PRELIMINARY PRICING SUPPLEMENT ISSUED AUGUST 16, 2000 (SUBJECT TO COMPLETION)
(TO PROSPECTUS SUPPLEMENT DATED AUGUST 19, 1999 AND
PROSPECTUS DATED AUGUST 17, 1999)
$200,000,000
AVISTA CORPORATION
% NOTES DUE 2005
(MEDIUM-TERM NOTES, SERIES D)
---------------
Interest Payable on and
---------------
PRICE % AND ACCRUED INTEREST, IF ANY
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
------ ----------- -------
Per Note...................... % % %
Total......................... $ $ $
The % Notes Due 2005 are a tranche of Avista Corporation's securities designated
Medium-Term Notes, Series D, and are described in the accompanying prospectus
and prospectus supplement. The Notes will bear interest at the rate of % per
annum from the date of issuance, provided, however, that the interest rate
payable on the Notes will be subject to adjustment to % per annum in the event
that Moody's Investors Service, Inc. and Standard & Poor's Rating Services
change their ratings on the Notes to be below investment grade, as described
herein.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PRICING
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT OR PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Morgan Stanley & Co. Incorporated expects to deliver the Notes to purchasers on
August , 2000.
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MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
August , 2000
This pricing supplement relates to an effective registration statement under the
Securities Act of 1933, and is subject to completion or amendment.
THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND
PROSPECTUS INCORPORATE BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT AVISTA CORP. THAT IS NOT INCLUDED IN OR DELIVERED WITH THE PROSPECTUS.
THIS INFORMATION IS AVAILABLE TO YOU AS SET FORTH IN THE ACCOMPANYING
PROSPECTUS.
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TABLE OF CONTENTS
PRICING SUPPLEMENT
PAGE
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USE OF PROCEEDS..............................................................P-3
DESCRIPTION OF THE NOTES.....................................................P-3
UNDERWRITERS.................................................................P-4
PROSPECTUS SUPPLEMENT
USE OF PROCEEDS..............................................................S-3
DESCRIPTION OF THE NOTES.....................................................S-3
CERTAIN UNITED STATES TAX CONSIDERATIONS....................................S-23
SUPPLEMENTAL PLAN OF DISTRIBUTION...........................................S-30
LEGAL MATTERS...............................................................S-32
PROSPECTUS
AVAILABLE INFORMATION..........................................................3
AVISTA CORPORATION.............................................................4
USE OF PROCEEDS................................................................4
DESCRIPTION OF THE DEBT SECURITIES.............................................5
PLAN OF DISTRIBUTION..........................................................16
LEGAL MATTERS.................................................................16
EXPERTS.......................................................................17
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WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OTHER THAN
THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND
PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED OR INCORPORATED
IN THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND
PROSPECTUS IS ACCURATE AS OF ANY DATE AFTER AUGUST , 2000, WHICH IS THE DATE OF
THIS PRICING SUPPLEMENT. WE ARE NOT OFFERING TO SELL THE NOTES AND WE ARE NOT
SOLICITING OFFERS TO BUY THE NOTES IN ANY JURISDICTION IN WHICH OFFERS ARE NOT
PERMITTED.
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USE OF PROCEEDS
Avista Corp. intends to use the net proceeds from the issuance and
sale of the Notes for the following purposes: (a) to pay short-term debt of
Avista Corp. issued to fund a portion of its construction, facility improvement
and maintenance programs, (b) to reimburse Avista Corp.'s treasury for funds
previously expended for any of these purposes and (c) for other corporate
purposes. At July 31, 2000, Avista Corp. had $181.0 million of short-term debt
outstanding, which bears interest at a weighted average rate of 7.67% per annum.
DESCRIPTION OF THE NOTES
The following description of certain terms of the Notes supplements
and supersedes (to the extent inconsistent) the description of the Notes set
forth in the accompanying prospectus supplement and the general terms and
provisions of the Debt Securities set forth under "Description of the Debt
Securities" in the accompanying prospectus, to which description reference is
hereby made. Certain capitalized terms used and not defined herein shall have
the meanings given to them in the accompanying prospectus supplement or
prospectus, the Notes or the Indenture, as the case may be.
GENERAL
The Notes will be issued as a separate tranche of Avista Corp.'s
Medium-Term Notes, Series D, under the Indenture between Avista Corp. and The
Chase Manhattan Bank, as trustee, which is more fully described in the
accompanying prospectus supplement and prospectus.
The Notes will be unsecured and will rank pari passu with all other
Indenture Securities, except as otherwise provided in the Indenture, and with
all other unsecured and unsubordinated indebtedness of Avista Corp. Avista
Corp's subsidiaries are separate and distinct legal entities and will have no
obligation to pay any amounts due on the Notes. Many of these subsidiaries have
indebtedness outstanding, some of which is secured, and the ability of these
subsidiaries to pay dividends or make other distributions may be subject to
limitations in the agreements relating to this indebtedness or otherwise
provided by law. As a result, the Notes will be effectively subordinated to all
indebtedness and other liabilities of Avista Corp's subsidiaries.
MATURITY; INTEREST
The Notes will mature on , 2005, and will be issued as Fixed Rate
Notes bearing interest at a rate of % per annum from the date of issuance,
unless and until adjusted as described below. Interest on the Notes will be
payable on each 1 and 1, commencing 1, 2000. The Regular Record
Date with respect to any Interest Payment Date will be the 15 or 15, as
the case may be, immediately preceding that Interest Payment Date (whether or
not such Regular Record Date is also a Business Day).
The interest rate on the Notes will be subject to adjustment in the
event that Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Services ("S&P") change their ratings on the Notes to be below
investment grade (below Baa3 for Moody's and below BBB- for S&P). Avista Corp.'s
current senior unsecured debt rating is Baa2 by Moody's, and BBB by S&P.
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Beginning with the first Interest Payment Date after any negative
rating change described above, the Notes will bear interest at an adjusted
interest rate per annum equal to the initial interest rate increased by 50 basis
points, resulting in an adjusted interest rate of % per annum.
As described in the accompanying prospectus, the principal of and
premium, if any, and interest, if any, on the Notes will be payable at the
corporate trust office of The Chase Manhattan Bank in New York, New York, as
Paying Agent for the Notes, and the Notes may be presented for registration of
transfer or exchange at the corporate trust office of The Chase Manhattan Bank
in New York, New York, as Security Registrar for the Notes. Notices and demands
to or upon Avista Corp. in respect of the Notes and the Indenture may be served
to Avista Corp., 1411 East Mission Avenue, Spokane, Washington 99202.
UNDERWRITERS
Subject to the terms and conditions set forth in a terms agreement,
dated August , 2000 (including certain sections of the Distribution Agreement
dated August 19, 1999 incorporated therein by reference, the "Terms Agreement"),
among Avista Corp., Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Salomon Smith Barney, Inc. (the "Underwriters"),
Avista Corp. has agreed to sell to the Underwriters, and the Underwriters have
severally agreed to purchase, the Notes in the respective principal amounts set
forth after their names below.
PRINCIPAL AMOUNT
NAME OF NOTES
---- ----------------
Morgan Stanley & Co. Incorporated...................... $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
Salomon Smith Barney, Inc..............................
Total............................................. $200,000,000
============
The Terms Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the Notes are subject to the approval certain
conditions. The Underwriters are committed to take and pay for all of the Notes
if any are taken.
The Underwriters have advised Avista Corp. that they propose initially
to offer part of the Notes directly to the public at the public offering price
set forth on the cover page of this pricing supplement, and part to certain
dealers at a price which represents a concession not in excess of % of the
principal amount of the Notes. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of % of the principal amount of the Notes to
certain other dealers. After the initial offering of the Notes, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
Avista Corp. has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Avista Corp. does not intend to apply for listing of the Notes on a
national securities exchange, but has been advised by the Underwriters that they
currently intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the Notes and any such market making may be discontinued at any time at the
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sole discretion of the Underwriters. Accordingly, no assurance can be given as
to the liquidity of any trading in the Notes.
In order to facilitate the offering of the Notes, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriters may over-allot in connection with the
offering, creating a short position in the Notes for their own account. In
addition, to cover over-allotments or to stabilize the price of the Notes, the
Underwriters may bid for, and purchase, the Notes in the open market. Finally,
the Underwriters may reclaim selling concessions allowed to a dealer for
distributing the Notes in the offering, if the Underwriters repurchase
previously distributed Notes in transactions to cover syndicate short positions,
in stabilization transactions or otherwise. Any of these activities may
stabilize or maintain the market price of the Notes above independent market
levels. The Underwriters are not required to engage in any of these activities
and may end any of these activities at any time.
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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 17, 1999)
$400,000,000
AVISTA CORPORATION
MEDIUM-TERM NOTES, SERIES D
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AVISTA CORPORATION MAY OFFER FROM TIME TO TIME ITS UNSECURED MEDIUM TERM NOTES,
SERIES D. THE SPECIFIC TERMS OF ANY NOTES OFFERED WILL BE INCLUDED IN A PRICING
SUPPLEMENT. UNLESS THE PRICING SUPPLEMENT PROVIDES OTHERWISE:
o THE NOTES WILL MATURE BETWEEN 9 MONTHS AND 40 YEARS FROM THE ISSUE DATE.
o THE NOTES WILL BEAR INTEREST AT EITHER A FIXED OR A FLOATING RATE. FLOATING
RATE INTEREST WOULD BE BASED ON:
o CD RATE
o CMT RATE
o COMMERCIAL PAPER RATE
o FEDERAL FUNDS RATE
o LIBOR
o PRIME RATE
o TREASURY RATE
o ANY OTHER RATE OR INDEX SPECIFIED IN THE APPLICABLE PRICING
SUPPLEMENT.
o INTEREST PAYMENT DATES FOR EACH FIXED RATE NOTE WILL BE JANUARY 1 AND JULY
1 OF EACH YEAR.
o THE NOTES MAY BE SUBJECT TO REDEMPTION AT THE OPTION OF AVISTA CORP. OR TO
REDEMPTION OR PURCHASE AT THE OPTION OF THE HOLDER.
o THE NOTES WILL BE DENOMINATED IN U.S. DOLLARS AND HAVE MINIMUM
DENOMINATIONS OF $1,000 AND ANY LARGER AMOUNT IN INTEGRAL MULTIPLES OF
$1,000.
o THE NOTES WILL BE HELD IN GLOBAL FORM BY THE DEPOSITORY TRUST COMPANY
EXCEPT UNDER THE CIRCUMSTANCES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT.
o THE NOTES WILL BE A NEW ISSUE OF SECURITIES WITH NO ESTABLISHED TRADING
MARKET.
o THE NOTES WILL NOT BE LISTED ON ANY SECURITIES EXCHANGE.
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PRICE TO AGENTS' PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
------ ----------- -------
Per Note...................... 100% .125% - .875% 99.875% - 99.125%
Total......................... $400,000,000 $500,000 - $3,500,000 $399,500,000 - $396,500,000
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated, Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Salomon Smith Barney Inc., have agreed to use
reasonable best efforts on Avista Corp.'s behalf to solicit purchases of the
Notes. Avista Corp. may also sell Notes to an Agent acting as principal for its
own account. In addition, Avista Corp. may sell, solicit and accept offers to
purchase Notes on its own behalf.
------------------------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
August 19, 1999
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS INCORPORATE
BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT AVISTA CORP.
THAT IS NOT INCLUDED IN OR DELIVERED WITH THE PROSPECTUS. THIS INFORMATION IS
AVAILABLE TO YOU AS SET FORTH IN THE ACCOMPANYING PROSPECTUS.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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USE OF PROCEEDS..............................................................S-3
DESCRIPTION OF THE NOTES.....................................................S-3
CERTAIN UNITED STATES TAX CONSIDERATIONS....................................S-23
SUPPLEMENTAL PLAN OF DISTRIBUTION...........................................S-30
LEGAL MATTERS...............................................................S-32
PROSPECTUS
AVAILABLE INFORMATION..........................................................3
AVISTA CORPORATION.............................................................4
USE OF PROCEEDS................................................................4
DESCRIPTION OF THE DEBT SECURITIES.............................................5
PLAN OF DISTRIBUTION..........................................................16
LEGAL MATTERS.................................................................16
EXPERTS.......................................................................17
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OTHER THAN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED OR INCORPORATED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE AFTER
AUGUST 19, 1999, WHICH IS THE DATE OF THIS PROSPECTUS SUPPLEMENT. WE ARE NOT
OFFERING TO SELL THE NOTES AND WE ARE NOT SOLICITING OFFERS TO BUY THE NOTES IN
ANY JURISDICTION IN WHICH OFFERS ARE NOT PERMITTED.
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USE OF PROCEEDS
Avista Corp. intends to use the net proceeds from the issuance and
sale of its Medium Term Notes, Series D (the "Notes") for any or all of the
following purposes: (a) to fund a portion of Avista Corp.'s construction,
facility improvement and maintenance programs (estimated to require $290 million
over the period 1999-2001), (b) to retire or exchange one or more outstanding
series of its preferred stock, bonds or long-term notes (estimated to require
$114 million over such period), (c) to reduce or eliminate short-term debt
issued for any of these purposes ($151 million at August 13, 1999), (d) to
reimburse Avista Corp.'s treasury for funds previously expended for any of these
purposes and (e) for other corporate purposes. The pricing supplement relating
to each Note will indicate the expected use of the proceeds of such Note.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes
supplements and supersedes (to the extent inconsistent) the description of the
general terms and provisions of the Debt Securities set forth under "DESCRIPTION
OF THE DEBT SECURITIES" in the accompanying prospectus, to which description
reference is hereby made. Certain capitalized terms used and not defined in this
prospectus supplement are defined under "DESCRIPTION OF THE DEBT SECURITIES" in
the accompanying prospectus. The particular terms and conditions of the Notes
sold pursuant to any pricing supplement to this prospectus supplement will be
described therein. The terms and conditions set forth in this "DESCRIPTION OF
NOTES" will apply to each Note unless otherwise specified in the pricing
supplement and in such Note.
GENERAL
The Notes will be issued as a series of debt securities under the
Indenture. The aggregate principal amount of the Notes which may be
authenticated and delivered under the Indenture will not be limited.
The Notes will be issued in fully registered form only, without
coupons. Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note. Except as set forth herein under "-- Book-Entry Only Issuance
- - The Depository Trust Company" or in any pricing supplement relating to
specific Notes, the Notes will not be issuable as Certificated Notes. The
authorized denominations of the Notes will be $1,000 and any larger amount that
is an integral multiple of $1,000.
Each Note will mature from nine months to forty years from its date of
issue, as selected by the purchaser and agreed to by Avista Corp.. Each Note may
also be subject to redemption at the option of Avista Corp. or to redemption or
purchase by Avista Corp. at the option of the Holder before its Stated Maturity
(as defined below). Each Floating Rate Note will mature on an Interest Payment
Date (as defined below) for such Note.
