National Rural Utilities Cooperative Finance Corporation $1,000,000,000 Extendible Collateral Trust Bonds Underwriting Agreement
Exhibit 1.1
EXECUTION COPY
National Rural Utilities
Cooperative Finance Corporation
$1,000,000,000 Extendible Collateral Trust Bonds
May 3, 2006
▇▇▇▇▇▇ Brothers Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
LaSalle Financial Services, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Deutsche Bank Securities Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
As Representatives of the several Underwriters
Ladies and Gentlemen:
National Rural Utilities Cooperative Finance Corporation, a District of Columbia cooperative
association (the “Company”), proposes to issue $1,000,000,000 principal amount of its Extendible
Collateral Trust Bonds (the “Bonds”), to be issued under and secured by an Indenture dated as of
February 15, 1994, between the Company and U.S. Bank National Association, as successor trustee
(the “Trustee”). Such Indenture, as amended by any supplemental indenture, is hereinafter called
the “Indenture”. The Bonds are more fully described in the Registration Statement and in the
Prospectus hereinafter mentioned. The Bonds will be issued in fully registered form only, in
denominations of $1,000 and any integral multiple thereof.
You have advised us (i) that you and any other firms and corporations named in Schedule I
attached hereto (you and such firms and corporations being hereinafter called the Underwriters,
which term shall also include any underwriter substituted as provided in Section 14 hereof), acting
severally and not jointly, are willing to purchase, on the terms and conditions hereinafter set
forth, the principal amount of the
Bonds specified in such Schedule I, and (ii) that you are authorized, on behalf of yourselves
and the other Underwriters, to enter into this Agreement. The final prospectus and the final
prospectus supplement relating to the offering of the Bonds, in the forms first furnished to the
Underwriters by the Company dated the date hereof and that will be filed with the SEC under Rule
424(b), are collectively referred to herein as the “Prospectus”. The term “Pricing Prospectus”
shall mean the prospectus, as amended or supplemented, relating to the Bonds that is included in
the Registration Statement
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immediately prior to the Applicable Time, including any document
incorporated by reference therein at the Applicable Time. Terms used but not otherwise defined
herein shall have the meanings assigned to them in the Indenture.
1. Certain Representations and Warranties by the Company. The Company represents and
warrants to each Underwriter as follows:
(a) Registration Statement and Prospectus. The Company has filed with the Securities
and Exchange Commission (the “Commission”) Registration Statement No. 333-72558 and Registration
Statement No. 333-109365 for the registration under the Securities Act of 1933, as amended (the
“Securities Act”), of the Bonds (including a prospectus relating thereto) and may have filed one
or more amendments thereto (including one or more amended or supplemental prospectuses) and such
registration statements and any such amendments have become effective. The Prospectus has been
prepared and will be filed pursuant to and within the time period required under Rule 424, Rule
430A, Rule 430B or Rule 430C, as applicable, under the Securities Act. A final term sheet,
containing solely a description of the terms of the Bonds, substantially in the form of Schedule
II attached hereto and approved by you (the “Pricing Term Sheet”), has been prepared and will be
filed pursuant to Rule 433(d), and all other material, if any, required to be filed by the Company
pursuant to Rule 433(d) in connection with the offer and sale of the Bonds has been or will be so
filed, in each case within the time period required under such Rule. The Company will not file
any other amendment of such registration statements or such prospectus or any supplement to such
prospectus on or after the Applicable Time and prior to the date and time of delivery of and
payment for the Bonds referred to in Section 3 hereof (the “Closing Date”), except with your
approval. Such registration statements, including any amendments thereto, the financial
statements and exhibits and any information contained or incorporated by reference in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, to the extent such information is
deemed pursuant to Rule 430B or Rule 430C under the Act to be included in the Registration
Statement at the time it became effective, are hereinafter called the “Registration Statement”.
Any reference in this Agreement to the Prospectus as amended or supplemented (including any
preliminary prospectus supplement relating to the Bonds) shall include, without limitation, any
prospectus or prospectus supplement filed with the Commission pursuant to Rule 424 of the
Commission under the Securities Act which amends or supplements the Prospectus. Any reference
herein to the Registration Statement 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 which were filed under
the Securities Exchange Act of 1934 (the “Exchange Act”) on or before the effective date of the
Registration Statement or the date of such Prospectus, as the case
may be; and any reference herein to the terms “amend”, “amendment” or “supplement” with
respect to the Registration Statement or the Prospectus shall be deemed to refer to and include
the filing of any document under the Exchange Act after the effective date of the Registration
Statement, or the date of any Prospectus, as the case may be, and deemed to be incorporated
therein by reference; provided that any statement in a document incorporated or deemed to be
incorporated in the Registration Statement or the Prospectus shall be deemed not to be contained
in the Registration Statement or the
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Prospectus if such statement has been modified or superseded
by any statement in the Registration Statement or the Prospectus when such documents became
effective or were filed with the Commission, or in the Pricing Prospectus at the Applicable Time.
