EXHIBIT 10.2
Ambac
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BOND DELIVERY AGREEMENT
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AVISTA CORPORATION
to
AMBAC ASSURANCE CORPORATION
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Dated December 15, 2004
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Relating to
First Mortgage Bonds, Collateral Series 2004B
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THIS BOND DELIVERY AGREEMENT, dated December 15, 2004, between AVISTA
CORPORATION, a Washington corporation (the "Company"), and AMBAC ASSURANCE
CORPORATION, a Wisconsin-domiciled stock insurance company ("Ambac");
WHEREAS, Ambac and the Company have entered into the Insurance Agreement,
dated as of September 1, 1999 (the "1999 Insurance Agreement") as supplemented
by the Insurance Agreement, dated as of January 1, 2002 (the "2002 Insurance
Agreement" and, together with the 1999 Insurance Agreement, the "Insurance
Agreement"), pursuant to which Ambac has issued, among other things, the 1999A
Policy and the 2002A Surety Bond in respect of the 1999A Revenue Bonds (as such
terms are hereinafter defined);
WHEREAS, the Company has established its First Mortgage Bonds, Collateral
Series 2004B, in the aggregate principal amount of $66,700,000 (the "Bonds"), to
be issued under and in accordance with, and secured by, the Mortgage and Deed of
Trust, dated as of June 1, 1939, of the Company to Citibank, N.A., as successor
trustee, as heretofore amended and supplemented and as further supplemented by
the Thirty-sixth Supplemental Indenture, dated as of December 1, 2004 (the
"Thirty-sixth Supplemental Indenture"), such indenture, as so amended and
supplemented, being hereinafter sometimes called the "Mortgage";
WHEREAS, the Bonds have been established in the same aggregate principal
amount as the 1999A Revenue Bonds and are to bear interest at the same rate or
rates as the 1999A Revenue Bonds; and the principal of and interest on the Bonds
are to be payable at the same times as the principal of and interest on the
1999A Revenue Bonds;
NOW, THEREFORE, in consideration of the issuance and sale by the City (as
hereinafter defined) of the 1999A Revenue Bonds and the loan of the proceeds
thereof to the Company as provided in the 1999A Loan Agreement (as hereinafter
defined), of the issuance by Ambac of the 1999A Policy and the 2002A Surety Bond
pursuant to the Insurance Agreement, of the waiver by Ambac of the restrictions
contained in Section 2.02 of the 1999 Insurance Agreement and Section 2.03 of
the 2002 Insurance Agreement pursuant to the terms hereof and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
irrevocably acknowledged, the Company proposes to issue and deliver the Bonds to
Ambac upon the terms and conditions set forth herein.
ARTICLE I
BONDS
SECTION 1.1. DELIVERY OF BONDS.
The Company hereby delivers to Ambac Bonds in the aggregate principal
amount of $66,700,000, maturing on October 1, 2032 and bearing interest as
provided in the Thirty-sixth Supplemental Indenture. The obligation of the
Company to pay the principal of and interest on the Bonds shall be deemed to
have been satisfied and discharged as and to the extent set forth therein and in
the Thirty-sixth Supplemental Indenture.
The Bonds are registered in the name of Ambac and shall be owned and held
by Ambac subject to the provisions of this Agreement and the Company shall have
no interest therein.
Ambac shall be entitled to exercise all rights of bondholders under the Mortgage
with respect to the Bonds.
Ambac hereby acknowledges receipt of the Bonds.
SECTION 1.2 PAYMENTS ON BONDS.
Ambac, as the registered owner of the Bonds, shall be entitled to retain
and apply to its own account the proceeds of payments of principal of and
interest on the Bonds; provided, however, that if at the time of any such
payment of principal of or interest on the Bonds the corresponding payment of
principal of or interest on the 1999A Revenue Bonds shall not have been made to
the holders thereof, Ambac shall turn such payment in respect of the Bonds over
to the 1999A Revenue Bond Trustee (as hereinafter defined) for deposit into the
Principal Amount or the Interest Account, as the case may be, within the Bond
Fund under the 0000X Xxxxxxx Xxxx Xxxxxxxxx (as hereinafter defined).
SECTION 1.3 WAIVER.
