PROVISIONS REGARDING AUCTIONS.
(a) In this Exhibit B, each reference to the purchase, sale or holding of
"PARS Rate Bonds" shall refer to beneficial interests in the PARS Rate Bonds,
unless the context clearly requires otherwise.
(b) During a PARS Rate Period, the provisions of Section 1.02 hereof and
this Exhibit B may be amended pursuant to Section 12.02 of the Indenture by
obtaining the consent of the Provider of the Credit Facility and the owners of
all Outstanding PARS Rate Bonds bearing interest at the PARS Rates as follows.
If on the first Auction Date occurring at least 20 days after the date on which
the Trustee mailed notice of such proposed amendment to the Owners of the
Outstanding PARS as required by Section 12.02, (i) Sufficient Clearing Bids have
been received or all of the PARS are subject to Submitted Hold Orders, and (ii)
there is delivered to the Issuer and the Trustee a Favorable Opinion of Bond
Counsel with respect to such amendment, the proposed amendment shall be deemed
to have been consented to by the owners of all Outstanding PARS. Notwithstanding
the foregoing, for so long as Goldman, Sachs & Co. is a Broker-Dealer, there may
not be a change in the definitions of Broker-Dealer Rate, Tranche I PARS or
Tranche II PARS without the consent of Goldman, Sachs & Co.
(c) During a PARS Rate Period, so long as the ownership of the PARS Rate
Bonds is maintained in book-entry form by the Securities Depository, an Existing
Owner or a beneficial owner may sell, transfer or otherwise dispose of a the
PARS Rate Bond only pursuant to a Bid or Sell Order in accordance with the
Auction Procedures or to or through a Broker-Dealer or to a Person that has
delivered a signed copy of a Master Purchaser's Letter to the Auction Agent,
provided that (i) in the case of all transfers other than pursuant to Auctions
such Existing Owner or its Broker-Dealer or its Agent Member advises the Auction
Agent of such transfer and (ii) a sale, transfer or other disposition of the
PARS Rate Bonds from a customer of a Broker-Dealer
B-11
<PAGE> 116
who is listed on the records of that Broker-Dealer as the Owner of such PARS
Rate Bonds to that Broker-Dealer or another customer of that Broker-Dealer shall
not be deemed to be a sale, transfer or other disposition for purposes of this
Section 1.08 if such Broker-Dealer remains the Existing Owner of the PARS Rate
Bonds so sold, transferred or disposed of immediately after such sale, transfer
or disposition.
SECTION 1.09. CHANGES IN AUCTION PERIOD OR AUCTION DATE.
(a) Changes in Auction Period.
(i) During any PARS Rate Period, the Company, may, from time to time
on any Interest Payment Date, change the length of the Auction Period with
respect to the PARS Rate Bonds between daily, seven days, 28 days, 35 days
and six months in order to accommodate economic and financial factors that
may affect or be relevant to the length of the Auction Period and the
interest rate borne by such PARS Rate Bonds. The Company shall initiate
the change in the length of the Auction Period by giving written notice to
the Issuer, the Trustee, the Auction Agent, the Broker-Dealers, the
Provider of the Credit Facility and the Securities Depository that the
Auction Period will change if the conditions described herein are
satisfied and the proposed effective date of the change, at least 10
Business Days prior to the Auction Date for such Auction Period.
(ii) Any such changed Auction Period shall be for a period of one
day, seven days, 28 days, 35 days or six months and shall be for all of
the PARS Rate Bonds in a PARS Rate Period.
(iii) The change in the length of the Auction Period shall not be
allowed unless Sufficient Clearing Bids existed at both the Auction before
the date on which the notice of the proposed change was given as provided
in this subsection (a) and the Auction immediately preceding the proposed
change.
(iv) The change in length of the Auction Period shall take effect
only if Sufficient Clearing Bids exist at the Auction on the Auction Date
for such first Auction Period. For purposes of the Auction for such first
Auction Period only, each Existing Owner shall be deemed to have submitted
Sell Orders with respect to all of its the PARS Rate Bonds except to the
extent such Existing Owner submits an Order with respect to such Bonds. If
the condition referred to in the first sentence of this paragraph (iv) is
not met, the Auction Rate for the next Auction Period shall be the Maximum
PARS Rate, and the Auction Period shall be a seven-day Auction Period.
(v) On the conversion date for the PARS Rate Bonds selected for
conversion from one Auction Period to another, any PARS Rate Bonds which
are not the subject of a specific Hold Order or Bid will be deemed to be
subject to a Sell Order.
(b) Changes in Auction Date. During any PARS Rate Period, the Auction
Agent, with the written consent of the Issuer, may specify an earlier Auction
Date (but in no event more than five Business Days earlier) than the Auction
Date that would otherwise be determined in
B-12
<PAGE> 117
accordance with the definition of "Auction Date" in order to conform with then
current market practice with respect to similar securities or to accommodate
economic and financial factors that may affect or be relevant to the day of the
week constituting an Auction Date and the interest rate borne on the PARS Rate
Bonds. The Issuer shall not consent to such change in the Auction Date unless it
shall have received from the Auction Agent not less than three days nor more
than 20 days prior to the effective date of such change a written request for
consent together with a certificate demonstrating the need for change in
reliance on such factors. The Auction Agent shall provide notice of its
determination to specify an earlier Auction Date for an Auction Period by means
of a written notice delivered at least 45 days prior to the proposed changed
Auction Date to the Trustee, the Company, the Issuer, the Broker-Dealers and the
Securities Depository.
(c) Changes Conditioned on Ratings. Notwithstanding anything herein to the
contrary, prior to any change in the duration of an Auction Period, the Trustee
shall receive written evidence from Moody's, if the Bonds are then rated by
Moody's, and from S&P, if the Bonds are then rated by S&P, in each case to the
effect that such rating agency has reviewed the proposed Change of Credit
Facility and that such Change of Credit Facility will not, by itself, result in
a reduction, suspension or withdrawal of its rating or ratings of the Bonds.
SECTION 1.10. AUCTION AGENT.
(a) The initial Auction Agent shall be IBJ Whitehall Bank & Trust Company,
New York, New York, or any successor appointed by the Trustee, at the written
direction of the Company, to perform the functions specified herein. The Auction
Agent shall designate its Principal Office and signify its acceptance of the
duties and obligations imposed upon it hereunder by a written instrument,
delivered to the Issuer, the Trustee, the Company and each Broker-Dealer which
will set forth such procedural and other matters relating to the implementation
of the Auction Procedures as shall be satisfactory to the Issuer and the
Trustee.
(b) Subject to any applicable governmental restrictions, the Auction Agent
may be or become the owner of or trade in the PARS Rate Bonds with the same
rights as if such entity were not the Auction Agent.
SECTION 1.11. QUALIFICATIONS OF AUCTION AGENT: RESIGNATION; REMOVAL. The
Auction Agent shall be (a) a bank or trust company organized under the laws of
the United States or any state or territory thereof having a combined capital
stock, surplus and undivided profits of at least $30,000,000, or (b) a member of
NASD having a capitalization of at least $30,000,000 and, in either case,
authorized by law to perform all of the duties imposed upon it by this Indenture
and a member of or a participant in, the Securities Depository. The Auction
Agent may at any time resign and be discharged of the duties and obligations
created by this Indenture by giving at least ninety (90) days notice to the
Issuer, the Company, the Trustee and the Provider. The Auction Agent may be
removed at any time by the Company by written notice, delivered to the Auction
Agent, the Company, the Trustee and the Provider. Upon any such resignation or
removal, the Trustee shall, at the direction of the Company, appoint a successor
Auction Agent meeting the requirements of this Section. In the event of the
resignation or removal of the Auction Agent, the Auction Agent shall pay over,
assign and deliver any moneys and the PARS Rate Bonds held by it in such
capacity to its successor. The Auction Agent shall continue to perform its
duties
B-13
<PAGE> 118
hereunder until its successor has been appointed by the Issuer. In the event
that the Auction Agent has not been compensated for its services, the Auction
Agent may resign by giving thirty (30) days notice to the Issuer, the Company,
the Trustee and the Provider even if a successor Auction Agent has not been
appointed.
B-14
<PAGE> 1
EXHIBIT 4(b)-3
================================================================================
LOAN AGREEMENT
BETWEEN
CITY OF FORSYTH, MONTANA
AND
AVISTA CORPORATION
$17,000,000
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999B
DATED AS OF SEPTEMBER 1, 1999
================================================================================
The amounts payable to the Issuer and certain other rights of the Issuer
under this Loan Agreement (except for amounts payable to, and certain rights of,
the Issuer under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06,
Section 5.07, Section 5.08 and Section 7.05 hereof and any rights of the Issuer
to receive notices, certificates, requests, requisitions, directions and other
communications hereunder) have been pledged and assigned to Chase Manhattan Bank
and Trust Company, National Association, as Trustee under the Trust Indenture,
dated as of September 1, 1999, from the Issuer. For the purpose of perfecting
the security interest of such Trustee in such amounts payable and such rights
assigned to such Trustee under the Montana Uniform Commercial Code --Secured
Transactions, the counterpart of this Loan Agreement actually delivered to the
Trustee shall be deemed the original thereof.
Forsyth Series 1999B Loan Agreement
<PAGE> 2
================================================================================
LOAN AGREEMENT
BETWEEN
CITY OF FORSYTH, MONTANA
AND
AVISTA CORPORATION
$17,000,000
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999B
DATED AS OF SEPTEMBER 1, 1999
================================================================================
The amounts payable to the Issuer and certain other rights of the Issuer
under this Loan Agreement (except for amounts payable to, and certain rights of,
the Issuer under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06,
Section 5.07, Section 5.08 and Section 7.05 hereof and any rights of the Issuer
to receive notices, certificates, requests, requisitions, directions and other
communications hereunder) have been pledged and assigned to Chase Manhattan Bank
and Trust Company, National Association, as Trustee under the Trust Indenture,
dated as of September 1, 1999, from the Issuer. For the purpose of perfecting
the security interest of such Trustee in such amounts payable and such rights
assigned to such Trustee under the Montana Uniform Commercial Code --Secured
Transactions, the counterpart of this Loan Agreement actually delivered to the
Trustee shall be deemed the original thereof.
This counterpart of the Loan Agreement has been actually delivered to
the Trustee and the Trustee acknowledges receipt thereof.
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION, as Trustee
By
Authorized Officer
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Recitals.....................................................................................................................1
ARTICLE I DEFINITIONS....................................................................................2
ARTICLE II REPRESENTATIONS, WARRANTIES AND AGREEMENTS.....................................................2
Section 2.01. Representations, Warranties and Agreements of Issuer...........................................2
Section 2.02. Representations, Warranties and Agreements of Company..........................................4
ARTICLE III ISSUANCE OF THE BONDS; THE LOAN; DISPOSITION OF PROCEEDS OF THE BONDS; THE PROJECT.............7
Section 3.01. Issuance of Bonds..............................................................................7
Section 3.02. Issuance of Other Obligations..................................................................7
Section 3.03. The Loan; Disposition of Bond Proceeds and Certain Other Moneys................................7
Section 3.04. Changes to Project.............................................................................7
ARTICLE IV LOAN PAYMENTS; PAYMENTS TO REMARKETING AGENT AND TRUSTEE; OTHER OBLIGATIONS....................8
Section 4.01. Loan Payments..................................................................................8
Section 4.02. Payments of Purchase Price.....................................................................8
Section 4.03. Payments Assigned; Obligation Absolute.........................................................8
Section 4.04. Payment of Expenses............................................................................9
Section 4.05. Indemnification................................................................................9
Section 4.06. Payment of Taxes and Charges in Lieu Thereof..................................................10
Section 4.07. Credit Facility...............................................................................10
Section 4.08. Compliance With Prior Agreement...............................................................11
ARTICLE V SPECIAL COVENANTS.............................................................................12
Section 5.01. Maintenance of Existence; Conditions Under Which Exceptions Permitted.........................12
Section 5.02. Permits or Licenses...........................................................................12
Section 5.03. Arbitrage Covenant............................................................................13
Section 5.04. Financing Statements..........................................................................13
Section 5.05. Covenants With Respect to Tax-Exempt Status of the Bonds......................................13
Section 5.06. Indemnification of Issuer.....................................................................13
Section 5.07. Records of Company; Maintenance and Operation of the Project..................................14
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Section 5.08. Right of Access to the Project................................................................14
Section 5.09. Remarketing Agent.............................................................................15
Section 5.10. Credit Ratings................................................................................15
Section 5.11. Purchases of PARS Rate Bonds..................................................................15
Section 5.12. Credit Facility...............................................................................15
ARTICLE VI ASSIGNMENT....................................................................................15
Section 6.01. Conditions....................................................................................15
Section 6.02. Documents Furnished to Trustee................................................................16
Section 6.03. Limitation....................................................................................16
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES................................................................16
Section 7.01. Events of Default.............................................................................16
Section 7.02. Force Majeure.................................................................................17
Section 7.03. Remedies......................................................................................18
Section 7.04. No Remedy Exclusive...........................................................................18
Section 7.05. Reimbursement of Attorneys'Fees...............................................................18
Section 7.06. Waiver of Breach..............................................................................18
ARTICLE VIII PURCHASE OR REDEMPTION OF BONDS...............................................................19
Section 8.01. Redemption of Bonds...........................................................................19
Section 8.02. Purchase of Bonds.............................................................................19
Section 8.03. Obligation to Prepay..........................................................................19
Section 8.04. Compliance With Indenture.....................................................................20
ARTICLE IX MISCELLANEOUS.................................................................................20
Section 9.01. Term of Agreement.............................................................................20
Section 9.02. Notices21
Section 9.03. Parties in Interest...........................................................................21
Section 9.04. Amendments....................................................................................21
Section 9.05. Counterparts..................................................................................21
Section 9.06. Severability..................................................................................21
Section 9.07. Governing Law.................................................................................21
Signatures..................................................................................................................22
EXHIBIT A -- Project Description
</TABLE>
-ii-
<PAGE> 5
LOAN AGREEMENT
This LOAN AGREEMENT, dated as of September 1, 1999, is between the CITY
OF FORSYTH, MONTANA, a political subdivision duly organized and existing under
the Constitution and laws of the State (the "Issuer"), and AVISTA CORPORATION, a
corporation duly organized under the laws of the State of Washington and duly
qualified to conduct business in the State (the "Company").
RECITALS:
A. The Issuer is authorized by the provisions of the Act to issue one or
more series of its revenue bonds to finance all or part of the cost of projects
consisting of exempt facilities (as such term is used in the Code) located
within the territorial limits of the Issuer.
B. The Act provides that payment of the principal of and interest on
revenue bonds issued thereunder shall be secured by a pledge of the revenues out
of which such revenue bonds shall be payable and may be secured by a pledge of
an agreement relating to a project.
C. The Issuer has previously issued the Prior Bonds on behalf of the
Company for the purpose of refinancing a portion of the costs of acquiring and
improving the Project.
D. The Issuer is authorized by the Act to issue its revenue refunding
bonds to refund the Prior Bonds.
E. By proper action of its governing body taken pursuant to and in
accordance with the provisions of the Act, the Issuer has authorized and
undertaken to issue its Pollution Control Revenue Refunding Bonds (Avista
Corporation Colstrip Project) Series 1999B and the issuance of the Bonds to
refund the Prior Bonds is authorized by the provisions of the Act.
F. The issuance of the Bonds to refund the Prior Bonds will provide
financing on more advantageous terms for the cost of the Project financed by the
Prior Bonds.
G. The Bonds shall be issued under and pursuant to the Trust Indenture,
dated as of September 1, 1999, between the Issuer and Chase Manhattan Bank and
Trust Company, National Association, as Trustee, pursuant to which the Issuer
shall pledge and assign to the Trustee certain rights of the Issuer hereunder.
H. Pursuant to this Agreement, the Issuer will loan the proceeds of the
Bonds to the Company to provide financing for the Project, and the Company
agrees to make, or cause to be made, payments sufficient to pay when due
(whether at stated maturity, by acceleration or otherwise) the principal of and
premium, if any, and interest on the Bonds.
I. The Company agrees under this Agreement to pay, or cause to be paid,
when due, the purchase price of Bonds purchased pursuant to the terms of the
Indenture.
<PAGE> 6
J. The issuance, sale and delivery of the Bonds and the execution and
delivery of this Agreement and the Indenture have been in all respects duly and
validly authorized in accordance with the Act and the Bond Resolution.
K. The Company and Ambac Assurance Corporation, a Wisconsin stock
insurance company, as Provider of the Credit Facility, have agreed to enter into
that certain Insurance Agreement, dated as of September 1, 1999, pursuant to
which the Provider is to issue its Municipal Bond Insurance Policy to guarantee
payment of the principal of the Bonds upon the stated maturity thereof, the
redemption price of the Bonds upon certain mandatory redemption and interest on
the Bonds as the same accrues and becomes due and payable.
In consideration of the respective representations and agreements
contained in this Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
All words and terms used but not otherwise defined in this Agreement,
shall for all purposes of this Agreement have the meanings specified in Article
I of the Indenture, unless the context clearly requires otherwise. In addition,
the following words and terms shall have the following meanings when used in
this Agreement:
"Affiliate" means any entity controlling, controlled by or under common
control with the Company.
"Indenture" means the Trust Indenture, dated as of September 1, 1999,
between the Issuer and the Trustee, relating to the issuance of the Bonds as
such Trust Indenture may be supplemented and amended from time to time as
therein permitted.
The words "hereto," "hereunder" and other words of similar import refer
to this Agreement as a whole.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
SECTION 2.01. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ISSUER. The
Issuer represents, warrants and agrees that:
(a) The Issuer is a political subdivision of the State, duly
organized and validly existing under the Constitution and laws of the
State.
(b) Under the Act, the Issuer has the power to enter into the
transactions contemplated by this Agreement and the Indenture and to
carry out its obligations
-2-
<PAGE> 7
hereunder and thereunder, including the issuance and sale of the Bonds.
By proper action of its governing body, the Issuer has been duly
authorized to execute, deliver and duly perform this Agreement and the
Indenture and to issue and sell the Bonds and has made all
determinations and findings as and where required by Section 90-5-106 of
the Act.
(c) The aggregate principal amount of the Bonds authorized to be
issued under the Indenture for the purpose of refunding the Prior Bonds
does not exceed the aggregate principal amount of the Prior Bonds now
outstanding.
(d) The Prior Agreement and the Prior Indenture are each in full
force and effect and have not been amended or supplemented.
(e) The proceeds of the sale of the Bonds (i) will be deposited
with the Prior Trustee for deposit into the Prior Bond Fund to provide a
portion of the moneys necessary for the Refunding and (ii) will be
applied by the Prior Trustee to redeem the Prior Bonds pursuant to the
Prior Indenture on the Redemption Date. The Prior Bonds are now
outstanding in the principal amount of $17,000,000. Prior to the
issuance and delivery of the Bonds, the Prior Trustee will be given
irrevocable instructions and will be directed to call all of the Prior
Bonds for redemption on the Redemption Date.
(f) The Bonds are to be issued under and secured by the
Indenture, pursuant to which certain of the Issuer's right, title and
interest in this Agreement and the revenues derived by the Issuer
pursuant to this Agreement will be pledged and assigned to the Trustee
as security for payment of the principal and purchase price of, premium,
if any, and interest on the Bonds.
(g) Neither the execution and delivery of this Agreement or the
Indenture, the issuance and sale of the Bonds, the consummation of the
transactions contemplated hereby and thereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, the Tax
Certificate, the Indenture or the Bonds conflicts with or results in a
breach of the terms, conditions or provisions of any restriction or any
agreement or instrument to which the Issuer is now a party or by which
it is bound, or constitutes a default under any of the foregoing.
(h) The Issuer has not assigned or pledged and will not assign
or pledge its interest in this Agreement other than to secure the Bonds.
(i) To the knowledge of the Issuer, after due inquiry, no
litigation is pending or threatened against the Issuer to restrain or
enjoin the issuance or sale of the Bonds or in any way affecting any
authority for or the validity of the Bonds, the Indenture, this
Agreement or the existence or powers of the Issuer or the right of the
Issuer under the Act to refinance a portion of the costs of the Project
through the issuance of the Bonds.
(j) To the knowledge of the Issuer, after due inquiry, no event
has occurred and no condition exists which, upon the issuance of the
Bonds, would constitute an event of default on the part of the Issuer
under the Prior Indenture.
-3-
<PAGE> 8
(k) The Issuer will not knowingly take or omit to take any
action reasonably within its control the taking or omission of which
would adversely affect the Tax-Exempt status of the Bonds. The Issuer
will file or cause to be filed with the United States Department of
Treasury the information required by Section 149(e) of the Code.
(l) A public hearing relating to the Refunding for the Project
was held on May 4, 1999, following public notice thereof, pursuant to
Section 147(f) of the Code, and the public hearing and approval
requirements of Section 147(f) of the Code have been satisfied.
(m) Within the meaning of Sections 2-2-121 and 2-2-125, Montana
Code Annotated, as amended, no "public officer," "public employee,"
"officer" or "employee" of the Issuer is engaged as counsel, consultant,
representative, or agents of the Company, or has a substantial financial
interest in the Company. None of the officers, deputies, or employees of
the Issuer or employees having terminated their employment with the
Issuer within the six months immediately preceding this Agreement are
"interested in" this Agreement, the Indenture, the Bonds or the
transactions contemplated thereby, within the meaning of Section
2-2-201, Montana Code Annotated, as amended.
Concurrently with the initial authentication and delivery of the Bonds
under the Indenture, the Issuer shall execute and deliver a certificate
reaffirming the foregoing representations, warranties and agreements as of the
date thereof.
SECTION 2.02. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF COMPANY. The
Company represents, warrants and agrees that:
(a) It is a corporation duly organized and validly existing
under the laws of the State of Washington and duly qualified as a
foreign corporation in good standing in the State, is not in violation
of any provision of its Articles of Incorporation or its Bylaws, in each
case as the same have been amended, has full corporate power to own its
properties and conduct its business, and has the corporate power to
enter into, and by proper corporate action has duly authorized the
execution and delivery of, this Agreement and the Tax Certificate.
(b) Neither the execution and delivery of this Agreement or the
Tax Certificate, the consummation of the transactions contemplated
hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement or the Tax Certificate conflicts with or
will result in a breach of any of the terms, conditions or provisions of
any law or judgment to which the Company or its property or assets are
subject or of any corporate restriction contained in its Articles of
Incorporation or its Bylaws, in each case as the same have been amended,
or any agreement or instrument to which the Company is now a party or by
which it is bound, or constitutes, with or without the giving of notice
or lapse of time or both, a default under any of the foregoing, or
results in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of the property or assets of the Company under the
terms of any instrument or agreement.
-4-
<PAGE> 9
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, usury or other similar laws affecting the
rights of creditors generally, equitable principles relating to the
availability of remedies and principles of public or governmental policy
limiting the enforceability of the indemnification and contribution
provisions.
(d) Other than the orders of the Washington Utilities and
Transportation Commission, the California Public Utilities Commission,
the Idaho Public Utilities Commission and the Oregon Public Utility
Commission and the approval by the Issuer, all of which orders and
approvals will have been received and be in effect prior to the initial
authentication and delivery of the Bonds, no consent, approval,
authorization or order of, or registration with, any court or
governmental or regulatory agency or body is required with respect to
the Company for the execution, delivery and performance by the Company
of this Agreement and the Tax Certificate.
(e) The Company has received an executed counterpart of the
Indenture and hereby consents to and approves of the provisions thereof.
(f) The information relating to the Project furnished by the
Company in writing to Chapman and Cutler, as Bond Counsel, in connection
with the issuance by the Issuer of the Bonds, is, to the best of the
Company's knowledge, true and correct.
(g) The Prior Agreement and the Prior Indenture are in full
force and effect and have not been amended or supplemented.
(h) To the best knowledge of the Company, no event has occurred
and is continuing under the provisions of the Prior Indenture that now
constitutes, or with the lapse of time or the giving of notice, or both,
would constitute, an event of default under the Prior Indenture.
(i) Upon the initial authentication and delivery of the Bonds,
the Company has given or will give timely notice as required by the
provisions of the Prior Agreement of the Company's intent to prepay the
amounts payable thereunder to provide for the redemption of the Prior
Bonds on the Redemption Date.
(j) The aggregate principal amount of Bonds authorized to be
issued under the Indenture does not exceed the aggregate principal
amount of the Prior Bonds now Outstanding.
(k) The Company does not, as of the date of issuance of the
Bonds, reasonably expect any use of moneys derived from the proceeds of
the Bonds or any investment or reinvestment thereof or from the sale of
the Project which would cause the Bonds to be classified as "arbitrage
bonds" within the meaning of Section 148 of the Code.
-5-
<PAGE> 10
(l) All of the proceeds of the Prior Bonds, including the
investment earnings thereon, have been disbursed in accordance with the
provisions of the Prior Indenture and the Prior Agreement and there are
no proceeds of the Prior Bonds, or investment earnings therefrom, or any
other moneys being held by the Prior Trustee under the Prior Indenture.
(m) The Pollution Control Facilities that comprise the Project
constitute Exempt Facilities and consist of those facilities described
in Exhibit A hereto (as such Exhibit A is from time to time amended or
supplemented in accordance with Section 3.04 hereof), and the Company
shall not consent to any changes in the Project which would adversely
affect the qualification of the Project as a "project" under the Act or
adversely affect the Tax-Exempt status of the Bonds.
(n) Substantially all of the proceeds of the Prior Bonds have
been expended for the purpose of acquiring, constructing and improving
the Project, which constitutes Exempt Facilities. None of the proceeds
of the Prior Bonds were used (i) to acquire land (or an interest
therein) or (ii) to acquire any property (or an interest therein) unless
the first use of such property was pursuant to such acquisition, all
within the meaning of Section 147 of the Code.
(o) The Montana Department of Health and Environmental Sciences
has certified that the pollution control facilities constituting part of
the Project, as designed, are in furtherance of the purpose of abating
or controlling atmospheric pollutants or contaminants, and water
pollution, as the case may be.
(p) No construction, reconstruction or acquisition (within the
meaning of the Code) of the Project was commenced prior to the taking of
official action by the Issuer with respect thereto and the Project has
been placed in service.
(q) The average maturity of the Bonds does not exceed 120% of
the average reasonably expected economic life of the Project.
(r) All of the Prior Bonds will be redeemed within 90 days of
the date of the initial authentication and delivery of the Bonds, and
all of the proceeds of the sale of the Bonds will be spent within 90
days of the initial authentication and delivery of the Bonds.
(s) The Project (i) was designed to meet applicable federal,
state and local requirements for the control of pollution or the
disposal of solid waste, (ii) was and is to be used solely for purposes
contemplated by the Act, and (iii) is located within the boundaries of
Rosebud County, Montana.
(t) The representations, warranties and covenants of the Company
set forth in the Project Certificate are incorporated herein by
reference and are hereby made a part of this Agreement as if set forth
herein.
-6-
<PAGE> 11
(u) The Company will cooperate with the Issuer in filing or
causing to be filed with the United States Department of Treasury the
information required by Section 149(e) of the Code.
(v) The Company will pay the principal of and premium, if any,
and interest to the Redemption Date on all Prior Bonds that are validly
presented to the Company for payment after the Prior Trustee has paid to
the Company, in accordance with Section 4.08 of the Prior Indenture, any
moneys held in trust for the payment of the principal of and premium, if
any, and interest on the Prior Bonds.
Concurrently with the initial authentication and delivery of the Bonds
under the Indenture, the Company shall execute and deliver a certificate
reaffirming the foregoing representations, warranties and agreements as of the
date thereof.
ARTICLE III
ISSUANCE OF THE BONDS; THE LOAN;
DISPOSITION OF PROCEEDS OF THE BONDS; THE PROJECT
SECTION 3.01. ISSUANCE OF BONDS. In order to refinance a portion of the
cost of the Project by effecting the Refunding, the Issuer shall issue the Bonds
under and in accordance with the Act and pursuant to the Indenture. The Company
hereby approves the issuance of the Bonds and all terms and conditions thereof.
SECTION 3.02. ISSUANCE OF OTHER OBLIGATIONS. The Issuer and the Company
expressly reserve the right to enter into, to the extent permitted by law, an
agreement or agreements other than this Agreement with respect to the issuance
by the Issuer, under an indenture or indentures other than the Indenture, of
obligations to provide additional funds to pay costs of facilities in addition
to the Project or to provide for the refunding of all or any principal amount of
the Bonds. Such obligations will not be entitled to the benefits of the
Indenture or the Credit Facility.
SECTION 3.03. THE LOAN; DISPOSITION OF BOND PROCEEDS AND CERTAIN OTHER
MONEYS. The Issuer shall lend to the Company the proceeds of the issuance and
sale of the Bonds for the purposes specified in Section 3.01 of this Agreement.
The Issuer and the Company shall, simultaneously with the delivery of the Bonds,
cause such proceeds, other than accrued interest, if any, to be transferred to
the Prior Trustee for deposit into the Prior Bond Fund to be used to pay the
principal amount of the Prior Bonds upon their redemption on the Redemption
Date.
SECTION 3.04. CHANGES TO PROJECT. The Company may at its own expense
cause the Project to be remodeled or cause such substitutions, modifications and
improvements to be made to the Project from time to time as the Company, in its
discretion, may deem to be desirable for its uses and purposes, which
remodeling, substitutions, modifications and improvements shall be included
under the terms of this Agreement as part of the Project; provided, however,
that no such remodeling, substitutions, modifications or improvements shall
change the description of the Project set forth in Exhibit A to this Agreement
or change the function of any principal
-7-
<PAGE> 12
component of the Project described in Exhibit A to this Agreement unless, in
either case, the Trustee and the Issuer first receive a Favorable Opinion of
Bond Counsel with respect to such change. If any such supplement or amendment
affects the description of the Project, the Company and the Issuer will amend
Exhibit A to this Agreement to reflect such supplement or amendment, which
supplement or amendment will not be considered as an amendment to this Agreement
requiring the consent of any Owner, the Trustee or the Provider for the purposes
of Article XII of the Indenture.
ARTICLE IV
LOAN PAYMENTS; PAYMENTS TO REMARKETING AGENT AND TRUSTEE;
OTHER OBLIGATIONS
SECTION 4.01. LOAN PAYMENTS. (a) As and for repayment of the loan made
to the Company by the Issuer pursuant to Section 3.03 hereof, the Company shall
pay to the Trustee, for the account of the Issuer, an amount equal to the
aggregate principal amount of and the premium, if any, on the Bonds from time to
time Outstanding and, as interest on its obligation to pay such amount, an
amount equal to interest on the Bonds, such amounts to be paid in installments
due on the dates, in the amounts and in the manner provided in the Indenture for
the payment of the principal of and premium, if any, and interest on the Bonds,
whether at maturity, upon redemption, acceleration or otherwise; provided,
however, that the obligation of the Company to make any such payment hereunder
shall be reduced by the amount of any moneys held by the Trustee under the
Indenture and available for such payment.
(b) In the event the Company shall fail to make any payment required by
Section 4.01(a) hereof with respect to the principal of and premium, if any, and
interest on any Bond, the payment so in default shall continue as an obligation
of the Company until the amount in default shall have been fully paid, and the
Company will pay interest on any overdue amount with respect to principal of
such Bond and, to the extent permitted by law, on any overdue amount with
respect to premium, if any, and interest on such Bond, at the interest rate then
borne by such Bond until paid.
SECTION 4.02. PAYMENTS OF PURCHASE PRICE. The Company shall pay or cause
to be paid for its account to the Trustee amounts equal to the amounts to be
paid by the Trustee as the purchase price for such Bonds pursuant to Section
3.01 and Section 3.02 of the Indenture in respect of Outstanding Bonds, such
amounts to be paid to the Trustee on the dates such payments are to be made
pursuant to Section 3.01 and Section 3.02 of the Indenture; provided, however,
that the obligation of the Company to make any such payment hereunder shall be
reduced by the amount of any moneys held by the Trustee under the Indenture and
available for such payment.
SECTION 4.03. PAYMENTS ASSIGNED; OBLIGATION ABSOLUTE. It is understood
and agreed that the Loan Payments are pledged and assigned by the Issuer to the
Trustee pursuant to the Indenture, and that all right, title and interest of the
Issuer hereunder (except for amounts payable to, and the rights of, the Issuer
under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06, Section 5.07,
Section 5.08 and Section 7.05 hereof and the Issuer's rights to receive notices,
-8-
<PAGE> 13
certificates, requests, requisitions, directions and other communications
hereunder) are pledged and assigned to the Trustee pursuant to the Indenture.
The Company assents to such pledge and assignment and agrees that the obligation
of the Company to make the Loan Payments and payments to the Trustee under
Section 4.02 hereof shall be absolute, irrevocable and unconditional and shall
not be subject to cancellation, termination or abatement, or to any defense
other than payment, or to any right of setoff, counterclaim or recoupment
arising out of any breach under this Agreement or the Indenture or otherwise by
the Company, the Trustee, the Remarketing Agent, the Provider, the Auction
Agent, the Broker-Dealer or any other party, and, further, that the Loan
Payments and the other payments due hereunder shall continue to be payable at
the times and in the amounts herein and therein specified whether or not the
Project, or any portion thereof, shall have been destroyed by fire or other
casualty, or title thereto, or the use thereof, shall have been taken by the
exercise of the power of eminent domain, and that there shall be no abatement of
or diminution in any such payments by reason thereof, whether or not the Project
shall be used or useful and whether or not any applicable laws, regulations or
standards shall prevent or prohibit the use of the Project or for any other
reason. The Project shall not constitute any part of the Trust Estate or any
part of the security for the Bonds.
SECTION 4.04. PAYMENT OF EXPENSES. The Company shall pay all of the
Administration Expenses of the Issuer, the Trustee, the Paying Agent, the
Registrar, the Auction Agent, the Broker Dealers, the Securities Depository,
Moody's and S&P under the Indenture and of any Remarketing Agent under a
Remarketing Agreement directly to each such entity. The Company shall also pay
all of the expenses of the Prior Trustee in connection with the Refunding and
all other reasonable fees and expenses incurred in connection with the issuance
of the Bonds, including, but not limited to, all costs associated with any
discontinuance of the book-entry system described in Section 2.16 of the
Indenture. The obligations of the Company under this Section 4.04 shall survive
the termination of this Agreement.
SECTION 4.05. INDEMNIFICATION. The Company releases the Trustee, the
Paying Agent and the Registrar and their respective officers, agents, servants
and employees from, agrees that the Trustee, the Paying Agent and the Registrar
and their respective officers, agents, servants and employees shall not be
liable for, and agrees to indemnify and hold free and harmless the Trustee, the
Paying Agent and the Registrar and their respective officers, agents, servants
and employees from and against, any liability for any loss or damage to property
or any injury to or death of any person that may be occasioned by any cause
whatsoever pertaining to the Project, except in any case as a result of the
negligence or willful misconduct of the Trustee, the Paying Agent and the
Registrar and their respective officers, agents, servants and employees.
The Company will indemnify and hold free and harmless the Trustee, the
Paying Agent and the Registrar and their respective officers, agents, servants
and employees from and against any loss, claim, damage, tax, penalty, liability,
disbursement, litigation or other expenses, attorneys' fees and expenses or
court costs arising out of, or in any way relating to, the execution or
performance of this Agreement, the Tax Certificate, the Auction Agreement, the
issuance or sale of the Bonds, the Refunding, the acceptance or administration
of the trust under the Indenture or any other cause whatsoever pertaining to
this Agreement, the Tax Certificate, the Indenture, the Auction Agreement or the
Credit Facility, except in any case as a result of the
-9-
<PAGE> 14
negligence or willful misconduct of the Trustee, the Paying Agent and the
Registrar or their respective officers, agents, servants and employees.
The obligations of the Company under this Section 4.05 shall survive the
termination of this Agreement.
SECTION 4.06. PAYMENT OF TAXES AND CHARGES IN LIEU THEREOF. (a) The
Company covenants and agrees that it will, from time to time for so long as the
Company has an ownership interest in the Project, promptly pay and discharge or
cause to be paid and discharged when due its share of all taxes, assessments,
levies, duties, imposts and governmental, utility and other charges lawfully
imposed upon the Project or any part thereof or upon income and profits thereof
or any payments hereunder. In the event that the Company sells or otherwise
transfers its interest in the Project while the Bonds are Outstanding, the
Company shall require the purchasers or transferor of the Company's interest in
the Project to assume the Company's obligations under this Section 4.06(a).
(b) The Company shall pay or cause to be satisfied and discharged or
make adequate provision to satisfy and discharge (including the provisions of
adequate bonding therefor) within 60 days after the same shall accrue, any lien
or charge upon the Loan Payments or payments under Section 4.02 hereof, and all
lawful claims or demands for labor, materials, supplies or other charges which,
if unpaid, might be or become a lien thereon.
(c) Notwithstanding subsections (a) and (b) of this Section, the Company
may, at its expense and in its own name and behalf or in the name and behalf of
the Issuer, in good faith contest any such liens, taxes, assessments and other
charges and, in the event of any such contest, may permit such liens, taxes,
assessments or other charges so contested to remain unpaid during the period of
such contest and any appeal therefrom; provided further that during such period
enforcement of such contested item is effectively stayed, unless by nonpayment
of any such items the lien of the Indenture as to the amounts payable hereunder
will be materially endangered, in which event the Company shall promptly pay and
cause to be satisfied and discharged all such unpaid items. The Issuer will
cooperate fully with the Company in any such contest. In the event that the
Company shall fail to pay any of the foregoing items required by this Section to
be paid by the Company, the Issuer may (but shall be under no obligation to) pay
the same, and any amounts so advanced therefor by the Issuer shall become an
additional obligation of the Company to the Issuer. The Company agrees to repay
the amounts so advanced, from the date thereof, together (to the extent
permitted by law) with interest thereon until paid at a rate per annum which is
one percentage point greater than the highest rate per annum then borne by any
of the Bonds.
SECTION 4.07. CREDIT FACILITY. (a) The Company may at any time provide
for a Change of Credit Facility, provided that the Company delivers to the
Trustee, any Auction Agent and any Remarketing Agent, not less than five
Business Days prior to the date on which the Trustee must notify the Owners of a
Change of Credit Facility pursuant to Section 2.18 of the Indenture and prior to
the effective date of any such Change of Credit Facility, the following:
-10-
<PAGE> 15
(1) a notice which (A) states the effective date of the Change
of Credit Facility, (B) describes the terms of the Change of Credit
Facility, and (C) directs the Trustee to give notice pursuant to Section
2.18(a) of the Indenture;
(2) a Favorable Opinion of Bond Counsel with respect to such
Change of Credit Facility and stating, in effect, that such change of
Credit Facility is authorized under this Agreement;
(3) a certificate of an Authorized Company Representative as to
whether the Bonds are then rated by either Moody's or S&P, or both; and
(4) written evidence from Moody's, if the Bonds are then rated
by Moody's, and from S&P, if the Bonds are then rated by S&P, in each
case to the effect that such rating agency has reviewed the proposed
Change of Credit Facility and that such Change of Credit Facility will
not, by itself, result in a reduction, suspension or withdrawal of its
rating or ratings of the Bonds.
(b) In lieu of satisfying the requirements of subsection (a) above, the
Company may provide for a Change of Credit Facility at any time that the Bonds
are subject to optional redemption pursuant to Section 4.02(b) of the Indenture,
provided that the Company delivers to the Trustee, any Auction Agent and any
Remarketing Agent not less than 30 days before the effective date of the Change
of Credit Facility:
(1) a notice which (A) states the effective date of the Change
of Credit Facility, (B) describes the terms of the Change of Credit
Facility, (C) directs the Trustee to give notice pursuant to Section
2.18 of the Indenture that the Bonds are subject to mandatory purchase,
in whole, on or before the effective date of the Change of Credit
Facility in accordance with Section 3.02(b) of the Indenture, and (D)
directs the Trustee to take any other action as shall be necessary for
the Trustee to take to effect the Change of the Credit Facility; and
(2) on or before the effective date of the Change of Credit
Facility, the Company shall furnish to the Trustee an opinion of Bond
Counsel satisfying the requirements of Section 4.07(a)(2) above.
(c) The Company may provide for one or more extensions of a Credit
Facility for any period commencing after its then-current expiration date
without complying with the foregoing provisions of this Section.
(d) The Company may rescind its election to make a Change of Credit
Facility at any time prior to the effective date thereof.
SECTION 4.08. COMPLIANCE WITH PRIOR AGREEMENT. The Company hereby
confirms its obligations under the Prior Agreement to furnish any moneys
required to be deposited with the Prior Trustee under the Prior Indenture in
order to redeem the Prior Bonds on the Redemption Date, to the extent that the
proceeds of the Bonds on deposit in the Prior Bond Fund, together
-11-
<PAGE> 16
with any investment earnings thereon, is less than the amount required to pay
the principal of and applicable redemption premium and interest on the Prior
Bonds upon their redemption on the Redemption Date, in accordance with the terms
and conditions of the Prior Indenture.
ARTICLE V
SPECIAL COVENANTS
SECTION 5.01. MAINTENANCE OF EXISTENCE; CONDITIONS UNDER WHICH
EXCEPTIONS PERMITTED. The Company shall maintain in good standing its corporate
existence as a corporation organized under the laws of one of the states of the
United States or the District of Columbia and will remain duly qualified to do
business in the State for so long as the Company has an ownership interest in
the Project, will not dissolve or otherwise dispose of all or substantially all
of its assets and will not consolidate with or merge into another corporation;
provided, however, that the Company may, without violating the foregoing,
undertake from time to time any one or more of the following, if, prior to the
effective date thereof, such action is approved by all public utility
commissions or similar entities that are required by law to approve such action
and there shall have been delivered to the Trustee a Favorable Opinion of Bond
Counsel with respect to the contemplated action:
(a) consolidate or merge with another corporation or sell or
otherwise transfer to another entity all or substantially all of its
assets as an entirety, provided the resulting, surviving or transferee
entity, as the case may be, shall be (i) the Company or (ii) an entity
qualified to do business in the State as a foreign corporation or
incorporated and existing under the laws of the State which shall have
assumed in writing all of the obligations of the Company hereunder and
shall deliver to the Trustee an opinion of counsel to the Company that
such consolidation or merger complies with the provisions of this
Section 5.01; or
(b) convey all or substantially all of its assets to one or more
wholly-owned subsidiaries of the Company so long as the Company shall
remain in existence and primarily liable on all of its obligations
hereunder.
SECTION 5.02. PERMITS OR LICENSES. In the event that it may be necessary
for the proper performance of this Agreement on the part of the Company or the
Issuer that any application or applications for any permit or license to do or
to perform certain things be made to any governmental or other agency by the
Company or the Issuer, the Company and the Issuer each shall, upon the request
of either, execute such application or applications.
-12-
<PAGE> 17
SECTION 5.03. ARBITRAGE COVENANT. The Issuer, to the extent it has any
control over proceeds of the Bonds, and the Company covenant and represent to
each other and to and for the benefit of the Beneficial Owners that so long as
any of the Bonds remain Outstanding, moneys on deposit in any fund in connection
with the Bonds, whether such moneys were derived from the proceeds of the sale
of the Bonds or from any other sources, will not be used in a manner which will
cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the
Code and any lawful regulations promulgated thereunder, as the same exist on
this date or may from time to time hereafter be amended, supplemented or
revised. The Company also covenants for the benefit of the Beneficial Owners to
comply with all of the provisions of the Tax Certificate. The Company reserves
the right, however, to make any investment of such moneys permitted by State
law, if, when and to the extent that said Section 148 or regulations promulgated
thereunder shall be repealed or relaxed or shall be held void by final judgment
of a court of competent jurisdiction, but only upon receipt of a Favorable
Opinion of Bond Counsel with respect to such investment.
SECTION 5.04. FINANCING STATEMENTS. The Company shall, to the extent
required by law, file and record, refile and re-record, or cause to be filed and
recorded, refiled and re-recorded, all documents or notices, including the
financing statements and continuation statements, referred to in Section 5.05 of
the Indenture. The Issuer shall cooperate fully with the Company in taking any
such action. Concurrently with the execution and delivery of the Bonds, the
Company shall cause to be delivered to the Trustee the opinion of counsel
required pursuant to Section 5.05(a) of the Indenture.
SECTION 5.05. COVENANTS WITH RESPECT TO TAX-EXEMPT STATUS OF THE BONDS.
The Company covenants for the benefit of the Owners of the Bonds and the Issuer
that it (a) has not taken, and will not take or permit to be taken on its
behalf, any action which would adversely affect the Tax-Exempt status of the
Bonds and (b) will take, or require to be taken, such actions as may, from time
to time, be required under applicable law or regulation to continue to cause the
Bonds to be Tax-Exempt.
SECTION 5.06. INDEMNIFICATION OF ISSUER. (a) The Company agrees that the
Issuer, its elected or appointed officials, officers, agents, servants and
employees, shall not be liable for, and agrees that it will at all times
indemnify and hold free and harmless the Issuer, its elected or appointed
officials, officers, agents, servants and employees from and against, and pay
all expenses of the Issuer, its elected or appointed officials, officers,
agents, servants and employees relating to, (a) any lawsuit, proceeding or claim
arising in connection with the Project or this Agreement that results from any
action taken by or on behalf of the Issuer, its elected or appointed officials,
officers, agents, servants and employees pursuant to or in accordance with this
Agreement or the Indenture that may be occasioned by any cause whatsoever,
except the negligence or willful misconduct of the Issuer, its elected or
appointed officials, officers, agents, servants or employees, or (b) any
liability for any loss or damage to property or any injury to or death of any
person that may be occasioned by any cause whatsoever pertaining to the Project,
except the negligence or willful misconduct of the Issuer, its elected or
appointed officials, officers, agents, servants or employees. In case any action
shall be brought against the Issuer in respect of which indemnity may be sought
against the Company, the Issuer shall promptly notify the Company in writing and
the Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Issuer and the payment of all expenses.
-13-
<PAGE> 18
Failure by the Issuer to notify the Company shall not relieve the Company from
any liability which it may have to the Issuer otherwise than under this Section
5.06. The Issuer shall have the right to employ separate counsel in any such
action and participate in the defense thereof, such counsel shall be paid by the
Issuer unless the employment of such counsel has been authorized by the Company.
The Company shall not be liable for any settlement of any such action without
its consent, but if any such action is settled with the consent of the Company
or if there be final judgment for the plaintiff in any such action, the Company
agrees to indemnify and hold free and harmless the Issuer, its elected or
appointed officials, officers, agents, servants and employees from and against
any loss or liability by reason of such settlement or judgment. The Company will
reimburse the Issuer, its elected or appointed officials, officers, agents,
servants and employees for any action taken pursuant to Section 5.03 of the
Indenture.
(b) The obligations of the Company under this Section 5.06 shall survive
the termination of this Agreement.
(c) It is the intention of the parties that the Issuer, its elected or
appointed officials, officers, agents, servants and employees shall not incur
any pecuniary liability by reason of the terms of this Agreement or the
Indenture, or the undertakings required of the Issuer hereunder or thereunder or
by reason of the issuance of the Bonds, the execution of the Indenture or the
performance of any act required of the Issuer by this Agreement or the Indenture
or requested of the Issuer by the Company.
SECTION 5.07. RECORDS OF COMPANY; MAINTENANCE AND OPERATION OF THE
PROJECT. (a) The Trustee and the Issuer shall be permitted at all reasonable
times during the term of this Agreement to examine the books and records of the
Company with respect to the Project; provided, however, that information and
data contained in the books and records of the Company shall be considered
proprietary and shall not be voluntarily disclosed by the Trustee or the Issuer
except as required by law.
(b) The Company shall cause the Project to be maintained in good repair
and shall cause the Project to be insured in accordance with standard industry
practice and shall pay all costs thereof. All proceeds of such insurance shall
be for the account of the Company.
(c) The Company shall be entitled to the proceeds of any condemnation
award or portion thereof made for damage to or taking of any of the Project or
other property of the Company.
(d) Anything in this Agreement to the contrary notwithstanding, the
Company shall have the right at any time to cause the operation of the Plant to
be terminated if the Company shall have determined or concurred in a
determination that the continued operation of the Plant is uneconomical for any
reason.
SECTION 5.08. RIGHT OF ACCESS TO THE PROJECT. The Company agrees that
the Issuer, the Trustee and their respective duly authorized agents shall have
the right, for so long as the Company has an ownership interest in the Project
and subject to such limitations, restrictions and requirements as the Company
may reasonably prescribe for plant security and safety reasons and
-14-
<PAGE> 19
in order to preserve secret processes and formulae, at all reasonable times to
enter upon and to examine and inspect the Project; provided, however, nothing
contained herein shall entitle the Issuer or the Trustee to any information or
inspection involving confidential material of the Company. Information and data
contained in the books and records of the Company shall be considered
proprietary and shall not be voluntarily disclosed by the Issuer or the Trustee
except as required by law. In the event that the Company sells or otherwise
transfers its interest in the Project, the Company shall require the purchaser
or transferee of the Company's interest in the Project to agree that the Issuer,
the Trustee and their respective duly authorized agents shall have the same
rights, and be subject to the same limitations, as are provided in this Section
with respect to the Project.
SECTION 5.09. REMARKETING AGENT. So long as any of the Bonds are subject
to optional or mandatory purchase pursuant to the provisions of the Indenture
(except during a Term Interest Rate Period that extends to the maturity of the
Bonds), the Company shall cause a Remarketing Agent to be appointed and acting
pursuant to a Remarketing Agreement at all such times as shall be necessary in
order to provide for the remarketing of the Bonds and the establishment of
interest rates to be borne by the Bonds in accordance with the provisions of the
Indenture.
SECTION 5.10. CREDIT RATINGS. The Company shall take all reasonable
action necessary to enable at least two nationally-recognized statistical rating
organizations (as that term is used in the rules and regulations of the
Securities and Exchange Commission under the Securities Exchange Act) to provide
credit ratings for the PARS Rate Bonds.
SECTION 5.11. PURCHASES OF PARS RATE BONDS. The Company shall not
purchase or otherwise acquire PARS Rate Bonds unless the Company redeems or
cancels such PARS Rate Bonds on the day of any such purchase.
SECTION 5.12. CREDIT FACILITY. Concurrently with the initial
authentication and delivery of the Bonds, the Company shall cause the original
Credit Facility to be delivered to the Trustee. Under the Credit Facility, the
Provider shall guarantee the payment of the principal of the Bonds upon the
stated maturity thereof and upon the mandatory redemption of the Bonds pursuant
to Section 4.03 of the Indenture and the payment of the interest on the Bonds as
the same accrues and becomes due and payable. The Issuer and the Company agree
to be bound by the provisions of the Indenture pertaining to the Credit
Facility.
ARTICLE VI
ASSIGNMENT
SECTION 6.01. CONDITIONS. The Company's interest in this Agreement may
be assigned in whole or in part by the Company: (a) to another entity, subject,
however, to the conditions that such assignment shall not relieve (other than as
described in Section 5.01(a)(ii) hereof) the Company from primary liability for
its obligations to make the Loan Payments or to make payments to the Trustee
under Section 4.02 hereof or for any other of its obligations hereunder, or (b)
to an Affiliate in connection with the conveyance of the Plant to such
Affiliate, subject,
-15-
<PAGE> 20
however, to the conditions that (i) such Affiliate is an entity described in
Section 5.01(a)(ii) hereof (in which case the Company shall be relieved of all
obligations hereunder); (ii) such conveyance is approved by any public utility
commissions or similar entities that are required by law to approve such
conveyance; and (iii) the Company shall have delivered to the Trustee (A) an
opinion of counsel to the Company that such assignment complies with the
provisions of this Section 6.01 and (B) a Favorable Opinion of Bond Counsel with
respect to such assignment.
SECTION 6.02. DOCUMENTS FURNISHED TO TRUSTEE. The Company shall, within
30 days after the delivery thereof, furnish to the Issuer and the Trustee a true
and complete copy of the agreements or other documents effectuating any
assignment pursuant to Section 6.01 hereof. The Trustee's only duties with
respect to any such agreement or other document so furnished to it shall be to
make the same available for examination by any Owner at the Principal Office of
the Trustee upon reasonable notice.
SECTION 6.03. LIMITATION. This Agreement shall not be assigned in whole
or in part, except as provided in this Article VI or in Section 4.03 or Section
5.01 hereof.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01. EVENTS OF DEFAULT. Each of the following events shall
constitute and is referred to in this Agreement as an "Event of Default":
(a) a failure by the Company to make when due any Loan Payment
or any payment required under Section 4.01 or Section 4.02 hereof, which
failure shall have resulted in an "Event of Default" under Section
9.01(a), Section 9.01(b) or Section 9.01(c) of the Indenture;
(b) a failure by the Company to pay when due any amount required
to be paid under this Agreement or to observe and perform any covenant,
condition or agreement on its part to be observed or performed under
this Agreement (other than a failure described in Section 7.01(a)
above), which failure shall continue for a period of 90 days (or such
longer period as the Issuer and the Trustee may agree to in writing)
after written notice, specifying such failure and requesting that it be
remedied, shall have been given to the Company by the Trustee or to the
Company and the Trustee by the Issuer; provided, however, that if such
failure is other than for the payment of money and is of such nature
that it cannot be corrected within the applicable period, such failure
shall not constitute an "Event of Default" so long as the Company
institutes corrective action within the applicable period and such
action is being diligently pursued;
(c) the dissolution or liquidation of the Company; or the filing
by the Company of a voluntary petition in bankruptcy; or failure by the
Company promptly to lift or bond any execution, garnishment or
attachment of such consequence as will impair its ability to make any
payments under this Agreement; or the filing of a petition or answer
proposing
-16-
<PAGE> 21
the entry of an order for relief by a court of competent jurisdiction
against the Company under Title 11 of the United States Code, as the
same may from time to time be hereafter amended, or proposing the
reorganization, arrangement or debt readjustment of the Company under
the provisions of any bankruptcy act or under any similar act which may
be hereafter enacted and the failure of said petition or answer to be
discharged or denied within ninety (90) days after the filing thereof or
the entry of an order for relief by a court of competent jurisdiction in
any proceeding for its liquidation or reorganization under the
provisions of any bankruptcy act or under any similar act which may be
hereafter enacted; or an assignment by the Company for the benefit of
its creditors; or the entry by the Company into an agreement of
composition with its creditors (the term "dissolution or liquidation of
the Company," as used in this subsection (c), shall not be construed to
include the cessation of the corporate existence of the Company
resulting either from a merger or consolidation of the Company into or
with another corporation or a dissolution or liquidation of the Company
following a transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions contained in
Section 5.01 hereto; or
(d) receipt by the Trustee of written notice from Ambac that an
Event of Default has occurred under the initial Credit Facility
Agreement or the occurrence of an event described in any subsequent
Credit Facility Agreement that is designated therein as giving rise to
an Event of Default hereunder.
SECTION 7.02. FORCE MAJEURE. The provisions of Section 7.01(b) hereof
are subject to the following limitations: if by reason of acts of God; strikes,
lockouts or other industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or the State, or any department,
agency, political subdivision, court or official of any of such State or any
other state which asserts regulatory jurisdiction over the Company; orders of
any kind of civil or military authority; insurrections; riots; epidemics;
landslides; lightning; earthquakes; volcanoes; fires; hurricanes; tornadoes;
storms; floods; washouts; droughts; arrests; restraint of government and people;
civil disturbances; explosions; breakage or accident to machinery; partial or
entire failure of utilities; or any cause or event not reasonably within the
control of the Company, the Company is unable in whole or in part to carry out
any one or more of its agreements or obligations contained herein, other than
its obligations under Section 4.01, Section 4.02, Section 4.04, Section 4.05,
Section 4.06, Section 5.01 and Section 5.06 hereof, the Company shall not be
deemed in default by reason of not carrying out said agreement or agreements or
performing said obligation or obligations during the continuance of such
inability. The Company shall make reasonable effort to remedy with all
reasonable dispatch the cause or causes preventing it from carrying out its
agreements, provided that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Company,
and the Company shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is in the judgment of the Company unfavorable
to the Company.
-17-
<PAGE> 22
SECTION 7.03. REMEDIES. (a) Upon the occurrence and continuance of any
Event of Default described in Section 7.01(a) or Section 7.01(c) hereof, and
further upon the condition that, in accordance with the terms of the Indenture,
the Bonds shall have been declared to be immediately due and payable pursuant to
any provision of the Indenture, the Loan Payments shall without further action,
become and be immediately due and payable.
(b) Any waiver of any "Event of Default" under the Indenture and a
rescission and annulment of its consequences shall constitute a waiver of the
corresponding Event or Events of Default under this Agreement and a rescission
and annulment of the consequences thereof.
(c) Upon the occurrence and continuance of any Event of Default, the
Issuer may take any action at law or in equity to collect any payments then due
and thereafter to become due hereunder or to seek injunctive relief or specific
performance of any obligation, agreement or covenant of the Company hereunder.
(d) Any amounts collected from the Company pursuant to this Section 7.03
shall be applied in accordance with the Indenture. No action taken pursuant to
this Section 7.03 shall relieve the Company from the Company's obligations
pursuant to Section 4.01 or Section 4.02 hereof.
SECTION 7.04. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved
to the Issuer hereby is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. No delay or omission to exercise any right or
power accruing upon any Event of Default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right or power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle the Issuer to exercise any remedy reserved to it in this Article VII, it
shall not be necessary to give any notice, other than such notice as may be
herein expressly required.
SECTION 7.05. REIMBURSEMENT OF ATTORNEYS' FEES. If the Company shall
default under any of the provisions hereof and the Issuer or the Trustee shall
employ attorneys or incur other reasonable and proper expenses for the
collection of payments due hereunder or for the enforcement of performance or
observance of any obligation or agreement on the part of the Company contained
herein, the Company will on demand therefor reimburse the Issuer or the Trustee,
as the case may be, for the reasonable and proper fees of such attorneys and
such other reasonable and proper expenses so incurred.
SECTION 7.06. WAIVER OF BREACH. In the event any obligation created
hereby shall be breached by either of the parties hereto and such breach shall
thereafter be waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. In view of the assignment of certain of the Issuer's rights and
interest hereunder to the Trustee, the Issuer shall have no power to waive any
Event of Default hereunder by the Company in respect of such rights and interest
without the consent of the Trustee, and the Trustee may exercise any of the
rights of the Issuer hereunder.
-18-
<PAGE> 23
ARTICLE VIII
PURCHASE OR REDEMPTION OF BONDS
SECTION 8.01. REDEMPTION OF BONDS. The Issuer shall take or cause to be
taken the actions required by the Indenture (other than the payment of money) to
discharge the lien thereof through the redemption, or provision for payment or
redemption, of all Bonds then Outstanding, or to effect the redemption, or
provision for payment or redemption, of less than all the Bonds then
Outstanding, upon receipt by the Issuer and the Trustee from an Authorized
Company Representative of a written notice designating the principal amount of
the Bonds to be redeemed and specifying the date of redemption (which, unless
waived by the Issuer and the Trustee, shall not be less than 30 days from the
date such notice is given, or such shorter period as the Trustee and the Company
may agree from time to time) and the applicable redemption provision of the
Indenture. Unless otherwise stated therein and except with respect to a
redemption under Section 4.03 of the Indenture, such notice shall be revocable
by the Company at any time prior to the time at which the Bonds to be redeemed,
or for the payment or redemption of which provision is to be made, are first
deemed to be paid in accordance with Article VIII of the Indenture. The Company
shall furnish any moneys required by the Indenture to be deposited with the
Trustee or otherwise paid by the Issuer in connection with any of the foregoing
purposes. In connection with any redemption of the Bonds, the Company shall
provide to the Trustee the names and addresses of the Securities Depositories
and Information Services as contemplated by Section 4.05 of the Indenture.
SECTION 8.02. PURCHASE OF BONDS. The Company may at any time, and from
time to time, furnish moneys to the Trustee accompanied by a notice directing
such moneys to be applied to the purchase of Bonds in accordance with the
provisions of the Indenture delivered pursuant to the Indenture, which Bonds
shall, at the direction of the Company, be delivered in accordance with Section
3.06(a)(ii) of the Indenture.
SECTION 8.03. OBLIGATION TO PREPAY. (a) The Company shall be obligated
to prepay in whole or in part the amounts payable hereunder upon a Determination
of Taxability (as defined below) giving rise to a mandatory redemption of the
Bonds pursuant to Section 4.03 of the Indenture, by paying an amount equal to,
when added to other funds on deposit in the Bond Fund, the aggregate principal
amount of the Bonds to be redeemed pursuant to the Indenture plus accrued
interest to the redemption date.
(b) The Company shall cause a mandatory redemption to occur within 180
days after a Determination of Taxability (as defined below) shall have occurred.
A "Determination of Taxability" shall be deemed to have occurred if, as a result
of the failure of the Company to observe any covenant, agreement or
representation in this Agreement, a final decree or judgment of any federal
court or a final action of the Internal Revenue Service determines that interest
paid or payable on any Bond is or was includible in the gross income of an Owner
of the Bonds for federal income tax purposes under the Code (other than an Owner
who is a "substantial user" or "related person" within the meaning of Section
147(a) of the Code). However, no such decree or action will be considered final
for this purpose unless the Company has been given written notice of the same,
either directly or in the name of any Owner of a Bond, and, if it so desires and
-19-
<PAGE> 24
is legally allowed, has been afforded the opportunity to contest the same,
either directly or in the name of any Owner of a Bond, and until conclusion of
any appellate review, if sought. If the Trustee receives written notice from any
Owner of a Bond stating (a) that the Owner has been notified in writing by the
Internal Revenue Service that it proposes to include the interest on any Bond in
the gross income of such Owner for the reasons described therein or any other
proceeding has been instituted against such Owner which may lead to a final
decree or action as described herein, and (b) that such Owner will afford the
Company the opportunity to contest the same, either directly or in the name of
the Owner, until a conclusion of any appellate review, if sought, then the
Trustee shall promptly give notice thereof to the Company, the Issuer, the
Provider and the Owner of each Bond then Outstanding. If a final decree or
action as described above thereafter occurs and the Trustee has received written
notice thereof as provided in Section 8.01 hereof at least 45 days prior to the
redemption date, the Trustee shall request prepayment from the Company of the
amounts payable hereunder and give notice of the redemption of the Bonds at the
earliest practical date, but not later than the date specified in this Article,
and in the manner provided by Section 4.05 of the Indenture.
At the time of any such prepayment of the amounts payable hereunder
pursuant to this Section, the prepayment amount shall be applied, together with
other available moneys in the Bond Fund, to the redemption of the Bonds on the
date specified in the notice as provided in the Indenture, whether or not such
date is an Interest Payment Date, to the Trustee's fees and expenses under the
Indenture accrued to such redemption of the Bonds, and to all sums due to the
Issuer under this Agreement.
Whenever the Company shall have given any notice of prepayment of the
amounts payable hereunder pursuant to this Article VIII, which includes a notice
for redemption of the Bonds pursuant to the Indenture, all amounts payable under
the first paragraph of this Section 8.03 shall become due and payable on the
date fixed for redemption of such Bonds.
SECTION 8.04. COMPLIANCE WITH INDENTURE. Anything in this Agreement to
the contrary notwithstanding, the Issuer and the Company shall take all actions
required by this Agreement and the Indenture in order to comply with the
provisions of Articles III and IV of the Indenture.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. TERM OF AGREEMENT. This Agreement shall remain in full
force and effect from the date of delivery hereof until the right, title and
interest of the Trustee in and to the Trust Estate shall have ceased, terminated
and become void in accordance with Article VIII of the Indenture and until all
payments required under this Agreement shall have been made. The date first
above written shall be for identification purposes only and shall not be
construed to imply that this Agreement was executed on such date.