(b) Accuracy of Registration Statement and Prospectuses. The Pricing Prospectus,
together with the Pricing Term Sheet and any other Issuer Free Writing Prospectus (collectively,
the “Disclosure Package”), as of 2:00 p.m. on May 3, 2006 (the “Applicable Time”), did not contain
any untrue statement of a material fact and did not omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they were made not
misleading; at all times subsequent to the date of this Agreement up to and including the Closing
Date, and when any post-effective amendment thereof shall become effective, the Registration
Statement (and the Registration Statement as amended if any post-effective amendment thereof shall
have become effective) will comply in all material respects with the provisions of the Securities
Act and the Exchange Act and the rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact and will not omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading; and, at all times
subsequent to the date of this Agreement up to and including the Closing Date, the Prospectus (and
the Prospectus as amended or supplemented, if the Company shall have filed with the Commission any
amendment thereof or supplement thereto) and the Disclosure Package, will fully comply with the
provisions of the Securities Act and the Exchange Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material fact and will not
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 none of the representations and warranties in this
paragraph (b) shall apply to (i) that part of the Registration Statement which shall constitute
the Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939
(the “Trust Indenture Act”) of the Trustee or (ii) statements in, or omissions from, the
Disclosure Package or the Prospectus or any amendment thereof or supplement thereto made in
reliance upon and in conformity with information furnished as herein stated or otherwise furnished
in writing to the Company by or on behalf of any Underwriter through you for use in connection
with the preparation of the Registration Statement or the Prospectus or any such amendment or
supplement.
(c) Issuer Free Writing Prospectuses. The Company has not made, and will not make
(other than the Pricing Term Sheet and any other documents listed on Schedule III attached
hereto), any offer relating to the Bonds that would constitute a “free writing prospectus” (as
defined in Rule 405 under the Securities Act), any such
free writing prospectus an “Issuer Free Writing Prospectus”, without the prior consent of the
Representatives; the Company will comply with the requirements of Rule 433 under the Securities
Act with respect to any such Issuer Free Writing Prospectus; any such Issuer Free Writing
Prospectus did not and will not, as of its issue date and through the Closing Date, include any
information that conflicts with the information contained in the Registration Statement and the
Prospectus; any such Issuer Free Writing Prospectus, when taken together with the information
contained in the Registration Statement and
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the Prospectus, did not, when issued or filed pursuant
to Rule 433 under the Securities Act, and will not through the Closing Date contain an untrue
statement of a material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading; and the
Company is not an “ineligible issuer” (as defined in Rule 405 under the Act) as of the eligibility
determination date for purposes of Rules 164 and 433 under the Act with respect to the offering of
the Bonds contemplated by the Registration Statement.
(d) Accountants. The accountants who have certified or shall certify the financial
statements filed and to be filed with the Commission as parts of the Registration Statement and
the Prospectus are independent with respect to the Company as required by the Securities Act and
rules and regulations of the Commission thereunder.
(e) Due Incorporation. The Company has been duly incorporated and is now, and on the
Closing Date will be, a validly existing cooperative association in good standing under the laws
of the District of Columbia, duly qualified and in good standing in each jurisdiction in which the
ownership or leasing of properties or the conduct of its business requires it to be qualified (or
the failure to be so qualified will not have a material adverse effect upon the business or
condition of the Company), and the Company has the corporate power and holds all valid permits and
other required authorizations from governmental authorities necessary to carry on its business as
now conducted and as to be conducted on the Closing Date and as contemplated by the Prospectus.
(f) Material Changes. Since the respective dates as of which information is given in
the Registration Statement, the Disclosure Package and the Prospectus, and except as set forth
therein, there has not been any material adverse change in the financial condition or the results
of operations of the Company, whether or not arising from transactions in the ordinary course of
business.
(g) Litigation. On the date hereof, except as set forth in the Disclosure Package
and the Prospectus, the Company does not have any litigation pending of a character which in the
opinion of counsel for the Company referred to in Section 13(c) hereof could result in a judgment
or decree having a material adverse effect on the condition, financial or other, or the results of
operations of the Company.
(h) Legality. On the Closing Date, the Bonds will be duly and validly authorized,
and no further authorization, consent or approval of the members and no further authorization or
approval of the Board of Directors of the Company or any
committee thereof will be required for the issuance and sale of the Bonds as contemplated
herein; and neither such issuance or sale of the Bonds nor the consummation of any other of the
transactions herein contemplated will result in a breach by the Company of any terms of, or
constitute a default under, any other agreement or undertaking of the Company.
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(i) No Stop Order. The Commission has not issued and, to the best knowledge of the
Company, is not threatening to issue any order preventing or suspending the use of the Prospectus
(as amended or supplemented, if the Company shall have filed with the Commission any amendment
thereof or supplement thereto).
(j) Regulation. The Company is not required to be registered as an investment
company under the Investment Company Act of 1940 and is not subject to regulation under the Public
Utility Holding Company Act of 1935.