The pricing supplement relating to each Note will describe the
following terms:
(a) the date or dates on which the principal of such Note is
payable or the method of determination thereof and the right, if any,
to extend such date or dates;
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(b) whether the Note is a Fixed Rate Note or a Floating Rate
Note;
(c) if the Note is a Fixed Rate Note, the rate per annum at
which the Note will bear interest;
(d) if the Note is a Floating Rate Note, the Base Rate, the
Initial Interest Rate, the Interest Reset Period, the Interest Reset
Dates, the Index Maturity, the Maximum Interest Rate, if any, the
Minimum Interest Rate, if any, the Spread or Spread Multiplier, if any
(all as defined below), and any other terms relating to the particular
method of calculating the interest rate on the Note;
(e) the date or dates from which such interest will accrue on
the Note, the Interest Payment Dates on which such interest shall be
payable, the right, if any, of Avista Corp. to defer or extend an
Interest Payment Date, and the Regular Record Date for any interest
payable on any Interest Payment Date and the person or persons to whom
interest on the Notes shall be payable on any Interest Payment Date,
if other than the person in whose name the Note is registered at the
close of business on the Regular Record Date for such interest;
(f) the place or places where, subject to the terms of the
Indenture as described in the accompanying Prospectus under
"DESCRIPTION OF THE DEBT SECURITIES -- Payment and Paying Agents," the
principal of and premium, if any, and interest, if any, on the Note
will be payable and where, subject to the terms of the Indenture as
described in the accompanying Prospectus under "DESCRIPTION OF THE
DEBT SECURITIES -- Registration and Transfer," the Note may be
presented for registration of transfer or exchange and the place or
places where notices and demands to or upon Avista Corp. in respect of
the Note and the Indenture may be served; the Security Registrar and
Paying Agents for the Note; and, if such is the case, that the
principal of the Note shall be payable without presentation or
surrender thereof;
(g) any period or periods within which, or date or dates on
which, the price or prices at which and the terms and conditions upon
which the Note may be redeemed, in whole or in part, at the option of
Avista Corp.;
(h) the obligation or obligations, if any, of Avista Corp. to
redeem or purchase the Note or any portion thereof pursuant to any
sinking fund or other mandatory redemption provisions or at the option
of the holder thereof, and the period or periods within which, or date
or dates on which, the price or prices at which, and the terms and
conditions upon which the Note shall be redeemed or purchased, in
whole or in part, pursuant to such obligation, and applicable
exceptions to the requirements of a notice of redemption in the case
of mandatory redemption or redemption at the option of the holder;
(i) the denominations in which the Note shall be issuable if
other than denominations of $1,000 and any larger amount that is an
integral multiple of $1,000; and
(j) any other terms of the Note.
"Business Day" with respect to any Note means any day, other than
Saturday or Sunday, which is (a) not a day on which banking institutions or
trust companies in The City of New York, New York or other city in which is
located any office or agency maintained for the payment of principal of or
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premium, if any, or interest on such Note, are authorized or required by law,
regulation or executive order to remain closed and (b) if such Note is a LIBOR
Note (as defined below), a London Banking Day. "London Banking Day" with respect
to any Note means any day on which dealings in deposits in U.S. dollars are
transacted in the London Interbank market.
PAYMENT OF PRINCIPAL AND INTEREST
The interest payable on the Notes on any Interest Payment Date (other
than interest payable at Maturity) will be paid to the Holders in whose names
the Notes are registered as of the Regular Record Date immediately preceding
such Interest Payment Date, such payment to be made by check mailed to the
addresses appearing in the Note register. Notwithstanding the foregoing,
(a) if the Original Interest Accrual Date of a Note is after a
Regular Record Date and before the corresponding Interest Payment
Date, interest so payable for the period from and including the
Original Interest Accrual Date to but excluding such Interest Payment
Date will be paid on the next succeeding Interest Payment Date to the
Holder of such Note on the related Regular Record Date;
(b) interest payable at Maturity will be paid to the Person to
whom principal is paid;
(c) defaulted interest will be payable as described under
"DESCRIPTION OF THE DEBT SECURITIES - Payment and Paying Agents" in
the accompanying Prospectus;
(d) if such Holder is a securities depositary, payment may be
made by such other means in lieu of check, as shall be agreed upon by
Avista Corp., the Trustee and such Holder; and
(e) upon the written request of a Holder of not less than $10
million in aggregate principal amount of Notes of the same tranche
delivered to Avista Corp. and the Paying Agent at least 10 days before
any Interest Payment Date, payment of interest on such Notes to such
Holder on such Interest Payment Date will be made by wire transfer of
immediately available funds to an account maintained within the
continental United States specified by the Holder or, if the Holder
maintains an account with the entity acting as Paying Agent, by
deposit into such account.
The principal of and premium, if any, and interest on the Notes at
Maturity will be made upon presentation at the corporate trust office of the
Paying Agent.
The "Regular Record Date" with respect to any Interest Payment Date
for a Fixed Rate Note will be the December 15 or June 15 (whether or not a
Business Day) immediately preceding such Interest Payment Date; and the "Record
Date" with respect to any Interest Payment Date for a Floating Rate Note will be
the date (whether or not a Business Day) fifteen calendar days immediately
preceding such Interest Payment Date.
Interest rates offered by Avista Corp. with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
Notes purchased in any transaction. Notes with similar variable terms but
different interest rates may be offered concurrently at any time. Avista Corp.
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may also concurrently offer Notes having different variable terms (as are
described herein or in the pricing supplement and Note).
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Interest
Accrual Date at the rate per annum stated on its face until the principal amount
of the Note is paid or duly provided for. Unless otherwise set forth in the
pricing supplement, interest on each Fixed Rate Note will be payable
semi-annually in arrears on each Interest Payment Date and at Maturity. Each
payment of interest in respect of an Interest Payment Date will include interest
accrued through the day before such Interest Payment Date. Interest on Fixed
Rate Notes will be computed on the basis of a 360-day year of twelve 30-day
months.
If, with respect to any Fixed Rate Note, any Interest Payment Date,
any redemption date or the Stated Maturity is not a Business Day, payment of the
amounts due on the Note on such date may be made on the next Business Day; and,
if such payment is made or duly provided for on such Business Day, no interest
will accrue on such amounts for the period from and after such Interest Payment
Date, redemption date or Stated Maturity, as the case may be, to such Business
Day.
FLOATING RATE NOTES
General
Each Floating Rate Note will bear interest from its Original Interest
Accrual Date to the first Interest Reset Date for the Note at the Initial
Interest Rate set forth on the face of the Note and in the pricing supplement.
Thereafter, the interest rate on the Note for each Interest Reset Period will be
determined by reference to an interest rate basis (the "Base Rate"), plus or
minus the Spread, if any, and/or multiplied by the Spread Multiplier, if any.
The "Spread" is the number of basis points (one basis point being equal to one
one-hundredth of a percentage point) that may be specified in the pricing
supplement as being applicable to the Note, and the "Spread Multiplier" is the
percentage that may be specified in the pricing supplement as being applicable
to the Note. The pricing supplement will designate one of the following Base
Rates as applicable to a Floating Rate Note:
(a) the CD Rate (a "CD Rate Note");
(b) the Constant-Maturity Treasury Rate (a "CMT Rate Note");
(c) the Commercial Paper Rate (a "Commercial Paper Rate Note");
(d) the Federal Funds Rate (a "Federal Funds Rate Note"),
(e) LIBOR (a "LIBOR Note");
(f) the Prime Rate (a "Prime Rate Note");
(g) the Treasury Rate (a "Treasury Rate Note"), or
(h) such other Base Rate as is set forth in the pricing supplement
and in the Note.
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As used herein, "H.15(519)" means the publication entitled "Statistical Release
H.15(519)," Selected Interest Rates, or any successor publication, published by
the Board of Governors of the Federal Reserve System; "H.15 Daily Update" means
the daily update of H.15(519), so published; and "Calculation Date," with
respect to an interest determination date for any Note, means the earlier of (x)
the tenth calendar day after such interest determination date, or, if such day
is not a Business Day, the next succeeding Business Day and (y) the Business Day
immediately preceding the related Interest Payment Date or the Maturity of that
Note, as the case may be. H.15(519) and H.15 Daily Update are available through
the Internet site maintained by the Board of Governors of the Federal Reserve
System at http://www.bog.frb.fed.us/releases/H15/.
Maximum Rate; Minimum Rate
As specified in the pricing supplement, a Floating Rate Note may also
have either or both of the following (in each case expressed as a rate per annum
on a simple interest basis):
(a) a maximum limitation, or ceiling, on the rate at which
interest may accrue during any interest period ("Maximum Interest
Rate") and
(b) a minimum limitation, or floor, on the rate at which
interest may accrue during any interest period ("Minimum Interest
Rate").
In addition to any Maximum Interest Rate that may be applicable to any Floating
Rate Note, the interest rate on a Floating Rate Note will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
U.S. law of general application. Under New York law currently in effect, a
business corporation may not use usury or the taking of more than the lawful
interest rate as a defense to any proceeding to recover damages on, or enforce
payment of, any obligation executed or effected by such corporation.
Calculation Agent
Avista Corp. will appoint, and enter into an agreement with, an agent
(the "Calculation Agent") to calculate interest rates on Floating Rate Notes.
Unless otherwise specified in the pricing supplement, The Chase Manhattan Bank
will be the Calculation Agent. All determinations of interest rates by the
Calculation Agent will, in the absence of manifest error, be conclusive for all
purposes and binding on the Holders of the Floating Rate Notes.
Interest Rate Reset
The interest rate on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semi-annually or annually (such period being the
"Interest Reset Period" for the Note, and the first day of each Interest Reset
Period being an "Interest Reset Date"), as specified in the pricing supplement;
and such interest rate, as so reset, will be effective as of and for the related
Interest Reset Date and for the balance of the Interest Reset Period to, but
excluding, the next succeeding Interest Reset Date. Unless otherwise specified
in the pricing supplement, the Interest Reset Dates will be:
o in the case of Floating Rate Notes that reset daily, each
Business Day;
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o in the case of Floating Rate Notes (other than Treasury Rate
Notes) that reset weekly, Wednesday of each week;
o in the case of Treasury Rate Notes that reset weekly, Tuesday of
each week (except as provided below under "Treasury Rate Notes");
o in the case of Floating Rate Notes that reset monthly, the third
Wednesday of each month;
o in the case of Floating Rate Notes that reset quarterly, the
third Wednesday of March, June, September and December of each
year;
o in the case of Floating Rate Notes that reset semi-annually, the
third Wednesday of the two months of each year specified in the
pricing supplement; and
o in the case of Floating Rate Notes that reset annually, the third
Wednesday of the month of each year specified in the pricing
supplement;
provided, however, that the interest rate in effect for the ten days immediately
before Maturity will be that rate in effect on the tenth day preceding Maturity.
If an Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset Date will be postponed to the
next succeeding Business Day, except that, in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, the Interest Reset Date
shall be the immediately preceding Business Day.
Accrual of Interest
Unless otherwise specified in the pricing supplement, interest
payments on Floating Rate Notes will be the amount of interest accrued from and
including the last date to which interest has been paid or duly provided for,
or, if no interest has been paid or duly provided for, from and including the
Original Interest Accrual Date, to but excluding the next succeeding Interest
Payment Date; provided, however, that in the case of a Floating Rate Note that
resets daily or weekly, interest payments will be the amount of interest accrued
from and including the most recent date to which interest has been paid or duly
provided for, or if no interest has been paid, from the Original Interest
Accrual Date, to, but excluding, the Regular Record Date immediately preceding
such Interest Payment Date, except that, at Maturity, interest payable will
include interest accrued to but excluding the date of Maturity.
Accrued interest for each Floating Rate Note will be calculated by
multiplying the principal amount of the Note by an accrued interest factor. Such
accrued interest factor will be computed by adding the interest factors
calculated for each day in the Interest Payment Period for which accrued
interest is being calculated. The interest factor (expressed as a decimal
calculated to seven decimal places without rounding) for each such day is
computed by dividing the interest rate applicable to such day by 360, in the
case of CD Rate Notes, Commercial Paper Rate Notes, Federal Fund Rate Notes,
LIBOR Notes and Prime Rate Notes or by the actual number of days in the year, in
the case of CMT Rate Notes and Treasury Rate Notes. For purposes of making the
foregoing calculation, the interest rate in effect on any Interest Reset Date
will be the applicable rate as reset on such date. Unless otherwise specified in
the pricing supplement, all percentages resulting from any calculation of the
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rate of interest on a Floating Rate Note will be rounded, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward, and all dollar amounts used in or resulting from such
calculation will be rounded to the nearest one-hundredth of a cent (with .005 of
a cent being rounded upward).
Interest Payment Dates
Unless otherwise indicated in the pricing supplement and except as
provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the pricing supplement; in the case of Floating Rate Notes that
reset quarterly, on the third Wednesday of March, June, September and December
of each year; in the case of Floating Rate Notes that reset semi-annually, on
the third Wednesday of the two months of each year specified in the pricing
supplement; and in the case of Floating Rate Notes that reset annually, on the
third Wednesday of the month of each year specified in the pricing supplement
(each such day being an "Interest Payment Date").
If, with respect to any Floating Rate Note, any Interest Payment Date
other than a redemption date or the Stated Maturity is not a Business Day, such
Interest Payment Date will be postponed to the next Business Day, except that,
if such Note is a LIBOR Note and such next Business Day is in the next calendar
month, such Interest Payment Date will be the immediately preceding Business
Day. If a redemption date or the Stated Maturity is not a Business Day, payment
of the amounts due on the Note on such date in respect of principal, premium, if
any, and/or interest, if any, may be made on the next Business Day; and if
payment is made or duly provided for on such Business Day, no interest shall
accrue on such amounts for the period from and after such redemption date or
Stated Maturity, as the case may be, to such Business Day.
CD Rate Notes
Each CD Rate Note will bear interest for each Interest Reset Period at
an interest rate calculated with reference to the CD Rate and the Spread or
Spread Multiplier, if any, and subject to the Maximum Interest Rate, if any, and
the Minimum Interest Rate, if any, specified in the CD Rate Note and the pricing
supplement.
Unless otherwise specified in the pricing supplement, the "CD Rate"
for each Interest Reset Period in respect of each CD Rate Note will be
determined by the Calculation Agent on the Calculation Date and will be
(a) the rate (expressed as a percentage per annum) as of the
second Business Day before the related Interest Reset Date (a "CD Rate
Determination Date") for negotiable certificates of deposit having the
Index Maturity specified in the CD Rate Note and the pricing
supplement as published in H.15(519) under the heading "CDs (Secondary
Market)", or
(b) that such rate is not so published by 9:00 A.M., New York
City time, on the Calculation Date, the rate as of the CD Rate
Determination Date for negotiable certificates of deposit of such
Index Maturity as published in H.15 Daily Update under the heading
"CDs (Secondary Market)", or
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(c) if neither of such rates is published by 3:00 P.M., New York
City time, on the Calculation Date, the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time,
on the CD Rate Determination Date for certificates of deposit in an
amount that is representative of a single transaction at that time
with a remaining maturity closest to such Index Maturity of three
leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent, in
its discretion (after consultation with Avista Corp.); provided,
however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as described above, the CD Rate for such
Interest Reset Period will be the same as the CD Rate for the
immediately preceding Interest Reset Period (or, if there was no
previous Interest Reset Period in respect of the CD Rate Note, the
rate of interest on the Note for such Interest Reset Period shall be
the Initial Interest Rate).