SECTION 9.02. NOTICES. Except as otherwise provided in this Agreement,
all notices, certificates, requests, requisitions and other communications
hereunder shall be in writing and
-20-
<PAGE> 25
shall be sufficiently given and shall be deemed given when mailed by Mail or by
certified or registered mail postage prepaid, or by overnight delivery service,
addressed as follows (and, if by overnight delivery service and required by the
chosen delivery service, with then-current telephone number of the addressee):
if to the Issuer, at City Hall, Forsyth, Montana 59327, Attention: Mayor; if to
the Company, at 1411 East Mission Avenue, Spokane, Washington 99220, Attention:
Treasurer; if to the Trustee, at such address as shall be designated by it in or
pursuant to the Indenture; if to the Auction Agent, if any, at such address as
shall be designated by such party pursuant to the Auction Agreement; if to the
Provider of the Credit Facility, at such address as shall be designated by it in
or pursuant to the Indenture; and if to the Remarketing Agent, if any, at such
address as shall be designated by such party pursuant to the Remarketing
Agreement. A copy of each notice, certificate, request or other communication
given hereunder to the Issuer, the Company, the Trustee, the Auction Agent, the
Provider and the Remarketing Agent shall also be given to the others. Any of the
foregoing parties may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates, requests or other
communications shall be sent.
SECTION 9.03. PARTIES IN INTEREST. This Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Company and their
respective successors and assigns, and no other person, firm or corporation
shall have any right, remedy or claim under or by reason of this Agreement
except for rights of payment and indemnification hereunder of the Trustee and
the Registrar. Section 9.05 hereof to the contrary notwithstanding, for purposes
of perfecting a security interest in this Agreement by the Trustee, only the
counterpart delivered, pledged and assigned to the Trustee shall be deemed the
original. No security interest in this Agreement may be created by the transfer
of any counterpart thereof other than the original counterpart delivered,
pledged and assigned to the Trustee.
SECTION 9.04. AMENDMENTS. This Agreement may be amended only by written
agreement of the Company and the Issuer and with the written consent of the
Trustee in accordance with the provisions of Section 12.05 or 12.06 of the
Indenture, as applicable; provided, however, that Exhibit A to this Agreement
may be amended upon compliance only with the requirements of Section 3.04
hereof.
SECTION 9.05. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which, when so executed and delivered, shall be an
original (except as expressly provided in Section 9.03 hereof), and such
counterparts shall together constitute but one and the same Agreement.
SECTION 9.06. SEVERABILITY. If any clause, provision or Section of this
Agreement shall, for any reason, be held invalid or unenforceable by any court
of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
SECTION 9.07. GOVERNING LAW. This Agreement shall be governed
exclusively by and construed in accordance with the laws of the State.
-21-
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CITY OF FORSYTH, MONTANA
By:
--------------------------------
Mayor
[SEAL]
ATTEST:
By:
--------------------------------
City Clerk
AVISTA CORPORATION
By:
--------------------------------
Vice President & Treasurer
-22-
<PAGE> 27
EXHIBIT A
PROJECT DESCRIPTION
1. POLLUTION CONTROL EQUIPMENT
SCRUBBER SYSTEM
The air pollution control facilities employed on Units #3 and #4 consist
of a complete scrubber system, including duct work, plenums, scrubber vessels,
reheaters and induced draft fans, together with infrastructures, monitoring and
electrical controls and instrumentation therefore, for the purpose of removing
the sulfur dioxide (SO2) and particulate matter from the flue gas. The scrubber
system also includes a scrubber maintenance facility, including a machine shop
and laboratory dedicated to the scrubber system and an environmental monitoring
laboratory for the pollution control facilities. The scrubber system utilizes
the Wet Venturi Principle and consists of eight modules for each unit through
which the steam generator gases from the burned coal must pass.
The gases in the scrubber are contacted with finely atomized scrubber
slurry. Within the stated performance of the system, fly ash particulates are
removed by the slurry droplets. The sulfur dioxide reacts with the alkali
contained in the slurry which results from the mixing of water, fly ash
particulates, hydrated high calcium lime and hydrated dolomitic lime. A major
portion of the sulfur dioxide is converted to solid sulfate compounds which are
retained in the scrubber liquid and can, therefore, be piped to and deposited in
an ash pond together with the particulate.
After the flue gas passes through the venturi section, absorption sprays
and wash trays, it is processed through a demister which removes any entrained
slurry and is then reheated and discharged through the stack.
The slurry system in the Units #3 and #4 scrubber system consists of
recycle tanks, regenerators, agitators, pumps and pipelines. The slurry from the
Units #3 and #4 scrubber system is transported to an effluent holding pond and
involves the use of effluent holding tanks, agitators, pumps and pipelines. A
separate wash tray pond system is used to store the suspended solids collected
from the wash tray system. Reclaimed water from the clear water section of these
ponds is circulated back to the scrubber system.
LIME STORAGE
The sole purpose of the lime system is to supply the lie slurry
requirements of the scrubber regeneration system. There is one lime system that
serves the sixteen scrubbers for Units #3 and #4. Major components of the system
include four slakers, in which calcined high calcium lime is reacted with water
to produce a hydrated lime slurry, slurry transfer tanks, where
A-1
<PAGE> 28
the slurry is diluted with water and mixed with dry hydrated dolomitic lime,
slurry feed storage tanks, where the slurry will be held for use by the
regenerators as needed, hydrators, for mixing calcined dolomitic lime with
water, and agitators.
SCRUBBER SLUDGE DISPOSAL
Effluent slurry is pumped from the plant to the sludge disposal pond
located approximately three miles southeast of the plant. The suspended solids
settle to the pond bottom and the clear water is pumped back to the plant.
There are two phases in the development of this pond. The first phase
requires the construction of one dam 108 feet high and 1,100 feet in length. A
saddle dam must also be added. The saddle dam will vary in height with a maximum
height for this phase of 36 feet and be approximately 2,800 feet in length. The
capacity of Phase 1 will be 6,650 acre-feet and it will last approximately 10
years.
The development of the second phase will require that the original dam
be raised to 138 feet in height and increased to a length of 2,500 feet. The
saddle dam will be raised to a maximum height of 66 feet and a total length of
3,500 feet. The capacity of the second phase will be an additional 7,000
acre-feet and it will last approximately 12 years, for a total life of 22 years.
The construction of the second phase is not included in cost reported at this
time.
The sludge disposal pond design takes into account a permit requirement
for minimum seepage, by providing low permeability plastic concrete filled
trenches around the periphery of the pond constructed during the course of Phase
1 work.
COAL DUST CONTROL SYSTEM
The coal dust control system is designed to collect, store and treat
coal dust resulting from mining, crushing, handling and storing coal in the
course of normal Units #3 and #4 operations. To control coal dust air pollution
the points where coal is transferred between conveyors or placed in coal piles
have been enclosed. The coal transfer stations between conveyors are enclosed
with steel framed structures with metal siding. The structures are equipped with
vacuum filtration systems, consisting of ducts, blowers, dust removal filters
and associated equipment, to remove coal dust from exhaust air from the
structures, and are also equipped with mechanical dust collectors. The main line
45,000 ton coal storage pile is enclosed with a 340' long A-frame precast panel
concrete structure designed to contain coal dust, thereby allowing its removal
and treatment.
COOLING TOWER DRIFT CONTAINMENT CONTROL FACILITY
Operation of the cooling towers produces exhaust air emissions
containing circulating water, particulates and other pollutants generally known
as cooling tower drift. To control release of these air pollutants, the cooling
towers are provided with high efficiency drift eliminators, located at the top
of the cooling tower structures, which remove drift from the cooling tower
exhaust air.
A-2
<PAGE> 29
2. SOLID WASTE DISPOSAL
BOTTOM ASH DISPOSAL
The function of the bottom ash disposal system is to remove
accumulations of furnace bottom ash, pulverizer pyrites, economizer ash, and air
preheater fly ash by means of a water-ash slurry to a disposal pond located
approximately 2,000 feet southeast of the plant site. The system consists
generally of three sets of fly ash hoppers, (economizer, air heater, and flue
gas duct hoppers) pyrite hoppers, the bottom ash hopper, and 18,000 gallon
transfer tank, a settling pond, a clear water pond and various pumps, and
pipelines.
Clinker grinders are used to grind the bottom ash which is then mixed
with water and sluiced to the ash transfer tank.
The economizer ash collected in economizer hoppers falls by gravity to
the ash transfer tank.
The pyrites are collected in local tanks and sluiced to the ash transfer
tank.
Ash collected in the flue gas duct hoppers and air preheater hoppers is
sluiced to the ash transfer tank.
These ashes are pumped from the ash transfer tank to the bottom ash
pond. Reclaimed water is returned from the bottom ash disposal pond and
redistributed to the various sections of the bottom ash disposal system.
The solid waste disposal facilities for purposes of the issuance of the
Bonds include only so much of the bottom ash disposal system as is external to
the plant building and include piping from the building to the settling pond,
the pond itself, return water pumps and lines, a clear water pond and piping
back to the plant building.
3. WATER POLLUTION CONTROL
NORTH PLANT SEDIMENT POND
The north plant sediment pond is designed to collect and store the storm
runoff from the general north plant area. These waters are retained in the pond,
allowing natural evaporation to desiccate the pond. This prevents high
quantities of suspended solids from being discharged to Armells Creek or other
state surface waters.
NORTH PLANT AREA DRAINAGE SYSTEM
The north plant area drainage system is designed to collect and store
storm runoff from the water treatment building, fuel oil handling area and the
cooling tower area in the north plant area drain pond. The pond also serves as a
storage facility for one cooling tower basin drain,
A-3
<PAGE> 30
cooling tower overflow, water treatment filter backwash, and for the cooling
tower blowdown water not used in the flue gas scrubbing process. These waters
are potentially contaminated with oil and high suspended and dissolved solids,
and this system stores these discharges preventing any discharge to Armells
Creek or other state surface waters. The north plant area drainage system
consists of collection basins, piping, concrete culverts, yard drains, manholes
and special yard gradings (berms) which route these discharges to the north
plant area sump and north plant area drain pond. The north plant area drain pond
incorporates a hypalon liner to comply with a permit requirement for minimum
seepage. The oil separator section of the sump receives oily surface collection
drains. The oil and water are separated. The oil from the sump is then trucked
away for disposal.
The water discharges are either pumped to the scrubber effluent holding
pond via a 6" diameter pipeline, 19,000 feet in length for evaporation, to the
circulating water system, or the plant oily waste sump as appropriate. Each
discharge arrangement has its own set of sump pumps. The pumps and piping system
which discharge to the plant oily waste sump are not included in the costs
covered by this Report, nor is the circulating water system. The waters
recovered are excess to any plant requirements and recovery of the waters does
not provide any economic benefit to the plant.
CHEMICAL AND OILY WASTE SYSTEM
The chemical and oily waste system is designed to collect, store, treat
and dispose of chemical and oily wastes resulting from the normal operation of
Units #3 and #4. This system consists of drains and pipes, oil separators,
chemical waste sumps, chemical waste neutralizing tanks, neutralizing chemical
storage tanks, chemical inspection equipment, and associated mechanical and
electrical control equipment.
The chemical waste drainage system includes drains and neutralization
tanks for collection and treatment of chemical waste Chemical waste drains are
located throughout Units #3 and #4, and are used to collect and transfer
chemical waste to holding sumps and neutralization tanks. The neutralization
equipment includes chemical storage and injection equipment as well as controls
and instrumentation.
The oily waste drainage system is made up of a network of drains which
collect oily waste from throughout Units #3 and #4, and dispose of the wastes in
the Units #3 and #4 main water-oil sump. Oil separation chambers in the sump
allow for oil removal. The treated water is monitored for trace oil levels and
released. After separation, the waste oil is removed by a contractor to an
offsite disposal area.
COOLING TOWER BLOWDOWN SYSTEM
The cooling tower blowdown system consists of a 6" pipeline from the
cooling tower to the waste disposal pond where the blowdown is treated by
settlement and evaporation in accordance with water pollution control
requirements.
A-4
<PAGE> 31
GROUNDWATER MONITORING WELLS
Groundwater monitoring wells have been installed around the various
ponds associated with the plant operation. These ponds include the scrubber
effluent holding pond, the scrubber drain pond, the scrubber wash tray pond, the
bottom ash pond, and the north plant area effluent pond. These groundwater
monitoring wells provide the ability through sampling to detect and quantify
accidental discharges from the above mentioned plant storage and waste ponds.
This is necessary to show compliance with State Groundwater Standards and with
permit requirements for minimum seepage.
A-5
<PAGE> 1
Exhibit 4(b)-4
================================================================================
TRUST INDENTURE
BETWEEN
CITY OF FORSYTH, MONTANA
AND
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION,
AS TRUSTEE
$17,000,000
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999B
DATED AS OF SEPTEMBER 1, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Recitals......................................................................................................................1
Granting Clauses..............................................................................................................1
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION.........................................................2
Section 1.01. General Definitions...........................................................................2
Section 1.02 PARS Rate Definitions........................................................................14
Section 1.03. Rules of Construction........................................................................19
ARTICLE II THE BONDS....................................................................................20
Section 2.01. Authorization and Terms of Bonds.............................................................20
Section 2.02. Interest Rates and Rate Periods..............................................................21
Section 2.03 PARS Rates; Conversions to and from PARS Rate Periods........................................22
Section 2.04. Daily Interest Rate; Adjustment to Daily Interest Rate Period................................24
Section 2.05. Weekly Interest Rate; Adjustment to Weekly Interest Rate Period..............................25
Section 2.06. Term Interest Rate; Adjustment to Term Interest Rate Period..................................26
Section 2.07. Flexible Interest Rate; Adjustment to Flexible Interest Rate Period..........................29
Section 2.08. Rescission of Election.......................................................................31
Section 2.09. Form of Bonds................................................................................32
Section 2.10. Execution of Bonds...........................................................................32
Section 2.11. Transfer and Exchange of Bonds...............................................................33
Section 2.12. Bond Register................................................................................33
Section 2.13. Bonds Mutilated, Lost, Destroyed or Stolen...................................................34
Section 2.14. Bonds; Limited Obligations...................................................................34
Section 2.15. Disposal of Bonds............................................................................35
Section 2.16. Book-Entry System............................................................................35
Section 2.17. Payments Pursuant to the Credit Facility.....................................................37
Section 2.18. Change of Credit Facility....................................................................39
Section 2.19. CUSIP Numbers................................................................................39
ARTICLE III PURCHASE AND REMARKETING OF BONDS............................................................39
Section 3.01. Owner's Option to Tender for Purchase........................................................39
Section 3.02. Mandatory Purchase...........................................................................41
Section 3.03. Payment of Purchase Price....................................................................41
Section 3.04. Remarketing of Bonds by Remarketing Agent....................................................42
Section 3.05. Limits on Remarketing........................................................................43
Section 3.06. Delivery of Bonds; Delivery of Proceeds of Remarketing Sale..................................43
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Section 3.07. No Remarketing Sales After Certain Events....................................................45
ARTICLE IV REDEMPTION OF BONDS..........................................................................45
Section 4.01. Redemption of Bonds Generally................................................................45
Section 4.02. Redemption Upon Optional Prepayment..........................................................45
Section 4.03. Redemption Upon Mandatory Prepayment.........................................................47
Section 4.04. Selection of Bonds for Redemption............................................................47
Section 4.05. Notice of Redemption.........................................................................47
Section 4.06. Partial Redemption of Bonds..................................................................48
Section 4.07. No Partial Redemption After Default..........................................................49
Section 4.08. Payment of Redemption Price..................................................................49
Section 4.09. Effect of Redemption.........................................................................49
ARTICLE V GENERAL COVENANTS............................................................................49
Section 5.01. Payment of Bonds.............................................................................49
Section 5.02. Performance of Covenants by Issuer; Authority; Due Execution.................................50
Section 5.03. Immunities and Limitations of Responsibility of Issuer; Remedies.............................51
Section 5.04. Defense of Issuer's Rights...................................................................52
Section 5.05. Recording and Filing; Further Instruments....................................................52
Section 5.06. Rights Under Agreement.......................................................................52
Section 5.07. Arbitrage and Tax Covenants..................................................................53
Section 5.08. No Disposition of Trust Estate...............................................................53
Section 5.09. Access to Books..............................................................................53
Section 5.10. Source of Payment of Bonds...................................................................53
Section 5.11. Credit Facility..............................................................................53
ARTICLE VI DEPOSIT OF BOND PROCEEDS; FUND AND ACCOUNTS; REVENUES........................................54
Section 6.01. Creation of Bond Fund and Accounts; Rebate Fund..............................................54
Section 6.02. Disposition of Bond Proceeds and Certain Other Moneys........................................54
Section 6.03. Deposits Into the Bond Fund; Use of Moneys in the Bond Fund..................................54
Section 6.04. Bonds Not Presented for Payment of Principal.................................................55
Section 6.05. Payment to the Company.......................................................................55
ARTICLE VII INVESTMENTS..................................................................................55
Section 7.01. Investment of Moneys in Funds................................................................55
Section 7.02. Conversion of Investment to Cash.............................................................56
Section 7.03. Credit for Gains and Charge for Losses.......................................................56
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE VIII DEFEASANCE...................................................................................56
ARTICLE IX DEFAULTS AND REMEDIES........................................................................59
Section 9.01. Events of Default............................................................................59
Section 9.02. Acceleration; Other Remedies.................................................................60
Section 9.03. Restoration to Former Position...............................................................62
Section 9.04. Owners' Right to Direct Proceedings..........................................................62
Section 9.05. Limitation on Owners' Right to Institute Proceedings.........................................62
Section 9.06. No Impairment of Right to Enforce Payment....................................................63
Section 9.07. Proceedings by Trustee Without Possession of Bonds...........................................63
Section 9.08. No Remedy Exclusive..........................................................................63
Section 9.09. No Waiver of Remedies........................................................................63
Section 9.10. Application of Moneys........................................................................63
Section 9.11. Severability of Remedies.....................................................................65
ARTICLE X TRUSTEE; PAYING AGENT; REGISTRAR; REMARKETING AGENT..........................................65
Section 10.01. Acceptance of Trusts.........................................................................65
Section 10.02. No Responsibilities for Recitals.............................................................65
Section 10.03. Limitations on Liability.....................................................................65
Section 10.04. Compensation, Expenses and Advances..........................................................66
Section 10.05. Notice of Events of Default and Determination of Taxability..................................67
Section 10.06. Action by Trustee............................................................................67
Section 10.07. Good-Faith Reliance..........................................................................68
Section 10.08. Dealings in Bonds; Allowance of Interest.....................................................68
Section 10.09. Several Capacities...........................................................................69
Section 10.10. Resignation of Trustee.......................................................................69
Section 10.11. Removal of Trustee...........................................................................69
Section 10.12. Appointment of Successor Trustee.............................................................70
Section 10.13. Qualifications of Successor Trustee..........................................................70
Section 10.14. Judicial Appointment of Successor Trustee....................................................70
Section 10.15. Acceptance of Trusts by Successor Trustee....................................................71
Section 10.16. Successor by Merger or Consolidation.........................................................71
Section 10.17. Standard of Care.............................................................................71
Section 10.18. Intervention in Litigation of the Issuer.....................................................71
Section 10.19. Remarketing Agent............................................................................71
Section 10.20. Qualifications of Remarketing Agent..........................................................72
Section 10.21. Registrar....................................................................................72
Section 10.22. Qualifications of Registrar; Resignation; Removal............................................73
Section 10.23. Paying Agents................................................................................73
Section 10.24. Additional Duties of Trustee.................................................................73
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
ARTICLE XI EXECUTION OF INSTRUMENTS BY OWNERS AND PROOF OF OWNERSHIP OF BONDS...........................74
ARTICLE XII MODIFICATION OF THIS INDENTURE AND THE AGREEMENT.............................................75
Section 12.01. Supplemental Indentures Without Owner Consent................................................75
Section 12.02. Supplemental Indentures Requiring Owner Consent..............................................77
Section 12.03. Effect of Supplemental Indenture.............................................................78
Section 12.04. Consent of the Company and the Provider......................................................78
Section 12.05. Amendment of Agreement Without Owner Consent.................................................78
Section 12.06. Amendment of Agreement Requiring Owner Consent...............................................79
ARTICLE XIII MISCELLANEOUS................................................................................80
Section 13.01. Successors of the Issuer.....................................................................80
Section 13.02. Parties in Interest..........................................................................80
Section 13.03. Severability.................................................................................80
Section 13.04. No Personal Liability of Issuer Officials....................................................81
Section 13.05. Bonds Owned by the Issuer or the Company.....................................................81
Section 13.06. Counterparts.................................................................................81
Section 13.07. Governing Law................................................................................81
Section 13.08. Notices......................................................................................81
Section 13.09. Holidays.....................................................................................82
Section 13.10. Purchase of Bonds by Trustee and Remarketing Agent...........................................82
Section 13.11. Notices to Moody's and S&P...................................................................82
Section 13.12. Rights of Provider...........................................................................83
Signatures...................................................................................................................84
EXHIBIT A -- FORM OF BOND
EXHIBIT B -- PARS AUCTION PROCEDURES
Section 1.01 Auction Procedures..........................................................................B-1
Section 1.02 Orders by Existing Owners and Potential Owners..............................................B-1
Section 1.03 Submission of Orders by Broker-Dealers to Auction Agent.....................................B-3
Section 1.04 Determination of PARS Rate..................................................................B-5
Section 1.05 Allocation of the PARS Rate Bonds...........................................................B-6
Section 1.06 Notice of PARS Rate.........................................................................B-8
Section 1.07 PARS Index.................................................................................B-10
Section 1.08 Miscellaneous Provisions Regarding Auctions................................................B-11
Section 1.09 Changes in Auction Period or Auction Date..................................................B-12
Section 1.10 Auction Agent..............................................................................B-13
Section 1.11 Qualifications of Auction Agent: Resignation; Removal......................................B-13
</TABLE>
-iv-
<PAGE> 6
TRUST INDENTURE
THIS TRUST INDENTURE is made and entered into as of September 1, 1999,
between the CITY OF FORSYTH, MONTANA, a political subdivision duly organized and
existing under the Constitution and laws of the State and CHASE MANHATTAN BANK
AND TRUST COMPANY, NATIONAL ASSOCIATION, as trustee.
RECITALS
A. In furtherance of its public purposes, the Issuer has entered into a
Loan Agreement, dated as of September 1, 1999, with Avista Corporation, a
Washington corporation, providing for the issuance by the Issuer of the Bonds
for the purpose of refunding, in advance of stated maturity, the Prior Bonds.
B. The execution and delivery of this Indenture and the issuance and
sale of the Bonds have been in all respects duly and validly authorized by
proper action duly adopted by the governing authority of the Issuer.
C. The execution and delivery of the Bonds and of this Indenture have
been duly authorized and all things necessary to make the Bonds, when executed
by the Issuer and authenticated by the Trustee, valid and binding legal
obligations of the Issuer and to make this Indenture a valid and binding
agreement have been done.
NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:
GRANTING CLAUSES
The Issuer, in consideration of the premises and the acceptance by the
Trustee of the trusts hereby created and of the purchase and acceptance of the
Bonds by the Owners thereof, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, in order to secure the payment of the
principal of, and premium, if any, and interest on, the Bonds according to their
tenor and effect and to secure the performance and observance by the Issuer of
all the covenants expressed or implied herein and in the Bonds, does hereby
grant, bargain, sell convey, mortgage and warrant, and assign, pledge and grant
a security interest in, the Trust Estate to the Trustee, and its successors in
trust and assigns forever for the benefit of the Owners:
TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned
or hereafter acquired, to the Trustee and its respective successors in trust and
assigns forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for
the equal and proportionate benefit, security and protection of all present and
future Owners of the Bonds issued under and secured by this Indenture without
privilege, priority or distinction as to the lien or otherwise of any of the
Bonds over any of the other Bonds;
<PAGE> 7
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of, and premium, if any,
and interest on, the Bonds due or to become due thereon, at the times and in the
manner mentioned in the Bonds and as provided in Article VIII hereof according
to the true intent and meaning thereof, and shall cause the payments to be made
as required under Article V hereof, or shall provide, as permitted hereby, for
the payment thereof in accordance with Article VIII hereof, and shall well and
truly keep, perform and observe all the covenants and conditions pursuant to the
terms of this Indenture to be kept, performed and observed by it, and shall pay,
or cause to be paid, the principal of, and premium, if any, and interest on, the
Bonds due or to become due in accordance with the terms and provisions hereof,
then and in that case this Indenture and the rights hereby granted shall cease,
terminate and be void and the Trustee shall thereupon cancel and discharge this
Indenture and execute and deliver to the Issuer and the Company such instruments
in writing as shall be requisite to evidence the discharge hereof, otherwise
this Indenture shall be and remain in full force and effect.
THIS TRUST INDENTURE FURTHER WITNESSETH, and it is expressly declared,
that all Bonds issued and secured hereunder are to be issued, authenticated and
delivered, and all of the Trust Estate is to be dealt with and disposed of,
under, upon and subject to the terms, conditions, stipulations, covenants,
agreements, trusts, uses and purposes hereinafter expressed, and the Issuer has
agreed and covenanted, and does hereby agree and covenant, with the Trustee and
with the respective Owners, from time to time, of the Bonds, or any part
thereof, as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. GENERAL DEFINITIONS. The terms defined in this Section
1.01 shall have the meanings provided herein for all purposes of this Indenture
and the Agreement, unless the context clearly requires otherwise. Additional
definitions relating to the PARS Rate are contained in Section 1.02. The two
sets of definitions contained in Sections 1.01 and 1.02 are set forth separately
for convenience of reference only.
"Act" means Sections 90-5-101 to 90-5-114, inclusive, Montana Code
Annotated, as from time to time supplemented and amended.
"Administration Expenses" means reasonable compensation and
reimbursement of reasonable expenses and advances payable to the Issuer, the
Trustee, the Registrar, the Remarketing Agent, the Paying Agent, Moody's and
S&P.
"Agreement" or "Loan Agreement" means the Loan Agreement, dated as of
September 1, 1999, between the Issuer and the Company, as amended and
supplemented from time to time.
"Ambac" shall mean Ambac Assurance Corporation, a Wisconsin-domiciled
stock insurance company.
-2-
<PAGE> 8
"Authorized Company Representative" means each person at the time
designated to act on behalf of the Company by written certificate furnished to
the Issuer and the Trustee containing the specimen signature of such person and
signed on behalf of the Company by its President, any Vice President, its
Secretary, any Assistant Secretary, its Treasurer or any Assistant Treasurer.
Such certificate may designate an alternate or alternates.
"Authorized Denomination" means (i) $25,000 or any integral multiple of
$25,000 when the Bonds bear interest as a PARS Rate; (ii) $100,000 or any
integral multiple of $100,000 when the Bonds bear interest at a Daily Interest
Rate or Weekly Interest Rate; (iii) $100,000 or any integral multiple of $5,000
in excess of $100,000 when the Bonds bear interest at a Flexible Interest Rate;
and (iv) $5,000 or any integral multiple of $5,000 when the Bonds bear interest
at a Term Interest Rate.
"Beneficial Owner" has, when the Bonds are held in book-entry form, the
meaning ascribed to such term in Section 2.16 hereof
"Bond" or "Bonds" means the Issuer's Pollution Control Revenue Refunding
Bonds (Avista Corporation Colstrip Project) Series 1999B, issued pursuant to
this Indenture.
"Bond Counsel" means Chapman and Cutler or any other firm of nationally
recognized bond counsel familiar with the type of transactions contemplated
under this Indenture selected by the Company and acceptable to the Trustee.
"Bond Documents" means this Indenture, the Agreement and the Bonds.
"Bond Fund" means the trust fund by that name created pursuant to
Section 6.01(a) hereof.
"Bond Payment Date" means any Interest Payment Date and any other date
on which the principal of, and premium, if any, and interest on, the Bonds is to
be paid to the Owners thereof, whether upon redemption, at maturity or upon
acceleration of maturity of the Bonds.
"Bond Purchase Contract" means the Bond Purchase Contract dated
September 8, 1999, between the Issuer and Goldman, Sachs & Co., as Underwriter.
"Bond Resolution" means the resolution duly adopted and approved by the
City Council of the Issuer on August 23, 1999, authorizing the issuance and sale
of the Bonds and the execution of this Indenture and the Agreement.
"Business Day" means any day except a Saturday, Sunday or other day (a)
on which commercial banks located in the cities in which the Principal Office of
the Trustee, the Principal Office of the Company, the Principal Office of the
Remarketing Agent or the Principal Office of the Paying Agent are located are
required or authorized by law or regulation to remain closed or are closed, or
(b) on which The New York Stock Exchange is closed.
-3-
<PAGE> 9
"Change of Credit Facility" means (a) the delivery of a Credit Facility
(or evidence thereof) to the Trustee, (b) the termination of an existing Credit
Facility or (c) a combination of (a) and (b), in each case in accordance with
Section 4.07 of the Agreement.
"Closing" and "Closing Date" means the date of the first authentication
and delivery of fully-executed and authenticated Bonds under this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended. Each
reference to a section of the Code herein shall be deemed to include the United
States Treasury Regulations, including temporary and proposed regulations,
relating to such section which are applicable to the Bonds or the use of the
proceeds thereof.
"1954 Code" means the Internal Revenue Code of 1954, as amended. Each
reference to a section of the 1954 Code herein shall be deemed to include the
United States Treasury Regulations, including temporary and proposed
regulations, relating to such section which are applicable to the Bonds or the
use of the proceeds thereof.
"Company" means Avista Corporation, a corporation organized and existing
under the laws of the State of Washington and formerly known as The Washington
Water Power Company, or its successors and assigns pursuant to Section 5.01 of
the Agreement.
"Costs of Issuance" means any items of expense directly or indirectly
payable or reimbursable by the Company and directly or indirectly attributable
to the authorization, sale and issuance of the Bonds, including, but not limited
to, printing costs; costs of preparation and reproduction of documents; initial
fees and charges of the Trustee, the Registrar and the Paying Agent; legal fees
and charges, if any; underwriting discount or fees paid to Goldman, Sachs & Co.
in connection with the initial offering and sale of the Bonds; the Issuer fees
and direct out-of-pocket expenses incurred in issuing and paying the Bonds and
loaning the proceeds of the Bonds to the Company (but not including any overhead
or administrative costs of the Issuer relating to the Bonds); letter of credit
fees and municipal bond insurance premiums, if any, (but such fees or premiums
shall not be treated as Costs of Issuance to the extent such fees and premiums
are for the payment of the reasonable costs of a transfer of credit risk under
the Code and do not reflect indirect payment of additional Costs of Issuance);
fees and disbursements of financial advisers, consultants and professionals; and
costs of credit ratings.
"Credit Facility" means a facility provided in accordance with Section
4.07 of the Agreement to provide security or liquidity for the Bonds. The term
"Credit Facility" includes, by way of example and not of limitation, one or more
letters of credit, bond insurance policies, standby bond purchase agreements,
lines of credit, first mortgage bonds and other security instruments or
liquidity devices. A Credit Facility may have an expiration date earlier than
the maturity of the Bonds. The initial Credit Facility is the Insurance Policy.
"Credit Facility Agreement" means any agreement between the Company and
the Provider and relating to the Credit Facility then in effect. The initial
Credit Facility Agreement is that Insurance Agreement dated as of September 1,
1999 between Ambac and the Company.
-4-
<PAGE> 10
"Daily Interest Rate" means the interest rate on the Bonds established
pursuant to Section 2.04 hereof
"Daily Interest Rate Period" means each period during which a Daily
Interest Rate is in effect.
"Delivery Office of the Trustee" means the office designated as such by
the Trustee in writing to the Remarketing Agent, the Registrar, the Issuer and
the Company.
"Determination of Taxability" shall have the meaning set forth in
Section 8.03 of the Agreement. The Trustee shall give notice of a Determination
of Taxability as provided in Section 10.05 hereof.
"DTC" means The Depository Trust Company and its successors and assigns.
"DTC Participants" means those brokers, securities dealers, banks, trust
companies, clearing corporations and certain other organizations from time to
time for which DTC holds Bonds as securities depository.
"DTC Representation Letter" has the meaning assigned thereto in Section
2.16(c) hereof.
"Due for Payment" has the meaning specified in the Credit Facility.
"Event of Default" means any occurrence or event specified in Section
9.01 hereof
"Executive Officer" means the Mayor of the Issuer.
"Exempt Facilities" means facilities which qualify as "sewage or solid
waste disposal facilities" or "air or water pollution control facilities" as
defined in the 1954 Code and which qualify as a "project" under the Act.
"Favorable Opinion of Bond Counsel" means an opinion of Bond Counsel
addressed to the Issuer and the Trustee to the effect that the proposed action
is not prohibited by the Act or the Indenture or the Loan Agreement, as
applicable, and will not adversely affect the Tax-Exempt status of the Bonds.
"Flexible Interest Rate" means, with respect to any Bond, the interest
rate or rates associated with such Bond established in accordance with Section
2.07 hereof.
"Flexible Interest Rate Period" means each period comprised of Flexible
Segments during which Flexible Interest Rates are in effect.
"Flexible Segment" means, with respect to each Bond bearing interest at
a Flexible Interest Rate, the period established in accordance with Section
2.07(a) hereof.
-5-
<PAGE> 11
"Government Obligations" means direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed as to full and
timely payment by, the United States of America, which are not subject to
redemption or prepayment prior to stated maturity.
"Indenture" means this Trust Indenture between the Issuer and the
Trustee relating to issuance of the Bonds, as amended or supplemented from time
to time as permitted herein.
"Information Services" means Financial Information, Inc.'s "Daily Called
Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302,
Attention: Editor; Kenny Information Services' "Called Bond Service," 65
Broadway, 16th Floor, New York, New York 10006; Moody's "Municipal and
Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention:
Municipal News Reports; the Municipal Securities Rulemaking Board, CDI Pilot,
1640 King Street, Suite 300, Alexandria, Virginia 22314 and Standard and Poor's
"Called Bond Record," 55 Water Street, New York, New York 10041; or, in
accordance with then-current guidelines of the Securities and Exchange
Commission, such other addresses and/or such other services providing
information with respect to called bonds, or no such services, as the Company
may designate in a certificate delivered to the Trustee.
"Initial Period" means the period from and including the Closing Date
through and including February 1, 2000.
"Insurance Policy" shall mean the municipal bond insurance policy issued
by Ambac insuring the payment when due of the principal of and interest on the
Bonds as provided therein.
"Insurance Trustee" has the meaning specified in the Insurance Policy.
The Insurance Policy specifies that the United States Trust Company of New York
is initially the Insurance Trustee.
"Interest Account" means the trust account by that name established in
the Bond Fund pursuant to Section 6.01 hereof.
"Interest Coverage Rate" means the interest rate specified in a Credit
Facility as being the rate used to determine the amount of interest on the Bonds
covered by such Credit Facility.
"Interest Payment Date" means:
(a) with respect to any PARS Rate Period, the Business Day
immediately following the Initial Period and (i) when used with respect
to any Auction Period other than a daily Auction Period, the Business
Day immediately following such Auction Period and (ii) when used with
respect to a daily Auction Period, the first Business Day of the month
immediately succeeding such Auction Period,
(b) with respect to any Daily or Weekly Interest Rate Period,
the first Business Day of each calendar month,
-6-
<PAGE> 12
(c) with respect to any Term Interest Rate Period, the first day
of the sixth month following the commencement of the Term Interest Rate
Period and the first day of each sixth month thereafter, and the day
following the last day of a Term Interest Rate Period,
(d) with respect to any Flexible Segment, the Business Day next
succeeding the last day of such Flexible Segment, and
(e) with respect to any Rate Period, the day next succeeding the
last day thereof.
"Investment Securities" means any of the following obligations
or securities, to the extent permitted by law and subject to the
provisions of Article VII hereof, on which neither the Company nor any
of its subsidiaries is the obligor.
(a) Government Obligations;
(b) Obligations of any of the following federal agencies, which
obligations represent the full faith and credit of the United States of
America:
- Export-Import Bank
- Farm Credit System Financial Assistance
Corporation
- Rural Economic Community Development
Administration (formerly the Farmers Home
Administration)
- General Services Administration
- U.S. Maritime Administration
- Small Business Administration
- Government National Mortgage Association (GNMA)
- U.S. Department of Housing & Urban Development
(PHA's)
- Federal Housing Administration
- Federal Financing Bank;
(c) Direct obligations of any of the following federal agencies
which obligations are not fully guaranteed by the full faith and credit
of the United States of America:
- Senior debt obligations rated "Aaa" by Moody's
and "AAA" by S&P issued by the Federal National
Mortgage Association (FNMA) or Federal Home Loan
Mortgage Corporation (FHLMC)
- Obligations of the Resolution Funding
Corporation (REFCORP)
- Senior debt obligations of the Federal Home Loan
Bank System
- Senior debt obligations of other
government-sponsored agencies approved by the
Provider;
(d) U.S. dollar denominated deposit accounts, federal funds and
bankers' acceptances with domestic commercial banks which have a rating
on their short term
-7-
<PAGE> 13
certificates of deposit on the date of purchase of "A-1" or "A-1+" by
S&P and "P-1" by Moody's and maturing no more than 360 days after the
date of purchase. (Ratings on holding companies are not considered as
the rating of the bank.);
(e) Commercial paper which is rated at the time of purchase in
the single highest classification, "A-1+" by S&P and "P-1" by Moody's
and which matures not more than 270 days after the date of purchase;
(f) Investments in a money market fund rated "AAAm" or "AAAm-G"
or better by S&P;
(g) Pre-refunded Municipal Obligations defined as follows: Any
bonds or other obligations of any state of the United States of America
or of any agency, instrumentality or local governmental unit of any such
state which are not callable at the option of the obligor prior to
maturity or as to which irrevocable instructions have been given by the
obligor to call on the date specified in the notice; and
(1) which are rated, based on an irrevocable escrow
account or fund (the "escrow"), in the highest rating category
of S&P and Moody's or any successors thereto; or
(2) (i) which are fully secured as to principal and
interest and redemption premium, if any, by an escrow consisting
only of cash or Government Obligations, which escrow may be
applied only to the payment of such principal of and interest
and redemption premium, if any, on such bonds or other
obligations on the maturity date or dates thereof or the
specified redemption date or dates pursuant to such irrevocable
instructions, as appropriate, and (ii) which escrow is
sufficient, as verified by a nationally recognized independent
certified public accountant, to pay principal of and interest
and redemption premium, if any, on the bonds or other
obligations described in this clause (g) on the maturity date or
dates specified in the irrevocable instructions referred to
above, as appropriate;
(h) General obligations of states with a rating of at least
"A2/A" or higher by both Moody's and S&P;
(i) Investment agreements approved in writing by the Provider
supported by appropriate opinions of counsel with notice to S&P; and
(j) Other forms of investments (including repurchase agreements)
approved in writing by the Provider with notice to S&P.
"Issue Date" means the date of the initial authentication and delivery
of the Bonds, being September 15, 1999.
-8-
<PAGE> 14
"Issuer" means the City of Forsyth, Montana, and its successors, and any
political subdivision resulting from or surviving any consolidation or merger to
which it or its successors may be a party.
"Loan Payments" means the payments required to be made by the Company
pursuant to Section 4.01(a) of the Agreement.
"Mail" means by first-class mail postage prepaid.
"Maturity Date" means March 1, 2034.
"Maximum Interest Rate" means (a) while a Credit Facility is in effect
that specifies an Interest Coverage Rate, the lesser of 18% per annum or the
Interest Coverage Rate specified in the Credit Facility, and (b) at all other
times, 18% per annum.
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns,
and, if such corporation shall for any reason no longer perform the functions of
a securities rating agency, "Moody's" shall be deemed to refer to any other
nationally recognized rating agency designated by the Company by notice to the
Issuer, the Trustee and the Remarketing Agent.
"Outstanding" or "Bonds Outstanding" or "Outstanding Bonds" means, as of
any given date, all Bonds which have been authenticated and delivered by the
Trustee under this Indenture, except:
(a) Bonds canceled or purchased by or delivered to the Trustee
for cancellation;
(b) Bonds that have become due (at maturity or on redemption,
acceleration or otherwise) and for the payment, including premium if
any, and interest accrued to the due date, of which sufficient moneys
are held by the Trustee;
(c) Bonds deemed paid in accordance with Article VIII hereof;
and
(d) Bonds in lieu of which others have been authenticated under
Section 2.11 (relating to transfer and exchange of Bonds) or Section
2.13 (relating to mutilated, lost, stolen, destroyed or undelivered
Bonds) or Bonds paid pursuant to Section 2.13;
provided, however, that if the principal of or interest due on Bonds is paid by
the Provider pursuant to the Credit Facility, such Bonds shall remain
Outstanding for all purposes of this Indenture until the Provider receives
payment therefor as contemplated by the Credit Facility.
Bonds purchased by the Trustee or the Company pursuant to Article III
hereof will continue to be Outstanding until the Company has paid or caused to
be paid to the Trustee an amount sufficient to provide for the payment of all
accrued interest on such Bonds and the Company has directed the Trustee to
cancel such Bonds. Bonds purchased pursuant to tenders
-9-
<PAGE> 15
and not delivered to the Trustee for payment are not Outstanding, but there will
be Outstanding Bonds authenticated and delivered in lieu of such undelivered
Bonds as contemplated by Section 3.03 hereof.
"Owner" or "Owners" or "Owner of Bonds" or "Owners of Bonds" means the
registered owner of any Bond; provided however, when used in the context of the
Tax-Exempt status of the Bonds, the term "Owners" shall include a Beneficial
Owner.
"PARS" and other definitions relating to PARS Rate Bonds are set forth
in Section 1.02 hereto. Reference is also hereby made to Exhibit B for certain
provisions relating to Auction Procedures for the PARS Rate Bonds.
"Paying Agent" means any paying agent appointed as provided in Section
10.23 hereof, or any successor thereto.
"Person" means one or more individuals, estates, joint ventures,
joint-stock companies, partnerships, associations, corporations, limited
liability companies, trusts or unincorporated organizations, and one or more
governments or agencies or political subdivisions thereof.
"Plant" means the Colstrip Plant Units 3 and 4 coal-fired steam electric
generating plant, located in Rosebud County, Montana.
"Pollution Control Facilities" means those items of machinery,
equipment, structures, improvements, other facilities and related property,
which have been or will be acquired, constructed and improved at the Plant and
are particularly described in Exhibit A to the Agreement, as said Exhibit A may
be from time to time amended.
"Principal Account" means the trust account by that name established
within the Bond Fund pursuant to Section 6.01 hereof.
"Principal Office of the Company" means the office of the Company
specified in or designated pursuant to Section 3.06(c) hereof.
"Principal Office of the Paying Agent" means the office designated in
writing by the Paying Agent to the Trustee, the Issuer, the Company, the
Registrar, the Provider and the Remarketing Agent.
"Principal Office of the Registrar" means the office or offices
designated as such by the Registrar in writing to the Trustee, the Company, the
Issuer, the Provider and the Remarketing Agent.
"Principal Office of the Remarketing Agent" means the office designated
in writing by the Remarketing Agent to the Trustee, the Issuer, the Company, the
Provider, the Registrar and the Paying Agent.
-10-
<PAGE> 16
"Principal Office of the Trustee" means the office designated as such by
the Trustee in writing to the Remarketing Agent, the Registrar, the Provider,
the Issuer and the Company.
"Prior Agreement" means the Loan Agreement between the Issuer and the
Company, dated as of October 1, 1989, pursuant to which the Company is obligated
to provide for payment of the Prior Bonds.
"Prior Bond Fund" means the bond fund created under Section 4.01(b) of
the Prior Indenture from which payments of principal and interest on the Prior
Bonds are made.
"Prior Bonds" means the City of Forsyth, Rosebud County, Montana,
Pollution Control Revenue Refunding Bonds (The Washington Water Power Company
Colstrip Project) Series 1989B which are being refunded pursuant to the
Refunding with the proceeds of the Bonds.
"Prior Indenture" means the Indenture of Trust between the Issuer and
the Prior Trustee, dated as of October 1, 1989, pursuant to which the Prior
Bonds were issued.
"Prior Trustee" means Chemical Bank (which is now known as The Chase
Manhattan Bank), as trustee under the Prior Indenture.
"Project" means the Company's 15% undivided interest in the Pollution
Control Facilities.
"Project Certificate" means the Company's certificate or certificates,
delivered concurrently with the initial authentication and delivery of the
Bonds, with respect to certain facts which are within the knowledge of the
Company to enable Bond Counsel to determine whether interest on the Bonds is
includible in the gross income of the Owners thereof under applicable provisions
of the Code.
"Provider" and "Provider of the Credit Facility" means the provider of
the Credit Facility. The initial Provider is Ambac.
"Provider Default" means any of the following events:
(a) the failure of the Provider to make any payment required
under the Credit Facility when the same shall become due and payable or
the Credit Facility shall for any reason cease to be in full force and
effect;
(b) a decree or order for relief shall be entered by a court or
insurance regulatory authority having jurisdiction over the Provider in
an involuntary case under an applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, custodian, trustee, sequestrator (or similar official) of
the Provider or for any substantial part of the property of the Provider
or ordering the winding-up or liquidation of the affairs of the
Provider, and the continuance of any such decree or order shall be
unstayed and remain in effect for a period of 60 consecutive days
thereafter; or
-11-
<PAGE> 17
(c) the Provider shall commence a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the Provider shall consent to or
acquiesce in the entry of an order for relief in an involuntary case
under any such law, or the Provider shall consent to the appointment of
or taking of possession by a receiver, liquidator, trustee, custodian,
sequestrator (or similar official) of the Provider or for any
substantial part of its property, or the Provider shall make a general
assignment for the benefit of creditors, or the Provider shall fail
generally or admit in writing its inability to pay its debts as such
debts become due, or the Provider shall take corporate action in
contemplation or furtherance of any of the foregoing.
"Rate" means any PARS Rate, Daily Interest Rate, Weekly Interest Rate,
Flexible Interest Rate or Term Interest Rate.
"Rate Period" means any PARS Rate Period, Daily Interest Rate Period,
Weekly Interest Rate Period, Flexible Interest Rate Period or Term Interest Rate
Period.
"Rating Category" means one of the generic rating categories of either
Moody's or S&P, without regard to any refinement or gradation of such rating
category by a numerical modifier or otherwise.
"Rebate Fund" means the trust fund by that name created pursuant to
Section 6.01(b) hereof.
"Record Date" means:
(a) with respect to a PARS Rate Period other than a daily
Auction Period, the second Business Day preceding an Interest Payment
Date therefor and during a daily Auction Period, the last Business Day
of the month preceding an Interest Payment Date therefor,
(b) with respect to any Interest Payment Date in respect of any
Daily Interest Rate Period, Weekly Interest Rate Period or Flexible
Segment, the Business Day next preceding such Interest Payment Date,
(c) with respect to any Interest Payment Date in respect of any
Term Interest Rate Period (except as provided in clause (d) below), the
fifteenth day of the month preceding such Interest Payment Date, and
(d) for any Interest Payment Date established pursuant to clause
(e) of the definition of "Interest Payment Date" in this Section 1.01 in
respect of a Term Interest Rate Period, the Business Day next preceding
such Interest Payment Date.
"Redemption Date" means December 1, 1999, the date upon which the Prior
Bonds are to be redeemed.
-12-
<PAGE> 18
"Refunding" means the series of transactions whereby the Prior Bonds are
refunded and cancelled with the proceeds of the Bonds and other money provided
by the Company.
"Registrar" means the Trustee or any successor Registrar appointed in
accordance with Section 10.22.
"Remarketing Agent" means any Person serving from time to time as
Remarketing Agent under this Indenture.
"Remarketing Agreement" means the remarketing agreement between the
Company and the Remarketing Agent pursuant to which the Remarketing Agent agrees
to act as Remarketing Agent for the Bonds, as such remarketing agreement may be
amended and supplemented from time to time.
"Revenues" means all moneys pledged hereunder and paid or payable to the
Trustee for the account of the Issuer in accordance with the Agreement and the
Credit Facility, and all receipts credited under the provisions of this
Indenture against such payments; provided however, that "Revenues" shall not
include moneys held by the Trustee in the Rebate Fund or to pay the purchase
price of Bonds subject to purchase pursuant to Article III hereof.
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., a corporation organized and existing under the laws
of the State of New York, its successors and assigns, and, if such corporation
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Company by notice to the Issuer, the
Trustee and the Remarketing Agent.
"Securities Depositories" means The Depository Trust Company, Call
Notification Department, 711 Stewart Avenue, Garden City, New York 11530,
Telephone: (516) 227-4070, Fax: (516) 227-4190, or, in accordance with
then-current guidelines of the Securities and Exchange Commission, such other
addresses and/or such other securities depositories, or no such depositories, as
the Company may designate in a certificate delivered to the Trustee.
"State" means the State of Montana.
"Supplemental Indenture" means any indenture supplemental to this
Indenture entered into between the Issuer and the Trustee pursuant to the
provisions of Section 12.01 or Section 12.02 hereof.
"Tax Certificate" means the Tax Exemption Certificate and Agreement
relating to the Bonds to be executed by the Company, the Issuer and the Trustee
on the date of the initial authentication and delivery of the Bonds, as amended
and supplemented from time to time.
"Tax-Exempt" means, with respect to interest on any obligations of a
state or local government, including the Bonds, that such interest is not
includible in gross income of the owners of such obligations for federal income
tax purposes, except for interest on any such
-13-
<PAGE> 19
obligations for any period during which such obligations are owned by a person
who is a "substantial user" of any facilities financed or refinanced with such
obligations or a "related person" within the meaning of Section 147(a) of the
Code, whether or not such interest is includible as an item of tax preference or
otherwise includible directly or indirectly for purposes of calculating other
tax liabilities, including any alternative minimum tax or environmental tax
under the Code.
"Term Interest Rate" means the interest rate on the Bonds established in
accordance with Section 2.06 hereof.
"Term Interest Rate Period" means each period of six months or more
during which a Term Interest Rate is in effect.
"Treasury Regulations" means the United States Treasury Regulations
dealing with the tax-exempt bond provisions of the Code.
"Trustee" means Chase Manhattan Bank and Trust Company, National
Association, as trustee under this Indenture, and any successor Trustee
appointed hereunder.
"Trust Estate" means all right, title and interest of the Issuer in and
to the Agreement (except for amounts payable to, and the rights of, the Issuer
under Section 4.04, Section 4.06(a), Section 5.03, Section 5.06, Section 5.07,
Section 5.08 and Section 7.05 thereof, and the Issuer's right to receive
notices, certificates, requests, requisitions, directions and other
communications thereunder), including, without limitation, all right, title and
interest of the Issuer in the Revenues, all moneys and other obligations which
are, from time to time, deposited or required to be deposited with or held or
required to be held by or on behalf of the Trustee in trust in the Bond Fund
under any of the provisions of this Indenture (except moneys or obligations
deposited with or paid to the Trustee for payment or redemption of Bonds that
are deemed no longer Outstanding hereunder), the Credit Facility, and all other
rights, title and interest which are subject to the lien of this Indenture;
provided, however, that the "Trust Estate" shall not include (a) moneys held by
the Trustee in the Rebate Fund or to pay the purchase price of Bonds subject to
purchase pursuant to Article III hereof or (b) the Plant, the Pollution Control
Facilities, the Project or any part thereof.
"Weekly Interest Rate" means the interest rate on the Bonds established
in accordance with Section 2.05 hereof.
"Weekly Interest Rate Period" means each period during which a Weekly
Interest Rate is in effect.
SECTION 1.02 PARS RATE DEFINITIONS. The terms defined in this Section
1.02 shall have the meanings provided herein for all purposes of this Indenture
and the Agreement, unless the context clearly requires otherwise.
"Agent Member" means a member of, or participant in, the Securities
Depository who will act on behalf of a Bidder and is identified as such in the
Bidder's Master Purchaser's Letter.
-14-
<PAGE> 20
"Auction" means each periodic implementation of the Auction Procedures.
"Auction Agent" means IBJ Whitehall Bank & Trust Company, New York, New
York, or any successor auctioneer appointed in accordance with Section 1.10 or
1.11 of Exhibit B hereto.
"Auction Agreement" means an agreement between the Auction Agent and the
Trustee pursuant to which the Auction Agent agrees to follow the procedures
specified in Exhibit B hereto, as such agreement may from time to time be
amended or supplemented.
"Auction Date" means during any period in which the Auction Procedures
are not suspended in accordance with the provisions hereof, if the PARS Rate
Bonds are in a daily Auction Period, each Business Day, and if the PARS Rate
Bonds are in any other Auction Period, the Business Day next preceding each
Interest Payment Date for such PARS Rate Bonds (whether or not an Auction shall
be conducted on such date); provided, however, that the last Auction Date with
respect to the PARS Rate Bonds in an Auction Period other than a daily Auction
Period shall be the earlier of (i) the Business Day next preceding the Interest
Payment Date next preceding the Conversion Date for the PARS Rate Bonds and (ii)
the Business Day next preceding the Interest Payment Date next preceding the
final maturity date for the PARS Rate Bonds; and provided, further, that if the
PARS Rate Bonds are in a daily Auction Period, the last Auction Date shall be
the earlier of (x) the Business Day next preceding the Conversion Date for the
PARS Rate Bonds and (y) the Business Day next preceding the final maturity date
for the PARS Rate Bonds. On the Business Day preceding the conversion from a
daily Auction Period to another Auction Period, there will be two Auctions, one
for the last daily Auction Period and one for the first Auction Period following
the conversion. The first Auction Date for the PARS Rate Bonds is February 1,
2000.
"Auction Period" means:
(i) with respect to the PARS Rate Bonds in a daily mode, a
period beginning on each Business Day and extending to but not including
the next succeeding Business Day,
(ii) with respect to the PARS Rate Bonds in a seven-day mode, a
period of generally seven days beginning on a Wednesday (or the day
following the last day of the prior Auction Period if the prior Auction
Period does not end on a Tuesday) and ending on the Tuesday thereafter
(unless such Tuesday is not a Business Day, in which case ending on the
Business Day immediately preceding such Tuesday),
(iii) with respect to the PARS Rate Bonds in a 28 day mode, a
period of generally 28 days beginning on a Wednesday (or the last day of
the prior Auction Period if the Auction Period does not end on a
Tuesday) and ending on the fourth Tuesday thereafter (unless such
Tuesday is not a Business Day, in which case on the Business Day
immediately preceding such Tuesday),
(iv) with respect to the PARS Rate Bonds in a 35 day mode, a
period of generally 35 days beginning on a Wednesday (or the last day of
the prior Auction Period if
-15-
<PAGE> 21
the Auction Period does not end on a Tuesday) and ending on the fifth
Tuesday thereafter (unless such Tuesday is not a Business Day, in which
case on the Business Day immediately preceding such Tuesday), and
(v) with respect to the PARS Rate Bonds in a semiannual mode, a
period of generally six months (or shorter period upon a conversion from
another Auction Period) beginning on the day following the last day of
the prior Auction Period and ending on the next succeeding March 1 or
September 1;
provided, however, that if there is a conversion from a daily Auction Period to
a seven-day Auction Period, the next Auction Period will begin on the date of
the conversion (i.e. the Interest Payment Date for the prior Auction Period) and
will end on the next succeeding Tuesday (unless such Tuesday is not a Business
Day, in which case on the next preceding Business Day), if there is a conversion
from a daily Auction Period to a 28-day Auction Period, the next Auction Period
will begin on the date of the conversion (i.e. the Interest Payment Date for the
prior Auction Period and will end on the Tuesday (unless such Tuesday is not a
Business Day, in which case on the next preceding Business Day) which is more
than 21 days but not more than 28 days from such date of conversion, and, if
there is a conversion from a daily Auction Period to a 35-day Auction Period,
the next Auction Period will begin on the date of the conversion (i.e. the
Interest Payment Date for the prior Auction Period) and will end on the Tuesday
(unless such Tuesday is not a Business Day, in which case on the next preceding
Business Day) which is more than 28 days but no more than 35 days from such date
of conversion.
"Auction Procedures" means the procedures for conducting Auctions for
the PARS Rate Bonds during a PARS Rate Period set forth in Exhibit B hereto.
"Auction Rate" means for each Auction Period, (i) if Sufficient Clearing
Bids exist, the Winning Bid Rate, provided, however, if all of the PARS Rate
Bonds are the subject of Submitted Hold Orders, the Minimum PARS Rate and (ii)
if Sufficient Clearing Bids do not exist, the Maximum PARS Rate.
"Available Bonds" means the aggregate principal amount of the PARS Rate
Bonds that are not the subject of Submitted Hold Orders.
"Bid" shall have the meaning specified in subsection (a) of Section 1.02
of Exhibit B hereto.
"Bidder" means each Existing Owner and Potential Owner who places an
Order.
"Broker-Dealer" means any entity that is permitted by law to perform the
function required of a Broker-Dealer in Exhibit B hereto that is a member of, or
a direct participant in, the Securities Depository, that has been selected by
the Company, with the consent of Goldman, Sachs & Co. as long as Goldman, Sachs
& Co. is a Broker-Dealer, and that is a party to a Broker-Dealer Agreement with
the Auction Agent.
-16-
<PAGE> 22
"Broker-Dealer Agreement" means an agreement between the Auction Agent
and a Broker Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in Exhibit B hereto, as such agreement may from to time be
amended or supplemented.
"Existing Owner" means a Person who has signed a Master Purchaser's
Letter and is listed as the beneficial owner of the PARS Rate Bonds in the
records of the Auction Agent.
"Hold Order" shall have the meaning specified in subsection (a) of
Section 1.02 of Exhibit B hereto.
"Master Purchaser's Letter" means a letter substantially in the form
attached to the Broker-Dealer Agreement addressed to a Broker-Dealer, among
others, in which a Person agrees, among other things, to offer to purchase, to
purchase, to offer to sell and/or to sell the PARS Rate Bonds as set forth in
Exhibit B hereto.
"Maximum PARS Rate" means, as of any Auction Date, the Maximum Interest
Rate.
"Minimum PARS Rate" means, as of any Auction Date, the lesser of the
Maximum Interest Rate and a per annum rate equal to 45% of the PARS Index in
effect on such Auction Date.
"No Auction Rate" means, as of any Auction Date, the lesser of the
Maximum PARS Rate and the rate determined by multiplying the Percentage of PARS
Index set forth below, based on the Prevailing Rating of the PARS Rate Bonds in
effect at the close of business on the Business Day immediately preceding such
Auction Date, by the PARS Index:
<TABLE>
<CAPTION>
PREVAILING RATING OF PERCENTAGE OF
PARS BONDS PARS INDEX
---------- ----------
<S> <C>
AAA/Aaa 65%
AA/Aa 70%
A/A 85%
Below A/A 100%
</TABLE>
"Order" means a Hold Order, Bid or Sell Order.
"PARS" means the PARS Rate Bonds while they bear interest at the PARS
Rates.
"PARS Index" shall have the meaning specified in Section 1.07 of Exhibit
B hereto.
"PARS Rate" means the rate of interest to be borne by the PARS Rate
Bonds during each Auction Period, not greater than the Maximum Interest Rate,
determined in accordance with Section 2.03; provided that all PARS shall bear
the same PARS Rate.
"PARS Rate Adjustment Date" means the first day of each Auction Period.
-17-
<PAGE> 23
"PARS Rate Bonds" means the Bonds during any PARS Rate Period.
"PARS Rate Conversion Date" means the date on which the PARS Rate Bonds
convert from an interest rate period other than a PARS Rate Period and begin to
bear interest at a PARS Rate.
"PARS Rate Period" means each period during which a PARS Rate is in
effect.
"Payment Default" means the failure to make payment of interest on,
premium, if any, and principal of the PARS Rate Bonds when due.
"Potential Owner" means any Person, including any Existing Owner, who
shall have executed a Master Purchaser's Letter and who may be interested in
acquiring a beneficial interest in the PARS Rate Bonds in addition to the PARS
Rate Bonds currently owned by such Person, if any,
"Prevailing Rating" means:
(a) AAA/Aaa, if the PARS Rate Bonds shall have a rating of AAA
or better by S&P and a rating of Aaa or better by Moody's;
(b) if not AAA/Aaa, AA/Aa if the PARS Rate Bonds shall have a
rating of AA- or better by S&P and a rating of Aa3 or better by Moody's;
(c) if not AAA/Aaa or AA/Aa, A/A if the PARS Rate Bonds shall
have a rating of A- or better by S&P and a rating of A3 or better by
Moody's; and
(d) if not AAA/Aaa, AA/Aa or A/A, then below A/A, whether or not
the PARS Rate Bonds are rated by any securities rating agency.
For purposes of this definition, S&P's rating categories of "AAA", "AA" and "A-"
and Moody's rating categories of "Aaa," "Aa3" and "A3," shall be deemed to refer
to and include the respective rating categories correlative thereto in the event
that any such Rating Agencies shall have changed or modified their generic
rating categories or if any successor thereto appointed in accordance with the
definitions thereof shall use different rating categories. If the PARS Rate
Bonds are not rated by a Rating Agency, the requirement of a rating by such
Rating Agency shall be disregarded. If the ratings for the PARS Rate Bonds are
split between two or more of the foregoing categories, the lower rating will
determine the Prevailing Rating.
"Principal Office" means, with respect to the Auction Agent, the office
thereof designated in writing to the Issuer, the Trustee and each Broker-Dealer.
"Securities Depository" means The Depository Trust Company and its
successors and assigns or any other securities depository selected by the Issuer
which agrees to follow the procedures required to be followed by such securities
depository in connection with the PARS Rate Bonds.
-18-
<PAGE> 24
"Sell Order" shall have the meaning specified in subsection (a) of
Section 1.02 of Exhibit B hereto.
"Submission Deadline" means 1:00 p.m., New York, New York time, on each
Auction Date not in a daily Auction Period and 11:00 a.m., New York, New York
time, on each Auction Date in a daily Auction Period, or such other time on such
date as shall be specified from time to time by the Auction Agent pursuant to
the Auction Agreement as the time by which Broker-Dealers are required to submit
Orders to the Auction Agent.
"Submitted Bid" shall have the meaning specified in subsection (b) of
Section 1.04 of Exhibit B hereto.
"Submitted Hold Order" shall have the meaning specified in subsection
(b) of Section 1.04 of Exhibit B hereto.
"Submitted Order" shall have the meaning specified in subsection (b) of
Section 1.04 of Exhibit B hereto.
"Submitted Sell Order" shall have the meaning specified in subsection
(b) of Section 1.04 of Exhibit B hereto.
"Sufficient Clearing Bids" means an Auction for which the aggregate
principal amount of the PARS Rate Bonds that are the subject of Submitted Bids
by Potential Owners specifying one or more rates not higher than the Maximum
PARS Rate is not less than the aggregate principal amount of the PARS Rate Bonds
that are the subject of Submitted Sell Orders and of Submitted Bids by Existing
Owners specifying rates higher than the Maximum PARS Rate.
"Winning Bid Rate" means the lowest rate in any Submitted Bid which, if
selected by the Auction Agent as the PARS Rate, would cause the aggregate
principal amount of PARS Rate Bonds that are the subject of Submitted Bids
specifying a rate not greater than such a rate to be at least equal to the
aggregate principal amount of Available Bonds.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(a) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles;
(b) references to Articles and Sections are to the Articles and Sections
of this Indenture or the Agreement, as the case may be;
(c) words importing the singular number shall include the plural number
and vice versa and words importing the masculine shall include the feminine and
vice versa; and
(d) the headings and Table of Contents herein are solely for convenience
of reference and shall not constitute a part of this Indenture nor shall they
affect its meanings, construction or effect.
-19-
<PAGE> 25
ARTICLE II
THE BONDS
SECTION 2.01. AUTHORIZATION AND TERMS OF BONDS.
(a) There is hereby authorized and created under this Indenture an issue
of bonds designated as City of Forsyth, Montana, Pollution Control Revenue
Refunding Bonds (Avista Corporation Colstrip Project) Series 1999B. The total
aggregate principal amount of Bonds that may be issued and Outstanding under
this Indenture is expressly limited to $17,000,000 exclusive of Bonds executed
and authenticated as provided in Section 2.07 hereof; provided however, that no
Bonds shall be delivered hereunder until the Trustee receives a request and
authorization of the Issuer signed by the Executive Officer to authenticate and
deliver the principal amount of the Bonds therein specified to the purchaser or
purchasers therein identified upon payment to the Prior Trustee, for the account
of the Issuer, of the sum specified in such request and authorization.
(b) The Bonds shall be issued as registered Bonds, without coupons, in
Authorized Denominations and shall all be dated as of the Issue Date. The Bonds
shall mature, subject to prior redemption as provided in Article IV hereof, upon
the terms and conditions hereinafter set forth, on the Maturity Date. The Bonds
shall bear interest at the rate or rates determined as provided in this Article
II.