(k) Compliance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company and its directors and
officers, in their capacities as such, are in compliance in all material respects with (i) the
applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and regulations promulgated
in connection therewith (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”) and (ii) the applicable regulations of the New
York Stock Exchange.
2. Agreement to Purchase. Subject to the terms and conditions and upon the
representations and warranties herein set forth, the Company agrees to sell to you and any other
Underwriters, severally and not jointly, and you and such other Underwriters, severally and not
jointly, agree to purchase from the Company, at a purchase price of 99.75% of the principal amount,
the principal amount of Bonds set forth opposite the names of the Underwriters in Schedule I
hereto.
3. Closing. Delivery of and payment for the Bonds shall be made at the offices of
Cravath, Swaine & ▇▇▇▇▇ LLP, Worldwide Plaza, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 9:30
a.m., New York City time, on May 10, 2006, or such later date (not later than May 17, 2006) as you,
as the Representatives of the Underwriters, shall designate, which date and time may be postponed
by agreement between you, as the Representatives, and the Company or as provided in Section 14
hereof. Delivery of the Bonds shall be made to you, for the respective accounts of the several
Underwriters, against payment by the several Underwriters through you of the purchase price
thereof, to or upon the order of the Company by certified or official bank check or checks payable,
or wire transfers, in immediately available funds. The Bonds shall be delivered in definitive
global form through the facilities of The Depository Trust Company (“DTC”).
4. Prospectuses. The Company has caused to be delivered to you, as the
Representatives of the Underwriters, copies of the Prospectus and the Disclosure Package and has
consented to the use of such copies for the purposes permitted by the Securities Act. The Company
agrees to deliver to you, as the Representatives of the Underwriters, without charge, from time to
time during such period as in the opinion of Cravath, Swaine & ▇▇▇▇▇ LLP, counsel for the
Underwriters, the Prospectus as required by law to be delivered in connection with sales by an
Underwriter or dealer, as many copies of the
Prospectus (and, in the event of any amendment of or supplement to the Prospectus, of such
amended or supplemented Prospectus) as you, as the Representatives of the Underwriters, may
reasonably request. If, at any time during the period in which the Company is (or but for the
exemption in Rule 172 would be) required to deliver copies of the Prospectus, as provided in this
Section 4, any event known to the Company relating to or affecting the Company shall occur which
should be set forth in an amendment of or
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supplement to the Disclosure Package or the Prospectus in
order to make the statements in the Disclosure Package or the Prospectus not misleading in the
light of the circumstances at the time it is delivered to the purchaser, or it shall be necessary
to amend or supplement the Disclosure Package or the Prospectus to comply with law or with the
rules and regulations of the Commission, the Company, at its expense, will forthwith prepare and
furnish to you for distribution to the Underwriters and dealers a reasonable number of copies of an
amendment or amendments of or a supplement or supplements to the Disclosure Package or the
Prospectus which will so amend or supplement the Disclosure Package or the Prospectus that, as
amended or supplemented, it will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements in
the Disclosure Package or the Prospectus not misleading in the light of the circumstances when it
is delivered to a purchaser, and will comply with law and with such rules and regulations. The
Company authorizes the Underwriters and all dealers effecting sales of the Bonds to use the
Disclosure Package and the Prospectus, as from time to time amended or supplemented, in connection
with the sale of the Bonds in accordance with applicable provisions of the Securities Act and the
applicable rules and regulations thereunder for the period during which the Company is required to
deliver copies of the Prospectus as provided in this Section 4.
5. Commission Proceedings as to Registration Statement. The Company agrees to advise
you promptly, as the Representatives of the Underwriters, and to confirm such advice in writing (a)
when any post-effective amendment of the Registration Statement shall have become effective and
when any further amendment of or supplement to the Prospectus shall be filed with the Commission,
(b) of any request by the Commission for any amendment of the Registration Statement or the
Prospectus or for additional information and (c) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the initiation of any
proceedings for that purpose. The Company will use every reasonable effort to prevent the issuance
of such a stop order and, if any such order shall at any time be issued, to obtain the withdrawal
thereof at the earliest possible moment.
6. Blue Sky. The Company will diligently endeavor, when and as requested by you, to
qualify the Bonds, or such portion thereof as you may request, for offering and sale under the
securities or blue sky laws of any jurisdictions which you shall designate.
7. Earnings Statement. The Company agrees to make generally available to its security
holders, in accordance with Section 11(a) of the Securities Act and Rule 158 thereunder, an
earnings statement of the Company (which need not be audited)
in reasonable detail and covering a period of at least 12 months beginning after the effective
date of the Registration Statement.
