Document:

Ex-10.3 TVA Discount Notes Selling Group Agreement

 

Exhibit 10.3

This Discount Notes Selling Group Agreement has been filed to provide investors with information
regarding its terms. It is not intended to provide any other factual information about the
Tennessee Valley Authority. The representations and warranties of the parties in this Discount
Notes Selling Group Agreement were made to, and solely for the benefit of, the other parties to
this Discount Notes Selling Group Agreement. The assertions embodied in the representations and
warranties may be qualified by information included in schedules, exhibits or other materials
exchanged by the parties that may modify or create exceptions to the representations and
warranties. Accordingly, investors should not rely on the representations and warranties as
characterizations of the actual state of facts at the time they were made or otherwise.

 

 

     This Form Discount Note Selling Group Agreement has been executed between TVA and each of the
following parties on the dates noted:

	 	 	 
	Party	 	Date executed
	Banc of America Securities LLC

	 	May 28, 2003
	Credit Suisse First Boston LLC

	 	May 23, 2003
	FTN Financial

	 	May 22, 2003
	Goldman, Sachs & Co.

	 	July 2, 2003
	J.P. Morgan Securities Inc.

	 	August 5, 2004
	Lehman Brothers Inc.

	 	May 27, 2003
	Merrill Lynch Government Securities Inc.

	 	June 10, 2003
	Morgan Stanley & Co., Incorporated

	 	September 26, 2006
	Myerberg & Company, LP

	 	June 18, 2003
	Suntrust Robinson Humphrey

	 	May 14, 2003

 

 

TENNESSEE VALLEY AUTHORITY

DISCOUNT NOTES

SELLING GROUP AGREEMENT

The Tennessee Valley Authority (“TVA”) may offer Discount Notes (“Notes”), which Notes are
described in TVA’s Discount Notes Offering Circular, for public distribution through a group of
investment dealers and dealer banks (“Selling Group”). You are invited to become a member of the
Selling Group (“Member”).

The signature of a person authorized to bind your organization at the conclusion of this Selling
Group Agreement (“Agreement”) constitutes both your organization’s acceptance of this invitation
and its consent to be bound by all the terms and conditions contained in this Agreement and by any
instructions contemplated by this Agreement, written or otherwise transmitted, in connection with
the distribution of the Notes which may be issued by TVA by its Treasurer or designees. 

SECTION 1. AUTHORIZATION. The Notes will be issued pursuant to (1) authority vested in
TVA by section 15d of the Tennessee Valley Authority Act of 1933, as amended, 16 U.S.C. §§
831-831ee (2000), (2) section 2.5 of the Basic Tennessee Valley Authority Power Bond Resolution
adopted by the Board of Directors of TVA (“Board”) on October 6, 1960, as amended, and (3) a
Resolution adopted by the Board on January 23, 1991, as amended, authorizing the issuance of
certain short-term debt through the use of the book-entry system of the Federal Reserve Banks. The
Notes will not be obligations of, nor will they be guaranteed by, the United States of America.

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SECTION 2. OFFERING. Each Member will offer Notes of original issue to investors,
according to the rate schedule established by TVA. Unless otherwise instructed, Members must
receive approval from TVA of all sales prior to confirmation with the customer pursuant to section
7 of this Agreement. TVA reserves the right, in its sole discretion, to reject any offer for the
purchase of the Notes, allot less than the face amount of the Notes requested by a Member, change
the rate schedule, or terminate the sale of the Notes. Members will be notified as promptly as
practicable of any such action.

SECTION 3. POSITIONING AND RECORDS. Members are prohibited from purchasing original issue
Notes acting as principal unless expressly authorized to do so by TVA. Any violation of this
restriction regarding purchasing original issue Notes acting as principal may result in a Member’s
immediate removal from the Selling Group at TVA’s sole discretion.

Reallowance of all or any part of the concession is allowed on all sales to dealers outside the
Selling Group subject to prior approval by TVA. Such reallowance must be reported to TVA monthly
in an electronic or written format. Any violation of the restriction regarding concession
reallowance or the restriction regarding sales to dealers outside the Selling Group may result in a
Member’s immediate removal from the Selling Group.

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TVA will maintain records of sales and amounts of Notes maturing on each future maturity date and
will, when requested by a Member, advise it of such dates and amounts.

SECTION 4. PRICING. Rate schedules for the Notes will usually be adjusted on a daily
basis to reflect TVA’s cash needs, current market conditions, and TVA’s maturity strategy. TVA
will make available to each Member of the Selling Group the appropriate rate schedule to be used in
offering Notes to the public. Such information will be transmitted by telephone or other
electronic means as soon as practicable. Rates may be changed at any time at the sole discretion
of TVA. Members will be notified of a pending change as soon as practicable and instructed to
cease offering Notes, except in the secondary market, until a new schedule is established.

The purchase price of each Note to the public shall be the difference between the face amount of
the Note and the quotient arrived at by dividing by 360 the product of (1) the principal amount of
the Note, (2) the percentage rate of discount applicable to the Note (said percentage rate of
discount being hereinafter called the “Discount Rate”), and (3) the actual number of days the Note
will be outstanding (excluding the date of issue but including the maturity date).

SECTION 5. SELLING CONCESSION. For all Notes confirmed by TVA to, and paid for by, a
Member, that Member will be allowed a concession, the amount of which will be determined from time
to time by TVA. Members will receive the concession by

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TVA’s deducting the amount of the concession from the gross amount otherwise due from each Member
in settlement of the Notes on the settlement date or through direct payment to a Member on a
periodic basis as TVA and such Member may agree. The concession with respect to any sale of Notes
may be withheld in whole or in part as to any Member at the discretion of TVA upon TVA’s
determination that such sale of Notes by such Member is in violation of the terms of this Agreement
or is otherwise improper. Except for concessions withheld as described above, no change in the
concession amount will be effective until TVA informs Member of such change by telephone or other
electronic means.

SECTION 6. SECONDARY MARKET. Each Member shall use its best efforts to maintain a viable
secondary market for the Notes and shall submit an electronic or written report to TVA, no later
than the fifth working day of each month, of such Member’s purchases and sales of the Notes in the
secondary market during the previous month. Each Member shall be responsible for continually
advising TVA of secondary Note inventories and market developments.

SECTION 7. TRANSMITTAL OF ORDERS AND CONFIRMATION OF SALES. Members shall confirm to TVA
by telephone or other means acceptable to TVA offers to purchase as to par amount, Discount Rate,
issue date, and maturity prior to the execution of the sale. It is hereby expressly agreed that
TVA shall have no obligation to accept an offer to purchase any Note prior to TVA’s acceptance, by
telephone or otherwise, of such offer to purchase. TVA’s acceptance of an offer to purchase shall
bind the Member and

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TVA to proceed with such sale, unless both parties agree otherwise.

SECTION 8. SETTLEMENT. Settlement for cash (same day), regular (next business day), skip
(2 business days forward) or other settlement delivery options as deemed appropriate will normally
be available. However, temporary restrictions on settlement type may be imposed by TVA at any
time. If restrictions are imposed, Members will be notified as quickly as possible by telephone or
other electronic means. Delivery of the Notes allotted to each Member shall be made on the
settlement date against payment in federal funds through the Federal Reserve’s wire transfer
system.

Failure of a Member to make payment for the Notes on the settlement date shall result in the Member
being liable to TVA in an amount equal to the sum of (1) the product of (a) the annual Discount
Rate of the Notes computed on a daily basis, (b) the principal amount of the Notes (with respect to
which Member failed to make payment), and (c) the number of days payment is not made, (2) any
Federal Reserve charges, and (3) other expenses or losses incurred by TVA as a result of a Member’s
failure to make payment; provided that no Member shall be liable for failure to make such payment
due to actions of TVA or its agents in violation of this Agreement or for any failure of the
Federal Reserve Banks, except when Member fails to follow applicable operating procedures of the
Federal Reserve Banks (including alternative procedures), or for any events beyond the reasonable
control of Member; and provided further, however, that Member’s liability pursuant to this section
8 shall not exceed an amount equal to the principal amount of the Notes (with respect to which
Member failed to make payment).

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SECTION 9. AUTHORIZED PERSONNEL. Member must provide TVA with electronic or written
notification of those persons within its organization authorized to act as liaisons to TVA in
connection with the distribution of the Notes. TVA is not obligated to coordinate any aspect of
the distribution of Notes with any person other than those authorized to act in Member’s behalf.
TVA will notify the Member, which notification may be oral and confirmed later in writing, of those
persons authorized to approve sales of Notes and otherwise act for TVA under this Agreement.

SECTION 10. WEB SITE. When a Member uses the web site provided by the Grant Street Group
or any similar web site related to the Notes (“Web Site”), the following provisions shall apply:

(1) Member shall designate in writing one or more employees it will authorize to use the
Web Site (each such individual being referred to herein as an “Authorized User”) by
submitting the information set forth in Exhibit A. An Authorized User may have access (a)
to view the Web Site and submit offers to buy Notes, (b) to view the Web Site and confirm
offers to buy Notes, or (c) to view the Web Site, submit offers to buy the Notes, and
confirm offers to buy the Notes.

(2) Member and its Authorized Users are responsible for controlling access to the Web Site
and for securing their computer systems (or the computer systems under their custody and
control) to prevent unauthorized use of the Web Site and purchase of Notes by means of the
Web Site. Member bears the risk of loss in the

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event an unauthorized purchase of Notes is made through its computer systems (or the
computer systems under its custody and control) or if an Authorized User makes an
unauthorized purchase of Notes offered by sale by means of the Web Site.

(3) Member shall advise TVA in writing if there is a change in employment of any of its
Authorized Users, if Member wants to terminate an employee’s status as an Authorized User,
or if Member wants to designate additional employees as Authorized Users.

(4) Member shall not allow employees, Authorized Users, or others located outside of the
United States to use the Web Site to participate in the purchase of Notes from TVA.

SECTION 11. FINANCIAL STATEMENTS. Members must provide for TVA’s review current audited
financial statements or other written financial information in a form satisfactory to TVA on a
regular basis but in no case less frequently than yearly.

SECTION 12. OTHER AGREEMENTS. TVA hereby reserves the right to select special Selling
Groups of investment dealers and dealer banks for the issuance of Notes or other debt securities in
circumstances that are deemed to be special situations. TVA has sole discretion and final decision
in such matters.

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SECTION 13. MEMBER LIABILITY. No Member has the authority to obligate TVA or any employee
of TVA for any expenses incurred by the Member, and TVA and its employees assume no such liability
under this Agreement. In connection with the distribution of the Notes, Member agrees to (1)
provide no information or make no representation that is inconsistent with the Discount Notes
Offering Circular, TVA’s current Information Statement, any supplement to any of the foregoing, and
any brochures, memoranda, and other descriptive material relating to the Notes furnished to Member
by TVA or approved by TVA in writing prior to their use; (2) comply with all applicable laws and
regulations relating to the sale of the Notes in each jurisdiction in which a Member offers, sells,
or otherwise distributes the Notes; and (3) permit TVA to inspect to the extent allowed by
applicable law, during regular business hours and on reasonable notice, the Member’s books and
records associated with its activities under this Agreement.

SECTION 14. CANCELLATION OF AGREEMENT. A Member may withdraw from membership in the
Selling Group upon written notice to TVA. Similarly, TVA may terminate, at no cost to TVA, the
membership of any Member at any time, but such termination shall not affect the obligation of the
Member or TVA to complete its performance with respect to any outstanding sales commitments.
Notice of such termination by TVA may be oral and confirmed later in writing.

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SECTION 15. SEVERABILITY OF PROVISIONS. In the event that one or more provisions
contained in this Agreement is determined to be invalid, illegal, or unenforceable in any respect,
the validity, legality, and enforceability of the remaining provisions contained in this Agreement
shall not be affected or impaired thereby, and this Agreement shall be interpreted as if such
invalid, illegal, or unenforceable provision was not contained in this Agreement.

SECTION 16. OFFICIALS NOT TO BENEFIT. No member of or delegate to Congress or Resident
Commissioner, or any officer, employee, special Government employee, or agent of TVA shall be
admitted to any share or part of this Agreement or to any benefit that may arise therefrom, but
this provision shall not be construed to extend to a corporation contracting for its general
benefit; nor shall any Member offer or give, directly or indirectly, to any officer, employee,
special Government employee, or agent of TVA, any gift, gratuity, favor, entertainment, loan, or
any other thing of monetary value, except as provided in 5 C.F.R. part 2635.

SECTION 17. INDEMNIFICATION. Member agrees to indemnify and hold TVA harmless from and
against any losses, liabilities, damages, or claims (or actions in respect thereof) to which TVA
may become subject insofar as such losses, liabilities, damages, or claims (or actions in respect
thereof) arise out of or relate to the making by Member of any representation or the giving by
Member of any information in connection

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with the offering or sale of the Notes which is inconsistent with TVA’s Discount Notes Offering
Circular, Information Statement, any supplement to the foregoing, or brochures, memoranda, or other
descriptive material relating to the Notes furnished to Member by TVA or approved by TVA in writing
prior to their use. Member further agrees to reimburse TVA for any legal or other expenses
reasonably incurred by TVA in connection with investigating or defending any such losses,
liabilities, damages, claims, or actions as such expenses are incurred. TVA agrees to give prompt
written notice to Member of any claim or the commencement of any action as to which indemnification
will be requested. Member’s obligation under this section shall be in addition to any liability
that it may otherwise have and shall extend, upon the same terms and conditions, to each director,
officer, and employee of TVA. Further, Member shall indemnify, protect, and hold TVA harmless from
and against any and all losses, liabilities, judgments, suits, actions, proceedings, claims,
damages, and costs (including attorney’s fees) resulting from the breach of section 10 of this
Agreement.

TVA agrees to indemnify and hold each Member harmless from and against any losses, claims, damages,
or liabilities, joint or several, to which such Member may become subject, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in TVA’s Discount Notes
Offering Circular, Information Statement, any supplements to the foregoing, or any brochures,
memoranda, or other descriptive material relating to the Notes furnished to Members by TVA or
approved by TVA in writing prior to their use with respect to the Notes (collectively,
“Information”) or arise out of or are based

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upon the omission or alleged omission to state therein a material fact necessary to make the
statements therein not misleading, and will reimburse each Member for any legal or other expenses
reasonably incurred by such Member in connection with the investigation or defense of any such
loss, claim, damage, liability, or action as such expenses are incurred; provided, however, that
the foregoing indemnity agreement with respect to the Information shall not inure to the benefit of
Member from whom the person asserting any such losses, claims, damages, liabilities, or actions
purchased Notes, or any person controlling Member, if a copy of the Information (as then amended
and supplemented if TVA shall have furnished any amendments or supplements thereto) was furnished
by TVA to Member in reasonably sufficient quantities prior to mailing by Member of confirmation of
the sale of the Notes and was not sent or given by or on behalf of Member to such person, at or
prior to the confirmation of the sale of the Notes to such person, and if the Information (as so
amended or supplemented) would have cured the defect giving rise to such losses, claims, damages,
liabilities, or actions; and provided, further, that TVA will not be liable in any such case to the
extent that any such loss, claim, damage, liability, or action arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission from the
Information made in reliance upon and in conformity with written information furnished to TVA by
Member specifically for use therein. Member agrees to give prompt notice to TVA of any claim or
the commencement of any action as to which indemnification will be requested. The obligations of
TVA under this section shall be in addition to any liability which TVA may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls Member within the
meaning of the Securities Act of 1933.

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SECTION 18. SEVERAL LIABILITLY. The obligations of each Member of the Selling Group will
be several and no Member of the Selling Group will incur any liability as a result of the
performance or failure to perform by any other Member.

SECTION 19. COMPLIANCE WITH INTERNAL REVENUE CODE. Income on Notes and other evidences
of indebtedness issued by TVA is subject to federal tax consequences. Accordingly, Member agrees to
comply with all applicable provisions of the Internal Revenue Code, as amended from time to time,
with respect to taxation of, information reporting about, and backup withholding on, the Notes.

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SECTION 20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of New York.