CMT Rate Notes
Each CMT Rate Note will bear interest for each Interest Reset Period
at a rate calculated with reference to the CMT Rate and the Spread or Spread
Multiplier, if any, and subject to the Maximum Interest Rate, if any, and the
Minimum Interest Rate, if any, specified in the CMT Rate Note and the pricing
supplement.
Unless otherwise specified in the pricing supplement, the "CMT Rate"
for each Interest Reset Period in respect of each CMT Rate Note will be
determined by the Calculation Agent on the Calculation Date and will be the rate
(expressed as a percentage per annum) displayed on the Designated CMT Telerate
Page (as defined below) under the caption "...Treasury Constant Maturities...
Federal Reserve Board Release H.15...Mondays Approximately 3:45 p.m." under the
column for the Designated CMT Maturity Index (as defined below) for
(a)(1) if the Designated CMT Telerate Page is 7051, the second
Business Day before the related Interest Reset Date (a "CMT Rate
Determination Date") or (2) if the Designated CMT Telerate Page is
7052, the week or the month, as applicable, ended immediately
preceding the week in which such CMT Rate Determination Date occurs,
or
(b) if that rate is no longer displayed on the relevant page, or
if not displayed by 3:00 P.M., New York City time on the Calculation
Date, the Treasury Constant Maturity rate for the Designated CMT
Maturity Index as published in H.15(519), or
(c) if that rate is no longer published or, if not published by
3:00 P.M., New York City time, on the Calculation Date, the Treasury
Constant Maturity rate for the Designated CMT Maturity Index (or other
United States Treasury rate for the Designated CMT Maturity Index) for
the CMT Rate Determination Date as may then be published by either the
Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in H.15(519), or
(d) if that information is not provided by 3:00 P.M., New York
City time, on the Calculation Date, then the CMT Rate for the CMT Rate
Determination Date shall be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side prices as
of approximately 3:30 P.M., New York City time, on the CMT Rate
Determination Date reported, according to their written records, by
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three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York selected by the
Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent, in its discretion (after consultation with Avista
Corp.), and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States
("Treasury notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not
less than such Designated CMT Maturity Index minus one year, or
(e) if the Calculation Agent cannot obtain three such Treasury
notes quotations, a yield to maturity based on the arithmetic mean of
the secondary market offer side prices as of approximately 3:30 P.M.,
New York City time, on the CMT Rate Determination Date of three
Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent, in its discretion (after
consultation with Avista Corp.), and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for
Treasury notes with an original maturity of the number of years that
is the next highest to the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million, or
(f) if three or four (and not five) of such Reference dealers
are quoting as described in clause (e) above, the arithmetic mean of
the offer prices obtained without the elimination of either the
highest or the lowest of such quotes; provided, however, that if fewer
than three Reference Dealers selected by the Calculation Agent are
quoting as described in this clause (f), the CMT Rate for such
Interest Reset Period will be the same as the CMT Rate for the
immediately preceding Interest Reset Period (or, if there was no such
previous Interest Reset Period in respect of such CMT Rate Note, the
rate of interest on such Note for such Interest Reset Period shall be
the Initial Interest Rate).
For purposes of clause (e) above, if two Treasury notes have remaining terms to
maturity equally close to the Designated CMT Maturity Index, the quotes for the
Treasury note with the shorter remaining term to maturity shall be used.
"Designated CMT Maturity Index", with respect to any CMT Rate Note,
will be the original period to maturity of the U.S. Treasury securities (either
1, 2, 3, 5, 7, 10, 20 or 30 years) specified in such CMT Rate Note and the
pricing supplement with respect to which the CMT Rate will be calculated. If no
such maturity is so specified, the Designated CMT Maturity Index will be 2
years.
"Designated CMT Telerate Page", with respect to any CMT Rate Note,
means the display on Bridge Telerate, Inc. on the page specified in the CMT Rate
Note and the pricing supplement, for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519) (or any other page that may replace such
page on that service, or any successor service, for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)). If no such page is so
specified, the page shall be 7052, for the most recent week.
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Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest for each Interest
Reset Period at a rate calculated with reference to the Commercial Paper Rate
and the Spread or Spread Multiplier, if any, and subject to the Maximum Interest
Rate, if any, and the Minimum Interest Rate, if any, specified in the Commercial
Paper Rate Note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Commercial
Paper Rate" for each Interest Reset Period in respect of each Commercial Paper
Rate Note will be determined by the Calculation Agent on the Calculation Date
and will be
(a) the Money Market Yield (as hereinafter defined) as of the
second Business Day before the related Interest Reset Date (a
"Commercial Paper Rate Determination Date") of the rate (expressed as
a percentage per annum) for commercial paper having the Index Maturity
specified in such Commercial Paper Rate Note and the pricing
supplement, as such rate shall be published in H.15(519) (as
hereinafter defined) under the heading "Commercial Paper -
Nonfinancial", or
(b) if that rate is not so published before 9:00 A.M., New York
City time, on the Calculation Date, the Money Market Yield as of the
Commercial Paper Rate Determination Date of the rate for commercial
paper of the Index Maturity specified in the Commercial Paper Rate
Note and in the pricing supplement, as published in H.15 Daily Update
under the heading "Commercial Paper-Nonfinancial", or
(c) if none of those rates is published by 3:00 P.M., New York
City time, on the Calculation Date, the Money Market Yield of the
arithmetic mean of the offered rates, as of 11:00 A.M., New York City
time, on such Commercial Paper Rate Determination Date, of three
leading dealers in commercial paper in The City of New York selected
by the Calculation Agent, in its discretion (after consultation with
Avista Corp.), for commercial paper of the Index Maturity specified in
the Commercial Paper Rate Note and in the pricing supplement placed
for an industrial issuer whose bond rating is "AA," or the equivalent,
from a nationally recognized statistical rating organization;
provided, however, that if the dealers selected are not quoting
offered rates as described above, the Commercial Paper Rate for the
Interest Reset Period will be deemed to be the same as the Commercial
Paper Rate for the preceding Interest Reset Period (or, if there was
no such previous Interest Reset Period in respect of such Commercial
Paper Rate Note, the rate of interest on the Note for such Interest
Reset Period shall be the Initial Interest Rate).
"Money Market Yield" is a yield calculated in accordance with the
following formula and expressed as a percentage:
Money Market Yield = D x 360 x 100
-------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Index Maturity specified in the Commercial Paper Rate Note
and the pricing supplement.
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Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest for each Interest
Reset Period at a rate calculated with reference to the Federal Funds Rate and
the Spread or Spread Multiplier, if any, and subject to the Maximum Interest
Rate, if any, and the Minimum Interest Rate, if any, specified in the Federal
Funds Rate Note and the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Federal
Funds Rate" for each Interest Reset Period in respect of each Federal Funds Rate
Note will be determined by the Calculation Agent on the Calculation Date and
will be
(a) the rate (expressed as a percentage per annum) as of the
second Business Day before the related Interest Reset Date (a "Federal
Funds Rate Determination Date") for Federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)", or
(b) if that rate is not so published by 9:00 A.M., New York City
time, on the Calculation Date, the rate on the Federal Funds Rate
Determination Date as published in H.15 Daily Update under the heading
"Federal Funds (Effective)", or
(c) if neither of those rates is published by 3:00 P.M., New
York City time, on the Calculation Date, the arithmetic mean of the
rates for the last transaction in overnight Federal funds as of 9:00
A.M., New York City time, on such Federal Funds Rate Determination
Date arranged by three leading brokers in Federal Funds transactions
in The City of New York selected by the Calculation Agent, in its
discretion (after consultation with Avista Corp.); provided, however,
that if the brokers selected by the Calculation Agent are not quoting
as described above, the Federal Funds Rate for the Interest Reset
Period will be the same as the Federal Funds Rate for the immediately
preceding Interest Reset Period (or, if there was no such previous
Interest Reset Period in respect of such Federal Funds Rate Note, the
rate of interest on the Note for such Interest Reset Period will be
the Initial Interest Rate).
LIBOR Notes
Each LIBOR Note will bear interest for each Interest Reset Period at a
rate calculated with reference to LIBOR and the Spread or Spread Multiplier, if
any, and subject to the Maximum Interest Rate, if any, and the Minimum Interest
Rate, if any, specified in the LIBOR Note and the pricing supplement.
Unless otherwise specified in the pricing supplement, "LIBOR" for each
Interest Reset Period will be determined by the Calculation Agent and will be:
(a)(1) if "LIBOR Reuters" is specified in the Note and the
pricing supplement as the Reporting Service, the arithmetic mean of
the offered rates (unless the specified Designated LIBOR Page (as
hereinafter defined) by its terms provides only for a single rate, in
which case the single rate will be used) for deposits in the Index
Currency specified in the LIBOR Note and the pricing supplement in the
London interbank market, for the period of the Index Maturity so
specified commencing on the related Interest Reset Date for the
Interest Reset Period, which appear or appears on the Designated LIBOR
Page at approximately 11:00 A.M., London time, on the second London
Banking Day (as defined above) before such Interest Reset Date (a
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"LIBOR Determination Date"), or (2) if "LIBOR Telerate" is specified
in the Note and the pricing supplement as the Reporting Service, the
rate for deposits in the Index Currency, for the period of such Index
Maturity commencing on the Interest Reset Date (or, if the pound
sterling is the Index Currency, commencing on the LIBOR Determination
Date), that appears on the Designated LIBOR Page at approximately
11:00 A.M., London time, on the LIBOR Determination Date;
(b) with respect to a LIBOR Determination Date on which fewer
than two offered rates appear (if "LIBOR Reuters" is specified in the
Note as the Reporting Service and calculation of LIBOR is based on the
arithmetic mean of the offered rates) or on which no rate appears (if
the Reporting Service specified in the Note and the pricing supplement
is either (1) "LIBOR Reuters" and the Designated LIBOR Page by its
terms provides only for a single rate or (2) "LIBOR Telerate"), the
Calculation Agent will request the principal London office of each of
four major reference banks in the London interbank market selected by
the Calculation Agent, in its discretion (after consultation with
Avista Corp.), to provide the Calculation Agent with its offered
quotations for deposits in the Index Currency, for the period of the
Index Maturity commencing on the Interest Reset Date (or, if the pound
sterling is the Index Currency, commencing on the LIBOR Determination
Date) for such Interest Reset Period and in a principal amount equal
to an amount of not less than U.S.$1 million (or the equivalent amount
in the Index Currency) that is representative of a single transaction
in the Index Currency in the market at such time, to prime banks in
the London interbank market at approximately 11:00 A.M., London time,
on the LIBOR Determination Date; if at least two such quotations are
provided, LIBOR, in respect of the LIBOR Determination Date, shall be
the arithmetic mean of such quotations;
(c) if fewer than two quotations are so provided, LIBOR in
respect of the LIBOR Determination Date will be the arithmetic mean of
the rates quoted by three major banks in the applicable Principal
Financial Center for the country of the Index Currency on the LIBOR
Determination Date selected by the Calculation Agent, in its
discretion (after consultation with Avista Corp.), at approximately
11:00 A.M. on the LIBOR Determination Date, for loans in the Index
Currency to leading European banks, for the period of the Index
Maturity commencing on the Interest Reset Date (or, if the pound
sterling is the Index Currency, commencing on the LIBOR Determination
Date) for the Interest Reset Period and in a principal amount of not
less than U.S.$1 million (or the equivalent amount in the Index
Currency) that is representative of a single transaction in the Index
Currency in the market at such time; provided, however, that if fewer
than three banks selected by the Calculation Agent are quoting rates
described above, LIBOR for such Interest Reset Period shall be the
same as LIBOR for the immediately preceding Interest Reset Period (or,
if there was no such previous Interest Reset Period, the rate of
interest on the Note for the Interest Reset Period shall be the
Initial Interest Rate).
"Designated LIBOR Page" means (x) if "LIBOR Reuters" is specified in a
LIBOR Note and the pricing supplement as the Reporting Service, the display on
the Reuters monitor money rates service (or any successor service) for the
purpose of displaying the London interbank rates of major banks for the Index
Currency, or (y) if "LIBOR Telerate" is so specified as the Reporting Service,
the display on Bridge Telerate, Inc., or any successor service, for the purpose
of displaying the London interbank rates of major banks for the Index Currency.
S-14
"Index Currency", with respect to any LIBOR Note, means the currency
(including any composite currency) so specified in the LIBOR Note and the
pricing supplement. If no currency is so specified, "Index Currency" means U.S.
dollars.
"Principal Financial Center" will be, for purposes of clause (c)
above, the principal financial center of the country of the specified Index
Currency, which generally will be the capital city of such country, except that
with respect to U.S. Dollars, Deutsche Marks and Euros, the Principal Financial
Center will be the City of New York, Frankfurt or Brussels, as the case may be.
Prime Rate Notes
Each Prime Rate Note will bear interest for each Interest Reset Period
at a rate calculated with reference to the Prime Rate and the Spread or Spread
Multiplier, if any, and subject to the Maximum Interest Rate, if any, and the
Minimum Interest Rate, if any, specified in the Prime Rate Note and the pricing
supplement.
Unless otherwise specified in the pricing supplement, the "Prime Rate"
for each Interest Reset Period in respect of each Prime Rate Note will be
determined by the Calculation Agent on the Calculation Date and will be
(a) the rate (expressed as a percentage per annum) as of the
second Business Day before the related Interest Reset Date (a "Prime
Rate Determination Date") as published in H.15(519) opposite the
heading "Bank Prime Loan", or
(b) if that rate is not so published prior to 9:00 A.M., New
York City time, on the Calculation Date, the rate as of such Prime
Rate Determination Date as published in H.15 Daily Update under the
heading "Bank Prime Loan", or
(c) if that rate is not so published before 3:00 P.M., New York
City time, on the Calculation Date, the arithmetic mean of the rates
publicly announced by each bank named on the Reuters Screen USPRIME1
Page (as defined below) as the bank's prime rate or base lending rate
as in effect on such Prime Rate Determination Date as quoted on the
Reuters Screen USPRIME1 Page on such Prime Rate Determination Date or
(d) if fewer than four such rates appear on the Reuters Screen
USPRIME1 Page for the Prime Rate Determination Date, the arithmetic
mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on the
Prime Rate Determination Date by at least two of three major money
center banks in The City of New York selected by the Calculation
Agent, in its discretion (after consultation with Avista Corp.), from
which quotations are requested; provided, however, that if fewer than
two prime rates are quoted by major money center banks as described
above, there shall be included in the group of rates whose arithmetic
mean is to be so determined the prime rates or base lending rates, as
of such Prime Rate Determination Date, of that number of substitute
banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, in each case having total
equity capital of at least U.S. $500 million and being subject to
supervision or examination by Federal or State authority, selected by
the Calculation Agent, in its discretion (after consultation with
Avista Corp.), which, when added to the number of rates provided by
major money center banks as aforesaid, shall equal two.