8. No fiduciary duty. The Company acknowledges and agrees that in connection with
this offering, sale of the Bonds or any other services the Underwriters may be deemed to be
providing hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between
the parties or any oral representations or assurances
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previously or subsequently made by the
Underwriters: (i) no fiduciary or agency relationship between the Company, on the one hand, and the
Underwriters, on the other, exists; (ii) the Underwriters are not acting as advisors, expert or
otherwise, to the Company, including, without limitation, with respect to the determination of the
public offering price of the Bonds, and such relationship between the Company, on the one hand, and
the Underwriters, on the other, is entirely and solely commercial, based on arms-length
negotiations; (iii) any duties and obligations that the Underwriters may have to the Company shall
be limited to those duties and obligations specifically stated herein; and (iv) the Underwriters
and their respective affiliates may have interests that differ from those of the Company. The
Company hereby waives any claims that the Company may have against the Underwriters with respect to
any breach of fiduciary duty in connection with the foregoing matters in this Section 8.
9. Clearance and Settlement. The Company will cooperate with the Underwriters to
permit the Bonds to be eligible for clearance and settlement through DTC.
10. Expenses. The Company agrees to pay all fees and expenses in connection with (a)
the preparation, printing and filing of the Registration Statement (including all exhibits to the
Registration Statement), the Prospectus and any amendments thereof and supplements thereto,
including any Issuer Free Writing Prospectus, and the furnishing of copies of each thereof to the
Underwriters (including costs of mailing and shipment), (b) the issuance of the Bonds, (c) the
rating of the Bonds by rating agencies, (d) the delivery of the Bonds to you in New York City for
the respective accounts of the several Underwriters, (e) the qualifying of the Bonds as provided in
Section 6 hereof and the determination of the eligibility of the Bonds for investment under the
laws of such jurisdictions as you may designate (including fees of not more than $10,000 and
disbursements of counsel for the Underwriters in connection therewith) and (f) any fees of a
book-entry depositary, listing agent, paying agent or transfer agent.
11. Reserved.
12. Indemnities.
(a) By the Company. The Company agrees to indemnify and hold harmless each
Underwriter, its directors and officers, and each person who controls any Underwriter within the
meaning of Section 15 of the Securities Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or any other statute or common law, and to reimburse the
Underwriters and such controlling persons, as
incurred, for any legal or other expenses incurred by them in connection with investigating
any claims and defending any actions, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any post-effective amendment thereof, or
the omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged
untrue statement of a
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material fact contained in the Prospectus (as amended or supplemented, if
the Company shall have filed with the Commission any amendment thereof or supplement thereto), any
preliminary prospectus, the Disclosure Package, or any Issuer Free Writing Prospectus, if used
within the period during which the Underwriters are authorized to use the Prospectus as provided
in Section 4 hereof, or the omission or alleged omission to state therein (if so used) a material
fact required to be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the indemnity agreement contained in this Section 12(a) shall not apply to
any such losses, claims, damages, liabilities or actions arising out of, or based upon, any such
untrue statement or alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was made in reliance upon and in conformity with information furnished as
herein stated in Section 15 or otherwise furnished in writing to the Company by or on behalf of
any Underwriter through you for use in connection with the preparation of the Registration
Statement or the Prospectus or any such amendment thereof or supplement thereto, any preliminary
prospectus, the Disclosure Package, or any Issuer Free Writing Prospectus, or was contained in
that part of the Registration Statement constituting the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of the Trustee. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise have.
(b) By the Underwriters. Each Underwriter severally and not jointly agrees, in the
manner and to the same extent as set forth in Section 12(a) hereof, to indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, the directors of the Company and those officers of the Company who shall have
signed the Registration Statement, with respect to any statement in or omission from the
Registration Statement or any post-effective amendment thereof or the Prospectus (as amended or
supplemented, if so amended or supplemented), any preliminary prospectus, the Disclosure Package,
or any Issuer Free Writing Prospectus, if such statement or omission was made in reliance upon and
in conformity with information furnished as herein stated in Section 15 or otherwise furnished in
writing to the Company through you on behalf of such Underwriter for use in connection with the
preparation of the Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto or any Issuer Free Writing Prospectus. The foregoing indemnity agreement shall
be in addition to any liability which the Underwriters may otherwise have.
(c) General. Each indemnified party will, within ten days after the receipt of
notice of the commencement of any action against such indemnified party in respect of which
indemnity may be sought from an indemnifying party on account of an
indemnity agreement contained in this Section 12, notify the indemnifying party in writing of
the commencement thereof. The omission of any indemnified party so to notify an indemnifying
party of any such action shall not relieve the indemnifying party from any liability which it may
have to such indemnified party on account of the indemnity agreement contained in this Section 12
or otherwise. Except as provided in the next succeeding sentence, in case any such action shall
be brought against any indemnified party and it shall notify an indemnifying party of the
commencement
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thereof, such indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party, and after notice in
writing from such indemnifying party to such indemnified party of its election so to assume the
defense thereof, such indemnifying party will not be liable to such indemnified party under this
Section 12 for any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of investigation. Such
indemnified party shall have the right to employ its own counsel in any such action, but the fees
and expenses of such counsel shall be at the expense of such indemnified party unless (i) the
employment of such counsel has been authorized in writing by the indemnifying party in connection
with the defense of such action, (ii) such indemnified party shall have been advised by such
counsel that there are material legal defenses available to it which are different from or
additional to those available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of such indemnified party)
or (iii) the indemnifying party shall not have assumed the defense of such action and employed
counsel therefor satisfactory to such indemnified party within a reasonable time after notice of
commencement of such action, in any of which events such fees and expenses shall be borne by the
indemnifying party. No indemnifying party shall, without the written consent of the indemnified
party, effect the settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which indemnification may be
sought hereunder (whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action or claim and (ii)
does not include any statement as to, or an admission of, fault, culpability or a failure to act,
by or on behalf of any indemnified party. No indemnified party shall effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification may be sought hereunder without the consent of
the indemnifying party (which consent shall not be unreasonably withheld).
