Exhibit 1.2
AVISTA CORPORATION
First Mortgage Bonds, 5.70%
Series due 2037
Underwriting
Agreement
December 12, 2006
Goldman, Sachs &
Co.,
As Representative of the several
Underwriters
Named in Schedule I
hereto,
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Avista Corporation, a Washington
corporation (the “ Company ”), proposes, subject
to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (collectively, the “
Underwriters ”) for whom you are acting as
representative (in such capacity the “ Representative
”) an aggregate of $150,000,000 principal amount of its First
Mortgage Bonds, 5.70% Series due 2037 (the “
Securities ”). The Securities are to be issued as a
series of bonds under the Mortgage and Deed of Trust, dated as of
June 1, 1939, between the Company and Citibank, N.A., as
trustee (the “ Trustee ”), as amended and
supplemented by various supplemental indentures including the
Forty-first Supplemental Indenture, dated as of December 1,
2006. Such Mortgage and Deed of Trust, as so amended and
supplemented, and such Forty-first Supplemental Indenture are
hereinafter called, respectively, the “ Mortgage
” and the “ Supplemental Indenture
”.
1. The Company represents and
warrants to, and agrees with, each of the Underwriters
that:
(a) An “automatic shelf
registration statement” as defined under Rule 405 under the
Securities Act of 1933, as amended (the “ Act ”)
on Form S-3 (File No. 333-139239) in respect of the Securities
has been filed with the Securities and Exchange Commission (the
“ Commission ”) not earlier than three years
prior to the date hereof; such registration statement, and any
post-effective amendment thereto, became effective on filing; and
no stop order suspending the effectiveness of such registration
statement or any part thereof has been issued and no proceeding for
that purpose has been initiated or, to the best knowledge of the
Company, threatened by the Commission, and no notice of objection
of the Commission to the use of such registration statement or any
part thereof or any post-effective amendment thereto pursuant to
Rule 401(g)(2) under the Act has been received by the Company; in
this agreement,
(i) the base prospectus filed as
part of such registration statement, in the form in which it has
most recently been filed with the Commission on or prior to the
date of this Agreement, is called the “ Basic
Prospectus ”;
(ii) any preliminary prospectus
(including any preliminary prospectus supplement) relating to the
Securities filed with the Commission pursuant to Rule 424(b) under
the Act is called a “ Preliminary Prospectus
”;
(iii) such registration statement,
as deemed revised pursuant to Rule 430B(f)(1) under the Act on the
effective date of such registration statement for purposes of
Section 11 of the Act (as such section applies to the Company
and the Underwriters for the Securities pursuant to Rule 430B(f)(2)
under the Act (the “ Effective Date ”)),
including the exhibits thereto and all documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the
Act at the Effective Date but excluding the Statement of
Eligibility on Form T-1, is called the “ Registration
Statement ”;
(iv) the Basic Prospectus, as
amended and supplemented immediately prior to the Applicable Time
(as defined in Section 1(c) hereof), is called the “
Pricing Prospectus ”;
(v) the form of the final prospectus
relating to the Securities filed with the Commission pursuant to
Rule 424(b) under the Act in accordance with Section 5(a)
hereof is called the “ Prospectus ”;
(vi) any reference to the Basic
Prospectus, the Pricing Prospectus, any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act, as of the date of such
prospectus;
(vii) any reference to any amendment
or supplement to the Basic Prospectus, any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include the form
of prospectus contained in any post-effective amendment to the
Registration Statement, any prospectus supplement relating to the
Securities filed with the Commission pursuant to Rule 424(b) under
the Act and any documents filed under the Securities Exchange Act
of 1934, as amended (the “ Exchange Act ”), and
incorporated therein, in each case after the date of the Basic
Prospectus, such Preliminary Prospectus, or the Prospectus, as the
case may be;
(viii) any reference to any
amendment to the Registration Statement shall be deemed to refer to
and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective
date of the Registration Statement that is incorporated by
reference in the Registration Statement; and
(ix) any “issuer free writing
prospectus” as defined in Rule 433 under the Act relating to
the Securities (including the final term sheet prepared and filed
pursuant to Section 5(a)) is called an “ Issuer Free
Writing Prospectus ”;
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(b) No order preventing or
suspending the use of any Preliminary Prospectus or any Issuer Free
Writing Prospectus has been issued by the Commission;
(c) the Pricing Prospectus, at the
time of filing thereof with the Commission, conformed in all
material respects to the requirements of the Act and the Trust
Indenture Act of 1939, as amended (the “ Trust Indenture
Act ”) and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided, however, that this representation and warranty
shall not apply to (A) any statements or omissions made in
reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through the Representative
expressly for use therein or (B) any information set forth in
the Pricing Prospectus (i) under the caption “The
Insurer” or (ii) in Exhibit A thereto;
(d) For the purposes of this
Agreement, the “Applicable Time” is 3:35 p.m. (Eastern