(c) The Bonds shall be numbered consecutively from 1 upward. Each Bond
shall bear interest from the Interest Payment Date next preceding the date of
registration and authentication thereof unless it is registered and
authenticated on or prior to the first Interest Payment Date, in which event it
shall bear interest from the Issue Date; provided, however, that if, as shown by
the records of the Paying Agent, interest on the Bonds shall be in default,
Bonds issued in exchange for Bonds surrendered for registration of transfer or
exchange shall bear interest from the last date to which interest has been paid
in full or duly provided for on the Bonds, or, if no interest has been paid or
duly provided for on the Bonds, from the Issue Date. Payment of the interest on
any Bond shall be made to the person appearing on the bond registration books of
the Registrar as the registered Owner thereof on the Record Date, such interest
to be paid by the Paying Agent to such registered Owner, as follows:
(1) in respect of any Bond which is registered in the book-entry
system pursuant to Section 2.16 hereof, in immediately available funds
by no later than 2:30 p.m., New York, New York time, and
(2) in respect of any Bond which is not registered in the
book-entry system pursuant to Section 2.16 hereof, (i) by bank check
mailed by first-class mail on the Interest Payment Date, to such Owner's
address as it appears on the registration books of the Registrar or at
such other address as has been furnished to the Registrar in writing by
such Owner, or (ii) during any Rate Period other than a Term Interest
Rate Period, in immediately available funds on the Interest Payment Date
(by wire transfer or by deposit to the account of the Owner of any such
Bond if such account is maintained with the
-20-
<PAGE> 26
Paying Agent), but in respect of any Owner of Bonds during a Daily
Interest Rate Period, a Weekly Interest Rate Period or a Flexible
Interest Rate Period, only to any Owner which owns Bonds in an aggregate
principal amount of at least $1,000,000 on the Record Date, according to
the written instructions given by such Owner to the Paying Agent or, if
no such instructions have been provided as of the Record Date, by bank
check mailed by first-class mail on the Interest Payment Date to the
Owner at such Owner's address as it appears as of the Record Date on the
registration books of the Registrar, except, in each case, that, if and
to the extent that there shall be a default in the payment of the
interest due on such Interest Payment Date, such defaulted interest
shall be paid to the Owners in whose name any such Bonds are registered
as of a special record date to be fixed by the Trustee, notice of which
shall be given to such Owners not less than ten (10) days prior thereto.
Both the principal of and premium, if any, on the Bonds shall be payable
upon surrender thereof in lawful money of the United States of America at the
Principal Office of the Paying Agent. Notwithstanding the foregoing, interest on
any Bond bearing a Flexible Interest Rate and not registered in the book-entry
system pursuant to Section 2.16 hereof shall be paid only upon presentation to
the Trustee of the Bond on which such payment is due.
SECTION 2.02. INTEREST RATES AND RATE PERIODS.
(a) General. The Bonds shall bear interest from and including the
Issue Date until final payment of the principal or redemption price thereof
shall have been made or provided for in accordance with the provisions hereof,
whether at maturity, upon redemption or otherwise, at the lesser of (A) the
Maximum Interest Rate or (B) the interest rate or rates determined as provided
in this Article II. Such rate or rates shall be effective for the periods set
forth in this Article II. During any Rate Period other than a PARS Rate Period
or a Term Interest Rate Period, interest on the Bonds shall be computed upon the
basis of a 365- or 366-day year, as applicable, for the number of days actually
elapsed. During any PARS Rate Period, interest on the Bonds shall be computed on
the basis of a 360-day year for the actual number of days elapsed except that
interest during a six month Auction Period shall be calculated on the basis of a
360-day year composed of twelve 30-day months. During any Term Interest Rate
Period, interest on the Bonds shall be computed upon the basis of a 360-day
year, consisting of twelve 30-day months. Notwithstanding any other provision of
this Indenture, it shall not be required that all Bonds bear interest at the
same rate, provided that only one Rate Period may apply to the Bonds. Not later
than 11:15 a.m. (New York, New York time) on the Business Day immediately
following the day on which there has been a change in the rate of interest
applicable to the Bonds, the Remarketing Agent shall give notice of such change
to the Trustee by telephone, promptly confirmed in writing. The Trustee hereby
agrees to give telephonic notice to the Company, promptly confirmed in writing,
on each Record Date of the amount of interest to be due and payable on the Bonds
on the next succeeding Interest Payment Date.
(b) Rate Periods. The term of the Bonds shall be divided into
consecutive Rate Periods during which the Bonds shall bear interest at the PARS
Rate, Daily Interest Rate, Weekly Interest Rate, Term Interest Rate or at
Flexible Interest Rates. During the initial Rate Period, the Bonds shall bear
interest at a PARS Rate.
-21-
<PAGE> 27
(c) Initial Period. The Bonds shall bear interest at the PARS Rate of
3.60% per annum for the Initial Period. Immediately following the Initial
Period, the Bonds shall bear interest at PARS Rates established for daily
Auction Periods unless, prior to the end of the Initial Period, the Company
changes the length of the Auction Periods immediately succeeding the Initial
Period to a longer Auction Period in accordance with Section 1.09 of Exhibit B
hereto.
(d) Determination Conclusive. The determination of each PARS Rate by
the Auction Agent and of each Flexible Interest Rate, Daily Interest Rate,
Weekly Interest Rate and Term Interest Rate and each Flexible Segment by the
Remarketing Agent, as the case may be, shall be conclusive and binding upon such
parties, the Trustee, the Paying Agent, the Issuer, the Company, the Owners of
the Bonds and any provider of a Credit Facility.
(e) Conversions Subject to Compliance With Credit Facility Agreement.
The Bonds shall not be converted from one Rate Period to a different Rate Period
unless any applicable conditions precedent to such conversion specified in the
Credit Facility Agreement (unless a Provider Default shall have occurred and be
continuing) have been satisfied.
SECTION 2.03. PARS RATES; CONVERSIONS TO AND FROM PARS RATE PERIODS.
(a) Determination and Notice of PARS Rates. The PARS Rate to be
applicable to the PARS Rate Bonds during each Auction Period shall be determined
by the Auction Agent and notice thereof shall be given, all as provided in
Exhibit B hereto. Exhibit B hereto is hereby incorporated herein by this
reference.
(b) Conversions to PARS Rate Periods. At the option of the Company
and subject to Section 2.02(e), all of the Bonds may be converted to a PARS Rate
Period from any other Rate Period as follows:
(i) In any such conversion from a Daily Interest Rate Period or
a Weekly Interest Rate Period, the PARS Rate Conversion Date shall be a
regularly scheduled Interest Payment Date on which interest is payable
for the Daily Interest Rate Period or the Weekly Interest Rate Period
from which the conversion is to be made. In any such conversion from a
Term Interest Rate Period, the PARS Rate Conversion Date shall be a
regularly scheduled Interest Payment Date on which a new Term Interest
Rate Period would otherwise have commenced, and in any such conversion
from a Flexible Interest Rate Period, the PARS Rate Conversion Date
shall be the last regularly scheduled Interest Payment Date on which
interest is payable for any Flexible Segment theretofore established for
the Bonds to be converted.
(ii) The Company shall give written notice of any such
conversion to the Auction Agent, any Remarketing Agent, the Issuer, the
Trustee and any provider of a Credit Facility not less than seven (7)
Business Days prior to the date on which the Trustee is required to
notify the Owners of the conversion pursuant to subparagraph (iii)
below. Such notice shall specify the PARS Rate Conversion Date and the
length of the initial Auction Period. Together with such notice, the
Company shall file with the Issuer, the Trustee and any provider of a
Credit Facility a Favorable Opinion of Bond Counsel.
-22-
<PAGE> 28
No such change to a PARS Rate Period shall become effective unless the
Company shall also file, with the Issuer and the Trustee, such a
Favorable Opinion of Bond Counsel dated the PARS Rate Conversion Date.
(iii) Not less than fifteen (15) days prior to the PARS Rate
Conversion Date the Trustee shall mail a written notice of the
conversion to the Owners of all Bonds to be converted; provided,
however, that the Trustee shall not mail such written notice if
converting from a Flexible Rate Period until it has received a written
confirmation from the Remarketing Agent that no Flexible Segment for the
Bonds extends beyond the PARS Rate Conversion Date. Such notice shall
state that the Bonds to be converted will be subject to mandatory
purchase on the PARS Rate Conversion Date at the purchase price
determined pursuant to Section 3.02(a) and will specify the time at
which Bonds are to be tendered for purchase.
(iv) The PARS Rate for the Auction Period commencing on the PARS
Rate Conversion Date shall be determined by the Broker-Dealer before the
Conversion Date and shall be the lowest rate which, in the judgment of
the Broker-Dealer, is necessary to enable the Bonds to be remarketed at
the principal amount thereof, plus accrued interest, if any, on the PARS
Rate Conversion Date. Such determination shall be conclusive and binding
upon the Issuer, the Company, the Trustee, the Auction Agent and the
Owners and Beneficial Owners of the Bonds to which such rate will be
applicable.
(v) Not later than 5:00 p.m., New York, New York time, on the
date of determination of the PARS Rate, the Broker-Dealer shall notify
the Trustee and the Company of such rate by telephone confirmed in
writing. Not later than 5:00 p.m., New York, New York time, on the next
succeeding Business Day, the Trustee shall give notice of such rate to
the Issuer and the Auction Agent.
(vi) The Company may revoke its election to effect a conversion
of the interest rate on any Bonds to a PARS Rate by giving written
notice of such revocation to the Issuer, the Trustee, the Remarketing
Agent, the Auction Agent, the Broker-Dealer and any provider of a Credit
Facility at any time prior to the setting of the PARS Rate by the
Broker-Dealer.
(c) Conversions From PARS Rate Periods. At the option of the Company
and subject to Section 2.02(e), all of the Bonds may be converted from a PARS
Rate Period to a Daily Interest Rate Period, a Weekly Interest Rate Period, a
Term Interest Rate Period or a Flexible Interest Rate Period, as follows:
(i) If the PARS are in an Auction Period other than the daily
Auction Period, the conversion date shall be the second regularly
scheduled Interest Payment Date following the final Auction Date. If the
PARS are in a daily Auction Period, the conversion date shall be the
next regularly scheduled Interest Payment Date.
(ii) The Company shall give written notice of any such
conversion to the Issuer, the Trustee, the Auction Agent, the
Broker-Dealer and any provider of a Credit
-23-
<PAGE> 29
Facility not less than seven (7) Business Days prior to the date on
which the Trustee is required to notify the Owners of the conversion
pursuant to subparagraph (iii) below. Such notice shall specify the
conversion date and the Rate Period to which the conversion will be made
and, if applicable, the length of any Term Rate Period. Together with
such notice, the Company shall file with the Issuer and the Trustee a
Favorable Opinion of Bond Counsel regarding such conversion. No
conversion shall become effective unless the Company shall also file,
with the Issuer, the Trustee and any provider of a Credit Facility, such
a Favorable Opinion of Bond Counsel dated the date of such conversion.
(iii) Not less than twenty (20) days prior to the conversion
date, the Trustee shall mail a written notice of the conversion to the
Owners of all Bonds to be converted, specifying the Rate Period to which
the Bonds are being converted, stating that the Bonds to be converted
will be subject to mandatory purchase on the conversion date at the
purchase price determined pursuant to Section 3.02(a), specifying the
time at which Bonds are to be tendered for purchase, stating any
conditions precedent to such conversion and stating that, if such
conditions are not satisfied, the Bonds will continue to bear interest
at PARS Rates but that the Bonds will be subject to mandatory purchase
in accordance with the last paragraph of Section 2.08 hereof.
SECTION 2.04. DAILY INTEREST RATE; ADJUSTMENT TO DAILY INTEREST RATE
PERIOD.
(a) Determination of Daily Interest Rate. During each Daily Interest
Rate Period, the Bonds shall bear interest at the Daily Interest Rate determined
by the Remarketing Agent on each Business Day for such Business Day. The Daily
Interest Rate shall be the rate determined by the Remarketing Agent (based on an
examination of Tax-Exempt obligations comparable to the Bonds known by the
Remarketing Agent to have been priced or traded under then-prevailing market
conditions) to be the lowest rate which would enable the Remarketing Agent to
sell the Bonds on the effective date of such rate at a price (without regard to
accrued interest) equal to 100% of the principal amount thereof. If the
Remarketing Agent shall not have determined a Daily Interest Rate for any day by
10:00 a.m., New York, New York time, the Daily Interest Rate for such day shall
be the same as the Daily Interest Rate for the immediately preceding day. The
Remarketing Agent shall notify the Company, the Trustee and the Paying Agent of
each Daily Interest Rate on the date of the determination thereof by written
notice communicated by electronic mail, by facsimile or by other means
acceptable to the Company, the Trustee, and the Paying Agent.
(b) Adjustment to Daily Interest Rate Period. At any time, the
Company, by written notice to the Issuer, the Trustee, the Paying Agent and the
Remarketing Agent may, subject to Section 2.02(e), elect that the Bonds shall
bear interest at a Daily Interest Rate. Such notice (A) shall specify the
effective date of such adjustment to a Daily Interest Rate, which shall be (1) a
Business Day not earlier than the fifteenth day following the fifth Business Day
after the date of receipt by the Trustee and the Paying Agent of such notice (or
such shorter period after the date of such receipt as shall be acceptable to the
Trustee); (2) in the case of an adjustment from a Term Interest Rate Period, a
day on which the Bonds would be permitted to be redeemed at the option of the
Company pursuant to Section 4.02(b)(iv) hereof or the day immediately following
the last day of the then-current Term Interest Rate Period, and (3) in the case
of an adjustment from a
-24-
<PAGE> 30
Flexible Interest Rate Period, the day immediately following the last day of the
then-current Flexible Interest Rate Period as determined in accordance with
Section 2.07(d) hereof; provided, however, that if prior to the Company's
mailing of notice of such election, any Bonds shall have been called for
redemption and such redemption shall not have theretofore been effected, the
effective date of such Daily Interest Rate Period shall not precede such
redemption date; and (B) if the adjustment is from a Term Interest Rate Period
having a duration in excess of one year, shall be accompanied by a Favorable
Opinion of Bond Counsel with respect to such adjustment.
(c) Notice of Adjustment to Daily Interest Rate Period. The Trustee
shall give notice by Mail of an adjustment to a Daily Interest Rate Period to
the Owners not less than 15 days prior to the effective date of such Daily
Interest Rate Period. Such notice shall state (A) that the interest rate on the
Bonds will be adjusted to a Daily Interest Rate (subject to the Company's
ability to rescind its election as provided in Section 2.08 hereof), (B) the
effective date of such Daily Interest Rate Period, (C) that such Bonds are
subject to mandatory purchase on such effective date, (D) the procedures for
such mandatory purchase, (E) the purchase price of such Bonds on such effective
date (expressed as a percentage of the principal amount thereof), and (F) that
the Owners of such Bonds do not have the right to retain their Bonds on such
effective date.
SECTION 2.05. WEEKLY INTEREST RATE; ADJUSTMENT TO WEEKLY INTEREST RATE
PERIOD.
(a) Determination of Weekly Interest Rate. During each Weekly
Interest Rate Period, the Bonds shall bear interest at the Weekly Interest Rate
determined by the Remarketing Agent no later than the first day of such Weekly
Interest Rate Period and thereafter no later than Tuesday of each week during
such Weekly Interest Rate Period, unless any such Tuesday shall not be a
Business Day, in which event the Weekly Interest Rate shall be determined by the
Remarketing Agent no later than the Business Day next preceding such Tuesday.
The Weekly Interest Rate shall be the rate determined by the Remarketing Agent
(based on an examination of Tax-Exempt obligations comparable to the Bonds known
by the Remarketing Agent to have been priced or traded under then prevailing
market conditions) to be the lowest rate which would enable the Remarketing
Agent to sell the Bonds on the effective date of such rate at a price (without
regard to accrued interest) equal to 100% of the principal amount thereof. If
the Remarketing Agent shall not have determined a Weekly Interest Rate for any
period, the Weekly Interest Rate shall be the same as the Weekly Interest Rate
in effect for the immediately preceding week. The first Weekly Interest Rate
determined for each Weekly Interest Rate Period shall apply to the period
commencing on the first day of such Weekly Interest Rate Period and ending on
the next succeeding Tuesday. Thereafter, each Weekly Interest Rate shall apply
to the period commencing on each Wednesday and ending on the next succeeding
Tuesday, unless such Weekly Interest Rate Period shall end on a day other than
Tuesday, in which event the last Weekly Interest Rate for such Weekly Interest
Rate Period shall apply to the period commencing on the Wednesday preceding the
last day of such Weekly Interest Rate Period and ending on such last day. The
Remarketing Agent shall notify the Company, the Trustee and the Paying Agent of
each Weekly Interest Rate on the date of the determination thereof by written
notice communicated by electronic mail, by facsimile or by other means
acceptable to the Company, the Trustee, and the Paying Agent.
-25-
<PAGE> 31
(b) Adjustment to Weekly Interest Rate Period. The Company, by
written notice to the Issuer, the Trustee, the Paying Agent and the Remarketing
Agent may, subject to Section 2.02(e), at any time elect that the Bonds shall
bear interest at a Weekly Interest Rate. Such notice (A) shall specify the
effective date of such adjustment to a Weekly Interest Rate, which shall be (1)
a Business Day not earlier than the fifteenth day following the fifth Business
Day after the date of receipt by the Trustee and the Paying Agent of such notice
(or such shorter period after the date of such receipt as shall be acceptable to
the Trustee); (2) in the case of an adjustment from a Term Interest Rate Period,
a day on which the Bonds would be permitted to be redeemed at the option of the
Company pursuant to Section 4.02(b)(iv) hereof or the day immediately following
the last day of the then-current Term Interest Rate Period; and (3) in the case
of an adjustment from a Flexible Interest Rate Period the day immediately
following the last day of the then-current Flexible Interest Rate Period as
determined in accordance with Section 2.07(d); provided however, that if prior
to the Company's making such election, any Bonds shall have been called for
redemption and such redemption shall not have theretofore been effected, the
effective date of such Weekly Interest Rate Period shall not precede such
redemption date; and (B) if the adjustment is from a Term Interest Rate Period
having a duration in excess of one year, shall be accompanied by a Favorable
Opinion of Bond Counsel with respect to such adjustment.
(c) Notice of Adjustment to Weekly Interest Rate Period. The Trustee
shall give notice by Mail of an adjustment to a Weekly Interest Rate Period to
the Owners not less than 15 days prior to the effective date of such Weekly
Interest Rate Period. Such notice shall state (A) that the interest rate on the
Bonds will be adjusted to a Weekly Interest Rate (subject to the Company's
ability to rescind its election as provided in Section 2.08 hereof), (B) the
effective date of such Weekly Interest Rate Period, (C) that such Bonds are
subject to mandatory purchase on such effective date, (D) the procedures for
such mandatory purchase, (E) the purchase price of such Bonds on such effective
date (expressed as a percentage of the principal amount thereof), and (F) that
the Owners of such Bonds do not have the right to retain their Bonds on such
effective date.
SECTION 2.06. TERM INTEREST RATE; ADJUSTMENT TO TERM INTEREST RATE
PERIOD.
(a) Determination of Term Interest Rate. During each Term Interest
Rate Period, the Bonds shall bear interest at the Term Interest Rate determined
by the Remarketing Agent on a Business Day selected by the Remarketing Agent,
but not more than 60 days prior to and not later than the effective date of such
Term Interest Rate Period. The Term Interest Rate shall be the rate determined
by the Remarketing Agent on such date as being the lowest rate (based on an
examination of Tax-Exempt obligations comparable to the Bonds known by the
Remarketing Agent to have been priced or traded under then prevailing market
conditions) which would enable the Remarketing Agent to sell the Bonds on the
effective date of such Term Interest Rate Period at a price (without regard to
accrued interest) equal to 100% of the principal amount thereof, provided
however, that if, for any reason, a Term Interest Rate for any Term Interest
Rate Period shall not be determined or become effective, then (A) in the event
the then-current Term Interest Rate Period is for one year or less, the Rate
Period for the Bonds shall automatically convert to a Daily Interest Rate Period
and (B) in the event the current Term Interest Rate Period is for more than one
year, the Rate Period for the Bonds shall automatically adjust to a Term
Interest Rate Period of one year and one day; provided, however, that if the
last day of any successive Term
-26-
<PAGE> 32
Interest Rate Period shall not be a day immediately preceding a Business Day,
then such successive Term Interest Rate Period shall end on the first day
immediately preceding the Business Day next succeeding such day or, if such Term
Interest Rate Period would end after the day prior to the final maturity date of
the Bonds, the next succeeding Rate Period shall be a Term Interest Rate Period
ending on the day prior to the final maturity date of the Bonds; provided
further that in the case of clause (B) above, if the Company delivers to the
Trustee a Favorable Opinion of Bond Counsel prior to the end of the
then-effective Term Interest Rate Period, the Rate Period for the Bonds will
adjust to a Daily Interest Rate Period. If the Daily Interest Rate for the first
day of a Daily Interest Rate Period described in clause (A) above is not
determined as provided in Section 2.04(a) hereof the Daily Interest Rate for the
first day of such Daily Interest Rate Period shall be 110% of the most recent
PSA Municipal Swap Index theretofore published in The Bond Buyer (or, if The
Bond Buyer is no longer published or no longer publishes the PSA Municipal Swap
Index, the variable rate index contained in the publication determined by the
Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined by
the Company, as the most comparable to The Bond Buyer). If a Term Interest Rate
for any such Term Interest Rate Period described in clause (B) above is not
determined as described in the first sentence of this Section 2.06(a), the Term
Interest Rate for such Term Interest Rate Period shall be 110% of the most
recent One-Year Note Index theretofore published in The Bond Buyer (or, if The
Bond Buyer is no longer published or no longer publishes the One-Year Note
Index, the one-year note index contained in the publication determined by the
Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined by
the Company, as the most comparable to The Bond Buyer). The Remarketing Agent
shall notify the Company, the Trustee and the Paying Agent of each Term Interest
Rate on the date of the determination thereof by written notice communicated by
electronic mail, by facsimile or by other means acceptable to the Company, the
Trustee, and the Paying Agent.
(b) Adjustment to or Continuation of Term Interest Rate Period. At
any time, the Company, by written notice to the Issuer, the Trustee, the Paying
Agent and the Remarketing Agent, may, subject to Section 2.02(e), elect that the
Bonds shall bear, or continue to bear, interest at a Term Interest Rate and
shall determine the duration of the Term Interest Rate Period during which such
Bonds shall bear interest at such Term Interest Rate. At the time the Company so
elects an adjustment to or continuation of a Term Interest Rate Period, the
Company may specify two or more consecutive Term Interest Rate Periods and, if
the Company so specifies, shall specify the duration of each such Term Interest
Rate Period as provided in this paragraph (b). Such notice shall specify the
effective date of each Term Interest Rate Period, which shall be (A) a Business
Day not earlier than the fifteenth day following the fifth Business Day after
the date of receipt by the Trustee and the Paying Agent of such notice (or such
shorter period after the date of such receipt as shall be acceptable to the
Trustee); (B) in the case of an adjustment from a Term Interest Period to a Term
Interest Period of a different duration or the continuation of a Term Interest
Rate Period, a day on which the Bonds would be permitted to be redeemed at the
option of the Company pursuant to Section 4.02(b)(iv) hereof or the day
immediately following the last day of the then-current Term Interest Rate
Period; and (C) in the case of an adjustment from a Flexible Interest Rate
Period the day immediately following the last day of the then-current Flexible
Interest Rate Period as determined in accordance with Section 2.07(d) hereof;
provided, however, that if prior to the Company's making such election, any
Bonds shall have been called for redemption and such redemption shall not have
theretofore been effected, the
-27-
<PAGE> 33
effective date of such Term Interest Rate Period shall not precede such
redemption date. In addition, such notice (x) shall specify the last day of such
Term Interest Rate Period (which shall be either the day preceding the date of
final maturity of the Bonds or a day which both immediately precedes a Business
Day and is at least 180 days after such effective date), and (y) unless such
Term Interest Rate Period immediately succeeds a Term Interest Rate Period of
the same duration and is subject to the same optional redemption rights under
Section 4.02(b)(iv) hereof, shall be accompanied by a Favorable Opinion of Bond
Counsel with respect to such adjustment.
If, by 15 days prior to the end of the then-current Term Interest Rate
Period, the Trustee shall not have received notice of the Company's election
that the Bonds shall bear interest at a PARS Rate, a Daily Interest Rate, a
Weekly Interest Rate, a Term Interest Rate or a Flexible Interest Rate, (A) in
the event the then-current Term Interest Rate Period is for one year or less,
the Rate Period for the Bonds shall automatically convert to a Daily Interest
Rate Period and (B) in the event the current Term Interest Rate Period is for
more than one year, the Rate Period for the Bonds shall automatically adjust to
a Term Interest Rate Period of one year and one day, provided however, that if
the last day of any successive Term Interest Rate Period shall not be a day
immediately preceding a Business Day, then such successive Term Interest Rate
Period shall end on the first day immediately preceding the Business Day next
succeeding such day or, if such Term Interest Rate Period would end after the
day prior to the Maturity Date, the next succeeding Rate Period shall be a Term
Interest Rate Period ending on the day prior to the Maturity Date; provided
however, that in the case of clause (B) above, if the Company delivers to the
Trustee a Favorable Opinion of Bond Counsel prior to the end of the
then-effective Term Interest Rate Period, the Rate Period for the Bonds will
adjust to a Daily Interest Rate Period. If the Daily Interest Rate for the first
day of a Daily Interest Rate Period described in clause (A) above is not
determined as provided in Section 2.04(a) hereof, the Daily Interest Rate for
the first day of such Daily Interest Rate Period shall be 110% of the most
recent PSA Municipal Swap Index theretofore published in The Bond Buyer (or, if
The Bond Buyer is no longer published or no longer publishes the PSA Municipal
Swap Index, the variable rate index contained in the publication determined by
the Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined
by the Company, as the most comparable to The Bond Buyer). If a Term Interest
Rate for any such Term Interest Rate Period described in clause (B) above is not
determined as described in the first sentence of this Section 2.06(a), the Term
Interest Rate for such Term Interest Rate Period shall be 110% of the most
recent One-Year Note Index theretofore published in The Bond Buyer (or, if The
Bond Buyer is no longer published or no longer publishes the One-Year Note
Index, the one-year note index contained in the publication determined by the
Remarketing Agent, or, if the Remarketing Agent is the Trustee, determined by
the Company, as the most comparable to The Bond Buyer).
At the same time that the Company elects to have the Bonds bear interest
at a Term Interest Rate or to continue to bear interest at a Term Interest Rate,
the Company may also elect that such Term Interest Rate Period shall be
automatically renewed for successive Term Interest Rate Periods each having the
same duration as the Term Interest Rate Period so specified; provided however,
that such election must be accompanied by a Favorable Opinion of Bond Counsel
with respect to such continuing automatic renewals of such Term Interest Rate
Period. If such election is made, no Favorable Opinion of Bond Counsel shall be
required in connection
-28-
<PAGE> 34
with the commencement of each successive Term Interest Rate Period determined in
accordance with such election. Further, at the same time that the Company elects
to have the Bonds bear interest at a Term Interest Rate or continue to bear
interest at a Term Interest Rate, subject to the provisions of Section 4.02(c)
hereof the Company may also specify to the Trustee optional redemption prices
and periods different from those set out in Section 4.02 hereof during the Term
Interest Rate Period(s) with respect to which such election is made.
(c) Notice of Adjustment to or Continuation of Term Interest Rate
Period. The Trustee shall give notice by Mail of an adjustment to or
continuation of a Term Interest Rate Period to the Owners not less than 15 days
prior to the effective date of such Term Interest Rate Period. Such notice shall
state (A) that the interest rate on the Bonds will be adjusted to, or continue
to be, a Term Interest Rate (subject to the Company's ability to rescind its
election as provided in Section 2.08 hereof), (B) the effective date and the
last date of such Term Interest Rate Period, (C) that the Term Interest Rate for
such Term Interest Rate Period will be determined not later than the effective
date thereof (D) how such Term Interest Rate may be obtained from the
Remarketing Agent, (E) the Interest Payment Dates after such effective date, (F)
that, during such Term Interest Rate Period, the Owners of such Bonds will not
have the right to tender their Bonds for purchase, (G) the redemption provisions
that will apply to the Bonds during such Term Interest Rate Period, and (H)
that, except when the new Term Interest Rate Period is preceded by a Term
Interest Rate Period of the same duration, such Bonds are thereby subject to
mandatory purchase on such effective date, the procedures for such mandatory
purchase, the purchase price of such Bonds on such effective date (expressed as
a percentage of the principal amount thereof), and the Owners of such Bonds do
not have the right to retain their Bonds on such effective date.
SECTION 2.07. FLEXIBLE INTEREST RATE; ADJUSTMENT TO FLEXIBLE INTEREST
RATE PERIOD.
(a) Determination of Flexible Segments and Flexible Interest Rates.
During each Flexible Interest Rate Period, each Bond shall bear interest during
each Flexible Segment for such Bond at the Flexible Interest Rate for such Bond
as described herein. Each Flexible Segment and Flexible Interest Rate for each
Bond shall be the Flexible Segment and Flexible Interest Rate determined by the
Remarketing Agent. Each Flexible Segment for any Bond shall be a period of not
less than one nor more than 270 days (subject to any limitations set forth in
the Remarketing Agreement), determined by the Remarketing Agent to be, in its
judgment, the period which, together with all other Flexible Segments for the
Bonds then outstanding, is likely to result in the lowest overall net interest
expense on the Bonds; provided however, that (A) any such Bond purchased on
behalf of the Company and remaining unsold in the hands of the Remarketing Agent
as of the close of business on the effective date of the Flexible Segment for
such Bond shall have a Flexible Segment of one day or, if such Flexible Segment
would not end on a day immediately preceding a Business Day, a Flexible Segment
of more than one day ending on the day immediately preceding the next Business
Day and (B) each Flexible Segment shall end on a day which immediately precedes
a Business Day and no Flexible Segment shall extend beyond the final maturity
date of the Bonds.
The Flexible Interest Rate for each Flexible Segment for each Bond shall
be the rate determined by the Remarketing Agent (based on an examination of
Tax-Exempt obligations comparable to the Bonds known by the Remarketing Agent to
have been priced or traded under
-29-
<PAGE> 35
then prevailing market conditions) no later than the first day of such Flexible
Segment (and in the case of a Flexible Segment of one day, no later than 12:30
p.m. New York, New York time, on such date) to be the lowest rate which would
enable the Remarketing Agent to sell the Bonds on the effective date of such
rate at a price (without regard to accrued interest) equal to 100% of the
principal amount thereof. If a Flexible Segment or a Flexible Interest Rate for
a Flexible Segment is not determined or effective, the Flexible Segment for such
Bond shall be a Flexible Segment of one day, and the interest rate for such
Flexible Segment of one day shall be 110% of the most recent PSA Municipal Swap
Index theretofore published in The Bond Buyer (or, if The Bond Buyer is no
longer published or no longer publishes the PSA Municipal Swap Index, the
variable rate index contained in the publication determined by the Remarketing
Agent, or, if the Remarketing Agent is the Trustee, determined by the Company,
as most comparable to The Bond Buyer). The Remarketing Agent shall notify the
Company, the Trustee and the Paying Agent of each Flexible Interest Rate and
Flexible Segment on the date of the determination thereof by written notice
communicated by electronic mail, by facsimile or by other means acceptable to
the Company, the Trustee, and the Paying Agent.
(b) Adjustment to Flexible Interest Rate Period. At any time, the
Company, by written notice to the Issuer, the Trustee, the Paying Agent and the
Remarketing Agent, may, subject to Section 2.02(e), elect that the Bonds shall
bear interest at Flexible Interest Rates. Such notice (A) shall specify the
effective date of the Flexible Interest Rate Period during which such Bonds
shall bear interest at Flexible Interest Rates, which shall be (1) a Business
Day not earlier than the fifteenth day following the fifth Business Day after
the date of receipt by the Trustee and the Paying Agent of such notice (or such
shorter period after the date of such receipt as shall be acceptable to the
Trustee), and (2) in the case of an adjustment from a Term Interest Rate Period,
a day on which the Bonds would be permitted to be redeemed at the option of the
Company pursuant to Section 4.02(b)(iv) hereof or the day immediately following
the last day of the then-current Term Interest Rate Period, provided however,
that if prior to the Company's making such election any Bonds shall have been
called for redemption and such redemption shall not have theretofore been
effected, the effective date of such Flexible Interest Rate Period shall not
precede such redemption date; and (B) in the case of an adjustment from a Term
Interest Rate Period having a duration in excess of one year, shall be
accompanied by a Favorable Opinion of Bond Counsel with respect to such
adjustment. During each Flexible Interest Rate Period commencing on the date so
specified (provided that the Favorable Opinion of Bond Counsel described in
clause (B) above, if required, is reaffirmed as of such date) and ending on the
day immediately preceding the effective date of the next succeeding Rate Period,
each Bond shall bear interest at a Flexible Interest Rate during each Flexible
Segment for such Bond.
(c) Notice of Adjustment to Flexible Interest Rate Period. The
Trustee shall give notice by Mail of an adjustment to a Flexible Interest Rate
Period to the Owners not less than 15 days prior to the effective date of such
Flexible Interest Rate Period. Such notice shall state (A) that the interest
rate on the Bonds will be adjusted to Flexible Interest Rates (subject to the
Company's ability to rescind its election as provided in Section 2.08 hereof),
(B) the effective date of such Flexible Interest Rate Period, (C) that such
Bonds are thereby subject to mandatory purchase on the effective date of such
Flexible Interest Rate Period, (D) the procedures for such mandatory purchase,
(E) the purchase price of such Bonds on such effective date (expressed as a
-30-
<PAGE> 36
percentage of the principal amount thereof), and (F) that the Owners of such
Bonds do not have the right to retain their Bonds on such effective date.
(d) Adjustment From Flexible Interest Rates. At any time during a
Flexible Interest Rate Period, the Company may elect that the Bonds shall no
longer bear interest at Flexible Interest Rates and shall instead bear interest
as otherwise permitted under this Indenture. The Company shall notify the
Issuer, the Trustee, the Paying Agent and the Remarketing Agent of such election
by Mail and shall specify the Rate Period to follow with respect to such Bonds
upon cessation of the Flexible Interest Rate Period and instruct the Remarketing
Agent to determine Flexible Segments of such duration that, as soon as possible,
all Flexible Segments shall end on the same date, not earlier than the day that
would permit the notices required by Sections 2.03(b)(iii), 2.04(c), 2.05(c) or
2.06(c), as applicable, to be given, and such date shall be the last day of the
then current Flexible Interest Rate Period. Upon the establishment of such
Flexible Segments, the day next succeeding the last day of all such Flexible
Segments shall be the effective date of the Rate Period elected by the Company.
The Remarketing Agent, promptly upon the determination thereof, shall give
written notice of such last day and such effective dates to the Issuer, the
Company, the Trustee and the Paying Agent.
SECTION 2.08. RESCISSION OF ELECTION. Notwithstanding anything herein to
the contrary, the Company may rescind any election by it to adjust to or, in the
case of a Term Interest Rate Period, continue a Rate Period pursuant to Section
2.03, Section 2.04, Section 2.05, Section 2.06 or Section 2.07 hereof prior to
the effective date of such adjustment or continuation or, as provided in Section
2.03(b)(vi) hereof, prior to the setting of the PARS Rate by the Broker-Dealer,
by giving written notice thereof to the Issuer, the Trustee, the Paying Agent,
any Auction Agent and any Remarketing Agent prior to such effective date. At the
time that the Company gives notice of rescission, it may also elect in such
notice to continue the Rate Period then in effect; provided however, that if the
Rate Period then in effect is a Term Interest Rate Period, the subsequent Term
Interest Rate Period shall not be of a different duration than the Term Interest
Rate Period then in effect unless the Company provides to the Trustee a
Favorable Opinion of Bond Counsel prior to the expiration of the then-current
Term Interest Rate Period. If the Trustee receives notice of such rescission
prior to the time the Trustee has given notice to the Owners of the Bonds of the
change in or continuation of Rate Periods pursuant to Section 2.03, Section
2.04, Section 2.05, Section 2.06 or Section 2.07 hereof, then such notice of
change in or continuation of Rate Periods shall be of no force and effect and
shall not be given to the Owners. If the Trustee receives notice of such
rescission after the Trustee has given notice to the Owners of the Bonds
pursuant to Section 2.03, Section 2.04, Section 2.05, Section 2.06 or Section
2.07 hereof of an adjustment from any Rate Period other than a Term Interest
Rate Period in excess of one year or if an attempted adjustment from one Rate
Period (other than a Term Interest Rate Period in excess of one year) to another
Rate Period does not become effective for any other reason, and if the Company
does not elect to continue the Rate Period then in effect, then the Rate Period
for the Bonds shall automatically adjust to or continue in a Daily Interest Rate
Period and the Trustee shall promptly give notice thereof to the Owners of the
Bonds. If the Trustee receives notice of such rescission after the Trustee has
given notice to the Owners of the Bonds pursuant to Section 2.03, Section 2.04,
Section 2.05, Section 2.06 or Section 2.07 hereof of an adjustment from
-31-
<PAGE> 37
a Term Interest Rate Period in excess of one year to another Rate Period
(including a Term Interest Rate Period of a different duration), or if an
attempted adjustment from a Term Interest Rate Period in excess of one year to
another Rate Period (including a Term Interest Rate Period of a different
duration) does not become effective for any reason and if the Company does not
elect to continue the Rate Period then in effect, then the Rate Period for the
Bonds shall continue to be a Term Interest Rate Period of the same duration as
the immediately preceding Term Interest Rate Period, subject to the second
proviso contained in Section 2.06(a); provided that if the Company delivers to
the Trustee a Favorable Opinion of Bond Counsel prior to the end of the
then-effective Term Interest Rate Period, the Rate Period for the Bonds shall be
as directed by the Company in writing. If a Daily Interest Rate for the first
day of any Daily Interest Rate Period to which a Rate Period is adjusted under
this Section 2.08 is not determined as provided in Section 2.04(a) hereof, the
Daily Interest Rate for the first day of such Daily Interest Rate Period shall
be 110% of the most recent PSA Municipal Swap Index theretofore published in The
Bond Buyer (or, if The Bond Buyer is no longer published or no longer publishes
the PSA Municipal Swap Index, the variable rate index contained in the
publication determined by the Remarketing Agent or if the Remarketing Agent is
the Trustee, determined by the Company, as most comparable to The Bond Buyer).
The Trustee shall promptly give written notice of each such automatic adjustment
to a Rate Period pursuant to this Section 2.08 to the Owners in the form
provided in Section 2.04(c) hereof.
Notwithstanding the rescission by the Company of any notice to adjust
to or from or continue a Rate Period, if notice has been given to Owners
pursuant to Section 2.03(b)(iii), Section 2.03(c)(iii), Section 2.04(c), Section
2.05(c), Section 2.06(c) or Section 2.07(c), the Bonds shall be subject to
mandatory purchase as specified in such notice.
SECTION 2.09. FORM OF BONDS. The Bonds and the certificate of
authentication to be executed thereon shall be in substantially the form
attached hereto as Exhibit A, with such appropriate variations, omissions and
insertions as are permitted or required by this Indenture. Upon adjustment to a
Term Interest Rate Period, the form of Bond may include a summary of the
mandatory and optional redemption provisions to apply to the Bonds during such
Term Interest Rate Period, or a statement to the effect that the Bonds will not
be optionally redeemed during such Term Interest Rate Period; provided that the
Registrar shall not authenticate such a revised Bond form prior to receiving a
Favorable Opinion of Bond Counsel that such Bond form satisfies the requirements
of the Act and of this Indenture and that authentication thereof will not
adversely affect the Tax-Exempt status of the Bonds.
SECTION 2.10. EXECUTION OF BONDS. The Bonds shall be signed in the name
and on behalf of the Issuer with the manual or facsimile signature of its Mayor
and attested by the manual or facsimile signature of the City Clerk. The Bonds
shall then be delivered to the Registrar for authentication by it. In case any
officer who shall have signed any of the Bonds shall cease to be such officer
before the Bonds so signed or attested shall have been authenticated or
delivered by the Registrar or issued by the Issuer, such Bonds may nevertheless
be authenticated, delivered and issued and, upon such authentication, delivery
and issuance, shall be as binding upon the Issuer as though those who signed and
attested the same had continued to be such officers of the Issuer. Also, any
Bond may be signed on behalf of the Issuer by such persons as on the actual date
of the execution of such Bond shall be the proper officers although on the
nominal date of such Bond any such person shall not have been such officer.
-32-
<PAGE> 38
Only such of the Bonds as shall bear thereon a certificate of
authentication in the form set forth in Exhibit A hereto, manually executed by
an authorized signatory of the Registrar, shall be valid or obligatory for any
purpose or entitled to the benefits of this Indenture, and such certificate of
the Registrar shall be conclusive evidence that the Bonds so authenticated have
been duly authenticated and delivered hereunder and are entitled to the benefits
of this Indenture.
Upon authentication of any Bond, the Registrar shall set forth on
such Bond (1) the date of such authentication and (2) in the case of a Bond
bearing interest at a Flexible Interest Rate and not registered in the
book-entry system pursuant to Section 2.16 hereof, such Flexible Interest Rate,
the last day of the applicable Flexible Segment, the number of days comprising
such Flexible Segment and the amount of interest to accrue during such Flexible
Segment.
SECTION 2.11. TRANSFER AND EXCHANGE OF BONDS. Registration of any Bond
may, in accordance with the terms of this Indenture, be transferred at the
Principal Office of the Registrar, upon the books of the Registrar required to
be kept pursuant to the provisions of Section 2.12 hereof, by the Person in
whose name it is registered, in person or by its attorney duly authorized in
writing, upon surrender of such Bond for cancellation, accompanied by a written
instrument of transfer in a form approved by the Registrar, duly executed. The
Registrar shall require the payment by the Owner of the Bond requesting such
transfer of any tax or other governmental charge required to be paid and there
shall be no other charge to any Owners for any such transfer. Whenever any Bond
shall be surrendered for registration of transfer, the Issuer shall execute and
the Registrar shall authenticate and deliver a new Bond or Bonds of the same
tenor and of Authorized Denominations. Except with respect to Bonds purchased
pursuant to Sections 3.01 and 3.02 hereof, no registration of transfer of Bonds
shall be required to be made for a period of fifteen (15) days next preceding
the date on which the Trustee Mails any notice of redemption, nor shall any
registration of transfer of Bonds called for redemption be required, except the
unredeemed portion of any Bond being redeemed in part.
Bonds may be exchanged at the Principal Office of the Registrar for a
like aggregate principal amount of Bonds of the same tenor and of Authorized
Denominations. The Registrar shall require the payment by the Owner of the Bond
requesting such exchange of any tax or other governmental charge required to be
paid with respect to such exchange, and there shall be no other charge to any
Owners for any such exchange. Except with respect to Bonds purchased pursuant to
Section 3.01 and Section 3.02 hereof, no exchange of Bonds shall be required to
be made for a period of fifteen (15) days next preceding the date on which the
Trustee Mails notice of redemption, nor shall any exchange of Bonds called for
redemption be required, except the unredeemed portion of any Bond being redeemed
in part.
The Issuer, the Registrar, the Trustee and any agent of the Issuer,
the Registrar or the Trustee may treat the person in whose name the Bond is
registered as the owner thereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not the Bond be overdue, and
neither the Issuer, the Registrar, the Trustee, any paying agent nor any such
agent shall be affected by notice to the contrary.
SECTION 2.12. BOND REGISTER. The Registrar will keep or cause to be kept
at its Principal Office sufficient books for the registration and the
registration of transfer of the Bonds, which
-33-
<PAGE> 39
shall at all times, during regular business hours, be open to inspection by the
Issuer, the Trustee, the Provider, the Remarketing Agent and the Company; and,
upon presentation for such purpose, the Registrar shall under such reasonable
regulations as it may prescribe, register the transfer or cause to be registered
the transfer, on said books, Bonds as hereinbefore provided.
SECTION 2.13. BONDS MUTILATED, LOST, DESTROYED OR STOLEN. If any Bond
shall become mutilated, the Issuer, upon the request and at the expense of the
Owner of said Bond, shall execute, and the Registrar shall thereupon
authenticate and deliver, a new Bond of like tenor and number in exchange and
substitution for the Bond so mutilated, but only upon surrender to the Registrar
of the Bond so mutilated. Every mutilated Bond so surrendered to the Registrar
shall be canceled by it and delivered to the Company. If any Bond issued
hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction
or theft may be submitted to the Issuer, the Company and the Registrar, and if
such evidence shall be satisfactory to them and indemnity satisfactory to them
shall be given, the Issuer, at the expense of the Owner, shall execute, and the
Registrar shall thereupon authenticate and deliver, a new Bond of like tenor in
lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any
such Bond shall have matured or shall be about to mature, instead of issuing a
substitute Bond the Registrar may pay the same without surrender thereof). The
Issuer may require payment of a reasonable fee for each new Bond issued under
this Section and payment of the expenses which may be incurred by the Issuer and
the Registrar. Any Bond issued under the provisions of this Section in lieu of
any Bond alleged to be lost, destroyed or stolen shall constitute an original
additional contractual obligation on the part of the Issuer whether or not the
Bond so alleged to be lost, destroyed or stolen be at any time enforceable by
anyone, and shall be equally and proportionately entitled to the benefits of
this Indenture with all other Bonds secured by this Indenture.
To the extent permitted by law, the provisions of this Section are
exclusive and shall preclude all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or stolen Bonds.
SECTION 2.14. BONDS; LIMITED OBLIGATIONS. The Bonds, together with
premium, if any, and interest thereon, shall be limited and not general
obligations of the Issuer not constituting or giving rise to a pecuniary
liability of the Issuer nor any charge against its general credit or taxing
powers nor an indebtedness of or a loan of credit thereof within the meaning of
any provision or limitation of the State Constitution or laws, shall be payable
solely from the Revenues and other moneys pledged therefor under this Indenture,
and shall be a valid claim of the respective Owners thereof only against the
Bond Fund, the Revenues and other moneys held by the Trustee as part of the
Trust Estate. The Issuer shall not be obligated to pay the purchase price of
Bonds from any source.
THE BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT, LIABILITY OR GENERAL
OBLIGATION OF THE ISSUER, THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF, OR
A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER, THE STATE OR OF ANY SUCH
POLITICAL SUBDIVISION, BUT SHALL BE PAYABLE SOLELY FROM THE REVENUES AND
PROCEEDS PROVIDED THEREFOR. THE ISSUER SHALL NOT BE OBLIGATED TO PAY THE SAME
NOR INTEREST THEREON EXCEPT FROM THE REVENUES AND PROCEEDS PLEDGED THEREFOR, AND
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE ISSUER, THE STATE OR OF
ANY POLITICAL
-34-
<PAGE> 40
SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR THE
INTEREST ON THE BONDS.
No recourse shall be had for the payment of the principal of, or
premium, if any, or interest on any of the Bonds or for any claim based thereon
or upon any obligation, covenant or agreement contained in this Indenture, the
Bonds, the Agreement or any other related documents, against any past, present
or future officer, elected official agent or employee of the Issuer, or any
incorporator, officer, director or member of any successor corporation, as such,
either directly or through the Issuer or any successor corporation, under any
rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such
incorporator, officer, director or member as such is hereby expressly waived and
released as a condition of and in consideration for the execution of this
Indenture and the issuance of any of the Bonds.
SECTION 2.15. DISPOSAL OF BONDS. Upon payment of the principal of,
premium, if any, and interest represented thereby or transfer or exchange
pursuant to Section 2.11 hereof or, replacement pursuant to Section 2.13 hereof,
any Bond shall be canceled and such Bond shall be disposed of by the Registrar
in accordance with its customary procedures and the Registrar shall provide
evidence satisfactory to the Company of such cancellation and disposition.
SECTION 2.16. BOOK-ENTRY SYSTEM.
(a) Unless otherwise determined by the Issuer, the Bonds shall be
issued in the form of a single certificated fully-registered Bond, registered in
the name of Cede & Co., as nominee of DTC, or any successor nominee (the
"Nominee"). The actual owners of the Bonds (the "Beneficial Owners") will not
receive physical delivery of Bond certificates except as provided herein. Except
as provided in paragraph (d) below, all of the outstanding Bonds shall be so
registered in the registration books kept by the Registrar, and the provisions
of this Section shall apply thereto.
(b) With respect to Bonds registered on the registration books kept
by the Registrar in the name of the Nominee, the Issuer, the Company, the Paying
Agent, the Registrar, the Trustee and the Remarketing Agent shall have no
responsibility or obligation to any DTC Participant or the Beneficial Owners.
Without limiting the immediately preceding sentence, the Issuer, the Company,
the Paying Agent, the Registrar, the Trustee and the Remarketing Agent shall
have no responsibility or obligation to DTC, any DTC Participant or any
Beneficial Owner with respect to (1) the accuracy of the records of DTC, the
Nominee or any DTC Participant with respect to any ownership interest in the
Bonds, (2) the delivery by DTC or any DTC Participant of any notice with respect
to the Bonds, including any notice of redemption, or (3) the payment to any DTC
Participant or Beneficial Owner of any amount with respect to principal or
purchase price of, or premium, if any, or interest on, the Bonds. The Issuer,
the Company, the Paying Agent, the Registrar, the Trustee and the Remarketing
Agent may treat and consider the person in whose name each Bond is registered in
the registration books kept by the Registrar as the owner and absolute owner of
such Bond for the purpose of payment of principal purchase price, premium and
interest with respect to such Bond, for the purpose of giving notices of
redemption and other matters with respect to such Bond, for the purpose of
registering transfers with respect to such
-35-
<PAGE> 41
Bond, and for all other purposes whatsoever. The Paying Agent shall pay all
principal of and premium if any, and interest on, the Bonds only to or upon the
order of the respective Owners, as shown in the registration books kept by the
Registrar, or their respective attorneys duly authorized in writing, and all
such payments shall be valid and effective to fully satisfy and discharge the
Issuer's obligations with respect to payment of principal of, and premium, if
any, and interest on, the Bonds to the extent of the sum or sums so paid. No
person other than an Owner, as shown in the registration books kept by the
Registrar, shall receive a certificated Bond evidencing the obligation of the
Issuer to make payments of principal, premium, if any, and interest pursuant to
this Indenture.
(c) The Issuer, the Paying Agent, the Remarketing Agent and the
Trustee shall execute and deliver to DTC a letter of representations in
customary form with respect to the Bonds in book-entry form (the "DTC
Representation Letter"), but such DTC Representation Letter shall not in any way
limit the provisions of the foregoing paragraph (b) or in any other way impose
upon the Issuer, the Trustee or the Paying Agent any obligation whatsoever with
respect to persons having interests in the Bonds other than the Owners, as shown
on the registration books kept by the Registrar. The Trustee, the Remarketing
Agent and the Paying Agent shall take all action necessary for all
representations of the Issuer in the DTC Representation Letter with respect to
the Trustee, the Remarketing Agent and the Paying Agent to be complied with at
all times, including but not limited to, the giving of all notices required
under the DTC Representation Letter. The Trustee and Paying Agent are hereby
authorized by the Issuer to enter into the DTC Representation Letter.
(d) DTC may determine to discontinue providing its services with
respect to the Bonds at any time by giving reasonable notice to the Issuer or
the Trustee and discharging its responsibilities with respect thereto under
applicable law. The Issuer, with the consent of the Company, may terminate the
services of DTC with respect to the Bonds. Upon the discontinuance or
termination of the services of DTC with respect to the Bonds, unless a
substitute securities depository is appointed to undertake the functions of DTC
hereunder, the Issuer, at the expense of the Company, is obligated to deliver
Bond certificates to the Beneficial Owners of such Bonds, as described in this
Indenture, and such Bonds shall no longer be restricted to being registered in
the registration books kept by the Registrar in the name of the Nominee, but may
be registered in whatever name or names Owners transferring or exchanging Bonds
shall designate, in accordance with the provisions of this Indenture.
(e) Notwithstanding any other provision of this Indenture to the
contrary, so long as any Bond is registered in the name of the Nominee, all
payments with respect to principal or purchase price of or, premium if any, and
interest on such Bond and all notices with respect to such Bond shall be made
and given, respectively, in the manner provided in the DTC Representation
Letter. Owners shall have no lien or security interest in any rebate or refund
paid by DTC to the Paying Agent which arises from the payment by the Paying
Agent of principal of, or premium, if any, or interest on, the Bonds in
immediately available funds to DTC.
(f) So long as any Bond is held in book-entry form a Beneficial Owner
(through its DTC Participant) shall give notice to the Trustee to elect to have
its Bonds purchased, and shall effect delivery of such Bonds by causing such DTC
Participant to transfer its interest in the Bonds equal
-36-
<PAGE> 42
to such Beneficial Owner's interest on the records of DTC to the Trustee's
participant account with DTC. The requirement for physical delivery of the Bonds
in connection with any purchase pursuant to Section 3.01 and Section 3.02 hereof
shall be deemed satisfied when the ownership rights in the Bonds are transferred
by DTC Participants on the records of DTC to the Trustee's participant account.
SECTION 2.17. PAYMENTS PURSUANT TO THE CREDIT FACILITY. So long as the
Credit Facility shall be in effect, the Trustee, Registrar and Paying Agent
shall observe the following provisions respecting the Credit Facility:
(a) If on the Business Day prior to each Interest Payment Date
and prior to each date upon which the principal of the Bonds becomes due
on the Maturity Date or pursuant to a mandatory redemption pursuant to
Section 4.03 hereof, the Trustee has received actual notice that
sufficient amounts will not be on deposit in the Bond Fund on such
Interest Payment Date, Maturity Date or redemption date to pay the
principal of or interest on the Bonds then maturing or subject to such
mandatory redemption, or if the Trustee determines on any Interest
Payment Date or on any date upon which the principal of the Bonds
becomes due on the Maturity Date or pursuant to a mandatory redemption
effected pursuant to Section 4.03 hereof that there are not sufficient
funds in the Bond Fund to pay the principal of or interest on the Bonds
coming due on such date, the Trustee shall so notify the Provider. Such
notice shall specify the amount of the anticipated or actual deficiency,
as the case may be, the Bonds to which such deficiency is applicable and
whether such Bonds will be or are deficient as to principal or interest,
or both. The Insurance Policy provides, in effect, that if the Trustee
has not so notified the Provider at least one Business Day prior to an
Interest Payment Date or prior to any date upon which the principal of
the Bonds becomes due on the Maturity Date or pursuant to a mandatory
redemption effected pursuant to Section 4.03 hereof, the Provider will
make payments of principal or interest, or both, due on the Bonds on or
before the first Business Day next following the date on which the
Provider shall have received notice of nonpayment from the Trustee.
Otherwise, such payments shall be made on such Interest Payment Date,
Maturity Date or redemption date.
(b) The Trustee shall, after giving notice to the Provider as
provided in (a) above, make available to the Provider and, at the
Provider's direction, to the Insurance Trustee, the registration books
of the Issuer maintained by the Registrar, and all records relating to
the Bond Fund and any other funds and accounts maintained under this
Indenture.
(c) The Trustee or the Registrar shall provide the Provider and
the Insurance Trustee with a list of Owners entitled to receive
principal or interest payments from the Provider under the terms of the
Credit Facility, and shall make arrangements with the Insurance Trustee
(i) to mail checks or drafts to the Owners entitled to receive full or
partial interest payments from the Provider and (ii) to pay principal
upon Bonds surrendered or, if a book-entry system is in effect,
ownership interests in Bonds transferred to the Insurance Trustee by the
Owners or Beneficial Owners entitled to receive full or partial
principal payments from the Provider.
-37-
<PAGE> 43
(d) The Trustee shall, at the time it provides notice to the
Provider pursuant to (a) above, notify the Owners entitled to receive
the payment of principal thereof or interest thereon from the Provider
(i) as to the fact of such entitlement, (ii) that the Provider will
remit to them all or a part of the interest payments next coming due
upon proof of the entitlement of such Owners to interest payments and
delivery to the Insurance Trustee, in form satisfactory to the Insurance
Trustee, of an appropriate assignment of the Owner's right to payment,
(iii) that should they be entitled to receive full payment of principal
from the Provider, they must surrender their Bonds (along with an
appropriate instrument of assignment in form satisfactory to the
Insurance Trustee to permit ownership of such Bonds to be registered in
the name of the Provider) for payment to the Insurance Trustee, and not
the Trustee or Paying Agent, and (iv) that should they be entitled to
receive partial payment of principal from the Provider, they must
surrender their Bonds for payment thereon first to the Paying Agent,
which shall note on such Bonds the portion of the principal previously
paid by the Paying Agent, and then, along with an appropriate instrument
of assignment in form satisfactory to the Insurance Trustee, to the
Insurance Trustee, which will then pay the unpaid portion of principal
thereof. At any time that there is a DTC book-entry system in effect for
the Bonds, the notice required pursuant to this Section 2.17 shall
specify that, in lieu of surrendering the Bonds, the beneficial
ownership interests to receive payment of such principal or interest
shall be transferred on the records of DTC to the order of the Insurance
Trustee.
(e) In the event that the Trustee or Paying Agent has notice
that any payment of principal of or interest on a Bond which has become
Due for Payment and which is made to an Owner by or on behalf of the
Issuer has been deemed a preferential transfer and theretofore recovered
from such Owner pursuant to the United States Bankruptcy Code by a
trustee in bankruptcy in accordance with the final, nonappealable order
of a court having competent jurisdiction, the Trustee or Paying Agent
shall, within five Business Days after it has notice that such payment
has been deemed a preferential transfer, notify all Owners that in the
event that any Owner's payment is so recovered, such Owner will be
entitled to payment from the Provider to the extent of such recovery if
sufficient funds are not otherwise available, and the Paying Agent shall
furnish to the Provider its records evidencing the payments of principal
of and interest on the Bonds which have been made by the Paying Agent
and subsequently recovered from Owners and the dates on which such
payments were made.
(f) In addition to those rights granted the Provider under this
Indenture, the Provider shall, to the extent it makes payment of
principal of or interest on the Bonds, become subrogated to the rights
of the recipients of such payments in accordance with the terms of the
Credit Facility, and to evidence such subrogation (i) in the case of
subrogation as to claims for past due interest, the Registrar shall note
the Provider's rights as subrogee on the registration books of the
Issuer maintained by the Registrar upon receipt from the Provider of
proof of the payment of interest thereon to the Owners, and (ii) in the
case of subrogation as to claims for past due principal, the Registrar
shall note the Provider's rights as subrogee on the registration books
of the Issuer maintained by the Registrar upon surrender of the Bonds by
the Owners thereof, together with proof of the payment of principal
thereof.
-38-
<PAGE> 44
SECTION 2.18. CHANGE OF CREDIT FACILITY.
(a) The Trustee shall give notice by Mail of a proposed Change of
Credit Facility pursuant to Section 4.07(a) of the Agreement to the Owners prior
to a date upon which the Owners can give the requisite notice to tender their
Bonds on or prior to the effective date of such Change of Credit facility. Such
notice shall (a) describe the proposed Change of Credit Facility (subject to the
Company's ability to rescind its election to make such Change of Credit
Facility), (b) state the effective date of such Change of Credit Facility, and
(c) state such other matters as the Company may direct.
(b) The Trustee shall give notice by Mail of a proposed Change of
Credit Facility pursuant to Section 4.07(b) of the Agreement to the Owners not
less than 15 days prior to the effective date of such Change of Credit Facility.
Such notice shall (a) describe the proposed Change of Credit Facility (subject
to the Company's ability to rescind its election to make such Change of Credit
Facility), (b) state the effective date of such Change of Credit Facility, (c)
state that such Bonds are subject to mandatory purchase on or before such
effective date pursuant to Section 3.02(a)(iii), (d) describe the procedures for
such mandatory purchase and the date thereof, (e) state the purchase price of
such Bonds on such effective date (expressed as a percentage of the principal
amount thereof), (f) state that the Owners of such Bonds do not have the right
to retain their Bonds on such effective date, and (g) state such other matters
as the Company may direct.
SECTION 2.19. CUSIP NUMBERS. The Issuer in issuing the Bonds may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
CUSIP numbers in notices of redemption as a convenience to Owners; provided that
any such notice may state that no representation is made as to the correctness
of such numbers either as printed on the Bonds or as contained in any notice of
a redemption and that reliance may be placed only on the other identification
numbers printed on the Bonds, and any such redemption shall not be affected by
any defect in or omission of such numbers. The Issuer or the Company will
promptly notify the Trustee and the Registrar of any change in any CUSIP
number(s).
Neither the Issuer, the Registrar nor the Trustee shall have any
responsibility for any defect in the CUSIP number that appears on any Bond,
check, advice of payment or redemption notice, and any such document may contain
a statement to the effect that CUSIP numbers have been assigned by an
independent service for convenience of reference and that neither the Issuer,
the Registrar nor the Trustee shall be liable for any inaccuracy in such
matters.
ARTICLE III
PURCHASE AND REMARKETING OF BONDS
SECTION 3.01. OWNER'S OPTION TO TENDER FOR PURCHASE.
(a) Daily Interest Rate Period. During any Daily Interest Rate
Period, any Bond or portion thereof in an Authorized Denomination shall be
purchased at the option of the Owner
-39-
<PAGE> 45
thereof on any Business Day at a purchase price equal to 100% of the principal
amount thereof plus accrued interest, if any, from the Interest Payment Date
next preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the principal amount thereof), upon (i) delivery to the
Trustee at the Delivery Office of the Trustee, by no later than 11:00 a.m., New
York, New York time, on such Business Day, of an irrevocable written notice or
irrevocable notice by telephone (promptly confirmed by telecopy or other
writing) which states the principal amount and certificate number (if the Bonds
are not then held in book-entry form) of such Bond and the date on which the
same shall be purchased, and (ii) subject to Section 2.16(f) hereof and the last
paragraph of Section 3.03 hereof, delivery of such Bond tendered for purchase to
the Trustee at the Delivery Office of the Trustee, accompanied by an instrument
of transfer thereof in a form satisfactory to the Trustee, executed in blank by
the Owner thereof with the signature of such Owner guaranteed by a member or
participant in a "signature guarantee program" as provided in the form of
assignment attached to such Bond, at or prior to 1:00 p.m., New York, New York
time, on the purchase date. The Trustee shall keep a written record of each
notice described in clause (i) above.
(b) Weekly Interest Rate Period. During any Weekly Interest Rate
Period, any Bond or portion thereof in an Authorized Denomination shall be
purchased at the option of the Owner thereof on any Business Day at a purchase
price equal to 100% of the principal amount thereof plus accrued interest, if
any, from the Interest Payment Date next preceding the date of purchase to the
date of purchase (unless the date of purchase shall be an Interest Payment Date,
in which case the purchase price shall be equal to the principal amount
thereof), upon (i) delivery to the Trustee at the Delivery Office of the Trustee
of an irrevocable written notice or an irrevocable notice by telephone (promptly
confirmed by telecopy or other writing), by 5:00 p.m., New York, New York time,
on any Business Day, which states the principal amount of such Bond and the
certificate number (if the Bonds are not then held in book-entry form) and the
date on which the same shall be purchased, which date shall not be prior to the
seventh day next succeeding the date of the delivery of such notice to the
Trustee, and (ii) subject to Section 2.16(f) hereof and the last paragraph of
Section 3.03 hereof, delivery of such Bond to the Trustee at the Delivery Office
of the Trustee, accompanied by an instrument of transfer thereof in a form
satisfactory to the Trustee, executed in blank by the Owner thereof with the
signature of such Owner guaranteed by a member or participant in a "signature
guarantee program" as provided in the form of assignment attached to such Bond,
at or prior to 1:00 p.m., New York, New York time, on the purchase date. The
Trustee shall keep a written record of each notice described in clause (i)
above.