(d) Contribution. If the indemnification provided for in this Section 12 shall for
any reason be unavailable to an indemnified party under Section 12(a) or 12(b) hereof in respect
of any loss, claim, damage or liability or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to
the amount paid or payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company on the one hand and the Underwriters on the other
from the offering of the
Bonds or (ii) if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and the Underwriters
on the other with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand and the
Underwriters on the other with respect to such offering shall be
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deemed to be in the same
proportion as the total net proceeds from the offering of the Bonds (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to such offering, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company on the one hand and the Underwriters on
the other shall be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 12(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section 12(d) shall be
deemed to include, for purposes of this Section 12(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 12(d), no Underwriter shall be required
to contribute any amount in excess of the amount by which the total price at which the Bonds
underwritten by it and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
The Underwriters’ obligations to contribute as provided in this Section 12(d) are several in
proportion to their respective underwriting obligations and not joint.
(e) Survival of Indemnities. The respective indemnity and contribution agreements of
the Company and the Underwriters contained in this Section 12, and the representations and
warranties of the Company set forth in Section 1 hereof, shall remain operative and in full force
and effect, regardless of any termination or cancelation of this Agreement or any investigation
made by or on behalf of any Underwriter or any such controlling person or the Company or any such
controlling person, director or officer, and shall survive the delivery of the Bonds, and any
successor of any Underwriter or of any such controlling person or of the Company, and any legal
representative of any such controlling person, director or officer, as the case may be, shall be
entitled to the benefit of the respective indemnity and contribution agreements.
13. Conditions to Underwriters’ Obligations. The several obligations of the
Underwriters hereunder are subject to the accuracy of and compliance with the representations and
warranties of the Company contained in Section 1 hereof, as of the date hereof and as of the
Closing Date, and to the following further conditions:
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(a) Effectiveness of Registration Statement. No stop order suspending the
effectiveness of the Registration Statement or qualification of the Indenture shall be in effect
on the Closing Date, and no proceedings for the issuance of such an order shall be pending or, to
the knowledge of the Company or you, threatened by the Commission on the Closing Date.
(b) Opinion of Counsel for the Underwriters. You, as the Representatives of the
Underwriters, shall have received from Cravath, Swaine & ▇▇▇▇▇ LLP an opinion and letter, each
dated the Closing Date and addressed to the Underwriters, with respect to the issuance and sale of
the Bonds, the form of the Registration Statement, the Prospectus (other than the financial
statements and other information of a statistical, accounting or financial nature included
therein), the Disclosure Package as of the Applicable Time and other related matters as you may
reasonably require, and the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(c) Opinions of Counsel for the Company. The Company shall have furnished to you, as
the Representatives of the Underwriters, on the Closing Date, the opinions and letters, addressed
to the Underwriters and dated the Closing Date, of (i) ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel for the
Company, which opinion shall be satisfactory in form and scope to counsel for the Underwriters,
substantially to the effect set forth in Exhibit A-1 and Exhibit A-2 hereto and (ii) ▇▇▇▇ ▇▇▇
List, Esq., General Counsel of the Company, which opinion shall be satisfactory in form and scope
to counsel for the Underwriters substantially to the effect set forth in Exhibit B hereto.
(d) Accountants’ Letter. Deloitte & Touche LLP shall have furnished to you, as the
Representatives of the Underwriters, at or prior to the Closing Date, a letter, addressed to the
Underwriters and dated the Closing Date, confirming that they are independent public accountants
with respect to the Company within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission; and stating, as of the Applicable Time and the Closing Date (or,
with respect to matters involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus or the Disclosure Package, as of a date
not more than five days prior to the Applicable Time and the Closing Date), the conclusions and
findings of such firm with respect to the financial information and other matters covered by its
letter delivered to you, as the Representatives of the Underwriters, concurrently with the
execution of this Agreement and confirming in all material respects the conclusions and findings
set forth in such prior letter or, if no such letter shall have been delivered to you, the
conclusions and findings of such firm, in form and substance satisfactory to you, as the
Representatives of the Underwriters, with
respect to such financial information and other matters as you, as the Representatives of the
Underwriters, shall reasonably request.