S-15
If in any calendar month the Prime Rate is not published in H.15(519)
or H.15 Daily Update and the banks or trust companies selected are not quoting
as described in the preceding paragraph, the "Prime Rate" for the Interest Reset
Period will be Prime Rate for the immediately preceding Interest Reset Period
(or, if there was no such previous Interest Reset Period in respect of such
Prime Rate Note, the rate of interest on the Prime Rate Note for the Interest
Reset Period shall be the Initial Interest Rate).
"Reuters Screen USPRIME1 Page" means the display designated as Page
"USPRIME1" on the Reuters monitor money rates service (or such other page as may
replace the USPRIME1 Page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
Treasury Rate Notes
Each Treasury Rate Note will bear interest for each Interest Reset
Period at a rate calculated with reference to the Treasury Rate and the Spread
or Spread Multiplier, if any, and subject to the maximum Interest Rate, if any,
and the minimum Interest Rate, if any, specified in the Treasury Rate Note and
the pricing supplement.
Unless otherwise specified in the pricing supplement, the "Treasury
Rate" for each Interest Reset Period in respect of each Treasury Rate Note will
be determined by the Calculation Agent on the Calculation Date and will be
(a) the rate (expressed as a percentage per annum) for the
auction held on the Treasury Rate Determination Date (as hereinafter
defined) for the Interest Reset Period of direct obligations of the
United States ("Treasury bills") having the Index Maturity specified
in the Treasury Rate Note and the pricing supplement, as such rate
shall appear under the heading "Investment Rate" on the display on
Bridge Telerate, Inc., or any successor service, on page 56 or page
57, or any other page that may replace either thereof on that service,
or
(b) if that rate is not published by 3:00 P.M., New York City
time, on the Calculation Date, the Bond Equivalent Yield of the rate
on Treasury Bills having the Index Maturity specified in the Treasury
Rate Note and in the pricing supplement as of such Treasury Rate
Determination Date, as such rate shall be published in H.15 Daily
Update under the heading "U.S. Government Securities/Treasury
Bills/Auction High", or
(c) if that rate is not so published by 3:00 P.M., New York City
time, on the Calculation Date, the Bond Equivalent Yield of the
auction rate of Treasury Bills having the Index Maturity specified
above, as otherwise announced by the United States Department of the
Treasury; or
(d) if that rate is not so announced by the United States
Department of the Treasury, or if that auction is not held, the Bond
Equivalent Yield of the rate as of such Treasury Rate Determination
Date of Treasury Bills having the Index Maturity specified above, as
such rate shall be published in H.15 (519) under the heading "U.S.
Government Securities/Treasury Bills/Secondary Market"; or
(e) if that rate is not so published by 3:00 P.M., New York City
time, on the Calculation Date, the rate as of such Treasury Rate
Determination Date of Treasury Bills having the Index Maturity
S-16
specified above, as that rate shall be published in H.15 Daily Update
under the heading "U.S. Government Securities/Treasury Bills/Secondary
Market"; or
(f) if that rate is not so published by 3:00 P.M., New York City
time, on the Calculation Date, the Bond Equivalent Yield of the
arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on the Treasury Rate Determination
Date, of three leading primary United States government securities
dealers selected by the Calculation Agent, in its discretion (after
consultations with Avista Corp.), for the issue of Treasury Bills with
a remaining maturity closest to the Index Maturity specified in the
Treasury Rate Note and in the pricing supplement; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are
not quoting bid rates as described above, then the "Treasury Rate" for
such Interest Reset Period will be deemed to be the same as the
Treasury Rate for the immediately preceding Interest Reset Period (or,
if there was no such previous Interest Reset Period in respect of such
Treasury Rate Note, the rate of interest on the Note for the Interest
Reset Period shall be the Initial Interest Rate).
The "Treasury Rate Determination Date" for each Interest Reset Period
is the day of the week in which the Interest Reset Date for the Interest Reset
Period falls on which Treasury bills would normally be auctioned. (As of the
date of this Prospectus Supplement, Treasury bills are normally sold at auction
on Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that such auction may
be held on the preceding Friday.) If, as the result of a legal holiday, an
auction is held on the preceding Friday, such Friday is the Treasury Rate
Determination Date pertaining to the Interest Reset Period commencing in the
next week. If an auction date falls on any day that would otherwise be an
Interest Reset Date for a Treasury Rate Note, then the Interest Reset Date is
instead the Business Day immediately following such auction date.
"Bond Equivalent Yield" shall be calculated in accordance with the
following formula and expressed as a percentage:
Bond Equivalent Yield = D x N
-------------
360 - (D x M)
where "D" refers to the applicable rate per annum for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which the
interest rate is being calculated.
REDEMPTION
The pricing supplement relating to each Note will indicate either that
such Note cannot be redeemed at the election of Avista Corp. before Stated
Maturity or that the Note will be redeemable, at the election of Avista Corp.,
in whole or in part, on any date on or after the date designated as the "Initial
Redemption Date" in the pricing supplement, at the applicable redemption price
plus accrued interest to the date fixed for redemption. If the Note is so
redeemable, the redemption price will initially be a percentage of the principal
amount of the Note to be redeemed equal to the "Initial Redemption Price"
specified in the pricing supplement for the twelve-month period commencing on
the Initial Redemption Date and will decline for the twelve-month period
S-17
commencing on each anniversary of the Initial Redemption Date by a percentage of
principal amount equal to the "Reduction Percentage" specified in the pricing
supplement until the redemption price is 100% of the principal amount of the
Note. The pricing supplement may specify a "Redemption Limitation Date" before
which Avista Corp. may not redeem a Note as contemplated above as a part of, or
in anticipation of, any refunding operation by the application, directly or
indirectly, of moneys borrowed having an effective interest cost to Avista Corp.
(calculated in accordance with generally accepted financial practice) less than
the effective interest cost to Avista Corp. (similarly calculated) of such Note.
The pricing supplement relating to each Note will also specify any
sinking fund or other mandatory redemption provisions applicable to the Note,
and any provisions for the redemption or purchase by Avista Corp. of the Note at
the option of the Holder.
Reference is made to the information contained under "DESCRIPTION OF
THE DEBT SECURITIES -- REDEMPTION" in the accompanying Prospectus.
LIMITATION ON SECURED DEBT
The Indenture will provide that, so long as any of the Notes remain
Outstanding, Avista Corp. will not create, issue, incur or assume any Secured
Debt (as hereinafter defined) other than Permitted Secured Debt (as hereinafter
defined) without the consent of the Holders of a majority in principal amount of
the Outstanding Indenture Securities of all series (including the Notes) and
tranches with respect to which this covenant is made (all such Indenture
Securities being hereinafter called "Benefitted Securities"), considered as one
class; provided, however, that this covenant will not prohibit the creation,
issuance, incurrence or assumption of any Secured Debt if either:
(a) Avista Corp. makes effective provision whereby all
Benefitted Securities then Outstanding will be secured equally and
ratably with such Secured Debt; or
(b) Avista Corp. delivers to the Trustee bonds, notes or other
evidences of indebtedness secured by the Lien (as hereinafter defined)
which secures such Secured Debt in an aggregate principal amount equal
to the aggregate principal amount of the Benefitted Securities then
Outstanding and meeting certain other requirements set forth in the
Indenture.
"Debt", with respect to any Person, means:
(a) indebtedness of the Person for borrowed money evidenced by a
bond, debenture, note or other written instrument or agreement by
which the Person is obligated to repay such borrowed money; and
(b) any guaranty by the Person of any such indebtedness of
another Person.
"Debt" does not include, among other things:
(x) indebtedness of the Person under any installment sale or
conditional sale agreement or any other agreement relating to
indebtedness for the deferred purchase price of property or services;
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(y) obligations of the Person under any lease agreement
(including any lease intended as security), whether or not such
obligations are required to be capitalized on the balance sheet of the
Person under generally accepted accounting principles, or
(z) liabilities secured by any Lien on any property owned by the
Person if and to the extent the Person has not assumed or otherwise
become liable for the payment thereof.
"Excepted Property" includes, among other things, cash, deposit
accounts, securities; contracts, leases and other agreements of all kinds;
contract rights, bills, notes and other instruments; revenues, accounts and
accounts receivable and unbilled revenues, claims, demands and judgments;
governmental and other licenses, permits, franchises, consents and allowances
(except to the extent that any of the same constitute rights or interests
relating to the occupancy or use of real property); certain intellectual
property rights and other general intangibles; vehicles, movable equipment and
aircraft; all goods, stock in trade, wares, merchandise and inventory held for
sale or lease in the ordinary course of business; materials, supplies, inventory
and other personal property consumable in the operation of any property of
Avista Corp.; fuel; portable tools and equipment; furniture and furnishings;
computers and data processing, telecommunications and other facilities used
primarily for administrative or clerical purposes or otherwise not used in
connection with the operation or maintenance of electric, gas or water utility
facilities; coal, ore, gas, oil and other minerals and timber; electric energy,
gas (natural or artificial), steam, water and other products generated,
produced, manufactured, purchased or otherwise acquired by Avista Corp.; real
property, gas wells, pipe lines, and other facilities used primarily for the
production or gathering of natural gas; all property which is the subject of a
lease agreement designating Avista Corp. as lessee and Avista Corp.'s interest
in such property and such lease agreement, whether or not such lease agreement
is intended as security.
"Lien" means any mortgage, deed of trust, pledge, security interest,
conditional sale or other title retention agreement or any lease in the nature
thereof.
"Permitted Secured Debt" means, as of any particular time:
(a) Secured Debt which matures less than one year from the date
of the issuance or incurrence thereof and is not extendible at the
option of the issuer; and any refundings, refinancings and/or
replacements of any such Secured Debt by or with similar Secured Debt;
(b) Secured Debt secured by Purchase Money Liens or any other
Liens existing or placed upon property at the time of, or within one
hundred eighty (180) days after, the acquisition thereof by Avista
Corp., and any refundings, refinancings and/or replacements of any
such Secured Debt; provided, however, that no such Purchase Money Lien
or other Lien shall extend to or cover any property of Avista Corp.
other than (1) the property so acquired and improvements, extensions
and additions to such property and renewals, replacements and
substitutions of or for the property or any part or parts of the
property and (2) with respect to Purchase Money Liens, other property
subsequently acquired by Avista Corp.;
(c) Secured Debt relating to governmental obligations the
interest on which is not included in gross income for purposes of
federal income taxation pursuant to Section 103 of the Internal
Revenue Code of 1986, as amended (or any successor provision of law),
for the purpose of financing or refinancing, in whole or in part,
costs of acquisition or construction of property to be used by Avista
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Corp., to the extent that the Lien which secures the Secured Debt is
required either by applicable law or by the issuer of such
governmental obligations or is otherwise necessary in order to
establish or maintain such exclusion from gross income; and any
refundings, refinancings and/or replacements of any Secured Debt by or
with similar Secured Debt;
(d) Secured Debt (i) which is related to the construction or
acquisition of property not previously owned by Avista Corp. or (ii)
which is related to the financing of a project involving the
development or expansion of property of Avista Corp. and (iii) in
either case, the obligee in respect of which has no recourse to Avista
Corp. or any property of Avista Corp. other than the property
constructed or acquired with the proceeds of such transaction or the
project financed with the proceeds of such transaction (or the
proceeds of such property or such project); and any refundings,
refinancings and/or replacements of any such Secured Debt by or with
Secured Debt described in clause (iii) above;
(e) Secured Debt permitted as described in the first paragraph
under this heading; and
(f) in addition to the Permitted Secured Debt described in
clauses (a) through (e) above, Secured Debt not otherwise so permitted
in an aggregate principal amount not exceeding 10% of the total assets
of Avista Corp. and its consolidated subsidiaries, as shown on the
latest balance sheet of Avista Corp. and its consolidated
subsidiaries, audited by independent certified public accountants,
dated before the date of the creation, issuance, incurrence or
assumption of such Secured Debt.
"Purchase Money Lien" means, with respect to any property being
acquired by Avista Corp., a Lien on such property which
(a) is taken or retained by the transferor of the property to
secure all or part of the purchase price thereof;
(b) is granted to one or more Persons other than the transferor
which, by making advances or incurring an obligation, give value to
enable the grantor of such Lien to acquire rights in or the use of the
property;
(c) is held by a trustee or agent for the benefit of one or more
Persons described in clause (a) or (b) above, provided that such Lien
may be held, in addition, for the benefit of one or more other Persons
which has given, or may thereafter give, value to or for the benefit
or account of the grantor of such Lien for one or more other purposes;
or
(d) otherwise constitutes a purchase money mortgage or a
purchase money security interest under applicable law; and, without
limiting the generality of the foregoing, for purposes of the
Indenture, the term Purchase Money Lien will be deemed to include any
Lien described above whether or not the Lien
(x) permits the issuance or other incurrence of additional
indebtedness secured by such Lien on the property,
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(y) permits the subjection to such Lien of additional property
and the issuance or other incurrence of additional indebtedness on the
basis thereof and/or
(z) has been granted before the acquisition of the property,
attaches to or otherwise covers property other than the property being
acquired and/or secures obligations issued before and/or after the
issuance of the obligations delivered in connection with such
acquisition.
"Secured Debt", with respect to any Person, means Debt created,
issued, incurred or assumed by such Person which is secured by a Lien upon any
property (other than Excepted Property) of Avista Corp., real, personal or
mixed, of whatever kind or nature and wherever located, whether owned at the
date of the initial authentication and delivery of the Notes or thereafter
acquired.
BOOK-ENTRY ONLY ISSUANCE - THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for the Notes. The Notes will be
issued only as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One or more fully-registered global certificates for the Notes,
representing the aggregate principal amount of Notes, will be issued and will be
deposited with DTC.
The following is based upon information furnished by DTC:
DTC is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning
of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" in DTC
include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is
owned by a number of its Direct Participants and by the NYSE, the
American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also
available to others, such as securities brokers and dealers,
banks and trust companies that clear transactions through or
maintain a custodial relationship with a Direct Participant
either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Notes within the DTC system must be made by or
through Direct Participants, which will receive a credit for the
Notes on DTC's records. The ownership interest of each actual
purchaser of each Note ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC
of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or
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Indirect Participants through which the Beneficial Owners entered
into the transaction. Transfers of ownership interests in the
Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership
interests in the Notes, except in the event that use of the
book-entry system for the Notes is discontinued, as discussed
below.
To facilitate subsequent transfers, all Notes deposited by
Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Notes with DTC and
their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Notes
are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
The delivery of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co., as registered
Holder of the Notes. If less than all of the Notes are being
redeemed, DTC's practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with
respect to Notes. Under its usual procedures, DTC mails an
Omnibus Proxy to Avista Corp. as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Payments on the Notes will be made to DTC. DTC's practice is
to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive
payment on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Participants and
not of DTC or Avista Corp., subject to any statutory or
regulatory requirements as may be in effect from time to time.