(c) Term Interest Rate Period. Any Bond or portion thereof in an
Authorized Denomination shall be purchased at the option of the Owner thereof on
the first day of any Term Interest Rate Period which is preceded by a Term
Interest Rate Period of equal duration at a purchase price equal to 100% of the
principal amount thereof upon (x) delivery to the Trustee at the Delivery Office
of
-40-
<PAGE> 46
the Trustee of an irrevocable notice in writing by 5:00 p.m., New York, New York
time, on any Business Day not less than fifteen days before the purchase date,
which states the principal amount and certificate number (if the Bonds are not
then held in book-entry form) of such Bond to be purchased, and (y) subject to
Section 2.16(f) hereof and the last paragraph of Section 3.03 hereof delivery of
such Bond to the Trustee at the Delivery Office of the Trustee, accompanied by
an instrument of transfer thereof in a form satisfactory to the Trustee,
executed in blank by the Owner thereof with the signature of such Owner
guaranteed by a member or participant in a "signature guarantee program" as
provided in the form of assignment attached to such Bond, at or prior to 1:00
p.m. New York, New York time, on the purchase date. The Trustee shall keep a
written record of each notice described in clause (x) above.
(d) If any Bond is to be purchased in part pursuant to Section
3.01(a), Section 3.01(b) or Section 3.01(c) hereof, the amount so purchased and
the amount not so purchased must each be an Authorized Denomination.
SECTION 3.02. MANDATORY PURCHASE.
(a) The Bonds shall be subject to mandatory purchase at a purchase
price equal to 100% of the principal amount thereof, plus accrued interest, if
any, to the purchase date described below, upon the occurrence of any of the
events stated below:
(i) as to any Bond, on the effective date of any change in a
Rate Period with respect to such Bond, other than the effective date of
a Term Interest Rate Period which was preceded by a Term Interest Rate
Period of the same duration;
(ii) as to each Bond in a Flexible Interest Rate Period, on the
Business Day next succeeding the last day of any Flexible Segment with
respect to such Bond; or
(iii) as to any Bond, on the date set forth in any notice of a
Change of Credit Facility given by the Company pursuant to Section
4.07(b) of the Agreement, which shall be a date that is on or before the
effective date of such Change of Credit Facility, provided, however,
that if the Bonds are then subject to optional redemption pursuant to
Section 4.02(b)(iv), the purchase price shall include any premium that
would have been payable upon such redemption had the Bonds been
redeemed.
(b) When Bonds are called for redemption pursuant to Section
4.02(b)(iv) hereof and if the Company gives notice to the Trustee on or before
the Business Day prior to the redemption date that the Company elects to have
the Bonds purchased in lieu of redemption, all or any portion of the Bonds that
the Company elects to purchase shall be subject to mandatory purchase on such
redemption date at a purchase price equal to 100% of the principal amount
thereof plus an amount equal to any premium that would have been payable upon
such redemption had the Bonds been redeemed. If the Bonds are purchased in lieu
of redemption on or prior to the applicable Record Date, the purchase price
shall include accrued interest from the Interest Payment Date next preceding the
date of purchase to the date of purchase (unless the date of purchase shall be
an Interest Payment Date, in which case the purchase price shall be equal to the
amount specified in the preceding sentence). If the Bonds are purchased in lieu
of redemption after such Record Date, the purchase price shall not include
accrued interest.
SECTION 3.03. PAYMENT OF PURCHASE PRICE. If Bonds are to be purchased
pursuant to Section 3.01 or Section 3.02, the Trustee shall pay the purchase
price of such Bonds but solely
-41-
<PAGE> 47
from the following sources in the order of priority indicated, and the Trustee
shall not have any obligation to use funds from any other source:
(a) proceeds of the remarketing and sale of such Bonds pursuant
to Section 3.04 hereof;
(b) moneys furnished to the Trustee pursuant to Article VIII
hereof, such moneys to be applied only to the purchase of Bonds which
are deemed to be paid in accordance with Article VIII hereof; and
(c) any other moneys furnished by or on behalf of the Company to
the Trustee for purchase of the Bonds; provided, however, that funds for
the payment of the purchase price of Bonds which are deemed to be paid
in accordance with Article VIII hereof shall be derived only from the
sources described in Section 3.03(a) and Section 3.03(b), in such order
of priority.
Subject to Section 2.16 hereof, the Registrar shall register new Bonds
as directed by the Remarketing Agent and make such Bonds available for delivery
on the date of such purchase. Payment of the purchase price of any Bond shall be
made in immediately available funds for Bonds in a Flexible, Daily, Weekly or
Term Interest Rate Period (subject to Section 2.16(f) hereof) in each case only
upon presentation and surrender of such Bond to the Trustee.
If moneys sufficient to pay the purchase price of Bonds to be purchased
pursuant to Section 3.01 or Section 3.02 hereof shall be held by the Trustee on
the date such Bonds are to be purchased, such Bonds shall be deemed to have been
purchased and shall be purchased according to the terms hereof, for all purposes
of this Indenture, irrespective of whether or not such Bonds shall have been
delivered to the Trustee, and the former Owner of such Bonds shall have no claim
under this Indenture or otherwise, for any amount due with respect to such Bonds
other than the purchase price thereof.
SECTION 3.04. REMARKETING OF BONDS BY REMARKETING AGENT.
(a) Whenever any Bonds are subject to purchase pursuant to Section
3.01 or Section 3.02 hereof, the Remarketing Agent shall offer for sale and use
its best efforts to remarket such Bonds to be so purchased, any such remarketing
to be made at a price equal to 100% of the principal amount thereof, plus
accrued interest, if any, to the purchase date. The Company may direct the
Remarketing Agent from time to time to cease and to resume sales efforts with
respect to some of or all of the Bonds.
(b) If the Remarketing Agent is remarketing the Bonds after the date
notice has been given of the redemption of such Bonds pursuant to Section 4.02
or 4.03 hereof (and prior to the redemption date thereof), the Remarketing Agent
shall provide to the Trustee the names of the Persons to whom the Bonds are
being remarketed so that the Trustee can provide the notice required by Section
3.05(a) hereof.
-42-
<PAGE> 48
(c) By 11:30 a.m., New York, New York time, on the date the Trustee
receives notice from any Owner in accordance with Section 3.01(a) hereof, and
promptly, but in no event later than 11:30 a.m., New York, New York time, on the
Business Day following the day on which the Trustee receives notice from any
Owner of its demand to have the Trustee purchase Bonds pursuant to Section
3.01(b) or Section 3.01(c) hereof, the Trustee shall give facsimile or
telephonic notice, confirmed in writing thereafter, to the Remarketing Agent
specifying the principal amount of Bonds which such Owner has demanded to have
purchased and the date on which such Bonds are demanded to be purchased.
SECTION 3.05. LIMITS ON REMARKETING. Any Bond purchased pursuant to
Sections 3.01 and 3.02 hereof from the date notice is given of redemption
pursuant to Sections 4.02 and 4.03 hereof through the date of such redemption
shall not be remarketed unless the Person buying such Bonds has been given
notice in writing by the Trustee that such Bonds are to be redeemed.
Furthermore, in addition to the requirements of the preceding sentence, if the
Bonds are subject to redemption pursuant to Section 4.03 hereof, the Person
buying such Bonds shall also be given notice in writing by the Trustee that a
Determination of Taxability has occurred and that such Bonds are subject to
mandatory redemption pursuant to Section 4.03 hereof.
SECTION 3.06. DELIVERY OF BONDS; DELIVERY OF PROCEEDS OF REMARKETING
SALE.
(a) DELIVERY OF BONDS.
Bonds purchased pursuant to Section 3.01 or Section 3.02 hereof shall
be delivered as follows:
(i) Delivery of Remarketed Bonds. Subject to Section 2.16
hereof, Bonds remarketed by the Remarketing Agent pursuant to Section
3.04 hereof shall not be delivered to any Person until it shall have
paid the purchase price therefor.
(ii) Delivery of Bonds Purchased by the Company. Bonds delivered
to the Trustee and purchased with moneys furnished by the Company shall
at the direction of the Company, be (A) held by the Trustee for the
account of the Company, (B) delivered to the Trustee for cancellation or
(C) delivered to the Company.
(iii) Delivery of Defeased Bonds. Bonds purchased by the
Remarketing Agent with moneys described in Section 3.03(b) hereof shall
not be remarketed and shall be delivered to the Trustee for
cancellation.
(b) REGISTRATION OF DELIVERED BONDS. Bonds delivered as provided in this
Section 3.06 shall be registered in the manner directed by the recipient
thereof.
(c) NOTICE OF FAILED REMARKETING. In the event that any Bonds are not
remarketed, the Remarketing Agent shall notify the Company by telephone,
promptly confirmed in writing by telecopy, and the Trustee in writing (which may
be delivered by telecopy) no later than 1:30 p.m., New York, New York time, on
any day on which Bonds are delivered or deemed delivered for purchase under this
Indenture, of the aggregate principal amount of Bonds not
-43-
<PAGE> 49
remarketed on such date and the aggregate principal amount of Bonds remarketed
on such date but for which the purchase price has not been paid (which Bonds for
purposes of this Indenture shall be considered to not be remarketed), as
follows:
(i) Such notice to the Company shall be given to the Principal
Office of the Company, as follows:
Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99220
Attention: Treasurer
Telephone: (509) 495-8045
Telecopy: (509) 495-4879
The Company may, by notice given in accordance with Section 13.08 hereof
to the Remarketing Agent and the Trustee, designate any further or different
addresses to which subsequent such notices may be given.
(ii) Such notice to the Trustee shall be given to the Trustee,
as follows:
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Administration
Telephone: (415) 954-9518
Telecopy: (415) 693-8850
The Trustee may, by notice given in accordance with Section 13.08 hereof
to the Company and the Trustee, designate any further or different addresses to
which subsequent such notices may be given.
(d) PROCEEDS OF SALE HELD FOR SELLER OF BONDS. Moneys deposited with the
Trustee for the purchase of Bonds pursuant to Section 3.01 and Section 3.02
hereof shall be held uninvested in trust in one or more separate accounts and
shall be paid to the former Owners of such Bonds upon presentation thereof. The
Trustee shall notify the Company in writing within five days after the date of
purchase if the Bonds have not been delivered, and if so directed by the
Company, shall give notice by Mail to each Owner whose Bonds are deemed to have
been purchased pursuant to Section 3.01 and Section 3.02 hereof stating that
interest on such Bonds ceased to accrue on the date of purchase and that moneys
representing the purchase price of such Bonds are available against delivery
thereof at the Delivery Office of the Trustee. Bonds deemed purchased pursuant
to Section 3.01 and Section 3.02 hereof shall cease to accrue interest on the
date of purchase. The Trustee shall hold moneys deposited for the purchase of
Bonds without liability for interest thereon, for the benefit of the former
Owner of the Bond on such date of purchase, who shall thereafter be restricted
exclusively to such moneys for any claim of whatever nature on its part under
this Indenture or on, or with respect to, such Bond. Any moneys so deposited
with and held by the Trustee not so applied to the payment of Bonds within six
months
-44-
<PAGE> 50
after such date of purchase shall be paid by the Trustee to the Company upon the
written direction of the Authorized Company Representative, and thereafter the
Trustee shall have no further liability with respect to such moneys and the
former Owners shall be entitled to look only to the Company for payment, and
then only to the extent of the amount so repaid to the Company, and the Company
shall not be liable for any interest thereon and shall not be regarded as a
trustee of such money.
SECTION 3.07. NO REMARKETING SALES AFTER CERTAIN EVENTS. Anything in
this Indenture to the contrary notwithstanding, there shall be no sales of Bonds
pursuant to a remarketing in accordance with Section 3.04 hereof, if (a) there
shall have occurred and not have been cured or waived an Event of Default
described in Section 9.01(a), Section 9.01(b) or Section 9.01(c) hereof of which
an authorized officer in the Principal Office of the Remarketing Agent and an
authorized officer of the corporate trust department of the Trustee have actual
knowledge or (b) the Bonds have been declared to be immediately due and payable
pursuant to Section 9.02 hereof and such declaration has not been rescinded
pursuant to Section 9.02(d) hereof.
ARTICLE IV
REDEMPTION OF BONDS
SECTION 4.01. REDEMPTION OF BONDS GENERALLY.
(a) The Bonds are subject to redemption if and to the extent the
Company is entitled or required to make and makes a prepayment pursuant to
Article VIII of the Agreement. Except as specifically provided in Section 4.03
hereof, the Trustee shall not give notice of any redemption under Section 4.05
hereof unless the Company has so directed in accordance with Section 8.01 of the
Agreement; provided that the Trustee may require prepayment of Loan Payments
under Section 4.01 of the Agreement in the case of mandatory redemption.
(b) If the Bonds are to be redeemed in part, they shall only be
redeemed in the principal amount of $100,000 or any integral multiple thereof
unless such redemption occurs during a Term Interest Rate Period which extends
to and includes the Maturity Date, in which case the Bonds may be redeemed in
the principal amount of $5,000 or any integral multiple thereof.
SECTION 4.02. REDEMPTION UPON OPTIONAL PREPAYMENT.
(a) The Bonds shall be redeemed in whole or in part, and if in part
by lot, at any time at a redemption price equal to 100% of the principal amount
thereof (except as otherwise provided in Section 4.02(a)(v) below) plus accrued
interest to the redemption date, upon receipt by the Trustee of a written notice
from the Company stating that any of the following events has occurred and that
the Company therefore intends to exercise its option to prepay the payments due
under the Agreement in whole or in part pursuant to Section 8.01 of the
Agreement and thereby effect the redemption of Bonds in whole or in part to the
extent of such prepayments:
-45-
<PAGE> 51
(i) the Company shall have determined or concurred in a
determination that the continued operation of the Plant is
impracticable, uneconomical or undesirable for any reason; or
(ii) all or substantially all of the Plant shall have been
condemned or taken by eminent domain;
(iii) the operation of the Plant shall have been enjoined or
shall have otherwise been prohibited by, or shall conflict with, any
order, decree, rule or regulation of any court or of any federal, state
or local regulatory body, administrative agency or other governmental
body;
(iv) unreasonable burdens or excessive liabilities shall have
been imposed upon the Company in respect of all or a part of the
Pollution Control Facilities or the Plant including, without limitation,
federal, state or other ad valorem, property, income or other taxes not
being imposed on the date of the Agreement, as well as any statute or
regulation enacted or promulgated after the date of the Agreement that
prevents the Company from deducting interest in respect of the Agreement
for federal income tax purposes; or
(v) all or substantially all of the Project shall be transferred
or sold to any entity other than an affiliate of the Company; provided,
however, that in the case of a redemption under this Section 4.02(a)(v),
the redemption price of the Bonds shall be equal to 101% of the
principal amount thereof, plus accrued interest to the date of
redemption, unless a smaller or no premium would be due upon optional
redemption of the Bonds as described in Section 4.02(b) below.
(b) The Bonds shall be subject to redemption in whole, or in part by
lot, prior to their maturity, following receipt by the Issuer and the Trustee of
a written notice from the Company pursuant to Section 8.01 of the Agreement and
upon prepayment of the Loan Payments at the option of the Company, as follows:
(i) While the Bonds bear interest at a PARS Rate, the Bonds
shall be subject to such redemption on the date next succeeding the last
day of any PARS Rate Period at a redemption price equal to 100% of the
principal amount thereof plus accrued interest, if any, to the
redemption date.
(ii) While the Bonds bear interest at a Flexible Interest Rate
or Rates, each Bond shall be subject to such redemption on the day next
succeeding the last day of each Flexible Segment for such Bond at a
redemption price equal to 100% of the principal amount thereof plus
accrued interest, if any, to the redemption date.
(iii) While the Bonds bear interest at a Daily Interest Rate or
a Weekly Interest Rate, the Bonds shall be subject to such redemption on
any Business Day at a redemption price equal to 100% of the principal
amount thereof plus accrued interest, if any, to the redemption date.
-46-
<PAGE> 52
(iv) While the Bonds bear interest at a Term Interest Rate, the
Bonds shall be subject to such redemption (1) on the day next succeeding
the last day of each Term Interest Rate Period at a redemption price
equal to the principal amount of the Bonds being redeemed plus accrued
interest, if any, to the redemption date and (2) either (A) on the
redemption dates and at the redemption prices specified by the Company
pursuant to Section 4.02(c) hereof or (B) during the redemption periods
specified below, in each case in whole or in part, at the redemption
prices (expressed as percentages of principal amount) hereinafter
indicated plus accrued interest, if any, to the redemption date:
<TABLE>
<CAPTION>
LENGTH OF TERM
INTEREST RATE PERIOD REDEMPTION DATES AND PRICES
<S> <C>
Greater than or equal to 11 years At any time on or after the first day of the
calendar month following the tenth anniversary of
the effective date at 102% declining 1%
annually to 100%
Less than 11 years Not redeemable
</TABLE>
(c) With respect to any Term Interest Rate Period, the Company may
specify in the notice required by Section 2.06(b) hereof redemption provisions,
prices and periods other than those set forth above; provided however, that such
notice shall be accompanied by a Favorable Opinion of Bond Counsel with respect
to such changes in redemption dates and prices.
SECTION 4.03. REDEMPTION UPON MANDATORY PREPAYMENT. The Bonds shall be
subject to mandatory redemption in whole on any date from amounts which are to
be prepaid by the Company under Section 8.03 of the Agreement, at a redemption
price equal to 100% of the principal amount thereof plus interest accrued, if
any, to the redemption date within one hundred eighty (180) days following a
Determination of Taxability; provided that if, in the opinion of Bond Counsel
delivered to the Trustee, the redemption of a specified portion of the Bonds
outstanding would have the result that interest payable on the Bonds remaining
outstanding after such redemption would remain Tax-Exempt, then the Bonds shall
be redeemed in part by lot (in Authorized Denominations), in such amount as Bond
Counsel in such opinion shall have determined is necessary to accomplish that
result.
SECTION 4.04. SELECTION OF BONDS FOR REDEMPTION. If less than all of the
Bonds are called for redemption the Trustee shall select the Bonds or any given
portion thereof to be redeemed, from the outstanding Bonds or such given portion
thereof not previously called for redemption, by lot. For the purpose of any
such selection the Trustee shall (to the extent practicable) assign a separate
number for each minimum Authorized Denomination of each Bond of a denomination
of more than such minimum; provided that, following any such selection, both the
portion of such Bond to be redeemed and the portion remaining shall be in
Authorized Denominations. The Trustee shall promptly notify the Issuer and the
Company in writing of the numbers of the Bonds or portions thereof so selected
for redemption.
-47-
<PAGE> 53
SECTION 4.05. NOTICE OF REDEMPTION.
(a) The Trustee, for and on behalf of the Issuer, shall give notice
of the redemption of any Bond by Mail, postage prepaid, not less than fifteen
(15) nor more than sixty (60) days prior to the redemption date, to the Owner of
such Bond at the address shown on the registration books of the Registrar on the
date such notice is mailed and to any Auction Agent, any Remarketing Agent, any
Provider, Moody's, S&P, the Securities Depositories and one or more of the
Information Services. Notice of redemption shall also be given to DTC in
accordance with the DTC Representation Letter. Notice of redemption to the
Securities Depositories and the Information Services shall be given by
registered mail. Each notice of redemption shall state the date of such notice,
the date of issue of the Bonds to be redeemed, the redemption date, the
redemption price, the place of redemption (including the name and appropriate
address or addresses of the Paying Agent), the source of the funds to be used
for such redemption, the principal amount, the CUSIP number (if any) of the
maturity and, if less than all, the distinctive certificate numbers of the Bonds
to be redeemed and, in the case of Bonds to be redeemed in part only, the
respective portions of the principal amount thereof to be redeemed. Each such
notice shall also state that the interest on the Bonds designated for redemption
shall cease to accrue from and after such redemption date and that on said date
there will become due and payable on each of said Bonds the principal amount
thereof to be redeemed, interest accrued thereon, if any, to the redemption date
and the premium, if any, thereon (such premium to be specified) and shall
require that such Bonds be then surrendered at the address or addresses of the
Paying Agent specified in the redemption notice. Notwithstanding the foregoing,
failure by the Trustee to give notice pursuant to this Section 4.05 to any one
or more of the Information Services or Securities Depositories or the
insufficiency of any such notices shall not affect the sufficiency of the
proceedings for redemption. Failure to give any required notice of redemption as
to any particular Bond shall not affect the validity of the call for redemption
of any Bonds in respect of which no such failure has occurred.
(b) With respect to any notice of optional redemption of Bonds in
accordance with Section 4.02 hereof, unless, upon the giving of such notice,
such Bonds shall be deemed to have been paid within the meaning of Article VIII
hereof, such notice may state that such redemption is conditioned upon the
receipt by the Trustee, on or prior to the date fixed for such redemption, of
moneys sufficient to pay the principal of, and premium, if any, and interest on,
such Bonds to be redeemed. In the event such moneys are not so received, the
redemption shall not be made and the Trustee shall within a reasonable time
thereafter give notice, in the manner in which the notice of redemption was
given, that such redemption will not take place.
(c) The Trustee shall also provide the notice with respect to the
Bonds to be redeemed as required by Section 3.05(a) hereof.
SECTION 4.06. PARTIAL REDEMPTION OF BONDS. Upon surrender of any Bond
redeemed in part only, the Registrar shall exchange the Bond redeemed for a new
Bond of like tenor and in an Authorized Denomination without charge to the Owner
in the principal amount of the portion of the Bond not redeemed. In the event of
any partial redemption of a Bond which is registered in the name of Cede & Co.,
DTC may elect to make a notation on the Bond certificate which reflects the date
and amount of the reduction in the principal amount of said Bond in lieu of
surrendering the Bond certificate to the Registrar for exchange. The Issuer, the
Company and the
-48-
<PAGE> 54
Trustee shall be fully released and discharged from all liability to the extent
of payment of the redemption price for such partial redemption.
SECTION 4.07. NO PARTIAL REDEMPTION AFTER DEFAULT. Anything in this
Indenture to the contrary notwithstanding, if there shall have occurred and be
continuing an Event of Default (other than an Event of Default described in
Section 9.0l(d) hereof) of which an authorized officer of the corporate trust
department of the Trustee has actual knowledge, there shall be no redemption of
less than all of the Bonds at the time Outstanding.
SECTION 4.08. PAYMENT OF REDEMPTION PRICE. For the redemption of any of
the Bonds, the Issuer shall cause to be deposited in the Bond Fund, solely out
of the Revenues and any other moneys constituting the Trust Estate, an amount
sufficient to pay the principal of, and premium, if any, and interest to become
due on, the Bonds called for redemption on the date fixed for such redemption.
The obligation of the Issuer to cause any such deposit to be made hereunder
shall be reduced by the amount of moneys in the Bond Fund or any fund in Article
VIII hereof available for and used on such redemption date for payment of the
principal of, and premium, if any, and accrued interest on, the Bonds to be
redeemed. The Trustee shall apply amounts as and when required available
therefor in the Bond Fund to pay principal of, and premium, if any, and interest
on, the Bonds.
SECTION 4.09. EFFECT OF REDEMPTION. Notice of redemption having been
duly given as aforesaid, and moneys for payment of the redemption price being
held by the Trustee if such redemption was conditioned thereon, the Bonds so
called for redemption shall, on the redemption date designated in such notice,
become due and payable at the redemption price specified in such notice,
interest on the Bonds so called for redemption shall cease to accrue, said Bonds
shall cease to be entitled to any lien, benefit or security under this
Indenture, and the Owners of said Bonds shall have no rights in respect thereof
except to receive payment of the redemption price thereof, without interest
accrued on any funds held to pay such redemption price accruing after the date
of redemption.
All Bonds fully redeemed pursuant to the provisions of this Article IV
shall be canceled upon surrender thereof to the Paying Agent, which shall upon
the written request of the Issuer, deliver to the Company a certificate
evidencing such cancellation.
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. PAYMENT OF BONDS.
(a) The Issuer covenants that it will promptly pay or cause to be
paid the principal of, and premium, if any, and interest on, every Bond issued
under this Indenture at the place, on the dates and in the manner provided
herein and in the Bonds, provided that the principal, premium if any, and
interest are payable by the Issuer solely from the Revenues, and nothing in the
Bonds or
-49-
<PAGE> 55
this Indenture shall be considered as assigning or pledging any other funds or
assets of the Issuer other than the Trust Estate.
(b) Each and every covenant made herein by the Issuer is predicated
upon the condition that the Issuer shall not in any event be liable for the
payment of the principal of, or premium, if any, or interest on the Bonds, or
for the payment of the purchase price of the Bonds, or the performance of any
pledge, mortgage, obligation or agreement created by or arising under this
Indenture or the Bonds from any property other than the Trust Estate; and,
further, that neither the Bonds nor any such obligation or agreement of the
Issuer shall be construed to constitute an indebtedness or a lending of credit
of the Issuer within the meaning of any constitutional or statutory provision
whatsoever, or constitute or give rise to a pecuniary liability of the Issuer or
a charge against its general credit or taxing power.
(c) For the payment of interest on the Bonds, the Issuer shall cause
to be deposited in the Interest Account on or prior to each Interest Payment
Date, solely out of Revenues and other moneys pledged therefor, an amount
sufficient to pay the interest to become due on such Interest Payment Date. The
obligation of the Issuer to cause any such deposit to be made hereunder shall be
reduced by the amount of moneys in the Interest Account available on the
Interest Payment Date for the payment of the interest on the Bonds.
(d) For payment of the principal of the Bonds upon redemption,
maturity or acceleration of maturity, the Issuer shall cause to be deposited in
the Principal Account, on or prior to the redemption date or the maturity date
(whether accelerated or not) of the Bonds, solely out of Revenues and other
moneys pledged therefor, an amount sufficient to pay the principal of the Bonds.
The obligation of the Issuer to cause any such deposit to be made hereunder
shall be reduced by the amount of moneys in the Principal Account available on
the redemption date or the maturity date (whether accelerated or not) for the
payment of the principal of the Bonds.
SECTION 5.02. PERFORMANCE OF COVENANTS BY ISSUER; AUTHORITY; DUE
EXECUTION. The Issuer covenants that it will faithfully perform at all times any
and all covenants, undertakings, stipulations and provisions contained in this
Indenture, in any and every Bond executed, authenticated and delivered hereunder
and in all of its proceedings pertaining thereto. The Issuer represents that it
is duly authorized under the Constitution and laws of the State to issue the
Bonds and to execute this Indenture, to execute and deliver the Agreement, to
assign the Agreement and amounts payable thereunder, and to pledge the amounts
hereby pledged in the manner and to the extent herein set forth. The Issuer
further represents that all action on its part for the issuance of the Bonds and
the execution and delivery of this Indenture has been duly and effectively
taken, and that the Bonds in the hands of the Owners thereof are and will be
valid and binding limited obligations of the Issuer.
The Issuer shall fully cooperate with the Trustee and with the Owners
of the Bonds to the end of fully protecting the rights and security of the
Owners of any Bonds.
The Issuer represents that it now has, and covenants that it shall
use its best efforts to maintain, complete and lawful authority and privilege to
enter into and perform its obligations under this Indenture and the Agreement,
and covenants that it will at all times use its best efforts
-50-
<PAGE> 56
to maintain its existence or provide for the assumption of its obligations under
this Indenture and the Agreement.
Except to the extent otherwise provided in this Indenture, the Issuer
shall not enter into any contract or take any action by which the rights of the
Trustee or the Owners of the Bonds may be impaired and shall, from time to time,
execute and deliver such further instruments and take such further action as may
be reasonably required to carry out the purposes of this Indenture.
SECTION 5.03. IMMUNITIES AND LIMITATIONS OF RESPONSIBILITY OF ISSUER;
REMEDIES. Without limiting the obligation of the Issuer to perform its covenants
and obligations hereunder:
(a) The Issuer shall be entitled to the advice of counsel and
shall be wholly protected as to action taken or omitted in good faith in
reliance on such advice.
(b) The Issuer may rely conclusively on any communication or
other document furnished to it hereunder and reasonably believed by it
to be genuine.
(c) The Issuer shall not be liable for any action.
(i) taken by it in good faith and reasonably believed by
it to be within its discretion or powers hereunder, or
(ii) in good faith omitted to be taken by it because
such action was reasonably believed to be beyond its discretion
or powers hereunder, or
(iii) taken by it pursuant to any direction or
instruction by which it is governed hereunder, or
(iv) omitted to be taken by it by reason of the lack of
any direction or instruction required hereby for such action;
nor shall it be responsible for the consequences of any error of
judgment made by it in good faith.
(d) The Issuer shall in no event be liable for the application
or misapplication of funds or for other acts or defaults by any person,
except its own officers and employees.
(e) When any payment or consent or other action by it is called
for hereby, it may defer such action pending receipt of such evidence
(if any) as it may require in support thereof.
(f) The Issuer shall not be required to take any remedial action
(other than the giving of notice) unless reasonable indemnity
satisfactory to it is furnished for any expense or liability to be
incurred thereby.
(g) As provided herein and in the Agreement, the Issuer shall be
entitled to reimbursement from the Company for its expenses reasonably
incurred or advances
-51-
<PAGE> 57
reasonably made, with interest at a rate per annum equal to the rate of
interest then in effect and as announced by The Chase Manhattan Bank as
its prime lending rate for domestic commercial loans in New York, New
York, in the exercise of its rights or the performance of its
obligations hereunder, to the extent that it acts without previously
obtaining indemnity.
(h) No permissive right or power to act which it may have shall
be construed as a requirement to act, and no delay in the exercise of a
right or power shall affect its subsequent exercise of that right or
power.
SECTION 5.04. DEFENSE OF ISSUER'S RIGHTS. The Issuer agrees that the
Trustee may defend the Issuer's rights to the payments and other amounts due
under the Agreement, for the benefit of the Owners of the Bonds, against the
claims and demands of all persons whomsoever. The Issuer covenants that it will
do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such indentures supplemental hereto and such further
acts, instruments and transfers as the Trustee may reasonably require for the
better assuring, transferring, pledging, assigning and confirming to the Trustee
all and singular the rights assigned hereby and the amounts pledged hereby to
the payment of the principal of, and premium, if any, and interest on, the
Bonds. The Issuer covenants and agrees that, except as herein and in the
Agreement provided, it will not sell, convey, assign, pledge, encumber or
otherwise dispose of any part of the Trust Estate.
SECTION 5.05. RECORDING AND FILING; FURTHER INSTRUMENTS.
(a) The Issuer and the Trustee shall cooperate with the Company in
causing to be filed and recorded all documents, notices and financing statements
related to this Indenture and to the Agreement which are necessary, as required
by law, in order to perfect the lien of this Indenture in the Trust Estate.
Concurrently with the execution and delivery of the Bonds and in accordance with
the requirements of Section 5.04 of the Agreement, the Company shall cause to be
delivered to the Trustee an opinion of counsel (i) stating that, in the opinion
of such counsel either (A) such action has been taken, as set forth therein,
with respect to the recording and filing of such documents, notices and
financing statements as is necessary to perfect the lien of this Indenture in
the Trust Estate, or (B) no such action is necessary to perfect such lien, and
(ii) stating the requirements for the filing of continuation statements or other
documentation or notices in order to maintain the perfection of the lien of this
Indenture in the Trust Estate.
(b) The Issuer shall upon the reasonable request of the Trustee, from
time to time execute and deliver such further instruments and take such further
action as may be reasonable (and consistent with the Bond Documents) and as may
be required to effectuate the purposes of this Indenture or any provisions
hereof, provided however, that no such instruments or actions shall pledge the
general credit or the full faith of the Issuer.
SECTION 5.06. RIGHTS UNDER AGREEMENT. The Agreement, a duly executed
counterpart, of which has been filed with the Trustee, sets forth the covenants
and obligations of the Issuer and the Company, including provisions that,
subsequent to the issuance of the Bonds and prior to the payment in full or
provision for payment thereof in accordance with the provisions hereof, the
-52-
<PAGE> 58
Agreement (except as expressly provided therein) may not be effectively amended,
changed, modified, altered or terminated without the concurring written consent
of the Trustee, as provided in Article XII hereof, and reference is hereby made
to the Agreement for a detailed statement of such covenants and obligations of
the Company, and the Issuer agrees that the Trustee in its name or (to the
extent required by law) in the name of the Issuer may enforce all rights of the
Issuer and all obligations of the Company under and pursuant to the Agreement,
whether or not the Issuer is in default hereunder. The Issuer shall cooperate
with the Trustee in enforcing the obligations of the Company to pay or cause to
be paid all amounts payable by the Company under the Agreement.
SECTION 5.07. ARBITRAGE AND TAX COVENANTS. The Issuer will not take or
fail to take any action that would impair the exclusion of interest on the Bonds
from gross income for federal income tax purposes. The Issuer further will not
knowingly act or fail to act so as to cause the proceeds of the Bonds, any
moneys derived, directly or indirectly, from the use or investment thereof and
any other moneys on deposit in any fund or account maintained in respect of the
Bonds (whether such moneys were derived from the proceeds of the sale of the
Bonds or from other sources) to be used in a manner which would cause the Bonds
to be treated as "arbitrage bonds" within the meaning of Section 148 of the
Code, or which would otherwise adversely affect the Tax-Exempt status of the
Bonds.
SECTION 5.08. NO DISPOSITION OF TRUST ESTATE. Except as permitted by
this Indenture, the Issuer shall not sell lease, pledge, assign or otherwise
encumber or dispose of its interest in the Trust Estate and will promptly pay
(but only from the Revenues) or cause to be discharged, or make adequate
provision to discharge, any lien or charge on any part thereof not permitted
hereby.
SECTION 5.09. ACCESS TO BOOKS. All books and documents in the possession
of the Issuer relating to the Revenues and the Trust Estate shall at all
reasonable times be open to inspection by such accountants or other agencies as
the Trustee may from time to time designate.
SECTION 5.10. SOURCE OF PAYMENT OF BONDS. The Bonds are not general
obligations of the Issuer but are limited obligations payable solely from the
Revenues. The Revenues have been pledged and assigned as security for the equal
and ratable payment of the Bonds and shall be used for no other purpose than to
pay the principal of, and premium, if any, and interest on, the Bonds, except as
may be otherwise expressly authorized in this Indenture or the Agreement.
SECTION 5.11. CREDIT FACILITY. The Trustee and the Paying Agent shall
take action under the Credit Facility, in accordance with the terms and subject
to the coverage thereof, to the extent necessary in order to cause amounts in
respect of the principal of and interest on the Bonds to be payable by the
Provider pursuant to the Credit Facility to the Owners of the Bonds. The Trustee
shall not sell, assign, transfer or surrender the Credit Facility (a) except to
a successor Trustee hereunder or (b) except in connection with a Change of
Credit Facility.
-53-
<PAGE> 59
ARTICLE VI
DEPOSIT OF BOND PROCEEDS; FUND AND ACCOUNTS; REVENUES
SECTION 6.01. CREATION OF BOND FUND AND ACCOUNTS; REBATE FUND.
(a) There is hereby created by the Issuer and ordered established a
separate Bond Fund, to be held by the Trustee and to be designated "City of
Forsyth, Montana, Pollution Control Revenue Refunding Bonds (Avista Corporation
Colstrip Project) Series 1999B Bond Fund" and therein a Principal Account and an
Interest Account.
(b) For purposes of complying with the requirements of Section 148 of
the Code, the Rebate Fund is hereby established with the Trustee to make
arbitrage payments as contemplated by the Tax Certificate. The Trustee shall
deposit such amounts into the Rebate Fund and pay such amounts from the Rebate
Fund as it shall be directed by an Authorized Company Representative. The
Trustee shall have no responsibility for calculating the amount of arbitrage
rebate with respect to the Bonds.
SECTION 6.02. DISPOSITION OF BOND PROCEEDS AND CERTAIN OTHER MONEYS. In
accordance with the direction contained in Section 3.03 of the Agreement,
simultaneously with the initial authentication and delivery of the Bonds: (i)
there shall be deposited with the Prior Trustee in the Prior Bond Fund and used
for the purpose of the Refunding of the Prior Bonds, an amount equal to
$17,000,000, representing the principal proceeds received from the sale of the
Bonds, and (ii) there shall be deposited into the Interest Account the accrued
interest on the Bonds, if any, from the Issue Date to the date of the initial
authentication and delivery of the Bonds.
SECTION 6.03. DEPOSITS INTO THE BOND FUND; USE OF MONEYS IN THE BOND
FUND.
(a) The Trustee shall deposit into the Principal Account of the Bond
Fund (i) payments made by the Company pursuant to the Agreement in respect of
principal of or premium payable on the Bonds, and (ii) any other moneys required
by this Indenture or the Agreement to be deposited into the Principal Account of
the Bond Fund.
(b) The Trustee shall deposit into the Interest Account of the Bond
Fund (i) payments made by the Company pursuant to the Agreement in respect of
interest on the Bonds, and (ii) any other moneys required by this Indenture or
the Agreement to be deposited into the Interest Account of the Bond Fund.
(c) Except as provided in Sections 6.04, 6.05, 9.10 and 10.04 and
Article VIII hereof, moneys in the Principal Account of the Bond Fund shall be
used solely for the payment of principal of and premium if any, on the Bonds as
the same shall become due and payable at maturity, upon redemption or upon
acceleration of maturity.
(d) Except as provided in Sections 6.04, 6.05, 9.10 and 10.04 and
Article VIII hereof, moneys in the Interest Account of the Bond Fund shall be
used solely to pay interest on the Bonds when due.
-54-
<PAGE> 60
SECTION 6.04. BONDS NOT PRESENTED FOR PAYMENT OF PRINCIPAL. In the event
any Bonds shall not be presented for payment when the principal thereof becomes
due, either at maturity or at the date fixed for redemption thereof or the
acceleration of maturity or in the event that any interest thereon is unclaimed,
if moneys sufficient to pay such Bonds or interest are held by the Trustee, the
Trustee shall segregate and hold such moneys in trust (but shall not invest such
moneys), without liability for interest thereon, for the benefit of Owners of
such Bonds who shall except as provided in the following paragraph, thereafter
be restricted exclusively to such fund or funds for the satisfaction of any
claim of whatever nature on their part under this Indenture or relating to said
Bonds or interest. Such Bonds which shall not have been so presented for payment
shall be deemed paid for any purposes of this Indenture.
Any moneys which the Trustee shall segregate and hold in trust for
the payment of the principal of or interest on any Bond and remaining unclaimed
for two years after such principal or interest has become due and payable shall
be paid by the Trustee to the Company upon request of an Authorized Company
Representative. After the payment of such unclaimed moneys to the Company, the
Owner of such Bond shall look only to the Company for payment, and then only to
the extent of the amount so repaid to the Company, and the Company shall not be
liable for any interest thereon and shall not be regarded as a trustee of such
money, and all liability of the Issuer and the Trustee with respect to such
moneys shall thereupon cease.
Neither the Company nor the Issuer shall have any right, title or
interest in or to any moneys held by the Trustee pursuant to this Section. The
Trustee shall not be liable to the Issuer or any Owner for interest on funds
held by it for the payment and discharge of the principal, interest, or premium
on any of the Bonds to any Owner.
SECTION 6.05. PAYMENT TO THE COMPANY. After the right, title and
interest of the Trustee in and to the Trust Estate and all covenants, agreements
and other obligations of the Issuer to the Owners shall have ceased, terminated
and become void and shall have been satisfied and discharged in accordance with
Section 6.04 and Article VIII hereof, and all fees, expenses and other amounts
payable to the Registrar, the Paying Agent, the Trustee, the Remarketing Agent,
the Provider and the Issuer pursuant to any provision of this Indenture or the
Credit Facility Agreement shall have been paid, any moneys remaining in the Bond
Fund and the Rebate Fund shall be paid to the Company upon request of an
Authorized Company Representative, other than any unclaimed moneys held pursuant
to Section 6.04. The Trustee may conclusively rely on certificates of the
Remarketing Agent and the Provider as to the amount of any fees, expenses and
other amounts owing to them.
ARTICLE VII
INVESTMENTS
SECTION 7.01. INVESTMENT OF MONEYS IN FUNDS. Subject to Section 5.07
hereof and the provisions of the Tax Certificate, moneys in the Bond Fund and
the Rebate Fund may be invested and reinvested in Investment Securities. Such
investments shall be made by the Trustee as specifically directed and designated
by the Company in a certificate of, or telephonic advice
-55-
<PAGE> 61
promptly confirmed by a certificate of, an Authorized Company Representative.
Each such certificate or telephonic advice shall contain a statement that each
investment so designated by the Company constitutes an Investment Security and
can be made without violation of any provision hereof or of the Agreement or of
the Tax Certificate. The Trustee shall be entitled to rely on each such
certificate or advice and shall incur no liability for making any such
investment so designated or for any loss, fee, tax or other charge incurred in
selling such investment or for any action taken pursuant to this Section that
causes the Bonds to be treated as "arbitrage bonds" within the meaning of
Section 148 of the Code. No investment instructions shall be given by the
Company if the investments to be made pursuant thereto would violate any
covenant set forth in Section 5.07 hereof or the provisions of the Agreement or
the Tax Certificate. The Trustee may act as principal or agent in the
acquisition or disposition of investments. The Trustee shall not be responsible
for any loss on any investment made in accordance herewith.
SECTION 7.02. CONVERSION OF INVESTMENT TO CASH. As and when any amounts
so invested may be needed for disbursements from the Bond Fund or the Rebate
Fund, the Trustee shall cause a sufficient amount of such investments to be sold
or otherwise converted into cash to the credit of such fund. As long as no Event
of Default shall have occurred and be continuing, the Company shall have the
right to designate the investments to be sold and to otherwise direct the
Trustee in the sale or conversion to cash of such investments; provided that the
Trustee shall be entitled to conclusively assume the absence of any Event of
Default unless it has notice thereof within the meaning of Section 10.05 hereof.
SECTION 7.03. CREDIT FOR GAINS AND CHARGE FOR LOSSES. Gains from
investments shall be credited to and held in and losses shall be charged to the
fund or account from which the investment is made.
ARTICLE VIII
DEFEASANCE
If the Issuer shall pay or cause to be paid to the Owner of any Bond
secured hereby the principal of, and premium, if any, and interest due and
payable, and thereafter to become due and payable, upon such Bond or any portion
of such Bond in an Authorized Denomination thereof, such Bond or portion thereof
shall cease to be entitled to any lien, benefit or security under this
Indenture.
If the Issuer shall pay or cause to be paid the principal of, and
premium if any, and interest due and payable on, all Outstanding Bonds, and
thereafter to become due and payable thereon, and shall pay or cause to be paid
all other sums payable hereunder by the Issuer, including any necessary and
proper fees, compensation and expenses of the Trustee, the Paying Agent, the
Registrar, the Provider and the Remarketing Agent, then, and in that case, the
right, title and interest of the Trustee in and to the Trust Estate shall
thereupon cease, terminate and become void. In such event, the Trustee shall
assign, transfer and turn over the Trust Estate to the Company and any surplus
in the Bond Fund and any balance remaining in any other fund created under this
Indenture shall be paid to the Company upon the request of an Authorized Company
-56-
<PAGE> 62
Representative, other than any unclaimed moneys held pursuant to Sections
3.06(d) and 6.04. The Trustee may conclusively rely on certificates of the
Remarketing Agent and the Provider as to the amount of any fees, expenses and
other amounts owing to them. Notwithstanding anything herein to the contrary, in
the event that the principal of and interest due on any Bonds shall be paid by
the Provider pursuant to the Credit Facility, such Bonds shall remain
Outstanding for all purposes, shall not be defeased or otherwise satisfied and
shall not be considered paid by the Issuer, and the assignment and pledge of the
Trust Estate and all covenants, agreements and other obligations of the Issuer
to such Owners shall continue to exist and shall run to the benefit of the
Provider and the Provider shall be subrogated to the rights of such Owners.
All or any portions of Bonds (in Authorized Denominations) shall, prior
to the maturity or redemption date thereof, be deemed to have been paid within
the meaning of this Article VIII and for all purposes of this Indenture when:
(a) in the event said Bonds or portions thereof have been
selected for redemption in accordance with Section 4.04 hereof, the
Trustee shall have given, or the Company shall have given to the Trustee
in form satisfactory to it irrevocable instructions to give, on a date
in accordance with the provisions of Section 4.05 hereof, notice of
redemption of such Bonds or portions thereof;
(b) there shall have been deposited with the Trustee moneys in
an amount sufficient (without relying on any investment income) to pay
when due the principal of, and premium, if any, and interest due and to
become due (which amount of interest to become due shall be calculated
at the Maximum Interest Rate unless the interest rate borne by all of
such Bonds is not subject to adjustment prior to the maturity or
redemption thereof, in which case the amount of interest shall be
calculated at the rate borne by such Bonds) on said Bonds or portions
thereof on and prior to the redemption date or maturity date thereof, as
the case may be;
(c) in the event said Bonds or portions thereof do not mature
and are not to be redeemed within the next succeeding 60 days, the
Issuer at the direction of the Company shall have given the Trustee in
form satisfactory to it irrevocable instructions to give, as soon as
practicable in the same manner as a notice of redemption is given
pursuant to Section 4.05 hereof, a notice to the Owners of said Bonds or
portions thereof and to the Provider that the deposit required by clause
(b) above has been made with the Trustee and that said Bonds or portions
thereof are deemed to have been paid in accordance with this Article
VIII and stating the maturity or redemption date upon which moneys are
to be available for the payment of the principal of, and premium, if
any, and interest on, said Bonds or portions thereof; and
(d) the Trustee shall have received a Favorable Opinion of Bond
Counsel with respect to such deposit.
In the event the requirements of the next succeeding paragraph can be
satisfied, the preceding paragraph shall not apply, and the following two
paragraphs shall be applicable.
-57-
<PAGE> 63
Any Bond shall be deemed to be paid within the meaning of this Article
VIII and for all purposes of this Indenture when:
(a) payment of the principal of and premium if any, on such
Bond, plus interest thereon to the due date thereof (whether such due
date is by reason of maturity or acceleration or upon redemption as
provided herein) either (A) shall have been made or caused to be made in
accordance with the terms thereof or (B) shall have been provided for by
irrevocably depositing with the Trustee in trust and irrevocably set
aside exclusively for such payment (1) moneys sufficient to make such
payment, and/or (2) Government Obligations maturing as to principal and
interest in such amount and at such time as will insure, without
reinvestment, the availability of sufficient moneys to make such
payment;
(b) all necessary and proper fees, compensation and expenses of
the Issuer, the Trustee, the Remarketing Agent, the Provider, the Paying
Agent and the Registrar pertaining to the Bonds with respect to which
such deposit is made shall have been paid or the payment thereof
provided for to the satisfaction of the Trustee, the Trustee being able
to conclusively rely on certificates of the Remarketing Agent and the
Provider as to the amount of any fees, compensation and expenses owing
to them; and
(c) an opinion of an independent public accountant of nationally
recognized standing, selected by the Company, to the effect that such
moneys and/or Government Obligations will insure, without reinvestment,
the availability of sufficient moneys to make such payment, and a
Favorable Opinion of Bond Counsel with respect to such deposit shall
have been delivered to the Trustee. At such times as a Bond shall be
deemed to be paid hereunder, as aforesaid, such Bond shall no longer be
secured by or entitled to the benefits of this Indenture, except for the
purposes of registration and exchange of Bonds and of any such payment
from such moneys or Government Obligations.
The foregoing provisions of this paragraph shall apply only if (x) such Bond is
to mature or be called for redemption prior to the next date upon which such
Bond is subject to purchase pursuant to Section 3.01 and 3.02 hereof; and (y)
the Company has waived, to the satisfaction of the Trustee, its right to convert
the interest rate borne by such Bond.
No deposit under clause (a)(B) of the preceding paragraph shall be
deemed a payment of such Bonds as aforesaid until: (i) proper notice of
redemption of such Bonds shall have been previously given in accordance with
Section 4.05 hereof, or in the event said Bonds are not to be redeemed within
the next succeeding 60 days, until the Company shall have given the Trustee on
behalf of the Issuer, in form satisfactory to the Trustee, irrevocable
instructions to notify, as soon as practicable, the Owners of the Bonds and the
Provider in accordance with Section 4.05 hereof, that the deposit required by
clause (a)(B) above has been made with the Trustee and that said Bonds are
deemed to have been paid in accordance with this Article VIII and stating the
maturity or redemption date upon which moneys are to be available for the
payment of the principal of and the applicable redemption premium, if any, on
said Bonds, plus interest thereon to the due date thereof; or (ii) the maturity
of such Bonds.
-58-
<PAGE> 64
Moneys deposited with the Trustee pursuant to this Article VIII shall
not be withdrawn or used for any purpose other than, and shall be held in trust
for, the payment of the principal of, premium, if any, and interest on said
Bonds or portions thereof, or for the payment of the purchase price of Bonds in
accordance with Section 3.03 hereof; provided that such moneys, if not then
needed for such purpose, shall to the extent practicable, be invested and
reinvested in Government Obligations maturing on or prior to the earlier of (i)
the date moneys may be required for the purchase of Bonds pursuant to Section
3.03 hereof or (ii) the Interest Payment Date next succeeding the date of
investment or reinvestment, and interest earned from such investments shall be
paid over to the Company, as received by the Trustee, free and clear of any
trust, lien or pledge. If payment of less than all the Bonds is to be provided
for in the manner and with the effect provided in this Article VIII, the Trustee
shall select such Bonds or portion of such Bonds in the manner specified by
Section 4.04 hereof for selection for redemption of less than all Bonds in the
principal amount, not less than $100,000 or, to the extent permitted by Section
4.01(b) hereof, $5,000, designated to the Trustee by the Company.
Notwithstanding that all or any portion of the Bonds are deemed to be
paid within the meaning of this Article VIII, the provisions of this Indenture
relating to (i) the registration and exchange of Bonds, (ii) the delivery of
Bonds to the Trustee for purchase and the related obligations of the Trustee
with respect thereto, (iii) replacement of mutilated, lost, destroyed or stolen
Bonds, (iv) payment of the Bonds from the moneys deposited as described in this
Article and (v) payment, compensation, reimbursement and indemnification of the
Trustee, shall remain in full force and effect with respect to all Bonds until
the Maturity Date or the last date fixed for redemption of all Bonds prior to
maturity and, in the case of clause (v), until payment, compensation,
reimbursement or indemnification, as the case may be, of the Trustee.
ARTICLE IX
DEFAULTS AND REMEDIES
SECTION 9.01. EVENTS OF DEFAULT. Each of the following events shall
constitute and is referred to in this Indenture as an "Event of Default":
(a) a failure to pay the principal of or premium, if any,
on any of the Bonds when the same shall become due and payable at
maturity, upon redemption or otherwise;
(b) a failure to pay an installment of interest on any of
the Bonds for a period of (i) 30 days after the date upon which such
interest has become due and payable if the Bonds bear interest at a
Term Interest Rate, or (ii) two Business Days after the date upon
which such interest has become due and payable if the Bonds bear
interest at a PARS Rate, a Flexible Interest Rate, a Daily Interest
Rate or a Weekly Interest Rate;
(c) a failure to pay an amount due in respect of the
purchase price of Bonds pursuant to Section 3.01 and Section 3.02
hereof after such payment has become due and payable;
-59-
<PAGE> 65
(d) a failure by the Issuer to observe and perform any
covenant, condition, agreement or provision (other than as specified
in Section 9.01(a), Section 9.01(b) and Section 9.01(c)) contained in
the Bonds or in this Indenture on the part of the Issuer to be
observed or performed, which failure shall continue for a period of
90 days after written notice, specifying such failure and requesting
that it be remedied, shall have been given to the Issuer and the
Company by the Trustee by registered or certified mail which may give
such notice in its discretion and shall give such notice at the
written request of the Owners of not less than 33-1/3% in principal
amount of the Bonds then Outstanding, unless the Trustee, or the
Trustee and the Owners of a principal amount of Bonds not less than
the principal amount of Bonds the Owners of which requested such
notice, as the case may be, shall agree in writing to an extension of
such period prior to its expiration; provided however, that the
Trustee, or the Trustee and the Owners of such principal amount of
Bonds, as the case may be, shall be deemed to have agreed to an
extension of such period if corrective action is initiated by the
Issuer or the Company on behalf of the Issuer within such period and
is being diligently pursued; or
(e) an "Event of Default" under the Agreement.
If on the date on which payment of principal of, interest on or other
amount in any respect of the Bonds is due, sufficient moneys are not available
to make such payment, the Trustee shall promptly give telephonic notice of such
insufficiency to the Company given to the person at the telephone number
provided for in Section 3.06(c) hereof.
SECTION 9.02. ACCELERATION; OTHER REMEDIES.
(a) If an Event of Default described in Section 9.01(a), Section
9.01(b) or Section 9.01(c) or an Event of Default described in Section 9.01(e)
hereof resulting from an "Event of Default" under Section 7.01(a) or Section
7.01(c) of the Agreement (of which the Trustee shall be deemed to have notice
pursuant to the provisions of Section 10.05 hereof) has occurred and has not
been cured or waived, then the Trustee may, with the consent of the Provider
(unless a Provider Default shall have occurred and be continuing) or upon the
written direction of the Provider (unless a Provider Default shall have occurred
and be continuing) or upon the written request of the Owners of not less than
33-1/3% in principal amount of the Bonds then Outstanding and with the consent
of the Provider (unless a Provider Default shall have occurred and be
continuing), the Trustee shall, by written notice by registered or certified
mail to the Issuer, the Company and the Provider, declare the Bonds to be
immediately due and payable, whereupon the Bonds shall without further action,
become and be immediately due and payable, anything in this Indenture or in the
Bonds to the contrary notwithstanding, and the Trustee shall give notice thereof
by Mail to all Owners of Outstanding Bonds.
(b) The provisions of Section 9.02(a) are subject further to the
condition that if, after the principal of the Bonds shall have been so declared
to be due and payable and before any judgment or decree for the payment of the
moneys due shall have been obtained or entered as hereinafter provided, the
Issuer shall cause to be deposited with the Trustee a sum sufficient to pay all
matured installments of interest upon all Bonds, any unpaid purchase price and
the principal of any and all Bonds which shall have become due otherwise than by
reason of such declaration
-60-
<PAGE> 66
(with interest upon such principal and, to the extent permissible by law, on
overdue installments of interest, at the rate per annum then borne by the Bonds)
and such amount as shall be sufficient to cover reasonable compensation and
reimbursement of expenses payable to the Trustee and all Events of Default
(other than nonpayment of the principal of Bonds which shall have become due by
said declaration) shall have been remedied, then, in every such case, such Event
of Default shall be deemed waived and such declaration and its consequences
rescinded and annulled, and the Trustee shall promptly give written notice of
such waiver, rescission or annulment to the Issuer and the Company, and shall
give notice thereof by Mail to all Owners of Outstanding Bonds; provided,
however, that no such waiver, rescission and annulment shall extend to or affect
any other Event of Default or subsequent Event of Default or impair any right,
power or remedy consequent thereon.
(c) Upon the occurrence and continuance of any Event of Default, then
and in every such case the Trustee in its discretion, with the consent of the
Provider (unless a Provider Default shall have occurred and be continuing) may,
and upon the written request of the Owners of not less than 33-1/3% in principal
amount of the Bonds then Outstanding and receipt of indemnity to its
satisfaction (except against negligence or willful misconduct) shall in its own
name and as the Trustee of an express trust:
(i) by mandamus, or other suit, action or proceeding at law or
in equity, enforce all rights of the Owners under, and require the
Issuer, the Company or the Provider to carry out any agreements with or
for the benefit of the Owners of Bonds and to perform its or their
duties under, the Act, the Agreement, this Indenture, the Credit
Facility and the Credit Facility Agreement, provided that any such
remedy may be taken only to the extent permitted under the applicable
provisions of the Agreement or this Indenture, as the case may be;
(ii) bring suit upon the Bonds;
(iii) by action or suit in equity require the Issuer to account
as if it were the trustee of an express trust for the Owners of Bonds;
or
(iv) by action or suit in equity enjoin any acts or things which
may be unlawful or in violation of the rights of the Owners of Bonds.
Anything in this Indenture to the contrary notwithstanding, upon the
occurrence and continuance of an Event of Default, the Provider (unless a
Provider Default shall have occurred and be continuing) shall be entitled
(subject to Section 9.04) to control and direct the enforcement of all rights
and remedies granted to the Owners of the Bonds or the Trustee for the benefit
of such Owners under this Indenture and shall be entitled to consent to any
request or direction of the Owners as a condition to the effectiveness of any
such request or direction.
(d) The Trustee shall waive any Event of Default hereunder and its
consequences and rescind any declaration of acceleration of principal upon (i)
the written direction of the Provider (unless a Provider Default shall have
occurred and be continuing) and (ii) the written request of the Owners of (A)
more than a majority in principal amount of all Outstanding Bonds in respect
-61-
<PAGE> 67
of which default in the payment of principal or purchase price of or interest on
the Bonds exists or (B) more than a majority in principal amount of all
Outstanding Bonds in the case of any other Event of Default; provided, however,
that (x) there shall not be waived any Event of Default specified in Section
9.01(a), Section 9.01(b) or Section 9.01(c) hereof unless prior to such waiver
or rescission the Issuer shall have caused to be deposited with the Trustee a
sum sufficient to pay all matured installments of interest upon all Bonds and
the principal and purchase price of any and all Bonds which shall have become
due otherwise than by reason of such declaration of acceleration (with interest
upon such principal and, to the extent permissible by law, on overdue
installments of interest, at the rate per annum then borne by the Bonds) and (y)
no Event of Default shall be waived unless (in addition to the applicable
conditions as aforesaid) there shall have been deposited with the Trustee such
amount as shall be sufficient to cover reasonable compensation and reimbursement
of expenses payable to the Trustee. In case of any waiver or rescission
described above, or in case any proceeding taken by the Trustee on account of
any such Event of Default shall have been discontinued or concluded or
determined adversely, then and in every such case the Issuer, the Trustee and
the Owners of Bonds shall be restored to their former positions and rights
hereunder, respectively; provided further that no such waiver or rescission
shall extend to any subsequent or other Event of Default, or impair any right
consequent thereon.
SECTION 9.03. RESTORATION TO FORMER POSITION. In the event that any
proceeding taken by the Trustee to enforce any right under this Indenture shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Trustee, then the Issuer, the Trustee and the Owners
of Bonds shall be restored to their former positions and rights hereunder,
respectively, and all rights, remedies and powers of the Trustee shall continue
as though no such proceeding had been taken.
SECTION 9.04. OWNERS' RIGHT TO DIRECT PROCEEDINGS. Anything in this
Indenture to the contrary notwithstanding, upon the occurrence and continuance
of an Event of Default, the Provider (provided that a Provider Default shall not
have occurred and be continuing) or the Owners of a majority in principal amount
of the Bonds then Outstanding, with the consent of the Provider (if no Provider
Default shall have occurred and be continuing), shall have the right, by an
instrument in writing executed and delivered to the Trustee and upon furnishing
to the Trustee indemnity satisfactory to it (except against negligence or
willful misconduct), to direct the time, method and place of conducting all
remedial proceedings available to the Trustee under this Indenture or exercising
any trust or power conferred on the Trustee by this Indenture, provided that
such direction shall not be other than in accordance with the provisions of law,
the Agreement and this Indenture and shall not result in any personal liability
of the Trustee.
SECTION 9.05. LIMITATION ON OWNERS' RIGHT TO INSTITUTE PROCEEDINGS. No
Owner shall have any right to institute any suit, action or proceeding in equity
or at law for the execution of any trust or power hereunder, or any other remedy
hereunder or in the Bonds, unless such Owner previously shall have given to the
Trustee written notice of an Event of Default as herein above provided and
unless the Owners of not less than 33-1/3% in principal amount of the Bonds then
Outstanding shall have made written request of the Trustee so to do after the
right to institute said suit, action or proceeding under Section 9.02 hereof
shall have accrued, and shall have afforded the Trustee a reasonable opportunity
to proceed to institute the same in either its or their name, and unless there
also shall have been offered to the Trustee security and indemnity satisfactory
to
-62-
<PAGE> 68
it against the costs, expenses and liabilities to be incurred therein or thereby
(except against negligence or willful misconduct), and the Trustee shall not
have complied with such request within a reasonable time; and such notification,
request and offer of indemnity are hereby declared in every such case, at the
option of the Trustee, to be conditions precedent to the institution of said
suit, action or proceeding, it being understood and intended that no one or more
of the Owners shall have any right in any manner whatever by his or their action
to affect, disturb or prejudice the security of this Indenture, or to enforce
any right hereunder or under the Bonds, except in the manner herein provided,
and that all suits, actions and proceedings at law or in equity shall be
instituted, had and maintained in the manner herein provided and for the equal
benefit of all Owners.
SECTION 9.06. NO IMPAIRMENT OF RIGHT TO ENFORCE PAYMENT. Notwithstanding
any other provision in this Indenture, the right of any Owner to receive payment
of the principal or purchase price of, and premium, if any, and interest on, its
Bond, on or after the respective due dates expressed therein, or to institute
suit for the enforcement of any such payment on or after the respective due
dates expressed therein, or to institute suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Owner.
SECTION 9.07. PROCEEDINGS BY TRUSTEE WITHOUT POSSESSION OF BONDS. All
rights of action under this Indenture or under any of the Bonds secured hereby
which are enforceable by the Trustee may be enforced by it without the
possession of any of the Bonds, or the production thereof at the trial or other
proceedings relative thereto, and any such suit, action or proceeding instituted
by the Trustee shall be brought in its name for the equal and ratable benefit of
the Owners, subject to the provisions of this Indenture.
SECTION 9.08. NO REMEDY EXCLUSIVE. Except as provided in Section 2.13,
no remedy herein conferred upon or reserved to the Trustee or to the Owners is
intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative, and shall be in addition to every other remedy
given hereunder or under the Agreement, or now or hereafter existing at law or
in equity or by statute; provided, however, that any conditions set forth herein
to the taking of any remedy to enforce the provisions of this Indenture, the
Bonds or the Agreement shall also be conditions to seeking any remedies under
any of the foregoing pursuant to this Section 9.08.
SECTION 9.09. NO WAIVER OF REMEDIES. No delay or omission of the Trustee
or of any Owner to exercise any right or power accruing upon any Event of
Default shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default, or an acquiescence therein; and every power
and remedy given by this Article IX to the Trustee and to the Owners,
respectively, may be exercised from time to time and as often as may be deemed
expedient.
SECTION 9.10. APPLICATION OF MONEYS. Any moneys received by the Trustee,
by any receiver or by any Owner pursuant to any right given or action taken
under the provisions of this Article IX, after payment of the costs and
expenses, liabilities and advances incurred or made by the Trustee or its agents
or counsel (provided that moneys held for Bonds not presented for
-63-
<PAGE> 69
payment or deemed paid pursuant to Section 3.06(d), Section 6.04 or Article VIII
hereof shall not be used for purposes other than payment of such Bonds), shall
be deposited in the Bond Fund and all moneys so deposited in the Bond Fund
during the continuance of an Event of Default (other than moneys for the payment
of Bonds which had matured or otherwise become payable prior to such Event of
Default or for the payment of interest due prior to such Event of Default) shall
be applied as follows:
(a) Unless the principal of all the Bonds shall have been
declared due and payable, all such moneys shall be applied (i) first, to
the payment to the persons entitled thereto of all installments of
interest then due on each Bond, with interest on overdue installments of
interest, if lawful at the rate per annum then borne by such Bond, in
the order of maturity of the installments of such interest and, if the
amount available shall not be sufficient to pay in full any particular
installment of interest, then to the payment ratably, according to the
amounts due on such installment, and (ii) second, to the payment to the
persons entitled thereto of the unpaid principal of any of the Bonds
which shall have become due (other than Bonds called for redemption for
the payment of which money is held pursuant to the provisions of this
Indenture) with interest on each Bond at its rate from the respective
dates upon which it became due and, if the amount available shall not be
sufficient to pay in full Bonds due on any particular date, together
with such interest, then to the payment ratably, according to the amount
of principal and interest due on such date, in each case to the persons
entitled thereto, without any discrimination or privilege.
(b) If the principal of all the Bonds shall have been declared
due and payable, all such moneys shall be applied to the payment of the
principal and interest then due and unpaid upon the Bonds, with interest
on overdue interest and principal as aforesaid, without preference or
priority of principal over interest or interest over principal or of any
installment of interest over any other installment of interest, or of
any Bond over any other Bond, ratably, according to the amounts due
respectively for principal and interest, to the persons entitled thereto
without any discrimination or privilege.