If the foregoing terms and conditions are acceptable, please have an authorized person sign and
return one copy of this Agreement to the Tennessee Valley Authority, 400 West Summit Hill Drive,
Knoxville, Tennessee, 37902, Attention: John M. Hoskins, Senior Vice President and Treasurer. A
second copy has been included for your files.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 	 	TENNESSEE VALLEY AUTHORITY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	John M. Hoskins	 	 
	 

	 	 	 	Senior Vice President and Treasurer	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 
	Accepted:	 	 
	 
	 	 	 	 
	 	 	 
	Selling Group Member	 	 
	 
	 	 	 	 
	 	 	 
	Signature of Authorized Partner or Officer	 	 
	 
	 	 	 	 
	 	 	 
	Name and Title of Partner or
Officer	 	 
	 
	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 	 	 

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EXHIBIT A

	 	 	 	 	 	 	 
	Authorized User Authorized User
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Name
	 	 	 	Name	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Title
	 	 	 	Title	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Mailing Address 
	 	 	 	Mailing Address	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	City                     State                    Zip Code

	 	 	 	City                     State                    Zip Code	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Phone Number 
	 	 	 	Phone Number	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Fax Number
	 	 	 	Fax Number	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	E-mail Address

	 	 	 	E-mail Address	 	 
	 
	 	 	 	 	 	 
	Check as appropriate:

	 	 	 	Check as appropriate:	 	 
	 
	 	 	 	 	 	 
	___ Viewing & Offering Authority

	 	 	 	___ Viewing & Offering Authority	 	 
	 
	 	 	 	 	 	 
	___ Viewing & Confirming Authority

	 	 	 	___ Viewing & Confirming Authority	 	 
	 
	 	 	 	 	 	 
	___ Viewing, Offering, & Confirming Authority

	 	 	 	___ Viewing, Offering, & Confirming Authority	 	 

15Ex-10.4 Electronotes Selling Agent Agreement

 

Exhibit 10.4

This Electronotes® Selling Agent Agreement has been filed to provide investors with
information regarding its terms. It is not intended to provide any other factual information about
the Tennessee Valley Authority. The representations and warranties of the parties in this
Electronotes® Selling Agent Agreement were made to, and solely for the benefit of, the
other parties to this Electronotes® Selling Agent Agreement. The assertions embodied in
the representations and warranties may be qualified by information included in schedules, exhibits
or other materials exchanged by the parties that may modify or create exceptions to the
representations and warranties. Accordingly, investors should not rely on the representations and
warranties as characterizations of the actual state of facts at the time they were made or
otherwise.

 

 

$3,000,000,000

MAXIMUM AGGREGATE PRINCIPAL AMOUNT OUTSTANDING

electronotes®

TENNESSEE VALLEY AUTHORITY POWER BONDS WITH MATURITIES OF ONE

YEAR TO THIRTY YEARS FROM DATE OF ISSUE

SELLING AGENT AGREEMENT

As of June 1, 2006

LaSalle Financial Services, Inc.

327 Plaza Real, Suite 225

Boca Raton, Florida 33432

A.G. Edwards & Sons, Inc.

One North Jefferson

St. Louis, Missouri 63103

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Edward D. Jones & Co., L.P.

12555 Manchester Road

St. Louis, Missouri 63131

First Tennessee Bank National Association

845 Crossover Lane, Suite 150

Memphis, Tennessee 38117

J.J.B. Hilliard, W.L. Lyons, Inc.

Hilliard Lyons Center, 5th Floor

P.O. Box 32760

Louisville, Kentucky 40232

Merrill Lynch, Pierce, Fenner & Smith Incorporated

4 World Financial Center, Floor 15

New York, New York 10080

 

 

Morgan Stanley & Co. Incorporated

Second Floor

1585 Broadway

New York, New York 10036

Wachovia Securities, LLC

301 South College Street

One Wachovia Center

Charlotte, North Carolina 28288

Dear Sirs:

     Tennessee Valley Authority, a wholly owned corporate agency and instrumentality of the United
States of America (“TVA” or the “Company”), has established a program to issue and sell its
Tennessee Valley Authority Power Bonds with Maturities of One Year to Thirty Years from Date of
Issue (the “electronotes®”) in an aggregate principal amount of up to $3,000,000,000
outstanding at any one time pursuant to the Tennessee Valley Authority Act of 1933, as amended (the
“TVA Act”), and under the Basic Tennessee Valley Authority Power Bond Resolution adopted by the
Board of Directors of TVA (the “Board”) on October 6, 1960, and amended on September 28, 1976,
October 17, 1989, and March 25, 1992 (as so amended, the “Basic Resolution”), and a Supplemental
Resolution adopted by the Board as of February 23, 2001, as amended on July 23, 2002, and on March
14, 2006, authorizing the issuance and sale of the electronotes® and designating and
delegating authority to certain officers to specify and determine the terms and conditions of the
electronotes® (the “Supplemental Resolution” and together with the Basic Resolution, the
“Resolutions”).

     As of June 1, 2006, there are $1,058,053,000 of electronotes® outstanding. The
electronotes® hereinafter issued (herein referred to as the “Bonds”) may be issued from
time to time in one or more installments. The terms and conditions of each installment of Bonds
shall be established in accordance with Section 2.2 of the Supplemental Resolution by the Company’s
Chief Financial Officer or Vice President and Treasurer (the “Designated Officers”) or the duly
authorized representative of either such officer in an Officer’s Certificate executed prior to the
issuance of each installment of Bonds (a “Designated Officer’s Certificate”). If the Bonds are to
be issued in multiple installments, the title of the Bonds and the general terms thereof shall be
set forth in the initial Designated Officer’s Certificate. Prior to the issuance of any
installment of Bonds, the specific terms of said installment of Bonds shall be set forth in a
subsequent Designated Officer’s Certificate or a supplement to the initial Designated Officer’s
Certificate. The Bonds shall have the maturity ranges, interest rates, and other terms set forth
in the Offering Circular referred to below as it may be amended or supplemented from time to time.
The Bonds will be issued, and the terms thereof established, from time to time by the Company in
accordance with the Resolutions.

     The Company has prepared an Information Statement dated November 18, 2005 (the “Information
Statement”), and the Power Bonds Offering Circular dated June 1, 2006, relating to the Bonds (the
“Power Bonds Offering Circular”) for the purpose of supplying information in

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respect of the offering of the Bonds. The Power Bonds Offering Circular, as most recently
amended, supplemented, or revised, together with the Information Statement which is attached
thereto and made a part thereof, as most recently amended, supplemented, or revised, and together
with the applicable Pricing Supplement or Permitted Free Writing, in either case, as most recently
amended, supplemented, or revised, is referred to herein as the “Offering Circular.” The term
“Permitted Free Writing” as used herein means the documents, if any, prepared by the Company that
(i) contain the final terms of the offering and (ii) are attached to the applicable Terms Agreement
for a tranche of Bonds. The term “Pricing Supplement” refers to the applicable supplement to the
Offering Circular that (i) sets forth only the terms of a particular installment of Bonds and (ii)
is prepared or approved by the Company.

     The “Pricing Disclosure Material” as used herein shall mean either (i) a Permitted Free
Writing with the final terms of the offering and the Offering Circular or (ii) the Pricing
Supplement prepared or approved by the Company and the Offering Circular, in either case, in the
last form conveyed to a purchaser prior to or simultaneously with the confirmation of sale.

     This Selling Agent Agreement amends and restates in its entirety (i) the Selling Agent
Agreement dated as of February 13, 2004, between TVA and the agents referred to therein and (ii)
the letter agreement between TVA and A.G. Edwards & Sons, Inc. dated as of January 5, 2005, under
which TVA appointed A.G. Edwards & Sons, Inc. as an agent under the Selling Agent Agreement
referred to in clause (i) of this paragraph.

I. Appointment of Agents

     Subject to the terms and conditions contained in this Selling Agent Agreement (the
“Agreement”), the Company hereby appoints or confirms the appointment, as the case may be, of each
of you as an agent of the Company (individually, an “Agent” and collectively, the “Agents”) for the
purpose of soliciting and receiving offers to purchase Bonds from the Company; and you hereby agree
to use your reasonable best efforts to solicit and receive offers to purchase Bonds upon terms
acceptable to the Company at such times and in such amounts as the Company shall from time to time
specify and in accordance with the terms hereof. The Company reserves the right, after
consultation with LaSalle Financial Services, Inc. (the “Purchasing Agent”), to enter into
agreements substantially identical hereto with other agents.

     Whenever the Company determines to sell Bonds pursuant to this Agreement, such Bonds shall be
sold pursuant to a Terms Agreement (as defined in Section IV(b) below) relating to such sale in
accordance with the provisions of Section IV(b) hereof between the Company and the Purchasing Agent
with the Purchasing Agent purchasing such Bonds as principal for resale to others.

     This Agreement shall not be construed to create either an obligation on the part of the
Company to sell any Bonds or an obligation of any of the Agents to purchase Bonds. Each Terms
Agreement shall create an obligation on the part of the Company to sell, and an obligation on the
part of the Purchasing Agent to purchase, the Bonds identified in such Terms Agreement.

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II. Conditions of the Obligations of the Agents

     Your obligations hereunder are subject at all times to the accuracy of the representations and
warranties of the Company herein and the performance and observance by the Company of all covenants
and agreements herein contained to be performed and observed by the Company and to the additional
conditions set forth in this Section II, which additional conditions shall be satisfied prior to
June 15, 2006 or such later date agreed to by the Company and the Purchasing Agent (the date the
last of such conditions are satisfied is hereinafter referred to as the “Commencement Date”).

     (a) (i) No litigation or proceeding shall be threatened or pending to restrain or enjoin the
issuance or delivery of the Bonds, or which in any way questions or affects the validity of the
Bonds, and (ii) there shall have been no material adverse change in the financial condition or the
results of operations of the Company or in its business prospects from that set forth in the
Offering Circular; and you shall have received a certificate of the Company dated as of or prior to
the Commencement Date and signed by a Designated Officer of the Company or a duly authorized
representative of a Designated Officer to the foregoing effect. The Designated Officer or the
representative of such Designated Officer making such certificate may rely upon the best of his or
her knowledge as to proceedings threatened.

     (b) You shall have received a favorable opinion of Maureen H. Dunn, Esq., Executive Vice
President and General Counsel for the Company, or Michael L. Wills, Assistant General Counsel,
Finance, for the Company, dated as of or prior to the Commencement Date, to the effect that:

     (i) The Company is an instrumentality and agency of the United States of America duly
created and validly existing under the provisions of the TVA Act and under the Constitution
of the United States, with full power and authority to hold properties and conduct its
business as described in the Offering Circular.

     (ii) The Company has the right and power under the TVA Act and under the Constitution
of the United States to issue the Bonds and to adopt the Resolutions, the Resolutions have
been duly and lawfully adopted by the Company in accordance with the provisions of the TVA
Act and are, except as provided in the last paragraph of this Section II(b), in full force
and effect, and no other authorization for the adoption of the Resolutions is required.

     (iii) The Secretary of the Treasury has approved the time of issuance and maximum rate
of interest of the Bonds in compliance with Section 15d of the TVA Act, and such approval
remains in full force and effect; the Bonds have been duly authorized and executed, and when
the terms of a particular Bond and of the issuance and sale thereof have been established in
accordance with the Resolutions and delivered against payment as contemplated by this
Agreement, such Bond will have been duly issued and delivered, in each case, in accordance
with the provisions of the TVA Act and the Resolutions, and will constitute a valid and
legally binding obligation of the Company, enforceable in accordance with its terms, subject
to fraudulent transfer, moratorium, and other laws of general applicability relating to or
affecting creditors’

4

 

rights and to general equity principles, payable, however, solely from the Net Power
Proceeds of the Company, as defined and set forth in the Basic Resolution; and when so
issued, such Bond will, except as provided in the last paragraph of this Section II(b), be
entitled to the benefits provided by the Resolutions.

     (iv) When issued, the Bonds will be subject to Federal income taxation, but under the
TVA Act the Bonds will be exempt as to principal and interest from all taxation now or
hereafter imposed by any state of the United States or local taxing authority of any such
state, except estate, inheritance, and gift taxes. The exemption from state and local
taxation may not apply to franchise or other nonproperty taxes in lieu thereof imposed on
corporations or to gain or loss on the sale or exchange of a Bond.

     (v) No consent, approval, authorization, or order of, or filing with, any governmental
agency or body or any court is required (except any that may be required to be obtained by
any Agent or any purchaser of the Bonds) for the consummation of this Agreement or the
transactions contemplated by this Agreement in connection with the issuance or sale of the
Bonds by the Company, except such as have been obtained and made under the TVA Act and such
as may be required under state securities laws in connection with qualification of the Bonds
pursuant to Section III (d) of this Agreement.

     (vi) This Agreement has been duly authorized, executed, and delivered by the Company
and is enforceable, subject, as to enforcement, (1) to fraudulent transfer, moratorium, and
other laws of general applicability relating to or affecting creditors’ rights, (2) to
general equity principles, and (3) to rights to indemnification and contributions which may
be limited by applicable law or equitable principles.

     (vii) The execution, delivery, and performance of this Agreement and the issuance and
sale of the Bonds and compliance with the terms and provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or constitute a default under,
the TVA Act, any statute, any rule, regulation, or order of any governmental agency or body
or any court having jurisdiction over the Company or any properties held by the Company, or
any agreement or instrument to which the Company is a party or by which the Company is bound
or to which any of the properties held by the Company is subject, or the regulations of the
Company, and the Company has full power and authority to authorize, issue, and sell the
Bonds as contemplated by this Agreement.

     (viii) When issued, the Bonds will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and will be exempted securities
within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
(other than for the purposes of Section 17A thereof).

     (ix) The priority granted to the United States by 31 U.S.C. § 3713 in the case of the
insolvency of certain persons indebted to the United States does not establish a priority in
favor of the United States with respect to Evidences of Indebtedness (as defined in the
Offering Circular) to the United States over other Evidences of Indebtedness of the Company,
including the Bonds.

5

 

     (x) Such counsel has no reason to believe that the Offering Circular, as of its date
and the date of such opinion, contained any untrue statement of a material fact or omitted
to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; the descriptions in the Offering
Circular of the Bonds, the TVA Act, the Resolutions, statutes, legal and governmental
proceedings, and contracts and other documents are accurate and fairly present the
information set forth therein, it being understood that such counsel need express no opinion
as to (a) the financial statements, schedules, or other financial or statistical data
contained in the Offering Circular and (b) the information set forth in the Offering
Circular under the heading “Tax Matters.”

     (xi) In addition, such counsel may also state in such opinion that its opinions in
paragraphs (ii) and (iii) regarding the force and effect of the Resolutions and the Bonds’
entitlement to the benefits thereof, respectively, are qualified to the extent that the
Resolutions may be affected by the paragraph captioned “TENNESSEE VALLEY AUTHORITY” in Title
IV of the Energy and Water Development Appropriations Act, 1998, Pub. L. No. 105-62, 111
Stat. 1320, 1338 (1997) (such paragraph being hereinafter referred to as the “Appropriations
Act paragraph”) and TVA’s actions taken pursuant thereto, relating to, among other things,
the use of revenues from TVA’s Power Program, as defined in the Basic Resolution, for
“essential stewardship activities,” as such term is used in the Appropriations Act
paragraph. Furthermore, such counsel may state in such opinion that its opinions are based
on facts and laws in existence on the date of such opinion.

     (c) You shall have received a letter dated as of or prior to the Commencement Date from
PricewaterhouseCoopers LLP, independent auditors, or another independent auditor reasonably
satisfactory to the Purchasing Agent, to the effect that:

     (i) they have inquired of Company officials who have responsibility for financial and
accounting matters regarding whether:

     (A) at the date of the latest available balance sheet, there was any decrease
in the total proprietary capital in excess of $100,000,000 or any increase in
short-term indebtedness (excluding issuances of Discount Notes (as defined in the
Offering Circular)) in excess of $100,000,000 or any increase in the principal
amount of long-term debt of (excluding issuances of electronotes® and
adjustments to the principal of inflation-indexed bonds) or any increase (not
including any increase resulting from the issuance of Discount Notes (as defined in
the Offering Circular) or adjustments to the principal of inflation-indexed bonds)
in net current liabilities (current liabilities less current assets) in excess of
$150,000,000 or any decrease in net assets in excess of $100,000,000, as compared
with amounts shown on the balance sheet included in the Offering Circular; or

     (B) at a subsequent specified date not more than five business days prior to
the date of such letter, there was any decrease in the total proprietary capital in
excess of $200,000,000 or any increase in short-term indebtedness

6

 

(excluding issuances of Discount Notes (as defined in the Offering Circular))
in excess of $100,000,000 or any increase in the principal amount of long-term debt
of the Company (excluding issuances of electronotes® and adjustments to
the principal of inflation indexed bonds), as compared with amounts shown on the
balance sheet included in the Offering Circular; or

(C) for the period from the closing date of the income statement included in
the Offering Circular to the closing date of the latest available income statement
there were any decreases, as compared with the corresponding period of the previous
year, in (1) operating revenues in an amount greater than $75 million, or (2)
operating income in an amount greater than $75 million, or (3) net income in an
amount greater than $75 million;

and those Company officials have advised them that there were no such decreases or increases (to
the extent quantifiable), except, in all cases set forth in clauses (A), (B) and (C) above, for
changes, increases, or decreases which the Offering Circular discloses have occurred or may occur
or which are described in such letter; and

     (ii) they have compared the dollar amounts (or percentages derived from such dollar
amounts) and other financial information contained in the Offering Circular (in each case to
the extent that such dollar amounts, percentages, and other financial information are
derived from the general accounting records of the Company subject to the internal controls
of the Company’s accounting system or are derived directly from such records by analysis or
computation) with the results obtained from inquiries, a reading of such general accounting
records and other procedures specified in such letter and have found such dollar amounts,
percentages, and other financial information to be in agreement in all material aspects with
such results, except for material items as otherwise specified in such letter. For purposes
of this provision, no item will be deemed material unless it exceeds 3 percent of the
financial statement classification.