Payment to DTC will be the responsibility of Avista Corp.,
disbursement of payments to Direct Participants will be the
responsibility of DTC, and further disbursement of payments to
the Beneficial Owners will be the responsibility of Direct
Participants and Indirect Participants.
Management of DTC is aware that some computer applications,
systems and the like for processing data ("Systems") that are
dependent upon calendar dates, including dates before, on, and
after January 1, 2000, may encounter "Year 2000 problems." DTC
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has informed Direct Participants and Indirect Participants and
other members of the financial community (the "Industry") that it
has developed and is implementing a program so that its Systems,
as the same relate to the timely payment of distributions
(including principal and interest payments) to securityholders,
book-entry deliveries, and settlement of trades within DTC
("Depositary Services"), continue to function appropriately. This
program includes a technical assessment and a remediation plan,
each of which is complete. Additionally, DTC's plan includes a
testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform its services properly is
also dependent upon other parties, including, but not limited to,
issuers and their agents, as well as DTC's Direct Participants
and Indirect Participants, third party vendors from whom DTC
licenses software and hardware, and third party vendors on whom
DTC relies for information or the provision of services,
including telecommunication and electrical utility service
providers, among others. DTC has informed the Industry that it is
contacting (and will continue to contact) third party vendors
from whom DTC acquires services to: (1) impress upon them the
importance of such services being Year 2000 compliant; and (2)
determine the extent of their efforts for Year 2000 remediation
(and, as appropriate, testing) of their services. In addition,
DTC is in the process of developing such contingency plans as it
deems appropriate.
According to DTC, the information in the preceding two
paragraphs with respect to DTC has been provided to the Industry
for informational purposes only and is not intended to serve as a
representation, warranty, or contract modification of any kind.
DTC may discontinue providing its services as securities depositary
for the Notes at any time by giving notice to Avista Corp. Under such
circumstances, in the event that a successor securities depositary is not
obtained, Note certificates will be delivered to the Beneficial Owners.
Additionally, Avista Corp. may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary). In that event,
certificates for the Notes will be delivered.
The information in this section concerning DTC and DTC's book-entry
system and procedures has been obtained from sources that Avista Corp. believes
to be reliable, but Avista Corp. takes no responsibility for the accuracy
thereof. Neither Avista Corp., the Trustee nor the Agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Notes or for
maintaining, supervising or reviewing any records relating thereto.
Except as provided herein, a Beneficial Owner of an interest in a
global Note certificate may not receive physical delivery of Notes. Accordingly,
each Beneficial Owner must rely on the procedures of DTC to exercise any rights
under the Notes.
CERTAIN UNITED STATES TAX CONSIDERATIONS
The following is a discussion of certain U.S. income tax
considerations based on the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury regulations (the "Regulations"),
published rulings, and judicial decisions, all as currently in effect. This
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discussion deals only with Notes held as capital assets (within the meaning of
Section 1221 of the Code) by U.S. Holders (as defined below) that are initial
purchasers, and not with special classes of holders such as banks, insurance
companies, dealers in securities or currencies, traders in securities that elect
to mark to market, tax-exempt organizations, persons holding Notes as part of a
straddle, hedging or conversion transaction, or persons whose functional
currency is not the U.S. dollar. All persons considering the purchase of Notes
are advised to consult their own tax advisors concerning the consequences, in
their particular circumstances, under the Code and the laws of any other taxing
jurisdiction, of the ownership of the Notes.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Note that is for United States federal income tax purposes:
(a) a citizen or resident of the United States;
(b) a corporation, partnership or other entity created or
organized under the laws of the United States or any political
subdivision thereof;
(c) an estate the income of which is subject to United States
federal income tax without regard to its source; or
(d) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all
substantial decisions of the trust.
PAYMENTS OF INTEREST
Interest on a Note, other than original issue discount, generally will
be taxable to a U.S. Holder as ordinary income at the time it is received or
accrued, depending on the holder's regular method of accounting for tax
purposes.
ORIGINAL ISSUE DISCOUNT
General
Original issue discount ("OID") is the excess of the "stated
redemption price at maturity" of a Note over its issue price if such excess
equals or exceeds a "de minimis amount" (as defined below). The issue price of a
Note generally will be the first price at which a substantial amount of Notes
included in the issue of which the Note is a part is sold other than to bond
houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers. The stated redemption price at
maturity is the sum of all payments provided for under the terms of the Note
other than "qualified stated interest". A qualified stated interest payment is
generally any one of a series of stated interest payments on a Note that are
unconditionally payable at least annually at a single fixed rate (with certain
exceptions for lower rates paid during some periods) applied to the outstanding
principal amount of the Note. Notes issued with OID are hereinafter called "OID
Notes". Special rules for "Floating Rate Notes" are described below under "Notes
Issued with Floating Interest Rates."
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U.S. Holders of OID Notes that mature more than one year from the date
of issuance generally must include OID in income as ordinary interest income in
advance of actual receipt of some or all of the corresponding interest payments
from Avista Corp. U.S. Holders of OID Notes generally must include in income the
daily portion of OID as it accrues during each accrual period over the life of a
Note under a formula based upon the compounding of interest at a rate that
provides for a constant yield to maturity (the "Constant Yield Method").
The Constant Yield Method
Under the Constant Yield Method, the amount of OID includible in
income by a U.S. Holder of an OID Note is the sum of the daily portions of OID
with respect to the OID Note for each day during the taxable year or portion of
the taxable year on which the U.S. Holder holds such OID Note ("accrued OID").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. Accrual
periods with respect to a Note may be of any length selected by the U.S. Holder
and may vary in length over the term of the Note as long as:
(a) no accrual period is longer than one year and
(b) each scheduled payment of interest or principal on the Note
occurs on either the final or first day of an accrual period.
The amount of OID allocable to an accrual period equals the excess of
(x) the product of the OID Note's adjusted issue price at the
beginning of the accrual period and such Note's yield to maturity
(determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period)
over
(y) the sum of the payments of qualified stated interest on the
Note allocable to the accrual period.
The "adjusted issue price" of an OID Note at the beginning of any
accrual period is the issue price of the Note:
(a) increased by the amount of accrued OID for each prior
accrual period; and
(b) decreased by the amount of any payments previously made on
the Note that were not qualified stated interest payments.
For purposes of determining the amount of OID allocable to an accrual
period, if an interval between payments of qualified stated interest on the Note
contains more than one accrual period, the amount of qualified stated interest
payable at the end of the interval (including any qualified stated interest that
is payable on the first day of the accrual period immediately following the
interval) is allocated pro rata on the basis of relative lengths to each accrual
period in the interval, and the adjusted issue price at the beginning of each
accrual period in the interval must be increased by the amount of any qualified
stated interest that has accrued before the first day of the accrual period but
that is not payable until the end of the interval. The amount of OID allocable
to an initial short accrual period may be computed using any reasonable method
S-25
if all other accrual periods other than a final short accrual period are of
equal length.
The amount of OID allocable to the final accrual period is the
difference between
(a) the amount payable at the maturity of the Note (other than
any payment of qualified stated interest) and
(b) the Note's adjusted issue price as of the beginning of the
final accrual period.
Because OID is calculated based on the compounding of interest, U.S.
Holders will generally have to include in income increasingly greater amounts of
OID in successive accrual periods.
De Minimis OID
In general, if the excess of a Note's stated redemption price at
maturity over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not an OID Note. Unless the
election described below under "Election to Treat All Interest as Original Issue
Discount" is made, a United States Holder of a Note with de minimis original
issue discount must include such de minimis original issue discount in income as
stated principal payments on the Note are made. The includible amount with
respect to each such payment will equal the product of the total amount of the
Note's de minimis original issue discount and a fraction, the numerator of which
is the amount of the principal payment made and the denominator of which is the
stated principal amount of the Note.
Short Term Notes
In general, an individual or other cash basis U.S. Holder of a Note
with a term of one year or less (a "short-term Note") is not required to accrue
OID (as specially defined below for the purposes of this paragraph) for U.S.
federal income tax purposes unless it elects to do so (but may be required to
include any stated interest in income as the interest is received). Accrual
basis U.S. Holders and certain other U.S. Holders, including banks, regulated
investment companies, dealers in securities, common trust funds, U.S. Holders
who hold Notes as part of certain identified hedging transactions, certain
pass-through entities and cash basis U.S. Holders who so elect, are required to
accrue OID on short-term Notes on either a straight-line basis or under the
Constant Yield Method (based on daily compounding), at the election of the U.S.
Holder. In the case of a U.S. Holder not required and not electing to include
OID in income currently, any gain realized on the sale or retirement of the
short-term Note will be ordinary income to the extent of the OID accrued on a
straight-line basis (unless an election is made to accrue the OID under the
Constant Yield Method) through the date of sale or retirement. U.S. Holders who
are not required and do not elect to accrue OID on short-term Notes will be
required to defer deductions for interest on borrowings allocable to short-term
Notes in an amount not exceeding the deferred income until the deferred income
is realized.
For purposes of determining the amount of OID subject to these rules,
all interest payments on a short-term Note, including stated interest, are
included in the short-term Note's stated redemption price at maturity.
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Election to Treat All Interest as Original Issue Discount
A U.S. Holder may elect to include in gross income all interest that
accrues on a Note using the Constant Yield Method, with the modifications
described below. For purposes of this election, interest includes stated
interest, OID, de minimis original issue discount, market discount, de minimis
market discount and unstated interest, as adjusted by an amortizable bond
premium (described below under "Notes Purchased at a Premium") or acquisition
premium.
In applying the Constant Yield Method to a Note with respect to which
this election has been made, the issue price of the Note will equal its cost to
the electing U.S. Holder, the issue date of the Note will be the date of its
acquisition by the electing U.S. Holder, and no payments on the Note will be
treated as payments of qualified stated interest. This election will generally
apply only to the Note with respect to which it is made and may not be revoked
without the consent of the Internal Revenue Service. If this election is made
with respect to a Note with amortizable bond premium, then the electing U.S.
Holder will be deemed to have elected to apply amortizable bond premium against
interest with respect to all debt instruments with amortizable bond premium
(other than debt instruments the interest on which is excludible from gross
income) held by the electing U.S. Holder as of the beginning of the taxable year
in which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Internal Revenue Service.
Notes Issued with Floating Interest Rates
Floating Rate Notes are subject to special rules. For these purposes,
a Floating Rate Note will qualify as a "variable rate debt instrument" if it:
(a) has an issue price that does not exceed the total
noncontingent principal payments by more than the lesser of (1) the
product of (A) the total noncontingent principal payments, (B) the
number of complete years to maturity from the issue date and (C) .015
and (2) 15 percent of the total noncontingent principal payments; and
(b) does not provide for stated interest other than stated
interest compounded or paid at least annually at (1) one or more
"qualified floating rates," (2) a single fixed rate and one or more
qualified floating rates, (3) a single "objective rate" or (4) a
single fixed rate and a single objective rate that is a "qualified
inverse floating rate."
A qualified floating rate or objective rate in effect at any time
during the term of the instrument must be set at a "current value" of that rate.
A "current value" of a rate is the value of the rate on any day that is no
earlier than 3 months before the first day on which that value is in effect and
no later than 1 year following that first day.
A variable rate is a "qualified floating rate" if:
(a) variations in the value of the rate can reasonably be
expected to measure contemporaneous variations in the cost of newly
borrowed funds in the currency in which the Note is denominated; or
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(b) it is equal to the product of such a rate and either (1) a
fixed multiple that is greater than 0.65 but not more that 1.35, or
(2) a fixed multiple greater than 0.65 but not more than 1.35,
increased or decreased by a fixed rate.
If a Note provides for two or more qualified floating rates that (a) are within
0.25 percentage points of each other on the issue date or (b) can reasonably be
expected to have approximately the same values throughout the term of the Note,
the qualified floating rates together constitute a single qualified floating
rate. A rate is not a qualified floating rate, however, if the rate is subject
to certain restrictions (including caps, floors, governors, or other similar
restrictions) unless such restrictions are fixed throughout the term of the Note
or are not reasonably expected to significantly affect the yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate,
that is determined using a single, fixed formula and that is based on objective
financial or economic information that is not within the control of or unique to
the circumstances of the issuer or a related party. A variable rate is not an
objective rate, however, if it is reasonably expected that the average value of
the rate during the first half of the Note's term will be either significantly
less than or significantly greater than the average value of the rate during the
final half of the Note's term. An objective rate is a "qualified inverse
floating rate" if:
(a) the rate is equal to a fixed rate minus a qualified floating
rate; and
(b) the variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly
borrowed funds.
If interest on a Note is stated at a fixed rate for an initial period
of one year or less followed by either a qualified floating rate or an objective
rate for a subsequent period and:
(a) the fixed rate and the qualified floating rate or objective
rate have values on the issue date of the Note that do not differ by
more than 0.25 percentage points; or
(b) the value of the qualified floating rate or objective rate
is intended to approximate the fixed rate,
the fixed rate and the qualified floating rate or the objective rate constitute
a single qualified floating rate or objective rate. Under these rules, CD Rate
Notes, CMT Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes,
LIBOR Notes, Prime Rate Notes and Treasury Rate Notes should generally be
treated as "variable rate debt instruments."
In general, if
(a) a Floating Rate Note that provides for stated interest at a
single qualified floating rate or objective rate throughout the term
thereof qualifies as a "variable rate debt instrument," and
(b) interest on such Note is unconditionally payable in cash or
other property (other than debt instruments of the issuer),
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then all stated interest on the Note is qualified stated interest and will be
taxed accordingly. The amount of OID for such Notes, if any, is determined by
using, in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date of the qualified floating rate or qualified
inverse floating rate, or, in the case of any other objective rate, a fixed rate
that reflects the yield reasonably expected for the Note.
In general, any other Floating Rate Note that qualifies as a variable
rate debt instrument will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of OID and
qualified stated interest on the Note. For this calculation, the amount of
interest and OID accruals on the Note are generally determined by:
(a) determining a fixed rate substitute for each variable rate
provided under the Floating Rate Note (generally, the value of each
variable rate as of the issue date or, in the case of an objective
rate that is not a qualified inverse floating rate, a rate that
reflects the reasonably expected yield on the Note);
(b) constructing the equivalent fixed rate debt instrument
(using the fixed rate substitutes described above);
(c) determining the amount of qualified stated interest and OID
with respect to the equivalent fixed rate debt instrument, and
(d) making the appropriate adjustments for actual variable rates
during the applicable accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument," then the Note would be treated as a contingent payment debt
obligation. The effect of treating a Floating Rate Note as a contingent payment
debt obligation would be to require a U.S. Holder, regardless of its regular
method of accounting, to accrue income based on the "comparable yield" of the
Floating Rate Note (i.e., the yield at which Avista Corp. would issue a fixed
rate debt instrument with the same maturity and with terms and conditions
otherwise similar to the Floating Rate Note). As a result, a U.S. Holder could
accrue income in excess of cash payments actually received, and any gain or loss
upon the sale, exchange or retirement of the Floating Rate Note would be treated
as other than long-term capital gain or loss.