time) on the date of this Agreement; the Pricing Prospectus, as
supplemented by the final term sheet prepared and filed pursuant to
Section 5(a) hereof (together the “ Pricing
Disclosure Package ”), as of the Applicable Time, did not
include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this
representation and warranty shall not apply to (A) any
statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an
Underwriter through the Representative expressly for use therein or
(B) any information set forth in the Pricing Prospectus
(i) under the caption “The Insurer” or
(ii) in Exhibit A thereto; no Issuer Free Writing Prospectus
listed on Schedule II(a) hereto conflicted or will conflict with
the information contained in the Registration Statement, the
Pricing Prospectus or the Prospectus; and no such Issuer Free
Writing Prospectus, considered together with the Pricing Disclosure
Package as of the Applicable Time, included any untrue statement of
a material fact or omitted to state any material fact necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply
to statements or omissions made in an Issuer Free Writing
Prospectus in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through the
Representative expressly for use therein;
(e) The documents incorporated by
reference in the Pricing Prospectus and the Prospectus, when they
became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the
Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading; any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement
thereto, when such documents are filed with the Commission, as the
case may be, will conform in all material respects to the
requirements of the Act
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or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder and will
not contain an untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Company by an Underwriter through the Representative expressly for
use therein; and no such documents were filed with the Commission
since the Commission’s close of business on the business day
immediately prior to the date of this Agreement and prior to the
time of the execution and delivery of this Agreement, except as set
forth on Schedule II (b) hereto;
(f) The Registration Statement
conforms, and any further amendments or supplements to the
Registration Statement will conform, in all material respects to
the requirements of the Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder and do not and
will not, as of the Effective Date, contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and
warranty shall not apply to (A) any statements or omissions
made in reliance upon and in conformity with information furnished
in writing to the Company by an Underwriter through the
Representative expressly for use therein or (B) any
information set forth in the Registration Statement (i) under
the caption “The Insurer” or (ii) in Exhibit A
thereto;
(g) The Prospectus and any
amendments or supplements thereto, when filed with the Commission,
will conform in all material respects to the requirements of the
Act and the Trust Indenture Act and the rules and regulations of
the Commission thereunder, and the Prospectus and any amendments
and supplements thereto, when they are filed with the Commission
and at the Time of Delivery (as defined below), will not include an
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty
shall not apply to any (A) statements or omissions made in
reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through the Representative
expressly for use therein or (B) any information set forth in
the Prospectus (i) under the caption “The Insurer”
or (ii) in Exhibit A thereto;
(h) Except as set forth in or
contemplated by the Pricing Prospectus, (i) since the
respective dates as of which information is given in the
Registration Statement and the Pricing Prospectus, there has not
been (A) any material adverse change in or affecting the
business, financial condition, shareholders’ equity or
results of operations of the Company and its subsidiaries,
considered as a whole, or any development reasonably expected to
result in such a material adverse change (in each case, a “
Material Adverse Change ”), (B) any transaction
entered into by the Company or any subsidiary thereof which is
material to the Company and its subsidiaries as a whole other than
transactions in the ordinary course of business, and (C) any
change in the capital stock or long-term debt of the Company or any
of its subsidiaries (except for
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shares of common stock issued under
the Company’s Dividend-Reinvestment and Stock Purchase Plan
and employee benefit plans and director and/or executive
compensation plans and except for scheduled maturities of long-term
debt) and (ii) neither the Company nor any of its subsidiaries
has any contingent obligation which is material to the Company and
its subsidiaries as a whole;
(i) The Company has been duly
incorporated and is validly existing in good standing as a
corporation under the laws of the State of Washington, is duly
qualified to do business and in good standing as a foreign
corporation under the laws of the States of Idaho, Montana and
Oregon, and has corporate and other power and authority and has all
material required approvals and authorizations to own, lease and
operate its properties, and to transact an electric and/or gas
public utility business in such jurisdictions;
(j) The Company has an authorized
capitalization as set forth in the Pricing Prospectus, and all of
the issued shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and
non-assessable;
(k) Each of Avista Capital, Inc.