     (d) You shall have received a favorable opinion of Orrick, Herrington & Sutcliffe LLP, counsel
for the Agents, dated as of or prior to the Commencement Date, to the effect that:

     (i) The Company is an instrumentality and agency of the United States of America duly
created and validly existing under the provisions of the TVA Act and under the Constitution
of the United States.

     (ii) The Company has the right and power under the TVA Act and under the Constitution
of the United States to issue the Bonds and to adopt the Resolutions, the Resolutions have
been duly and lawfully adopted by the Company in accordance with the provisions of the TVA
Act and are, except as provided in the second to last paragraph of this Section II(d), in
full force and effect and no other authorization for the adoption of the Resolutions is
required.

     (iii) The Secretary of the Treasury has approved the time of issuance and maximum rate
of interest of the Bonds in compliance with Section 15d of the TVA

7

 

Act; the Bonds have been duly authorized and executed and when the terms of a
particular Bond and of the issuance and sale thereof have been established in accordance
with the Resolutions and delivered against payment as contemplated by this Agreement, such
Bond will have been duly issued and delivered, in each case, in accordance with the
provisions of the TVA Act and the Resolutions, and will constitute a valid and legally
binding obligation of the Company, enforceable in accordance with its terms, subject, as to
enforcement, to fraudulent transfer, moratorium, and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles, payable,
however, solely from the Net Power Proceeds of the Company, as defined and set forth in the
Basic Resolution; and, except as provided in the second to last paragraph of this Section
II(d), such Bond will, when issued, be entitled to the benefits provided by the Resolutions.

     (iv) When issued, the Bonds will be subject to Federal income taxation, but under the
TVA Act the Bonds will be exempt both as to principal and interest from all taxation now or
hereafter imposed by any state of the United States or local taxing authority of any such
state, except estate, inheritance, and gift taxes. The exemption from state and local
taxation may not apply to franchise or other nonproperty taxes in lieu thereof imposed on
corporations or to gain or loss on the sale or exchange of a Bond.

     (v) This Agreement has been duly authorized, executed, and delivered by the Company.

     (vi) When issued, the Bonds will be exempt from the registration requirements of the
Securities Act of 1933, as amended, and will be exempted securities within the meaning of
the Securities Exchange Act of 1934, as amended, and no indenture need be qualified with
respect to the Bonds under the Trust Indenture Act of 1939, as amended.

     (vii) Such counsel shall state that they have examined the statements with respect to
the Bonds and the Resolutions contained in the Offering Circular and, in the opinion of such
counsel, such statements, insofar as they relate to the provisions of statutes or documents
therein described, are true and correct in all material respects.

     In addition, such counsel shall state in such opinion that during the course of the
preparation of the Offering Circular, they reviewed the Offering Circular and participated in
conferences with representatives of the Company and its counsel, at which the contents of the
Offering Circular and related matters were discussed. Although such counsel may state that they are
not passing upon or assuming any responsibility for the accuracy, completeness, or fairness of any
of the statements made in the Offering Circular, on the basis of the information which they gained
in the course of the services referred to above, nothing which has come to their attention in the
course of such review has caused them to believe that the Offering Circular, as of its date and the
date of such opinion, 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. Notwithstanding the foregoing, such counsel may state that they
are not expressing any opinion or belief as to the financial statements, schedules, or other
financial data contained in the Offering Circular.

8

 

     In addition, such counsel may also state in such opinion that its opinions in paragraphs (ii)
and (iii) regarding the force and the effect of the Resolutions and the Bonds’ entitlement to the
benefits thereof, respectively, are qualified to the extent that the Resolutions may be affected by
the Appropriations Act paragraph and the Company’s actions taken pursuant thereto, relating to,
among other things, the use of revenues from the Company’s Power Program, as defined in the Basic
Resolution, for “essential stewardship activities,” as such term is used in the Appropriations Act
paragraph.

     Furthermore, such counsel may state in such opinion that its opinions are based on facts and
laws in existence on the date of such opinion.

     (e) You shall have received a favorable opinion of Orrick, Herrington & Sutcliffe LLP, special
tax counsel for the Company, dated as of or prior to the Commencement Date, confirming their tax
opinion as described in the Offering Circular.

     (f) You shall have received a certificate of the Secretary or an Assistant Secretary of the
Company, dated as of or prior to the Commencement Date, as to the Resolutions authorizing the
issuance and sale of the Bonds and certain related matters.

     The obligation of the Purchasing Agent to purchase Bonds under any Terms Agreement is subject
to the conditions that (i) no litigation or proceeding shall be threatened or pending to restrain
or enjoin the issuance or delivery of the Bonds, or which in any way questions or affects the
validity of the Bonds, and (ii) there shall have been no material adverse change in the financial
condition or results from operations of the Company or in its business prospects from that set
forth in the Offering Circular, each of which conditions shall be met on the corresponding
Settlement Date (as defined in Section IV(b) hereof). Further, if specifically called for by any
Terms Agreement, the Purchasing Agent’s obligations with respect to such Bonds under such Terms
Agreement shall be subject to the satisfaction on the corresponding Settlement Date of the
conditions set forth above in clause (a) as it relates to the officer’s certificate of a Designated
Officer or representative thereof, clause (b) as it relates to the opinion of the Executive Vice
President and General Counsel to the Company or the Assistant General Counsel, Finance, for the
Company, clause (c) as it relates to the letter of the independent auditor, clause (d) as it
relates to the opinion of counsel to the Agents, clause (e) as it relates to the tax opinion of
special counsel to the Company, and clause (f) as it relates to the certificate of the Secretary or
an Assistant Secretary of the Company; provided, however, that each shall be dated as of the
Settlement Date, and to the extent appropriate such opinions, letters, and certificates may
reconfirm matters set forth in prior opinions, letters, and certificates, with such changes as may
be necessary to reflect changes in the financial statements and other information derived from the
accounting records of the Company; provided, further, that to the extent opinions of counsel
referred to in clauses (b) and (d) are required to be delivered, references in such clauses to the
Offering Circular shall be deemed to refer to the Offering Circular and the Pricing Disclosure
Material.

9

 

III. Covenants of the Company

     In further consideration of your agreements herein contained, the Company covenants as
follows:

     (a) To furnish to you, without charge, a copy of (i) the resolutions of the Board of Directors
of the Company authorizing the issuance and sale of the Bonds, certified by the Secretary or an
Assistant Secretary of the Company as having been duly adopted and (ii) as many copies of the
Offering Circular and the Pricing Disclosure Material as you may reasonably request.

     (b) Before amending or supplementing the Offering Circular (other than by means of a Pricing
Supplement), to furnish you a copy of each such proposed amendment or supplement, and to afford you
a reasonable opportunity to comment on any such proposed amendment or supplement.

     (c) To furnish you copies of each amendment to the Offering Circular and the Pricing
Disclosure Material in such quantities as you may from time to time reasonably request; and if at
any time when an Offering Circular or Pricing Disclosure Material is being used in connection with
the initial offering of any of the Bonds, any event shall have occurred as a result of which the
Offering Circular or the Pricing Disclosure Material would either include any untrue statement of a
material fact or omit 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, the Company will (A)
notify you to suspend the solicitation of offers to purchase Bonds and if notified by the Company,
you shall forthwith suspend such solicitation and cease using the Offering Circular or the Pricing
Disclosure Material, as applicable, as then amended or supplemented, and (B) if the Company
notifies you that it would like you to resume the solicitation of offers to purchase, promptly
prepare an amendment or supplement to the Offering Circular or the Pricing Disclosure Material
which will correct such statement or omission, and furnish you copies of any such amendment or
supplement in such quantities as you may reasonably request.

     (d) To furnish the necessary information, execute all proper applications and other requisite
forms, and otherwise cooperate in qualifying the Bonds under the securities or Blue Sky laws of
such states as may be designated by the Purchasing Agent and in determining their eligibility for
investment; provided, however, the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in connection with any such
qualifications. The Company shall cooperate in continuing such qualifications in effect so long as
required for the distribution of the Bonds.

     (e) Prior to the termination of this Agreement pursuant to Article VII hereof, to furnish to
the Agents, as soon as practicable after the end of each fiscal year, a copy of its annual
financial statements for such year, and to furnish to the Purchasing Agent, from time to time, such
other information concerning the Company as the Purchasing Agent may reasonably request.

     (f) (i) If the Company and the Purchasing Agent agree to list Bonds on any stock exchange (a
“Stock Exchange”), to use its reasonable efforts, in cooperation with the Purchasing

10

 

Agent, to cause such Bonds to be accepted for listing on any such Stock Exchange, in each case
as the Company and the Purchasing Agent shall deem to be appropriate. In connection with any such
agreement to list Bonds on a Stock Exchange, the Company shall use its reasonable efforts to obtain
such listing promptly and shall furnish any and all documents, instruments, information, and
undertakings that may be reasonably necessary or advisable in order to obtain and maintain the
listing.

     (ii) So long as any Bond remains outstanding and listed on a Stock Exchange, if the
Offering Circular or the Pricing Disclosure Material, in each case as then amended or
supplemented, would include any untrue statement of a material fact or omit to state any
material fact relating to any matter described in the Offering Circular or the Pricing
Disclosure Material the inclusion of which was required by the listing rules and regulations
of such Stock Exchange on which any Bonds are listed (the “Listing Rules”) or by such Stock
Exchange, to provide to the Purchasing Agent information about the change or matter and to
amend or supplement the Offering Circular or the Pricing Disclosure Material in order to
comply with the Listing Rules or as otherwise requested by the Stock Exchange.

     (iii) To use reasonable efforts to comply with any undertakings given by it from time to
time to any Stock Exchange on which any Bonds are listed.

     (g) To notify the Purchasing Agent promptly in writing in the event that the Company does not
have a security listed on the New York Stock Exchange.

     (h) To notify the Agents immediately, and confirm such notice in writing, of any change in the
rating assigned by any nationally recognized statistical rating organization, as such term is
defined in Rule 436(g)(2) under the Securities Act, to the program under which the Bonds are issued
(the “Program”) or any debt securities (including the Bonds) of the Company, or the public
announcement by any nationally recognized statistical rating organization that it has under
surveillance or review, with possible negative implications, its rating of the Program or any such
debt securities, or the withdrawal by any nationally recognized statistical rating organization of
its rating of the Program or any such debt securities.

     (i) Semiannually as soon as practicable after March 31 and September 30 of each year that this
Agreement remains in effect (each, a “Bring Down Date”), to deliver, or cause to be delivered, to
each of the Agents (i) a certificate of the Company, dated as of the applicable Bring Down Date, to
the effect that the representations and warranties of the Company in this Agreement are true and
correct, (ii) the opinion of the General Counsel or Assistant General Counsel, Finance, of the
Company, dated as of the applicable Bring Down Date, to the effect set forth in Section II(b), and
(iii) the letter of the independent accountant, dated as of the applicable Bring Down Date, to the
effect set forth in Section II(c), provided, however, that (a) the obligation to deliver the letter
of the independent accountant is contingent upon each Agent’s providing the Company with a
representation letter that is satisfactory to the independent accountant and (b) to the extent
appropriate, such opinion, letters, and certificates may reconfirm matters set forth in prior
opinions, letters, and certificates, with such changes as may be necessary to reflect changes in
the financial statements and other information derived from the accounting records of the Company.

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IV. Offering by Agents

     (a) Solicitations as Agent. You hereby agree, as Agents hereunder, to use your
reasonable best efforts to solicit and receive offers to purchase Bonds upon the terms and
conditions set forth herein and in the Offering Circular and the Pricing Disclosure Material. For
the purpose of such solicitation you will use the Offering Circular which has been most recently
distributed to you by the Company or any entity acting on behalf of the Company and the Pricing
Disclosure Material, and you will solicit offers to purchase only as permitted or contemplated
thereby and herein and only as permitted by the applicable securities laws or regulations of any
jurisdiction. The Company reserves the right, in its sole discretion, to suspend solicitation of
offers to purchase Bonds commencing at any time for any period of time or permanently. Upon
receipt of instructions (which may be given orally) from the Company, you will as soon as
practicable, but in any event no later than one business day after receipt of such instructions,
suspend solicitation of offers to purchase until such time as the Company has advised you that such
solicitation may be resumed.

     You are authorized to solicit orders for the Bonds only in denominations of $1,000 or more (in
multiples of $1,000). You are not authorized to appoint subagents or to engage the service of any
other broker or dealer in connection with the offer or sale of the Bonds without the consent of the
Company; provided, however, the Purchasing Agent may engage the service of any other broker or
dealer without the consent of the Company. The Purchasing Agent will, however, on a periodic
basis, provide the Company with a listing of those brokers or dealers so engaged. In addition,
unless otherwise instructed by the Company, the Purchasing Agent shall communicate to the Company,
orally or in writing, each offer to purchase Bonds. The Company shall have the sole right to
accept offers to purchase Bonds offered through the Purchasing Agent and may reject any proposed
purchase of Bonds as a whole or in part. Moreover, the Company may not accept orders to purchase
Bonds (or any payment for Bonds) which (i) bear interest at a rate above the maximum rate of
interest approved by the Secretary of the Treasury or permitted in the applicable authorizing
resolutions or (ii) exceed the principal amount of Bonds permitted to be issued during any period
under the applicable authorizing resolutions. You shall have the right, in your discretion
reasonably exercised, to reject any offer to purchase Bonds, as a whole or in part, and any such
rejection shall not be deemed a breach of your agreements contained herein.

     (b) Purchases as Principal. Each sale of Bonds to the Purchasing Agent as principal
for resale to others shall be made in accordance with the terms of this Agreement and a separate
agreement, substantially in the form of Exhibit C hereto (or such other form as the Purchasing
Agent and the Company shall agree to), which will provide for the sale of such Bonds to, and the
purchase and reoffering thereof by, the Purchasing Agent. Each such separate agreement (which may
be an oral agreement and confirmed in writing as described below between the Purchasing Agent and
the Company) is herein referred to as a “Terms Agreement.” A Terms Agreement may also specify
certain provisions relating to the reoffering of such Bonds by the Purchasing Agent. The Terms
Agreement shall not be effective, and the Agents agree that no confirmation of a sale of Bonds
shall be delivered to a prospective purchaser, until the Company has made the Pricing Disclosure
Material available to the Agents. The Purchasing Agent’s agreement to purchase Bonds pursuant to
any Terms Agreement shall be deemed to have been made on the

12

 

basis of the representations, warranties, and agreements of the Company herein contained and
shall be subject to the terms and conditions herein set forth. Except pursuant to a Terms
Agreement, under no circumstances shall the Purchasing Agent be obligated to purchase any Bonds for
its own account. Each Terms Agreement, whether oral (and confirmed in writing which may be by
facsimile transmission) or in writing, shall describe the Bonds to be purchased pursuant thereto by
the Purchasing Agent, and may specify, among other things, the principal amount of Bonds to be
purchased, the interest rate or formula and maturity date or dates of such Bonds, the interest
payment dates, if any, the price to be paid to the Company for such Bonds, the initial public
offering price at which the Bonds are proposed to be reoffered, and the time and place of delivery
of and payment for such Bonds (the “Settlement Date”), whether the Bonds provide for a survivor’s
option or for optional redemption by the Company and on what terms and conditions, and any other
relevant terms.

     In connection with the resale of the Bonds purchased by the Purchasing Agent on behalf of the
Agents, without the consent of the Company, you are not authorized to appoint subagents or to
engage the service of any other broker or dealer; provided, however, the Purchasing Agent may
engage the service of any other broker or dealer without the consent of the Company. The
Purchasing Agent will, however, on a periodic basis, provide the Company with a listing of those
brokers or dealers so engaged. Unless authorized by the Purchasing Agent in each instance, each
Agent agrees not to purchase and sell Bonds during the initial public offering for which an order
from a client has not been received.

     The Company agrees to pay the Purchasing Agent, as consideration for soliciting offers to
purchase Bonds, a concession in the form of a discount equal to the percentages of initial offering
price of each Bond sold as set forth in Exhibit A hereto or such other discount agreed to by the
Company and the Purchasing Agent (the “Concession”). The Purchasing Agent and the other Agents
will share the Concession in such proportions as they may agree.

     (c) Public Offering Price. Unless otherwise authorized by the Company, all Bonds
shall be sold to the public at a purchase price not to exceed 100 percent of the principal amount
thereof, plus accrued interest, if any, with the exception of Bonds that bear a zero interest rate
and are issued at a substantial discount from the principal amount payable at the Maturity Date (a
“Zero-Coupon Bond”). Zero-Coupon Bonds shall be sold to the public at a purchase price no greater
than an amount, expressed as a percentage of the principal face amount of such Bonds, equal to (i)
the net proceeds to the Company on the sale of such Bonds, plus (ii) the Concession, plus (iii)
accrued interest, if any. Such purchase price shall be set forth in the confirmation statement of
the Selling Group (as defined in Exhibit B) member responsible for such sale, and delivered to the
purchaser along with a copy of the Offering Circular (if not previously delivered).