In consideration of the delivery of the Bonds as contemplated by Section
1.1 hereof, Ambac hereby consents and agrees that, during the period from and
including the date of this Agreement to and including June 14, 2005, (a) the
Company shall not be required to comply with the provisions of Section 2.02 of
the 1999 Insurance Agreement or Section 2.03 of the 2002 Insurance Agreement and
(b) the non-compliance by the Company with the provisions of Section 2.02 of the
1999 Insurance Agreement or Section 2.03 of the 2002 Insurance Agreement shall
not constitute an Event of Default (as defined in either the 1999 Insurance
Agreement or the 2002 Insurance Agreement), and Ambac hereby waives any such
non-compliance. On and after June 15, 2005, the waiver provided by this Section
1.3 shall cease to be effective, regardless of whether Ambac continues to
possess the Bonds, and the failure of the Company to comply with Section 2.3,
hereof or with Section 2.02 of the 1999 Insurance Agreement and Section 2.03 of
the 2002 Insurance Agreement shall constitute an Event of Default under the
Insurance Agreement, notwithstanding the grace period and notice requirement
provided by Section 3.01(c) thereof; it being understood and agreed that
compliance with Section 2.3 hereof shall be deemed to constitute compliance with
Section 2.02 of the 1999 Insurance Agreement and Section 2.03 of the 2002
Insurance Agreement.
ARTICLE II
NO TRANSFER OF BONDS; SURRENDER OF BONDS
SECTION 2.1. NO TRANSFER OF THE BONDS.
Ambac shall not sell, assign or otherwise transfer any Bonds delivered to
it under this Agreement except to a successor obligor on the 1999A Policy. The
Company may take such actions as it shall deem necessary, desirable or
appropriate to effect compliance with such restrictions on transfer, including
the issuance of stop-transfer instructions to the trustee under the Mortgage or
any other transfer agent thereunder.
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SECTION 2.2. SURRENDER OF BONDS.
If (a) at any time 1999A Revenue Bonds in any principal amount shall have
ceased to be "outstanding" under the 0000X Xxxxxxx Xxxx Xxxxxxxxx and (b) at
such time or thereafter there shall be no amounts due to Ambac under Section
2.01(a) of the 1999 Insurance Agreement in respect of the redemption or payment
of such 1999A Revenue Bonds, Ambac shall forthwith surrender to, or upon the
order of, the Company an equal principal amount of Bonds.
SECTION 2.3 SUBSTITUTE BONDS
The Company hereby covenants to issue and deliver to the 1999A Revenue
Bond Trustee, no later than June 15, 2005, First Mortgage Bonds, equal in
principal amount to the 1999A Revenue Bonds and bearing interest at the same
rate or rates, payable at the same times, as the 1999A Revenue Bonds (such First
Mortgage Bonds being hereinafter called the "Substitute Bonds"), in order to
evidence or secure the Company's obligations under Section 4.01 of the 1999A
Loan Agreement. Upon, and as a condition to, the issuance and delivery of the
Substitute Bonds to the 1999A Revenue Bond Trustee, as aforesaid, Ambac shall
surrender the Bonds to, or upon the order of, the Company.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 DEFINITIONS.
"CITY" means the City of Forsyth, Montana, a political subdivision of the
State of Montana.
"1999A POLICY" means the municipal bond insurance policy issued by Ambac
in respect of the 1999A Revenue Bonds.
"1999A LOAN AGREEMENT" means the Loan Agreement, dated as of September 1,
1999, between the City and the Company, relating to the 1999A Revenue Bonds.
"1999A REVENUE BONDS" means the Pollution Control Revenue Refunding Bonds
(Avista Corporation Colstrip Project) Series 1999A issued by the City.
"1999A REVENUE BOND INDENTURE" means the Trust Indenture, dated as of
September 1, 1999 between the City and JPMorgan Chase Bank, N.A. (successor by
merger to Chase Manhattan Bank and Trust Company, National Association),
trustee, relating to the 0000X Xxxxxxx Xxxxx".
"1999A REVENUE BOND TRUSTEE" means the trustee under the Revenue Bond
Indenture.
"2002A SURETY BOND" means the surety bond issued by Ambac in respect of
the 1999A Revenue Bonds.
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SECTION 3.2 OBLIGATIONS ABSOLUTE AND UNCONDITIONAL
The obligation of the Company to pay the principal of and interest on the
Bonds, as set forth therein and in the Thirty-sixth Supplemental Indenture,
shall be absolute and unconditional. The Company irrevocably agrees that it
shall not, in any judicial proceeding wherein Ambac shall seek to enforce
payment of the Bonds, take the position that the amount the Company is obligated
to pay in respect of the principal of or interest on the Bonds held by Ambac is
other than the amount or amounts specifically contemplated in the Bonds and the
Thirty-sixth Supplemental Indenture.
SECTION 3.3 THIRD PARTY BENEFICIARY
The 1999A Revenue Bond Trustee shall be a third-party beneficiary of, and
shall be entitled to enforce, Section 1.2 of this Agreement.
SECTION 3.4. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
law of the State of New York.
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IN WITNESS WHEREOF, the Company and Ambac have caused this Agreement to be
executed and delivered as of the date first above written.
AVISTA CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
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Senior Vice President
AMBAC ASSURANCE CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
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Vice President
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