(“ Avista Capital ”), Avista Energy, Inc.
(“ Avista Energy ”) and Advantage IQ, Inc.
(“ Advantage IQ ”) is duly incorporated and
validly existing in good standing under the laws of the State of
Washington and has corporate and other power and authority and has
all material required approvals and authorizations to own, lease
and operate its properties, and to transact its
business;
(l) All of the issued shares of
capital stock of Avista Capital, Avista Energy and Advantage IQ
have been duly and validly authorized and issued, are fully paid
and non-assessable; 1,715,000 shares of Avista Capital’s
capital stock are issued and outstanding and the Company is the
record and beneficial owner of all shares of such capital stock;
11,822,899 shares of Avista Energy’s capital stock are issued
and outstanding and Avista Capital is the record and beneficial
owner of 11,801,728 shares of such capital stock; and 29,591,434
shares of Advantage IQ’s capital stock are issued and
outstanding (which consist of (i) 2,031,814 shares of
non-voting preferred stock and (ii) 27,559,620 shares of
common stock) and Avista Capital is the record and beneficial owner
of 1,849,698 shares of such preferred stock and 27,540,570 shares
of such common stock; and the shares of capital stock of Avista
Capital, Avista Energy and Advantage IQ that are owned directly or
indirectly by the Company are owned free and clear of all security
interests, liens, encumbrances, equities and claims;
(m) The Securities have been duly
authorized by all necessary corporate action on the part of the
Company, and have been duly executed by the Company and, when duly
authenticated and delivered by the Trustee under the Mortgage, and
issued, delivered and paid for in accordance with this Agreement,
will be duly issued and delivered by the Company and will
constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms,
subject to (i) bankruptcy, insolvency, reorganization,
arrangement, moratorium and other laws of general applicability
relating to or affecting creditors’ rights and
(ii) general principles of equity, whether such enforceability
is considered a proceeding in
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equity or at law, and by rules of
law governing specific performance, injunction relief, foreclosure,
receivership and other equitable remedies (the exceptions referred
to in clauses (i) and (ii) being hereinafter called,
collectively, the “ Exceptions ”), and are
entitled to the benefits provided by the Mortgage; the Securities
will be substantially in the form previously delivered to the
Representative; and the Securities will conform in all material
respects to the description thereof contained in the Pricing
Disclosure Package and the Prospectus;
(n) The Mortgage has been duly
authorized and the Mortgage (excluding the Supplemental Indenture)
has been duly executed and delivered; when the Supplemental
Indenture is duly executed, delivered and appropriately recorded,
the Mortgage will constitute a valid and legally binding
instrument, enforceable in accordance with its terms, subject to
the Exceptions and except, further, to the extent that the law of
the states in which the mortgaged property is located may limit or
deny certain remedies provided for in the Mortgage; the Mortgage
has been duly qualified under the Trust Indenture Act; and the
Mortgage will conform in all material respects to the description
thereof contained in the Pricing Disclosure Package and the
Prospectus;
(o) The Company has good and
marketable title in fee simple to all of its real estate and fixed
properties and good title to all of its other property, subject
only (i) to the lien of the Mortgage, (ii) to leases of
minor portions of the Company’s property to others for uses
which do not interfere with the Company’s business;
(iii) to leases of certain property of the Company not used in
its utility business, (iv) to Excepted Encumbrances (as
defined in the Mortgage) and (v) to encumbrances, defects and
irregularities customarily found in properties of like size and
character, which, in the Company’s opinion, do not materially
impair the use of the property affected thereby in the operation of
the business of the Company; upon the due execution, delivery and
appropriate recording of the Supplemental Indenture, the Mortgage
will constitute, subject only to the exceptions enumerated
immediately above, a valid first mortgage lien for the security of
the Securities and all other bonds issued and presently outstanding
thereunder on such properties, which include substantially all of
the physical properties and franchises of the Company other than
those expressly excepted;
(p) The description in the Mortgage
of the properties intended to be subject to the Mortgage is
adequate to constitute a lien thereon; and the Mortgage (excluding
the Supplemental Indenture) has been duly and properly recorded in
the proper offices of the respective counties in which the real
estate and other physical properties of the Company are located,
and the Supplemental Indenture will be so recorded forthwith, and
no other recording or filing of the Mortgage is or will be
necessary to maintain or perfect of record the lien
thereof;
(q) The issue and sale of the