(e) Officer’s Certificate. You shall have received, on the Closing Date, a
certificate of the Company dated the Closing Date, signed on its behalf by the President, the
Governor or a Vice President of the Company, to the effect that the signer of such
12
certificate has
examined the Registration Statement and the Prospectus and that (i) in such person’s opinion, as
of the effective date of the Registration Statement, the Registration Statement did not contain an
untrue statement of a material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, as of the Applicable
Time the Disclosure Package did not contain an untrue statement of a material fact and did not
omit to state a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and the Prospectus as of its date and as
of the Closing Date did not contain an untrue statement of a material fact and did not omit to
state a material fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, (ii) the representations and warranties of the Company
herein are true and correct as of the Closing Date and (iii) the Pledged Property consists solely
of Mortgage Notes and Permitted Investments or, if such is not the case, a description of the
other collateral included in the Pledged Property.
(f) (i) The Company shall not have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus, exclusive of any amendment or
supplement thereto after the date hereof, any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or contemplated in
the Prospectus or (ii) since such date there shall not have been any change in the members’ equity
or long-term debt of the Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs, management, financial
position, member’s equity or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of which, in any such case
described in clauses (i) or (ii), is, in your reasonable judgment, so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering or the delivery of the
Bonds on the terms and in the manner contemplated in the Prospectus.
(g) On or after the date hereof: (i) no downgrading shall have occurred in the rating
accorded the Company’s debt securities by any “nationally recognized statistical rating
organization”, as that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its rating of any of the
Company’s debt securities.
(h) On or after the date hereof, there shall not have occurred any of the following: (i) a
suspension or material limitation in trading in securities of the Company or generally on The New
York Stock Exchange, (ii) a banking moratorium on
commercial banking activities in New York declared by Federal or state authorities, (iii) any
outbreak of hostilities involving the United States, any escalation of hostilities involving the
United States, any attack on the United States or any act of terrorism in which the United States
is involved, (iv) any major disruption in the settlement of securities in the United States or any
other relevant jurisdiction or a declaration of a national emergency or war by the United States
or (v) such a material adverse change in
13
general economic, political or financial conditions
domestically or internationally (or the effect of international conditions on the financial
markets in the United States or the effect of conditions in the United States on international
financial markets shall be such) the effect of which, in any such case described in clauses (iii)
or (iv), is, in your reasonable judgment, to make it impracticable or inadvisable to proceed with
the public offering or delivery of the Bonds on the terms and in the manner contemplated in the
Prospectus.
(i) Miscellaneous. The Company shall have taken, on or prior to the Closing Date,
all other action, if any, which it is stated in the Registration Statement (or any post-effective
amendment thereof), the Prospectus (as amended or supplemented, if so amended or supplemented) or
the Disclosure Package that the Company will take prior to or concurrently with the issuance and
delivery of the Bonds, and all agreements herein contained to be performed on the part of the
Company on or prior to the Closing Date shall have been so performed.
(j) Other Documents. The Company shall have furnished to you and to Cravath, Swaine
& ▇▇▇▇▇ LLP such further certificates and documents as you or they may have reasonably requested
prior to the Closing Date.
If any of the conditions specified in this Section 13 shall not have been fulfilled when and as
required by this Agreement to be fulfilled, this Agreement and all obligations of the Underwriters
hereunder may be canceled on, or at any time prior to, the Closing Date by you, as the
Representatives of the Underwriters. Notice of such cancelation shall be given to the Company in
writing, or by telegraph, telephone or telex confirmed in writing.
14. Substitution of Underwriters. If any one or more of the Underwriters shall fail
or refuse on the Closing Date to purchase and pay for the Bonds which it or they have agreed to
purchase hereunder, then (a) if the aggregate principal amount of the Bonds which the defaulting
Underwriter or Underwriters so agreed to purchase shall not exceed $100,000,000, the nondefaulting
Underwriters shall be obligated to purchase the Bonds from the Company, in proportion to their
respective obligations hereunder and upon the terms herein set forth, or (b) if the aggregate
principal amount of the Bonds which the defaulting Underwriter or Underwriters so agreed to
purchase shall exceed $100,000,000 either you, as the Representatives of the Underwriters, or the
Company shall have the right at any time prior to 9:30 a.m., New York City time, on the next
business day after the Closing Date to procure one or more of the other Underwriters, or any
others, to purchase such Bonds from the Company, in such amounts as may be agreed upon and upon the
terms herein set forth. If within such specified time neither you, as the Representatives, nor the
Company shall have procured such other
Underwriters or any others to purchase the Bonds agreed to be purchased by the defaulting
Underwriter or Underwriters, this Agreement shall terminate without liability on the part of any
nondefaulting Underwriter or of the Company. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 14, the Closing Date may be postponed for such period,
not exceeding seven days, as you, as the Representatives, shall determine in order that any
required changes in the Registration
14
Statement the Prospectus or the Disclosure Package or in any
other documents or arrangements may be effected. Any action taken or termination of this Agreement
under this Section 14 shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
15. Information Furnished by Underwriters. The Company acknowledges that (i) the
table of Underwriters and their respective participation in the sale of the Bonds, (ii) the first
paragraph under the table of underwriters related to offering price, concessions and reallowances
and (iii) the second paragraph under the table of underwriters related to stabilization, syndicate
covering transactions and penalty bids under the heading “Underwriting” in the prospectus
supplement portion of the Prospectus, and the last two paragraphs under the heading “Plan of
Distribution” in the Prospectus, constitute the only information furnished in writing by you, on
behalf of the Underwriters, for inclusion therein, and you, as the Representatives of the
Underwriters, confirm that such statements are correct.