(c) If the principal of all the Bonds shall have been declared
due and payable, and if such declaration shall thereafter have been
rescinded and annulled under the provisions of this Article then,
subject to the provisions of subparagraph (b) of this Section 9.10 which
shall be applicable in the event that the principal of all the Bonds
shall later become due and payable, the moneys shall be applied in
accordance with the provisions of subparagraph (a) of this Section 9.10.
Whenever moneys are to be applied pursuant to the provisions of this
Section 9.10, such moneys shall be applied at such times, and from time to time,
as the Trustee shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys becoming
available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the Bond Payment Date upon which such application is to
commence and upon such Bond Payment Date interest on the amounts of principal
and interest to be paid on such Bond Payment Date shall cease to accrue. The
Trustee shall give notice of the deposit with it of any such moneys and of the
fixing of any such Bond Payment Date by Mail to the Provider and all Owners of
Outstanding Bonds and shall not be required to make payment to
-64-
<PAGE> 70
any Owner until such Bond shall be presented to the Trustee for appropriate
endorsement or cancellation if fully paid.
SECTION 9.11. SEVERABILITY OF REMEDIES. It is the purpose and intention
of this Article IX to provide rights and remedies to the Trustee and the Owners
which may be lawfully granted under the provisions of the Act, but should any
right or remedy herein granted be held to be unlawful the Trustee and the Owners
shall be entitled, as above set forth, to every other right and remedy provided
in this Indenture and by law.
ARTICLE X
TRUSTEE; PAYING AGENT; REGISTRAR; REMARKETING AGENT
SECTION 10.01. ACCEPTANCE OF TRUSTS. The Issuer initially appoints Chase
Manhattan Bank and Trust Company, National Association, as Trustee and Paying
Agent. The Trustee hereby accepts and agrees to execute the trusts hereby
created, but only upon the additional terms set forth in this Article X, to all
of which the Issuer agrees and the respective Owners agree by their acceptance
of delivery of any of the Bonds. The Trustee, prior to the occurrence of an
Event of Default and after the curing of all Events of Default, undertakes to
perform such duties and only such duties as are specifically set forth herein
and no implied covenant shall be read into this Indenture.
SECTION 10.02. NO RESPONSIBILITIES FOR RECITALS. The recitals,
statements and representations contained in this Indenture or in the Bonds, save
only the Trustee's authentication upon the Bonds, shall not be taken and
construed as made by or on the part of the Trustee, and the Trustee does not
assume, and shall not have, any responsibility or obligation for the correctness
of any thereof or for the validity, sufficiency or priority of this Indenture or
the Agreement, or the perfection or the maintenance of the perfection of any
security interest granted hereby.
SECTION 10.03. LIMITATIONS ON LIABILITY. The Trustee may execute any of
the trusts or powers hereof and perform the duties required of it hereunder by
or through attorneys, agents, receivers or employees, and shall be entitled to
advice of counsel concerning all matters of trust and its duties hereunder and
shall not be answerable for the conduct of any such attorney, agent, receiver or
employee if appointed by the Trustee with reasonable care, and the advice of any
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted hereunder in good faith and reliance
thereon. The Trustee shall not be answerable for the exercise of any discretion
or power under this Indenture or for anything whatsoever in connection with the
trusts created hereby, except only for its own negligence or willful misconduct.
The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Provider or the Owners of a majority in aggregate principal amount of the Bonds
Outstanding relating to the time, method and place of
-65-
<PAGE> 71
conducting any proceeding or any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this Indenture.
No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers.
The permissive rights of the Trustee to do things enumerated in this
Trust Indenture shall not be construed as a duty unless so specified herein.
The Trustee shall not be liable for any error of judgment made in
good faith by an officer, director or employee unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts.
The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Provider or the Owners pursuant to the provisions of
this Trust Indenture unless such Owners shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
Whether or not expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of the Trustee
shall be subject to the provisions of this Article X and shall extend to the
Registrar, Paying Agents, and employees and agents of the Trustee.
SECTION 10.04. COMPENSATION, EXPENSES AND ADVANCES. The Trustee, the
Paying Agent and the Registrar shall be entitled to such compensation as shall
be agreed in writing with the Company for their services rendered hereunder (not
limited by any provision of law in regard to the compensation of the trustee of
an express trust) and to reimbursement for their actual out-of-pocket expenses
(including reasonable counsel fees and expenses) reasonably incurred in
connection therewith except as a result of their negligence or willful
misconduct. If the Issuer shall fail to perform any of the covenants or
agreements contained in this Indenture, the Trustee may, in its uncontrolled
discretion and without notice to the Owners, at any time and from time to time,
make advances to effect performance of the same on behalf of the Issuer, but the
Trustee shall be under no obligation so to do; and any and all such advances
shall bear interest at a rate per annum equal to the lesser of the Maximum
Interest Rate and the rate of interest then in effect and as announced by The
Chase Manhattan Bank as its prime lending rate for domestic commercial loans in
New York, New York; but no such advance shall operate to relieve the Issuer from
any Event of Default. In no event shall the Trustee be liable for any claims
resulting from any decision on its part not to advance funds as permitted in the
immediately preceding sentence. In the Agreement, the Company has agreed that it
will pay to the Trustee, the Paying Agent, and the Registrar compensation and
reimbursement of expenses and advances and certain indemnitees, but the Company
may, without creating an Event of Default, contest in good faith the
reasonableness of any such expenses and advances. If the Company shall have
failed to make any payment to the Trustee, the Paying Agent or the Registrar
under the Agreement, then each of the Trustee, the Paying Agent and the
Registrar shall have, in addition to any other rights hereunder, a claim, prior
to the claim of the Owners, for the payment of their compensation and
-66-
<PAGE> 72
indemnitees and the reimbursement of their expenses and any advances made by
them, as provided in this Section 10.04, upon the moneys and obligations in the
Bond Fund, except for moneys or obligations deposited with or paid to the
Trustee for the redemption or payment of Bonds which are deemed to have been
paid in accordance with Article VIII hereof, or funds held pursuant to Section
6.04 hereof.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 7.01(c) of the
Agreement, the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section 10.04 shall survive the termination of
this Indenture.
SECTION 10.05. NOTICE OF EVENTS OF DEFAULT AND DETERMINATION OF
TAXABILITY. The Trustee shall not be required to take notice, or be deemed to
have notice of any default or Event of Default, other than an Event of Default
under Section 9.01(a), Section 9.01(b) or Section 9.01(c) hereof or any Provider
Default, unless the Trustee shall have been specifically notified in writing at
the Principal Office of the Trustee, Attention: Corporate Trust Administration,
of such Event of Default or Provider Default by the Owners of at least 25% in
principal amount of the Bonds then Outstanding, the Issuer, the Company, the
Provider or the Remarketing Agent. The Trustee may, however, at any time, in its
discretion, require of the Issuer full information and cooperation as to the
performance of any of the covenants, conditions and agreements contained herein.
Such inquiry shall not for the purposes of this Section 10.05 constitute notice
of any Event of Default. The Issuer shall not be required to take notice, or be
deemed to have notice, of any Event of Default, other than an Event of Default
of which it shall have actual knowledge. If an Event of Default occurs after the
Trustee has notice of the same as provided in this Section 10.05, or if a
Determination of Taxability occurs of which the Trustee has actual knowledge,
then the Trustee shall give notice thereof by Mail to the Provider, the
Remarketing Agent and the Owners of Outstanding Bonds.
SECTION 10.06. ACTION BY TRUSTEE. Except as provided in Section 3.03,
Section 9.02 and Section 9.04 hereof and except for the payment of principal of,
and premium, if any, and interest on, the Bonds when due from moneys held by the
Trustee as part of the Trust Estate, the Trustee shall be under no obligation to
take any action in respect of any Event of Default or toward the execution or
enforcement of any of the trusts hereby created, or to institute, appear in or
defend any suit or other proceeding in connection therewith, unless requested in
writing so to do by the Owners of at least 33-1/3% in principal amount of the
Bonds then Outstanding and, if in its opinion such action may tend to involve it
in expense or liability, unless furnished, from time to time as often as it may
require, with security and indemnity satisfactory to it (except against
negligence or willful misconduct); but the foregoing provisions are intended
only for the protection of the Trustee, and shall not affect any discretion or
power given by any provisions of this Indenture to the Trustee to take action in
respect of any Event of Default without such notice or request from the Owners,
or without such security or indemnity.
-67-
<PAGE> 73
Notwithstanding any other provision of this Indenture, in determining
whether the rights of the Owners will be adversely affected by any action taken
pursuant to the terms and provisions of this Indenture, the Trustee shall
consider the effect on the Owners as if there were no Credit Facility.
SECTION 10.07. GOOD-FAITH RELIANCE. The Trustee, the Registrar, the
Provider and the Remarketing Agent, shall be protected and shall incur no
liability in acting or proceeding in good faith upon any resolution, notice,
telegram, telex or facsimile transmission, request, consent, waiver,
certificate, statement, affidavit, voucher, bond, requisition or other paper or
document which it shall in good faith believe to be genuine and to have been
passed or signed by the proper board, body or person or to have been prepared
and furnished pursuant to any of the provisions of this Indenture or the
Agreement, or upon the written opinion of any attorney, engineer, accountant or
other expert believed, without independent investigation, by the Trustee, the
Registrar or the Remarketing Agent, as the case may be, to be qualified in
relation to the subject matter. The Trustee, the Registrar, the Provider and the
Remarketing Agent, shall be under no duty to make any investigation or inquiry
as to any statements contained or matters referred to in any such instrument,
but may accept and rely upon the same as conclusive evidence of the truth and
accuracy of such statements; provided, however, that the Trustee may, in its
discretion, make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation it shall be entitled to examine the books,
records and premises of the Company personally or by agent or attorney. Neither
the Trustee, the Registrar, the Provider nor the Remarketing Agent shall be
bound to recognize any person as an Owner or to take any action at such person's
request unless satisfactory evidence of the ownership of such Bond shall be
furnished to such entity.
Whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of negligence or bad
faith on its part, request and conclusively rely upon a certificate of an
Authorized Company Representative or an Executive Officer.
The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Notwithstanding anything elsewhere in this Indenture contained, the
Trustee shall have the right, but shall not be required, to demand, in respect
of the authentication of any Bonds or the taking of any other action whatsoever
within the purview of this Indenture or the Agreement, any showings,
certificates, opinions or other information, or corporate action or evidence
thereof, in addition to those by the terms hereof or thereof required as a
condition of such action which are reasonably deemed desirable by the Trustee
for the purpose of establishing the right of the Issuer or the Company to
request the taking of such action by the Trustee.
SECTION 10.08. DEALINGS IN BONDS; ALLOWANCE OF INTEREST. The Trustee,
the Registrar, the Provider, or the Remarketing Agent, in its individual
capacity, may in good faith buy, sell own,
-68-
<PAGE> 74
hold and deal in any of the Bonds issued hereunder and may join in any action
which any Owner may be entitled to take with like effect as if it did not act in
any capacity hereunder. The Trustee, the Registrar, the Provider, or the
Remarketing Agent, in its individual capacity, either as principal or agent, may
also engage in or be interested in any financial or other transaction with the
Issuer or the Company, and may act as depositary, trustee or agent for any
committee or body of Owners secured hereby or other obligations of the Issuer or
the Company as freely as if it did not act in any capacity hereunder.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on any moneys received
hereunder except such as it may agree with the Company to pay thereon.
SECTION 10.09. SEVERAL CAPACITIES. Anything in this Indenture to the
contrary notwithstanding, the same entity may serve hereunder as the Trustee,
the Registrar, the Paying Agent and the Remarketing Agent and in any other
combination of such capacities, to the extent permitted by law. For purposes of
this Trust Indenture, the Remarketing Agent shall not be deemed to be an agent
or representative of the Trustee.
SECTION 10.10. RESIGNATION OF TRUSTEE. The Trustee may resign and be
discharged of the trusts created by this Indenture by executing any instrument
in writing resigning such trust and specifying the date when such resignation
shall take effect, and filing the same with the Issuer, the Company, the
Registrar, the Provider, and the Remarketing Agent not less than 45 days before
the date specified in such instrument when such resignation shall take effect,
and by giving notice of such resignation by Mail not less than three weeks prior
to such resignation date, to all Owners of Bonds. Such resignation shall take
effect on the day specified in such instrument and notice, unless previously a
successor Trustee shall have been appointed as hereinafter provided, in which
event such resignation shall take effect immediately upon the appointment of
such successor Trustee, but in no event shall a resignation take effect earlier
than the date on which a successor Trustee has been appointed and has accepted
its appointment.
SECTION 10.11. REMOVAL OF TRUSTEE.
(a) The Trustee may be removed at any time by filing with the Trustee
so removed and with the Issuer, the Company, the Registrar, the Provider, and
the Remarketing Agent, an instrument or instruments in writing executed by (i)
the Provider, if no Provider Default or Event of Default shall have occurred and
be continuing and if the Trustee has acted or failed to act hereunder in a
manner that is contrary to the standard of care of the Trustee provided for
herein, or (ii) the Owners of not less than a majority in principal amount of
the Bonds then Outstanding and, if no Provider Default shall have occurred and
be continuing, the Provider.
(b) The Issuer may, and, so long as no default or Event of Default is
then existing under Section 7.01 of the Agreement or Section 9.01(a), (b) or (c)
of this Indenture, at the request of the Company will, remove the Trustee if (i)
the Trustee fails to comply with Section 10.13(a), (b), (c) or (e) hereof, (ii)
the Trustee is adjudged a bankrupt or an insolvent, (iii) a receiver or other
-69-
<PAGE> 75
public officer takes charge of the Trustee or its property or (iv) the Trustee
otherwise becomes incapable of acting.
(c) In no event shall a removal take effect earlier than the date on
which a successor Trustee has been appointed and has accepted its appointment.
SECTION 10.12. APPOINTMENT OF SUCCESSOR TRUSTEE. In case at any time the
Trustee shall be removed, or be dissolved, or if its property or affairs shall
be taken under the control of any state or federal court or administrative body
because of insolvency or bankruptcy, or for any other reason, then a vacancy
shall forthwith and ipso facto exist in the office of Trustee and a successor
may be appointed, and in case at any time the Trustee shall resign, then a
successor may be appointed by filing with the Issuer, the Company, the Registrar
and the Remarketing Agent an instrument in writing executed by (i) the Provider,
if no Provider Default shall have occurred and be continuing, or (ii) the Owners
of not less than a majority in principal amount of the Bonds then Outstanding
and, if no Provider Default shall have occurred and be continuing, the Provider,
or (iii) the Company if no default or Event of Default is then existing under
Section 7.01 of the Agreement or Section 9.01(a), (b) or (c) of this Indenture.
Copies of such instrument shall be promptly delivered by the Issuer to the
predecessor Trustee and to the Trustee so appointed.
Until a successor Trustee shall be appointed by the Provider, the Owners
or by the Company as herein authorized, the Issuer, by an instrument authorized
by the governing body of the Issuer, shall appoint a successor Trustee
acceptable to the Company and the Provider. After any appointment by the Issuer,
it shall cause notice of such appointment to be given to the Remarketing Agent
and the Registrar and to be given by Mail to all Owners of Bonds. Any new
Trustee so appointed by the Issuer shall immediately and without farther act be
superseded by a Trustee appointed by the Owners in the manner above provided.
SECTION 10.13. QUALIFICATIONS OF SUCCESSOR TRUSTEE. Every successor
Trustee (a) shall be a national or state bank or trust company that is
authorized by law to perform all the duties imposed upon it by this Indenture,
(b) shall have (or, in the case of a corporation included in a bank holding
company system, the related bank holding company shall have) a combined capital
and surplus of at least $50,000,000 as set forth in its (or its related bank
holding company's) most recent published annual report of condition, (c) shall
be permitted under the Act to perform the duties of Trustee, (d) shall be
acceptable to the Provider, and (e) so long as the Bonds are subject to optional
or mandatory purchase pursuant to the provisions of this Indenture and no
book-entry system for the Bonds is in effect pursuant to Section 2.16 hereof,
shall have an office or agency located in New York, New York, if there can be
located, with reasonable effort, such an institution willing and able to accept
the trust on reasonable and customary terms.
SECTION 10.14. JUDICIAL APPOINTMENT OF SUCCESSOR TRUSTEE. In case at any
time the Trustee shall resign and no appointment of a successor Trustee shall be
made pursuant to the foregoing provisions of this Article X prior to the date
specified in the notice of resignation as the date when such resignation is to
take effect, the resigning Trustee may forthwith apply to a court of competent
jurisdiction for the appointment of a successor Trustee. If no appointment of a
successor Trustee shall be made pursuant to the foregoing provisions of this
Article X within six months after a vacancy shall have occurred in the office of
Trustee, any Owner may apply to any
-70-
<PAGE> 76
court of competent Jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor Trustee.
SECTION 10.15. ACCEPTANCE OF TRUSTS BY SUCCESSOR TRUSTEE. Any successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer
an instrument accepting such appointment hereunder, and thereupon such successor
Trustee, without any further act, deed or conveyance, shall become duly vested
with all the estates, property rights, powers, trusts, duties and obligations of
its predecessor in the trust hereunder, with like effect as if originally named
Trustee herein. Upon request of such Trustee, such predecessor Trustee and the
Issuer shall execute and deliver an instrument transferring to such successor
Trustee all the estates, property, rights, powers and trusts hereunder of such
predecessor Trustee and, subject to the provisions of Section 10.04 hereof, such
predecessor Trustee shall pay over to the successor Trustee all moneys and other
assets at the time held by it hereunder.
SECTION 10.16. SUCCESSOR BY MERGER OR CONSOLIDATION. Any corporation
into which any Trustee hereunder may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which any Trustee hereunder shall be a party, or to which all or
substantially all of its corporate trust business shall be transferred, shall be
the successor Trustee under this Indenture, without the execution or filing of
any paper or any further act on the part of the parties hereto, anything in this
Indenture to the contrary notwithstanding, provided, however, if such successor
corporation is not a trust company or state or national bank that has trust
powers, the Trustee shall resign from the trusts hereby created prior to such
merger, transfer or consolidation or the successor corporation shall resign from
such trusts as soon as practicable after such merger, transfer or consolidation.
SECTION 10.17. STANDARD OF CARE. Notwithstanding any other provisions of
this Article X, the Trustee shall, during the existence and prior to the curing
of an Event of Default of which the Trustee has notice as provided in Section
10.05 hereof, exercise such of the rights and powers vested in it by this
Indenture and use the same degree of skill and care in their exercise as a
prudent person would use and exercise under the circumstances in the conduct of
his own affairs.
SECTION 10.18. INTERVENTION IN LITIGATION OF THE ISSUER. In any judicial
proceeding to which the Issuer is a party and which in the opinion of the
Trustee and its counsel has a substantial bearing on the interests of the Owners
of the Bonds, the Trustee may and shall upon receipt of indemnity satisfactory
to it (except against negligence or willful misconduct) at the written request
of the Owners of at least 25% in principal amount of the Bonds then Outstanding
and if permitted by the court having jurisdiction in the premises, intervene in
such judicial proceeding.
SECTION 10.19. REMARKETING AGENT. The Company has covenanted in the
Agreement that at all times while any of the Bonds are Outstanding and are
subject to optional or mandatory purchase pursuant to the provisions hereof
there shall be a Remarketing Agent for the Bonds appointed and acting pursuant
to the provisions of this Indenture. The Remarketing Agent shall designate its
Principal Office to the Trustee, the Company, the Registrar and the Issuer.
-71-
<PAGE> 77
The Issuer shall cooperate with the Trustee, the Registrar and the
Company to cause the necessary arrangements to be made and to be thereafter
continued whereby funds from the sources specified herein and in the Agreement
will be made available for the purchase of Bonds presented at the Delivery
Office of the Trustee and whereby Bonds, executed by the Issuer and
authenticated by the Trustee, shall be made available to the Remarketing Agent
to the extent necessary for delivery pursuant to Section 3.06 hereof.
SECTION 10.20. QUALIFICATIONS OF REMARKETING AGENT. The Remarketing
Agent shall have a capitalization of at least $50,000,000 and be authorized by
law to perform all the duties contemplated by this Indenture to be performed by
the Remarketing Agent and agrees to take all actions required of it under the
DTC Representation Letter while a book-entry system is in effect for the Bonds.
The Remarketing Agent may at any time resign and be discharged of the duties and
obligations contemplated by this Indenture by giving at least 30 days' notice to
the Issuer, the Company, the Registrar and the Trustee. The Remarketing Agent
may be removed at any time, at the direction of the Company, by an instrument,
signed by the Authorized Company Representative, filed with the Issuer, the
Remarketing Agent, the Registrar and the Trustee at least 30 days prior to the
effective date of such removal. Upon the resignation or removal of the
Remarketing Agent, the Company may appoint a new Remarketing Agent.
In the event of the resignation or removal of the Remarketing Agent,
the Remarketing Agent shall pay over, assign and deliver any moneys held by it
in such capacity to its successor or, if there be no successor, to the Trustee.
In the event that the Company shall fail to appoint a Remarketing
Agent hereunder, or in the event that the Remarketing Agent shall resign or be
removed, or be dissolved, or if the property or affairs of the Remarketing Agent
shall be taken under the control of any state or federal court or administrative
body because of bankruptcy or insolvency, or for any other reason, and the
Company shall not have appointed a successor Remarketing Agent, the Trustee,
notwithstanding the provisions of the first paragraph of this Section 10.20,
shall ipso facto be deemed to be the Remarketing Agent for all purposes of this
Indenture until the appointment by the Company of the Remarketing Agent or
successor Remarketing Agent, as the case may be; provided, however, that the
Trustee, in its capacity as Remarketing Agent, shall not be required to sell
Bonds or determine the interest rate on the Bonds pursuant to Article II hereof
on the basis of an examination of Tax-Exempt obligations comparable to the Bonds
but shall determine any applicable alternate interest rate if so required by the
applicable provisions of Article II hereof.
SECTION 10.21. REGISTRAR. Pursuant to the provisions hereof the Trustee
is the initial Registrar for the Bonds. By its execution of this Indenture, the
Trustee signifies its acceptance of the duties of Registrar hereunder. Any
successor Registrar shall designate to the Issuer, the Company and the
Remarketing Agent its office where the registration books shall be kept and
signify its acceptance of the duties imposed upon it hereunder by a written
instrument of acceptance delivered to the Issuer and the Trustee under which
such Registrar will agree, particularly, to keep such books and records as shall
be consistent with prudent industry practice and to make such books and records
available for inspection by the Issuer, the Trustee, the Company, the Provider
and the Remarketing Agent at all reasonable times. So long as the Bonds are
subject to optional or mandatory purchase pursuant to the provisions of this
Indenture and no
-72-
<PAGE> 78
book-entry system for the Bonds is in effect pursuant to Section 2.16 hereof,
the Registrar shall maintain in New York, New York, an office or agency for the
exchange, registration and registration of transfer of the Bonds.
The Issuer shall cooperate with the Trustee, the Remarketing Agent
and the Company to cause the necessary arrangements to be made and to be
thereafter continued whereby Bonds, executed by the Issuer and authenticated by
the Registrar, shall be made available for exchange, registration and
registration of transfer at the Principal Office of the Registrar. The Issuer
shall cooperate with the Trustee, the Registrar, the Company and the Remarketing
Agent to cause the necessary arrangements to be made and thereafter continued
whereby the Trustee and the Remarketing Agent shall be furnished such records
and other information, at such times, as shall be required to enable the Trustee
and the Remarketing Agent to perform the duties and obligations imposed upon
them hereunder.
SECTION 10.22. QUALIFICATIONS OF REGISTRAR; RESIGNATION; REMOVAL. The
Registrar shall be a corporation duly organized under the laws of the United
States of America or any state or territory thereof, having a combined capital
surplus and retained earnings of at least $10,000,000 and authorized by law to
perform all the duties imposed upon it by this Indenture. The Registrar may at
any time resign and be discharged of the duties and obligations created by this
Indenture by giving at least 45 days' notice to the Issuer, the Trustee, the
Remarketing Agent and the Company. The Registrar may be removed at any time by
an instrument signed by the Authorized Company Representative and filed with the
Issuer, the Registrar, the Trustee, and the Remarketing Agent. Upon the
resignation or removal of the Registrar, the Company shall appoint a new
Registrar.
In the event of the resignation or removal of the Registrar, the
Registrar shall deliver any Bonds held by it in such capacity to its successor
or, if there be no successor, to the Trustee.
In the event that the Company shall fail to appoint a Registrar
hereunder, or in the event that the Registrar shall resign or be removed, or be
dissolved, or if the property or affairs of the Registrar shall be taken under
the control of any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and the Company shall not
have appointed its successor as Registrar, the Trustee shall ipso facto be
deemed to be the Registrar for all purposes of this Indenture until the
appointment by the Company of the Registrar or successor Registrar, as the case
may be.
SECTION 10.23. PAYING AGENTS. The Company, with the written approval of
the Trustee and the Issuer, may appoint and at all times have one or more paying
agents in such place or places as the Company may designate, for the payment of
the principal of, and premium, if any, and the interest on, the Bonds. Each such
paying agent shall have the power to hold moneys in trust. It shall be the duty
of the Trustee to make such arrangements with any such paying agent as may be
necessary to assure, to the extent of the moneys held by the Trustee for such
payment, the prompt payment of the principal of, and premium, if any, and
interest on, the Bonds presented at either place of payment. The Paying Agent
initially appointed hereunder is the Trustee, and the place of payment shall be
the Delivery Office of the Trustee.
-73-
<PAGE> 79
SECTION 10.24. ADDITIONAL DUTIES OF TRUSTEE. The Trustee shall:
(a) hold all Bonds delivered to it hereunder for the account of
and for the benefit of the respective Owners which shall have so
delivered such Bonds pursuant to Section 3.01 or Section 3.02 until
moneys representing the purchase price of such Bonds shall have been
delivered to or for the account of or to the order of such Owners;
(b) hold all moneys delivered to it hereunder for the purchase
of Bonds for the benefit of the person or entity which shall have so
delivered such moneys until the Bonds purchased with such moneys shall
have been delivered to or for the account of such person or entity;
(c) keep such books and records with respect to the Bonds as
shall be consistent with prudent industry practice and to make such
books and records available for inspection by the Issuer, any Paying
Agent, the Company and the Remarketing Agent at all reasonable times;
and
(d) as long as a book-entry system is in effect for the Bonds,
the Trustee will comply with the DTC Representation Letter and perform
all duties required of it thereunder.
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS
AND PROOF OF OWNERSHIP OF BONDS
Any request, direction, consent or other instrument in writing required
or permitted by this Indenture to be signed or executed by the Owners or on
their behalf by an attorney-in-fact may be in any number of concurrent
instruments of similar tenor and may be signed or executed by the Owners in
person or by an agent or attorney-in-fact appointed by an instrument in writing
or as provided in the Bonds. Proof of the execution of any such instrument and
of the ownership of Bonds shall be sufficient for any purpose of this Indenture
and shall be conclusive in favor of the Trustee with regard to any action taken
by it under such instrument if made in the following manner:
(a) The fact and date of the execution by any person of any such
instrument may be proved by the certificate of any officer in any
jurisdiction who, by the laws thereof, has power to take acknowledgments
within such Jurisdiction, to the effect that the person signing such
instrument acknowledged before him the execution thereof, or by an
affidavit of a witness to such execution.
(b) The ownership of Bonds shall be proved by the registration
books kept under the provisions of Section 2.12 hereof.
-74-
<PAGE> 80
Nothing contained in this Article XI shall be construed as limiting the
Trustee to such proof, it being intended that the Trustee may accept any other
evidence of matters herein stated which it may deem sufficient. Any request by
or consent of any Owner shall bind every future Owner of the same Bond or any
Bond or Bonds issued in lieu thereof or upon registration of transfer thereof in
respect of anything done by the Trustee or the Issuer in pursuance of such
request or consent.
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE AGREEMENT
SECTION 12.01. SUPPLEMENTAL INDENTURES WITHOUT OWNER CONSENT. The Issuer
and the Trustee may, from time to time and at any time, without the consent of
the Owners, enter into a Supplemental Indenture as follows:
(a) to cure any formal defect, omission, inconsistency or
ambiguity in this Indenture;
(b) to add to the covenants and agreements of the Issuer
contained in this Indenture or of the Company or of the Provider
contained in any document, other covenants or agreements thereafter to
be observed, or to assign or pledge additional security for any of the
Bonds, or to surrender any right or power reserved or conferred upon the
Issuer or the Company, which in the judgment of the Trustee is not
materially adverse to the Owners of the Bonds;
(c) to confirm as further assurance, any pledge of or lien on
the Revenues or any other moneys, securities or funds subject or to be
subjected to the lien of this Indenture;
(d) to comply with the requirements of the Trust Indenture Act
of 1939, as from time to time amended, if applicable to this Indenture;
(e) to modify, alter, amend or supplement this Indenture or any
Supplemental Indenture in any other respect which in the judgment of the
Trustee is not materially adverse to the Owners of the Bonds;
(f) to implement a conversion of the interest rate on the Bonds;
(g) to provide for a Change of Credit Facility;
(h) to provide for a depository to accept Bonds in lieu of the
Trustee;
(i) to modify or eliminate the book-entry registration system
for any of the Bonds;
-75-
<PAGE> 81
(j) to provide for uncertificated Bonds or for the issuance of
coupons and bearer Bonds or Bonds registered only as to principal but
only to the extent that such would not adversely affect the Tax-Exempt
status of the Bonds;
(k) to secure or maintain ratings on the Bonds from Moody's
and/or S&P;
(1) to provide demand purchase obligations to cause the Bonds to
be authorized purchases for investment companies;
(m) to provide for the appointment of a Remarketing Agent or a
successor Trustee, Registrar, Paying Agent or Remarketing Agent;
(n) to provide the procedures required to permit any Owner to
separate the right to receive interest on the Bonds from the right to
receive principal thereof and to sell or dispose of such right as
contemplated by Section 1286 of the Code (or similar successor
provision);
(o) to provide for any additional procedures, covenants or
agreements necessary to maintain the Tax-Exempt status of the Bonds; and
(p) to modify, alter, amend or supplement this Indenture in any
other respect, including amendments which would otherwise be described
in Section 12.02 hereof, if the effective date of such supplement or
amendment is a date on which all Bonds affected thereby are subject to
mandatory purchase pursuant to Section 3.02 hereof or if notice by Mail
of the Proposed amendment or supplement is given to Owners of the Bonds
at least thirty (30) days before the effective date thereof and, on or
before such effective date, such Owners have the right to require
purchase of their Bonds pursuant to Section 3.01 hereof.
Before the Issuer and the Trustee shall enter into any Supplemental
Indenture pursuant to this Section 12.01, (1) in the case of a Supplemental
Indenture entered into pursuant to clauses (l), (n) or (p) of this Section and
provided that no Provider Default shall have occurred and be continuing, there
shall have been delivered to the Trustee and the Company, the written consent of
the Provider, and (2) in all cases, there shall have been delivered to the
Trustee, the Provider and the Company, a Favorable Opinion of Bond Counsel with
respect to such Supplemental Indenture and further stating that such
Supplemental Indenture is authorized or permitted by this Indenture and will,
upon the execution and delivery thereof, be valid and binding upon the Issuer in
accordance with its terms. Neither the Issuer nor the Trustee will be obligated
to enter into any such Supplemental Indenture that would materially alter their
respective rights, duties or immunities under this Indenture, under the
Agreement or otherwise.
The Trustee shall provide written notice of any Supplemental Indenture
described in this Section 12.01 to Moody's, S&P, the Provider, the Remarketing
Agent and the Owners of all Bonds then Outstanding at least 15 days prior to the
effective date of such Supplemental Indenture. Such notice shall state the
effective date of such Supplemental Indenture and shall briefly describe the
nature of such Supplemental Indenture and shall state that a copy thereof is on
-76-
<PAGE> 82
file at the Principal Office of the Trustee for inspection by the parties
mentioned in the preceding sentence.
SECTION 12.02. SUPPLEMENTAL INDENTURES REQUIRING OWNER CONSENT.
(a) Except for any Supplemental Indenture entered into pursuant to
Section 12.01 hereof, subject to the terms and provisions contained in this
Section 12.02 and not otherwise, the Provider (unless a Provider Default shall
have occurred and be continuing), together with the Owners of not less than 60%
in aggregate principal amount of the Bonds then Outstanding shall have the right
from time to time to consent to and approve the execution and delivery by the
Issuer and the Trustee of any Supplemental Indenture deemed necessary or
desirable by the Issuer for the purposes of modifying, altering, amending,
supplementing or rescinding, in any particular, any of the terms or provisions
contained in this Indenture; provided however, that, unless approved in writing
by the Provider (unless a Provider Default shall have occurred and be
continuing) and the Owners of all the Bonds then affected thereby, nothing
herein contained shall permit, or be construed as permitting, (i) a change in
the times, amounts or currency of payment of the principal of, or premium if
any, or interest on, any Outstanding Bond, a change in the terms of the purchase
thereof by the Trustee, or a reduction in the principal amount or redemption
price of any Outstanding Bond or the rate of interest thereon, or (ii) the
creation of a claim or lien upon, or a pledge of, the Revenues ranking prior to
or on a parity with the claim, lien or pledge created by this Indenture (except
as referred to in Section 10.04 hereof), or (iii) a reduction in the aggregate
principal amount of Bonds the consent of the Owners of which is required for any
such Supplemental Indenture or which is required, under Section 12.06 hereof,
for any modification, alteration, amendment or supplement to the Agreement.
(b) If at any time the Issuer shall request the Trustee to enter into
any Supplemental Indenture for any of the purposes of this Section 12.02, the
Trustee shall cause notice of the proposed Supplemental Indenture to be given by
Mail to Moody's, S&P, the Provider, the Remarketing Agent and all Owners of
Outstanding Bonds. Such notice shall briefly set forth the nature of the
proposed Supplemental Indenture and shall state that a copy thereof is on file
at the Principal Office of the Trustee for inspection by the Owners, Moody's,
S&P, the Provider and the Remarketing Agent.
(c) Within two years after the date of the mailing of such notice, the
Issuer and the Trustee may enter into such Supplemental Indenture in
substantially the form described in such notice, but only if there shall have
first been delivered to the Trustee (i) the required consents, in writing, of
the Owners and the Provider and (ii) a Favorable Opinion of Bond Counsel with
respect to such Supplemental Indenture and further stating that such
Supplemental Indenture is authorized or permitted by this Indenture and will,
upon the execution and delivery thereof, be valid and binding upon the Issuer in
accordance with its terms. Neither the Issuer nor the Trustee will be obligated
to enter into any such Supplemental Indenture that would materially alter their
respective rights, duties or immunities under this Indenture, under the
Agreement or otherwise.
(d) If Owners of not less than the percentage of Bonds required by
this Section 12.02 shall have consented to and approved the execution and
delivery of a Supplemental Indenture as herein provided, no Owner shall have any
right to object to the execution and delivery of such
-77-
<PAGE> 83
Supplemental Indenture, or to object to any of the terms and provisions
contained therein or the operation thereof, or in any manner to question the
propriety of the execution and delivery thereof, or to enjoin or restrain the
Issuer or the Trustee from executing and delivering the same or from taking any
action pursuant to the provisions thereof.
SECTION 12.03. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution and
delivery of any Supplemental Indenture pursuant to the provisions of this
Article XII, this Indenture shall be, and be deemed to be, modified and amended
in accordance therewith, and the respective rights, duties and obligations under
this Indenture shall thereafter be determined, exercised and enforced under this
Indenture subject in all respects to such modifications and amendments.
SECTION 12.04. CONSENT OF THE COMPANY AND THE PROVIDER. No Supplemental
Indenture under this Article XII and no amendment of the Agreement shall become
effective unless the Company shall have consented thereto in writing.
Any provision of this Indenture expressly recognizing or granting
rights in or to the Provider may not be amended in any manner which affects the
rights of the Provider hereunder without the prior written consent of the
Provider.
SECTION 12.05. AMENDMENT OF AGREEMENT WITHOUT OWNER CONSENT. Without the
consent of or notice to the Owners, the Issuer and the Company may, with the
consent of the Provider (unless a Provider Default shall have occurred and be
continuing) modify, alter, amend or supplement the Agreement, and the Trustee
may consent thereto, as may be required:
(a) by the provisions of the Agreement and this Indenture;
(b) for the purpose of curing any formal defect, omission,
inconsistency or ambiguity therein;
(c) in connection with any other change therein which in the
judgment of the Trustee is not materially adverse to the Owners;
(d) to secure or maintain ratings on the Bonds from Moody's
and/or S&P;
(e) to add to the covenants and agreements of the Issuer
contained in the Agreement or of the Company or of the Provider
contained in any document, other covenants or agreements thereafter to
be observed, or to assign or pledge additional security for any of the
Bonds, or to surrender any right or power reserved or conferred upon the
Issuer or the Company, which shall not materially adversely affect the
interest of the Owners of the Bonds;
(f) to provide demand purchase obligations to cause the Bonds to
be authorized purchases for investment companies;
(g) to provide the procedures required to permit any Owner to
separate the right to receive interest on the Bonds from the right to
receive principal thereof and to sell
-78-
<PAGE> 84
or dispose of such right as contemplated by Section 1286 of the Code (or
similar successor provision);
(h) to provide for any additional procedures, covenants or
agreements necessary to maintain the Tax-Exempt status of interest on
the Bonds;
(i) to implement a conversion of the interest rate on the Bonds
or in connection with the appointment of a Remarketing Agent;
(j) to provide for a Change of Credit Facility; and
(k) to modify, alter, amend or supplement the Agreement in any
other respect, including amendments which would otherwise be described
in Section 12.06 hereof, if the effective date of such supplement or
amendment is a date on which all Bonds affected thereby are subject to
mandatory purchase pursuant to Section 3.02 hereof or if notice by Mail
of the proposed amendment or supplement is given to Owners of the Bonds
at least thirty (30) days before the effective date thereof and, on or
before such effective date-, such Owners have the right to demand
purchase of their Bonds pursuant to Section 3.01 hereof.
A revision of Exhibit A to the Agreement in accordance with Section 3.04
of the Agreement shall not be deemed a modification, alteration, amendment or
supplement to the Agreement, or to this Indenture, for any purpose of this
Indenture.
Before the Issuer shall enter into, and the Trustee shall consent to,
any modification, alteration, amendment or supplement to the Agreement pursuant
to this Section 12.05, there shall have been delivered to the Issuer, the
Provider and the Trustee a Favorable Opinion of Bond Counsel with respect to
such modification, alteration, amendment or supplement and further stating that
such modification, alteration, amendment or supplement is authorized or
permitted by the Agreement or this Indenture and will, upon the execution and
delivery thereof, be valid and binding upon the Issuer in accordance with its
terms. Neither the Issuer nor the Trustee will be obligated to enter into or
consent to any such modifications, alterations, amendments or supplements to the
Agreement that would materially alter their respective rights, duties or
immunities under this Indenture, under the Agreement or otherwise.
SECTION 12.06. AMENDMENT OF AGREEMENT REQUIRING OWNER CONSENT. Except in
the case of modifications, alterations, amendments or supplements referred to in
Section 12.05 hereof, the Issuer shall not enter into, and the Trustee shall not
consent to, any amendment, change or modification of the Agreement without the
written approval or consent of the Provider (unless a Provider Default shall
have occurred and be continuing) and the Owners of not less than 60% in
aggregate principal amount of the Bonds then Outstanding, given and procured as
provided in Section 12.02 hereof, provided, however, that, unless approved in
writing by the Provider (unless a Provider Default shall have occurred and be
continuing) and the Owners of all Bonds affected thereby, nothing herein
contained shall permit, or be construed as permitting, a change in the
obligations of the Company under Section 4.01 and Section 4.02 of the Agreement.
If at any time the Issuer or the Company shall request the consent of the
Trustee to any such proposed
-79-
<PAGE> 85
modification, alteration, amendment or supplement permitted under this Section
12.06, the Trustee shall cause notice thereof to be given in the same manner as
provided by Section 12.02 hereof with respect to Supplemental Indentures. Such
notice shall briefly set forth the nature of such proposed modification,
alteration, amendment or supplement and shall state that copies of the
instrument embodying the same are on file at the Principal Office of the Trustee
for inspection by all Owners. The Issuer may enter into, and the Trustee may
consent to, any such proposed modification, alteration, amendment or supplement
subject to the same conditions and with the same effect as provided in Section
12.02 hereof with respect to Supplemental Indentures.
Before the Issuer shall enter into, and the Trustee shall consent to,
any modification, alteration, amendment or supplement to the Agreement pursuant
to this Section 12.06, there shall have been delivered to the Issuer, the
Provider and the Trustee a Favorable Opinion of Bond Counsel with respect to
such modification, alteration, amendment or supplement and further stating that
such modification, alteration, amendment or supplement is authorized or
permitted by the Agreement or this Indenture and will, upon the execution and
delivery thereof, be valid and binding upon the Issuer in accordance with its
terms. Neither the Issuer nor the Trustee will be obligated to enter into any
such modifications, alterations, amendments or supplements to the Agreement that
would materially alter their respective rights, duties or immunities under this
Indenture, under the Agreement or otherwise.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. SUCCESSORS OF THE ISSUER. In the event of the dissolution
of the Issuer, all the covenants, stipulations, promises and agreements in this
Indenture contained, by or on behalf of, or for the benefit of the Issuer, shall
bind or inure to the benefit of the successors of the Issuer from time to time
and any entity, officer, board, commission, agency or instrumentality to whom or
to which any power or duty of the Issuer shall be transferred.
SECTION 13.02. PARTIES IN INTEREST. Except as herein otherwise
specifically provided, nothing in this Indenture expressed or implied is
intended or shall be construed to confer upon any person, firm or corporation
other than the Issuer, the Remarketing Agent, the Registrar, the Paying Agent,
the Company, the Trustee, the Provider and the Owners of Bonds any right, remedy
or claim under or by reason of this Indenture, this Indenture being intended to
be for the sole and exclusive benefit of the Issuer, the Remarketing Agent, the
Registrar, the Paying Agent, the Company, the Trustee, the Provider and the
Owners of Bonds. The Trustee shall have no fiduciary duty to any entity other
than the Owner of any Bond as such and only in accordance with, into the extent
of, the terms and provisions hereunder.
SECTION 13.03. SEVERABILITY. In case any one or more of the provisions
of this Indenture or of the Agreement or of the Bonds shall for any reason, be
held to be illegal or invalid, such illegality or invalidity shall not affect
any other provisions of this Indenture, the Agreement, or of the Bonds, and this
Indenture, the Agreement and the Bonds shall be construed and enforced as if
such illegal or invalid provisions had not been contained herein or therein.
-80-
<PAGE> 86
SECTION 13.04. NO PERSONAL LIABILITY OF ISSUER OFFICIALS. No
representation, warranty, covenant or agreement contained in the Bonds or in
this Indenture or in any of the documents or certificates related thereto shall
be deemed to be the representation, warranty, covenant or agreement of any
official, officer, agent, counsel or employee of the Issuer in his or her
individual capacity, and neither the members of the Issuer nor any official
executing the Bonds shall be liable personally on the Bonds or be subject to any
personal liability or accountability by reason of the issuance thereof.
SECTION 13.05. BONDS OWNED BY THE ISSUER OR THE COMPANY. In determining
whether the Owners of the requisite aggregate principal amount of the Bonds have
concurred in any direction, consent or waiver under this Indenture, Bonds which
are owned by the Issuer or the Company or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company (unless the Issuer, the Company or such person owns all Bonds which are
then Outstanding, determined without regard to this Section 13.05) shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver, only
Bonds which the Trustee actually knows are so owned shall be so disregarded.
Bonds so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Bonds and that the pledgee is not
the Issuer or the Company or any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. In
case of a dispute as to such right, any decision by the Trustee taken upon the
advice of counsel shall be full protection to the Trustee.
SECTION 13.06. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which, when so executed and delivered, shall be
an original; but such counterparts shall together constitute but one and the
same Indenture.
SECTION 13.07. GOVERNING LAW. This Indenture shall be governed by and
construed in accordance with the laws of the State; provided, however, that the
rights, protections and immunities of the Trustee shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 13.08. NOTICES. Except as otherwise provided in this Indenture,
all notices, certificates, requests, requisitions, directions or other
communications by the Issuer, the Company, the Trustee, the Registrar, the
Paying Agent, the Provider or the Remarketing Agent, pursuant to this Indenture
shall be in writing and shall be sufficiently given and shall be deemed given
when mailed by Mail or by certified or registered mail postage prepaid, or by
overnight delivery service, addressed as follows (and, if by overnight delivery
service and required by the chosen delivery service, with then-current telephone
numbers of the addressees):
if to the Issuer, to: City of Forsyth, Montana
City Hall
Forsyth, Montana 59327
Attention: Mayor
-81-
<PAGE> 87
if to the Trustee, to: Chase Manhattan Bank and Trust Company,
National Association
101 California Street, Suite 2725
San Francisco, California 94111
Attention: Corporate Trust Administration
if to the Company, to: Avista Corporation
1411 East Mission Avenue
Spokane, Washington 99220
Attention: Treasurer
if to the Provider, to: Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
if to the Registrar or the Paying Agent, to such address as is designated in
writing by it to the Trustee and the Issuer; if to any Auction Agent, at the
address specified in the Auction Agreement; and if to any Remarketing Agent, at
the address specified in the Remarketing Agreement. Any of the foregoing may, by
notice given hereunder to each of the others, designate any further or different
addresses to which subsequent notices, certificates, requests or other
communications shall be sent hereunder. Any communications required to be given
hereunder by the Company shall be given by an Authorized Company Representative.
SECTION 13.09. HOLIDAYS. If the date for making any payment or the last
date for performance of any act or the exercising of any right, as provided in
this Indenture, shall not be a Business Day, such payment may, unless otherwise
provided in this Indenture or the Agreement, be made or act performed or right
exercised on the next succeeding Business Day with the same force and effect as
if done on the nominal date provided in this Indenture, and no interest shall
accrue for the period after such nominal date.
SECTION 13.10. PURCHASE OF BONDS BY TRUSTEE AND REMARKETING AGENT. The
Trustee and the Issuer agree that in connection with the purchase of any Bonds
pursuant to this Indenture, the Trustee and the Remarketing Agent are acting
solely on behalf of the Company.
SECTION 13.11. NOTICES TO MOODY'S AND S&P. The Trustee shall provide
prior written notice to Moody's (if the Bonds are then rated by Moody's) and to
S&P (if the Bonds are then rated by S&P) of (a) the payment of the principal of
all of the Bonds, (b) the resignation or removal of the Trustee or the
Remarketing Agent, (c) any modifications, alterations, amendments or supplements
of this Indenture, the Agreement and the Remarketing Agreement, and (d) the
conversion under Article II hereof of the method by which interest on the Bonds
is determined.
The agreement of the Trustee herein to give notices to Moody's and S&P
has been made as a matter of courtesy and accommodation only and the Trustee
shall not be liable to any Person for any failure to give any such notice.
-82-
<PAGE> 88
SECTION 13.12. RIGHTS OF PROVIDER. Upon a Change of Credit Facility, all
rights provided herein to a Provider other than its right of subrogation
pursuant to Section 2.17(f) shall be of no force and effect with respect to the
Provider and Credit Facility which has been replaced and shall apply only to the
new Provider and Credit Facility.
-83-
<PAGE> 89
IN WITNESS WHEREOF, CITY OF FORSYTH, MONTANA, has caused this Indenture
to be signed in its name and behalf by the Mayor, and its official seal to be
hereunto affixed and attested by the City Clerk-Treasurer and to evidence its
acceptance of the trusts hereby created the Trustee has caused this Indenture to
be signed in its name and behalf by one of its Assistant Vice Presidents, all as
of September 1, 1999.
CITY OF FORSYTH, MONTANA
By:
---------------------------------
Mayor
[SEAL]
ATTEST:
- --------------------------------
City Clerk-Treasurer
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------------
Assistant Vice President
-84-
<PAGE> 90
EXHIBIT A
[FORM OF BOND]
STATEMENT OF INSURANCE
Municipal Bond Insurance Policy No. (the "Policy") with respect to
payments due for principal of and interest on this bond has been issued by Ambac
Assurance Corporation ("Ambac Assurance"). The Policy has been delivered to the
United States Trust Company of New York, New York, New York, as the Insurance
Trustee under said Policy and will be held by such Insurance Trustee or any
successor insurance trustee. The Policy is on file and available for inspection
at the principal office of the Insurance Trustee and a copy thereof may be
secured from Ambac Assurance or the Insurance Trustee. All payments required to
be made under the Policy shall be made in accordance with the provisions
thereof. The owner of this bond acknowledges and consents to the subrogation
rights of Ambac Assurance as more fully set forth in the Policy.
REGISTERED REGISTERED
No. R-__ $__________
UNITED STATE OF AMERICA
STATE OF MONTANA
CITY OF FORSYTH, MONTANA
POLLUTION CONTROL REVENUE REFUNDING BONDS
(AVISTA CORPORATION COLSTRIP PROJECT)
SERIES 1999B
MATURITY DATE ISSUE DATE CUSIP NO.
March 1, 2034 September ___, 1999 ____________
[FLEXIBLE INTEREST RATE: _________________________
LAST DAY OF FLEXIBLE SEGMENT: ___________________
NUMBER OF DAYS IN FLEXIBLE SEGMENT: _____________
AMOUNT OF INTEREST TO ACCRUE DURING FLEXIBLE SEGMENT: ___]*
- -------------------
* To be included only in Bonds bearing interest at a Flexible Interest Rate
and not registered in the book-entry system pursuant to Section 2.16 of the
Indenture.
A-1
<PAGE> 91
Registered Owner: ____________________________
Principal Amount: DOLLARS
----------------------------- --------------------------
CITY OF FORSYTH, MONTANA (the "Issuer"), a political subdivision duly
organized and existing under the Constitution and laws of the State of Montana,
for value received, hereby promises to pay (but only out of the source
hereinafter provided) to the registered owner identified above, or registered
assigns, on March 1, 2034, the principal amount set forth above and to pay (but
only out of the sources hereinafter provided) interest on the balance of said
principal amount from time to time remaining unpaid from the Interest Payment
Date (as defined in the Indenture) next preceding the date of registration and
authentication hereof unless this Bond (as hereinafter defined) is registered
and authenticated after a Record Date (as defined in the Indenture) and on or
prior to the related Interest Payment Date, in which event this Bond shall bear
interest from such Interest Payment Date, or unless this Bond is registered and
authenticated before the Record Date for the first Interest Payment Date, in
which event this Bond shall bear interest from the Issue Date set forth above
(the "Issue Date"); provided, however, that if, as shown by the records of the
Paying Agent (as hereinafter defined), interest on the Bonds (as hereinafter
defined) shall be in default, Bonds issued in exchange for Bonds surrendered for
registration of transfer or exchange shall bear interest from the last date to
which interest has been paid in full or duly provided for on the Bonds, or, if
no interest has been paid or duly provided for on the Bonds, from the Issue
Date, until payment of said principal amount has been made or duly provided for,
at the rates and on the dates determined as described herein and in the
Indenture (as hereinafter defined), and to pay (but only out of the sources
hereinafter provided) interest on overdue principal and, to the extent permitted
by law, on overdue interest at the rate then borne by this Bond, except as the
provisions hereinafter set forth with respect to redemption, purchase or
acceleration prior to maturity may become applicable hereto. The principal of
and premium, if any, on this Bond are payable in lawful money of the United
States of America at the principal corporate trust office in San Francisco,
California, of Chase Manhattan Bank and Trust Company, National Association, or
its successors and assigns, as Paying Agent (the "Paying Agent"). Interest
payments on this Bond shall be made by the Paying Agent to the registered owner
hereof as of the close of business on the Record Date with respect to each
Interest Payment Date and shall be paid:
(a) in respect of any Bond that is registered in the book-entry system,
pursuant to the Indenture, in immediately available funds by no later than 2:30
p.m., New York, New York time, and
(b) in respect of any Bond that is not registered in the book-entry
system,
(i) by bank check mailed by first-class mail on the Interest
Payment Date to the registered owner hereof at its address as it appears
on the registration books of Chase Manhattan Bank and Trust Company,
National Association, as registrar (the "Registrar") or at such other
address as is furnished in writing by such registered owner to the
Registrar, or
A-1
<PAGE> 92
(ii) during any Rate Period (as defined in the Indenture) other
than a Term Interest Rate Period (as defined in the Indenture), in
immediately available funds on the Interest Payment Date (by wire
transfer or by deposit to the account of the registered owner of this
Bond if such account is maintained with the Paying Agent),
but in respect of any registered owner of any Bond or Bonds in a PARS Rate
Period (as defined in the Indenture) or a Daily Interest Rate Period (as defined
in the Indenture) or a Weekly Interest Rate Period (as defined in the Indenture)
or a Flexible Interest Rate Period (as defined in the Indenture), only to any
registered owner that owns Bonds in an aggregate principal amount of at least
$1,000,000 on such Record Date, according to the written instructions given by
the registered owner hereof to the Paying Agent or, if no such instructions have
been provided as of the Record Date, by bank check mailed by first-class mail on
the Interest Payment Date to the registered owner at such registered owner's
address as it appears as of the Record Date on the registration books of the
Registrar. Notwithstanding the foregoing, interest in respect of any Bond
bearing a Flexible Rate (as defined in the Indenture) shall be paid only upon
presentation to Chase Manhattan Bank and Trust Company, National Association, as
Trustee (the "Trustee") of the Bond on which such payment is due.
THIS BOND AND ALL OTHER BONDS OF THE ISSUE OF WHICH IT FORMS A PART
SHALL BE A LIMITED OBLIGATION OF THE ISSUER, SHALL NOT CONSTITUTE NOR GIVE RISE
TO A GENERAL OBLIGATION OR LIABILITY OF THE ISSUER OR A CHARGE AGAINST ITS
GENERAL CREDIT OR TAXING POWERS, AND SHALL NOT CONSTITUTE AN INDEBTEDNESS OF THE
ISSUER OR OF THE STATE OF MONTANA, OR A LOAN OF CREDIT THEREOF WITHIN THE
MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION.
This Bond is one of the duly authorized Pollution Control Revenue
Refunding Bonds (Avista Corporation Colstrip Project) Series 1999B of the
Issuer, originally issued in the aggregate principal amount of $17,000,000 (the
"Bonds"), issued pursuant to proper action duly adopted by the Issuer on May 11,
1999 and May 18, 1999, and the applicable provisions of Sections 90-5-101 to
90-5-114, inclusive, Montana Code Annotated, as amended (the "Act"), and
executed under a Trust Indenture, dated as of September 1, 1999 (the
"Indenture"), between the Issuer and Chase Manhattan Bank and Trust Company,
National Association, as trustee (the "Trustee," which term shall include any
successor Trustee), for the purpose of providing the funds necessary for the
refunding of certain pollution control revenue bonds previously issued by the
Issuer to finance certain pollution control facilities owned by Avista
Corporation, a Washington corporation (the "Company"). Pursuant to the Loan
Agreement, dated as of September 1, 1999 (the "Loan Agreement"), between the
Issuer and the Company, the proceeds of the Bonds have been loaned to the
Company.
This Bond and all other Bonds of the issue of which it forms a part are
issued pursuant to and in full compliance with the Constitution and laws of the
State of Montana, particularly the Act, and pursuant to further proceedings
adopted by the governing authority of the Issuer, which proceedings authorize
the execution and delivery of the Indenture. This Bond and the issue of which it
forms a part are limited and not general obligations of the Issuer payable
solely from the Revenues (as defined in the Indenture) and amounts derived under
the Loan Agreement and pledged under the Indenture consisting of all amounts
payable from time to time by the Company
A-3
<PAGE> 93
in respect of the indebtedness under the Loan Agreement and all receipts of the
Trustee credited under the provisions of the Indenture against said amounts
payable. No Owner of any Bond issued under the Act has the right to compel any
exercise of the taxing power of the Issuer to pay the Bonds, or the interest or
premium if any, thereon. The Bonds shall not constitute an indebtedness or a
general obligation of the Issuer or a loan of credit thereof within the meaning
of any constitutional or statutory provision, nor shall any of the Bonds
constitute or give rise to a pecuniary liability of the Issuer or a charge
against its general credit or taxing powers.
Any term used herein as a defined term but not defined herein shall be
defined as in the Indenture.
In the manner hereinafter provided and subject to the provisions of the
Indenture, the term of the Bonds will be divided into consecutive Rate Periods
during each of which the Bonds shall bear interest at the lesser of (a) Maximum
Interest Rate (as defined in the Indenture) or (b) either the PARS Rate (the
"PARS Rate Period"), the Daily Interest Rate (the "Daily Interest Rate Period"),
the Weekly Interest Rate (the "Weekly Interest Rate Period"), the Term Interest
Rate (the "Term Interest Rate Period") or the Flexible Interest Rate (the
"Flexible Interest Rate Period"). Rate Periods for this Bond shall be determined
in accordance with the Indenture.
This Bond shall bear interest from the Interest Payment Date next
preceding the date of registration and authentication hereof unless it is
registered and authenticated after a Record Date and on or prior to the related
Interest Payment Date, in which event this Bond shall bear interest from such
Interest Payment Date, or unless this Bond is registered and authenticated
before the Record Date for the first Interest Payment Date, in which event this
Bond shall bear interest from the Issue Date; provided, however, that if, as
shown by the records of the Paying Agent, interest on the Bonds shall be in
default, Bonds issued in exchange for Bonds surrendered for transfer or exchange
shall bear interest from the last date to which interest has been paid in full
or duly provided for on the Bonds, or, if no interest has been paid or duly
provided for on the Bonds, from the Issue Date. Interest shall be computed, (a)
in the case of a PARS Rate Period, on the basis of a 360-day year for the actual
number of days elapsed except that interest during a six-month Auction Period
shall be calculated on the basis of a 360-day year composed of twelve 30-day
months, (b) in the case of a Term Interest Rate Period, on the basis of a
360-day year consisting of twelve 30-day months, and (c) in the case of any
other Rate Period, on the basis of a 365 or 366 day year, as appropriate, for
the actual number of days elapsed. The term "Interest Payment Date" means (i)
with respect to any PARS Rate Period, the Business Day immediately following the
Initial Period and (y) when used with respect to any Auction Period other than a
daily Auction Period, the Business Day immediately following such Auction Period
and (z) when used with respect to a daily Auction Period, the first Business Day
of the month immediately succeeding such Auction Period, (ii) with respect to
any Daily or Weekly Interest Rate Period, the first Business Day of each
calendar month, (iii) with respect to any Term Interest Rate Period, the first
day of the sixth month following the commencement of the Term Interest Rate
Period and the first day of each sixth month thereafter, and the day following
the last day of a Term Interest Rate Period, (iv) with respect to any Flexible
Segment, the Business Day next succeeding the last day thereof, and (v) with
respect to any Rate Period, the day next succeeding the last day thereof. The
term "Business Day" means any day except a Saturday, Sunday or other day (a) on
which commercial banks located in the cities in which the Principal Office of
the Trustee, the Principal
A-4
<PAGE> 94
Office of the Company, the Principal Office of the Remarketing Agent or the
Principal Office of the Paying Agent are located are required or authorized by
law to remain closed or are closed, or (b) on which The New York Stock Exchange
is closed.
The Bonds shall be deliverable in the form of registered Bonds without
coupons in the following denominations: (i) $25,000 or any integral multiple of
$25,000 when the Bonds bear interest at a PARS Rate; (ii) $100,000 or any
integral multiple of $100,000 when the Bonds bear interest at a Daily or Weekly
Interest Rate; (iii) $100,000 or any integral multiple of $5,000 in excess of
$100,000 when the Bonds bear interest at a Flexible Interest Rate; and (iv)
$5,000 or integral multiples of $5,000 when the Bonds bear interest at a Term
Interest Rate (such denominations being referred to herein as ("Authorized
Denominations").
As provided in the Loan Agreement, the Company may, at its option,
provide for a Change of Credit Facility (as defined in the Indenture), which
includes the delivery or termination (or a combination thereof) of one or more
letters of credit, bond insurance policies, standby bond purchase agreements,
lines of credit, first mortgage bonds or other security instruments or liquidity
devices.
During each PARS Rate Period, the Bonds shall bear interest, determined
in accordance with the provisions of the Indenture, by the Auction Agent for
each Auction Period.
During each Daily Interest Rate Period, the Bonds shall bear interest at
a Daily Interest Rate, determined in accordance with the provisions of the
Indenture by the Remarketing Agent on each Business Day for such Business Day.
If the Remarketing Agent shall not have determined a Daily Interest Rate for any
day by 10:00 a.m., New York, New York time, the Daily Interest Rate for such day
shall be the same as the Daily Interest Rate for the immediately preceding day.
During each Weekly Interest Rate Period, the Bonds shall bear interest
at a Weekly Rate, determined in accordance with the provisions of the Indenture
by the Remarketing Agent no later than the first day of such Weekly Interest
Rate Period and thereafter no later than Tuesday of each week during such Weekly
Interest Rate Period, unless any such Tuesday shall not be a Business Day, in
which event the Weekly Interest Rate shall be determined by the Remarketing
Agent no later than the Business Day next preceding such Tuesday.
During each Term Interest Rate Period, the Bonds shall bear interest at
the Term Interest Rate, determined in accordance with the provisions of the
Indenture by the Remarketing Agent on a Business Day selected by the Remarketing
Agent but no more than 60 days prior to and not later than the effective date of
such Term Interest Rate Period.
During each Flexible Interest Rate Period, each Bond shall bear interest
during each Flexible Segment for such Bond at the Flexible Interest Rate for
such Bond as described in the Indenture. Each Flexible Segment and Flexible
Interest Rate shall be determined in accordance with the provisions of the
Indenture by the Remarketing Agent. Each Flexible Segment shall be a period of
not less than one nor more than 270 days.
A-5
<PAGE> 95
At the times and subject to the conditions set forth in the Indenture,
the Company may elect that the Bonds shall bear interest at an interest rate,
and for a period, different from those then applicable. The Trustee shall give
notice of any such adjustment to the owners of the Bonds not less than 15 days
prior to the effective date of such adjustment.
During any Daily Interest Rate Period, any Bond or portion thereof in an
Authorized Denomination shall be purchased at the option of the Owner thereof on
any Business Day at a purchase price equal to 100% of the principal amount
thereof plus accrued interest, if any, from the Interest Payment Date next
preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the principal amount thereof) upon (a) delivery to the Trustee
at the Delivery Office of the Trustee, by not later than 11:00 a.m., New York,
New York time, on such Business Day, of an irrevocable written notice or
irrevocable notice by telephone, which states the principal amount and the
certificate number (if the Bonds are not then held in book entry form) of such
Bond and the date on which the same shall be purchased, and (b) except when a
book-entry system is in effect for the Bonds, delivery of such Bond to the
Trustee at the Delivery Office of the Trustee, accompanied by an instrument of
transfer thereof, in a form satisfactory to the Trustee, executed in blank by
the owner thereof with the signature of such owner guaranteed by a member or
participant in a "signature guarantee program" as provided in the form of
assignment attached to such Bond, at or prior to 1:00 p.m., New York, New York
time, on the date specified in such notice.
During any Weekly Interest Rate Period, any Bond or portion thereof in
an Authorized Denomination shall be purchased at the option of the Owner thereof
on any Business Day at a purchase price equal to 100% of the principal amount
thereof plus accrued interest, if any, from the Interest Payment Date next
preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the principal amount thereof), upon (a) delivery to the
Trustee at the Delivery Office of the Trustee of an irrevocable written notice
or an irrevocable notice by telephone (promptly confined by telecopy or other
writing), by 5:00 p.m., New York, New York time, on any Business Day, which
states the principal amount of such Bond and the certificate number (if the
Bonds are not held in book-entry form) and the date on which the same shall be
purchased, which date shall not be prior to the seventh day next succeeding the
date of the delivery of such notice to the Trustee, and (b) except when a
book-entry system is in effect for the Bonds, delivery of such Bond to the
Trustee at the Delivery Office of the Trustee, accompanied by an instrument of
transfer thereof, in a form satisfactory to the Trustee, executed in blank by
the Owner thereof with the signature of such Owner guaranteed by a member or
participant in a "signature guarantee program" as provided in the form of
assignment attached to such Bond, at or prior to 1:00 p.m., New York, New York
time, on the date specified in such notice.