     (d) Procedures. Procedural details relating to the issue and delivery of, and the
solicitation of offers to purchase and purchase of and payment for, the Bonds, pursuant to Section
IV(a) and IV(b) of this Agreement, are set forth in the Administrative Procedures attached hereto
as Exhibit B, as amended from time to time (the “Procedures”). The provisions of the Procedures
shall apply to all transactions contemplated hereunder. You and the Company each agree to perform
the respective duties and obligations specifically provided to be performed

13

 

in the Procedures. The Procedures may only be amended by written agreement of the Company and
the Purchasing Agent, and a copy of any such amendment shall be provided promptly to JPMorgan Chase
Bank, N.A., or any successor paying agent.

     (e) Offering Circular Delivery. You shall furnish to each person to whom you sell or
deliver Bonds a copy of the Offering Circular and the Pricing Disclosure Material. You are not
authorized to give any information or to make any representation not contained in the Offering
Circular, the Pricing Disclosure Material, or the documents incorporated by reference or
specifically referred to in either thereof in connection with the offer and sale of the Bonds. You
will not use any additional marketing materials in connection with any offer or sale of the Bonds
other than the brochure prepared by the Company and previously furnished to the Purchasing Agent.

     (f) Compliance With Laws. The Agents are aware that no action has been or will be
taken by the Company that would permit a public offering of the Bonds or possession or distribution
of the Offering Circular, the Pricing Disclosure Material or any other material relating to the
Bonds in any country or jurisdiction where action for that purpose is required (other than states
of the United States in connection with securities or Blue Sky laws of such states). Accordingly,
the Agents agree that they will observe all applicable laws and regulations in each jurisdiction in
or from which it may directly or indirectly acquire, offer, sell, or deliver Bonds or have in their
possession or distribute the Offering Circular, the Pricing Disclosure Material or any other
offering material relating to the Bonds, and the Agents will obtain any consent, approval or
permission required for the purchase, offer, or sale by them of Bonds under the laws and
regulations in force in any such jurisdiction to which they are subject or in which they make such
purchase, offer, or sale; provided, however, that the obligations of the Agents pursuant to this
Section IV(f) does not apply to any website of the Company with respect to the Bonds.

V. Representations and Warranties of the Company

     The Company represents and warrants to and agrees with the Agents that as of the date hereof,
as of each date on which the Company accepts an offer to purchase Bonds pursuant to a Terms
Agreement, as of each Settlement Date, and as of each date the Offering Circular is amended or
supplemented:

     (a) The Offering Circular does not and the Pricing Disclosure Material will not include any
untrue statement of a material fact, and the Offering Circular does not and the Pricing Disclosure
Material will not omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The preceding sentence does
not apply to statements in the Offering Circular or the Pricing Disclosure Material based upon
written information furnished to the Company by the Purchasing Agent or by any Agent through the
Purchasing Agent specifically for use therein.

     (b) The Board has duly adopted the Resolutions, copies of which have been or will be provided
to the Agents, providing for the issuance and sale of the Bonds thereunder.

14

 

     (c) The Secretary of the Treasury has approved the time of issuance of and the maximum rate of
interest to be borne by the Bonds, in compliance with Section 15d of the TVA Act, the rate of
interest on the Bonds will not exceed the maximum rate of interest approved by the Secretary of the
Treasury, and no other approval, authorization, consent, or order of or filing with any public
board or body (other than in connection with qualifying the Bonds for offering and sale under the
securities or Blue Sky laws of any jurisdiction) is required for or in connection with the issuance
and sale of the Bonds as contemplated hereby.

     (d) The Bonds have been duly authorized and, when issued and delivered pursuant to the
Resolutions and this Agreement, will be duly issued and delivered and will constitute valid and
legally binding obligations of the Company enforceable in accordance with their terms, subject, as
to enforcement, to fraudulent transfer, moratorium, and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles, payable, however,
solely from the Net Power Proceeds of the Company, as defined and set forth in the Basic
Resolution.

     (e) When issued and delivered pursuant to the Resolutions and this Agreement, the Bonds will
conform, in all material respects, to the descriptions thereof contained in the Offering Circular
and the Pricing Disclosure Material.

     (f) The Company is not, in any material respect, in violation of the TVA Act or in default in
the performance or observance of any obligation, agreement, covenant, or condition contained in any
material contract or lease to which the Company is a party or by which it is bound, and the
execution and delivery of this Agreement and the issuance and delivery of the Bonds, the incurrence
of the obligations herein set forth and the consummation of the transactions herein contemplated
will not conflict with, or constitute a breach of or default under, the TVA Act and the regulations
of the Company thereunder, any material contract or lease to which the Company is a party or by
which it is bound, or any law, administrative regulation, or court decree to which it is subject.

     (g) Except as may be described in the Offering Circular or the Pricing Disclosure Material,
since November 18, 2005, there has not been any material adverse change in the financial condition
or the results of operations of the Company or in its business prospects.

     (h) Except as disclosed in the Offering Circular or the Pricing Disclosure Material, there are
no actions, suits, or proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its property, at law or in equity or before or by any Federal or state
commission, regulatory body, or administrative agency or other governmental body, in which a
decision might have a material adverse effect on the business or property of the Company or which
would in any way interfere with the issuance and delivery of the Bonds or the performance by the
Company of its obligations thereunder or under the Resolutions.

     (i) This Agreement has been duly authorized, executed, and delivered by the Company.

     (j) The program under which the electronotes® are issued as well as the Bonds are
rated “Aaa” by Moody’s Investor Services, Inc. and “AAA” by Standard & Poor’s Rating Services or
such other rating as to which the Company shall have most recently notified the Agents pursuant to
Section III(h) hereof.

15

 

     (k) The Company has not distributed and will not distribute any offering material in
connection with the offering and sale of the Bonds other than the Offering Circular, the Pricing
Disclosure Material, if any, the Pricing Supplement, if any, the Permitted Free Writing, if any,
and any amendment or supplement to any thereof.

VI. Indemnification and Contribution

     (a) The Company will indemnify and hold harmless each Agent against any losses, claims,
damages, or liabilities, joint or several, to which the Agent may become subject, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) (i) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact contained in the
Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, the Permitted Free
Writing or any amendment or supplement to any thereof or (ii) arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading, and will
reimburse the Agent for any legal or other expenses reasonably incurred by the Agent in connection
with investigating or defending any such loss, claim, damage, liability, or action as such expenses
are incurred; provided, however, that the foregoing indemnity agreement with respect to the
Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, the Permitted Free
Writing and any amendment or supplement to any thereof shall not inure to the benefit of any Agent
from whom the person asserting any such losses, claims, damages, or liabilities purchased Bonds, or
any person controlling such Agent, if (i) TVA or another entity acting on TVA’s behalf furnished a
copy of the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, or the
Permitted Free Writing (each as then amended and supplemented) to such Agent prior to the mailing
or delivery by such Agent of written confirmation of the sale of the Bonds, (ii) a copy of such
Offering Circular, Pricing Disclosure Material, Pricing Supplement, or Permitted Free Writing was
not sent or given by or on behalf of such Agent to such person at or prior to delivery of the
written confirmation of the sale of the Bonds to such person, and (iii) the Offering Circular, the
Pricing Disclosure Material, the Pricing Supplement, or the Permitted Free Writing would have cured
the defect giving rise to such losses, claims, damages, or liabilities; and provided, further, that
the Company will not be liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from the Offering Circular, the Pricing Disclosure Material, the
Pricing Supplement, or the Permitted Free Writing (or any amendment or supplements to any thereof)
included or omitted in reliance upon and in conformity with written information furnished to the
Company by any Agent relating to such Agent specifically for use therein and will reimburse any
legal or other expenses reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability, or action as such expenses are incurred.

     (b) Each Agent will indemnify and hold harmless the Company against any losses, claims,
damages, or liabilities to which the Company may become subject, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the Offering Circular, the
Pricing Disclosure Material, the Pricing Supplement or the Permitted Free Writing or any amendment
or supplement to any thereof or the omission or the alleged omission to state

16

 

therein a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished to the Company by
the Agent relating to such Agent specifically for use therein.

     (c) Promptly after receipt by an indemnified party under this Section VI of notice of the
commencement of any action, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under Section VI(a) or Section VI(b) above, notify the
indemnifying party of the commencement thereof. Failure of an indemnified party to provide such
notice within a reasonable time shall not relieve the indemnifying party from any liability under
Section VI(a) or Section VI(b) above to the extent it is not materially prejudiced as a result
thereof, and in any event, the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party otherwise than under Section VI(a) or
Section VI(b) above. In case any proceeding (including any governmental investigation) shall be
instituted involving any person in respect of which indemnity may be sought pursuant to Section
VI(a) or Section VI(b) above and such person timely notifies the indemnifying party of the
institution thereof, the indemnifying party shall be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party notified, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain or provide its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is understood that
the indemnifying party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties, including all indemnified Agents, and that
all such fees and expenses shall be reimbursed as they are incurred.

     (d) If the indemnification provided for in this Section VI is unavailable in whole or in part
(other than for failure to provide timely notice) to hold harmless an indemnified party under
Section VI(a) or Section VI(b) above, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims, damages, or
liabilities referred to in Section VI(a) or Section VI(b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one hand and the Agent
on the other from the particular installment or installments of Bonds associated with such
indemnification 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
Agent on the other in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Agent on the other shall be
deemed to be in the same proportion as the total net proceeds from the particular installment or
installments

17

 

of Bonds associated with such indemnification (before deducting expenses) received by the
Company bear to the total commissions or discounts received by the Agent in respect thereof. The
relative fault shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the Agent and the parties’ relative intent,
knowledge, access to information, and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses, claims, damages, or
liabilities referred to in the first sentence of this Section VI(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this Section VI(d).
Notwithstanding the provisions of this Section VI(d), no Agent shall be required to contribute any
amount in excess of the amount by which the total price at which such installment or installments
of Bonds sold by it were offered to the public exceeds the amount of any damages which such Agent
has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission or other conduct described in Section VI(b) above. No person guilty of
fraudulent misrepresentation shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Agent’s obligation in this Section VI(d) to contribute is
several in proportion to its respective purchase obligation and not joint. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.

     (e) The obligations of any indemnifying party under this Section VI shall be in addition to
any liability which such party may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, which controls such indemnified party within the meaning of the
Securities Act of 1933, as amended, and to each employee, officer, and director of the indemnified
party.

VII. Termination; Survival of Certain Representations and Obligations

     This Agreement may be terminated at any time by the Company or the Purchasing Agent upon the
giving of five business days’ written notice of such termination to the nonterminating party. In
the event of any such termination, no party shall have any liability to any other party hereto,
except for obligations hereunder which expressly survive the termination of this Agreement and
except that, if the time of termination is subsequent to the execution of a Terms Agreement, but
prior to the Settlement Date specified therein, the Company shall have the obligation to deliver
such Bond or Bonds subject to such Terms Agreement.

     Subsequent to the execution of a Terms Agreement, (i) the Purchasing Agent may terminate such
Terms Agreement, and (ii), if the Purchasing Agent does not elect to terminate such Terms Agreement
pursuant to clause (i) of this sentence, upon the request of an Agent with respect to Bonds to be
purchased through the Purchasing Agent by such Agent, the Purchasing Agent shall terminate such
Terms Agreement to the extent of the Bonds that were to be purchased through the Purchasing Agent
by such requesting Agent, in each case immediately

18

 

upon notice to the Company, at any time prior to the Settlement Date relating thereto, if
there shall have occurred any:

     (A) change, or any development involving a prospective change, which, in the
judgment of the Purchasing Agent or such requesting Agent, materially impairs the
investment quality of the Bonds, including, but, not limited to, any change in or
affecting particularly the business or properties of the Company; or

     (B) suspension or limitation of trading in securities generally on the New York
Stock Exchange, or any setting of minimum prices for trading on such exchange, or
any suspension of trading of any securities of the Company in the Federal Reserve
book-entry system; or

     (C) banking moratorium declared by Federal or New York authorities; or

     (D) outbreak or escalation of hostilities in which the United States is
involved, any declaration of war by Congress, or any other substantial national or
international calamity or emergency if, in the judgment of the Purchasing Agent or
such requesting Agent, the effect of any such outbreak, escalation, declaration,
calamity, or emergency makes it impractical to proceed with completion of the sale
of and payment for the Bonds.

     If this Agreement is terminated, the last sentence of the second paragraph of Section IV(a),
Section III(c) and (d), Section VI, and the first item of Section XII shall survive; provided,
that, if the time of termination is subsequent to the execution of a Terms Agreement but prior to
the Settlement Date specified therein, the provisions of Section III(a) and (b), and Section IV(b),
(d), (e), and (f) shall also survive until such Settlement Date.

VIII. Notices

     Except as otherwise specifically provided herein, all statements, requests, notices, advices,
and other communications hereunder shall be in writing, or by telephone if promptly confirmed in
writing, and if to you shall be sufficient in all respects if mailed, delivered, or sent by
facsimile transmission (confirmed in writing) to you at your address or facsimile number set forth
below by your signature and if to the Company shall be sufficient in all respects if mailed,
delivered, or sent by facsimile transmission (confirmed in writing) to the Company at 400 West
Summit Hill Drive, Knoxville, Tennessee 37902, Attention: Senior Vice President,
Treasurer/Investor Relations, facsimile number (865) 632-6673. All such notices shall be effective
on receipt. Notwithstanding the foregoing, the Company may furnish copies of proposed amendments
or supplements to the Offering Circular as required by Section III(b) of this Agreement by sending
such amendments or supplements to you at the e-mail address set forth below your signature.

19

 

IX. Binding Effect of Agreement

     This Agreement shall be binding upon you and the Company, and inure solely to the benefit of
you and the Company and any other person expressly entitled to indemnification hereunder and the
respective personal representatives, successors, and assigns of each, and no other person shall
acquire or have any rights under or by virtue of this Agreement.

X. Governing Law

     This Agreement shall be governed by and construed in accordance with the substantive laws of
the State of New York.

XI. Power of Attorney

     If this Agreement is executed by or on behalf of any party, such person hereby states that at
the time of the execution of this Agreement he has no notice of revocation of the power of attorney
by which he has executed this Agreement as such attorney.

XII. Expenses

     The Company will pay the expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation and filing of the Offering Circular, the Pricing
Disclosure Material, the Pricing Supplement, and any Permitted Free Writing and any amendment or
supplement to any thereof; (ii) the preparation, issuance, and delivery of the Bonds; (iii) the
fees and disbursements of the Company’s counsel and auditors and of any paying or other agents
appointed by the Company; (iv) the printing and delivery to you in quantities as hereinabove stated
of copies of the Offering Circular, the Pricing Disclosure Material, the Pricing Supplement, and
any Permitted Free Writing and any amendment or supplement to any thereof; (v) the reasonable fees
and disbursements of Orrick, Herrington & Sutcliffe LLP, counsel for the Agents (including “Blue
Sky” fees and disbursements, if any); (vi) if the Company lists Bonds on a securities exchange, the
costs and fees of such listing; and (vii) any fees charged by rating agencies for the rating of the
electronotes® program or the Bonds.

XIII. Counterparts

     This Agreement may be executed by each of the parties hereto in any number of counterparts,
and by each of the parties hereto on separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.

XIV. Additional Definition

     As used herein, “business day” means any day other than a Saturday, Sunday, or any day on
which banking institutions are authorized or required by law or executive order to be closed in the
City of New York.

20

 

XV. Officials Not to Benefit

     No member of or delegate to Congress or Resident Commissioner and no officer, employee,
special Government employee, or agent of the Company shall be admitted to any share or part of this
Agreement or to any benefit that may arise therefrom, but this provision shall not be construed to
extend to a corporation contracting for its general benefit; nor shall any of the Agents offer or
give, directly or indirectly, to any officer, employee, special Government employee, or agent of
the Company, any gift, gratuity, favor, entertainment, loan, or any other thing of some monetary
value, except as provided in 5 C.F.R. part 2635.

XVI. Miscellaneous

     You agree to comply, to the extent applicable to you, with the equal opportunity clause set
forth in Executive Order No. 11246 and with 41 C.F.R. part 60-1. All applicable clauses referred
to in the foregoing order and regulations are incorporated herein by reference as if fully set
forth.

XVII. No Fiduciary Duty

     The Company and each Selling Agent acknowledge and agree that, except to the extent expressly
set forth herein, each Selling Agent is acting solely in the capacity of an arm’s length
contractual counterparty to the Company with respect to the offering of the Bonds contemplated by
this Selling Agent Agreement (including in connection with determining the terms of the offerings)
and not as a fiduciary to the Company or any other person. Additionally, each Selling Agent is not
advising the Company or any other person as to any legal, tax, investment, accounting, or
regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning
such matters and shall be responsible for making its own independent investigation and appraisal of
the transactions contemplated hereby, and the Selling Agents shall have no responsibility or
liability to the Company with respect thereto. Any review by any Selling Agent of the Company, the
transactions contemplated hereby or other matters relating to such transactions will be performed
solely for the benefit of such Selling Agent and shall not be on behalf of the Company or any other
person.