NOTES PURCHASED AT A PREMIUM
A U.S. Holder that purchases a Note for an amount in excess of its
"stated redemption price at maturity" may elect to treat such excess as
"amortizable bond premium," in which case the amount required to be included in
the U.S. Holder's income each year with respect to interest on the Note will be
reduced by the amount of amortizable bond premium allocable (based on the Note's
yield to maturity) to such year. Any election to amortize bond premium shall
apply to all bonds (other than bonds the interest on which is excludible from
gross income) held by the U.S. Holder at the beginning of the first taxable year
to which the election applies or thereafter acquired by the U.S. Holder, and is
irrevocable without the consent of the Internal Revenue Service. See also
"Original Issue Discount -- Election to Treat All Interest as Original Issue
Discount."
S-29
BASIS AND SALES, EXCHANGES OR RETIREMENTS
A U.S. Holder's tax basis in a Note will generally equal the cost of
such Note to the U.S. Holder plus the total amount of OID or market discount
included in such U.S. Holder's income plus the amount of income, if any,
attributable to de minimis OID and de minimis market discount included in the
U.S. Holder's income with respect to the Note, less (a) any payments received by
such U.S. Holder that are not qualified stated interest and (b) the amount of
any amortizable bond premium applied to reduce interest on the Note.
Upon the sale, exchange or payment of a Note having a maturity date
more than one year from the date of issuance, the U.S. Holder of a Note will
generally realize capital gain or loss equal to the difference between the
amount realized and the U.S. Holder's tax basis in such Note. U.S. Holders of
OID Notes that have a maturity date one year or less from the date of issuance,
and who do not elect to accrue OID using the Constant Yield Method, will
generally be required to treat gain realized on the sale, exchange or payment of
such Note as interest income to the extent of OID accrual on a straight-line
basis through the date of such sale, exchange or payment. Capital gain of a
non-corporate U.S. Holder is generally subject to a maximum tax rate of 20% in
respect of property held for more than one year. Under current law, the
deductibility of capital losses is subject to certain limitations.
BACKUP WITHHOLDING
Certain backup withholding and information reporting requirements may
apply to payments on a Note to registered U.S. Holders who are not otherwise
exempt from such requirements pursuant to the Code. In general, with respect to
non-corporate U.S. Holders, information reporting requirements will apply to
payments of principal, any premium and interest on a Note and the proceeds of
the sale of a Note before maturity, and to the accrual of OID on OID Notes and
backup withholding at a rate of 31% will apply to such payments and to payments
of OID if the U.S. Holder fails to provide an accurate taxpayer identification
number or is notified by the Internal Revenue Service that it has failed to
report all interest and dividends required to be shown on its federal income tax
returns. Any amounts withheld from a payment to a U.S. Holder under backup
withholding rules would be allowed as a refund or a credit against such U.S.
Holder's U.S. federal income tax provided the required information is furnished
to the Internal Revenue Service.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by Avista Corp.
through Morgan Stanley & Co. Incorporated, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc, the Agents, who
have agreed to use reasonable efforts to solicit offers to purchase the Notes;
provided that Avista Corp. has reserved its right to sell, solicit and accept
offers to purchase Notes on its own behalf. Avista Corp. will have the sole
right to accept offers to purchase Notes and may reject any offer in whole or in
part. An Agent will have the right to reject any offer in whole or in part.
Payment of the purchase price of the Notes will be required to be made in
immediately available funds. Unless otherwise specified in the pricing
supplement, Avista Corp. will pay an Agent, in connection with sales of Notes
resulting from a solicitation made or an offer to purchase received by such
Agent, a commission ranging from .125% to .875% of the initial offering price of
the Notes to be sold, depending upon the maturity of the Notes.
S-30
Avista Corp. may also sell Notes to an Agent as principal for its own
account at discounts to be agreed upon at the time of sale. The Notes may be
resold to investors and other purchasers at a fixed offering price or at
prevailing market prices, or prices related thereto at the time of such resale
or otherwise, as determined by the Agent and specified in the pricing
supplement. An Agent may offer the Notes it has purchased as principal to other
dealers. An Agent may sell the Notes to any dealer at a discount and, unless
otherwise specified in the pricing supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by such Agent from
Avista Corp. After the initial public offering of the Notes that are to be
resold by the Agents to investors and other purchasers on a fixed public
offering price basis, the public offering price, concession, and discount may be
changed.
In order to facilitate the offering of the Notes, the Agents may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Agents may overallot in connection with the
offering, creating a short position in the Notes for their own account. In
addition, to cover overallotments or to stabilize the price of the Notes, the
Agents may bid for, and purchase, the Notes in the open market. Finally, any
underwriting syndicate participating in a sale of Notes to one or more Agents
acting as principal may reclaim selling concessions allowed to an underwriter or
a dealer for distributing the Notes in the offering, if the syndicate
repurchases previously distributed Notes in transactions to cover syndicate
short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Notes above
independent market levels. The Agents are not required to engage in these
activities, and may end any of these activities at any time.
The Agents may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"). Avista Corp. and
the Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the federal securities laws, or to contribute to
payments made in respect of any such liabilities. Avista Corp. has also agreed
to reimburse the Agents for certain expenses.
Avista Corp. does not intend to apply for the listing of the Notes on
a national securities exchange, but has been advised by the Agents that the
Agents intend to make a market in the Notes, as permitted by applicable laws and
regulations. The Agents are not obligated to do so, however, and the Agents may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
Concurrently with the offering of Notes through the Agent as described
herein, Avista Corp. may issue other Debt Securities under the Indenture
referred to herein. Any Debt Securities sold by Avista Corp. pursuant to the
Prospectus will reduce the aggregate principal amount of Notes that may be
offered by this Prospectus Supplement and the Prospectus.
The Agents and/or certain of their affiliates may engage in
transactions with and perform services for Avista Corp. and certain of its
affiliates in the ordinary course of business.
S-31
LEGAL MATTERS
The following information supplements the information regarding legal
opinions contained under "LEGAL MATTERS" in the accompanying prospectus. In
addition to the matters referred to in the prospectus, certain U.S. federal
income tax matters will be passed upon for Avista Corp. by Thelen Reid & Priest
LLP. The opinions of Paine, Hamblen, Coffin, Brooke & Miller LLP and Thelen Reid
& Priest LLP, each as counsel to Avista Corp., and Sullivan & Cromwell, as
counsel to the Agents, will be conditioned upon, and subject to certain
assumptions regarding, future action required to be taken by Avista Corp. and
the Trustee in connection with the issuance and sale of any particular Note, the
specific terms of Notes and other matters which may affect the validity of Notes
but which cannot be ascertained on the date of such opinions.
S-32
PROSPECTUS
$400,000,000
AVISTA CORPORATION
DEBT SECURITIES
---------------
Avista Corporation may offer from time to time up to $400,000,000, in
principal amount of its unsecured debt securities, in one or more series, at
prices and on terms to be determined at the time of sale.
One or more supplements to this prospectus will indicate the terms of
each series of debt securities, and each tranche within a series including,
where applicable, the
o series designation,
o principal amount,
o stated maturity date,
o interest rate and interest payment dates,
o initial public offering price, and
o provisions for redemption, if any.
Avista Corp. may sell the debt securities to or through underwriters,
dealers or agents or directly to one or more purchasers. The applicable
prospectus supplement will describe each offering of the debt securities.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August 17, 1999
THIS PROSPECTUS INCORPORATES BY REFERENCE IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT AVISTA CORP. THAT IS NOT INCLUDED IN OR DELIVERED
WITH THIS PROSPECTUS. SEE "AVAILABLE INFORMATION". YOU MAY OBTAIN COPIES OF
DOCUMENTS CONTAINING SUCH INFORMATION FROM US, WITHOUT CHARGE, BY EITHER CALLING
OR WRITING TO US AT:
AVISTA CORPORATION
POST OFFICE BOX 3727
SPOKANE, WASHINGTON 99220
ATTENTION: TREASURER
TELEPHONE: (509) 489-0500
TABLE OF CONTENTS
Page Page
---- ----
Available Information....................3
Remedies.............................9
Avista Corporation.......................4
Consolidation, Merger, Sale of
Use of Proceeds..........................4 Assets and Other Transactions.......11
Description of the Debt Securities.......5 Modification of Indenture...........12
General.............................5 Duties of the Trustee;
Resignation; Removal................15
Payment and Paying Agents...........6
Evidence of Compliance..............15
Registration and Transfer...........7
Governing Law.......................15
Redemption..........................7
Plan of Distribution.....................16
Satisfaction And Discharge..........7
Legal Matters............................16
Events of Default...................8
Experts..................................17
WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OTHER THAN
THIS PROSPECTUS AND THE USUAL SUPPLEMENTS TO THIS PROSPECTUS. YOU SHOULD NOT
ASSUME THAT THE INFORMATION CONTAINED OR INCORPORATED IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE AFTER AUGUST 17, 1999, WHICH IS THE DATE OF THIS
PROSPECTUS. WE ARE NOT OFFERING TO SELL THE DEBT SECURITIES AND WE ARE NOT
SOLICITING OFFERS TO BUY THE DEBT SECURITIES IN ANY JURISDICTION IN WHICH OFFERS
ARE NOT PERMITTED.
2
AVAILABLE INFORMATION
Avista Corp. files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy this
information at the SEC's Public Reference Room and at its Regional Offices:
Public Reference Room New York Regional Office Chicago Regional Office
Judiciary Plaza 7 World Trade Center Citicorp Center
450 Fifth Street, N.W. Suite 1300 500 West Madison Street
Room 1024 New York, New York 10048 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661-2551
You may obtain information on the operation of the SEC's public
reference rooms by calling the SEC at 1-800-SEC-0330. You may also obtain copies
of such material by mail from the Public Reference Section of the SEC, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
SEC also maintains an Internet site that contains Avista Corp.'s reports, proxy
statements and other information filed with the SEC. The address of that site is
http://www.sec.gov.
Avista Corp.'s Common Stock is listed on the New York and Pacific
Stock Exchanges, and reports, proxy statements and other information concerning
Avista Corp. can also be inspected at the offices of those exchanges located at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005, and the
Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104,
respectively.
Avista Corp. is incorporating into this prospectus by reference:
o Avista Corp.'s most recent Annual Report on Form 10-K filed
with the SEC pursuant to the Exchange Act and
o all other documents filed by Avista Corp. with the SEC
pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the filing of Avista Corp.'s most
recent Annual Report and prior to the termination of the
offering made by this prospectus,
and all of those documents are deemed to be a part of this prospectus from the
date of filing such documents. We refer to the documents incorporated into this
prospectus by reference as the "Incorporated Documents". Any statement contained
in an Incorporated Document may be modified or superseded by a statement in this
prospectus or in any prospectus supplement or in any subsequently filed
Incorporated Document. The Incorporated Documents as of the date of this
prospectus are:
o Annual Report on Form 10-K for the year ended December 31,
1998;
o Quarterly Reports on Form 10-Q for the quarters ended March
31 and June 30, 1999; and
o Current Report on Form 8-K dated June 15, 1999.
Avista Corp. maintains an Internet site at http://www.avistacorp.com
(which is not intended to be an active hyperlink) which contains information
concerning Avista Corp. and its affiliates. The information contained at Avista
Corp.'s Internet site is not incorporated in this prospectus by reference and
you should not consider it a part of this prospectus.
3
AVISTA CORPORATION
Avista Corp., formerly known as The Washington Water Power Company,
was incorporated in the State of Washington in 1889, and is a diversified energy
services company. Avista Corp.'s subsidiaries include Avista Energy, Avista
Advantage, Avista Labs and Pentzer Corporation. At December 31, 1998, Avista
Corp.'s employees included 1,536 people in its utility operations and
approximately 2,153 people in its majority-owned non-regulated businesses
(energy and non-energy). Avista Corp.'s corporate headquarters are located at
1411 East Mission Avenue, Spokane, Washington 99220, which serves as the Inland
Northwest's center for manufacturing, transportation, health care, education,
communication, agricultural and service businesses.
The Company's operations are organized into four lines of business,
two of which comprise its utility operations. The Energy Delivery business
provides electricity and natural gas in a 26,000 square-mile area in eastern
Washington and northern Idaho, with a combined population of approximately
825,000, as of December 31, 1998, as well as natural gas services in a 4,000
square-mile area in northeast and southwest Oregon and South Lake Tahoe region
of California, with a combined population of approximately 459,000, as of such
date. The Generation and Resources business includes the generation and
production of electric energy, and short- and long-term electric and natural gas
wholesale sales and wholesale marketing primarily to, and commodity trading
with, other utilities and power brokers in the Western System Coordinating
Council. The National Energy Trading and Marketing business, which is conducted
through subsidiaries, focuses on commodity trading, energy marketing and energy
related products and services on a national basis. The non-energy business
primarily consists of Pentzer, a private investment firm.
Regulatory, economic and technological changes have brought about the
accelerating transformation of the electric utility industry from a vertically
integrated monopoly to separate market driven businesses. Changes underway in
the utility and energy industries are creating new opportunities to expand
Avista Corp.'s businesses and serve new markets. In pursuing such opportunities,
Avista Corp. is shifting its strategic direction to growth in order to achieve
its goal of becoming a diversified North American energy company.
USE OF PROCEEDS
Avista Corp. intends to use the net proceeds from the issuance and
sale of the debt securities offered by this prospectus (the "Debt Securities")
for any or all of the following purposes: (a) to fund a portion of Avista
Corp.'s construction, facility improvement and maintenance programs, (b) to
retire or exchange one or more outstanding series of its preferred stock, bonds
or long-term notes, (c) to reduce or eliminate short-term debt issued for any of
these purposes, (d) to reimburse Avista Corp.'s treasury for funds previously
expended for these purposes and (e) for other corporate purposes. Avista Corp.
also has an existing shelf registration statement on file with the SEC for the
issuance and sale of Medium-Term Notes, Series C. As of June 30, 1999, Avista
Corp. had $166,000,000 of Medium-Term Notes, Series C available for issuance and
sale, the net proceeds from which may be used for purposes similar to those
enumerated above. The prospectus supplement relating to each series or tranche
of the Debt Securities will indicate the expected use of the proceeds of that
series or tranche.
4
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
Avista Corp. may issue the Debt Securities in one or more series, or
in one or more tranches within a series, under an Indenture, dated as of April
1, 1998 (the "Original Indenture"), between Avista Corp. and The Chase Manhattan
Bank, as trustee (the "Trustee"), the Original Indenture, as amended and
supplemented from time to time, being hereinafter referred to as the Indenture.
The terms of the Debt Securities will include those stated in the Indenture and
those made part of the Indenture by the Trust Indenture Act. The following
summary is not complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the Indenture and the Trust
Indenture Act. Avista Corp. has filed the Indenture, as well as a form of
officer's certificate to establish a series of debt securities, as exhibits to
the registration statement of which this prospectus is a part. Capitalized terms
used under this heading which are not otherwise defined in this prospectus have
the meanings set forth in the Indenture. Wherever particular provisions of the
Indenture or terms defined in the Indenture are referred to, those provisions or
definitions are incorporated by reference as part of the statements made in this
prospectus and those statements are qualified in their entirety by that
reference. References to article and section numbers, unless otherwise
indicated, are references to article and section numbers of the Indenture.