Securities and the compliance by the Company with all of the
provisions of the Securities, the Mortgage and this Agreement and
the consummation by the Company of the transactions herein and
therein contemplated will not (i) violate the Company’s
Restated Articles of Incorporation, as amended, or By-laws or
(ii) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, (A) any statute
or, to the knowledge of the
6
Company, any order, rule or
regulation of any court or any federal or state regulatory
authority or other governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their
properties, or (B) any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, which breach, violation or default referred to in this
clause (ii) would individually, or in the aggregate, have, or
would be reasonably expected to have, a material adverse effect on
the business, financial condition, shareholders’ equity or
results of operations of the Company and its subsidiaries
considered as a whole (in each case, a “ Material Adverse
Effect ”);
(r) No consent, approval,
authorization, order, registration or qualification of or with any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties is
required for the issue and sale of the Securities or the
consummation by the Company of the transactions contemplated by
this Agreement or the Mortgage, except the registration under the
Act of the Securities and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters, and such
consents, approvals, authorizations, filings or registrations as
may be required by the Washington Utilities and Transportation
Commission (the “ WUTC ”), the Idaho Public
Utilities Commission (the “ IPUC ”) and the
Public Utility Commission of Oregon (the “ OPUC
”);
(s) None of the Company, Avista
Capital, Avista Energy and Advantage IQ is (i) currently in
violation of its Restated Articles of Incorporation or By-laws or,
(ii) except as set forth in the Pricing Prospectus, in default
in the performance or observance of any obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be
bound which default, in the case of clause (ii) would have, or
would be reasonably expected to have, a Material Adverse Effect,
except for any such default in the performance or observance of any
such obligation, agreement, covenant or condition that has been
waived in accordance with the applicable agreement;
(t) Other than as set forth in the
Pricing Prospectus, neither the Company nor any of its subsidiaries
(i) is in violation of any statute, or any rule, regulation,
decision or order of any governmental agency or body or any court
relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the
environmental or human exposure to hazardous or toxic substances
(collectively, “ environmental laws ”),
(ii) does not own or operate any real property which to its
knowledge is contaminated with any substance that is subject to any
environmental laws, (iii) is not to its knowledge liable for
any off-site disposal or contamination pursuant to any
environmental laws, and (iv) is not subject to any claim
relating to any environmental laws and the Company is not aware of
any pending investigation which could reasonably be expected to
lead to such a claim, which, in the case of (i), (ii), (iii), or
(iv), would reasonably be expected to result in a Material Adverse
Effect;
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(u) The statements set forth in the
Pricing Prospectus and the Prospectus under the captions
“Description of the Offered Bonds” and
“Description of the Bonds”, insofar as they purport to
constitute a summary of the terms of the Securities, and under the
caption “Underwriting”, insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate and fairly present the information purported
to be given;
(v) Other than as set forth in the
Pricing Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party
or of which any property of the Company or any of its subsidiaries
is the subject, which, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and, to the best of the
Company’s knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
(w) The Company is not, and, after
giving effect to the offering and sale of the Securities, will not
be an “investment company”, as such term is defined in
the United States Investment Company Act of 1940, as amended (the
“ Investment Company Act ”);
(x) (i) At the time of filing the
Registration Statement, (ii) at the time of the most recent
amendment thereto for the purposes of complying with
Section 10(a)(3) of the Act (whether such amendment was by
post-effective amendment, incorporated report filed pursuant to
Section 13 or 15(d) of the Exchange Act or form of
prospectus), and (iii) at the time the Company or any person
acting on its behalf (within the meaning, for this clause only, of
Rule 163(c) under the Act) made any offer relating to the
Securities in reliance on the exemption of Rule 163 under the Act,
the Company was a “well-known seasoned issuer” as
defined in Rule 405 under the Act; and (B) at the earliest
time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer
(within the meaning of Rule 164(h)(2) under the Act) of the
Securities, the Company was not an “ineligible issuer”
as defined in Rule 405 under the Act.