Any bond or portion thereof in an Authorized Denomination shall be
purchased at the option of the Owner thereof on the first day of any Term
Interest Rate Period which is preceded by a Term Interest Rate Period of equal
duration at a purchase price equal to 100% of the principal amount thereof, upon
(i) delivery to the Trustee at the Delivery Office of the Trustee accompanied by
an instrument of transfer thereof in a form satisfactory to the Trustee of an
irrevocable notice in writing by 5:00 p.m., New York, New York time, on any
Business Day not
A-6
<PAGE> 96
less than fifteen days before the purchase date, which states the principal
amount and certificate number (if the Bonds are not then held in book-entry
form) of such Bond to be purchased and (ii) except when a book-entry system is
in effect for the Bonds, delivery of such Bond to the Trustee at the Delivery
Office of the Trustee, accompanied by an instrument of transfer thereof, in a
form satisfactory to the Trustee, executed in blank by the Owner thereof with
the signature of such Owner guaranteed by a member or participant in a
"signature guarantee program" as provided in the form of assignment attached to
such Bond, at or prior to 1:00 p.m., New York, New York time, on the purchase
date.
"Record Date" means (a) with respect to a PARS Rate Period other than a
daily Auction Period, the second Business Day preceding an Interest Payment Date
therefor and during a daily Auction Period, the last Business Day of the month
preceding an Interest Payment Date therefor, (b) with respect to any Interest
Payment Date in respect of any Daily Interest Rate Period, Weekly Interest Rate
Period or Flexible Segment, the Business Day next preceding such Interest
Payment Date, (c) with respect to any Interest Payment Date in respect of any
Term Interest Rate Period, the fifteenth day of the month preceding such
Interest Payment Date (except as provided in the following clause (d); and (d)
for any Interest Payment Date established pursuant to clause (e) of the
definition of "Interest Payment Date" in Section 1.01 of the Indenture in
respect of a Term Interest Rate Period, the Business Day next preceding such
Interest Payment Date.
In each case in which a portion of a Bond is purchased, both the portion
so purchased and the portion of such Bond not so purchased shall be in
Authorized Denominations.
This Bond shall be subject to mandatory purchase at a purchase price
equal to 100% of the principal amount thereof to the purchase date plus accrued
interest, if any, to the purchase date: (a) on the effective date of any change
in a Rate Period with respect to this Bond other than the effective date of a
Term Interest Rate Period which was preceded by a Term Interest Rate Period of
the same duration; (b) during any Flexible Interest Rate Period, on the day next
succeeding the last day of any Flexible Segment thereof; and (c) in connection
with a Change of Credit Facility, as provided in Section 3.02(a)(iii) of the
Indenture.
The Bonds are also subject to mandatory purchase during any Term
Interest Rate Period on a day that the Bonds would be subject to optional
redemption pursuant to Section 4.02(b)(iv) of the Indenture, at a purchase price
equal to 100% the principal amount thereof plus an amount equal to any premium
which would have been payable on such redemption date had the Bonds been
redeemed if the Company gives notice to the Trustee on or before the Business
Day prior to the redemption date that it elects to have the Bonds purchased in
lieu of redemption. If the Bonds are purchased on or prior to the Record Date,
the purchase price shall include accrued interest from the Interest Payment Date
next preceding the date of purchase to the date of purchase (unless the date of
purchase shall be an Interest Payment Date, in which case the purchase price
shall be equal to the amount specified in the preceding sentence). If the Bonds
are purchased after the Record Date, the purchase price shall not include
accrued interest.
BY ACCEPTANCE OF THIS BOND, THE REGISTERED OWNER HEREBY AGREES THAT, IF
THIS BOND IS TO BE PURCHASED AND IF MONEYS SUFFICIENT TO PAY THE PURCHASE PRICE
SHALL BE HELD BY THE TRUSTEE ON THE DATE THIS BOND IS TO BE PURCHASED, THIS BOND
A-7
<PAGE> 97
SHALL BE DEEMED TO HAVE BEEN PURCHASED AND SHALL BE PURCHASED ACCORDING OF THE
INDENTURE, WHETHER OR NOT THIS BOND SHALL HAVE BEEN DELIVERED TO THE TRUSTEE,
AND THE OWNER OF THIS BOND SHALL HAVE NO CLAIM HEREON, UNDER THE INDENTURE OR
OTHERWISE, FOR ANY AMOUNT OTHER THAN THE PURCHASE PRICE HEREOF.
The Bonds shall be redeemed in whole or in part, and if in part by lot,
at any time at a redemption price equal to the principal amount thereof plus
accrued interest to the redemption date upon receipt by the Trustee of a written
notice from the Company stating that any of the following events has occurred
and that the Company therefore intends to exercise its option to prepay the
payments due under the Loan Agreement in whole or in part and thereby effect the
redemption of Bonds in whole or in part to the extent of such prepayments: (a)
the Company shall have determined or concurred in a determination that the
continued operation of the Plant is impracticable, uneconomical or undesirable
for any reason; (b) all or substantially all of the Plant shall have been
condemned or taken by eminent domain; (c) the operation of the Plant shall have
been enjoined or shall have otherwise been prohibited by, or shall conflict
with, any order, decree, rule or regulation of any court or of any federal,
state or local regulatory body, administrative agency or other governmental
body; (d) unreasonable burdens or excessive liabilities shall have been imposed
upon the Company in respect of all or a part of the Pollution Control Facilities
or the Plant including, without limitation, federal, state or other ad valorem,
property, income or other taxes not being imposed on the date of the Loan
Agreement, as well as any statute or regulation enacted or promulgated after the
date of the Loan Agreement that prevents the Company from deducting interest in
respect of the Agreement for federal income tax purposes; or (e) all or
substantially all of the Project shall be transferred or sold to any entity
other than an affiliate of the Company; provided, however, that in the case of a
redemption under this paragraph, the redemption price of the Bonds shall be
equal to 101% of the principal amount thereof, plus accrued interest to the date
of redemption, unless a smaller or no premium would be due upon optional
redemption of the Bonds as described in the following paragraph.
The Bonds shall be subject to redemption upon prepayment of the Loan
Payments at the option of the Company, in whole, or in part by lot, prior to
their maturity, as follows:
(a) While the Bonds bear interest at a PARS Rate, the Bonds
shall be subject to such redemption on the date next succeeding the last
day of any PARS Rate Period at a redemption price equal to 100% of the
principal amount thereof plus accrued interest, if any, to the
redemption date.
(b) While the Bonds bear interest at a Flexible Interest Rate or
Rates, each Bond shall be subject to such redemption on the day next
succeeding the last day of each Flexible Segment for such Bond at a
redemption price equal to 100% of the principal amount thereof.
(c) While the Bonds bear interest at a Daily Interest Rate or a
Weekly Interest Rate, the Bonds shall be subject to such redemption on
any Business Day at a redemption price equal to 100% of the principal
amount thereof, plus accrued interest, if any, to the redemption date.
A-8
<PAGE> 98
(d) While the Bonds bear interest at a Term Interest Rate, the
Bonds shall be subject to such redemption (1) on the day next succeeding
the last day of each Term Interest Rate Period at a redemption price
equal to the principal amount of the Bonds being redeemed plus accrued
interest, if any, to the redemption date and (2) either (i) on the
redemption dates and at the redemption prices specified by the Company
pursuant to the next succeeding paragraph or (ii) during the redemption
periods specified below, in each case in whole or in part, at the
redemption prices (expressed as percentages of principal amount)
hereinafter indicated plus accrued interest, if any, to the redemption
date:
<TABLE>
<CAPTION>
LENGTH OF TERM
INTEREST RATE PERIOD REDEMPTION DATES AND PRICES
<S> <C>
Greater than or equal to 11 years At any
time on or after the first day of
the calendar month following the
tenth anniversary of the effective
date at 102% declining 1% annually
to 100%
Less than 11 years Not redeemable
</TABLE>
With respect to any Term Interest Rate Period, the Company may specify
in a notice given to the Trustee redemption provisions, prices and periods other
than those set forth above; provided, however, that such notice shall be
accompanied by a Favorable Opinion of Bond Counsel to the effect that the
proposed action is not prohibited by the laws of the State and the Indenture and
will not adversely affect the Tax-Exempt status of the Bonds.
The Bonds shall be redeemed in whole on any date from amounts which are
to be prepaid by the Company under the Loan Agreement, at a redemption price
equal to 100% of the principal amount thereof plus interest accrued, if any, to
the redemption date within 180 days after the occurrence of a Determination of
Taxability; provided that if, in the Favorable Opinion of Bond Counsel delivered
to the Trustee, the redemption of a specified portion of the Bonds outstanding
would have the result that interest payable on the Bonds remaining outstanding
after such redemption would remain Tax-Exempt, then the Bonds shall be redeemed
in part by lot (in Authorized Denominations), in such amount as Bond Counsel in
such opinion shall have determined is necessary to accomplish that result.
A "Determination of Taxability" shall be deemed to have occurred if as a
result of the Company's failure to observe any covenant, agreement or
representation in the Loan Agreement, a final decree or judgment of any federal
court or a final action of the Internal Revenue Service determines that interest
paid or payable on any Bond is or was includible in the gross income of an Owner
of the Bonds for federal income tax purposes under the Code (other than an Owner
who is a "substantial user" or "related person" within the meaning of Section
147(a) of the Code). However, no such decree or action will be considered final
for this purpose unless the Company has been given written notice and, if it is
so desired and is legally allowed, has been afforded the opportunity to contest
the same, either directly or in the name of any Owner of a Bond, and until
conclusion of any appellate review, if sought.
A-9
<PAGE> 99
Notice of any optional or mandatory redemption shall be given by
first-class mail not less than 15 days nor more than 60 days prior to the date
fixed for redemption to the Owners of Bonds at the address shown on the
registration books of the Registrar on the date such notice is mailed. If less
than all of the Bonds are called for redemption, the Trustee shall select the
Bonds or any given portion thereof from the outstanding Bonds or such given
portion thereof not previously called for redemption, by lot. For the purpose of
any such selection the Trustee shall assign a separate number for each minimum
Authorized Denomination of each Bond of a denomination of more than such
minimum; provided that, following any such selection, both the portion of such
Bond to be redeemed and the portion remaining shall be in Authorized
Denominations.
Subject to the limitations and upon payment of the charges, if any,
provided in the Indenture, Bonds may be exchanged at the Principal Office of the
Registrar for a like aggregate principal amount of Bonds of the same tenor and
of Authorized Denominations.
This Bond is transferable by the person in whose name it is registered,
in person, or by its attorney duly authorized in writing, at the Principal
Office of the Registrar, but only in the manner, subject to the limitations and
upon payment of the charges provided in the Indenture, and upon surrender and
cancellation of this Bond accompanied by a written instrument of transfer in a
form approved by the Registrar, duly executed. Upon such transfer a new fully
registered Bond or Bonds in Authorized Denominations, for the same aggregate
principal amount, will be issued to the transferee in exchange therefor.
The Issuer, the Registrar, the Trustee and any agent of the Issuer, the
Registrar or the Trustee may treat the person in whose name this Bond is
registered as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Bond be overdue, and
neither the Issuer, the Registrar, the Trustee, any paying agent nor any such
agent shall be affected by notice to the contrary.
The Bonds are equally and ratably secured, to the extent provided in the
Indenture, by the pledge thereunder of the "Revenues," which term is used herein
as defined in the Indenture and which as therein defined means all moneys paid
or payable to the Trustee for the account of the Issuer in accordance with the
Loan Agreement and all receipts credited under the provisions of the Indenture
against such payments; provided, however, that "Revenues" shall not include
moneys held by the Trustee to pay the purchase price of Bonds subject to
purchase pursuant to the Indenture. The Issuer has also pledged and assigned to
the Trustee as security for the Bonds all other rights and interests of the
Issuer under the Loan Agreement (other than its rights to indemnification and
certain administrative expenses and certain other rights).
The Owner of this Bond shall have no right to enforce the provisions of
the Indenture, or to institute action to enforce the covenants therein, or to
take any action with respect to any Event of Default under the Indenture, or to
institute, appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture.
With certain exceptions as provided therein, the Indenture and the Loan
Agreement may be modified or amended only with the consent of the Provider
(unless a Provider Default as
A-10
<PAGE> 100
specified in the Indenture shall have occurred and be continuing) and the Owners
of not less than 60% in aggregate principal amount of all Bonds then Outstanding
under the Indenture.
Reference is hereby made to the Indenture, the Loan Agreement, the
Credit Facility and the Tax Certificate, copies of which are on file with the
Trustee, for the provisions, among others, with respect to the nature and extent
of the rights, duties and obligations of the Issuer, the Company, the Trustee,
the Registrar, the Remarketing Agent and the Owners of the Bonds. The Owner of
this Bond, by the acceptance hereof, is deemed to have agreed and consented to
and to be bound by the terms and provisions of the indenture, the Loan Agreement
and the Tax Certificate.
The Indenture prescribes the manner in which it may be discharged,
including (a) a provision that the Bonds shall be deemed to be paid if moneys
sufficient to pay the principal of, premium, if any, and interest on the Bonds
and all necessary and proper fees, compensation and expenses of the Trustee, the
Registrar, the Provider and the Remarketing Agent, shall have been deposited
with the Trustee, after which the Bonds shall no longer be secured by or
entitled to the benefits of the Indenture, except for the purposes of
registration and exchange of Bonds and of delivery of the Bonds to the Trustee
for purchase, and (b) a provision that, if the Bonds mature or are called for
redemption prior to the next date upon which the Bonds are subject to purchase
pursuant to the Indenture, and if the Company waives its right to convert the
interest rate borne by the Bonds, the Bonds shall be deemed to be paid if
Government Obligations, as defined therein, maturing as to principal and
interest in such amounts and at such times as to insure the availability of
sufficient moneys to pay the principal of, premium, if any, and interest on the
Bonds and all necessary and proper fees, compensation and expenses of the
Trustee and the Registrar, shall have been deposited with the Trustee, after
which the Bonds shall no longer be secured by or entitled to the benefits of the
Indenture, except for the purposes of registration and exchange of Bonds and of
such payment.
No recourse shall be had for the payment of the principal of, premium,
if any, or interest on any of the Bonds or for any claim based thereon or upon
any obligation, covenant or agreement in the Indenture contained, against any
past, present or future officer, elected official agent or employee of the
Issuer, or any incorporator, officer, director or member of any successor
corporation, as such, either directly or through the Issuer or any successor
corporation, under any rule of law or equity, statute or constitution or by the
enforcement of any assessment or penalty or otherwise, and all such liability of
any such incorporator, officer, director or member is hereby expressly waived
and released as a condition of and in consideration for the execution of the
Indenture and the issuance of any of the Bonds.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions
and things required to exist, happen and be performed precedent to and in the
execution and delivery of the Indenture and the issuance of this Bond do exist,
have happened and have been performed in due time, form and manner as required
by law, and that the issuance of this Bond and the issue of which it forms a
part, together with all other obligations of the Issuer, does not exceed or
violate any constitutional or statutory limitation of indebtedness.
A-11
<PAGE> 101
This Bond shall not be entitled to any security or benefit under the
Indenture, or be valid or become obligatory for any purpose, until this Bond
shall have been authenticated by the execution by the Registrar of the
certificate of authentication inscribed hereon.
IN WITNESS WHEREOF, CITY OF FORSYTH, MONTANA, has caused this Bond to be
executed in its name with the signature of its Mayor and attested by the
signature of its City Clerk-Treasurer, all as of the Issue Date specified above.
CITY OF FORSYTH, MONTANA
By:
------------------------------------
Mayor
[SEAL]
ATTEST:
- ----------------------------------
City Clerk-Treasurer
A-12
<PAGE> 102
[FORM OF TRUSTEE'S CERTIFICATE]
CERTIFICATE OF AUTHENTICATION
This is to certify that this Bond is one of the Bonds of the Series
described in the within-mentioned Indenture.
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION,
as Registrar
By:
------------------------------------
Authorized Signatory
Date of registration and authentication: ___________________________
A-13
<PAGE> 103
[FORM OF ASSIGNMENT]
The following abbreviations, when used in the inscription on the face
the within Bond shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT--
TEN ENT -- as tenants by the entirety _______ Custodian _______
JT TEN -- as joint tenants with (Cust) (Minor)
right of survivorship and
not as tenants in common under Uniform Gifts to Minors Act of
------------------------------------
(State)
Additional abbreviations may also be used though not in the list above.
For value received _____________________________________________ hereby
sells, assigns and transfers unto
INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
---------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address of Assignee)
the within Bond of the CITY OF FORSYTH, MONTANA, and hereby irrevocably
constitutes and appoints ____________________________________ attorney to
register the transfer of said Bond on the books kept for registration thereof
with full power of substitution in the premises.
Dated: Signature:
---------------------------- -------------------------
SIGNATURE GUARANTEED:
- ----------------------------------
NOTICE: Signature(s) must be guaranteed by an "eligible guarantor institution"
that is a member of or a participant in a "signature guarantee program" (e.g.,
the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion
Program or the New York Stock Exchange, Inc. Medallion Signature Program).
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without alteration
or enlargement or any change whatever.
A-14
<PAGE> 104
EXHIBIT B
PARS AUCTION PROCEDURES
SECTION 1.01. AUCTION PROCEDURES. While the Bonds bear interest at the
PARS Rate, Auctions shall be conducted on each Auction Date (other than the
Auction Date immediately preceding (i) each Rate Period commencing after the
ownership of the Auction Rate Bonds is no longer maintained in the Book-Entry
System; (ii) each Rate Period commencing after the occurrence and during the
continuance of a Payment Default; or (iii) any Rate Period commencing less than
two Business Days after the cure of a Payment Default). If there is an Auction
Agent on such Auction Date, Auctions shall be conducted in the manner set forth
in this Exhibit B.
SECTION 1.02. ORDERS BY EXISTING OWNERS AND POTENTIAL OWNERS.
(a) Prior to the Submission Deadline on each Auction Date:
(i) each Existing Owner may submit to a Broker-Dealer, in
writing or by such other method as shall be reasonably acceptable to
such Broker-Dealer, information as to:
(A) the principal amount of the PARS Rate Bonds, if any,
held by such Existing Owner which such Existing Owner
irrevocably commits to continue to hold for the next succeeding
Auction Period without regard to the rate determined by the
Auction Procedures for such Auction Period,
(B) the principal amount of the PARS Rate Bonds, if any,
held by such Existing Owner which such Existing Owner
irrevocably commits to continue to hold for the next succeeding
Auction Period if the rate determined by the Auction Procedures
for such Auction Period shall not be less than the rate per
annum then specified by such Existing Owner (and which such
Existing Owner irrevocably offers to sell on the next succeeding
Interest Payment Date (or the same day in the case of a daily
Auction Period) if the rate determined by the Auction Procedures
for the next succeeding Auction Period shall be less than the
rate per annum then specified by such Existing Owner), and/or
(C) the principal amount of the PARS Rate Bonds, if any,
held by such Existing Owner which such Existing Owner
irrevocably offers to sell on the next succeeding Interest
Payment Date (or on the same day in the case of a daily Auction
Period) without regard to the rate determined by the Auction
Procedures for the next succeeding Auction Period; and
(ii) for the purpose of implementing the Auctions and thereby to
achieve the lowest possible interest rate on the PARS Rate Bonds, the
Broker-Dealers shall contact Potential Owners, including Persons that
are Existing Owners, to determine the principal amount of the PARS Rate
Bonds, if any, which each such Potential Owner irrevocably
B-1
<PAGE> 105
offers to purchase if the rate determined by the Auction Procedures for
the next succeeding Auction Period is not less than the rate per annum
then specified by such Potential Owner.
For the purposes hereof, an Order containing the information referred to
in clause (i)(A) of this subsection (a) is herein referred to as a "Hold Order",
an Order containing the information referred to in clause (i)(B) or (ii) of this
subsection (a) is herein referred to as a "Bid", and an Order containing the
information referred to in clause (i)(C) of this subsection (a) is herein
referred to as a "Sell Order."
(b) (i) A Bid by an Existing Owner shall constitute an irrevocable
offer to sell:
(A) the principal amount of the PARS Rate Bonds specified
in such Bid if the rate determined by the Auction Procedures on
such Auction Date shall be less than the rate specified therein;
or
(B) such principal amount or a lesser principal amount of
the PARS Rate Bonds to be determined as set forth in subsection
(a)(v) of Section 1.05 hereof if the rate determined by the
Auction Procedures on such Auction Date shall be equal to such
specified rate; or
(C) a lesser principal amount of the PARS Rate Bonds to be
determined as set forth in subsection (b)(iv) of Section 1.05
hereof if such specified rate shall be higher than the Maximum
PARS Rate and Sufficient Clearing Bids do not exist.
(ii) A Sell Order by an Existing Owner shall constitute an
irrevocable offer to sell:
(A) the principal amount of the PARS Rate Bonds specified
in such Sell Order; or
(B) such principal amount or a lesser principal amount of
the PARS Rate Bonds as set forth in subsection (b)(iv) of
Section 1.05 hereof if Sufficient Clearing Bids do not exist.
(iii) A Bid by a Potential Owner shall constitute an irrevocable
offer to purchase:
(A) the principal amount of the PARS Rate Bonds specified
in such Bid if the rate determined by the Auction Procedures on
such Auction Date shall be higher than the rate specified
therein; or
(B) such principal amount or a lesser principal amount of
the PARS Rate Bonds as set forth in subsection (a)(vi) of
Section 1.05 hereof if the rate determined by the Auction
Procedures on such Auction Date shall be equal to such specified
rate.
B-2
<PAGE> 106
(c) Anything herein to the contrary notwithstanding:
(i) for purposes of any Auction, any Order which specifies the
PARS Rate Bonds to be held, purchased or sold in a principal amount
which is not $25,000 or an integral multiple thereof shall be rounded
down to the nearest $25,000, and the Auction Agent shall conduct the
Auction Procedures as if such Order had been submitted in such lower
amount;
(ii) for purposes of any Auction other than during a daily
Auction Period, any portion of an Order of an Existing Owner which
relates to a PARS Rate Bond which has been called for redemption on or
prior to the Interest Payment Date next succeeding such Auction shall be
invalid with respect to such portion and the Auction Agent shall conduct
the Auction Procedures as if such portion of such Order had not been
submitted;
(iii) for purposes of any Auction other than during a daily
Auction Period, no portion of a PARS Rate Bond which has been called for
redemption on or prior to the Interest Payment Date next succeeding such
Auction shall be included in the calculation of Available Bonds for such
Auction; and
(iv) the Auction Procedures shall be suspended during the period
commencing on the date of the Auction Agent's receipt of notice from the
Trustee or the Issuer of the occurrence of an Event of Default resulting
from a failure to pay principal, premium or interest on any PARS Rate
Bond when due (provided however that for purposes of this provision only
payment by the Provider of the Credit Facility shall be deemed to cure
such Event of Default and no such suspension of the Auction Procedures
shall occur) but shall resume two Business Days after the date on which
the Auction Agent receives notice from the Trustee that such Event of
Default has been waived or cured, with the next Auction to occur on the
next regularly scheduled Auction Date occurring thereafter.
SECTION 1.03. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(a) Each Broker-Dealer shall submit to the Auction Agent in writing or
by such other method as shall be reasonably acceptable to the Auction Agent,
prior to the Submission Deadline on each Auction Date, all Orders obtained by
such Broker-Dealer and specifying with respect to each Order:
(i) the name of the Bidder placing such Order;
(ii) the aggregate principal amount of the PARS Rate Bonds that
are the subject of such Order;
(iii) to the extent that such Bidder is an Existing Owner:
(A) the principal amount of the PARS Rate Bonds, if any,
subject to any Hold Order placed by such Existing Owner;
B-3
<PAGE> 107
(B) the principal amount of the PARS Rate Bonds, if any,
subject to any Bid placed by such Existing Owner and the rate
specified in such Bid; and
(C) the principal amount of the PARS Rate Bonds, if any,
subject to any Sell Order placed by such Existing Owner; and
(iv) to the extent such Bidder is a Potential Owner, the rate
specified in such Bid.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth of one percent (0.001%).
(c) If an Order or Orders covering all of the PARS Rate Bonds held by an
Existing Owner is not submitted to the Auction Agent prior to the Submission
Deadline, the Auction Agent shall deem a Hold Order to have been submitted on
behalf of such Existing Owner covering the principal amount of the PARS Rate
Bonds held by such Existing Owner and not subject to Orders submitted to the
Auction Agent; provided, however, that if there is a conversion from one Auction
Period to another Auction Period and Orders have not been submitted to the
Auction Agent prior to the Submission Deadline covering the aggregate principal
amount of the PARS Rate Bonds held by such Existing Owner, the Auction Agent
shall deem a Sell Order to have been submitted on behalf of such Existing Owner
covering the principal amount of the PARS Rate Bonds held by such Existing Owner
not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders covering in the aggregate more than the
principal amount of the Outstanding PARS Rate Bonds held by any Existing Owner
are submitted to the Auction Agent, such Orders shall be considered valid as
follows:
(i) all Hold Orders shall be considered Hold Orders, but only up
to and including in the aggregate the principal amount of the PARS Rate
Bonds held by such Existing Owner;
(ii) (A) any Bid of an Existing Owner shall be considered valid
as a Bid of an Existing Owner up to and including the excess of
the principal amount of the PARS Rate Bonds held by such
Existing Owner over the principal amount of the PARS Rate Bonds
subject to Hold Orders referred to in paragraph (i) above;
(B) subject to clause (A), all Bids of an Existing Owner
with the same rate shall be aggregated and considered a single
Bid of an Existing Owner up to and including the excess of the
principal amount of the PARS Rate Bonds held by such Existing
Owner over the principal amount of the PARS Rate Bonds held by
such Existing Owner subject to Hold Orders referred to in
paragraph (i) above,
(C) subject to clause (A), if more than one Bid with
different rates is submitted on behalf of such Existing Owner,
such Bids shall be considered Bids of an Existing Owner in the
ascending order of their respective rates up to the
B-4
<PAGE> 108
amount of the excess of the principal amount of the PARS Rate
Bonds held by such Existing Owner over the principal amount of
the PARS Rate Bonds held by such Existing Owner subject to Hold
Orders referred to in paragraph (i) above, and
(D) the principal amount, if any, of such PARS Rate Bonds
subject to Bids not considered to be Bids of an Existing Owner
under this paragraph (ii) shall be treated as the subject of a
Bid by a Potential Owner; and
(iii) all Sell Orders shall be considered Sell Orders, but only
up to and including a principal amount of the PARS Rate Bonds equal to
the excess of the principal amount of the PARS Rate Bonds held by such
Existing Owner over the sum of the principal amount of the PARS Rate
Bonds considered to be subject to Hold Orders pursuant to paragraph (i)
above and the principal amount of the PARS Rate Bonds considered to be
subject to Bids of such Existing Owner pursuant to paragraph (ii) above.
(e) If more than one Bid is submitted on behalf of any Potential
Owner, each Bid submitted with the same rate shall be aggregated and considered
a single Bid and each Bid submitted with a different rate shall be considered a
separate Bid with the rate and the principal amount of the PARS Rate Bonds
specified therein.
(f) Any Bid submitted by an Existing Owner or a Potential Owner
specifying a rate lower than the Minimum PARS Rate shall be treated as a Bid
specifying the Minimum PARS Rate.
(g) Neither the Company, the Issuer, the Trustee nor the Auction Agent
shall be responsible for the failure of any Broker-Dealer to submit an Order to
the Auction Agent on behalf of any Existing Owner or Potential Owner.
SECTION 1.04. DETERMINATION OF PARS RATE.
(a) Not later than 9:30 a.m., New York, New York time, on each Auction
Date, the Auction Agent shall advise the Broker-Dealers and the Trustee by
telephone of the Minimum PARS Rate, the Maximum PARS Rate and the PARS Index.
(b) Promptly after the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to as a "Submitted Hold Order," a
"Submitted Bid" or a "Submitted Sell Order," as the case may be, and
collectively as a "Submitted Order") and shall determine (i) the Available
Bonds, (ii) whether there are Sufficient Clearing Bids, and (iii) the Auction
Rate.
(c) Promptly after the Auction Agent has made the determinations
pursuant to subsection (b) above, the Auction Agent shall advise the Trustee by
telephone (promptly confirmed in writing), telex or facsimile transmission of
the Auction Rate for the next succeeding Auction Period.
B-5
<PAGE> 109
(d) In the event the Auction Agent shall fail to calculate, or for any
reason fail to timely provide the Auction Rate for any Auction Period, the PARS
Rate for such Auction Period shall be the applicable No Auction Rate provided,
however, that if the Auction Procedures are suspended pursuant to Section
1.02(iv), the PARS Rates for the next succeeding Auction Period shall be the
Maximum PARS Rate.
(e) In the event of a failed conversion to a Daily Interest Rate
Period, a Weekly Interest Rate Period, a Flexible Interest Rate Period or a Term
Interest Rate Period or in the event of a failure to change the length of the
current Auction Period due to the lack of Sufficient Clearing Bids at the
Auction on the Auction Date for the first new Auction Period, the PARS Rate for
the next Auction Period shall be the Maximum PARS Rate and the Auction Period
shall be a seven-day Auction Period.
SECTION 1.05. ALLOCATION OF THE PARS RATE BONDS.
(a) In the event of Sufficient Clearing Bids, subject to the further
provisions of subsections (c) and (d) below, Submitted Orders shall be accepted
or rejected as follows in the following order of priority:
(i) the Submitted Hold Order of each Existing Owner shall be
accepted, thus requiring each such Existing Owner to continue to hold
the PARS Rate Bonds that are the subject of such Submitted Hold Order;
(ii) the Submitted Sell Order of each Existing Owner shall be
accepted and the Submitted Bid of each Existing Owner specifying any
rate that is higher than the Winning Bid Rate shall be rejected, thus
requiring each such Existing Owner to sell the PARS Rate Bonds that are
the subject of such Submitted Sell Order or Submitted Bid;
(iii) the Submitted Bid of each Existing Owner specifying any
rate that is lower than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Owner to continue to hold the PARS Rate
Bonds that are the subject of such Submitted Bid;
(iv) the Submitted Bid of each Potential Owner specifying any
rate that is lower than the Winning Bid Rate shall be accepted, thus
requiring each such Potential Owner to purchase the PARS Rate Bonds that
are the subject of such Submitted Bid;
(v) the Submitted Bid of each Existing Owner specifying a rate
that is equal to the Winning Bid Rate shall be accepted, thus requiring
each such Existing Owner to continue to hold the PARS Rate Bonds that
are the subject of such Submitted Bid, but only up to and including the
principal amount of the PARS Rate Bonds obtained by multiplying (A) the
aggregate principal amount of the Outstanding PARS Rate Bonds which are
not the subject of Submitted Hold Orders described in paragraph (i)
above or of Submitted Bids described in paragraphs (iii) or (iv) above
by (B) a fraction the numerator of which shall be the principal amount
of the Outstanding PARS Rate Bonds held by such Existing Owner subject
to such Submitted Bid and the denominator of which shall be the
aggregate principal amount of the Outstanding PARS Rate Bonds subject to
such
B-6
<PAGE> 110
Submitted Bids made by all such Existing Owners that specified a rate
equal to the Winning Bid Rate, and the remainder, if any, of such
Submitted Bid shall be rejected, thus requiring each such Existing Owner
to sell any excess amount of the PARS Rate Bonds;
(vi) the Submitted Bid of each Potential Owner specifying a rate
that is equal to the Winning Bid Rate shall be accepted, thus requiring
each such Potential Owner to purchase the PARS Rate Bonds that are the
subject of such Submitted Bid, but only in an amount equal to the
principal amount of the PARS Rate Bonds obtained by multiplying (A) the
aggregate principal amount of the Outstanding PARS Rate Bonds which are
not the subject of Submitted Hold Orders described in paragraph (i)
above or of Submitted Bids described in paragraphs (iii), (iv) or (v)
above by (B) a fraction the numerator of which shall be the principal
amount of the Outstanding PARS Rate Bonds subject to such Submitted Bid
and the denominator of which shall be the sum of the aggregate principal
amount of the Outstanding PARS Rate Bonds subject to such Submitted Bids
made by all such Potential Owners that specified a rate equal to the
Winning Bid Rate, and the remainder of such Submitted Bid shall be
rejected; and
(vii) the Submitted Bid of each Potential Owner specifying any
rate that is higher than the Winning Bid Rate shall be rejected.
(b) In the event there are not Sufficient Clearing Bids, subject to
the further provisions of subsections (c) and (d) below, Submitted Orders shall
be accepted or rejected as follows in the following order of priority:
(i) the Submitted Hold Order of each Existing Owner shall be
accepted, thus requiring each such Existing Owner to continue to hold
the PARS Rate Bonds that are the subject of such Submitted Hold Order;
(ii) the Submitted Bid of each Existing Owner specifying any
rate that is not higher than the Maximum PARS Rate shall be accepted,
thus requiring each such Existing Owner to continue to hold the PARS
Rate Bonds that are the subject of such Submitted Bid;
(iii) the Submitted Bid of each Potential Owner specifying any
rate that is not higher than the Maximum PARS Rate shall be accepted,
thus requiring each such Potential Owner to purchase the PARS Rate Bonds
that are the subject of such Submitted Bid;
(iv) the Submitted Sell Orders of each Existing Owner shall be
accepted as Submitted Sell Orders and the Submitted Bids of each
Existing Owner specifying any rate that is higher than the Maximum PARS
Rate shall be deemed to be and shall be accepted as Submitted Sell
Orders, in both cases only up to and including the principal amount of
the PARS Rate Bonds obtained by multiplying (A) the aggregate principal
amount of the PARS Rate Bonds subject to Submitted Bids described in
paragraph (iii) of this subsection (b) by (B) a fraction the numerator
of which shall be the principal amount of the Outstanding PARS Rate
Bonds held by such Existing Owner subject to such Submitted Sell Order
or such Submitted Bid deemed to be a Submitted Sell Order and the
B-7
<PAGE> 111
denominator of which shall be the principal amount of the Outstanding
PARS Rate Bonds subject to all such Submitted Sell Orders and such
Submitted Bids deemed to be Submitted Sell Orders, and the remainder of
each such Submitted Sell Order or Submitted Bid shall be deemed to be
and shall be accepted as a Hold Order and each such Existing Owner shall
be required to continue to hold such excess amount of the PARS Rate
Bonds; and
(v) the Submitted Bid of each Potential Owner specifying any
rate that is higher than the Maximum PARS Rate shall be rejected.
(c) If, as a result of the procedures described in subsection (a) or
(b) above, any Existing Owner or Potential Owner would be required to purchase
or sell an aggregate principal amount of the PARS Rate Bonds which is not an
integral multiple of $25,000 on any Auction Date, the Auction Agent shall by
lot, in such manner as it shall determine in its sole discretion, round up or
down the principal amount of the PARS Rate Bonds to be purchased or sold by any
Existing Owner or Potential Owner on such Auction Date so that the aggregate
principal amount of the PARS Rate Bonds purchased or sold by each Existing Owner
or Potential Owner on such Auction Date shall be an integral multiple of
$25,000, even if such allocation results in one or more of such Existing Owners
or Potential Owners not purchasing or selling any the PARS Rate Bonds on such
Auction Date.
(d) If, as a result of the procedures described in subsection (a)
above, any Potential Owner would be required to purchase less than $25,000 in
principal amount of the PARS Rate Bonds on any Auction Date, the Auction Agent
shall by lot, in such manner as it shall determine in its sole discretion,
allocate the PARS Rate Bonds for purchase among Potential Owners so that the
principal amount of PARS purchased on such Auction Date by any Potential Owner
shall be an integral multiple of $25,000, even if such allocation results in one
or more of such Potential Owners not purchasing the PARS Rate Bonds on such
Auction Date.
SECTION 1.06. NOTICE OF PARS RATE.
(a) On each Auction Date, the Auction Agent shall notify by telephone
each Broker-Dealer that participated in the Auction held on such Auction Date
and submitted an Order on behalf of any Existing Owner or Potential Owner of:
(i) the PARS Rate fixed for the succeeding Auction Period or, in
the case of PARS Rate Bonds in a daily Auction Period, the PARS Rate on
the PARS Rate Bonds fixed for the current Auction Period;
(ii) whether Sufficient Clearing Bids existed for the
determination of the Winning Bid Rate;
(iii) if such Broker-Dealer submitted a Bid or a Sell Order on
behalf of an Existing Owner, whether such Bid or Sell Order was accepted
or rejected, in whole or in part, and the principal amount of the PARS
Rate Bonds, if any, to be sold by such Existing Owner;
B-8
<PAGE> 112
(iv) if such Broker-Dealer submitted a Bid on behalf of a
Potential Owner, whether such Bid was accepted or rejected, in whole or
in part, and the principal amount of the PARS Rate Bonds, if any, to be
purchased by such Potential Owner;
(v) if the aggregate principal amount of the PARS Rate Bonds to
be sold by all Existing Owners on whose behalf such Broker-Dealer
submitted Bids or Sell Orders is different from the aggregate principal
amount of the PARS Rate Bonds to be purchased by all Potential Owners on
whose behalf such Broker-Dealer submitted a Bid, the name or names of
one or more Broker-Dealers (and the Agent Member, if any, of each such
other Broker-Dealer) and the principal amount of the PARS Rate Bonds to
be (A) purchased from one or more Existing Owners on whose behalf such
other Broker-Dealers submitted Bids or Sell Orders or (B) sold to one or
more Potential Owners on whose behalf such Broker-Dealer submitted Bids;
and
(vi) the immediately succeeding Auction Date.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Owner or Potential Owner shall:
(i) advise each Existing Owner and Potential Owner on whose
behalf such Broker-Dealer submitted a Bid or Sell Order whether such Bid
or Sell Order was accepted or rejected, in whole or in part;
(ii) instruct each Potential Owner on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part, to
instruct such Potential Owner's Agent Member to pay to such
Broker-Dealer (or its Agent Member) through the Securities Depository
the amount necessary to purchase the principal amount of the PARS Rate
Bonds to be purchased pursuant to such Bid (including, with respect to
the PARS Rate Bonds in a daily Auction Period, accrued interest if the
purchase date is not an Interest Payment Date for such PARS Rate Bond)
against receipt of such the PARS Rate Bonds;
(iii) instruct each Existing Owner on whose behalf such
Broker-Dealer submitted a Sell Order that was accepted or a Bid that was
rejected, in whole or in part, to instruct such Existing Owner's Agent
Member to deliver to such Broker-Dealer (or its Agent Member) through
the Securities Depository the principal amount of the PARS Rate Bonds to
be sold pursuant to such Bid or Sell Order against payment therefor;
(iv) advise each Existing Owner on whose behalf such
Broker-Dealer submitted an Order and each Potential Owner on whose
behalf such Broker-Dealer submitted a Bid of the PARS Rate for the next
succeeding Auction Period;
(v) advise each Existing Owner on whose behalf such
Broker-Dealer submitted an Order of the Auction Date of the next
succeeding Auction or, in the case of PARS Rate Bonds in a daily Auction
Period, the PARS Rate for the current Auction Period; and
B-9
<PAGE> 113
(vi) advise each Potential Owner on whose behalf such
Broker-Dealer submitted a Bid that was accepted, in whole or in part, of
the Auction Date of the next succeeding Auction.
(c) On the basis of the information provided to it pursuant to
paragraph (a) above, each Broker-Dealer that submitted a Bid or Sell Order shall
allocate any funds received by it pursuant to subparagraph (b)(ii) above, and
any PARS Rate Bonds received by it pursuant to (b)(iii) above, among the
Potential Owners, if any, on whose behalf such Broker-Dealer submitted Bids, the
Existing Owners, if any, on whose behalf such Broker-Dealer submitted Bids or
Sell Orders, and any Broker-Dealer identified to it by the Auction Agent
pursuant to subparagraph (a)(v) above.
(d) On the Business Day after the Auction Date or, in the case of PARS
Rate Bonds in a daily Auction Period, on such Auction Date, the Securities
Depository shall execute the transactions described above, debiting and
crediting the accounts of the respective Agent Members as necessary to effect
the purchase and sale of PARS Rate Bonds as determined in the Auction.
SECTION 1.07. PARS INDEX.
(a) the PARS Index on any Auction Date with respect to the PARS Rate
Bonds in any Auction Period other than a six-month Auction Period shall be the
Seven-Day "AA" Composite Commercial Paper Rate on such date. The PARS Index
respect to the PARS Rate Bonds in a six-month Auction Period shall be the
Six-Month Treasury Bill Rate, as last published in The Bond Buyer. If either
rate is unavailable, the PARS Index shall be a rate agreed to by all
Broker-Dealers and consented to by the Issuer.
"Seven-Day `AA' Composite Commercial Paper Rate" on any date of
determination, means the interest equivalent of the seven-day rate on commercial
paper placed on behalf of issuers whose corporate bonds are rated AA by S&P, or
the equivalent of such rating by S&P, as made available on a discount basis or
otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date of determination, or (B) if the Federal Reserve
Bank of New York does not make available any such rate, then the arithmetic
average of such rates, as quoted on a discount basis or otherwise, by Goldman,
Sachs & Co., Lehman Commercial Paper Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof, their respective affiliates or
successors which are commercial paper dealers (the "Commercial Paper Dealers"),
to the Auction Agent for the close of business on the Business Day immediately
preceding such date of determination.
For purposes of the definitions of Seven-Day "AA" Composite Commercial
Paper Rate, the "interest equivalent" means the equivalent yield on a 360-day
basis of a discount-basis security to an interest-bearing security. If any
Commercial Paper Dealer does not quote a commercial paper rate required to
determine the Seven-Day "AA" Composite Commercial Paper Rate, the Seven-Day "AA"
Composite Commercial Paper Rate shall be determined on the basis of the
quotation or quotations furnished by the remaining Commercial Paper Dealer or
Commercial Paper Dealers and any substitute commercial paper dealer not included
within the definition of Commercial Paper Dealer above, which may be CS First
Boston Corporation or Morgan Stanley
B-10
<PAGE> 114
Dean Witter or their respective affiliates or successors which are commercial
paper dealers (a "Substitute Commercial Paper Dealer") selected by the Trustee
(who shall be under no liability for such selection) to provide such commercial
paper rate or rates not being supplied by any Commercial Paper Dealer or
Commercial Paper Dealers, as the case may be, or if the Trustee does not select
any such substitute Commercial Paper Dealer or Substitute Commercial Paper
Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers.
(b) If for any reason on any Auction Date the PARS Index shall not be
determined as hereinabove provided in this Section, the PARS Index shall be the
PARS Index for the Auction Period ending on such Auction Date.
(c) The determination of the PARS Index as provided herein shall be
conclusive and binding upon the Issuer, the Company, the Trustee, the
Broker-Dealers, the Auction Agent and the Owners and Beneficial Owners of the
PARS Rate Bonds.
SECTION 1.08. MISCELLANEOUS PROVISIONS REGARDING AUCTIONS.
(a) In this Exhibit B, each reference to the purchase, sale or holding
of "PARS Rate Bonds" shall refer to beneficial interests in the PARS Rate Bonds,
unless the context clearly requires otherwise.
(b) During a PARS Rate Period, the provisions of Section 1.02 hereof
and this Exhibit B may be amended pursuant to Section 12.02 of the Indenture by
obtaining the consent of the Provider of the Credit Facility and the owners of
all Outstanding PARS Rate Bonds bearing interest at the PARS Rates as follows.
If on the first Auction Date occurring at least 20 days after the date on which
the Trustee mailed notice of such proposed amendment to the Owners of the
Outstanding PARS as required by Section 12.02, (i) Sufficient Clearing Bids have
been received or all of the PARS are subject to Submitted Hold Orders, and (ii)
there is delivered to the Issuer and the Trustee a Favorable Opinion of Bond
Counsel with respect to such amendment, the proposed amendment shall be deemed
to have been consented to by the owners of all Outstanding PARS.
(c) During a PARS Rate Period, so long as the ownership of the PARS
Rate Bonds is maintained in book-entry form by the Securities Depository, an
Existing Owner or a beneficial owner may sell, transfer or otherwise dispose of
a the PARS Rate Bond only pursuant to a Bid or Sell Order in accordance with the
Auction Procedures or to or through a Broker-Dealer or to a Person that has
delivered a signed copy of a Master Purchaser's Letter to the Auction Agent,
provided that (i) in the case of all transfers other than pursuant to Auctions
such Existing Owner or its Broker-Dealer or its Agent Member advises the Auction
Agent of such transfer and (ii) a sale, transfer or other disposition of the
PARS Rate Bonds from a customer of a Broker-Dealer who is listed on the records
of that Broker-Dealer as the Owner of such PARS Rate Bonds to that Broker-Dealer
or another customer of that Broker-Dealer shall not be deemed to be a sale,
transfer or other disposition for purposes of this Section 1.08 if such
Broker-Dealer remains the Existing Owner of the PARS Rate Bonds so sold,
transferred or disposed of immediately after such sale, transfer or disposition.
B-11
<PAGE> 115
SECTION 1.09. CHANGES IN AUCTION PERIOD OR AUCTION DATE.
(a) Changes in Auction Period.
(i) During any PARS Rate Period, the Company, may, from time to
time on any Interest Payment Date, change the length of the Auction
Period with respect to the PARS Rate Bonds between daily, seven days, 28
days, 35 days and six months in order to accommodate economic and
financial factors that may affect or be relevant to the length of the
Auction Period and the interest rate borne by such PARS Rate Bonds. The
Company shall initiate the change in the length of the Auction Period by
giving written notice to the Issuer, the Trustee, the Auction Agent, the
Broker-Dealers, the Provider of the Credit Facility and the Securities
Depository that the Auction Period will change if the conditions
described herein are satisfied and the proposed effective date of the
change, at least 10 Business Days prior to the Auction Date for such
Auction Period.
(ii) Any such changed Auction Period shall be for a period of
one day, seven days, 28 days, 35 days or six months and shall be for all
of the PARS Rate Bonds in a PARS Rate Period.
(iii) The change in the length of the Auction Period shall not
be allowed unless Sufficient Clearing Bids existed at both the Auction
before the date on which the notice of the proposed change was given as
provided in this subsection (a) and the Auction immediately preceding
the proposed change.
(iv) The change in length of the Auction Period shall take
effect only if Sufficient Clearing Bids exist at the Auction on the
Auction Date for such first Auction Period. For purposes of the Auction
for such first Auction Period only, each Existing Owner shall be deemed
to have submitted Sell Orders with respect to all of its the PARS Rate
Bonds except to the extent such Existing Owner submits an Order with
respect to such Bonds. If the condition referred to in the first
sentence of this paragraph (iv) is not met, the Auction Rate for the
next Auction Period shall be the Maximum PARS Rate, and the Auction
Period shall be a seven-day Auction Period.
(v) On the conversion date for the PARS Rate Bonds selected for
conversion from one Auction Period to another, any PARS Rate Bonds which
are not the subject of a specific Hold Order or Bid will be deemed to be
subject to a Sell Order.
(b) Changes in Auction Date. During any PARS Rate Period, the Auction
Agent, with the written consent of the Issuer, may specify an earlier Auction
Date (but in no event more than five Business Days earlier) than the Auction
Date that would otherwise be determined in accordance with the definition of
"Auction Date" in order to conform with then current market practice with
respect to similar securities or to accommodate economic and financial factors
that may affect or be relevant to the day of the week constituting an Auction
Date and the interest rate borne on the PARS Rate Bonds. The Issuer shall not
consent to such change in the Auction Date unless it shall have received from
the Auction Agent not less than three days nor more than 20 days prior to the
effective date of such change a written request for consent together with a
B-12
<PAGE> 116
certificate demonstrating the need for change in reliance on such factors. The
Auction Agent shall provide notice of its determination to specify an earlier
Auction Date for an Auction Period by means of a written notice delivered at
least 45 days prior to the proposed changed Auction Date to the Trustee, the
Company, the Issuer, the Broker-Dealers and the Securities Depository.
(c) Changes Conditioned on Ratings. Notwithstanding anything herein to
the contrary, prior to any change in the duration of an Auction Period, the
Trustee shall receive written evidence from Moody's, if the Bonds are then rated
by Moody's, and from S&P, if the Bonds are then rated by S&P, in each case to
the effect that such rating agency has reviewed the proposed Change of Credit
Facility and that such Change of Credit Facility will not, by itself, result in
a reduction, suspension or withdrawal of its rating or ratings of the Bonds.
SECTION 1.10. AUCTION AGENT.
(a) The initial Auction Agent shall be IBJ Whitehall Bank & Trust
Company, New York, New York, or any successor appointed by the Trustee, at the
written direction of the Company, to perform the functions specified herein. The
Auction Agent shall designate its Principal Office and signify its acceptance of
the duties and obligations imposed upon it hereunder by a written instrument,
delivered to the Issuer, the Trustee, the Company and each Broker-Dealer which
will set forth such procedural and other matters relating to the implementation
of the Auction Procedures as shall be satisfactory to the Issuer and the
Trustee.
(b) Subject to any applicable governmental restrictions, the Auction
Agent may be or become the owner of or trade in the PARS Rate Bonds with the
same rights as if such entity were not the Auction Agent.
SECTION 1.11. QUALIFICATIONS OF AUCTION AGENT: RESIGNATION; REMOVAL. The
Auction Agent shall be (a) a bank or trust company organized under the laws of
the United States or any state or territory thereof having a combined capital
stock, surplus and undivided profits of at least $30,000,000, or (b) a member of
NASD having a capitalization of at least $30,000,000 and, in either case,
authorized by law to perform all of the duties imposed upon it by this Indenture
and a member of or a participant in, the Securities Depository. The Auction
Agent may at any time resign and be discharged of the duties and obligations
created by this Indenture by giving at least ninety (90) days notice to the
Issuer, the Company, the Trustee and the Provider. The Auction Agent may be
removed at any time by the Company by written notice, delivered to the Auction
Agent, the Company, the Trustee and the Provider. Upon any such resignation or
removal, the Trustee shall, at the direction of the Company, appoint a successor
Auction Agent meeting the requirements of this Section. In the event of the
resignation or removal of the Auction Agent, the Auction Agent shall pay over,
assign and deliver any moneys and the PARS Rate Bonds held by it in such
capacity to its successor. The Auction Agent shall continue to perform its
duties hereunder until its successor has been appointed by the Issuer. In the
event that the Auction Agent has not been compensated for its services, the
Auction Agent may resign by giving thirty (30) days notice to the Issuer, the
Company, the Trustee and the Provider even if a successor Auction Agent has not
been appointed.
B-13
<PAGE> 1
EXHIBIT 4(d)-2
CONFORMED COPY
================================================================================
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
(364 DAY)
among
AVISTA CORPORATION,
THE BANKS NAMED HEREIN,
TORONTO DOMINION (TEXAS), INC.,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and
THE BANK OF NEW YORK
----------------
Dated as of June 29, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Section Page
- ------- ------- ----
<S> <C> <C>
I. DEFINITIONS ............................................................................... 1
SECTION 1.01. Defined Terms ................................................... 1
SECTION 1.02. Terms Generally ................................................. 16
SECTION 1.03. Certain Date References ......................................... 17
II. THE CREDITS .............................................................................. 17
SECTION 2.01. Commitments ..................................................... 17
SECTION 2.02. Loans ........................................................... 18
SECTION 2.03. Notice of Revolving Borrowings .................................. 20
SECTION 2.04. Auction Bid Procedure ........................................... 21
SECTION 2.05. Notes; Repayment of Loans ....................................... 24
SECTION 2.06. Fees ............................................................ 24
SECTION 2.07. Interest on Loans ............................................... 25
SECTION 2.08. Default Interest ................................................ 26
SECTION 2.09. Alternate Rate of Interest ...................................... 26
SECTION 2.10. Termination, Reduction and Extension of Commitments ............. 27
SECTION 2.11. Prepayment ...................................................... 28
SECTION 2.12. Reserve Requirements; Change in Circumstances ................... 28
SECTION 2.13. Change in Legality .............................................. 30
SECTION 2.14. Indemnity ....................................................... 30
SECTION 2.15. Pro Rata Treatment .............................................. 31
SECTION 2.16. Sharing of Setoffs .............................................. 31
SECTION 2.17. Payments ........................................................ 32
SECTION 2.18. Taxes ........................................................... 33
SECTION 2.19. Termination or Assignment of Commitments Under Certain
Circumstances ................................................... 36
III. REPRESENTATIONS AND WARRANTIES .......................................................... 36
SECTION 3.01. Organization; Powers ............................................ 36
SECTION 3.02. Authorization ................................................... 37
SECTION 3.03. Enforceability .................................................. 37
SECTION 3.04. Governmental Approvals .......................................... 38
SECTION 3.05. Financial Statements ............................................ 38
SECTION 3.06. No Material Adverse Change ...................................... 38
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3.07. Litigation; Compliance with Laws ................................ 38
SECTION 3.08. Federal Reserve Regulations ..................................... 39
SECTION 3.09. Investment Company Act; Public Utility Holding Company Act ...... 39
SECTION 3.10. Use of Proceeds ................................................. 39
SECTION 3.11. No Material Misstatements ....................................... 39
SECTION 3.12. Employee Benefit Plans .......................................... 40
SECTION 3.13. Environmental and Safety Matters ................................ 40
SECTION 3.14. Significant Subsidiaries ........................................ 41
SECTION 3.15. Year 2000 Compliance ............................................ 41
IV. CONDITIONS OF LENDING .................................................................... 41
SECTION 4.01. All Borrowings .................................................. 41
SECTION 4.02. First Borrowing ................................................. 42
V. AFFIRMATIVE COVENANTS ..................................................................... 43
SECTION 5.01. Existence; Businesses and Properties ............................ 44
SECTION 5.02. Insurance ....................................................... 44
SECTION 5.03. Taxes and Obligations ........................................... 45
SECTION 5.04. Financial Statements, Reports, etc .............................. 45
SECTION 5.05. Litigation and Other Notices .................................... 46
SECTION 5.06. ERISA ........................................................... 47
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections ..................................................... 47
SECTION 5.08. Use of Proceeds ................................................. 48
VI. NEGATIVE COVENANTS ....................................................................... 48
SECTION 6.01. Liens ........................................................... 48
SECTION 6.02. Mergers, Consolidations and Acquisitions ........................ 52
SECTION 6.03. Disposition of Assets ........................................... 53
VII. EVENTS OF DEFAULT ....................................................................... 54
VIII. THE AGENT ............................................................................... 57
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
IX. MISCELLANEOUS ............................................................................ 60
SECTION 9.01. Notices ......................................................... 60
SECTION 9.02. Survival of Agreement ........................................... 61
SECTION 9.03. Binding Effect .................................................. 61
SECTION 9.04. Successors and Assigns .......................................... 61
SECTION 9.05. Expenses; Indemnity ............................................. 66
SECTION 9.06. Right of Setoff ................................................. 67
SECTION 9.07. Applicable Law .................................................. 67
SECTION 9.08. Waivers; Amendment .............................................. 67
SECTION 9.09. Interest Rate Limitation ........................................ 68
SECTION 9.10. Entire Agreement ................................................ 69
SECTION 9.11. Waiver of Jury Trial ............................................ 69
SECTION 9.12. Severability .................................................... 69
SECTION 9.13. Counterparts .................................................... 69
SECTION 9.14. Headings ........................................................ 70
SECTION 9.15. Jurisdiction; Consent to Service of Process ..................... 70
</TABLE>
References
Exhibit A Form of Note
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Administrative Questionnaire
Exhibit D Form of Opinion of Counsel for the Borrower
Schedule 2.01 Banks
Schedule 3.14 Significant Subsidiaries
iii
<PAGE> 5
AMENDMENT AND RESTATEMENT, dated as of June 29,
1999 of the REVOLVING CREDIT AGREEMENT dated as of June
30, 1998, among AVISTA CORPORATION, a Washington
corporation (herein called the "Borrower"), the banks
listed in Schedule 2.01 (the "Banks"), TORONTO DOMINION
(TEXAS), INC., as agent for the Banks (in such capacity,
the "Agent"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as syndication agent (the "Syndication
Agent") and THE BANK OF NEW YORK, as documentation agent
(the "Documentation Agent").
The Borrower has requested that the Banks extend credit to the
Borrower in order to enable the Borrower to borrow on a standby revolving credit
basis on and after the date hereof, at any time prior to the Expiration Date (as
herein defined) a principal amount not in excess of $135,000,000 at any time
outstanding (subject to a possible increase to $150,000,000, as provided in
Section 2.01(b) below). The proceeds of such borrowings are to be used for
general corporate purposes. In consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit C.
<PAGE> 6
"Affiliate" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.
"Agency Fees" shall have the meaning assigned to such term in
Section 2.06(c).
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the greater
of (a) the Prime Rate (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be) in effect on such
day and (b) the sum of (i) the Federal Funds Effective Rate in effect for such
day plus (ii) 1/2 of 1%. If for any reason the Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist.
"Applicable Percentage" shall mean, with respect to any Bank,
the percentage of the total Commitments represented by such Bank's Commitment.
If the Commitments have terminated or expired, the Applicable Percentage shall
be determined based upon the Commitments most recently in effect, giving effect
to any assignments.
"Applicable Rate" shall mean on any date, with respect to any
ABR Loan or Eurodollar Revolving Loan, or with respect to the Commitment Fees
payable hereunder, as the case may be, the applicable rate per annum set forth
below under the caption "ABR Spread," "Eurodollar Spread" or "Commitment Fee",
as the case may be, based upon the Ratings:
<TABLE>
<CAPTION>
Eurodollar Commitment
Ratings ABR Spread Spread Fee
------- ---------- ------ ---
<S> <C> <C> <C>
Level 1 0.00% .11%
A- or higher by S&P;
and A3 or higher by
Moody's
Level 2 0.00% .625% .15%
</TABLE>
2
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
BBB+ by S&P; and Baa1
by Moody's
Level 3 0.00% .75% .20%
BBB by S&P; and Baa2
by Moody's
Level 4 1.00% .25%
BBB- by S&P; and Baa3
by Moody's
Level 5 .50% 1.50% .375%
Lower than BBB- by
S&P; and lower than
Baa3 by Moody's
</TABLE>
For purposes of the foregoing, (i) if the Ratings in effect on any date fall in
different Levels, the Applicable Rate shall be determined on such date by
reference to the superior (numerically lower) Level, unless the Ratings differ
by more than one Level, in which case the applicable Level shall be the Level
next below the superior (numerically lower) of the two; (ii) if either Moody's
or S&P shall not have in effect a Rating (other than because such rating agency
shall no longer be in the business of rating corporate debt obligations), then
such rating agency will be deemed to have established a Rating in Level 5; and
(iii) if any rating established or deemed to have been established by Moody's or
S&P shall be changed (other than as a result of a change in the rating system of
either Moody's or S&P), such change shall be effective as of the day after the
date on which such change is first announced by the rating agency making such
change. Each change in the Applicable Rate shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of either Moody's or S&P shall change, or if either such rating agency
shall cease to be in the business of rating corporate debt obligations, the
Borrower and the Banks shall negotiate in good faith to amend the references to
specific ratings in this definition to reflect such changed rating system or the
non- availability of ratings from such rating agency.
3
<PAGE> 8
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Bank and an assignee, and accepted by the Agent and
the Borrower, in the form of Exhibit B or such other form as shall be approved
by the Agent.
"Auction Bid" shall mean an offer by a Bank to make an Auction
Loan in accordance with Section 2.04.
"Auction Bid Rate" shall mean, with respect to any Auction Bid,
the Margin for Eurodollar Auction Loans, the Fixed Rate for Fixed Rate Loans or
the Delayed Fixed Rate for Delayed Fixed Rate Loans, as applicable, offered by
the Bank in making such Auction Bid.
"Auction Bid Request" shall mean a request by the Borrower for
Auction Bids in accordance with Section 2.04.
"Auction Facility" shall mean the facility described in Section
2.04.
"Auction Loan" shall mean a Loan made pursuant to Section 2.04.
"Availability Period" shall mean the period from and including
the Effective Date to but excluding the earlier of the Expiration Date and the
date of the termination of the Commitments.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrowing" shall mean (a) a group of Revolving Loans of the
same Type, made, converted or continued on the same date and, in the case of
Eurodollar Loans, as to which a single Interest Period is in effect or (b) an
Auction Loan or group of Auction Loans of the same Type made on the same date
and as to which a single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City.
"Capital Lease Obligations" of any person shall mean the
obligations of such person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance
4
<PAGE> 9
sheet of such person under GAAP and, for the purposes of this Agreement, the
amount of such obligations at any time shall be the capitalized amount thereof
at such time determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof),
of shares representing more than 30% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; or (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who were neither (i) nominated by the board
of directors of the Borrower nor (ii) appointed by directors so nominated;
provided, that no event described in clause (a) or clause (b) shall constitute a
"Change in Control" if the senior secured long-term debt rating of the Borrower
shall be at least BBB or higher by S&P and Baa2 or higher by Moody's immediately
after giving effect to the transaction that would otherwise constitute a Change
in Control.
"Class", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans or Auction Loans.
"Closing Date" shall mean the date of this Agreement. "Code"
shall mean the Internal Revenue Code of 1986, as the same may be amended from
time to time.
"Commitment" shall mean, with respect to each Bank, the
commitment of such Bank to make Revolving Loans hereunder as set forth in
Section 2.01, as the same may be reduced from time to time pursuant to Section
2.10.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.06(a).
"Control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
5
<PAGE> 10
"Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.
"Delayed Fixed Rate" shall mean, with respect to any Auction
Loan (other than a Eurodollar Auction Loan or a Fixed Rate Loan), the fixed rate
of interest per annum specified by the Bank in making such Auction Loan in its
related Auction Bid.
"Delayed Fixed Rate Loan" shall mean an Auction Loan bearing
interest at a Delayed Fixed Rate for which an Auction Bid Request is made two
Business Days before the proposed date of borrowing.
"dollars" or "$" shall mean lawful money of the United States of
America.
"Environmental Law" shall mean any and all applicable present
and future treaties, laws, regulations, enforceable requirements, binding
determinations, orders, decrees, judgments, injunctions, permits, approvals,
authorizations, licenses, permissions, notices or binding agreements issued,
promulgated or entered by any Governmental Authority, relating to the
environment, preservation or reclamation of natural resources, or to the
management, release or threatened release of contaminants or noxious odor,
including the Hazardous Materials Transportation Act, Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, Clean Air Act of 1970, as
amended, Toxic Substances Control Act of 1976, Occupational Safety and Health
Act of 1970, as amended, Emergency Planning and Community Right-to-Know Act of
1986, Safe Drinking Water Act of 1974, as amended, and any similar or
implementing state law, and all amendments or regulations promulgated
thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that is a member of a group of which the Borrower is a member
and which is treated as a single employer under Section 414 of the Code.
6
<PAGE> 11
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Eurodollar Rate.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate in accordance with the provisions
of Article II.
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/100 of 1%) equal to the product of (i) the arithmetic
average of rates at which dollar deposits approximately equal to the principal
amount of the portion of such Eurodollar Loan to be made by The Toronto-Dominion
Bank, and for a maturity equal to the applicable Interest Period, are offered to
The Toronto-Dominion Bank for Eurodollars at approximately 10:00 a.m., New York
City time, two Business Days prior to the commencement of such Interest Period
and (ii) Statutory Reserves. In the event that such rate is not available at
such time for any reason, then the "Eurodollar Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Agent in immediately available
funds in the London interbank market at approximately 10:00 a.m., New York City
time, two Business Days prior to the commencement of such Interest Period.
"Event of Default" shall have the meaning assigned to such term
in Article VII.
"Expiration Date" shall mean June 27, 2000.
"Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
reported on such Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so reported for any day that is a Business Day, the average of
the quotations for the day of such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
7
<PAGE> 12
"Fees" shall mean the Commitment Fee, the Utilization Fee and
the Agency Fees.
"Financial Officer" of any corporation shall mean the chief
financial officer or Treasurer of such corporation.
"First Mortgage" shall mean the Mortgage and Deed of Trust dated
as of June 1, 1939, made by the Borrower in favor of Citibank, N.A., as
successor Trustee, as the same has been amended, modified or supplemented to
date and as the same may be further amended, modified or supplemented from time
to time hereafter.