In addition to the Debt Securities, other debt securities may be
issued under the Indenture, without any limit on the aggregate principal amount.
The Debt Securities and all other debt securities issued under the Indenture are
collectively referred to as the "Indenture Securities." Each series of Indenture
Securities will be unsecured and will rank pari passu with all other series of
Indenture Securities, except as otherwise provided in the Indenture, and with
all other unsecured and unsubordinated indebtedness of Avista Corp. Except as
otherwise described in the applicable prospectus supplement, the Indenture does
not limit the incurrence or issuance by Avista Corp. of other secured or
unsecured debt, whether under the Indenture, under any other indenture that
Avista Corp. may enter into in the future or otherwise. See the prospectus
supplement relating to any offering of Debt Securities.
The applicable prospectus supplements will describe the following
terms of the Debt Securities of each series or tranche:
(a) the title of the Debt Securities;
(b) any limit upon the aggregate principal amount of the Debt
Securities;
(c) the date or dates on which the principal of the Debt
Securities is payable or the method of determination thereof and the
right, if any, to extend such date or dates;
(d) the rate or rates at which the Debt Securities will bear
interest, if any, or the method by which such rate or rates, if any,
will be determined, the date or dates from which any such interest
will accrue, the interest payment dates on which any such interest
will be payable, the right, if any, of Avista Corp. to defer or extend
an interest payment date, and the regular record date for any interest
payable on any interest payment date and the person or persons to whom
interest on the Debt Securities will be payable on any interest
payment date, if other than the person or persons in whose names the
Debt Securities are registered at the close of business on the regular
record date for such interest;
5
(e) the place or places where, subject to the terms of the
Indenture as described below under "--Payment and Paying Agents", the
principal of and premium, if any, and interest, if any, on the Debt
Securities will be payable and where, subject to the terms of the
Indenture as described below under "--Registration and Transfer", the
Debt Securities may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon
Avista Corp. in respect of the Debt Securities and the Indenture may
be served; the Security Registrar and Paying Agents for the Debt
Securities; and, if such is the case, that the principal of the Debt
Securities will be payable without presentation or surrender;
(f) any period or periods within which, or date or dates on
which, the price or prices at which and the terms and conditions upon
which the Debt Securities may be redeemed, in whole or in part, at the
option of Avista Corp.;
(g) the obligation or obligations, if any, of Avista Corp. to
redeem or purchase any of the Debt Securities pursuant to any sinking
fund or other mandatory redemption provisions or at the option of the
Holder, and the period or periods within which, or date or dates on
which, the price or prices at which and the terms and conditions upon
which the Debt Securities will be redeemed or purchased, in whole or
in part, pursuant to such obligation, and applicable exceptions to the
requirements of a notice of redemption in the case of mandatory
redemption or redemption at the option of the Holder;
(h) the denominations in which any of the Debt Securities will
be issuable if other than denominations of $1,000 and any integral
multiple of $1,000;
(i) if the Debt Securities are to be issued in global form, the
identity of the depositary; and
(j) any other terms of the Debt Securities.
PAYMENT AND PAYING AGENTS
Except as may be provided in the applicable prospectus supplement,
Avista Corp. will pay interest, if any, on each Debt Security on each interest
payment date to the person in whose name such Debt Security is registered (the
registered holder of any Indenture Security being called a "Holder") as of the
close of business on the regular record date relating to such interest payment
date; provided, however, that Avista Corp. will pay interest at maturity
(whether at stated maturity, upon redemption or otherwise, "Maturity") to the
person to whom principal is paid. However, if there has been a default in the
payment of interest on any Debt Security, such defaulted interest may be payable
to the Holder of such Debt Security as of the close of business on a date
selected by the Trustee which is not more than 30 days and not less than 10 days
before the date proposed by Avista Corp. for payment of such defaulted interest
or in any other lawful manner not inconsistent with the requirements of any
securities exchange on which such Debt Security may be listed, if the Trustee
deems such manner of payment practicable. (See Section 307.)
Unless otherwise specified in the applicable prospectus supplement,
Avista Corp. will pay the principal of and premium, if any, and interest, if
any, on the Debt Securities at Maturity upon presentation of the Debt Securities
at the corporate trust office of The Chase Manhattan Bank in New York, New York,
as paying agent for Avista Corp. Avista Corp. may change the place of payment of
the Debt Securities, may appoint one or more additional paying agents (including
Avista Corp.) and may remove any paying agent, all at its discretion. (See
Section 502.)
6
REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable prospectus supplement,
Holders may register the transfer of Debt Securities, and may exchange Debt
Securities for other Debt Securities of the same series and tranche, of
authorized denominations and having the same terms and aggregate principal
amount, at the corporate trust office of The Chase Manhattan Bank in New York,
New York, as security registrar for the Debt Securities. Avista Corp. may change
the place for registration of transfer and exchange of the Debt Securities, may
appoint one or more additional security registrars (including Avista Corp.) and
may remove any security registrar, all at its discretion. (See Section 502.)
Except as otherwise provided in the applicable prospectus supplement, no service
charge will be made for any transfer or exchange of the Debt Securities, but
Avista Corp. may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of the Debt Securities. Avista Corp. will not be required
to execute or to provide for the registration of transfer of or the exchange of
(a) any Debt Security during a period of 15 days before giving any notice of
redemption or (b) any Debt Security selected for redemption in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part. (See
Section 305.)
REDEMPTION
The applicable prospectus supplement will set forth any terms for the
optional or mandatory redemption of Debt Securities. Except as otherwise
provided in the applicable prospectus supplement with respect to Debt Securities
redeemable at the option of the Holder, Debt Securities will be redeemable only
upon notice by mail not less than 30 nor more than 60 days before the date fixed
for redemption. If less than all the Debt Securities of a series, or any tranche
thereof, are to be redeemed, the particular Debt Securities to be redeemed will
be selected by such method as shall be provided for such series or tranche, or
in the absence of any such provision, by such method of random selection as the
Security Registrar deems fair and appropriate. (See Sections 403 and 404.)
Any notice of redemption at the option of Avista Corp. may state that
such redemption will be conditional upon receipt by the paying agent or agents,
on or before the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such Debt Securities
and that if such money has not been so received, such notice will be of no force
or effect and Avista Corp.
will not be required to redeem such Debt Securities. (See Section 404.)
SATISFACTION AND DISCHARGE
Any Indenture Securities, or any portion of the principal amount
thereof, will be deemed to have been paid for purposes of the Indenture and, at
Avista Corp.'s election, the entire indebtedness of Avista Corp. in respect
thereof will be deemed to have been satisfied and discharged, if there shall
have been irrevocably deposited with the Trustee or any Paying Agent (other than
Avista Corp.), in trust:
(a) money in an amount which will be sufficient, or
(b) in the case of a deposit made before the maturity of such
Indenture Securities, Eligible Obligations, which do not contain
provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof, will
provide moneys which, together with the money, if any, deposited with
or held by the Trustee or such Paying Agent, will be sufficient, or
7
(c) a combination of (a) and (b) which will be sufficient,
to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on such Indenture Securities. For this purpose, Eligible
Obligations include direct obligations of, or obligations unconditionally
guaranteed by, the United States, entitled to the benefit of the full faith and
credit thereof and certificates, depositary receipts or other instruments which
evidence a direct ownership interest in such obligations or in any specific
interest or principal payments due in respect thereof and such other obligations
or instruments as shall be specified in an accompanying prospectus supplement.
(See Section 601.)
The right of Avista Corp. to cause its entire indebtedness in respect
of the Indenture Securities of any series to be deemed to be satisfied and
discharged as described above will be subject to the satisfaction of conditions
specified in the instrument creating such series.
The Indenture will be deemed to have been satisfied and discharged
when no Indenture Securities remain outstanding thereunder and Avista Corp. has
paid or caused to be paid all other sums payable by Avista Corp. under the
Indenture. (See Section 602.)
EVENTS OF DEFAULT
Any one or more of the following events with respect to a series of
Indenture Securities that has occurred and is continuing will constitute an
"Event of Default" with respect to such series of Indenture Securities:
(a) failure to pay interest on any Indenture Security of such
series within 60 days after the same becomes due and payable;
provided, however, that no such failure shall constitute an Event of
Default if Avista Corp. has made a valid extension of the interest
payment period with respect to the Indenture Securities of such series
if so provided with respect to such series; or
(b) failure to pay the principal of or premium, if any, on any
Indenture Security of such series within 3 business days after its
Maturity; provided, however, that no such failure will constitute an
Event of Default if Avista Corp. has made a valid extension of the
Maturity of the Indenture Securities of such series, if so provided
with respect to such series; or
(c) failure to perform, or breach of, any covenant or warranty
of Avista Corp. contained in the Indenture for 90 days after written
notice to Avista Corp. from the Trustee or to Avista Corp. and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Indenture Securities of such series as provided in the
Indenture unless the Trustee, or the Trustee and the Holders of a
principal amount of Securities of such series not less than the
principal amount of Indenture Securities the Holders of which gave
such notice, as the case may be, agree in writing to an extension of
such period before its expiration; provided, however, that the
Trustee, or the Trustee and the Holders of such principal amount of
Indenture Securities of such series, as the case may be, will be
deemed to have agreed to an extension of such period if corrective
action is initiated by Avista Corp. within such period and is being
diligently pursued; or
(d) default under any bond, debenture, note or other evidence of
indebtedness of Avista Corp. for borrowed money (including Indenture
Securities of other series) or under any mortgage, indenture, or other
instrument to evidence any indebtedness of Avista Corp. for borrowed
8
money, which default (1) constitutes a failure to make any payment in
excess of $5,000,000 of the principal of, or interest on, such
indebtedness or (2) has resulted in such indebtedness in an amount in
excess of $10,000,000 becoming or being declared due and payable prior
to the date it would otherwise have become due and payable, without
such payment having been made, such indebtedness having been
discharged, or such acceleration having been rescinded or annulled,
within a period of 90 days after written notice to Avista Corp. by the
Trustee or to Avista Corp. and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of such series
as provided in the Indenture,
(e) certain events in bankruptcy, insolvency or reorganization
of Avista Corp. (See Section 701.)
(See Section 701.)
REMEDIES
Acceleration of Maturity
If an Event of Default applicable to the Indenture Securities of any
series occurs and is continuing, then either the Trustee or the Holders of not
less than 33% in aggregate principal amount of the Outstanding Indenture
Securities of such series may declare the principal amount (or, if any of the
Outstanding Indenture Securities of such series are Discount Securities, such
portion of the principal amount thereof as may be specified in the terms
thereof) of all of the Outstanding Indenture Securities of such series to be due
and payable immediately by written notice to Avista Corp. (and to the Trustee if
given by the Holders); provided, however, that if an Event of Default occurs and
is continuing with respect to more than one series of Indenture Securities, the
Trustee or the Holders of not less than 33% in aggregate principal amount of the
Outstanding Indenture Securities of all such series, considered as one class,
may make such declaration of acceleration and not the Holders of the Indenture
Securities of any one such series.
At any time after such a declaration of acceleration with respect to
the Indenture Securities of any series has been made, but before a judgment or
decree for payment of the money due has been obtained, such declaration and its
consequences will, without further act, be deemed to have been rescinded and
annulled, if
(a) Avista Corp. has paid or deposited with the Trustee a sum
sufficient to pay
(1) all overdue interest, if any, on all Indenture
Securities of such series;
(2) the principal of and premium, if any, on any Indenture
Securities of such series which have become due otherwise
than by such declaration of acceleration and interest, if
any, thereon at the rate or rates prescribed therefor in
such Indenture Securities;
(3) interest, if any, upon overdue interest, if any, at the
rate or rates prescribed therefor in such Indenture
Securities, to the extent that payment of such interest is
lawful; and
(4) all amounts due to the Trustee under the Indenture in
respect of compensation and reimbursement of expenses; and
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(b) all Events of Default with respect to Indenture Securities
of such series, other than the non-payment of the principal of the
Indenture Securities of such series which has become due solely by
such declaration of acceleration, have been cured or waived as
provided in the Indenture. (See Section 702.)
Right to Direct Proceedings
If an Event of Default with respect to the Indenture Securities of any
series occurs and is continuing, the Holders of a majority in principal amount
of the Outstanding Indenture Securities of such series will have the right to
direct the time, method and place of conducting any proceedings for any remedy
available to the Trustee in exercising any trust or power conferred on the
Trustee; provided, however, that if an Event of Default occurs and is continuing
with respect to more than one series of Indenture Securities, the Holders of a
majority in aggregate principal amount of the Outstanding Indenture Securities
of all such series, considered as one class, will have the right to make such
direction, and not the Holders of the Indenture Securities of any one of such
series; and provided, further, that (a) such direction does not conflict with
any rule of law or with the Indenture, and could not involve the Trustee in
personal liability in circumstances where indemnity would not, in the Trustee's
sole discretion, be adequate and (b) the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such direction. (See
Section 712.)
Limitation on Right to Institute Proceedings
No Holder of any Indenture Security will have any right to institute
any proceeding, judicial or otherwise, with respect to the Indenture or for the
appointment of a receiver or for any other remedy thereunder unless:
(a) such Holder has previously given to the Trustee written
notice of a continuing Event of Default with respect to the Indenture
Securities of any one or more series;
(b) the Holders of a majority in aggregate principal amount of
the outstanding Indenture Securities of all series in respect of which
such Event of Default has occurred, considered as one class, have made
written request to the Trustee to institute proceedings in respect of
such Event of Default and have offered the Trustee reasonable
indemnity against costs and liabilities to be incurred in complying
with such request; and
(c) for 60 days after receipt of such notice, the Trustee has
failed to institute any such proceeding and no direction inconsistent
with such request has been given to the Trustee during such 60 day
period by the Holders of a majority in aggregate principal amount of
Indenture Securities then Outstanding.
Furthermore, no Holder of Indenture Securities of any series will be
entitled to institute any such action if and to the extent that such action
would disturb or prejudice the rights of other Holders of Indenture Securities
of such series. (See Section 707.)
No Impairment of Right to Receive Payment
Notwithstanding that the right of a Holder to institute a proceeding
with respect to the Indenture is subject to certain conditions precedent, each
Holder of an Indenture Security will have the right, which is absolute and
unconditional, to receive payment of the principal of and premium, if any, and
interest, if any, on such Indenture Security when due and to institute suit for
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the enforcement of any such payment, and such rights may not be impaired or
affected without the consent of such Holder. (See Section 708.)
Notice of Default
The Trustee is required to give the Holders notice of any default
under the Indenture to the extent required by the Trust Indenture Act, unless
such default shall have been cured or waived, except that no such notice to
Holders of a default of the character described in clause (c) under "- Events of
Default" may be given until at least 75 days after the occurrence thereof. For
purposes of the preceding sentence, the term "default" means any event which is,
or after notice or lapse of time, or both, would become, an Event of Default.