16. Termination. This Agreement shall be subject to termination by you, by notice
given to the Company prior to delivery of and payment for the Bonds, if prior to such time any of
the events described in Sections 13(f), 13(g) or 13(h) occurs.
17. Miscellaneous.
(a) Except as otherwise expressly provided in this Agreement, (i) whenever notice is required
by all the provisions of this Agreement to be given to the Company, such notice shall be in
writing addressed to the Company at its office, Woodland Park, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of the Governor, and (ii) whenever notice is required by the provisions
of this Agreement to be given to you, as the Representatives of the Underwriters or of any of
them, such notice shall be in writing addressed to the offices of ▇▇▇▇▇▇ Brothers Inc., ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Debt Capital Markets, Global Power.
(b) The Company agrees to furnish to you and to Cravath, Swaine & ▇▇▇▇▇ LLP, without charge,
a signed copy of the Registration Statement and each amendment thereof, including all financial
statements and all exhibits thereto (except such financial statements and exhibits as are
incorporated therein by reference and which shall have been previously furnished to you), and to
furnish to each of the other Underwriters, without charge, a copy of the Registration Statement
and each amendment thereof, including all financial statements (except such financial statements
as are incorporated therein by reference) but without exhibits.
(c) This Agreement is made solely for the benefit of the several Underwriters and the Company
and their respective successors and assigns, and, to the extent provided in Section 12 hereof, any
controlling person referred to in such Section 12 and the directors of the Company and those
officers of the Company who shall have signed the Registration Statement, and their respective
legal representatives, successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term “successor” or the term “successors and assigns”
as
15
used in this Agreement shall not include any purchaser, as such purchaser, from any of the
Underwriters of the Bonds.
(d) If this Agreement shall be canceled or terminated by the Underwriters on any of the
grounds referred to or specified in Section 13 hereof or because of any failure or refusal on the
part of the Company to comply with any of the terms or to fulfill any of the conditions of this
Agreement, the Company will reimburse the Underwriters severally for all their out-of-pocket
expenses (including the fees and disbursements of their counsel) reasonably incurred by them in
connection with the subject matter of this Agreement.
(e) The term “business day” as used in this Agreement shall mean any day on which the New
York Stock Exchange, Inc., is open for trading.
(f) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS.
(g) Section headings have been inserted in this Agreement as a matter of convenience of
reference only and it is agreed that such section headings are not a part of this Agreement and
will not be used in the interpretation of any provision of this Agreement.
16
Please confirm that you are acting on behalf of yourself and the other several Underwriters
and that the foregoing correctly sets forth the agreement between the Company and the several
Underwriters.
| Very truly yours, | ||||
| NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, | ||||
| by | ||||
| /s/ | ||||
| Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | ||||
| Title: Sr. Vice President & Chief Financial Officer | ||||
17
Acting on behalf of ourselves
and the other several Underwriters
named in Schedule I attached hereto,
we hereby confirm as of the date
hereof that this letter correctly
sets forth the agreement between
the Company and the several
Underwriters:
| ▇▇▇▇▇▇ BROTHERS INC. | ||||||
| by | ||||||
| /s/
|
||||||
| Title: | ||||||
| LASALLE FINANCIAL SERVICES, INC. | ||||||
| by | ||||||
| /s/
|
||||||
| Title: | ||||||
| DEUTSCHE BANK SECURITIES INC. | ||||||
| by | ||||||
| /s/
|
||||||
| Title: | ||||||
| /s/
|
||||||
| Title: | ||||||
SCHEDULE I
Underwriting Agreement dated May 3, 2006
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
| Principal Amount | ||||
| of $1,000,000,000 | ||||
| Extendible Collateral Trust Bonds | ||||
| Underwriter | to be Purchased | |||
▇▇▇▇▇▇ Brothers Inc. |
$ | 300,000,000 | ||
LaSalle Financial Services, Inc. |
$ | 300,000,000 | ||
Deutsche Bank Securities Inc. |