"Fixed Rate" shall mean, with respect to any Auction Loan (other
than a Eurodollar Auction Loan or a Delayed Fixed Rate Loan), the fixed rate of
interest per annum specified by the Bank making such Auction Loan in its related
Auction Bid.
"Fixed Rate Loan" shall mean an Auction Loan bearing interest at
a Fixed Rate for which an Auction Bid Request is made on the day of the proposed
borrowing.
"GAAP" shall mean generally accepted accounting principles,
applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" of or by any person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness; provided, however, that
the term Guarantee shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
8
<PAGE> 13
"Indebtedness" of any person shall mean, without duplication,
(a) all obligations of such person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such person evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such
person upon which interest charges are customarily paid, (d) all obligations of
such person under conditional sale or other title retention agreements relating
to property or assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of property or services
(other than trade payables incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such person, whether or not the obligations
secured thereby have been assumed, but limited, if such obligations are without
recourse to such person, to the lesser of the principal amount of such
Indebtedness or the fair market value of such property, (g) all Guarantees by
such person of Indebtedness of others, (h) all Capital Lease Obligations of such
person, (i) all obligations of such person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements (the amount of any such obligation to be the
amount that would be payable upon the acceleration, termination or liquidation
thereof) and (j) all obligations of such person as an account party in respect
of letters of credit and bankers' acceptances. The Indebtedness of any person
shall include the Indebtedness of any partnership in which such person is a
general partner.
"Interest Payment Date" shall mean, with respect to any Loan,
the last day of the Interest Period applicable to the Borrowing of which such
Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each day that would have been an
Interest Payment Date had successive Interest Periods of three months' duration
been applicable to such Borrowing and, in addition, the date of any refinancing
or conversion of such Borrowing with or to a Borrowing of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter,
as the Borrower may elect, (b) as to any
9
<PAGE> 14
ABR Borrowing, the period commencing on the date of such Borrowing and ending on
the earliest of (i) the next succeeding March 31, June 30, September 30 or
December 31, (ii) the Expiration Date, and (iii) the date such Borrowing shall
be repaid or prepaid in accordance with Section 2.11 and (c) with respect to any
Fixed Rate Borrowing or Delayed Fixed Rate Borrowing, the period (which shall
not be less than 7 days or more than 360 days) commencing on the date of such
Borrowing and ending on the date specified in the applicable Auction Bid
Request; provided, however, that if any Interest Period would end on a day other
than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Loans" shall mean loans made by the Banks to the Borrower
pursuant to this Agreement.
"Loan Documents" shall mean this Agreement and the Notes.
"Margin" shall mean, with respect to any Auction Loan bearing
interest at a rate based on the Eurodollar Rate, the marginal rate of interest,
if any, to be added to or subtracted from the Eurodollar Rate to determine the
rate of interest applicable to such Loan, as specified by the Bank making such
Loan in its related Auction Bid.
"Margin Stock" shall have the meaning given such term under
Regulation U.
"Material Adverse Effect" shall mean an effect on the business,
assets, operations or financial condition of the Borrower and the Subsidiaries
taken as a whole which could reasonably be expected to have a material adverse
effect on the creditworthiness of the Borrower.
10
<PAGE> 15
"Moody's" shall mean Moody's Investors Service, Inc.
"Notes" shall mean promissory notes of the Borrower,
substantially in the form of Exhibit A, evidencing Loans.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"person" shall mean a corporation, association, partnership,
trust, organization, business, individual or government or governmental agency
or political subdivision thereof.
"Plan" shall mean any pension plan subject to the provisions of
Title IV of ERISA or Section 412 or the Code which is maintained for employees
of the Borrower or any ERISA Affiliate.
"Pre-Restatement Credit Agreement" shall mean the Revolving
Credit Agreement (364 day) among The Washington Water Power Company, the banks
named therein, Toronto Dominion (Texas), Inc., Bank of America National Trust
and Savings Association and the Bank of the New York, dated as of June 30, 1998,
as in effect prior to its amendment and restatement hereby.
"Prime Rate" shall mean the rate of interest per annum adopted
from time to time by The Toronto-Dominion Bank at its principal office in New
York City as its prime rate. For purposes of this Agreement, any change in the
Alternate Base Rate due to a change in the Prime Rate shall be effective on the
date such change in the Prime Rate is adopted.
"Ratings" shall refer to the ratings of Moody's and S&P
applicable to the Borrower's senior secured long-term debt obligations.
"Register" shall have the meaning given to such term in Section
9.04(d).
"Regulation D" shall mean Regulation D of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof and shall include any successor or other regulation or official
interpretation of the Board relating to reserve requirements applicable to
member banks of the Federal Reserve System.
11
<PAGE> 16
"Regulation U" shall mean Regulation U of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Parties" shall mean, with respect to any specified
Person, such Person's Affiliates and the respective directors, officers,
employees, agents and advisors of such Person and such Person's Affiliates.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).
"Required Banks" shall mean, at any time, Banks having Revolving
Credit Exposures representing at least 66-2/3% of the aggregate Revolving
Exposures or, if there shall be no Revolving Credit Exposure, Banks having
Commitments representing at least 66-2/3% of the aggregate Commitments. For
purposes of declaring the Loans to be due and payable pursuant to Article VII,
and for all purposes after the Loans become due and payable pursuant to Article
VII or the Commitments expire or terminate, the outstanding Auction Loans of the
Banks shall be included in their respective Revolving Credit Exposure in
determining the Required Banks.
"Responsible Officer" of any corporation shall mean any
executive officer or Financial Officer of such corporation and any other officer
or similar official thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement.
"Revolving Credit Exposure" shall mean, with respect to any Bank
at any time, the sum of the outstanding principal amount of such Bank's
Revolving Loans at such time.
"Revolving Loan" shall mean a Loan made pursuant to Section
2.03.
12
<PAGE> 17
"S&P" shall mean Standard & Poor's Ratings Services.
"Significant Subsidiary" shall mean a Subsidiary meeting any one
of the following conditions: (a) the investments in and advances to such
Subsidiary by the Borrower and the other Subsidiaries, if any, as at the end of
the Borrower's latest fiscal quarter exceeded 10% of the total assets of the
Borrower and its Subsidiaries at such date, computed and consolidated in
accordance with GAAP; or (b) the Borrower's and the other Subsidiaries'
proportionate share of the total assets (after intercompany eliminations) of
such Subsidiary as at the end of the Borrower's latest fiscal quarter exceeded
10% of the total assets of the Borrower and its Subsidiaries at such date,
computed and consolidated in accordance with GAAP; or (c) the equity in the
income from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of such Subsidiary for the
period of four consecutive fiscal quarters ending at the end of the Borrower's
latest fiscal quarter exceeded 10% of such income of the Borrower and its
Subsidiaries for such period, computed and consolidated in accordance with GAAP;
or (d) such Subsidiary is the parent of one or more Subsidiaries and, together
with such Subsidiaries would, if considered in the aggregate, constitute a
Significant Subsidiary.
"Statutory Reserves" shall mean a fraction (ex- pressed as a
decimal) the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency or supplemental
reserves) with respect to Eurodollar funding (including with respect to
Eurocurrency Liabilities as defined in Regulation D) in an amount approximately
equal to the respective Eurodollar Loan and with a term approximately equal to
the Interest Period for such Eurodollar Loan expressed as a decimal established
by the Board or by any other United States banking authority to which the Agent
is subject. Such reserve percentages shall include, without limitation, those
imposed under Regulation D. Statutory Reserves shall be adjusted automatically
on and as of the effective date of any change in any reserve percentage.
"subsidiary" shall mean, for any person (the "Parent"), any
corporation, partnership or other entity of which securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar
13
<PAGE> 18
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) are at
the time directly or indirectly owned or controlled by the Parent or one or more
of its subsidiaries or by the Parent and one or more of its subsidiaries.
"Subsidiary" shall mean a subsidiary of the Borrower.
A "Subsidiary Event" shall mean the following; provided,
however, that a Subsidiary Event shall not be deemed to have occurred if the
Banks have previously consented thereto:
(a) any Significant Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in Section 5.01(a) as if
such section applied to such Significant Subsidiary, with all references
therein to the Borrower being deemed references to such Significant
Subsidiary;
(b) any Significant Subsidiary shall fail to observe or perform
any covenant, condition or agreement in Sections 5.01(b), 5.02, 5.03 or
5.07 as if such sections applied to such Significant Subsidiary, with
all references therein to the Borrower being deemed references to such
Significant Subsidiary, and such default shall continue unremedied for a
period of 30 days after notice thereof from the Agent or any Bank to the
Borrower;
(c) any Significant Subsidiary shall:
(i) merge into or consolidate with any other person, or
permit any other person to merge into or consolidate with it, or
purchase, lease or otherwise acquire (in one transaction or a
series of transactions) all or substantially all of the assets
of any other person (whether directly by purchase, lease or
other acquisition of all or substantially all of the assets of
such person or indirectly by purchase or other acquisition of
all or substantially all of the capital stock of such other
person) other than acquisitions in the ordinary course of such
Significant Subsidiary's business, except that if, at the time
thereof and immediately after giving effect thereto no Event
14
<PAGE> 19
of Default or Default shall have occurred and be continuing,
then (A) such Significant Subsidiary may (i) merge with or into,
or consolidate with, any Subsidiary or (ii) merge with or into,
or consolidate with, the Borrower in a transaction in which the
Borrower is the surviving corporation, (B) such Significant
Subsidiary may purchase, lease or otherwise acquire from any
Subsidiary all or substantially all of its assets and may
purchase or otherwise acquire all or substantially all of the
capital stock of any person who immediately thereafter is a
Subsidiary, (C) such Significant Subsidiary may merge with or
into, or consolidate with, any other person so long as the
assets of such person at the time of such consolidation or
merger, do not exceed 10% of the total assets of the Borrower
and its Subsidiaries, after giving effect to such merger or
consolidation, computed and consolidated in accordance with GAAP
consistently applied, and (D) such Significant Subsidiary may
purchase, lease or otherwise acquire any or all of the assets of
any other person (and may purchase or otherwise acquire the
capital stock of any other person) so long as the assets being
purchased, leased or acquired (or the Significant Subsidiary's
proportionate share of the assets of the person whose capital
stock is being acquired) do not exceed 10% of the total assets
of the Borrower and its Subsidiaries, after giving effect to
such acquisition, computed and consolidated in accordance with
GAAP consistently applied, or
(ii) sell, lease, transfer, assign or other wise dispose
of (in one transaction or in a series of transactions), in any
fiscal year, assets (whether now owned or hereafter acquired)
which, together with the amount of all sales, leases, transfers,
assignments or dispositions by the Borrower permitted under
Section 6.03 (other than sales, leases, transfers, assignments
or other dispositions permitted under clauses (i) through (iv)
of such Section), are in excess of 10% of the assets of the
Borrower and its Subsidiaries as of the end of the most recent
fiscal year, computed and consolidated in accordance with GAAP
consistently applied, except (A) a Significant Subsidiary may
sell, lease, transfer, assign or otherwise dispose of, in any
fiscal year, assets in the ordinary course of business which,
together
15
<PAGE> 20
with the amount of all sales, leases, transfers, assignments or
dispositions in the ordinary course permitted under Section
6.03(i), do not exceed 5% of the assets of the Borrower and its
Subsidiaries as of the end of the most recent fiscal year,
computed and consolidated in accordance with GAAP consistently
applied, (B) to the extent permitted in clause (c)(i) above and
(C) any Significant Subsidiary may sell, lease, transfer, assign
or otherwise dispose of, or create, incur, assume or permit to
exist Liens on, receivables and related properties or interests
therein;
provided, however, that, notwithstanding anything in this clause (c) to the
contrary, a Subsidiary Event shall not be deemed to have occurred and shall not
constitute an Event of Default under paragraph (k) of Article VII if, after
giving effect to the consummation of any transaction contemplated by clause
(c)(i) or (c)(ii) hereof, such Significant Subsidiary shall have or shall be
deemed to have a ratio of total long-term Indebtedness to total stockholders'
equity equal to or less than 1.5 to 1.0.
"Transactions" shall have the meaning assigned to such term in
Section 3.02.
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall mean,
in the case of a Revolving Loan or Borrowing, the Eurodollar Rate and the
Alternate Base Rate or, in the case of an Auction Loan or Borrowing, the
Eurodollar Rate, Fixed Rate or Delayed Fixed Rate.
"Utilization Fee", shall have the meaning assigned to such term
in Section 2.06.
SECTION 1.02. Terms Generally. The definitions in Section 1.01
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
16
<PAGE> 21
be construed in accordance with GAAP, as in effect from time to time; provided,
however, that, for purposes of determining compliance with any covenant set
forth in Article VI, such terms shall be construed in accordance with GAAP as in
effect on the date of this Agreement applied on a basis consistent with the
application used in preparing the Borrower's audited financial statements
referred to in Section 3.05.
SECTION 1.03. Certain Date References. All references herein to
"the date hereof" and "the date of this Agreement" shall be deemed references to
the date of this Amendment and Restatement.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
each Bank agrees, severally and not jointly, to make Revolving Loans to the
Borrower, at any time and from time to time on or after the date of this
Agreement, and until the earlier of the Expiration Date and the termination of
the Commitment of such Bank in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding that will not result in (i) the
Revolving Credit Exposure of any Bank exceeding the Commitment set forth
opposite its name in Schedule 2.01 hereto, as the same may be reduced from time
to time pursuant to Section 2.10 or (ii) the sum of the total Revolving Credit
Exposure plus the aggregate principal amount of outstanding Auction Loans
exceeding the total Commitments.
Within the limits set forth in the preceding sentence, the
Borrower may borrow, pay or prepay and reborrow Revolving Loans on or after the
date of this Agreement and prior to the Expiration Date, subject to the terms,
conditions and limitations set forth herein.
(b) On not more than two occasions the Borrower may by written
notice to the Administrative Agent cause New Banks (as defined below) to assume
Commitments by an aggregate amount not in excess of $15,000,000 in the aggregate
(the "New Commitments"). Each such notice shall specify (i) the date (each a
"Transition Date") on which the Borrower proposes that New Commitments shall
become effective, which shall be not less than ten Business Days after the date
on which such notice is delivered to the Administrative Agent and (ii) the
identity of each person
17
<PAGE> 22
that has agreed to assume any portion of such New Commitments (each a "New
Bank") and the amount of such New Commitments allocated to such New Bank.
Subject only to there not existing any Default or Event of Default on such
Transition Date before or after giving effect to such New Commitments, such New
Commitments shall become effective as of such Transition Date and, if any
Revolving Loans are outstanding on such Transition Date, each Bank shall assign
to the New Banks, and each of the New Banks shall purchase from the Banks, at
the principal amount thereof, such interests in the Revolving Loans outstanding
on such Transition Date as shall be necessary in order that, after giving effect
to all such assignments and purchases, such Revolving Loans will be held by
Banks and New Banks ratably in accordance with their Commitments after giving
effect to the addition of such New Commitments to the Commitments. The
Administrative Agent shall notify the Banks promptly upon receipt of the
Borrower's notice thereof of each Transition Date and in respect thereof the New
Commitments, the New Banks and, in the case of each notice to any Bank, the
respective interests in such Bank's Revolving Loans subject to the assignments
contemplated by the immediately preceding sentence. In the event that any Bank
shall incur any breakage cost as a result of making any such assignment, or that
any New Bank shall incur any reverse breakage cost as a result of taking any
such assignment, the Borrower shall indemnify it for such cost, calculated as
contemplated by Section 2.14 in the case of breakage costs and calculated based
upon the difference between the Eurodollar Rate applicable to each assigned
Revolving Loan and the cost to the New Bank of funding its assigned interests in
the case of reverse breakage costs. It is expressly understood that no Bank
shall have any obligation to agree to an increase in the amount of the
Commitment pursuant to this Section.
SECTION 2.02. Loans. (a) Each Revolving Loan shall be made as
part of a Borrowing consisting of Revolving Loans made by the Banks ratably in
accordance with their Commitments. Each Auction Loan shall be made in accordance
with the procedures set forth in Section 2.04. The failure of any Bank to make
any Loan required to be made hereunder shall not in itself relieve any other
Bank of its obligation to lend hereunder (it being understood, however, that no
Bank shall be responsible for the failure of any other Bank to make any Loan
required to be made by such other Bank). The Loans comprising each Borrowing
shall be in an aggregate principal amount which is an integral multiple of
$1,000,000.
18
<PAGE> 23
(b) Subject to Section 2.09, (i) each Revolving Borrowing shall
be comprised entirely of ABR Loans or Eurodollar Loans, as the Borrower may
request pursuant to Section 2.03, and (ii) each Auction Borrowing shall be
comprised entirely of Eurodollar Loans, Fixed Rate Loans or Delayed Fixed Rate
Loans as the Borrower may request in accordance with Section 2.04. Each Bank may
at its option fulfill its Commitment with respect to any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Bank to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement and the applicable Note. Borrowings of more than one Type or Class may
be outstanding at the same time; provided, however, that the Borrower shall not
be entitled to request any Borrowing which, if made, would result in an
aggregate of more than five separate Eurodollar Loans of any Bank being
outstanding hereunder at any one time. For purposes of the foregoing, Loans
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Loans.
(c) Subject to paragraph (e) below, each Bank shall make a
Revolving Loan in the amount of its pro rata portion, as determined under
Section 2.15, or, if an Auction Loan, in the relevant amount as determined under
Section 2.04, of each Borrowing hereunder on the proposed date thereof by wire
transfer of immediately available funds to the Agent in Houston, Texas, not
later than 2:00 p.m., New York City time, and the Agent shall by 3:00 p.m., New
York City time, make available to the Borrower in immediately available funds
the amounts so received (i) by wire transfer for credit to the account of the
Borrower with Seattle First National Bank, Account Number 13972-203; ABA #
12500002-4, or (ii) as otherwise specified by the Borrower in its notice of
Borrowing or, if a Borrowing shall not occur on such date because any condition
precedent herein specified shall not have been met, return the amounts so
received to the respective Banks. Unless the Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Agent such Bank's portion of such Borrowing, the Agent may
assume that such Bank has made such portion available to the Agent on the date
of such Borrowing in accordance with this paragraph (c) and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have made
such portion available to the Agent, such Bank and the Borrower severally agree
to repay to the Agent forthwith on demand such corresponding amount together
with interest
19
<PAGE> 24
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent at (i) in the case of
the Borrower the interest rate applicable at the time to the Loans comprising
such Borrowing and (ii) in the case of such Bank, the Federal Funds Effective
Rate. If such Bank shall repay to the Agent such corresponding amount, such
amount shall constitute such Bank's Loan as part of such Borrowing for purposes
of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Expiration Date.
(e) The Borrower may refinance all or any part of any Borrowing
with a Borrowing of the same or a different Type or Class, subject to the
conditions and limitations set forth in this Agreement. Any Borrowing or part
thereof so refinanced shall be deemed to be repaid or prepaid in accordance with
Section 2.05 or 2.11, as applicable, with the proceeds of a new Borrowing, and
the proceeds of the new Borrowing, to the extent they do not exceed the
principal amount of the Borrowing being refinanced, shall not be paid by the
Banks to the Agent or by the Agent to the Borrower pursuant to paragraph (c)
above.
SECTION 2.03. Notice of Revolving Borrowings. To request a
Revolving Borrowing, the Borrower shall give the Agent written or telecopy
notice (or telephone notice promptly confirmed in writing or by telecopy) (a) in
the case of a Eurodollar Borrowing, not later than 10:00 a.m., New York City
time, three Business Days before a proposed borrowing and (b) in the case of an
ABR Borrowing, not later than 12:00 (noon), New York City time, the day of a
proposed borrowing. Such notice shall be irrevocable and shall in each case
refer to this Agreement and specify (i) whether the Borrowing then being
requested is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of
such Borrowing (which shall be a Business Day) and the amount thereof; and (iii)
if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with
respect thereto. If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. If the Borrower shall not have given notice in
accordance with this Section 2.03 of its election to refinance a Borrowing prior
to the end of
20
<PAGE> 25
the Interest Period in effect for such Borrowing, then the Borrower shall
(unless such Borrowing is repaid at the end of such Interest Period) be deemed
to have given notice of an election to refinance such Borrowing with an ABR
Borrowing. The Agent shall promptly advise the Banks of any notice given
pursuant to this Section 2.03 and of each Bank's portion of the requested
Borrowing.
SECTION 2.04. Auction Bid Procedure. (a) Subject to the terms
and conditions set forth herein, from time to time during the Availability
Period the Borrower may request Auction Bids and may (but shall not have any
obligation to) accept Auction Bids and borrow Auction Loans; provided that the
sum of the total Revolving Credit Exposure plus the aggregate principal amount
of outstanding Auction Loans at any time shall not exceed the total Commitments.
To request Auction Bids, the Borrower shall notify the Agent of such request by
telephone, in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New
York City time, four Business Days before the date of the proposed Borrowing, in
the case of a Fixed Rate Borrowing, not later than 1:00 p.m., New York City
time, one Business Day before the date of the proposed Borrowing, or, in the
case of a Delayed Fixed Rate Borrowing, not later than 2:00 p.m., New York City
time, two Business Days before the date for the proposed Borrowing; provided
that the Borrower may submit up to (but not more than) (i) 1 Eurodollar Auction
Bid Request and (ii) 1 Fixed Rate Auction Bid Request or 1 Delayed Fixed Rate
Auction Bid Request on the same day. Each such telephonic Auction Bid Request
shall be confirmed promptly by hand delivery or telecopy to the Agent of a
written Auction Bid Request in a form approved by the Agent and signed by the
Borrower. Each such telephonic and written Auction Bid Request shall specify the
following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be a Eurodollar Borrowing, a
Fixed Rate Borrowing, or a Delayed Fixed Rate Borrowing;
(iv) the Interest Period (or Interest Periods) to be applicable
to such Borrowing, which shall be a
21
<PAGE> 26
period contemplated by the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.02.
(b) Following receipt of an Auction Bid Request in accordance
with this Section, the Agent shall notify the Banks of the details thereof by
telecopy, inviting the Banks to submit Auction Bids in the case of a Eurodollar
Auction Bid Request, no later than 2:00 p.m., New York City time, four Business
Days before the proposed date of the Borrowing, in the case of a Fixed Rate
Auction Bid Request, no later than 2:00 p.m., one Business Day before the
proposed date of the Borrowing, and, in the case of a Delayed Fixed Rate Bid
Request, not later than 3:00 p.m., New York City time, two Business Days before
the proposed date of the Borrowing.
(c) Each Bank may (but shall not have any obligation to) make
one or more Auction Bids to the Borrower in response to an Auction Bid Request.
Each Auction Bid by a Bank must be in a form approved by the Agent and must be
received by the Agent by telecopy, in the case of a Eurodollar Auction
Borrowing, not later than 12:00 (noon), New York City time, three Business Days
before the proposed date of such Auction Borrowing, in the case of a Fixed Rate
Borrowing, not later than 10:30 a.m., New York City time, on the proposed date
of such Auction Borrowing, and, in the case of a Delayed Fixed Rate Bid, not
later than 12:00 (noon), New York City time, one Business Day before the
proposed date of such Auction Borrowing. Auction Bids that do not conform
substantially to the form approved by the Agent may be rejected by the Agent,
and the Agent shall notify the applicable Bank as promptly as practicable. Each
Auction Bid shall specify (i) the principal amount (which shall be an integral
multiple of $1,000,000 and which may equal the entire principal amount of the
Auction Borrowing requested by the Borrower) of the Auction Loan or Loans that
the Bank is willing to make, (ii) the Auction Bid Rate or Rates at which the
Bank is prepared to make such Loan or Loans (expressed as a percentage rate per
annum in the form of a decimal to no more than four decimal places) and (iii)
the Interest Period applicable to each such Loan and the last day thereof in
accordance with the Auction Bid Request.
(d) The Agent shall promptly notify the Borrower by telecopy of
the Auction Bid Rate and the principal amount
22
<PAGE> 27
specified in each Auction Bid and the identity of the Bank that shall have made
such Auction Bid.
(e) Subject only to the provisions of this paragraph, the
Borrower may accept or reject any Auction Bid. The Borrower shall notify the
Agent by telephone, confirmed by telecopy in a form approved by the Agent,
whether and to what extent it has decided to accept or reject each Auction Bid,
in the case of a Eurodollar Auction Borrowing, not later than 2:00 p.m., New
York City time, three Business Days before the date of the proposed Auction
Borrowing, in the case of a Fixed Rate Borrowing, not later than 11:30 a.m., New
York City time, on the proposed date of the Auction Borrowing, and, in the case
of a Delayed Fixed Rate Borrowing, not later than 1:00 p.m., New York City time,
one Business day before the date of the proposed Auction Borrowing; provided
that (i) the failure of the Borrower to give such notice shall be deemed to be a
rejection of each Auction Bid, (ii) the Borrower shall not accept an Auction Bid
made at a particular Auction Bid Rate if the Borrower rejects an Auction Bid
made at a lower Auction Bid Rate, (iii) the aggregate amount of the Auction Bids
accepted by the Borrower shall not exceed the aggregate amount of the requested
Auction Borrowing specified in the related Auction Bid Request, (iv) to the
extent necessary to comply with clause (iii) above, the Borrower may accept
Auction Bids at the same Auction Bid Rate in part, which acceptance, in the case
of multiple Auction Bids at such Auction Bid Rate, shall be made pro rata in
accordance with the amount of each such Auction Bid, and (v) except pursuant to
clause (iv) above, no Auction Bid shall be accepted for an Auction Loan unless
such Auction Loan is in an integral multiple of $1,000,000. A notice given by
the Borrower pursuant to this paragraph shall be irrevocable.
(f) The Agent shall notify each bidding Bank by telephone and
telecopy whether or not its Auction Bid has been accepted (and, if so, the
amount and Auction Bid Rate so accepted) in the case of Eurodollar Auction
Loans, by 3:00 p.m., New York City time, three Business Days before the
borrowing date, in the case of Fixed Rate Loans, by 12:00 (noon), New York City
time, on the borrowing date, and, in the case of Delayed Fixed Rate Loans, by
3:00 p.m., New York City time, one Business Day before the Borrowing Date. Each
successful bidder will thereupon become bound, subject to the terms and
conditions hereof, to make the Auction Loan in respect of which its Auction Bid
has been accepted.
23
<PAGE> 28
(g) If the Agent shall elect to submit an Auction Bid in its
capacity as a Bank, it shall submit such Auction Bid directly to the Borrower at
least one quarter of an hour earlier than the time by which the other Banks are
required to submit their Auction Bids to the Agent pursuant to paragraph (b) of
this Section.
SECTION 2.05. Notes; Repayment of Loans. The Loans made by each
Bank shall be evidenced by a Note, duly executed on behalf of the Borrower,
dated the date of this Agreement, in substantially the form attached hereto as
Exhibit A, with the blanks appropriately filled, payable to the order of such
Bank in a principal amount equal to such Bank's Commitment. The outstanding
principal balance of each Revolving Loan and Auction Loan, as evidenced by such
a Note, shall be payable on the last day of the Interest Period applicable to
such Loan and on the Expiration Date. Each Note shall bear interest from the
date of the first borrowing hereunder on the outstanding principal balance
thereof as set forth in Section 2.07. Each Bank shall, and is hereby authorized
by the Borrower to, endorse on the schedule attached to each Note delivered to
such Bank (or on a continuation of such schedule attached to such Note and made
a part thereof), or otherwise to record in such Bank's internal records, an
appropriate notation evidencing the date and amount of each Loan from such Bank,
each payment and prepayment of principal of any such Loan, each payment of
interest on any such Loan and the other information provided for on such
schedule; provided, however, that any such recordation shall be conclusive
absent manifest error and the failure of any Bank to make such a notation or any
error therein shall not affect the obligation of the Borrower to repay the Loans
made by such Bank in accordance with the terms of this Agreement and the
applicable Notes.
SECTION 2.06. Fees. (a) The Borrower agrees to pay to each Bank,
through the Agent, on the first Business Day of January, April, July and
October, in each year, and on the date on which the Commitment of such Bank
shall be terminated as provided herein, a commitment fee (a "Commitment Fee") on
the average daily unused amount of the Commitment of such Bank during the
preceding quarter (or shorter period commencing with the date hereof or ending
with the Expiration Date or the date on which the Commitment of such Bank shall
be terminated); provided, that, for purposes of determining the Commitment Fee,
the undrawn portion of the Commitments shall not be deemed to be reduced by the
amount of any borrowing under the Auction Facility. The Commitment Fees shall
accrue on each day at a rate per annum equal to the Applicable Rate in effect on
such day.
24
<PAGE> 29
All Commitment Fees shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days, as appropriate. The Commitment Fee due to
each Bank shall commence to accrue on the date of this Agreement and shall cease
to accrue on the date on which the Commitment of such Bank shall be terminated
as provided herein.
(b) The Borrower agrees to pay to the Agent, for its own
account, the fees separately agreed between the Agent and the Borrower, at the
times agreed to (the "Agency Fees" and the "Structuring Fee").
(c) The Borrower agrees to pay to the Administrative Agent for
the account of each Bank, on the date of this Agreement, a fee of 0.05% on the
Commitment of such Bank under the Pre-Restatement Credit Agreement and a fee of
0.10% on any amount by which the Commitment of such Bank exceeds its Commitment
under the Pre-Restatement Credit Agreement.
(d) For any day on which the outstanding principal amount of
Loans shall be greater than 50% of the total Commitments, the Borrower shall pay
to the Administrative Agent for the account of each Bank a utilization fee (a
"Utilization Fee") equal to 0.15% per annum on such Bank's Applicable Percentage
of the aggregate amount of the outstanding Loans on such day. The Utilization
Fees, if any, in respect of any fiscal quarter shall be payable in arrears on
each March 31, June 30, September 30 and December 31, on the date on which the
Commitments terminate and on any later date on which the Loans are repaid in
full; provided, however, that if the Utilization Fee should be payable on a day
other than a Business Day, such date of payment shall be extended to the next
succeeding Business Day. All Utilization Fees shall be computed on the basis of
a year of 365 or 366 days, as appropriate, and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(e) All Fees shall be paid on the dates due, in immediately
available funds, to the Agent for distribution, if and as appropriate, among the
Banks. Once paid, none of the Fees shall be refundable under any circumstances.
SECTION 2.07. Interest on Loans. (a) Subject to the provisions
of Section 2.08, the Loans comprising each ABR Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 365
or
25
<PAGE> 30
366 days, as the case may be) at a rate per annum equal to the Alternate Base
Rate plus the Applicable Rate.
(b) Subject to the provisions of Section 2.08, the Loans
comprising each Eurodollar Borrowing shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 360 days) (i) in the case of
a Eurodollar Revolving Loan at a rate per annum equal to the Eurodollar Rate for
the Interest Period in effect for such Borrowing plus the Applicable Rate or
(ii) in the case of a Eurodollar Auction Loan, at the Eurodollar Rate for the
Interest Period in effect for such Borrowing plus the Margin applicable to such
Loan.
(c) Each Fixed Rate Loan shall bear interest at the Fixed Rate
applicable to such Loan. Each Delayed Fixed Rate Loan shall bear interest at the
Delayed Fixed Rate applicable to such Loan. (d) Interest on each Loan shall be
payable on the Interest Payment Dates applicable to such Loan except as
otherwise provided in this Agreement. The applicable Alternate Base Rate or
Eurodollar Rate for each Interest Period or day within an Interest Period, as
the case may be, shall be determined by the Agent, and such determination shall
be conclusive absent manifest error.
SECTION 2.08. Default Interest. If the Borrower shall default in
the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, the Borrower shall on
demand from time to time pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date of actual payment (after as
well as before judgment) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the Alternate
Base Rate plus the Applicable Rate plus 2%.
SECTION 2.09. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing the Agent shall have in good
faith determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such dollar deposits are being offered will
not adequately and fairly reflect the cost to the majority in interest of the
Banks of making or maintaining their Eurodollar Loans during such Interest
Period, or that reasonable means do not exist for ascertaining the Eurodollar
Rate, the Agent shall, as soon as practicable
26
<PAGE> 31
thereafter, give written or telecopy notice of such determination to the
Borrower and the Banks. In the event of any such determination, (i) any request
by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 shall, until
the Agent shall have advised the Borrower and the Banks that the circumstances
giving rise to such notice no longer exist, be deemed to be a request for an ABR
Borrowing and (ii) any request by the Borrower for a Eurodollar Auction
Borrowing shall be ineffective; provided that (A) if the circumstances giving
rise to such notice do not affect all the Banks, then requests by Borrower for
Eurodollar Auction Borrowings may be made to Banks that are not affected thereby
and (B) if the circumstances giving rise to such notice affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted. Each
determination by the Agent hereunder shall be conclusive absent manifest error.
SECTION 2.10. Termination, Reduction and Extension of
Commitments. (a) The Commitments shall be automatically terminated on the
Expiration Date.
(b) Upon at least three Business Days' prior irrevocable written
or telecopy notice to the Agent, the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
unused portion of the Commitments; provided, however, that (i) each partial
reduction of the Commitments shall be in an integral multiple of $1,000,000 and
(ii) the Borrower shall not terminate or reduce the Commitments if, after giving
effect to any concurrent prepayment of the Loans in accordance with Section
2.11, the sum of the Revolving Credit Exposure plus the aggregate principal
amount of outstanding Auction Loans would exceed the total Commitments.
(c) Each reduction in the Commitments hereunder shall be made
ratably among the Banks in accordance with their respective applicable
Commitments. The Borrower shall pay to the Agent for the account of the Banks,
on the date of each termination or reduction, the Commitment Fees on the amount
of the Commitments so terminated or reduced accrued through the date of such
termination or reduction.
(d) The Borrower may request an extension of this Agreement upon
60 days' prior written notice to the Agent; provided, that, such extension will
be at the sole option of the Banks and will require the written agreement of
each Bank in order to become effective.
27
<PAGE> 32
SECTION 2.11. Prepayment. (a) The Borrower shall have the right
at any time and from time to time to prepay any Borrowing, in whole or in part,
upon at least three Business Days' prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to the Agent;
provided, however, that each partial prepayment shall be in an amount which is
an integral multiple of $1,000,000, and that the Borrower shall not have the
right to prepay any Auction Loan without the prior consent of the Bank thereof.
(b) On the date of any termination or reduction of the
Commitments pursuant to Section 2.10, the Borrower shall pay or prepay so much
of the Borrowings as shall be necessary in order that the aggregate principal
amount of the Revolving Credit Exposure plus the aggregate principal amount of
Auction Loans outstanding will not exceed the aggregate Commitments after giving
effect to such termination or reduction.
(c) Each notice of prepayment shall specify the prepayment date
and the principal amount of each Borrowing (or portion thereof) to be prepaid,
shall be irrevocable and shall commit the Borrower to prepay such Borrowing by
the amount stated therein on the date stated therein. All prepayments under this
Section 2.11 shall be subject to Section 2.14 but otherwise without premium or
penalty. All prepayments under this Section 2.11 shall be accompanied by accrued
interest on the principal amount being prepaid to the date of payment.
SECTION 2.12. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
there is adopted any new law, rule or regulation or any change in applicable law
or regulation or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of law) which shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by such Bank (except
any such reserve requirement which is reflected in the Eurodollar Rate) or shall
impose on such Bank or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Bank, and the result of any of
the foregoing shall be to increase the cost to such Bank of making or
maintaining any Eurodollar Loan or to reduce the amount of any sum received or
receivable by such Bank hereunder or under the Notes (whether of principal,
interest
28
<PAGE> 33
or otherwise) in respect of Eurodollar Loans by an amount deemed by such Bank to
be material, then the Borrower will pay to such Bank upon demand such additional
amount or amounts as will compensate such Bank for such additional costs
incurred or reduction suffered.
(b) If any Bank shall have determined that the applicability of
any law, rule, regulation, agreement or guideline adopted after the date hereof
regarding capital adequacy, or any change in any of the foregoing or the
adoption after the date hereof of any change in any law, rule, regulation,
agreement or guideline existing on the date hereof or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any lending office of such Bank) or any
Bank's holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital or on the capital of such Bank's holding company, if any,
as a consequence of this Agreement or the Loans made by such Bank pursuant
hereto to a level below that which such Bank or such Bank's holding company
could have achieved but for such applicability, adoption, change or compliance
(taking into consideration such Bank's policies and the policies of such Bank's
holding company with respect to capital adequacy) by an amount deemed by such
Bank to be material, then from time to time the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such Bank or such Bank's
holding company for any such reduction suffered.
(c) A certificate of each Bank setting forth in reasonable
detail such amount or amounts as shall be necessary to compensate such Bank or
its holding company as specified in paragraph (a) or (b) above, as the case may
be, and the manner in which such Bank has determined the same, shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay each Bank the amount shown as due on any such certificate
delivered by it within 10 days after its receipt of the same.
(d) Failure on the part of any Bank to demand compensation for
any increased costs or reduction in amounts received or receivable or reduction
in return on capital with respect to any period shall not constitute a waiver of
such Bank's right to demand compensation with respect to such period or any
other period. The protection of this
29
<PAGE> 34
Section shall be available to each Bank regardless of any possible contention of
the invalidity or inapplicability of the law, rule, regulation, guideline or
other change or condition which shall have occurred or been imposed.
SECTION 2.13. Change in Legality. (a) Notwithstanding any other
provision herein, if any change in, or adoption of, any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Bank to
make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Agent, such Bank may:
(i) declare that Eurodollar Loans will not there after be made
by such Bank hereunder, whereupon any request by the Borrower for a
Eurodollar Borrowing shall, as to such Bank only, be deemed a request
for an ABR Loan unless such declaration shall be subsequently withdrawn;
and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall
be automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Bank shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Bank or the
converted Eurodollar Loans of such Bank shall instead be applied to repay the
ABR Loans made by such Bank in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.13, a notice to the Borrower
by any Bank shall be effective as to each Eurodollar Loan, if lawful, on the
last day of the Interest Period currently applicable to such Eurodollar Loan.
SECTION 2.14. Indemnity. The Borrower shall indemnify each Bank
against any loss or expense which such Bank may sustain or incur as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
Eurodollar Borrowing hereunder the applicable conditions set forth in Article
IV, (b) any failure by the Borrower to borrow or to refinance any Eurodollar
Loan hereunder after irrevocable notice of such borrowing or refinancing has
been given pursuant to Sections 2.03 and 2.04, (c) any payment or
30
<PAGE> 35
prepayment of a Eurodollar Loan required by any other provision of this
Agreement or otherwise made or deemed made on a date other than the last day of
the Interest Period applicable thereto or (d) any default in payment or
prepayment of the principal amount of any Eurodollar Loan or any part thereof or
interest accrued thereon, as and when due and payable (at the due date thereof,
whether by scheduled maturity, acceleration, irrevocable notice of prepayment or
otherwise) including, in each such case, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or employing
deposits from third parties acquired to effect or maintain such Loan or any part
thereof as a Eurodollar Loan. Such loss or reasonable expense shall include an
amount equal to the excess, if any, as reasonably determined by such Bank, of
(i) its cost of obtaining the funds for the Eurodollar Loan being paid, prepaid,
converted or not borrowed (assumed to be the Eurodollar Rate applicable thereto)
for the period from the date of such payment, prepayment, conversion or failure
to borrow to the last day of the Interest Period for such Loan (or, in the case
of a failure to borrow, the Interest Period for such Eurodollar Loan which would
have commenced on the date of such failure) over (ii) the amount of interest (as
reasonably determined by such Bank) that would be realized by such Bank in
reemploying the funds so paid, prepaid or not borrowed for such period or
Interest Period, as the case may be. A certificate of any Bank setting forth any
amount or amounts which such Bank is entitled to receive pursuant to this
Section, and the manner in which such Bank has determined the same, shall be
delivered to the Borrower and shall be conclusive absent manifest error.
SECTION 2.15. Pro Rata Treatment. Except as required under
Sections 2.04 and 2.13, each Borrowing, each payment or prepayment of principal
of any Borrowing, each payment of interest on the Loans, each payment of the
Commitment Fees, each reduction of the Commitments and each refinancing of any
Borrowing with a Borrowing of any Type shall be allocated pro rata among the
Banks in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). Each Bank agrees that
in computing such Bank's portion of any Borrowing to be made hereunder, the
Agent may, in its discretion, round each Bank's percentage of such Borrowing,
computed in accordance with Section 2.01, to the next higher or lower whole
dollar amount.
SECTION 2.16. Sharing of Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of
31
<PAGE> 36
banker's lien, setoff or counterclaim against the Borrower, or pursuant to a
secured claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim, received
by such Bank under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, obtain payment (voluntary or involuntary) in
respect of any Revolving Loan or Revolving Loans as a result of which the unpaid
principal portion of its Revolving Loans shall be proportionately less than the
unpaid principal portion of the Revolving Loans of any other Bank, it shall be
deemed simultaneously to have purchased from such other Bank at face value, and
shall promptly pay to such other Bank the purchase price for, a participation in
the Revolving Loans of such other Bank, so that the aggregate unpaid principal
amount of the Revolving Loans and participations in Revolving Loans held by each
Bank shall be in the same proportion to the aggregate unpaid principal amount of
all Revolving Loans then outstanding as the principal amount of its Revolving
Loans prior to such exercise of banker's lien, setoff or counterclaim or other
event was to the principal amount of all Revolving Loans outstanding prior to
such exercise of banker's lien, setoff or counter-claim or other event;
provided, however, that, if any such purchase or purchases or adjustments shall
be made pursuant to this Section and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrower expressly consents to the
foregoing arrangements and agrees that any Bank holding a participation in a
Revolving Loan deemed to have been so purchased may exercise any and all rights
of banker's lien, setoff or counterclaim with respect to any and all moneys
owing by the Borrower to such Bank by reason thereof as fully as if such Bank
had made a Loan directly to the Borrower in the amount of such participation.
SECTION 2.17. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any Fees or other
amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in dollars to the Agent at its
offices at 909 Fanning, Suite 1700, Houston, Texas, in immediately available
funds.
(b) Whenever any payment (including principal of or interest on
any Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business
32
<PAGE> 37
Day, such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of interest
or Fees, if applicable.
SECTION 2.18. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.17, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the net income of the Agent or any Bank (or any
transferee or assignee thereof, including a participation holder (any such
entity being called a "Transferee")) and franchise taxes imposed on the Agent or
any Bank (or Transferee) by the United States or any jurisdiction under the laws
of which the Agent or any such Bank (or such Transferee) or the applicable
lending office, is organized or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Banks (or any Transferee) or the Agent, (i) the sum payable
shall be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.18) such Bank (or such Transferee) or the Agent (as the case may
be) shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other Governmental Authority in accordance with applicable law; provided,
however, that no Transferee of any Bank shall be entitled to receive any greater
payment under this paragraph (a) than such Bank would have been entitled to
receive with respect to the rights assigned, participated or other wise
transferred unless such assignment, participation or transfer shall have been
made at a time when the circumstances giving rise to such greater payment did
not exist.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").
33
<PAGE> 38
(c) The Borrower will indemnify each Bank (or Transferee) and
the Agent for the full amount of Taxes and Other Taxes paid by such Bank (or
such Transferee)or the Agent, as the case may be, and any liability (including
penalties, interest and reasonable expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant taxing authority or other Governmental Authority. Such
indemnification shall be made within 30 days after the date any Bank (or
Transferee) or the Agent, as the case may be, makes written demand therefor. If
a Bank (or Transferee) or the Agent shall become aware that it is entitled to
receive a refund in respect of Taxes or Other Taxes as to which it has been
indemnified by the Borrower pursuant to this Section 2.18, it shall promptly
notify the Borrower of the availability of such refund and shall, within 30 days
after receipt of a request by the Borrower, apply for such refund at the
Borrower's expense. If any Bank (or Transferee) or the Agent receives a refund
in respect of any Taxes or Other Taxes as to which it has been indemnified by
the Borrower pursuant to this Section 2.18, it shall promptly notify the
Borrower of such refund and shall repay such refund to the Borrower (to the
extent of amounts that have been paid by the Borrower under this Section 2.18
with respect to such refund) within 30 days (or promptly upon receipt, if the
Borrower has requested application for such refund pursuant hereto), net of all
reasonable out-of-pocket expenses of such Bank and without interest; provided
that the Borrower, upon the request of such Bank (or such Transferee) or the
Agent, agrees to return such refund (plus penalties, interest or other charges)
to such Bank (or such Transferee) or the Agent in the event such Bank (or such
Transferee) or the Agent is required to repay such refund. Nothing contained in
this paragraph (c) shall require any Bank (or Transferee) or the Agent to make
available any of its tax returns (or any other information relating to its taxes
which it deems to be confidential); provided that Borrower, at its expense,
shall have the right to receive an opinion from a firm of independent public
accountants of recognized national standing acceptable to the Borrower that the
amount due hereunder is correctly calculated.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrower in respect of any payment to any Bank (or
Transferee) or the Agent, the Borrower will furnish to the Agent, at its address
referred to in Section 9.01, the original or a certified copy of a receipt
evidencing payment thereof.
34
<PAGE> 39
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.18
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.
(f) On or prior to the execution of this Agreement and on or
before the transfer to a Transferee, the Agent shall notify the Borrower of each
Bank's (or Transferee's) address. On or prior to the Bank's (or Transferee's)
first Interest Payment Date, and from time to time as required by law, each Bank
(or Transferee) that is organized under the laws of a jurisdiction outside the
United States shall, if legally able to do so, deliver to the Borrower and the
Agent such certificates, documents or other evidence, as required by the Code or
Treasury Regulations issued pursuant thereto, including Internal Revenue Service
Form 1001 or Form 4224 and any other certificate or statement of exemption
required by Treasury Regulation Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any
subsequent version thereof or successors thereto, properly completed and duly
executed by such Bank (or Transferee) establishing that such payment is (i) not
subject to United States Federal withholding tax under the Code because such
payment is effectively connected with the conduct by such Bank (or Transferee)
of a trade or business in the United States or (ii) totally exempt from United
States Federal withholding tax, or subject to a reduced rate of such tax under a
provision of an applicable tax treaty. Unless the Borrower and the Agent have
received forms or other documents satisfactory to them indicating that such
payments hereunder or under the Notes are not subject to United States Federal
withholding tax or are subject to such tax at a rate reduced by an applicable
tax treaty, the Borrower shall withhold taxes from such payments at the
applicable statutory rate.
(g) The Borrower shall not be required to pay any additional
amounts to any Bank (or Transferee) in respect of United States Federal
withholding tax pursuant to paragraph (a) above if the obligation to pay such
additional amounts would not have arisen but for a failure by such Bank (or
Transferee) to comply with the provisions of paragraph (f) above; provided,
however, that the Borrower shall be required to pay those amounts to any Bank
(or Transferee) that it was required to pay hereunder prior to the failure of
such Bank (or Transferee) to comply with the provisions of such paragraph (f).
35
<PAGE> 40
SECTION 2.19. Termination or Assignment of Commitments Under
Certain Circumstances. (a) Any Bank (or Transferee) claiming any additional
amounts payable pursuant to Section 2.12 or Section 2.18 or exercising its
rights under Section 2.13 shall use reasonable efforts (consistent with legal
and regulatory restrictions) to file any certificate or document requested by
the Borrower or to change the jurisdiction of its applicable lending office if
the making of such a filing or change would avoid the need for or reduce the
amount of any such additional amounts which may thereafter accrue or avoid the
circumstances giving rise to such exercise and would not, in the sole
determination of such Bank, be otherwise disadvantageous to such Bank (or
Transferee). (b) In the event that any Bank shall have delivered a notice or
certificate pursuant to Section 2.12 or 2.13, or the Borrower shall be required
to make additional payments under Section 2.18 to any Bank (or Transferee) or to
the Agent with respect to any Bank (or Transferee), the Borrower shall have the
right, at its own expense, upon notice to such Bank (or Transferee) and the
Agent (a) to terminate the Commitment of such Bank (or Transferee) or (b) to
require such Bank (or Transferee) to transfer and assign without recourse (in
accordance with and subject to the restrictions contained in Section 9.04) all
its interests, rights and obligations under this Agreement (other than any
outstanding Auction Loans) to another financial institution which shall assume
such obligations; provided that (i) no such termination or assignment shall
conflict with any law, rule or regulation or order of any Governmental Authority
and (ii) the Borrower or the assignee, as the case may be, shall pay to the
affected Bank (or Transferee) in immediately available funds on the date of such
termination or assignment the principal of and interest accrued to the date of
payment on the Loans made by it hereunder and all other amounts accrued for its
account or owed to it hereunder.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Banks that:
SECTION 3.01. Organization; Powers. Each of the Borrower and the
Significant Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as
36
<PAGE> 41
now conducted and as proposed to be conducted, (c) is qualified to do business
in every jurisdiction where such qualification is required, except where the
failure so to qualify would not result in a Material Adverse Effect, and (d) in
the case of the Borrower, has the corporate power and authority to execute,
deliver and perform its obligations under each of the Loan Documents and each
other agreement or instrument contemplated thereby to which it is or will be a
party and to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and
performance by the Borrower of each of the Loan Documents and the borrowings
hereunder (collectively, the "Transactions") (a) have been duly authorized by
all requisite corporate and, if required, stockholder action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation the violation
of which could reasonably be expected to impair the validity and enforceability
of this Agreement or any other Loan Document or materially impair the rights of
or benefits available to the Banks under the Loan Documents, or of the
certificate or articles of incorporation or other constitutive documents or
by-laws of the Borrower or any Significant Subsidiary, (B) any order of any
Governmental Authority the violation of which could reasonably be expected to
impair the validity or enforce ability of this Agreement or any other Loan
Document, or materially impair the rights of or benefits available to the Banks
under the Loan Documents, or (C) any provision of any indenture or other
material agreement or instrument evidencing or relating to borrowed money to
which the Borrower or any Significant Subsidiary is a party or by which any of
them or any of their property is or may be bound in a manner which could
reasonably be expected to impair the validity and enforceability of this
Agreement or any other Loan Document or materially impair the rights of or
benefits available to the Banks under the Loan Documents, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice or lapse of time
or both) a default under any such indenture, agreement or other instrument in a
manner which could reasonably be expected to impair the validity and
enforceability of this Agreement or any other Loan Document or materially impair
the rights of or benefits available to the Banks under the Loan Documents or
(iii) result in the creation or imposition under any such indenture, agreement
or other instrument of any Lien upon or with respect to any property or assets
now owned or hereafter acquired by the Borrower.
SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and each other Loan
Document when executed and
37
<PAGE> 42
delivered by the Borrower will constitute, a legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with its terms.
SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except
such as have been made or obtained and are in full force and effect.
SECTION 3.05. Financial Statements. The Borrower has heretofore
furnished to the Banks its consolidated balance sheets and statements of income
and statements of cash flow as of and for the fiscal year ended December 31,
1998, audited by and accompanied by the opinion of Deloitte & Touche,
independent public accountants. Such financial statements present fairly the
financial condition and results of operations of the Borrower and its
consolidated subsidiaries as of such dates and for such periods. Such balance
sheets and the notes thereto, together with the Borrower's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, reflect all liabilities,
direct or contingent, of the Borrower and its consolidated Subsidiaries as of
the dates thereof which are material on a consolidated basis. Such financial
statements were prepared in accordance with GAAP applied (except as noted
therein) on a consistent basis.
SECTION 3.06. No Material Adverse Change. Except as disclosed in
the Borrower's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 and in the Borrower's Form 10-Q for the fiscal quarter ended March 31,
1999, there has been no change in the business, assets, operations or financial
condition of the Borrower and the Subsidiaries, taken as a whole, since December
31, 1998, which could reasonably be expected to have a material adverse effect
on the creditworthiness of the Borrower.
SECTION 3.07. Litigation; Compliance with Laws. (a) Except as
set forth in the Annual Report of the Borrower on Form 10-K for the year ended
December 31, 1998, or in any document filed prior to the date of this Agreement
pursuant to Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934,
there are not any actions, suits or proceedings at law or in equity or by or
before any Governmental Authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
business, property or rights of any such person (i) which involve any Loan
Document or the Transactions or (ii) which could reasonably be anticipated,
38
<PAGE> 43
individually or in the aggregate, to result in a Material Adverse Effect.
(b) Neither the Borrower nor any of the Subsidiaries is in
violation of any law, rule or regulation, or in default with respect to any
judgment, writ, injunction or decree of any Governmental Authority, where such
violation or default would be reasonably likely to result in a Material Adverse
Effect.
SECTION 3.08. Federal Reserve Regulations. (a) Neither the
Borrower nor any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation U or X.
SECTION 3.09. Investment Company Act; Public Utility Holding
Company Act. The Borrower is not (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 or (b) subject
to regulation as a "holding company" under the Public Utility Holding Company
Act of 1935.
SECTION 3.10. Use of Proceeds. The Borrower will use the
proceeds of the Loans only for the purposes specified in the preamble to this
Agreement.
SECTION 3.11. No Material Misstatements. No information, report,
financial statement, exhibit or schedule furnished by or on behalf of the
Borrower to the Agent or any Bank in connection with the negotiation of any Loan
Document or included therein or delivered pursuant thereto contained, contains
or will contain any material misstatement of fact or, when considered together
with all reports theretofore filed with the Securities and Exchange Commission,
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading.
39
<PAGE> 44
SECTION 3.12. Employee Benefit Plans. Each of the Borrower and
its ERISA Affiliates is in compliance in all material respects with the
applicable provisions of ERISA and the regulations and published interpretations
thereunder. No Reportable Event has occurred as to which the Borrower or any
ERISA Affiliate was required to file a report with the PBGC, and the present
value of all benefit liabilities under each Plan (based on those assumptions
used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed by more than $10,000,000 the value of the assets of such Plan.
SECTION 3.13. Environmental and Safety Matters. Each of the
Borrower and each Subsidiary has complied with all Federal, state, local and
other statutes, ordinances, orders, judgments, rulings and regulations relating
to environmental pollution or to environmental or nuclear regulation or control
or to employee health or safety, except where noncompliance would not be
reasonably likely to result in a Material Adverse Effect. Neither the Borrower
nor any Subsidiary has received notice of any failure so to comply, except where
noncompliance would not be reasonably likely to result in a Material Adverse
Effect. The Borrower's and the Subsidiaries' plants do not manage any hazardous
wastes, hazardous substances, hazardous materials, toxic substances, toxic
pollutants or substances similarly denominated, as those terms or similar terms
are used in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the
Clean Water Act or any other applicable law relating to environmental pollution
or employee health and safety, or any nuclear fuel or other radioactive
materials, in violation of any law or any regulations promulgated pursuant
thereto, where such violation would be reasonably likely to result in a Material
Adverse Effect. The Borrower is aware of no events, conditions or circumstances
involving environmental pollution or contamination or employee health or safety
that could reasonably be expected to result in a Material Adverse Effect. The
representations and warranties set forth in this Section 3.13 are, however,
subject to any matters, circumstances or events set forth in the Borrower's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 and in
the Borrower's Form 10-Q for the fiscal quarter ended March 31, 1999; provided,
however, that the inclusion of such matters, circumstances or events as
exceptions (or any other exceptions contained in the representations and
warranties which refer to the Borrower's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 or the
40
<PAGE> 45
Borrower's Form 10-Q for the fiscal quarter ended March 31, 1999) shall not be
construed to mean that the Borrower has concluded that any such matter,
circumstance or effect is likely to result in a Material Adverse Effect.
SECTION 3.14. Significant Subsidiaries. Schedule 3.14 sets forth
as of the date hereof a list of all Significant Subsidiaries of the Borrower and
the percentage ownership interest of the Borrower therein.
SECTION 3.15. Year 2000 Compliance. The Borrower and each
Significant Subsidiary has a) initiated a review and assessment of all areas
within its and each of its Significant Subsidiaries' business and operations
(including those mission critical suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its Significant Subsidiaries may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999) and (b) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and,
as of the date of this Agreement, is implementing that plan in accordance with
that timetable. The Borrower and each Significant Subsidiary reasonably believes
that all computer applications that are material to its or any of its
Significant Subsidiaries' business and operations will on a timely basis be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
ARTICLE IV. CONDITIONS OF LENDING
The obligations of the Banks to make Loans hereunder are subject
to the satisfaction of the following conditions:
SECTION 4.01. All Borrowings. On the date of each Borrowing,
including each Borrowing in which Loans are refinanced with new Loans as
contemplated by Section 2.02(e):
(a) The Agent shall have received a notice of such Borrowing as
required by Section 2.03.
(b) The representations and warranties set forth in Article III
hereof (except, in the case of a refinancing of Loans that does not
increase the sum of the Revolving Credit Exposure and the Auction Loans
of
41
<PAGE> 46
any Bank outstanding, the representations set forth in Sections 3.06 and
3.07) shall be true and correct in all material respects on and as of
the date of such Borrowing with the same effect as though made on and as
of such date, except to the extent such representations and warranties
expressly relate to an earlier date.
(c) The Borrower shall be in compliance with all the terms and
provisions set forth herein and in each other Loan Document on its part
to be observed or performed, and at the time of and immediately after
such Borrowing no Event of Default or Default shall have occurred and be
continuing.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Borrowing. On the date of this Agreement:
(a) Each Bank shall have received a duly executed Note complying
with the provisions of Section 2.05.
(b) The Agent shall have received a favorable written opinion of
Paine, Hamblen, Coffin, Brooke & Miller, counsel for the Borrower, dated
the date of this Agreement and addressed to the Banks, to the effect set
forth in Exhibit D hereto, and the Borrower hereby instructs such
counsel to deliver such opinions to the Agent.
(c) The Agent shall have received evidence satisfactory to it
and set forth on Schedule 4.02(c) that the Borrower shall have obtained
all consents and approvals of, and shall have made all filings and
registrations with, any Governmental Authority required in order to
consummate the Transactions, in each case without the imposition of any
condition which, in the judgment of the Banks, could adversely affect
their rights or interests hereunder.
(d) All legal matters incident to this Agreement and the
borrowings hereunder shall be satisfactory to the Banks and their
counsel and to Cravath, Swaine & Moore, counsel for the Agent.
(e) The Agent shall have received (i) a copy of the certificate
or articles of incorporation, including
42
<PAGE> 47
all amendments thereto, of the Borrower, certified as of a recent date
by the Secretary of State of the state of its organization, and a
certificate as to the good standing of the Borrower as of a recent date,
from such Secretary of State; (ii) a certificate of the Secretary or
Assistant Secretary of the Borrower dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of the
by-laws of the Borrower as in effect on the Closing Date and at all
times since a date prior to the date of the resolutions described in
clause (B) below, (B) that attached thereto is a true and complete copy
of resolutions duly adopted by the board of directors of the Borrower
authorizing the execution, delivery and performance of the Loan
Documents and the borrowings hereunder, and that such resolutions have
not been modified, rescinded or amended and are in full force and
effect, (C) that the certificate or articles of incorporation of the
Borrower have not been amended since the date of the last amendment
thereto shown on the certificate of good standing furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen signature of
each officer executing any Loan Document or any other document delivered
in connection herewith on behalf of the Borrower; (iii) a certificate of
another officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate pursuant to
(ii) above; and (iv) such other documents as the Banks or their counsel
or Cravath, Swaine & Moore, counsel for the Agent, may reasonably
request.
(f) The Agent shall have received a certificate, dated the
Closing Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(g) The Agent shall have received all Fees and other amounts due
and payable on or prior to the date of this Agreement, including all
Fees accrued to the date hereof under the Pre-Restatement Credit
Agreement.
ARTICLE V. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Bank that so long as
this Agreement shall remain in effect or the
43
<PAGE> 48
principal of or interest on any Loan, any Fees or any other expenses or any
amounts payable under any Loan Document shall be unpaid, unless the Required
Banks shall otherwise consent in writing, the Borrower will:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 6.02.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names utilized in the conduct of the Borrower's business except where the
failure so to obtain, preserve, renew, extend or maintain any of the foregoing
would not result in a Material Adverse Effect; maintain and operate such
business in substantially the manner in which it is presently conducted and
operated, except as otherwise expressly permitted under this Agreement; comply
in all material respects with all applicable laws, rules, regulations and orders
of any Governmental Authority, whether now in effect or hereafter enacted if
failure to comply with such requirements would result in a Material Adverse
Effect; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times; provided, however, that the Borrower may cause
the discontinuance of the operation or a reduction in the capacity of any of its
facilities, or any element or unit thereof including, without limitation, real
and personal properties, facilities, machinery and equipment, (i) if, in the
judgment of the Borrower, it is no longer advisable to operate the same, or to
operate the same at its former capacity, and such discontinuance or reduction
would not result in a Material Adverse Effect, or (ii) if the Borrower intends
to sell and dispose of its interest in the same in accordance with the terms of
this Agreement and within a reasonable time shall endeavor to effectuate the
same.
SECTION 5.02. Insurance. (a) Maintain insurance, to such extent
and against such risks, as is customary with companies in the same or similar
businesses and owning similar properties in the same general area in which the
44
<PAGE> 49
Borrower operates and (b) maintain such other insurance as may be required by
law. All insurance required by this Section 5.02 shall be maintained with
financially sound and reputable insurers or through self-insurance; provided,
however, that the portion of such insurance constituting self-insurance shall be
comparable to that usually maintained by companies engaged in the same or
similar businesses and owning similar properties in the same general area in
which the Borrower operates and the reserves maintained with respect to such
self-insured amounts are deemed adequate by the officer or officers of the
Borrower responsible for insurance matters.
SECTION 5.03. Taxes and Obligations. Pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits or in respect of its property, before the same
shall become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the Borrower shall, to
the extent required by GAAP, have set aside on its books adequate reserves with
respect thereto.
SECTION 5.04. Financial Statements, Reports, etc. Furnish to the
Agent and each Bank:
(a) within 105 days after the end of each fiscal year, its
consolidated and consolidating balance sheets and related statements of
income and statements of cash flow, showing the financial condition of
the Borrower and its consolidated Subsidiaries as of the close of such
fiscal year and the results of its operations and the operations of such
Subsidiaries during such year, all audited by Deloitte & Touche or other
independent public accountants of recognized national standing
acceptable to the Required Banks and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to
the effect that such consolidated financial statements fairly present
the financial condition and results of operations of the Borrower on a
consolidated basis (except as noted therein) in accordance with GAAP
consistently applied;
(b) within 50 days after the end of each of the first three
fiscal quarters of each fiscal year, its
45
<PAGE> 50
consolidated and, to the extent otherwise available, consolidating
balance sheets and related statements of income and statements of cash
flow, showing the financial condition of the Borrower and its
consolidated subsidiaries as of the close of such fiscal quarter and the
results of its operations and the operations of such subsidiaries during
such fiscal quarter and the then elapsed portion of the fiscal year, all
certified by one of its Financial Officers as fairly presenting the
financial condition and results of operations of the Borrower on a
consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements under
(a) or (b) above, a certificate of the relevant accounting firm opining
on or certifying such statements or Financial Officer (which
certificate, when furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal
interpretations) certifying that to the knowledge of the accounting firm
or the Financial Officer, as the case may be, no Event of Default or
Default has occurred or, if such an Event of Default or Default has
occurred, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto;
(d) promptly after the same become publicly available, copies of
all periodic and other reports, proxy statements and other materials
filed by it with the Securities and Exchange Commission, or any
governmental authority succeeding to any of or all the functions of said
Commission, or with any national securities exchange, or distributed to
its share holders, as the case may be; and
(e) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
the Borrower or any Significant Subsidiary, or compliance with the terms
of any Loan Document, as the Agent or any Bank may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Agent
and each Bank prompt written notice of the following:
46
<PAGE> 51
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any written threat or
notice of intention of any person to file or commence, any action, suit
or proceeding, whether at law or in equity or by or before any
Governmental Authority, against the Borrower or any Subsidiary thereof
which could reasonably be anticipated to result in a Material Adverse
Effect; and
(c) any development that has resulted in, or could reasonably be
anticipated to result in, a Material Adverse Effect.