The Trust Indenture Act currently permits the Trustee to withhold notices of
default (except for certain payment defaults) if the Trustee in good faith
determines the withholding of such notice to be in the interests of the Holders.
(See Section 802.)
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
Avista Corp. may not consolidate with or merge into any other Person,
or convey or otherwise transfer, or lease, all of its properties, as or
substantially as an entirety, to any Person, unless:
(a) the Person formed by such consolidation or into which Avista
Corp. is merged or the Person which acquires by conveyance or other
transfer, or which leases (for a term extending beyond the last Stated
Maturity of the Indenture Securities then Outstanding), all of the
properties of Avista Corp., as or substantially as an entirety, shall
be a Person organized and existing under the laws of the United
States, any State or Territory thereof or the District of Columbia or
under the laws of Canada or any Province thereof; and
(b) such Person shall expressly assume the due and punctual
payment of the principal of and premium, if any, and interest, if any,
on all the Indenture Securities then Outstanding and the performance
and observance of every covenant and condition of the Indenture to be
performed or observed by Avista Corp.
In the case of the conveyance or other transfer of all of the properties of
Avista Corp., as or substantially as an entirety, to any person as contemplated
above, Avista Corp. would be released and discharged from all obligations under
the Indenture and on all Indenture Securities then outstanding unless Avista
Corp. elects to waive such release and discharge. Upon any such consolidation or
merger or any such conveyance or other transfer of properties of Avista Corp.,
the successor, transferee or lessee would succeed to, and be substituted for,
and would be entitled to exercise every power and right of, Avista Corp. under
the Indenture. (See Sections 1001, 1002 and 1003.)
For purposes of the Indenture, the conveyance, transfer or lease by
Avista Corp. of all of its facilities:
(a) for the generation of electric energy,
(b) for the transmission of electric energy,
(c) for the distribution of electric energy and/or natural gas,
in each case considered alone,
(d) all of its facilities described in clauses (a) and (b),
considered together, or
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(e) all of its facilities described in clauses (b) and (c),
considered together,
will in no event be deemed to constitute a conveyance or other transfer of all
the properties of Avista Corp., as or substantially as an entirety, unless,
immediately following such conveyance, transfer or lease, Avista Corp. owns no
unleased properties in the other such categories of property not so conveyed or
otherwise transferred or leased.
The Indenture will not prevent or restrict:
(a) any consolidation or merger after the consummation of which
Avista Corp. would be the surviving or resulting entity, or
(b) any conveyance or other transfer, or lease, of any part of
the properties of Avista Corp. which does not constitute the entirety,
or substantially the entirety, thereof. (See Section 1004.)
If Avista Corp. conveys or otherwise transfers any part of its
properties which does not constitute the entirety, or substantially the
entirety, thereof to another Person meeting the requirements set forth in the
first paragraph under this heading, and if:
(a) such transferee expressly assumes the due and punctual
payment of the principal of and premium, if any, and interest, if any,
on all Indenture Securities then outstanding and the performance and
observance of every covenant and condition of the Indenture to be
performed or observed by Avista Corp.; and
(b) there is delivered to the Trustee an independent expert's
certificate (i) describing the property so conveyed or transferred and
identifying the same as facilities for the generation, transmission or
distribution of electric energy or for the storage, transportation or
distribution of natural gas and (ii) stating that the aggregate
principal amount of the Indenture Securities then outstanding does not
exceed 70% of the fair value of such property,
then Avista Corp. would be released and discharged from all obligations and
covenants under the Indenture and on all Indenture Securities then outstanding
unless Avista Corp. elects to waive such release and discharge. In such event,
the transferee would succeed to, and be substituted for, and would be entitled
to exercise every right and power of, Avista Corp. under the Indenture. (See
Section 1005.)
MODIFICATION OF INDENTURE
Modifications Without Consent
Avista Corp. and the Trustee may enter into one or more supplemental
indentures, without the consent of any Holders of Indenture Securities, for any
of the following purposes:
(a) to evidence the succession of another Person to Avista Corp.
and the assumption by any such successor of the covenants of Avista
Corp. in the Indenture and in the Indenture Securities; or
(b) to add one or more covenants of Avista Corp. or other
provisions for the benefit of all Holders of Indenture Securities or
for the benefit of the Holders of, or to remain in effect only so long
as there shall be Outstanding, Indenture Securities of one or more
12
specified series, or one or more Tranches thereof, or to surrender any
right or power conferred upon Avista Corp. by the Indenture; or
(c) to change or eliminate any provisions of the Indenture or to
add any new provisions to the Indenture, provided that if such change,
elimination or addition adversely affects the interests of the Holders
of the Indenture Securities of any series or Tranche in any material
respect, such change, elimination or addition will become effective
with respect to such series or Tranche only when no Indenture Security
of such series or Tranche remains Outstanding; or
(d) to provide collateral security for the Indenture Securities
or any series thereof; or
(e) to establish the form or terms of the Indenture Securities
of any series or Tranche as permitted by the Indenture; or
(f) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if
any, thereon and for the procedures for the registration, exchange and
replacement thereof and for the giving of notice to, and the
solicitation of the vote or consent of, the Holders thereof, and for
any and all other matters incidental thereto; or
(g) to evidence and provide for the acceptance of appointment by
a successor trustee with respect to the Indenture Securities of one or
more series; or
(h) to provide for the procedures required to permit the
utilization of a non-certificated system of registration for all, or
any series or Tranche of, the Indenture Securities; or
(i) to change any place or places where (1) the principal of and
premium, if any, and interest, if any, on all or any series of
Indenture Securities, or any Tranche thereof, will be payable, (2) all
or any series of Indenture Securities, or any Tranche thereof, may be
surrendered for registration of transfer, (3) all or any series of
Indenture Securities, or any Tranche thereof, may be surrendered for
exchange and (4) notices and demands to or upon Avista Corp. in
respect of all or any series of Indenture Securities, or any Tranche
thereof, and the Indenture may be served; or
(j) to cure any ambiguity, to correct or supplement any
provision therein which may be defective or inconsistent with any
other provision therein, or to make any other changes to the
provisions thereof or to add any other provisions with respect to
matters and questions arising under the Indenture, so long as such
other changes or additions do not adversely affect the interests of
the Holders of Indenture Securities of any series or Tranche in any
material respect.
Without limiting the generality of the foregoing, if the Trust
Indenture Act is amended after the date of the Original Indenture in such a way
as to require changes to the Indenture or the incorporation therein of
additional provisions or so as to permit changes to, or the elimination of,
provisions which, at the date of the Original Indenture or at any time
thereafter, were required by the Trust Indenture Act to be contained in the
Indenture, the Indenture will be deemed to have been amended so as to conform to
such amendment or to effect such changes or elimination, and Avista Corp. and
the Trustee may, without the consent of any Holders of Indenture Securities,
enter into one or more supplemental indentures to evidence or effect such
amendment. (See Section 1101.)
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Modifications Requiring Consent
Except as provided above, the consent of the Holders of a majority in
aggregate principal amount of the Indenture Securities of all series then
Outstanding, considered as one class is required for the purpose of adding any
provisions to, or changing in any manner, or eliminating any of the provisions
of, the Indenture pursuant to one or more supplemental indentures; provided,
however, that if less than all of the series of Indenture Securities Outstanding
are directly affected by a proposed supplemental indenture, then the consent
only of the Holders of a majority in aggregate principal amount of Outstanding
Indenture Securities of all series so directly affected, considered as one
class, will be required; and provided, further, that if the Indenture Securities
of any series have been issued in more than one Tranche and if the proposed
supplemental indenture directly affects the rights of the Holders of one or
more, but less than all, of such Tranches, then the consent only of the Holders
of a majority in aggregate principal amount of the Outstanding Indenture
Securities of all Tranches so directly affected, considered as one class, will
be required; and provided, further, that no such amendment or modification may:
(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Indenture Security
other than pursuant to the terms thereof, or reduce the principal
amount thereof or the rate of interest thereon (or the amount of any
installment of interest thereon) or change the method of calculating
such rate or reduce any premium payable upon the redemption thereof,
or reduce the amount of the principal of any Discount Security that
would be due and payable upon a declaration of acceleration of
Maturity or change the coin or currency (or other property) in which
any Indenture Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity of any Indenture
Security (or, in the case of redemption, on or after the redemption
date) without, in any such case, the consent of the Holder of such
Indenture Security;
(b) reduce the percentage in principal amount of the Outstanding
Indenture Securities of any series, or any Tranche thereof, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with any provision of the Indenture or of any
default thereunder and its consequences, or reduce the requirements
for quorum or voting, without, in any such case, the consent of the
Holder of each Outstanding Indenture Security of such series or
Tranche; or
(c) modify certain of the provisions of the Indenture relating
to supplemental indentures, waivers of certain covenants and waivers
of past defaults with respect to the Indenture Securities of any
series, or any Tranche thereof, without the consent of the Holder of
each outstanding Indenture Security of such series or Tranche.
A supplemental indenture which changes or eliminates any covenant or
other provision of the Indenture which has expressly been included solely for
the benefit of the Holders of, or which is to remain in effect only so long as
there shall be Outstanding, Indenture Securities of one or more specified
series, or one or more Tranches thereof, or modifies the rights of the Holders
of Indenture Securities of such series or Tranche with respect to such covenant
or other provision, will be deemed not to affect the rights under the Indenture
of the Holders of the Indenture Securities of any other series or Tranche.
If the supplemental indenture or other document establishing any
series or Tranche of Indenture Securities so provides, and as specified in the
applicable prospectus supplement and/or pricing supplement, the Holders of such
Indenture Securities will be deemed to have consented, by virtue of their
14
purchase of such Indenture Securities, to a supplemental indenture containing
the additions, changes or eliminations to or from the Indenture which are
specified in such supplemental indenture or other document, no Act of such
Holders will be required to evidence such consent and such consent may be
counted in the determination of whether the Holders of the requested principal
amount of Indenture Securities have consented to such supplemental indenture.
(See Section 1102.)
DUTIES OF THE TRUSTEE; RESIGNATION; REMOVAL
The Trustee will have, and will be subject to, all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Trustee will be under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any Holder of Indenture Securities, unless such Holder offers it
reasonable indemnity against the costs, expenses and liabilities which might be
incurred thereby. The Trustee will not be required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of its
duties if the Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it. (See Sections 801 and 803.)
The Trustee may resign at any time with respect to the Indenture
Securities of one or more series by giving written notice thereof to Avista
Corp. or may be removed at any time with respect to the Indenture Securities of
one or more series by Act of the Holders of a majority in principal amount of
the outstanding Indenture Securities of such series delivered to the Trustee and
Avista Corp. No resignation or removal of the Trustee and no appointment of a
successor trustee will become effective until the acceptance of appointment by a
successor trustee in accordance with the requirements of the Indenture. So long
as no Event of Default or event which, after notice or lapse of time, or both,
would become an Event of Default has occurred and is continuing, if Avista Corp.
has delivered to the Trustee with respect to one or more series a resolution of
its Board of Directors appointing a successor trustee with respect to that or
those series and such successor has accepted such appointment in accordance with
the terms of the Indenture, the Trustee with respect to that or those series
will be deemed to have resigned and the successor will be deemed to have been
appointed as trustee in accordance with the Indenture. (See Section 810.)
EVIDENCE OF COMPLIANCE
Compliance with the Indenture provisions is evidenced by written
statements of Avista Corp. officers or persons selected or paid by Avista Corp.
In certain cases, Avista Corp. must furnish opinions of counsel and
certifications of an engineer, appraiser or other expert (who in some cases must
be independent). In addition, the Indenture requires that Avista Corp. give the
Trustee, not less than annually, a brief statement as to Avista Corp.'s
compliance with the conditions and covenants under the Indenture.
GOVERNING LAW
The Indenture and the Indenture Securities will be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the Trust Indenture of 1939, as amended, shall be applicable.
15
PLAN OF DISTRIBUTION
Avista Corp. may sell the Debt Securities in any of four ways: (a)
directly to a limited number of institutional purchasers or to a single
purchaser, (b) through agents, (c) through underwriters or (d) through dealers.
The applicable prospectus supplement relating to each series of Debt Securities
will set forth the terms of the offering of such Debt Securities, including the
name or names of any such agents, underwriters or dealers, the purchase price of
such Debt Securities and the net proceeds to Avista Corp. from such sale, any
underwriting discounts and other items constituting underwriters' compensation,
the initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
If Avista Corp. uses underwriters to sell Debt Securities, the
underwriters will acquire such Debt Securities for their own account and may
resell them in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
Unless otherwise set forth in the prospectus supplement relating to a series of
Debt Securities, the obligations of any underwriter or underwriters to purchase
such Debt Securities will be subject to certain conditions precedent, and such
underwriter or underwriters will be obligated to purchase all of such Debt
Securities if any are purchased, except that, in certain cases involving a
default by one or more underwriters, less than all of such Debt Securities may
be purchased.
If an agent of Avista Corp. is used in any sale of a series of Debt
Securities, any commissions payable by Avista Corp. to such agent will be set
forth in the applicable prospectus supplement relating to such Debt Securities.
Unless otherwise indicated in the applicable prospectus supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
Any underwriters, dealers or agents participating in the distribution
of the Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of Debt Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act.
Agents, underwriters and dealers may be entitled under agreements entered into
with Avista Corp. to indemnification by Avista Corp. against certain
liabilities, including liabilities under the Securities Act.
Unless otherwise provided in the applicable prospectus supplement
relating to a series of Debt Securities, Avista Corp. does not intend to apply
for the listing of the Notes on a national securities exchange, but has been
advised by the agents that they intend to make a market in the Notes, as
permitted by applicable laws and regulations. The agents are not obligated to do
so, however, and the agents may discontinue making a market at any time without
notice. No assurance can be given as to the liquidity of any trading market for
the Notes.
The agents and/or certain of their affiliates may engage in
transactions with and perform services for Avista Corp. and certain of its
affiliates in the ordinary course of business.
LEGAL MATTERS
The validity of the Debt Securities and certain other matters of New
York law and matters of federal securities law will be passed upon for Avista
Corp. by Thelen Reid & Priest LLP, New York, New York, counsel to Avista Corp.
The authorization of the Debt Securities by the Company and certain other
matters of Washington law, as well as the authorization of the Debt Securities
by the public utility regulatory commissions under Washington, Idaho, Montana,
Oregon and California law, will be passed upon for Avista Corp. by Paine,
16
Hamblen, Coffin, Brooke & Miller LLP, Spokane, Washington, counsel for Avista
Corp. The validity of the Debt Securities will be passed upon for any
underwriters or agents by Sullivan & Cromwell, New York, New York. In giving
their opinions Thelen Reid & Priest LLP and Sullivan & Cromwell may assume the
conclusions of Washington, California, Idaho, Montana and Oregon law set forth
in the opinion of Paine, Hamblen, Coffin, Brooke & Miller LLP.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from Avista Corp.'s most recent
Annual Report on Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
17