21

 

     If the foregoing is in accordance with your understanding, please sign and return to us a
counterpart hereof, and upon acceptance hereof by you, this letter and such acceptance hereof shall
constitute a binding agreement between the Company and you.

	 	 	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TENNESSEE VALLEY AUTHORITY	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ John M. Hoskins	 	 
	 

	 	 	 	Name:
	 	John M. Hoskins	 	 
	 

	 	 	 	Title:
	 	Senior Vice President, 
Treasurer/Investor Relations	 	 

 

 

Confirmed and accepted

as of the date first above written:

A.G. EDWARDS & SONS, INC.

	 	 	 
	 
	 	 
	By:

	 	/s/ Joyce Opinsky
	 

	 	Name: Joyce Opinsky
	 

	 	Title:   Vice President

One North Jefferson

St. Louis, Missouri 63103

Attention: Joyce Opinsky

Facsimile: 314-955-7341

E-Mail: joyce.opinsky@agedwards.com

 

 

CITIGROUP GLOBAL MARKETS INC.

	 	 	 
	By:

	 	/s/ Jack D. McSpadden, Jr.
	 

	 	Name: Jack D. McSpadden, Jr.
	 

	 	Title:   Managing Director

388 Greenwich Street

New York, New York 10013

Facsimile: 646-291-5209

E-Mail: jack.d.mcspadden@citigroup.com

 

 

EDWARD D. JONES & CO., L.P.

	 	 	 
	By:

	 	/s/ David G. Otto
	 

	 	Name: David G. Otto
	 

	 	Title:   Principal, Government & Mortgage-backed Securities

12555 Manchester Road

St. Louis, Missouri 63131

Attention: David G. Otto

Facsimile: 314-515-5214

E-Mail: dg.otto@edwardjones.com

 

 

FIRST TENNESSEE BANK NATIONAL ASSOCIATION

	 	 	 
	By:

	 	/s/ Joel Ross
	 

	 	Name: Joel Ross
	 

	 	Title:   SVP

845 Crossover Lane, Suite 150

Memphis, Tennessee 38117

Attention: Stephen Valadie

Facsimile: 901-435-8990

E-Mail: steve.valadie@ftnfinancial.com.

 

 

J.J.B. HILLIARD, W.L. LYONS, INC.

	 	 	 
	By:

	 	/s/ Donald Merrifield
	 

	 	Name: Donald Merrifield
	 

	 	Title:   Senior Vice President

Hilliard Lyons Center

5th Floor

P.O. Box 32760

Louisville, Kentucky 40232

Attention: Don Merrifield

Facsimile: 502-588-1215

E-Mail: dmerrifield@hilliard.com

 

 

LASALLE FINANCIAL SERVICES, INC.

	 	 	 
	By:

	 	/s/ Melissa Toth
	 

	 	Name: Melissa Toth

327 Plaza Real, Suite 225

Boca Raton, Florida 33432

Facsimile: 561-361-1243

-2-

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

	 	 	 
	By:

	 	/s/ Brant Meleski
	 

	 	Name: Brant Meleski
	 

	 	Title:   Director

4 World Financial Center, Floor 26

New York, New York 10080

Attention: Brant Meleski

Facsimile: 212-449-7938

E-Mail: brant_meleski@ml.com

 

 

MORGAN STANLEY & CO. INCORPORATED

By: /s/ Michael Fusco

Second Floor

1585 Broadway

New York, New York 10036

Attention: Debt Syndicate Department

Facsimile: 212-507-2404

 

 

WACHOVIA SECURITIES, LLC

	 	 	 
	By:

	 	/s/ George Curci
	 

	 	Name: George Curci
	 

	 	Title:   Senior Vice President

Wachovia Securities, LLC

901 East Byrd Street

3rd Floor

Richmond, VA 23219

Attention: George Curci

Facsimile: 804-868-2298

E-Mail: george.curci@wachoviasec.com

 

 

EXHIBIT A

Power Bonds

TENNESSEE VALLEY AUTHORITY

DEALER AGENT PROGRAM

Unless agreed to otherwise by the Company and the Purchasing Agent the following Concessions are
payable as a percentage of the initial offering price to public of each Bond sold to or through the
Purchasing Agent.

	 	 	 	 	 
	1 year
	 	 	0.200	%
	2 years
	 	 	0.400	%
	3 years
	 	 	0.625	%
	4 years
	 	 	1.000	%
	5 years
	 	 	1.000	%
	7 years
	 	 	1.250	%
	10 years
	 	 	1.500	%
	13 years
	 	 	2.000	%
	15 years
	 	 	2.000	%
	more than 15 years
	 	 	2.000	%

EXHIBIT A-1

 

EXHIBIT B

TENNESSEE VALLEY AUTHORITY

electronotes®

$3,000,000,000

MAXIMUM AGGREGATE PRINCIPAL AMOUNT OUTSTANDING

TENNESSEE VALLEY AUTHORITY POWER BONDS WITH MATURITIES OF ONE

YEAR TO THIRTY YEARS FROM DATE OF ISSUE

ADMINISTRATIVE PROCEDURES

     Power Bonds With Maturities of One Year to Thirty Years from Date of Issue (the “Bonds”) are
offered from time to time by the Tennessee Valley Authority (the “Company”). The Bonds will be
offered by LaSalle Financial Services, Inc. (the “Purchasing Agent”), and A.G. Edwards & Sons,
Inc., Citigroup Global Markets Inc., Edward D. Jones & Co., L.P., First Tennessee Bank National
Association, J.J.B. Hilliard, W.L. Lyons, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. Incorporated, and Wachovia Securities, LLC (collectively, the “Agents”)
pursuant to a Selling Agent Agreement among the Company and the Agents dated as of June 1, 2006 (as
may be amended from time to time, the “Selling Agent Agreement”), and if the Bonds are to be
purchased by the Purchasing Agent as principal for resale to others, one or more terms agreements
substantially in the form attached to the Selling Agent Agreement as Exhibit C (each a “Terms
Agreement”). Pursuant to the Selling Agent Agreement, the Agents have agreed to use their
reasonable best efforts to solicit offers to purchase Bonds. Any Bonds purchased by the Purchasing
Agent pursuant to a Terms Agreement will be resold by the Purchasing Agent (and by any Agent that
purchases them from the Purchasing Agent) to (i) customers of the Agents or (ii) selected
broker-dealers (the “Selling Group”) for distribution to their customers pursuant to a Master
Selected Dealers Agreement (a “Dealers Agreement”) attached hereto as Exhibit E. The Bonds have
not been, and will not be, registered with the Securities and Exchange Commission (the
“Commission”). JPMorgan Chase Bank, N.A., will act as paying agent (the “Paying Agent”) under an
Issuing and Paying Agency Agreement, dated as of April 12, 2001, as amended on November 14, 2002,
and as of June 1, 2006, between the Company and the Paying Agent (as hereafter amended or
supplemented from time to time, the “Paying Agency Agreement”) covering the Bonds.

     The Bonds will be issued in book-entry form (each, a “Book-Entry Note”) and represented by a
fully registered master global note certificate without coupons (a “Master Note”) held by the
Paying Agent, as agent for The Depository Trust Company (“DTC”) and

EXHIBIT B-1

 

recorded in the book-entry system maintained by DTC1. Each Book-Entry Note will
have the annual interest rate (which will not exceed the maximum rate of interest approved by the
Secretary of the Treasury (the “Maximum Rate of Interest”)), maturity, and other terms set forth in
the relevant Pricing Supplement or Permitted Free Writing (each as defined in the Selling Agent
Agreement). Owners of beneficial interests in a Book-Entry Note will be entitled to physical
delivery of Bonds issued in certificated form equal in principal amount to their respective
beneficial interests only upon certain limited circumstances described in the Offering Circular.
Administrative procedures and specific terms of the offering are explained below. Administrative
responsibilities, accountable document control, and record keeping responsibilities will be handled
by the Company or by an agent of the Company.

     Book-Entry Notes will be issued in accordance with the administrative procedures set forth
herein. To the extent the procedures set forth below conflict with or omit certain of the
provisions of the Bonds, the Resolutions, the Selling Agent Agreement, or the Offering Circular,
the relevant provisions of the Bonds, the Resolutions, the Selling Agent Agreement, and the
Offering Circular shall control. Capitalized terms used herein that are not otherwise defined
shall have the meanings ascribed thereto in the Selling Agent Agreement.

Administrative Procedures for Bonds

     In connection with the qualification of Bonds for eligibility in the book-entry system
maintained by DTC, the Paying Agent will perform the custodial, document control, and
administrative functions described below, in accordance with its obligations under a Letter of
Representations from the Company and the Paying Agent to DTC, dated April 12, 2001, and a
Medium-Term Note Certificate Agreement between the Paying Agent and DTC (the “Certificate
Agreement”), dated December 2, 1988, and its obligations as a participant in DTC, including DTC’s
Same-Day Funds Settlement System (“SDFS”). The procedures set forth below apply only to Bonds that
are held in the book-entry system maintained by DTC and may be modified in compliance with DTC’s
then applicable procedures and upon agreement by the Company and the Purchasing Agent. The Paying
Agent will be promptly notified of any modifications to the procedures set forth below.

	 	 	 
	Maturities:

	 	Each Book-Entry Note will mature on a date (the “Maturity Date”) one year
to thirty years from the date of issuance by the Company of such Book-Entry
Note. Book-Entry Notes may be issued with any maturity selected by the
Company. “Maturity” when used with respect to any Book-Entry Note means
the date on which the outstanding principal amount of such Book-Entry

 

			
	1	 	The original master note was executed and
authenticated by TVA as of April 12, 2001, a second master note was executed
and authenticated by TVA as of November 14, 2002, and a third master note was
executed and authenticated by TVA as of June 1, 2006. Upon repayment in full
of all amounts due on the electronotes® issued prior to the
date hereof and evidenced by the original master note or the second master
note, such master note will be cancelled and returned to the Company or
disposed of in accordance with the Paying Agent’s customary procedures.
All electronotes® hereinafter issued will be represented by
the third master note. Notwithstanding anything herein to the contrary, the
principal amount of electronotes® outstanding under the third
master note, together with the principal amounts then outstanding under the
original master note and the second master note, may not at any time exceed
$3,000,000,000.

EXHIBIT B-2

 

	 	 	 
	 

	 	Note
becomes due and payable in full in accordance with its terms, whether at
its Maturity Date or by redemption, repayment or otherwise.
	 
	 	 
	Issuance:

	 	The Book-Entry Notes will be represented by a Master Note. Each Master
Note will be dated and issued as of the date of its countersignature by the
Paying Agent.
	 
	 	 
	Identification Numbers:

	 	The Company has received from the CUSIP Service Bureau (the “CUSIP Service
Bureau”) of Standard & Poor’s Corporation (“Standard & Poor’s”) one series
of CUSIP numbers consisting of approximately 900 CUSIP numbers for future
assignment to Book-Entry Notes. The Company will provide DTC and the
Paying Agent with a list of such CUSIP numbers. The Company will assign
CUSIP numbers as described below under Settlement Procedure “B.” DTC will
notify the CUSIP Service Bureau periodically of the CUSIP numbers that the
Company has assigned to Book-Entry Notes. The Company will reserve
additional CUSIP numbers when necessary for assignment to Book-Entry Notes
and will provide the Paying Agent and DTC with the list of additional CUSIP
numbers so obtained.
	 
	 	 
	Registration:

	 	Unless otherwise specified by DTC, each Master Note will be issued only in
fully registered form without coupons. Each Master Note will be registered
in the name of Cede & Co., as nominee for DTC, on the bond register
maintained under the Paying Agency Agreement by the Paying Agent. The
beneficial owner of a Book-Entry Note (or one or more indirect participants
in DTC designated by such owner) will designate one or more participants in
DTC (with respect to such Book-Entry Note, the “Participants”) to act as
agent or agents for such owner in connection with the book-entry system
maintained by DTC, and DTC will record in book-entry form, in accordance
with instructions provided by such Participants, a credit balance with
respect to such Book-Entry Note in the account of such Participants. The
ownership interest of such beneficial owner in such Book-Entry Note will be
recorded through the records of such Participants or through the separate
records of such Participants and one or more indirect participants in DTC.
So long as Cede & Co. is the registered owner of a Master Note, DTC will be
considered the sole owner and holder of the Book-Entry Notes represented by
the Master Note for all purposes under the Resolutions.
	 
	 	 
	Transfers:

	 	Transfers of interests in a Book-Entry Note will be accomplished by book
entries made by DTC and, in turn, by Participants (and in

EXHIBIT B-3

 

	 	 	 
	 

	 	certain cases,
one or more indirect participants in DTC) acting on behalf of beneficial
transferors and transferees of such interests.
	 
	 	 
	Denominations:

	 	Book-Entry Notes will be issued in denominations of $1,000 or more (in
multiples of $1,000).
	 
	 	 
	Issue Price:

	 	Unless otherwise specified in an applicable Pricing Supplement or Permitted
Free Writing, each Book-Entry Note will be issued at the percentage of
principal amount specified in the Offering Circular relating to such
Book-Entry Note.
	 
	 	 
	Interest:

	 	Each Book-Entry Note will bear interest at a fixed rate, which may be zero
during all or any part of the term in the case of certain Book-Entry Notes
issued at a price representing a substantial discount from the principal
amount payable at Maturity. The rate of interest on any Book-Entry Note
may not exceed the Maximum Rate of Interest which on the date of the
Selling Agency Agreement is 9%. Interest on each Book-Entry Note will
accrue from the Issue Date of such Book-Entry Note for the first interest
period and from the most recent Interest Payment Date to which interest has
been paid for all subsequent interest periods. Except as set forth
hereafter, each payment of interest on a Book-Entry Note will include
interest accrued to but excluding, as the case may be, the Interest Payment
Date or the date of Maturity (other than a Maturity Date of a Book-Entry
Note occurring on the 31st day of a month in which case such payment of
interest will include interest accrued to but excluding the 30th day of
such month). Any payment of principal, premium, or interest required to be
made on a day that is not a Business Day (as defined below) may be made on
the next succeeding Business Day and no interest shall accrue as a result
of any such delayed payment.
	 
	 	 
	 

	 	Each Book-Entry Note will bear interest from and including its Issue Date
at the rate per annum set forth in the applicable Pricing Supplement or
Permitted Free Writing until the principal amount thereof is paid, or made
available for payment, in full. Unless otherwise specified in the
applicable Pricing Supplement or Permitted Free Writing, interest on each
Book-Entry Note (other than a Zero-Coupon Bond) will be payable either
monthly, quarterly, semiannually, or annually on each Interest Payment Date
and at Maturity (or on the date of redemption or repayment if a Book-Entry
Note is repurchased by the Company prior to maturity pursuant to mandatory
or optional redemption provisions or the Survivor’s Option). Interest will
be payable to the person in whose name a Book-Entry Note is registered at
the close of

EXHIBIT B-4

 

	 	 	 
	 

	 	business on the Regular Record Date next preceding each
Interest Payment Date; provided, however, that interest payable at Maturity
will be payable to the person to whom principal shall be payable. The
Regular Record Date with respect to any Interest Payment Date shall be the
date fifteen calendar days prior to such Interest Payment Date, whether or
not such date shall be a Business Day; provided, however, that interest
payable at Maturity will be payable to the person to whom principal shall
be payable.
	 
	 	 
	 

	 	Any payment of principal, and premium, if any, or interest required to be
made on a Book-Entry Note on a day which is not a Business Day need not be
made on such day, but may be made on the next succeeding Business Day with
the same force and effect as if made on such day, and no additional
interest shall accrue as a result of such delayed payment. Unless
otherwise specified in the applicable Pricing Supplement or Permitted Free
Writing, any interest on the Book-Entry Notes will be computed on the basis
of a 360-day year of twelve 30-day months. The interest rates the Company
will agree to pay on newly issued Book-Entry Notes are subject to change
without notice by the Company from time to time, but no such change will
affect any Book-Entry Notes already issued or as to which an offer to
purchase has been accepted by the Company.
	 
	 	 
	 

	 	The Interest Payment Dates for a Book-Entry Note that provides for monthly
interest payments shall be the fifteenth day of each calendar month,
commencing in the calendar month that next succeeds the month in which the
Book-Entry Note is issued. In the case of a Book-Entry Note that provides
for quarterly interest payments, the Interest Payment Dates shall be the
fifteenth day of each third month, commencing in the third succeeding
calendar month following the month in which the Book-Entry Note is issued.
In the case of a Book-Entry Note that provides for semiannual interest
payments, the Interest Payment dates shall be the fifteenth day of each
sixth month, commencing in the sixth succeeding calendar month following
the month in which the Book-Entry Note is issued. In the case of a
Book-Entry Note that provides for annual interest payments, the Interest
Payment Date shall be the fifteenth day of every twelfth month, commencing
in the twelfth succeeding calendar month following the month in which the
Book-Entry Note is issued.
	 