$ | 300,000,000 | ||
Calyon Securities (USA) Inc. |
$ | 13,333,000 | ||
HSBC Securities (USA) Inc. |
$ | 13,333,000 | ||
Greenwich Capital Markets, Inc. |
$ | 13,334,000 | ||
Comerica Securities, Inc. |
$ | 5,454,000 | ||
Credit Suisse Securities (USA) LLC |
$ | 5,454,000 | ||
▇.▇. ▇▇▇▇▇▇ Securities Inc. |
$ | 5,454,000 | ||
Key Banc Capital Markets, A Division of
▇▇▇▇▇▇▇▇ Investments Inc. |
$ | 5,454,000 | ||
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated |
$ | 5,454,000 | ||
Mitsubishi UFJ Securities International plc |
$ | 5,455,000 | ||
▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. |
$ | 5,455,000 | ||
Rabo Securities USA, Inc. |
$ | 5,455,000 | ||
Scotia Capital (USA) Inc. |
$ | 5,455,000 | ||
SunTrust Capital Markets, Inc. |
$ | 5,455,000 | ||
UBS Securities LLC |
$ | 5,455,000 | ||
Total |
$ | 1,000,000,000 | ||
SCHEDULE II
Underwriting Agreement dated May 3, 2006
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
COOPERATIVE FINANCE CORPORATION
FORM OF EXTENDIBLE COLLATERAL TRUST BOND TERM SHEET
Issuer: |
National Rural Utilities Cooperative Finance Corporation | |
Ratings: |
A1 / A+/ A+ (all with stable outlook) | |
Principal Amount: |
$1,000,000,000 | |
Security Type: |
Extendible Collateral Trust Bonds | |
Legal Format: |
SEC Registered | |
Issue Price: |
100.00% of principal amount | |
Minimum Denominations |
$1,000 and integral multiples thereof | |
Settlement Date: |
May 10, 2006 | |
Initial Maturity Date: |
June 1, 2007 | |
Maturity Extension Option: |
On each Election Date, to the date occurring 366 calendar days from and including the 1st day of the next succeeding month | |
Election Date |
1st day of each month, from June 1, 2006 to May 1, 2010, inclusive | |
Final Maturity Date: |
June 1, 2011 | |
Interest Payment
Dates: |
1st day of each month, beginning on June 1, 2006 | |
Interest Reset Dates: |
May 10, 2006 for the initial interest period and the 1st day of each month thereafter | |
Interest
Determination Dates: |
2 London business days prior to the relevant Interest Reset Date | |
Coupon |
1-month LIBOR (Telerate 3750) + the Spread |
Spread:
|
For Interest Reset Dates Occurring | Spread | ||
| From and including May 10, 2006 to and including May 1, 2007 | Minus 0.01% | |||
| From and including June 1, 2007 to and including May 1, 2008 | Plus 0.01% | |||
| From and including June 1, 2008 to and including May 1, 2009 | Plus 0.02% | |||
| From and including June 1, 2009 to and including May 1, 2010 | Plus 0.03% | |||
| From and including June 1, 2010 to and including May 1, 2011 | Plus 0.04% | |||
Underwriters:
|
▇▇▇▇▇▇ Brothers Inc. (Joint Book-Running Manager) | |||
| LaSalle Financial Services, Inc. (Joint Book-Running Manager) | ||||
| Deutsche Bank Securities Inc. (Joint Book-Running Manager) | ||||
| Calyon Securities (USA) Inc. (Senior Co-Manager) | ||||
| HSBC Securities (USA) Inc. (Senior Co-Manager) |
| Greenwich Capital Markets, Inc. (Senior Co-Manager) | ||
| Comerica Securities, Inc. (Co-Manager) | ||
| Credit Suisse Securities (USA) LLC (Co-Manager) | ||
| ▇.▇. ▇▇▇▇▇▇ Securities Inc. (Co-Manager) | ||
| Key Banc Capital Markets, A Division of ▇▇▇▇▇▇▇▇ Investments Inc. (Co-Manager) | ||
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (Co-Manager) |
||
| Mitsubishi UFJ Securities International plc (Co-Manager) | ||
| ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. (Co-Manager) | ||
| Rabo Securities USA, Inc. (Co-Manager) | ||
| Scotia Capital (USA) Inc. (Co-Manager) | ||
| SunTrust Capital Markets, Inc. (Co-Manager) | ||
| UBS Securities LLC (Co-Manager) |
The issuer has filed a registration statement (including a prospectus) with the U.S.
Securities and Exchange Commission (SEC) for this offering. Before you invest, you should read the
prospectus for this offering in that registration statement, and other documents the issuer has
filed with the SEC, for more complete information about the issuer and this offering. You may get
these documents for free by searching the SEC online database
(▇▇▇▇▇®) at ▇▇▇.▇▇▇.▇▇▇. Alternatively, you may obtain a copy of the prospectus from ▇▇▇▇▇▇ Brothers Inc. by calling
▇-▇▇▇-▇▇▇-▇▇▇▇, from LaSalle Financial Services, Inc. by calling ▇-▇▇▇-▇▇▇-▇▇▇▇ or from Deutsche
Bank Securities Inc. by calling 1-800-503-4611.
SCHEDULE III
Attach any Issuer Free Writing Prospectus to be included in the Disclosure Package
including the Final Term Sheet.
including the Final Term Sheet.
| • | Final Term Sheet as per Schedule II |