(y) The Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange
Act;
(z) Deloitte & Touche LLP,
who have certified certain financial statements of the Company and
its subsidiaries and have audited the Company’s internal
control over financial reporting and management’s assessment
thereof, is a registered public accounting firm, and is independent
with respect to the Company and its subsidiaries, each within the
meaning of the Exchange Act and the rules and regulations of the
Commission thereunder and the rules and regulations of the Public
Company Accounting Oversight Board;
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(aa) The Company maintains internal
control over financial reporting (as such term is defined in Rule
13a-15(f) under the Exchange Act) that complies with the
requirements of the Exchange Act and has been designed by the
Company’s principal executive officer and principal financial
officer, or under their supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; the
Company’s internal control over financial reporting is
effective; and the Company is not aware of any material weaknesses
in its internal control over financial reporting;
(bb) Since the date of the latest
audited financial statements included or incorporated by reference
in the Pricing Prospectus, there has been no change in the
Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting;
and
(cc) The Company maintains
disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act) that comply with the requirements
of the Exchange Act and have been designed to ensure that material
information relating to the Company and its subsidiaries is
communicated to the Company’s principal executive officer and
principal financial officer. The Company’s disclosure
controls and procedures are effective.
2. Subject to the terms and
conditions herein set forth, the Company agrees to issue and sell
to each of the Underwriters, severally and not jointly, and each of
the Underwriters agrees, severally and not jointly, to purchase
from the Company, at a purchase price of 98.977% of the principal
amount thereof, plus accrued interest, if any, from
December 15, 2006 to the Time of Delivery hereunder, the
principal amount of Securities set forth opposite the name of such
Underwriter in Schedule I hereto.
3. Upon the authorization by the
Representative of the release of the Securities, the several
Underwriters propose to offer the Securities for sale upon the
terms and conditions set forth in this Agreement and the
Prospectus.
4. (a) The Securities to be
purchased by each Underwriter hereunder will be represented by one
or more definitive global Securities in book-entry form to be
deposited with The Depository Trust Company (“ DTC
”) or its designated custodian. The Company will deliver the
global Securities to DTC or such custodian to be credited to the
account of the Representative, for the account of each Underwriter,
against payment by or on behalf of such Underwriter of the purchase
price therefor by wire transfer of Federal (same day) funds to the
account specified by the Company to the Representative, by causing
DTC to credit the Securities to the account of the Representative
at DTC. The Company will cause the certificates representing the
Securities to be made available to the Representative for checking
at least twenty-four hours prior to the Time of Delivery (as
defined below) at the office of DTC or its designated custodian
(the “ Designated Office ”). The time and date
of such delivery and payment shall be 10:00 a.m., New York City
time, on December 15, 2006 or such other time and date as the
Representative and the Company may agree upon in writing. Such time
and date are herein called the “ Time of Delivery
”; and
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(b) The documents to be d