	 	 
	 

	 	Each payment of interest on a Book-Entry Note shall include accrued
interest from and including the Issue Date or from and including the last
day in respect of which interest has been paid

EXHIBIT B-5

 

	 	 	 
	 

	 	(or duly provided for), as
the case may be, to, but excluding, the Interest Payment Date or Maturity
Date, as the case may be.
	 
	 	 
	Calculation of Interest:

	 	Unless otherwise specified in the applicable Pricing Supplement or
Permitted Free Writing, interest on the Book-Entry Notes (including
interest for partial periods) will be calculated on the basis of a 360-day
year of twelve 30-day months.
	 
	 	 
	Business Day:

	 	“Business Day” means, unless otherwise specified in the applicable Pricing
Supplement or Permitted Free Writing, any day, other than a Saturday or
Sunday, that meets the following applicable requirement: such day is not a
day on which banking institutions are authorized or required by law or
executive order to be closed in the City of New York.
	 
	 	 
	Payments of Principal
and Interest:

	 	Promptly after each Regular Record Date, the Paying Agent will deliver to
the Company and DTC a written notice specifying by CUSIP number the amount
of interest, if any, to be paid on each Book-Entry Note on the following
Interest Payment Date (other than an Interest Payment Date coinciding with
a Maturity Date) and the total of such amounts. DTC will confirm the
amount payable on each Book-Entry Note on such Interest Payment Date by
reference to the daily bond reports published by Standard & Poor’s. On
such Interest Payment Date, the Company will pay to the Paying Agent, and
the Paying Agent in turn will pay to DTC, such total amount of interest due
(other than on the Maturity Date), at the times and in the manner set forth
below under “Manner of Payment.” If any Interest Payment Date for any
Book-Entry Note is not a Business Day, the payment due on such day shall be
made on the next succeeding Business Day and no interest shall accrue on
such payment for the period from and after such Interest Payment Date.
	 
	 	 
	Payments on the 

Maturity Date:

	 	On or about the first Business Day of each month, the Paying Agent will
deliver to the Company and DTC a written list of principal, premium, if
any, and interest to be paid on any Book-Entry Note maturing or subject to
redemption (pursuant to a sinking fund or otherwise) or repayment
(“Maturity”) in the following month. The Paying Agent, the Company, and
DTC will confirm the amounts of such principal, premium, if any, and
interest payments with respect to such Book-Entry Note on or about the
fifth Business Day preceding the Maturity Date of such Book-Entry Note. On
the Maturity Date, the Company will pay to the Paying Agent, and the Paying
Agent in turn will pay to DTC, the principal amount of such Book-Entry
Note, together with interest and premium, if any, due on such Maturity
Date, at

EXHIBIT B-6

 

	 	 	 
	 

	 	the times and in the manner set forth below under “Manner of
Payment.” If the Maturity Date of any Book-Entry Note is not a Business
Day, the payment due on such day shall be made on the next succeeding
Business Day and no interest shall accrue on such payment for the period
from and after such Maturity Date.
	 
	 	 
	Manner of Payment:

	 	The total amount of any principal, premium, if any, and interest due on
Book-Entry Notes on any Interest Payment Date or at Maturity shall be paid
by the Company to the Paying Agent in immediately available funds on such
date. The Company will make such payment on such Book-Entry Notes by
instructing the Paying Agent to withdraw funds from an account maintained
by the Company by wire transfer as agreed with the Paying Agent. The
Company will confirm such instructions in writing to the Paying Agent.
Prior to 11:00 a.m., New York City time, on the Maturity Date or as soon as
possible thereafter, the Paying Agent will make payment to DTC in
accordance with existing arrangements between DTC and the Paying Agent, in
funds available for immediate use by DTC, each payment of interest,
principal, and premium, if any, due on a Book-Entry Note on such date. On
each Interest Payment Date (other than on the Maturity Date) the Paying
Agent will pay DTC such interest payments in same-day funds in accordance
with existing arrangements between the Paying Agent and DTC. Thereafter,
on each such date, DTC will pay, in accordance with its SDFS operating
procedures then in effect, such amounts in funds available for immediate
use to the respective Participants with payments in amounts proportionate
to their respective holdings in principal amount of beneficial interest in
such Book-Entry Note as are recorded in the book-entry system maintained by
DTC. Neither the Company nor the Paying Agent shall have any direct
responsibility or liability for the payment by DTC of the principal of, or
premium, if any, or interest on, the Book-Entry Notes to such Participants.
	 
	 	 
	Withholding Taxes:

	 	The amount of any taxes required under applicable law to be withheld from
any interest payment on a Book-Entry Note will be determined and withheld
by the Participant, indirect participant in DTC, or other person
responsible for forwarding payments and materials directly to the
beneficial owner of such Book-Entry Note.
	 
	 	 
	Procedure for Rate
Setting and Posting:

	 	The Company and the Agents will discuss, from time to time, the aggregate
principal amounts of, the Maturities, the Issue Price and the interest
rates (which will not exceed the Maximum Rate of Interest) to be borne by
Book-Entry Notes that may be sold as a

EXHIBIT B-7

 

	 	 	 
	 

	 	result of the solicitation of orders
by the Agents. If the Company decides to set interest rates borne by any
Book-Entry Notes in respect of which the Agents are to solicit orders (the
setting of such interest rates to be referred to herein as “Posting” and
the day on which such interest rates are set to be referred to herein as
the “Posting Day”), or if the Company decides to change interest rates
previously posted by it, it will promptly advise the Agents of the prices
and interest rates to be posted.
	 
	 	 
	 

	 	The Company will assign a separate CUSIP number for each tranche of
Book-Entry Notes to be posted, and will so advise and notify the Paying
Agent and Purchasing Agent of said assignment by telephone and/or by
telecopier or other form of electronic transmission. The Purchasing Agent
will, in turn, include the assigned CUSIP number on all Posting notices
communicated to the Agents and Selling Group members.
	 
	 	 
	Offering of Book-Entry
Notes:

	 	In the event that there is a Posting, the Purchasing Agent will communicate
to each of the Agents and Selling Group members the aggregate principal
amount and Maturities of, along with the interest rates to be borne by,
each Book-Entry Note that is the subject of the Posting. Thereafter, the
Purchasing Agent, along with the other Agents and the Selling Group, will
solicit offers to purchase the Book-Entry Notes accordingly.
	 
	 	 
	Purchase of Book-Entry
Notes by the Purchasing
Agent:

	 	The Purchasing Agent will, no later than 4:00 p.m. (New York City time) on
the seventh day subsequent to the day on which such Posting occurs, or if
such seventh day is not a Business Day, on the preceding Business Day, or
on such other Business Day and time as shall be mutually agreed upon by the
Company and the Purchasing Agent (any such day, a “Trade Day”), (i)
complete, execute, and deliver to the Company a Terms Agreement that sets
forth, among other things, the amount of each Book-Entry Note that the
Purchasing Agent is offering to purchase or (ii) inform the Company that
none of the Book-Entry Notes will be purchased by the Purchasing Agent.
	 
	 	 
	Acceptance and
Rejection of Orders:

	 	Unless otherwise agreed by the Company and the Purchasing Agent, the
Company has the sole right to accept orders to purchase Book-Entry Notes
and may reject any such order in whole or in part; provided that the
Company may not accept orders to purchase Book-Entry Notes which bear
interest at a rate above the Maximum Rate of Interest. Unless otherwise
instructed by the Company, the Purchasing Agent will promptly advise the
Company by telephone of all offers to purchase Book-Entry Notes received by
it, other than those rejected by it in whole or in

EXHIBIT B-8

 

	 	 	 
	 

	 	part in the reasonable
exercise of its discretion. No order for less than $1,000 principal amount
of Book-Entry Notes will be accepted.

Upon receipt of a completed and executed Terms Agreement from the
Purchasing Agent (substantially in the form attached to the Selling Agent
Agreement as Exhibit C), the Company will (i) promptly execute and return
such Terms Agreement to the Purchasing Agent or (ii) inform the Purchasing
Agent that its offer to purchase the Book-Entry Notes has been rejected, in
whole or in part. The Purchasing Agent will thereafter promptly inform the
other Agents and participating Selling Group members of the action taken by
the Company.
	 
	 	 
	Preparation of Pricing
Supplement or Permitted
Free Writing:

	 	The Company will provide a Pricing Supplement (substantially in the form
attached to the Selling Agent Agreement as Exhibit D) or a Permitted Free
Writing (in the form to be attached to the Terms Agreement), in either case
reflecting the terms of such Book-Entry Note, and will supply a copy
thereof (or additional copies if requested) to the Purchasing Agent, on or
as soon as reasonably practicable after the Posting Day but in no event
later than 12:00 p.m. on the Trade Day, and one copy to the Paying Agent.
The Purchasing Agent will cause an Offering Circular (together with the
Pricing Supplement or Permitted Free Writing) to be delivered to each of
the other Agents and Selling Group members that purchased such Book-Entry
Notes, and each of these, in turn, will, pursuant to the terms of the
Selling Agent Agreement and the Master Selected Dealer Agreement, cause to
be delivered a copy of the Offering Circular (together with the Pricing
Supplement or Permitted Free Writing) to each purchaser of Book-Entry Notes
from such Agent or Selling Group member. The Agents and the Selling Group
members will not deliver a confirmation for sale to any prospective
purchaser until it has delivered the Offering Circular (together with the
Pricing Supplement or Permitted Free Writing) as required by the
immediately preceding sentence.
	 
	 	 
	 

	 	In each instance that a Pricing Supplement or Permitted Free Writing is
prepared, the Agents or Selling Group members will affix the Pricing
Supplement or Permitted Free Writing to the Offering Circular prior to
their use if the Pricing Supplement or Permitted Free Writing is not
already affixed thereto.
	 
	 	 
	Delivery of
Confirmation and
Offering Circular:

	 	Subject to “Suspension of Solicitation; Amendment or Supplement” below, the
Agents and Selling Group members will deliver an Offering Circular
(together with the Pricing

EXHIBIT B-9

 

	 	 	 
	 

	 	Supplement or Permitted Free Writing) as herein
described with respect to each Book-Entry Note sold by it.
	 
	 	 
	 

	 	For each Book-Entry Note sold by an Agent or Selling Group member, the
Agent or Selling Group member who sold such Book-Entry Note will issue a
confirmation to the purchaser, setting forth the terms of such Book-Entry
Note and other applicable details described above and delivery and payment
instructions. In addition, the Agent or Selling Group member who sold such
Book-Entry Note will deliver to such purchaser the Offering Circular
(together with the Pricing Supplement or Permitted Free Writing) in
relation to such Book-Entry Note as soon as reasonably practicable after
the Company provides a copy of such Offering Circular (together with the
Pricing Supplement or Permitted Free Writing) to the Purchasing Agent but
in no event later than the delivery of the confirmation of sale.
	 
	 	 
	Settlement:

	 	The receipt of immediately available funds by the Company in payment for
Book-Entry Notes and the issuance of the Book-Entry Notes shall constitute
“Settlement” with respect to such Book-Entry Notes. All orders accepted by
the Company will be settled within one to three Business Days pursuant to
the timetable for Settlement set forth below, unless the Company and the
Purchasing Agent agree to Settlement on a later date, and shall be
specified upon acceptance of such offer; provided, however, that in all
cases the Company will notify the Paying Agent on the date issuance
instructions are given.
	 
	 	 
	Settlement Procedures:

	 	In the event of a purchase of a Book-Entry Note by the Purchasing Agent, as
principal, appropriate Settlement details, if different from those set
forth below, will be set forth in the applicable Terms Agreement to be
entered into between the Purchasing Agent and the Company pursuant to the
Selling Agent Agreement. Settlement Procedures with regard to each
Book-Entry Note purchased by the Purchasing Agent, as principal, shall be
as follows:

	 	A.	 	The Purchasing Agent will communicate the following details of the terms
of the offer with respect to each Book-Entry Note to be issued (the “Bond
Sale Information”) to the Company by telephone confirmed in writing or by
facsimile transmission or other acceptable written means:

	 	1.	 	Principal amount of the offer;
	 
	 	2.	 	Interest Rate;

EXHIBIT B-10

 

	 	3.	 	Interest Payment Dates;
	 
	 	4.	 	Settlement Date;
	 
	 	5.	 	Maturity Date;
	 
	 	6.	 	Purchase Price;
	 
	 	7.	 	Purchasing Agent’s commission determined pursuant to Section IV(a) of
the Selling Agent Agreement;
	 
	 	8.	 	Net proceeds to the Company;
	 
	 	9.	 	Trade Date;
	 
	 	10.	 	If a Book-Entry Note is redeemable by the Company, such of the
following as are applicable:

	 	(i)	 	The date on and after which such Book-Entry Note may be redeemed (the
“Redemption Commencement Date”),
	 
	 	(ii)	 	Initial redemption price (% of par), and
	 
	 	(iii)	 	Amount (% of par) that the initial redemption price shall decline
(but not below par) on each anniversary of the Redemption Commencement
Date;

	 	11.	 	Whether the Book-Entry Note has the Survivor’s Option and the terms of
any other repayment provision;
	 
	 	12.	 	If a discount bond, the total amount of original issue discount, the
yield to maturity, and the initial accrual period of original issue
discount;
	 
	 	13.	 	DTC Participant Number of the institution through which the customer
will hold the beneficial interest in the Global Security.

	 	B.	 	The Company will confirm the previously assigned CUSIP number to the
Book-Entry Note and then advise the Paying Agent and the Purchasing Agent
by telephone (confirmed in writing at any time on the same date) or by
telecopier or other form of electronic transmission of the information
received in accordance with Settlement

EXHIBIT B-11

 

	 	 	 	Procedure “A” above and the assigned
CUSIP number. Each such communication by the Company will be deemed to
constitute a representation and warranty by the Company to the Paying Agent
and the Agents that (i) such Book-Entry Note is then, and at the time of
issuance and sale thereof will be, duly authorized for issuance and sale by
the Company; (ii) such Book-Entry Note, and the Master Note representing
such Book-Entry Note, will conform with the terms of the Resolutions; and
(iii) upon delivery of the Book-Entry Note, the aggregate principal amount
of all Bonds issued under the Resolutions will not exceed the aggregate
principal amount of Bonds authorized for issuance at such time by the
Company.
	 
	 	C.	 	The Paying Agent will communicate to DTC and the Purchasing Agent
through DTC’s Participant Terminal System a pending deposit message
specifying the following Settlement information:

	 	1.	 	The information received in accordance with Settlement Procedure “A.”
	 
	 	2.	 	The numbers of the participant accounts maintained by DTC on behalf of
the Paying Agent and the Purchasing Agent.
	 
	 	3.	 	The initial Interest Payment Date for such Book-Entry Note and, if then
calculated, the amount of interest payable on such Initial Interest Payment
Date (which amount shall have been confirmed by the Paying Agent).
	 
	 	4.	 	The CUSIP number of such Book-Entry Note.
	 
	 	5.	 	The frequency of interest.

	 	D.	 	DTC will credit such Book-Entry Note to the participant account of the
Paying Agent maintained by DTC.
	 
	 	E.	 	The Paying Agent will enter an SDFS deliver order through DTC’s
Participant Terminal System instructing DTC to (i) debit such Book-Entry
Note to the Paying Agent’s participant account and credit such Book-Entry
Note to the participant account of the Purchasing Agent maintained by DTC
and (ii) debit the settlement account of the Purchasing Agent and credit
the settlement account of the Paying Agent maintained by DTC, in an amount

EXHIBIT B-12

 

	 	 	 	equal to the price of such Book-Entry Note less the Purchasing Agent’s
commission. The entry of such a deliver order shall be deemed to
constitute a representation and warranty by the Paying Agent to DTC that
(a) the Master Note representing such Book-Entry Note has been issued and
authenticated, and (b) the Paying Agent is holding the Master Note
representing such Book-Entry Note pursuant to the Certificate Agreement.
	 
	 	F.	 	The Purchasing Agent will enter an SDFS deliver order through DTC’s
Participant Terminal System instructing DTC to (i) debit such Book-Entry
Note to the Purchasing Agent’s participant account and credit such
Book-Entry Note to the participant accounts of the Participants to whom
such Book-Entry Note is to be credited maintained by DTC and (ii) debit the
settlement accounts of such Participants and credit the settlement account
of the Purchasing Agent maintained by DTC, in an amount equal to the price
of the Book-Entry Note so credited to their accounts.
	 
	 	G.	 	Transfers of funds in accordance with SDFS deliver orders described in
Settlement Procedures “E” and “F” will be settled in accordance with SDFS
operating procedures in effect on the Settlement Date.
	 