SECTION 5.06. ERISA. (a) Comply in all material respects with
the applicable provisions of ERISA and (b) furnish to the Agent and each Bank
(i) as soon as possible, and in any event within 30 days after any Responsible
Officer of the Borrower or any ERISA Affiliate either knows or has reason to
know that any Reportable Event has occurred that alone or together with any
other Reportable Event could reasonably be expected to result in liability of
the Borrower to the PBGC in an aggregate amount exceeding $10,000,000, a
statement of a Financial Officer setting forth details as to such Reportable
Event and the action proposed to be taken with respect thereto, together with a
copy of the notice, if any, of such Reportable Event given to the PBGC, (ii)
promptly after receipt thereof, a copy of any notice the Borrower or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate
which is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) or to appoint a trustee to administer any Plan or Plans
and (iii) within 10 days after the due date for filing with the PBGC pursuant to
Section 412(n) of the Code of a notice of failure to make a required installment
or other payment with respect to a Plan, a statement of a Financial Officer
setting forth details as to such failure and the action proposed to be taken
with respect thereto, together with a copy of such notice given to the PBGC.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by any Bank to visit and inspect the financial
records and the properties of the Borrower at reasonable times and as often as
requested and to make extracts from
47
<PAGE> 52
and copies of such financial records, and permit any representatives designated
by any Bank to discuss the affairs, finances and condition of the Borrower with
the chief financial officer of the Borrower, or other person designated by the
chief financial officer, and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans
only for the purposes set forth in the preamble to this Agreement.
ARTICLE VI. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Bank that, so long
as this Agreement shall remain in effect or the principal of or interest on any
Loan, any Fees or any other expenses or amounts payable under any Loan Document
shall be unpaid, unless the Required Banks shall otherwise consent in writing,
the Borrower will not:
SECTION 6.01. Liens. Create, incur, assume or permit to exist
any Lien on any property or assets (including stock or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower created by the
documents, instruments or agreements existing on the date hereof and
which are listed as exhibits to the Borrower's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, to the extent that
such Liens secure only obligations arising under such existing
documents, agreements or instruments;
(b) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower; provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition and
(ii) such Lien does not apply to any other property or assets of the
Borrower;
(c) the Lien of the First Mortgage;
(d) Liens permitted under the First Mortgage (whether or not
such permitted Liens cover properties or assets subject to the Lien of
the First Mortgage) and any other Liens to which the Lien of the First
Mortgage is expressly made subject;
48
<PAGE> 53
(e) the Lien of any collateral trust mortgage or similar
instrument which would be intended to eventually replace (in one
transaction or a series of transactions) the First Mortgage (as amended,
modified or supplemented from time to time, "Collateral Trust Mortgage")
on properties or assets of the Borrower to secure bonds, notes and other
obligations of the Borrower; provided that, so long as the First
Mortgage shall constitute a Lien on properties or assets of the
Borrower, the bonds, notes or other obligations issued under the
Collateral Trust Mortgage (i) shall also be secured by an equal
principal amount of bonds issued under the First Mortgage or (ii) shall
be issued against property additions not subject to the Lien of the
First Mortgage;
(f) Liens permitted under the Collateral Trust Mortgage (whether
or not such permitted Liens cover properties or assets subject to the
Lien of the Collateral Trust Mortgage) and any other Liens to which the
Lien of the Collateral Trust Mortgage is subject;
(g) Liens for taxes, assessments or governmental charges not yet
due or which are being contested in compliance with Section 5.03;
(h) carriers', warehousemen's, mechanic's, materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations that are not due or which are being
contested in compliance with Section 5.03;
(i) pledges and deposits made in the ordinary course of business
in compliance with workmen's compensation, unemployment insurance and
other social security laws or regulations;
(j) Liens incurred or created in connection with or to secure
the performance of bids, tenders, trade contracts (other than for
Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(k) zoning restrictions, easements, rights-of-way, restrictions
on use of real property and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not substantial
in amount and do not materially detract from the value
49
<PAGE> 54
of the property subject thereto or interfere with the ordinary conduct
of the business of the Borrower or any of its Subsidiaries;
(l) Liens (i) which secure obligations not assumed by the
Borrower, (ii) on account of which the Borrower has not and does not
expect to pay interest directly or indirectly and (iii) which exist upon
real estate or rights in or relating to real estate in respect of which
the Borrower has a right-of-way or other easement for purposes of
substations or transmission or distribution facilities;
(m) rights reserved to or vested in any federal, state or local
governmental body or agency by the terms of any right, power, franchise,
grant, license, con tract or permit, or by any provision of law, to
recapture or to purchase, or designate a purchase of or order the sale
of, any property of the Borrower or to terminate any such right, power,
franchise, grant, license, contract or permit before the expiration
thereof;
(n) Liens of judgments covered by insurance, or upon appeal and
covered by bond, or to the extent not so covered not exceeding at one
time $10,000,000 in aggregate amount;
(o) any Liens, moneys sufficient for the discharge of which
shall have been deposited in trust with the trustee or mortgagee under
the instrument evidencing such Lien, with irrevocable authority of such
trustee or mortgagee to apply such moneys to the discharge of such Lien
to the extent required for such purpose;
(p) rights reserved to or vested in any federal, state or local
governmental body or agency or other public authority to control or
regulate the business or property of the Borrower;
(q) any obligations or duties, affecting the property of the
Borrower to any federal, state or local governmental body or agency or
other public authority with respect to any authorization, permit,
consent or license of such body, agency or authority, given in
connection with the purchase, construction, equipping, testing and
operation of the Borrower's utility property;
50
<PAGE> 55
(r) with respect to any property which the Borrower may
hereafter acquire, any exceptions or reservations therefrom existing at
the time of such acquisition or any terms, conditions, agreements,
covenants, exceptions and reservations expressed or provided in the
deeds of other instruments, respectively, under and by virtue of which
the Borrower shall hereafter acquire the same, none of which materially
impairs the use of such property for the purposes for which it is
acquired by the Borrower;
(s) leases and subleases entered into in the ordinary course of
business;
(t) banker's Liens and other Liens in the nature of a right of
setoff;
(u) Liens resulting from any transaction permitted under Section
6.03(v);
(v) renewals, replacements, amendments, modifications,
supplements, refinancings or extensions of Liens set forth above to the
extent that the principal amount of Indebtedness secured by such Lien
immediately prior thereto is not increased and such Lien is not extended
to other property (it being understood that such limitation does not
apply to the Liens described in subsection (c), (e) or (u) above);
(w) security deposits or amounts paid into trust funds for the
reclamation of mining properties;
(x) restrictions on transfer or use of properties and assets,
first rights of refusal, and rights to acquire properties and assets
granted to others;
(y) non-consensual equitable Liens on the Borrower's
tenant-in-common or other interest in joint projects;
(z) Liens on the Borrower's tenant-in-common or other interest
in joint projects incurred by the project sponsor without the express
consent of the Borrower to such incurrence;
(aa) cash collateral contemplated under Section 2.06(i) of the
$125,000,000 Revolving Credit Agreement (3 Years) dated as of June 30,
1998 between Avista Corporation (formerly The Washington Water Power
Company), Toronto Dominion (Texas), Inc., and the banks named therein;
and
51
<PAGE> 56
(ab) Liens not expressly permitted in clauses (a) through (aa)
of this Section 6.01 to secure Indebtedness of the Borrower, provided
that the aggregate outstanding principal amount of the Indebtedness so
secured does not at any one time exceed 5% of the total assets of the
Borrower and its Subsidiaries, computed and consolidated in accordance
with GAAP consistently applied.
SECTION 6.02. Mergers, Consolidations and Acquisitions. Merge
into or consolidate with any other person, or permit any other person to merge
into or consolidate with it, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or substantially all of the assets
of any other person (whether directly by purchase, lease or other acquisition of
all or substantially all of the assets of such person or indirectly by purchase
or other acquisition of all or substantially all of the capital stock of such
other person) other than acquisitions in the ordinary course of the Borrower's
business, except that if (A) at the time thereof and immediately after giving
effect thereto no Event of Default or Default shall have occurred and be
continuing and (B) in the case of any merger or consolidation involving the
Borrower in which the Borrower is not the surviving corporation, the surviving
corporation shall assume in writing the obligations of the Borrower under this
Agreement and any other Loan Documents, then (a) the Borrower may merge or
consolidate with any Subsidiary in a transaction in which the Borrower is the
surviving corporation, (b) the Borrower may purchase, lease or otherwise acquire
from any Subsidiary all or substantially all of its assets and may purchase or
otherwise acquire all or substantially all of the capital stock of any person
who immediately thereafter is a Subsidiary,(c) the Borrower may merge with or
into, or consolidate with, any other person so long as (i) in the case where the
business of such other person, or an Affiliate of such other person, entirely or
primarily consists of an electric or gas utility business, the senior secured
long-term debt rating of the Borrower shall be at least BBB or higher by S&P and
Baa2 or higher by Moody's immediately after such merger or consolidation, or in
the case of a merger or consolidation in which the Borrower is not the surviving
entity, the senior secured long-term debt rating of the surviving entity or an
Affiliate thereof shall be at least BBB+ or higher by S&P and Baa1 or higher by
Moody's immediately after such merger or consolidation, or (ii) in the case
where such other person's business does not entirely or primarily consist of an
electric or gas utility
52
<PAGE> 57
business, the assets of such person at the time of such consolidation or merger
do not exceed 10% of the total assets of the Borrower and its Subsidiaries after
giving effect to such merger or consolidation, computed and consolidated in
accordance with GAAP consistently applied, and (d) the Borrower may purchase,
lease or otherwise acquire any or all of the assets of any other person (and may
purchase or otherwise acquire the capital stock of any other person) so long as
(i) the assets being purchased, leased or acquired (or the assets of the person
whose capital stock is being acquired) entirely or primarily consist of electric
or gas utility assets or (ii) in the case where the assets being purchased,
leased or acquired (or the assets of the person whose capital stock is being
acquired) do not entirely or primarily consist of electric or gas utility
assets, the assets being acquired (or the Borrower's proportionate share of the
assets of the person whose capital stock is being acquired) do not exceed 10% of
the total assets of the Borrower and its Subsidiaries, after giving effect to
such acquisition, computed and consolidated in accordance with GAAP consistently
applied.
SECTION 6.03. Disposition of Assets. Sell, lease, transfer,
assign or otherwise dispose of (in one transaction or in a series of
transactions), in any fiscal year, assets (whether now owned or hereafter
acquired) which, together with the amount of all sales, leases, transfers,
assignments or other dispositions permitted under clause (c)(ii) of the
definition of Subsidiary Event in Article I (other than sales, leases,
transfers, assignments or other dispositions permitted under clauses (c)(ii) (A)
through (C) in such definition), exceed 10% of the assets of the Borrower and
its Subsidiaries as of the end of the most recent fiscal year, computed and
consolidated in accordance with GAAP consistently applied, except (i) the
Borrower may, in any fiscal year, sell, lease, transfer, assign or otherwise
dispose of assets in the ordinary course of business which, together with the
amount of all sales, leases, transfers, assignments or other dispositions in the
ordinary course permitted under clause (c)(ii)(A) of the definition of
Subsidiary Event in Article I, do not exceed 5% of the assets of the Borrower
and its Subsidiaries as of the end of the most recent fiscal year, computed and
consolidated in accordance with GAAP consistently applied, (ii) to the extent
permitted under Section 5.03, 6.01 or Section 6.02, (iii) the Borrower may sell,
lease, transfer, assign or otherwise dispose of its interest in the Washington
Public Power Supply System Nuclear Project No. 3 in accordance with the
settlement agreement among the Borrower, the Washington Public Power Supply
System and
53
<PAGE> 58
Bonneville Power Administration, as the same may be amended, modified or
supplemented from time to time, (iv) the Borrower may sell, lease, transfer,
assign or otherwise dispose of its interests in the Colstrip and Centralia
Projects and related assets and (v) the Borrower may sell, lease, transfer,
assign or otherwise dispose (including by way of capital contribution) of, or
create, incur, assume or permit to exist Liens on, receivables and related
properties or interests therein.
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening (and during the continuance) of any of
the following events ("Events of Default"):
(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the borrowings hereunder, or any
representation, warranty, statement or information contained in any
report, certificate, financial statement or other instrument furnished
in connection with or pursuant to any Loan Document, shall prove to have
been false or misleading in any material respect when so made, deemed
made or furnished;
(b) default shall be made in the payment of any principal of any
Loan when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any
Loan or any Fee or any other amount (other than an amount referred to in
(b) above) due under any Loan Document, when and as the same shall
become due and payable, and such default shall continue unremedied for a
period of five Business Days;
(d) default shall be made in the due observance or performance
by the Borrower of any covenant, condition or agreement contained in
Section 5.01(a) or 5.05 or in Article VI;
(e) default shall be made in the due observance or performance
by the Borrower of any covenant, condition or agreement contained in any
Loan Document (other than those specified in (b), (c) or (d) above) and
such default shall continue unremedied for a period of
54
<PAGE> 59
30 days after notice thereof from the Agent or any Bank to the Borrower;
(f) the Borrower or any Significant Subsidiary shall (i) fail to
pay any principal or interest, regardless of amount, due in respect of
any Indebted ness when the aggregate unpaid principal amount is in
excess of $25,000,000, when and as the same shall become due and payable
(after expiration of any applicable grace period), or (ii) fail to
observe or perform any other term, covenant, condition or agreement
(after expiration of any applicable grace period) contained in any
agreement or instrument evidencing or governing any such Indebtedness if
the effect of any failure referred to in this clause (ii) is to cause,
or to permit the holder or holders of such Indebtedness or a trustee on
its or their behalf (with or without the giving of notice, the lapse of
time or both) to cause, such Indebtedness to become due prior to its
stated maturity; (g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (i) relief in respect of the Borrower or any Significant
Subsidiary, or of a substantial part of the property or assets of the
Borrower or a Significant Subsidiary, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law,
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Significant
Subsidiary or for a substantial part of the property or assets of the
Borrower or a Significant Subsidiary or (iii) the winding-up or
liquidation of the Borrower or any Significant Subsidiary; and such
proceeding or petition shall continue undismissed, or an order or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 or more days;
(h) the Borrower or any Significant Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or fail
to contest in a timely and appropriate manner, any proceeding or the
filing of any petition described in (g) above, (iii) apply for or
55
<PAGE> 60
consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Significant Subsidiary or for a substantial part of the property or
assets of the Borrower or any Significant Subsidiary, (iv) file an
answer admitting the material allegations of a petition filed against it
in any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(i) a final judgment or judgments shall be rendered against the
Borrower, any Significant Subsidiary or any combination thereof for the
payment of money with respect to which an aggregate amount in excess of
$25,000,000 is not covered by insurance and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by
a judgment creditor to levy upon assets or properties of the Borrower or
any Significant Subsidiary to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to
make a required installment or other payment (within the meaning of
Section 412(n)(l) of the Code), shall have occurred with respect to any
Plan or Plans that reasonably could be expected to result in liability
of the Borrower to the PBGC or to a Plan in an aggregate amount
exceeding $25,000,000 and, within 30 days after the reporting of any
such Reportable Event to the Agent or after the receipt by the Agent of
the statement required pursuant to Section 5.06, the Agent shall have
notified the Borrower in writing that (i) the Required Banks have made a
determination that, on the basis of such Reportable Event or Reportable
Events or the failure to make a required payment, there are reasonable
grounds (A) for the termination of such Plan or Plans by the PBGC, (B)
for the appointment by the appropriate United States District Court of a
trustee to administer such Plan or Plans or (C) for the imposition of a
lien in favor of a Plan and (ii) as a result thereof an Event of Default
exists hereunder; or a trustee shall be appointed by a United States
District Court to administer any such Plan or Plans; or the PBGC shall
institute proceedings to terminate any Plan or Plans;
56
<PAGE> 61
(k) there shall occur a Subsidiary Event; or
(l) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Agent, at the request of the Required Banks,
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate forthwith the Commitments and (ii)
declare the Loans then outstanding to be forthwith due and payable in whole or
in part, whereupon (A) the Commitments will automatically be terminated and (B)
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and any unpaid accrued Fees and all other liabilities
of the Borrower accrued hereunder and under any other Loan Document, shall
become forthwith due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event with respect to the Borrower
described in paragraph (g) or (h) above, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
ARTICLE VIII. THE AGENT
In order to expedite the various transactions contemplated by
this Agreement, Toronto Dominion (Texas), Inc. is hereby appointed to act as
Agent on behalf of the Banks. Each of the Banks hereby irrevocably authorizes
and directs the Agent to take such action on behalf of such Bank under the terms
and provisions of this Agreement, and to exercise such powers hereunder as are
specifically delegated to or required of the Agent by the terms and provisions
hereof, together with such powers as are reasonably incidental thereto. The
Agent is hereby expressly authorized on behalf of the Banks, without hereby
limiting any implied authority, (a) to receive on behalf of each of the Banks
any payment of principal of or interest on the
57
<PAGE> 62
Loans outstanding hereunder and all other amounts accrued hereunder paid to the
Agent, and to distribute to each Bank its proper share of all payments so
received as soon as practicable; (b) to give notice promptly on behalf of each
of the Banks to the Borrower of any event of default specified in this Agreement
of which the Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute promptly to each Bank copies of all notices,
agreements and other material as provided for in this Agreement as received by
such Agent.
Neither the Agent nor any of its directors, officers, employees
or agents shall be liable to any Bank as such for any action taken or omitted by
any of them hereunder except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower of any of the terms, conditions, covenants or
agreements of this Agreement. The Agent shall not be responsible to the Banks
for the due execution, genuineness, validity, enforceability or effectiveness of
this Agreement or any other instrument to which reference is made herein. The
Agent shall in all cases be fully protected in acting, or refraining from
acting, in accordance with written instructions signed by the Required Banks,
and, except as otherwise specifically provided herein, such instructions and any
action taken or failure to act pursuant thereto shall be binding on all the
Banks. The Agent shall, in the absence of knowledge to the contrary, be entitled
to rely on any paper or document believed by it in good faith to be genuine and
correct and to have been signed or sent by the proper person or persons. Neither
the Agent nor any of its directors, officers, employees or agents shall have any
responsibility to the Borrower on account of the failure or delay in performance
or breach by any Bank of any of its obligations hereunder or to any Bank on
account of the failure of or delay in performance or breach by any other Bank or
the Borrower of any of their respective obligations hereunder or in connection
herewith. The Agent may execute any and all duties hereunder by or through
agents or employees and shall be entitled to advice of legal counsel selected by
it with respect to all matters arising hereunder and shall not be liable for any
action taken or suffered in good faith by it in accordance with the advice of
such counsel.
The Agent and its affiliates may accept deposits from, lend
money to and generally engage in any kind of
58
<PAGE> 63
business with the Borrower or other affiliate thereof as if it were not the
Agent.
Each Bank recognizes that applicable laws, rules, regulations or
guidelines of governmental authorities may require the Agent to determine
whether the transactions contemplated hereby should be classified as "highly
lever aged" or assigned any similar or successor classification, and that such
determination may be binding upon the other Banks. Each Bank understands that
any such determination shall be made solely by the Agent based upon such factors
(which may include, without limitation, the Agent's internal policies and
prevailing market practices) as the Agent shall deem relevant and agrees that
the Agent shall have no liability for the consequences of any such
determination.
Each Bank agrees (i) to reimburse the Agent in the amount of
such Bank's pro rata share (based on its Commitment hereunder) of any expenses
incurred for the benefit of the Banks by the Agent, including reasonable counsel
fees and compensation of agents and employees paid for services rendered on
behalf of the Banks, not reimbursed by the Borrower and (ii) to indemnify and
hold harmless the Agent and any of its directors, officers, employees or agents,
on demand, in the amount of its pro rata share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as the Agent or
any of them in any way relating to or arising out of this Agreement or any
action taken or omitted by it or any of them under this Agreement, to the extent
not reimbursed by the Borrower; provided, however, that no Bank shall be liable
to the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or wilful misconduct of the Agent or any of its
directors, officers, employees or agents.
Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank based on
such documents and information as it shall deem appropriate at the time,
continue to make its own decisions in taking or not taking action under or based
59
<PAGE> 64
upon this Agreement, any related agreement or any document furnished hereunder.
The Agent may execute any of its duties under this Agreement by
or through agents or attorneys selected by them using reasonable care and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys selected and authorized to act by it with reasonable
care unless the damage complained of directly results from an act or failure to
act on part of the Agent which constitutes gross negligence or wilful
misconduct. Delegation to an attorney or agent shall not release the Agent from
its obligation to perform or cause to be performed the delegated duty.
The Documentation Agent and the Syndication Agent shall not have
any rights, powers, obligations, liabilities, responsibilities or duties under
this Agreement other than those applicable to all Banks as such. Without
limiting the foregoing, none of the Banks identified as "Documentation Agent" or
"Syndication Agent" shall have or be deemed to have any fiduciary relationship
with any Bank. Each Bank acknowledges that it has not relied, and will not rely,
on any of the Banks so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telecopy, graphic scanning or other
telegraphic communications equipment of the sending party, as follows:
(a) if to the Borrower, to it at East 1411 Mission Avenue
(99202), P.O. Box 3727, Spokane, Washington 99220, Attention of the
Senior Vice President, Chief Financial Officer and Treasurer (Telecopy
No. 509-482-4879);
(b) if to the Agent, to it at 909 Fannin, Suite 1700, Houston,
Texas 77010, Attention of Kimberly Burleson (Telecopy No. 713-951-9921);
and
(c) if to a Bank, to it at its address (or telecopy number) set
forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Bank shall have become a party hereto.
60
<PAGE> 65
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or other telegraphic communications equipment of the sender, or on the
date five Business Days after dispatch by certified or registered mail if
mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 9.01 or in accordance with the latest
unrevoked direction from such party given in accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties, including, without limitation, any indemnities
and reimbursement obligations, made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Banks and shall survive the making by the Banks of
the Loans, and the execution and delivery to the Banks of the Notes evidencing
such Loans, regardless of any investigation made by the Banks, or on their
behalf, and shall continue in full force and effect as long as the principal of
or any accrued interest on any Loan or any Fee or any other amount payable under
this Agreement or any other Loan Document is outstanding and unpaid and so long
as the Commitments have not been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the Agent and
when the Agent shall have received copies hereof which, when taken together,
bear the signatures of each Bank, and thereafter shall be binding upon and inure
to the benefit of the Borrower, the Agent and each Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior consent of
all the Banks.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of the Borrower, the Agent or
the Banks that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and permitted assigns.
61
<PAGE> 66
(b) Each Bank (including the Agent when acting as a Bank) may
assign to one or more assignees all or a portion of its interests, rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Revolving Credit Commitment and the same portion of the
applicable Loan or Loans at the time owing to it and the applicable Note or
Notes held by it, other than any Auction Loans or Notes held by it, which may,
but need not, be assigned); provided, however, that (i) except in the case of an
assignment to a Bank or an Affiliate of such Bank, the Borrower and the Agent
must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld), (ii) that no assignee of any Bank shall be
entitled to receive any greater payment or protection under Sections 2.12,
2.13(a), 2.14 or 2.18 than such Bank would have been entitled to receive with
respect to the rights assigned or otherwise transferred unless such assignment
or transfer shall have been made at a time when the circumstances giving rise to
such greater payment did not exist, (iii) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Agreement, except that this clause (iii) shall not apply
to rights in respect of outstanding Auction Loans, (iv) the amount of the
Commitment of the assigning Bank subject to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Agent) shall not be less than $5,000,000 (or, if less, the
total amount of their Commitments), (v) the parties to each such assignment
shall execute and deliver to the Agent an Assignment and Acceptance, together
with the Note or Notes subject to such assignment and a processing and
recordation fee of $5,000 and (vi) the assignee, if it shall not be a Bank,
shall deliver to the Agent an Administrative Questionnaire. Upon acceptance and
recording pursuant to paragraph (e) of this Section 9.04, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Bank under this Agreement and (B) the assigning Bank thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 2.12, 2.14, 2.18
and 9.05, as
62
<PAGE> 67
well as to any Fees accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance,
the assigning Bank thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Bank warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Commitment, and the outstanding balances of its Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance; (ii) except as set forth in (i) above,
such assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower or any Subsidiary or the
performance or observance by the Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 5.04 and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon the Agent, such assigning Bank or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all the obligations which by the
terms of this Agreement are required to be performed by it as a Bank.
(d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it including the recordation of the names and addresses
of the Banks, and the
63
<PAGE> 68
Commitment of, and principal amount of the Loans owing to, each Bank pursuant to
the terms hereof from time to time (the "Register"). The Agent and the Banks may
treat each person whose name is recorded in the Register pursuant to the terms
hereof as a Bank hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower and any Bank, at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Bank and an assignee together with the Note
or Notes subject to such assignment, an Administrative Questionnaire completed
in respect of the assignee (unless the assignee shall already be a Bank
hereunder), the processing and recordation fee referred to in paragraph (b)
above and, if required, the written consent of the Borrower and the Agent to
such assignment, the Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Banks. Within five Business Days after receipt of notice,
the Borrower, at its own expense, shall execute and deliver to the Agent, in
exchange for the surrendered Note or Notes, a new Note or Notes to the order of
such assignee in a principal amount equal to the applicable Commitment assumed
by it pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained a Commitment, a new Note to the order of such assigning Bank in a
principal amount equal to the applicable Commitment retained by it. Such new
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note; such new Notes shall be dated the
date of the surrendered Notes which they replace and shall otherwise be in
substantially the form of Exhibit A hereto. Canceled Notes shall be returned to
the Borrower.
(f) Each Bank may without the consent of the Borrower or the
Agent sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it and the Notes held by it);
provided, however, that (i) such Bank's obligations under this Agreement shall
remain unchanged, (ii) such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.12, 2.14 and 2.18 to the same extent as if
they were Banks (provided, that the amount of such benefit shall be limited to
the amount in respect of the interest sold to which the seller of such
participation
64
<PAGE> 69
would have been entitled had it not sold such interest) and (iv) the Borrower,
the Agent and the other Banks shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement, and such Bank shall retain the sole right to enforce the obligations
of the Borrower relating to the Loans and to approve any amendment, modification
or waiver of any provision of this Agreement (other than amendments,
modifications or waivers decreasing any fees payable hereunder or the amount of
principal of or the rate at which interest is payable on the Loans, extending
any scheduled principal payment date or date fixed for the payment of interest
on the Loans or changing or extending the Commitments).
(g) Any Bank or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Borrower furnished to such Bank
by or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information.
(h) Notwithstanding anything to the contrary contained herein,
any Bank (a "Granting Bank") may grant to a special purpose funding vehicle (an
"SPC") the option to fund all or any part of any Loan that such Granting Bank
would otherwise be obligated to fund pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to fund any Loan,
and (ii) if an SPC elects not to exercise such option or otherwise fails to fund
all or any part of such Loan, the Granting Bank shall be obligated to fund such
Loan pursuant to the terms hereof. The funding of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Bank to the same extent, and as if,
such Loan were funded by such Granting Bank. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or payment under this Agreement
for which a Bank would otherwise be liable for so long as, and to the extent,
the Granting Bank provides such indemnity or makes such payment. Notwithstanding
anything to the contrary contained in this Agreement, any SPC may disclose on a
confidential basis any non-public information relating to its funding of Loans
to any rating agency, commercial paper dealer or
65
<PAGE> 70
provider of any surety or guarantee to such SPC. This paragraph may not be
amended without the prior written consent of each Granting Bank, all or any part
of whose Loan is being funded by an SPC at the time of such amendment.
(i) Any Bank may at any time assign for security purposes all or
any portion of its rights under this Agreement and the Notes issued to it to a
Federal Reserve Bank; provided that no such assignment shall release a Bank from
any of its obligations hereunder.
(j) Subject to Section 6.02, the Borrower shall not assign or
delegate any of its rights or duties hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Agent in connection
with the preparation of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by the Agent or any Bank in connection with the
enforcement or protection of their rights in connection with this Agreement and
the other Loan Documents or in connection with the Loans made or the Notes
issued hereunder, including the fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Agent, and, in connection with any such
amendment, modification or waiver or any such enforcement or protection, the
fees, charges and disbursements of any other internal or external counsel for
the Agent or any Bank. The Borrower further agrees that it shall indemnify the
Banks from and hold them harmless against any documentary taxes, assessments or
charges made by any Governmental Authority by reason of the execution and
delivery of this Agreement or any of the other Loan Documents.
(b) The Borrower agrees to indemnify the Agent and each Bank and
each of their respective directors, officers, employees and agents (each such
person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges and disbursements, incurred
by or asserted against any Indemnitee arising out of, in any way connected with,
or as a result of (i) the execution or delivery of this Agreement or any other
Loan Document or any agreement or instrument contemplated thereby, the
performance by the parties thereto of their respective
66
<PAGE> 71
obligations thereunder or the consummation of the Transactions and the other
transactions contemplated thereby, (ii) the use of the proceeds of the Loans or
(iii) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Agent or any Bank. All amounts due under this
Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing and the Loans shall have been accelerated as set
forth in Article VII, each Bank is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Bank (or bank
Controlling such Bank) to or for the credit or the account of the Borrower
against any of and all the obligations of the Borrower now or hereafter existing
under this Agreement and other Loan Documents held by such Bank. The rights of
each Bank under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Bank may have. Any Bank shall
provide the Borrower with written notice promptly after exercising its rights
under this Section.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Agent or any Bank in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to
67
<PAGE> 72
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the Agent
and the Banks hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies which they would otherwise have. No
waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Banks; provided, however,
that no such agreement shall (i) decrease the principal amount of, or extend the
maturity of or any scheduled principal payment date or date for the payment of
any interest on any Loan, or waive or excuse any such payment or any part
thereof, or decrease the rate of interest on any Loan, without the prior written
consent of each holder of a Note affected thereby, (ii) change or extend the
Commitment or decrease the Commitment Fees of any Bank without the prior written
consent of such Bank, or (iii) amend or modify the provisions of Section 2.15,
the provisions of this Section or the definition of "Required Banks", without
the prior written consent of each Bank; provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the Agent
hereunder without the prior written consent of the Agent. Each Bank and each
holder of a Note shall be bound by any waiver, amendment or modification
authorized by this Section regardless of whether its Note shall have been marked
to make reference thereto, and any consent by any Bank or holder of a Note
pursuant to this Section shall bind any person subsequently acquiring a Note
from it, whether or not such Note shall have been so marked.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything
herein or in the Notes to the contrary, if at any time the applicable interest
rate, together with all fees and charges which are treated as interest under
applicable law (collectively the "Charges"), as provided for herein or in any
other document executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Bank, shall exceed the
68
<PAGE> 73
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by such Bank in accordance with applicable law, the
rate of interest payable under the Note held by such Bank, together with all
Charges payable to such Bank, shall be limited to the Maximum Rate.
SECTION 9.10. Entire Agreement. This Agreement and the other
Loan Documents constitute the entire contract between the parties relative to
the subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 9.11. Waiver of Jury Trial. Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any litigation directly or indirectly arising
out of, under or in connection with this Agreement or any of the other Loan
Documents. Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement and the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications in
this Section 9.11.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together
69
<PAGE> 74
shall constitute but one contract, and shall become effective as provided in
Section 9.03.
SECTION 9.14. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a)
The Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the Agent
or any Bank may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Borrower or its
properties in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
70
<PAGE> 75
WITNESS the due execution hereof as of the date first above
written.
AVISTA CORPORATION,
by
/s/ Jon E. Eliassen
---------------------------------
Name: Jon E. Eliassen
Title: Senior Vice President
and Chief Financial Officer
TORONTO DOMINION (TEXAS), INC., as
Agent,
by
/s/ Jeffery R. Lents
---------------------------------
Name: Jeffery R. Lents
Title: Vice President
THE BANK OF NEW YORK, as
Documentation Agent,
by
/s/ Trisha E. Hardy
---------------------------------
Name: Trisha E. Hardy
Title: Assistant Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Syndication
Agent,
by
/s/ Gary M. Tsuyuki
---------------------------------
Name: Gary M. Tsuyuki
Title: Managing Director
TORONTO DOMINION (TEXAS), INC.,
by
71
<PAGE> 76
/s/ Jeffery R. Lents
---------------------------------
Name: Jeffery R. Lents
Title: Vice President
THE BANK OF NEW YORK,
by
/s/ Trisha E. Hardy
---------------------------------
Name: Trisha E. Hardy
Title: Assistant Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
by
/s/ Gary M. Tsuyuki
---------------------------------
Name: Gary M. Tsuyuki
Title: Managing Director
THE BANK OF NOVA SCOTIA
by
/s/ Daryl K. Hogge
---------------------------------
Name: Daryl K. Hogge
Title: Officer
FIRST SECURITY BANK, N.A.,
by
/s/ Brian W. Cook
---------------------------------
Name: Brian W. Cook
Title: Vice President
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
by
/s/ Robert Bottamedi
---------------------------------
Name: Robert Bottamedi
Title: Vice President
MELLON BANK, N.A.,
by
/s/ Mark W. Rogers
---------------------------------
72
<PAGE> 77
Name: Mark W. Rogers
Title: Vice President
U.S. BANK, NATIONAL ASSOCIATION,
by
/s/ Wilfred C. Jack
---------------------------------
Name: Wilfred C. Jack
Title: Vice President
WACHOVIA BANK, N.A.,
by
/s/ Jessica S. Wright
---------------------------------
Name: Jessica S. Wright
Title: Vice President
WELLS FARGO BANK, N.A.,
by
/s/ Tom Beil
---------------------------------
Name: Tom Beil
Title: Vice President
EXHIBIT A
[FORM OF]
NOTE
$__________________ [ ], 1999
New York, New York
FOR VALUE RECEIVED, the undersigned, AVISTA CORPORATION, a Washington
corporation (the "Borrower"), hereby promises to pay to the order of
_______________________ (the "Bank"), at the office of Toronto Dominion (Texas),
Inc., (the "Agent"), at 909 Fanning, Suite 1700, Houston, Texas 77010, (i) on
the last day of each Interest Period, as defined in the $135,000,000 Amended and
Restated Revolving Credit Agreement dated as of June 29, 1999 (the "Credit
Agreement"), among the Borrower, the Banks named therein and the Agent, the
aggregate unpaid principal amount of all Loans (as defined in the Credit
73
<PAGE> 78
Agreement) made to the Borrower by the Bank pursuant to the Credit Agreement to
which such Interest Period applies and (ii) on the Expiration Date (as defined
in the Credit Agreement) the lesser of the principal sum of __________________
Dollars ($______________) and the aggregate unpaid principal amount of all Loans
made to the Borrower by the Bank pursuant to the Credit Agreement, in lawful
money of the United States of America in immediately available funds, and to pay
interest from the date hereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at the rate or rates per annum and
payable on the dates provided in the Credit Agreement.
The Borrower promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at the rate or rates provided in the Credit Agreement.
The Borrower hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The nonexercise by the holder of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
and maturity dates thereof shall be endorsed by the holder hereof on the
schedule attached hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof, or otherwise recorded by
such holder in its internal records; provided, however, that the failure of the
holder hereof to make such a notation or any error in such a notation shall not
affect the obligations of the Borrower under this Note.
This Note is one of the Notes referred to in the Credit
Agreement, which, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events, for optional and
mandatory prepayment of the principal hereof prior to the maturity hereof and
for the amendment or waiver of certain provisions of the Credit Agreement, all
upon the terms and conditions therein specified. This Note shall be construed in
accordance with and governed by the laws of the State of New York and any
applicable laws of the United States of America.
AVISTA CORPORATION
by
74
<PAGE> 79
---------------------------------
Name:
Title:
75
<PAGE> 80
Loans and Payments
Payments
<TABLE>
<CAPTION>
Amount Unpaid Name of
and Principal Person
Type/Class of Maturity Balance of Making
Date Loan Date Principal Interest Note Notation
---- ---- ---- --------- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
76
<PAGE> 81
EXHIBIT B
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the $135,000,000 Amended and Restated
Credit Agreement dated as of June 29, 1999 (as in effect from time to time, the
"Credit Agreement"), among Avista Corporation, a Washington corporation (the
"Borrower"), the banks listed on Schedule 2.01 thereto (the "Banks") and Toronto
Dominion (Texas), Inc., as agent for the Banks (in such capacity, the "Agent").
Terms defined in the Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to
the Assignee, and the Assignee hereby purchases and assumes, without recourse,
from the Assignor, effective as of the Effective Date set forth on the reverse
hereof, the interests set forth on the reverse hereof (the "Assigned Interest")
in the Assignor's rights and obligations under the Credit Agreement, including,
without limitation, the interests set forth on the reverse hereof in the
Commitment of the Assignor on the Effective Date and Revolving Loans [and
Auction Loans] owing to the Assignor which are outstanding on the Effective
Date, together with unpaid interest accrued on the assigned Revolving Loans [and
Auction Loans] to the Effective Date, and the amount, if any, set forth on the
reverse hereof of the Fees accrued to the Effective Date for the account of the
Assignor. Each of the Assignor and the Assignee hereby makes and agrees to be
bound by all the representations, warranties and agreements set forth in Section
9.04(c) of the Credit Agreement, a copy of which has been received by each such
party. From and after the Effective Date (i) the Assignee shall be a party to
and be bound by the provisions of the Credit Agreement and, to the extent of the
interests assigned by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and under the Loan Documents and (ii) the
Assignor shall, to the extent of the interests assigned by this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Credit Agreement.
2. This Assignment and Acceptance is being delivered to the
Agent together with (i) the Notes evidencing the Loans
77
<PAGE> 82
included in the Assigned Interest, (ii) if the Assignee is organized under the
laws of a jurisdiction outside the United States, the forms specified in Section
2.18(f) of the Credit Agreement, duly completed and executed by such Assignee,
(iii) if the Assignee is not already a Bank under the Credit Agreement, an
Administrative Questionnaire in the form of Exhibit C to the Credit Agreement
and (iv) a processing and recordation fee of $5,000.
3. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment (may not be fewer than 5 Business Days after the
Date of Assignment):
<TABLE>
<CAPTION>
Percentage Assigned of
Facility and Commitment
Principal Amount Thereunder (set forth,
Assigned (and to at least 8 decimals,
identifying as a percentage of the
information as to Facility and the
individual aggregate Commitments of
Facility Auction Loans) all Banks thereunder)
- -------- -------------- ---------------------
<S> <C> <C>
Commitment Assigned: $ %
Revolving Loans: $ %
Auction Loans: $ %
Fees Assigned (if any): $ %
</TABLE>
78
<PAGE> 83
The terms set forth above and on the reverse
side hereof are hereby agreed to: Accepted:
__________________, as Assignor TORONTO DOMINION (TEXAS), INC., as
Agent
By: By:
--------------------------------- ---------------------------------
Name: Name:
Title: Title:
__________________, as Assignee AVISTA CORPORATION
By: By:
--------------------------------- ---------------------------------
Name: Name:
Title: Title:
<PAGE> 84
EXHIBIT C
Administrative Questionnaire
<PAGE> 85
EXHIBIT D
Opinion of Counsel for the Borrower
SCHEDULE 2.01
Banks
<TABLE>
<CAPTION>
Bank Commitment
- ---- ----------
<S> <C>
Toronto Dominion (Texas), Inc. $18,125,000.00
909 Fanning
Suite 1700
Houston, TX 77010
Attention: Ms. Kimberly Burleson
Telecopy: (713) 951-9921
With copies to:
The Toronto-Dominion Bank U.S.A. Division
31 West 52nd Street
New York, NY 10019-6101
Attention: Mr. Peter Cody
Telecopy: (212) 262-1929
Bank of America National Trust $2,500.000.00
and Savings Association
555 California Street
41st Floor
San Francisco, CA 94104
Attention: Mr. Lawrence Balingit
Telecopy: (415) 622-0632
The Bank of Nova Scotia $20,000,000.00
888 S.W. 5th Avenue
Suite 750
Portland, OR 97204-2078
Attention: Mr. Scott Bruun
Telecopy: (503) 222-5502
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
<S> <C>
The Bank of New York $24,375,000.00
One Wall Street
New York, NY 10286
Attention of: Ms. Trisha E. Hardy
Telecopy: (212) 635-7923
First Security Bank, N.A. $13,750,000.00
119 N. 9th Street(83702)
Boise, ID 83730
Attention: Mr. Brian Cook
Telecopy: (208) 393-2472
Morgan Guaranty Trust Company of New York $15,000,000.00
60 Wall Street
New York, NY 10261
Attention: Mr. Robert Bottamedi
Telecopy: (212) 648-5018
Mellon Bank, N.A. $5,625,000.00
1 Mellon Bank Center
Room 151-4530
Pittsburgh, PA 15258
Attention: Mr. Mark Rogers
Telecopy: (412) 236-1840
U.S. Bank $7,500,000.00
1420 Fifth Avenue
11th Floor
WWH276
Seattle, WA 98101
Attention: Mr. Wilfred Jack
Telecopy: (206) 344-3643
Wachovia Bank, N.A. $15,625,000.00
191 Peachtree Street, N.E.
Atlanta, GA 30303
Attention: Ms. Jessica Wright
Telecopy: (404) 332-5397
Wells Fargo Bank, National Association $12,500,000.00
524 W. Riverside Avenue
Suite 800
8th Floor
Spokane, WA 99210
</TABLE>
<PAGE> 87
Attention: Mr. Tom Beil
Telecopy: (509) 455-5762
<PAGE> 88
SCHEDULE 3.14
Significant Subsidiaries
<TABLE>
<CAPTION>
Name Percent Ownership
---- -----------------
<S> <C>
Avista Capital, Inc. 100%
Pentzer Corporation 100%
</TABLE>
<PAGE> 1
Exhibit 10(q)-7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into this 10th
day of September, 1998, by and between THE WASHINGTON WATER POWER COMPANY, a
Washington corporation, whose principal place of business is located at 1411
East Mission Avenue, Spokane, Washington ("WWP" or the "Company") and David J.
Meyer (the "Employee"), an individual currently residing in Spokane, Washington.
The Company or the Employee may hereafter be referred to individually as a
"Party" or collectively as the "Parties."
WHEREAS, the Company wishes to employ the Employee as Senior Vice
President and General Counsel, and the Employee wishes to accept such
employment;
WHEREAS, the Company and the Employee desire to enter into this
Employment Agreement setting forth the terms and conditions of employment;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the Parties
agree as follows:
1. Employment and Duties.
1.1 The Company, and any successor thereto, agree to employ
Employee and Employee agrees to be employed by the Company beginning as of the
Effective Date of this Agreement, subject to the terms and conditions of this
Agreement. The Effective Date of this Agreement is September 16, 1998. Employee
agrees to begin performing the services as contemplated herein as soon as is
reasonably practicable after the Effective Date, after giving any required
notice to his existing employer.
1.2 From the Effective Date, and for the term of this Agreement,
Employee shall serve as General Counsel, and, subject to ratification and
approval by the Board of Directors of the Company, shall also hold the office of
Senior Vice President. Employee shall perform such duties and exercise such
powers as are customarily expected of the Senior Vice President and General
Counsel of business organizations which are similar to the Company. Such titles,
authority, duties and responsibilities may be changed from time to time only by
mutual written agreement of the Parties.
1.3 Employee's period of employment under this Agreement shall be
for a period of five (5) years, beginning as of the Effective Date of this
Agreement ("Initial Term"), and shall continue thereafter, on a year-to-year
basis, unless terminated by written notice delivered to Employee not less than
twelve (12) months prior to any anniversary date following the Initial Term. The
Initial Term, plus any year-to-year renewals, shall collectively constitute the
"Employment Period."
1.4 Employee shall, during the period of the employment by
Company, devote his entire business time, energy and best efforts to the
business and affairs of the Company and not engage, directly or indirectly, in
any other business or businesses to the extent such activity would be contrary
to the interests of Company or any Affiliate of Company or would detract from
Employee's ability to perform his duties under this Agreement.
<PAGE> 2
1.5 Employee shall be subject to the policies and procedures
adopted, established or amended by Company from time to time which are
applicable to all employees generally, except where inconsistent herewith.
2. Compensation and Benefits. During the term of this Agreement the
Company agrees to pay or cause to be paid to Employee, and Employee agrees to
accept in exchange for the services rendered hereunder by him, the following
compensation:
2.1 Base Salary. The Company shall pay Employee an annual base
salary of Two Hundred and Forty Thousand ($240,000.00), payable not less often
than monthly in equal installments, which salary shall be subject to prospective
adjustment from time to time by the Board of Directors of the Company, in its
sole discretion, but shall not be reduced during the term of this Agreement. An
increase in annual base salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement.
2.2 Signing Bonus. On the Effective Date, the Company shall award
Employee a signing bonus of $200,000 (the "Signing Bonus"). In the event that
Employee terminates his employment with the Company prior to the expiration of
the Employment Period, other than for Good Reason (as defined below), Employee
shall repay to the Company, within sixty (60) days of date of termination, the
amount of the Signing Bonus as is proportionate to the period of time remaining
in the Employment Period.
2.3 Restricted Stock Award. Employee shall be awarded restricted
shares of the Company's Common Stock (the "Common Stock") having a fair market
value on the Effective Date equal to $200,000. This award will vest at me rate
of 25% on each of the first four anniversaries of the Effective Date. For
purposes of this section, the "fair market value" of the Common Stock means the
average of the high and low trading prices on the applicable day. This award
shall be made by the Company as soon as reasonably practicable following the
Effective Date. Regardless of the date this award is made, the number of
restricted shares awarded to Employee shall be calculated as described in the
first sentence of this section 2.3.
2.4 Stock Option Grant. On the Effective Date, Employee shall be
awarded an option to purchase 20,000 shares of Common Stock, with an exercise
price equal to the fair market value of the Common Stock on the Effective Date.
These options will vest at the rate of 25% on each of the first four
anniversaries of the Effective Date.
2.5 Incentive. Retirement. and Welfare Benefit Plans. During the
term of this Agreement, and so long as he is employed by the Company, Employee
shall be eligible to participate in all incentive, stock option, restricted
stock, performance unit or share, savings, retirement, health insurance or
health care plan, life insurance, disability insurance and welfare plans,
practices, policies and programs, including indemnification and a change of
control agreements, presently available or offered generally to other senior
executives of the Company, except with respect to any benefits under any plan,
practice, policy or program to which the Employee has waived his rights in
writing. As of the Effective Date, Employee shall be deemed to be an eligible
Employee to participate in the supplemental executive retirement plan and other
pension/benefit plans of the Company (or in the applicable successor plans
thereto), on terms not less favorable than those now in effect, and with
termination/death/disability benefits accrued and vesting as of the Effective
Date, and calculated on the basis of not less than twenty years of
2
<PAGE> 3
credited benefit service (@ 2.5%) for these and any other plans or programs
relating to termination, death, disability, and based on a level of final
average earnings of not less than the Employee's annual base salary and
bonus/incentive compensation earned during his first full year of employment.
2.6 Other Fringe Benefits. During the term of this Agreement,
Employee shall be entitled to other fringe benefits provided by Company policy
to officers or senior executives of the Company. In addition, Employee shall
also be entitled to not less than thirty (30) days paid Leave pursuant to the
Company's One-Leave Program (as currently in effect or as may be modified from
time to time).
3. Termination. Employment of Employee under this Agreement may be
terminated as follows:
3.1 By the Company. With or without Cause (as defined below), the
Company may terminate the Employment of Employee at any time during the
Employment Period upon giving Notice of Termination (as defined below).
3.2 By Executive. With or without Good Reason (as defined below),
Employee may terminate his employment at any time during the Employment Period
upon giving Notice of Termination.
3.3 Automatic Termination. This Agreement and Employee's
employment hereunder shall terminate automatically upon the death or total
disability of Employee. The term "total disability" as used herein shall mean
permanent and total disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"). Termination under this Section
3.3 shall be deemed to be effective (a) at the end of the calendar month in
which Employee's death occurs or (b) immediately upon a determination by the
Board of Directors of Employee's total disability, as defined herein.
3.4 Notice. Except as otherwise provided in Section 1.3, The term
"Notice of Termination" shall mean at least twenty (20) days' written notice of
termination of Employee's employment, during which period Employee's employment
and performance of services will continue; provided, however, that the Company
may, upon notice to Employee and without reducing Employee's compensation during
such period, excuse Employee from any or all of his duties during such period.
The effective date of the termination of Employee's employment hereunder shall
be the date on which such twenty (20) day period expires.
3.5 Cause. Wherever reference is made in this Agreement to
termination being with or without Cause, "Cause" is limited to the occurrence of
one or more of the following events:
(a) The willful failure or refusal to carry out the lawful duties
of Employee described herein or any directions of the Board of Directors
of the Company, which directions are reasonably consistent with the
duties set forth herein to be performed by the Employee;
3
<PAGE> 4
(b) Violation by Employee of a state or federal criminal law
involving the commission of a crime against the Company or a felony;
(c) Current use by Employee of illegal substances, deception,
fraud, misrepresentation or dishonesty by Employee; any incident
materially compromising Employee's reputation or ability to represent
the Company with the public; any act or omission by Employee which
substantially impairs the Company's business, goodwill or reputation; or
any other misconduct; or
(d) Any other material and willful violation of any provision of
this Agreement.
3.6 Good Reason. Whenever reference is made in this Agreement to
termination being with or without Good Reason, "Good Reason" is limited to the
occurrence of one or more of the following events:
(a) The reduction in the Employee's annual base salary and other
entitlements specified in this Agreement or the reduction in the value
of other bonus payments or equity awards that Employee is eligible to
receive under this Agreement (provided, however, that Good Reason shall
not exist under this Section 3.6(a) in the event Employee does not
actually realize such values because of failure to satisfy performance
or other criteria applicable to such bonus payments or equity awards);
(b) The material diminution, change or reduction without his
consent of the Employee's title, authority, duties or responsibilities;
(c) The Company requiring Employee without his consent to be
based at any offices or locations other than his location as of the
Effective Date of this Agreement; or
(d) Any breach by the Company of any other material provision of
this Agreement.
4. Termination Payments. In the event of termination of the employment
of Employee, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 4.
4.1 Termination by the Company. If the Company terminates the
Employee's employment without Cause prior to the end of the Employment Period,
(a) (i) Employee shall be entitled to receive termination payments equal to the
greater of twenty-four (24) months' annual base salary or the annual base salary
Employee would have received if his employment hereunder had continued until the
end of the Employment Period; (ii) the restricted stock award granted to
Employee under Section 2.3 hereof will vest in full; and (iii) vesting of all
other equity awards or stock options granted to Employee pursuant to this
Agreement will accelerate on the date of termination, but only up to the
percentages that would have been vested had Employee remained in regular
employment with the Company to the end of the Employment Period; (iv) the
Company shall pay to or cause to be paid to the Employee, pursuant to the terms
of the respective plans, based on the Employee's annual base salary at the time
Notice of Termination is given, the value of all benefits to which the Employee
would have been entitled had he remained
4
<PAGE> 5
in the employment of the Company until the end of the Employment Period, under
the Company's pension plans, supplemental executive retirement plans, disability
plans and such other benefit plans as may be adopted from time to time during
the Employee's employment with the Company; and (v) the Company shall continue
medical and welfare benefits for the Employee and the Employee's spouse at least
equal to those which would have been provided if the Employee's employment had
not been terminated, such benefits to be in accordance with the most favorable
medical and welfare benefit plans, practices, programs or policies of the
Company as in effect and applicable generally to other senior executives of the
Company and their families; and (b) Employee shall be entitled to receive any
unpaid annual base salary which has accrued for services already performed as of
the date termination of Employee's employment becomes effective, and any earned
and unpaid incentives, as well as any vested pension and benefit rights. For
purposes of determining under clause (a)(iii) above whether equity awards or
options that vest upon achievement of stock price appreciation goals would have
been vested at the end of the Employment Period, a 15% annual growth rate in the
market price of the Common Stock from the date of termination of employment
shall be assumed.
If Employee is terminated by the Company for Cause, Employee shall not
be entitled to receive any of the foregoing benefits, other than those set forth
in clause (b) above.
4.2 Termination by Employee. In the case of the termination of
Employee's employment by Employee other than for Good Reason, Employee shall not
be entitled to any payments hereunder, other than those set forth in Section
4.1(b) hereof. In the case of the termination of Employee's employment for Good
Reason, Employee shall be entitled to receive those payments set forth in
Section 4.1(a) and (b) hereof.
4.3 Expiration of Term. In the case of a termination of
Employee's employment as a result of the expiration of the Employment Period,
Employee shall not be entitled to receive any payments hereunder, other than
those set forth in Section 4.1(b) hereof.
4.4 Termination Because of Death or Total Disability. In the
event of a termination of Employee's employment because of his death or total
disability, Employee or his Personal Representative shall be entitled to receive
termination payments in accordance with the Company's Executive Income
Continuation Plan, or any successor plan thereto generally applicable to the
Company's executive officers.
4.5 Payment Schedule. All payments under this Section 4 shall be
made to the Employee at the same interval as payments of salary were made to
Employee immediately prior to termination.
5. Confidential Information. Employee acknowledges that the Company's
business is highly competitive and that the Company's books, records and
documents, the Company's technical information concerning its products,
equipment, services and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning the Company's customers and business Affiliates, all compromise
confidential business information and trade secrets of the Company which are
valuable, special, and unique assets of the Company which the Company uses in
its business to obtain a competitive advantage over the Company's competitors
which do not know or use this information. Employee further acknowledges that
protection of the Company's confidential
5
<PAGE> 6
business information and trade secrets against unauthorized disclosure and use,
is of critical importance to the Company in maintaining its competitive
position. Accordingly, Employee hereby agrees that he will not, at any time
during or after his employment by the Company, make any unauthorized disclosure
of any confidential business information or trade secrets of the Company, or
make any use thereof, except for the benefit of, and on behalf of the Company,
or make any use thereof, except for the benefit of and on behalf of the Company.
For the purposes of this Section, the term the "Company" shall also include
Affiliates of the Company.
6. Return of Materials. In the event of the termination of Employee's
employment with the Company or the expiration of this Agreement, Employee will
return all documents, data and other materials of whatever nature, including,
without limitation, drawings, specifications, research, reports, embodiments,
software and manuals to the Company which pertain to his employment with the
Company or to any Intellectual Property and shall not retain or cause or allow
any third party to retain photocopies of other reproductions of the foregoing.
7. Notice and Cure of Breach. Whenever a breach of this Agreement by
either Party is relied upon as justification for any action taken by the other
Party pursuant to any provisions of this Agreement, other than pursuant to the
definition of "Cause" set forth in Section 3 hereof, before such action is
taken, the Party asserting the breach of this Agreement shall give the other
Party at least twenty (20) days' prior written notice of the existence and the
nature of such breach before taking further action hereunder and shall give the
Party purportedly in breach of this Agreement the opportunity to correct such
breach during the twenty (20) day period.
8. Form of Notice. All notices given hereunder shall be given in
writing, shall specifically refer to this Agreement and shall be personally
delivered or sent by telecopy or other electronic facsimile transmission or by
reputable overnight courier, at the address set forth below or at such other
address as may hereafter be designated by notice given in compliance with the
terms hereof. Such notice shall be effective upon receipt or upon refusal of the
addressee to accept delivery.
If to Employee: The Washington Water Power Company
East 1411 Mission Avenue
Spokane, Washington
If to the Company: The Washington Water Power Company
East 1411 Mission Avenue
Spokane, Washington
9. Assignment. This Agreement is personal to the Employee and shall not
be assignable by Employee. The Company may assign its rights hereunder to (a)
any corporation resulting from any merger, consolidation or other reorganization
to which the Company is a party or (b) any corporation, partnership, association
or other person to which the Company may transfer all or substantially all of
the assets and business of the Company existing at such time. All of the terms
and provisions of this Agreement shall be binding upon and shall inure to the
benefit of and may be enforceable by the Parties hereto and their respective
successors and permitted assigns.
6
<PAGE> 7
10. Waivers. No delay or failure by any Party hereto in exercising,
protecting or enforcing any of its rights, tides, interests or remedies
hereunder, and no course of dealing or performance with respect thereto, shall
constitute a waiver thereof. The express waiver by a Party hereto of any right,
title, interest or remedy in a particular instance or circumstance shall not
constitute a waiver thereof in any other instance or circumstance. All rights
and remedies shall be cumulative and not exclusive of any other rights or
remedies. Any controversies or claims arising out of or relating to this
Agreement shall be fully and finally settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effective (the "AAA Rules"), conducted by one arbitrator either mutually agreed
upon by the Company and the Employee or chosen in accordance with the AAA Rules,
except that the Parties thereto shall have any right to discovery as would be
permitted by the Federal Rules of Civil Procedure for a period of ninety (90)
days following the commencement of such arbitration and the arbitrator thereof
shall resolve any dispute which arises in connection with such discovery. The
prevailing Party shall be entitled to costs, expenses and reasonable attorney
fees, and judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
11. Amendments in Writing. No amendment, modification, waiver,
termination or discharge of any provision of this Agreement, nor consent to any
departure therefrom by either Party hereto, shall in any event be effective
unless the same shall be in writing, specifically identifying this Agreement and
the provision intended to be amended, modified, waived, terminated or discharged
and signed by the Company and Employee, and each such amendment, modification,
waiver, termination or discharge shall be effective only in the specific
instance and for the specific purpose for which given. No provision of this
Agreement shall be varied, contradicted or explained by any oral agreement,
course of dealing or performance or any other matter not set forth in an
agreement in writing and signed by the Company and the Employee.
12. Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable in any jurisdiction, for any reason, then, to
the full extent permitted by law (a) all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
order to carry out the intent of the Parties hereto as nearly as may be
possible, (b) such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision hereof; and (c)
any court or arbitrator having jurisdiction thereof shall have the power to
reform such provision to the extent necessary for such provision to be
enforceable under applicable law. Any benefits and payments owing to the
Employee under this Agreement shall be a general liability of the Company, and
shall be paid from the general assets of the Company, and shall be an unfunded
and unsecured promise to pay money in the future, to the extent the Company is
unable or has not elected to otherwise fund or secure such payments or
administer such payments and benefits under an existing plan or program.
13. Miscellaneous.
13.1 This Agreement shall in all respects, including all matters
of construction, validity and performance, be governed by and construed and
enforced in accordance with, the Laws of the State of Washington, without regard
to any rules governing conflicts of laws.
13.2 All headings used herein are for convenience only and shall
not in any way affect the construction of or be taken into consideration in
interpreting this Agreement.
7
<PAGE> 8
13.3 This Agreement, and any amendment or modification entered
into pursuant thereto, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
13.4 This Agreement on the date hereof constitutes the entire
agreement between the Company and Employee with respect to the subject matter
hereof and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Employee with respect
to such subject matter are hereby superseded and nullified in their entireties.
IN WITNESS WHEREOF the Parties have executed and entered into this
Agreement on the date set forth above.
EMPLOYEE: COMPANY:
/s/ David J. Meyer By /s/ T. M. Matthews
- --------------------------------- -----------------------------------
Title Chairman and CEO
--------------------------------
8
<PAGE> 1
EXHIBIT 12
AVISTA CORPORATION
Computation of Ratio of Earnings to Fixed Charges and Preferred Dividend
Requirements Consolidated
(Thousands of Dollars)
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt $ 62,032 $ 66,218 $ 63,413 $ 60,256 $ 55,580
Amortization of debt expense
and premium - net 3,044 2,859 2,862 2,998 3,441
Interest portion of rentals 4,645 4,301 4,354 4,311 3,962
-------- -------- -------- -------- --------
Total fixed charges $ 69,721 $ 73,378 $ 70,629 $ 67,565 $ 62,983
======== ======== ======== ======== ========
Earnings, as defined:
Net income from continuing ops $ 26,031 $ 78,139 $114,797 $ 83,453 $ 87,121
Add (deduct):
Income tax expense 16,740 43,335 61,075 49,509 52,416
Total fixed charges above 69,721 73,378 70,629 67,565 62,983
-------- -------- -------- -------- --------
Total earnings $112,492 $194,852 $246,501 $200,527 $202,520
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 1.61 2.66 3.49 2.97 3.22
Fixed charges and preferred
dividend requirements:
Fixed charges above $ 69,721 $ 73,378 $ 70,629 $ 67,565 $ 62,983
Preferred dividend requirements (1) 35,149 13,057 8,261 12,711 14,612
-------- -------- -------- -------- --------
Total $104,870 $ 86,435 $ 78,890 $ 80,276 $ 77,595
======== ======== ======== ======== ========
Ratio of earnings to fixed charges
and preferred dividend requirements 1.07 2.25 3.12 2.50 2.61
</TABLE>
- ----------
(1) Preferred dividend requirements have been grossed up to their pre-tax level.
<PAGE> 1
Exhibit 21
Avista Corporation
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
Subsidiary State of Incorporation
---------- ----------------------
<S> <C>
Altus Corporation Nevada
Avista Capital, Inc. Washington
Avista Advantage, Inc. Washington
Avista Communications, Inc. Washington
Avista Development, Inc. Washington
Avista Energy, Inc. Washington
Avista Fiber, Inc. Washington
Avista International, Inc. Washington
Avista Laboratories, Inc. Washington
Avista Power, Inc. Washington
Avista Services, Inc. Washington
Pentzer Corporation Washington
WWP Receivables Corp. Washington
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AVISTA CORPORATION, INCLUDED IN THE ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,500,837
<OTHER-PROPERTY-AND-INVEST> 714,186
<TOTAL-CURRENT-ASSETS> 1,214,069
<TOTAL-DEFERRED-CHARGES> 284,402
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,713,494
<COMMON> 310,491
<CAPITAL-SURPLUS-PAID-IN> (4,513)
<RETAINED-EARNINGS> 87,521
<TOTAL-COMMON-STOCKHOLDERS-EQ> 393,499
145,000
263,309
<LONG-TERM-DEBT-NET> 544,895<F1>
<SHORT-TERM-NOTES> 111,030
<LONG-TERM-NOTES-PAYABLE> 5,097
<COMMERCIAL-PAPER-OBLIGATIONS> 10,000
<LONG-TERM-DEBT-CURRENT-PORT> 49,401
0
<CAPITAL-LEASE-OBLIGATIONS> 4,810
<LEASES-CURRENT> 1,650
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,184,803<F2>
<TOT-CAPITALIZATION-AND-LIAB> 3,713,494
<GROSS-OPERATING-REVENUE> 7,904,984
<INCOME-TAX-EXPENSE> 16,740<F3>
<OTHER-OPERATING-EXPENSES> 7,873,627
<TOTAL-OPERATING-EXPENSES> 7,873,627
<OPERATING-INCOME-LOSS> 31,357
<OTHER-INCOME-NET> 76,490
<INCOME-BEFORE-INTEREST-EXPEN> 107,847<F4>
<TOTAL-INTEREST-EXPENSE> 65,076
<NET-INCOME> 26,031
21,392
<EARNINGS-AVAILABLE-FOR-COMM> 4,639
<COMMON-STOCK-DIVIDENDS> 18,301
<TOTAL-INTEREST-ON-BONDS> 44,541
<CASH-FLOW-OPERATIONS> 111,176
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
<FN>
<F1>LONG-TERM DEBT-NET DOES NOT MATCH THE AMOUNT REPORTED ON THE COMPANY'S
CONSOLIDATED STATEMENT OF CAPITALIZATION AS LONG-TERM DEBT DUE TO THE OTHER
CATEGORIES REQUIRED BY THIS SCHEDULE.
<F2>OTHER ITEMS CAPITAL AND LIABILITIES INCLUDES THE CURRENT LIABILITIES, DEFERRED
CREDITS AND MINORITY INTEREST, LESS CERTAIN AMOUNTS INCLUDED UNDER LONG-TERM
DEBT-CURRENT PORTION AND LEASES-CURRENT. FROM THE COMPANY'S CONSOLIDATED
BALANCE SHEET.
<F3>THE COMPANY DOES NOT INCLUDE INCOME TAX EXPENSE AS AN OPERATING EXPENSE ITEM.
IT IS INCLUDED ON THE COMPANY'S STATEMENTS AS A BELOW-THE-LINE ITEM.
<F4>INCOME BEFORE INTEREST EXPENSE IS NOT A SPECIFIC LINE ITEM ON THE COMPANY'S
INCOME STATEMENTS. THE COMPANY COMBINES TOTAL INTEREST EXPENSE AND OTHER INCOME
TO CALCULATE INCOME BEFORE INCOME TAXES.
</FN>
</TABLE>