	 	H.	 	The Paying Agent, upon confirming receipt of such funds, will credit to
an account of the Company funds available for immediate use in an amount
equal to the amount credited to the Paying Agent’s DTC participant account
in accordance with Settlement Procedure “E.”
	 
	 	I.	 	The Purchasing Agent will confirm the purchase of each Book-Entry Note
to the purchaser thereof either by transmitting to the Participant to whose
account such Book-Entry Note has been credited a confirmation order through
DTC’s Participant Terminal System or by mailing a written confirmation to
such purchaser. In all cases, the Offering Circular (together with the
Pricing Supplement or Permitted Free Writing) must be delivered as soon as
reasonably practicable after the Company provides a copy of such Offering
Circular (together with the Pricing Supplement or Permitted Free Writing)
to the Purchasing Agent but in no event later than the delivery of such
confirmation.

EXHIBIT B-13

 

	 	J.	 	Upon request, the Paying Agent will as soon as practicable send to the
Company a statement setting forth the principal amount of Book-Entry Notes
outstanding as of the date of such request under the Resolutions and
setting forth the CUSIP number(s) assigned to, and a brief description of,
any orders of which the Company has advised the Paying Agent but which have
not yet been settled.

	 	 	 	 	 
	Settlement Procedures	 	For Book-Entry Notes solicited by the Purchasing Agent or Agent and
accepted by the Company, Settlement Procedures “A” through “J” shall be
completed as soon as possible but not later than the respective times (New
York City time) set forth below:
	 
	 	 	 	 
	Timetable:

	 	Settlement Procedure
	 	Time
	 

	 	 	 	 
	 

	 	A
	 	4:00 p.m. on the Trade Day.
	 

	 	B
	 	5:00 p.m. on the Trade Day.
	 

	 	C
	 	2:00 p.m. on the Business Day
before the Settlement Date.
	 

	 	D
	 	11:00 a.m. on the Settlement Date.
	 

	 	E-F
	 	2:00 p.m. on the Settlement Date.
	 

	 	G
	 	2:45 p.m. on the Settlement Date.
	 

	 	H
	 	3:00 p.m. on the Settlement Date.
	 

	 	I
	 	5:00 p.m. on the Settlement Date.
	 

	 	J
	 	At the request of the Company.
	 
	 	 	 	 
	 	 	In the event of a purchase of Book-Entry Notes by the Purchasing Agent, as
principal, appropriate Settlement details, if different from those set
forth above, will be set forth in the applicable Terms Agreement to be
entered into between the Purchasing Agent and the Company pursuant to the
Selling Agent Agreement.
	 
	 	 	 	 
	 	 	NOTE: The Offering Circular (together with the Pricing Supplement or
Permitted Free Writing) must be delivered as soon as reasonably practicable
after the Company provides a copy of such Offering Circular (together with
the Pricing Supplement or Permitted Free Writing) to the Purchasing Agent
but in no event later than the delivery of the written confirmation given
to the customer (Settlement Procedure “I”). Settlement Procedure “G” is
subject to extension in accordance with any extension of Fedwire closing
deadlines and in the other events specified in the SDFS operating
procedures in effect on the Settlement Date.
	 
	 	 	 	 
	 	 	If Settlement of a Book-Entry Note is rescheduled or cancelled,

EXHIBIT B-14

 

	 	 	 	 	 
	 	 	the Paying
Agent will deliver to DTC, through DTC’s Participant Terminal System, a
cancellation message to such effect by no later than 2:00 p.m., New York
City time, on the Business Day immediately preceding the scheduled
Settlement Date.
	 
	 	 	 	 
	Failure to Settle:	 	If the Paying Agent fails to enter an SDFS deliver order with respect to a
Book-Entry Note pursuant to Settlement Procedure “E,” the Paying Agent may
deliver to DTC, through DTC’s Participant Terminal System, as soon as
practicable a withdrawal message instructing DTC to debit such Book-Entry
Note to the participant account of the Paying Agent maintained at DTC. DTC
will process the withdrawal message; provided, that, such participant
account contains Book-Entry Notes having the same terms and having a
principal amount that is at least equal to the principal amount of such
Book-Entry Notes to be debited. If withdrawal messages are processed with
respect to all the Book-Entry Notes identified by a single CUSIP number,
the CUSIP number assigned to such Book-Entry Notes shall, in accordance
with CUSIP Service Bureau procedures, be cancelled and not immediately
reassigned.
	 
	 	 	 	 
	 	 	If the purchase price for any Book-Entry Note is not timely paid to the
Participants with respect to such Book-Entry Note by the beneficial
purchaser thereof (or a person, including an indirect participant in DTC,
acting on behalf of such purchaser), such Participants may enter a SDFS
deliver order through DTC’s participant Terminal System reversing the
orders entered pursuant to Settlement Procedure “F.”
	 
	 	 	 	 
	 	 	Notwithstanding the foregoing, upon any failure to settle with respect to a
Book-Entry Note, DTC may take any actions in accordance with its SDFS
operating procedures then in effect.
	 
	 	 	 	 
	Procedure for Rate 

Changes:	 	Each time a decision has been reached to change rates, the Company will
promptly advise the Agents of the new rates, who will forthwith suspend
solicitation of purchases of Book-Entry Notes at the prior rates. The
Agents may telephone the Company with recommendations as to the changed
interest rates.
	 
	 	 	 	 
	Suspension of
Solicitation; Amendment
or Supplement:	 	Subject to the Company’s representations, warranties, and covenants
contained in the Selling Agent Agreement, the Company may instruct the
Agents to suspend at any time for any period of time or permanently, the
solicitation of orders to purchase Book-Entry Notes. Upon receipt of such
instructions (which may be given orally), each Agent will forthwith suspend
solicitation until such time as the Company has advised it that

EXHIBIT B-15

 

	 	 	 	 	 
	 	 	solicitation of offers to purchase may be resumed.
	 
	 	 	 	 
	 	 	In the event that at the time the Company suspends solicitation of offers
to purchase there shall be any orders outstanding for settlement, the
Company will promptly advise the Agents and the Paying Agent whether such
orders may be settled and whether copies of the Offering Circular (together
with the Pricing Supplement or Permitted Free Writing) as in effect at the
time of the suspension may be delivered in connection with the settlement
of such orders. The Company will have the sole responsibility for such
decision and for any arrangements which may be made in the event that the
Company determines that such orders may not be settled or that copies of
such Offering Circular (together with the Pricing Supplement or Permitted
Free Writing) may not be so delivered.
	 
	 	 	 	 
	 	 	If the Company decides to amend or supplement the Offering Circular (or any
Pricing Supplement or Permitted Free Writing), it will promptly advise the
Agents and furnish the Agents and the Paying Agent with the proposed
amendment or supplement and with such certificates and opinions as are
required, all to the extent required by and in accordance with the terms of
the Selling Agent Agreement. The Company will provide the Agents and the
Paying Agent with copies of any such supplement.
	 
	 	 	 	 
	Paying Agent Not to
Risk Funds:	 	Nothing herein shall be deemed to require the Paying Agent to risk or
expend its own funds in connection with any payment to the Company, or the
Agents or the purchasers, it being understood by all parties that payments
made by the Paying Agent to either the Company or the Agents shall be made
only to the extent that funds are provided to the Paying Agent for such
purpose.
	 
	 	 	 	 
	Advertising Costs:	 	The Company shall have the sole right to approve the form and substance of
any advertising an Agent may initiate in connection with such Agent’s
solicitation to purchase the Book-Entry Notes. The expense of such
advertising will be solely the responsibility of such Agent, unless
otherwise agreed to by the Company.

EXHIBIT B-16

 

EXHIBIT C

TENNESSEE VALLEY AUTHORITY

electronotes®

TERMS AGREEMENT

                     ___, 200_

Tennessee Valley Authority

400 West Summit Hill Drive

Knoxville, Tennessee 37902

The undersigned agrees to purchase the following aggregate principal amount of Book-Entry Notes:

	 	 	 	 	 
	$
	 	 	 	 
	 

	 	 

	 	 

The terms of such Book-Entry Notes shall be as follows:

	 	 	 	 	 	 	 
	CUSIP Number:
	 	 	 
 	 	 	 
	Interest Rate:
	 	 	 
	% 	 	 	 
	Maturity Date:
	 	 	 
	 	 	 
	Price to Public:
	 	 	 
	 	 	 
	Agent’s Concession:

	 	 	 
	%	 	 
	Settlement Date, Time, and Place:
	 	 	 
	 	 	 
	Survivor’s Option:
	 	 	 
	 	 	 
	Interest Payment Dates:
	 	 	 
	 	 	 
	Optional Redemption, if any:
	 	 	 
	 	 	 
	Initial Redemption Date:
	 	 	 
	 	 	 
	Redemption Price:

	 	 	Initially                     % of Principal Amount and
declining                     % of the Principal
Amount on each anniversary of the
Initial Redemption Date until the
Redemption Price is 100% of the
Principal Amount. 

EXHIBIT C-1

 

[Any other terms and conditions agreed to by the Purchasing Agent and the Company]

	 	 	 	 	 	 	 
	 	 	LASALLE FINANCIAL SERVICES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

ACCEPTED:

TENNESSEE VALLEY AUTHORITY

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

EXHIBIT C-2

 

EXHIBIT D

[Form of Pricing Supplement]

Tennessee Valley Authority

electronotes®

Tennessee Valley Authority Power Bonds

With Maturities of 12 Months or More from Date of Issue

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Pricing Supplement No.	 	 	 	 	 	 	 	Trade Date:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	To Offering Circular Supplement dated                    , 200_	 	 	 	 	 	 	 	Issue Date:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	and Offering Circular dated June 1, 2006	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Stated	 	 	 	Maturity	 	 	 	Price to	 	 	 	Discounts &	 	 	 	 	 	 	 	 	 	 	 	 	 	Survivor’s	 	 	 	 	 	 	 	 	 	 	 	 	 	Proceeds	 	 
	 	CUSIP	 	 	Interest Rate1	 	 	 	Date	 	 	 	Public2	 	 	 	Commissions	 	 	 	Interest Payment	 	 	 	Option	 	 	 	 	 	 	 	 	Subject to Redemption or Repayment	 	 	 	TVA	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	First	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Frequency	 	 	 	Payment	 	 	 	 	 	 	 	 	Yes/No	 	 	 	Date and terms of redemption or repayment	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Original Issue Discount Note:	 	 	Total Amount of OID:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	     Yes
	 	 	     No	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

 

			
	1	 	The interest rates on the TVA electronotes® may be changed by TVA from time to time, but any such change will not affect the interest rate on any TVA electronotes ® offered prior to the effective date of the change.
	 
	2	 	Expressed as a percentage of aggregate principal amount. Actual Price to Public may be less and will be determined by prevailing market prices at the time of purchase as set forth in the confirmation sheet.

EXHIBIT D-1

 

 

EXHIBIT E

Form of Master Selected Dealer Agreement

	 	 	 
	 

Name of Broker-Dealer

	 	 
	 
	 	 
	Address:
	 	 
	 
	 	 
	 

	 	 
	 

	 	 
	 

	 	 

Dear Selected Dealer:

          In connection with public offerings of securities after the date hereof for which we are
acting as manager of an underwriting syndicate or are otherwise responsible for the distribution of
securities to the public by means of an offering of securities for sale to selected dealers, you
may be offered the right as such a selected dealer to purchase as principal a portion of such
securities. This will confirm our mutual agreement as to the general terms and conditions
applicable to your participation in any such selected dealer group organized by us as follows.

          1. Applicability of this Agreement. The terms and
conditions of this
Agreement shall be applicable to any public offering of securities (“Securities”) pursuant to a
registration statement filed under the Securities Act of 1933 (the “Securities Act”), or exempt
from registration thereunder (other than a public offering of Securities effected wholly outside
the United States of America), wherein LaSalle Financial Services, Inc. (“LFS”) (acting for its
own account or for the account of any underwriting or similar group or syndicate) is responsible
for managing or otherwise implementing the sale of the Securities to selected broker-dealers (“Selected Dealers”) and has expressly informed you that such terms and conditions shall be
applicable. Any such offering of Securities to you as a Selected Dealer is hereinafter called an “Offering”. In the case of any Offering where we are acting for the account of any underwriting or
similar group or syndicate
(“Underwriters”), the terms and conditions of this Agreement shall be for the benefit of, and
binding upon, such Underwriters, including, in the case of any Offering where we are acting with
others as representatives of Underwriters, such other representatives.

          2.
Conditions of Offering; Acceptance and Purchases. Any Offering will be subject to
delivery of the Securities and their acceptance by us and any other Underwriters, may be

EXHIBIT E-1

 

 

subject to the approval of all legal matters by counsel and the satisfaction of other
conditions, and may be made on the basis of reservation of Securities or an allotment against
subscription. We will advise you by telegram, telex or other form of written communication (“Written Communication”) of the particular method and supplementary terms and
conditions (including, without limitation, the information as to prices and offering date referred
to in Section 3(c) hereof) of any Offering in which you are invited to participate. “Written
Communication” may include, in the case of any Offering described in Section 3(a) hereof, Time of
Sale Information (as defined below) and, in the case of an Offering described in Section 3(b)
hereof, an offering circular. To the extent such supplementary terms and conditions are
inconsistent with any provision herein, such terms and conditions shall supersede any such
provision. Unless otherwise indicated in any such Written
Communication, acceptances and other communications by you with respect to an Offering should be
sent to LaSalle Financial Services, Inc., 327 Plaza Real, Suite 225, Boca Raton, Florida 33432
(Telecopy: (561) 416-6180). We reserve the right to reject any acceptance in whole or in part.
Unless notified otherwise by us, Securities purchased by you shall be paid for on such date as we
shall determine, on one business day’s prior notice to you, by certified or official bank check, in
an amount equal to the Public Offering Prices (as hereinafter defined) or, if we shall so advise
you, at such Public Offering Price less the Concession (as hereinafter defined), payable in
immediately available funds to the order of LaSalle Financial Services, Inc., against delivery of
the Securities. If Securities are purchased and paid for at such Public Offering Price, such
Concession will be paid after the termination of the provisions of Section 3(c) hereof with respect
to such Securities. Notwithstanding the foregoing, unless notified otherwise by us, payment for and
delivery of Securities purchased by you shall be made through the facilities of The Depository
Trust Company, if you are a member, unless you have otherwise notified us prior to the date
specified in a Written Communication to you from us or, if you are not a member, settlement may be
made through a correspondent who is a member pursuant to instructions which you will send to us
prior to such specified date.

          3. Representations, Warranties and Agreements.

          (a) Registered Offerings. In the case of any Offering of Securities that are registered
under the Securities Act (“Registered Offering”), the following terms should have the following
meaning. The term “Preliminary Prospectus” means any preliminary prospectus relating to the
Offering or any preliminary prospectus supplement together with a prospectus relating to the
Offering. The term “Prospectus” means the prospectus, together with the final prospectus
supplement, if any, relating to the Offering filed or to be filed under Rule 424 of the Securities
Act. The term “free writing prospectus” has the meaning set forth in Rule 405 under the Securities
Act and the term “Permitted Free Writing Prospectus” means (i) a free writing prospectus authorized
for use by the issuer in connection with the Offering of the Securities that has been filed with
the Securities & Exchange Commission (the “Commission”) in accordance with Rule 433(d) of the
Securities Act or (ii) a free writing prospectus containing solely a description of terms of the
Securities that (a) does not reflect the final terms, (b) is exempt from the filing requirement
pursuant to Rule 433(d)(5)(i) and (c) is furnished to you by LFS. “Time of Sale Information ” means
the Preliminary Prospectus together with each Permitted Free Writing Prospectus, if any, relating
to the Offering of Securities. In connection with any Registered Offering, we shall provide you
with, or otherwise make available (electronically or by other means), such number of copies of the
Time of Sale Information and of the Prospectus (other than in each case information incorporated by
reference therein) as you may reasonably request for the purposes contemplated by the Securities

EXHIBIT E-2

 

 

Act and the Securities Exchange Act of 1934 (the “Exchange Act”) and the applicable rules and
regulations of the Commission thereunder. You represent and warrant that you are familiar with Rule
173 under the Securities Act and agree that you will comply therewith. You agree that you will not
use, authorize use of, refer to, or participate in the planning for use of any written
communication (as defined in Rule 405 under the Securities Act) concerning the Offering, any issuer
of the Securities, (including without limitation any free writing prospectus and any information
furnished by any issuer of the Securities but not incorporated by reference into the Preliminary
Prospectus or Prospectus) other than: (a) any Preliminary Prospectus or Prospectus; (b) any
Permitted Free Writing Prospectus; or (c) any communications that comply with Rule 134 or Rule 135
of the Securities Act. You represent that the Time of Sale Information has been conveyed to each
person to whom you sell or deliver Securities prior to entering into a contract of sale with such
person. You agree to make a record of your distribution of the Time of Sale Information related to
each Offering. When furnished with copies of any revised Preliminary Prospectus or Permitted Free
Writing Prospectus or a new Permitted Free Writing Prospectus revising or supplementing the terms
of the Preliminary Prospectus or a previous Permitted Free Writing Prospectus, you will, upon our
request, promptly forward copies thereof to each person to whom you have theretofore distributed a
Preliminary Prospectus or Permitted Free Writing Prospectus prior to entering into any contract of
sale with such person. You will not be authorized by the issuer or other seller of Securities
offered pursuant to a prospectus or by any Underwriter to give any information or to make any
representation not contained in the Time of Sale Information in connection with the sale of such
Securities.

          (b) Offerings Pursuant to Offering Circular. In the case of any Offering of
Securities, other than a Registered Offering, which is made pursuant to an offering circular or
other document comparable to a prospectus in a Registered Offering, including, without limitation,
an Offering of “exempted securities” as defined in Section 3(a)(12) of the Exchange Act (an
“Exempted Securities Offering”), we shall provide you with such number of copies of each
preliminary offering circular and of the final offering circular relating thereto as you may
reasonably request. You agree that you will comply with the applicable Federal and state laws, and
the applicable rules and regulations of any regulatory body promulgated thereunder, governing the
use and distribution of offering circulars by brokers or dealers. You agree that in purchasing
Securities pursuant to an offering circular you will rely upon no statements whatsoever, written or
oral, other than the statements in the final offering circular delivered to you by us. You will not
be authorized by the issuer or other seller of Securities offered pursuant to an offering circular
or by any Underwriter to give any information or to make any representation not contained in the
offering circular in connection with the sale of such Securities.

          (c) Offer and Sale to the Public. With respect to any Offering of Securities, we will
inform you by a Written Communication of the public offering price, the selling concession, the
reallowance (if any) to broker-dealers and the time when you may commence selling Securities to the
public. After such public offering has commenced, we may change the public offering price, the
selling concession and the reallowance (if any) to broker-dealers. The offering price, selling
concession and reallowance (if any) to broker-dealers at
any time in effect with respect to an Offering are hereinafter referred to, respectively, as
the “Public Offering Price”, the “Concession” and the “Reallowance”. With respect to each
Offering of Securities, until the provisions of this Section 3(c) shall be terminated pursuant to
Section 5 hereof, you agree to offer Securities to the public at no more than the Public Offering
Price. If notified by us, you may sell securities to the

EXHIBIT E-3

 

 

public at a lesser negotiated price than the Public Offering Price, but in an amount not to exceed
the Concession. If a Reallowance is in effect, a reallowance from the Public Offering Price not in
excess of such Reallowance may be allowed as consideration for services rendered in distribution to
broker-dealers (i) who are actually engaged in the investment banking or securities business, (ii)
who execute the written agreement prescribed by Rule 2740(c) of the Conduct Rules of the National
Association of Securities Dealers, Inc. (the “NASD”) and (iii) who, if they are foreign banks,
broker-dealers or institutions not eligible for membership in the NASD, represent to you that they
will promptly reoffer such Securities at the Public Offering Price and will abide by the conditions
with respect to foreign banks, broker-dealers and institutions set forth in Section 3(e) hereof.

          (d) Over-allotment; Stabilization; Unsold Allotments. We may, with respect to any
Offering, be authorized to over-allot in arranging sales to Selected Dealers, to purchase and sell
Securities for long or short account and to stabilize or maintain the market price of the
Securities. You agree not to purchase and sell Securities for which an order from a client has not
been received without our consent in each instance. You further agree that, upon our request at any
time and from time to time prior to the termination of the provisions of Section 3 (c) hereof with
respect to any Offering, you will report to us the amount of Securities purchased by you pursuant
to such Offering which then remain unsold by you and will, upon our request at any such time, sell
to us for our account or the account of one or more Underwriters such amount of such unsold
Securities as we may designate at the Public Offering Price less an amount to be determined by us
not in excess of the Concession. If, prior to the later of (i) the termination of the provisions of
Section 3(c) hereof with respect to any Offering or (ii) the covering by us of any short position
created by us in connection with such Offering for our account or the account of one or more
Underwriters, we purchase or contract to purchase for our account or the account of one or more
Underwriters in the open market or otherwise any Securities purchased by you under this Agreement
as part of such Offering, you agree to pay us on demand an amount equal to the Concession with
respect to such Securities (unless you shall have purchased such Securities pursuant to Section 2
hereof at the Public Offering Price in which case we shall not be obligated to pay such Concession
to you pursuant to Section 2) plus transfer taxes and broker’s commissions or dealer’s mark-up, if
any, paid in connection with such purchase or contract to purchase.

          (e) NASD. You represent and warrant that you are actually engaged in the investment
banking or securities business. In addition, you further represent and warrant that you are either
(i) a member in good standing of the NASD, (ii) a foreign bank, broker-dealer or institution not
eligible for membership in the NASD which agrees not to make any sales within the United States,
its territories or its possessions or to persons who are citizens thereof or residents therein, and
in making any other sales to comply with the NASD’s interpretation with respect to free riding and
withholding, or (iii), solely in connection with an Exempted Securities Offering, a bank, as
defined in Section 3(a)(6) of the Exchange Act, that does not otherwise fall within provision (i)
or (ii) of this sentence (a “Bank”). You further represent, by your participation in an Offering,
that you have provided to us all documents and other information required to be filed with respect
to you, any related person or any person associated with you or any such related person pursuant to
the supplementary requirements of the NASD’s interpretation with respect to review of corporate
financing as such requirements relate to such Offering.

          You agree that, in connection with any purchase or sale of the Securities wherein a selling
Concession, discount or other allowance is received or granted, (1) you will comply

EXHIBIT
E-4

 

 

with the provisions of Rule 2740 of the Conduct Rules of the NASD, (2 ) if you are a non-NASD
member broker or dealer in a foreign country, you will also comply (a), as though you were an NASD
member, with the provision of Rules 2730, 2740 and 2750 of the Conduct Rules and (b) with Rule 2420
of the Conduct Rules as that Rule applies to a non-NASD member broker or dealer in a foreign
country and (3), in connection with an Exempted Securities Offering, if you are a Bank, you will
also comply, as though you were an NASD member, with the provision of Rules 2730, 2740 and 2750 of
the Conduct Rules.

          You further agree that, in connection with any purchase of securities from us that is not
otherwise covered by the terms of this Agreement (whether we are acting as manager, as a member of
an underwriting syndicate or a selling group or otherwise), if a selling Concession, discount or
other allowance is granted to you, clauses (1), (2) and (3) of the preceding paragraph will be
applicable.

          (f) Relationship among Underwriters and Selected Dealers. We may buy Securities from
or sell Securities to any Underwriter or Selected Dealer and the Underwriters (if any) and the
Selected Dealers may purchase Securities from and sell Securities to each other at the Public
Offering Price less all or any part of the Reallowance. You are not authorized to act as agent for
us, any Underwriter or the issuer or other seller of any Securities in offering Securities to the
public or otherwise. Neither we nor any Underwriter shall be under any obligation to you except for
obligations assumed hereby or in any Written Communication from us in connection with any Offering.
Nothing contained herein or in any Written Communication from us shall constitute the Selected
Dealers an association or partners with us or any Underwriter or with one another. If the Selected
Dealers, among themselves or with the Underwriters, should be deemed to constitute a partnership
for Federal income tax purposes, then you elect to be excluded from the application of Subchapter
K, Chapter 1, Subtitle A of the Internal Revenue Code of 1986 and agree not to take any position
inconsistent with that election. You authorize us, in our discretion, to execute and file on your
behalf such evidence of that election as may be required by the Internal Revenue Service. In
connection with any Offering, you shall be liable for your proportionate amount of any tax, claim,
demand or liability that may be asserted against you alone or against one or more Selected Dealers
participating in such Offering, or against us or the Underwriters, based upon the claim that the
Selected Dealers (including you), or any of them, constitute an association, an unincorporated
business or other entity, including, in each case, your proportionate amount of any expense
incurred in defending against any such tax, claim, demand or liability.

          (g) Blue Sky Laws. Upon application to us, we shall inform you as to any advice we
have received from counsel concerning the jurisdictions in which Securities have been qualified for
sale or are exempt under the securities or blue sky laws of such jurisdictions, but we do not
assume any obligation or responsibility as to your right to sell Securities in any such
jurisdiction.

          (h) Compliance with Law. You agree that in selling Securities pursuant to any Offering
(which agreement shall also be for the benefit of the issuer or other seller of such Securities)
you will comply with all applicable laws, rules and regulations, including the applicable
provisions of the Securities Act and the Exchange Act, the applicable rules and regulations of the
Securities and Exchange Commission thereunder, the applicable rules and
regulations of the NASD, the applicable rules and regulations of any securities exchange
having jurisdiction over the Offering, including but not limited to NASD Rule 2310, New York Stock
Exchange Rule 405, NASD Notice

EXHIBIT E-5

 

 

– to- Members 03-71 and any other laws, rules or regulations regarding suitability or diligence of
accounts. You represent and warrant, on behalf of yourself and any subsidiary, affiliate, or agent
to be used by you in the context of this Agreement, that you and they have not relied upon advice
from us, any issuer of the Securities, the Underwriters or other sellers of the Securities or any
of our or their respective affiliates regarding the suitability of the Securities for any investor.

          (i)
Registration of the Securities. You are aware that no action has been or will be
taken by the issuer of the Securities that would permit the offer or sale of the Securities or
possession or distribution of the Prospectus or any other offering material relating to the
Securities in any jurisdiction where action for that purpose is required, other than registering
the Securities under the Securities Act in the case of a Registered Offering. Accordingly, you
agree that you will observe all applicable laws and regulations in each jurisdiction in or from
which you may directly or indirectly acquire, offer, sell, or deliver Securities or have in your
possession or distribute the Prospectus or any other offering material relating to the Securities,
and you will obtain any consent, approval or permission required by you for the purchase, offer, or
sale by you of the Securities under the laws and regulations in force in any such jurisdiction to
which you are subject or in which you make such purchase, offer, or sale. Neither the issuer of the
Securities nor LFS or any Selected Dealers or Underwriters shall have any responsibility for
determining what compliance is necessary by you or for your obtaining such consents, approvals, or
permissions. You further agree that you will take no action that will impose any obligations on the
issuer of the Securities, LFS, or any Selected Dealers or Underwriters. Subject as provided above,
you shall, unless prohibited by applicable law, furnish to each person to whom you offer, sell or
deliver Securities a copy of the Prospectus (as then amended or supplemented) or (unless delivery
of the Prospectus is required by applicable law) inform each such person that a copy thereof (as
then amended or supplemented) will be made available upon request. You are not authorized to give
any information or to make any representation not contained in the Prospectus or the documents
incorporated by reference or specifically referred to therein in connection with the offer and sale
of the Securities. In the case of an Exempted Securities Offering, all references to “Prospectus”
in this section shall be interpreted to mean “offering circular.”

          (j)
Electronic Media. You agree that you are familiar with the Commission’s guidance
on the use of electronic media to deliver documents under the Federal Securities laws (including,
but not limited to, Release 33-7856 (May 4, 2000) and Release 33-7233 (October 6, 1995)) and the
NASD Notice-to-Members 98-3 (January 1998) concerning delivery of documents by broker dealers
through electronic media. You agree that you will comply therewith in connection with the delivery
of the Time of Sale Information to investors in connection with a Registered Offering.

          (k) Structured Products. You agree that you are familiar with NASD Notice-to-Members
05-59 concerning NASD members’ obligations when selling structured products and, to the extent it
is applicable to you, you agree to comply with the requirements therein.

EXHIBIT E-6

 

 

          (l) New Products You agree to comply with NASD Notice-to-Members 05-26 recommending
best practices for reviewing new products (which agreement shall also be for the benefit of any
issuer of the Securities).

          (m) U. S. Patriot Act/Office of Foreign Asset Control (OFAC). You represent and
warrant, on behalf of yourself and any subsidiary, affiliate, or agent to be used by you in the
context of this Agreement, that you and they comply and will comply with all applicable rules and
regulations of the Office of Foreign Assets Control of the U.S. Department of the Treasury and all
applicable requirements of the U.S. Bank Secrecy Act and the USA PATRIOT Act and the rules and
regulations promulgated thereunder.

          (n) Cease and Desist Proceedings. You represent and warrant that you are not the
subject of a pending proceeding under Section 8A of the Securities Act in connection with the
Offering.

          4.
Indemnification. You agree to indemnify and hold harmless LFS, the issuer of the
Securities and any Underwriter and each person, if any, who controls (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act) LFS or the issuer of the
Securities, and their respective directors, officers and employees from and against any and all
losses, liabilities, costs or claims (or actions in respect thereof) (collectively, “Losses”) to
which any of them may become subject (including all reasonable costs of investigating, disputing or
defending any such claim or action), insofar as such Losses arise out of or are in connection with
the breach of any representation, warranty or agreement made by you herein.

          If any claim, demand, action or proceeding (including any governmental investigation) shall be
brought or alleged against an indemnified party in respect of which indemnity is to be sought
against an indemnifying party, the indemnified party shall promptly notify the indemnifying party
in writing, and the indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified party and any others
the indemnified party may designate in such proceeding and shall pay the reasonable fees and
expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the reasonable fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel, (ii) the
indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to
such indemnified party or (iii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential differing interests
between them. It is agreed that the indemnifying party shall not, in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of
more than one separate law firm (in addition to local counsel where necessary) for all such
indemnified parties. Such firm shall be designated in writing by the indemnified party. The
indemnifying party shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying

EXHIBIT E-7

 

 

party agrees to indemnify the indemnified party from and against any loss or liability by reason of
such settlement or judgment. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter of such proceeding.

          The indemnity agreements contained in this Section and the representations and warranties by
you in this Agreement shall remain operative and in full force and effect regardless of: (i) any
termination of this Agreement; (ii) any investigation made by an indemnified party or on such
party’s behalf its officers or directors or any person controlling an indemnified party or by or on
behalf of the indemnifying party, its directors or officers or any person controlling the
indemnifying party; and (iii) acceptance of and payment for any Securities.

          5.
Termination, Supplements and Amendments. This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof and supercedes all prior oral or
written agreements between the parties hereto or their predecessors with regard to the subject
matter hereof. This Agreement may be terminated by Written Communication from you to LFS or from
LFS to you. Until so terminated, this Agreement shall continue in full force and effect. This
Agreement may be supplemented or amended by us by written notice thereof to you, and any such
supplement or amendment to this Agreement shall be effective with respect to any Offering to which
this Agreement applies after the date you received such supplement or amendment. Each reference to
“this Agreement” herein shall, as appropriate, be to this Agreement as so amended and supplemented.
The terms and conditions set forth in Section 3(c) hereof with regard to any Offering will
terminate at the close of business on the 30th day after the commencement of the public offering of
the Securities to which such Offering relates, but in our discretion may be extended by us for a
further period not exceeding 30 days and in our discretion, whether or not extended, may be
terminated at any earlier time.

          6. Successors and Assigns. This Agreement shall be binding on, and inure to the
benefit of, the parties hereto and other persons specified in Section 1 hereof, and the respective
successors and assigns of each of them.

          7. Governing Law. This Agreement and the terms and conditions set forth herein with
respect to any Offering together with such supplementary terms and conditions with respect to such
Offering as may be contained in any Written Communication from us to you in connection therewith
shall be governed by, and construed in accordance with, the laws of the State of New York.

          8. Headings and References. The headings, titles and subtitles herein are inserted for
convenience of reference only and are to be ignored in any construction of the provisions hereof.

          Please confirm by signing and returning to us the enclosed copy of this
Agreement that your subscription to, or your acceptance of any reservation of, any
Securities pursuant to an Offering shall constitute (i) acceptance of and agreement to the terms
and

EXHIBIT E-8

 

 

conditions of this Agreement (as supplemented and amended pursuant to Section 5 hereof) together
with and subject to any supplementary terms and conditions contained in any Written Communication
from us in connection with such Offering, all of which shall constitute a binding agreement between
you and us, individually or as representative of any Underwriters, (ii) confirmation that your
representations and warranties set forth in Section 3 hereof are true and correct at that time,
(iii) confirmation that your agreements set forth in Sections 2 and 3 hereof have been and will be
fully performed by you to the extent and at the times required thereby and (iv) acknowledgment that
you have requested and received from us sufficient copies of the Time of Sale Information and
prospectus or final offering circular, as the case may be, with respect to such Offering in order
to comply with your undertakings in Section 3(a) or 3(b) hereof.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	LaSalle Financial Services, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Melissa Toth	 	 
	 

	 	 	 	 

Name: Melissa Toth
	 	 
	 

	 	 	 	Title: First Vice President	 	 
	 
	 	 	 	 	 	 

	 	 	 	 	 
	CONFIRMED:                     ,     20__	 	 
	 
	 	 	 	 
	 	 	 
	(NAME OF BROKER-DEALER)	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

EXHIBIT E-9

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