Exhibit 1.1
Costco Wholesale
Corporation
5.300% Senior Notes due
2012
5.500% Senior Notes due
2017
Underwriting
Agreement
February 13, 2007
J.P. Morgan Securities
Inc.,
As representative of the several
Underwriters
named in Schedule I
hereto,
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
Costco Wholesale Corporation, a
Washington corporation (the “Company”), proposes,
subject to the terms and conditions stated herein, to issue and
sell to the Underwriters named in Schedule I hereto (the
“Underwriters”) an aggregate of $2,000,000,000
principal amount of the Notes of the Company, specified above (the
“Securities”).
1. The Company represents and
warrants to, and agrees with, each of the Underwriters
that:
(a) An “automatic shelf
registration statement” as defined under Rule 405 under the
Securities Act of 1933, as amended (the “Act”) on Form
S-3 (File No. 333-140651) in respect of the Securities has
been filed with the Securities and Exchange Commission (the
“Commission”) not earlier than three years prior to the
date hereof; such registration statement, and any post-effective
amendment thereto, became effective on filing; and no stop order
suspending the effectiveness of such registration statement or any
part thereof has been issued and no proceeding for that purpose has
been initiated or threatened by the Commission, and no notice of
objection of the Commission to the use of such registration
statement or any post-effective amendment thereto pursuant to Rule
401(g)(2) under the Act has been received by the Company (the base
prospectus filed as part of such registration statement, in the
form in which it has most recently been filed with the
Commission
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on or prior to the date of this
Agreement, is hereinafter called the “Basic
Prospectus”; any preliminary prospectus (including any
preliminary prospectus supplement) relating to the Securities filed
with the Commission pursuant to Rule 424(b) under the Act is
hereinafter called a “Preliminary Prospectus”; the
various parts of such registration statement, including all
exhibits thereto but excluding Form T-1 and including any
prospectus supplement relating to the Securities that is filed with
the Commission and deemed by virtue of Rule 430B to be part of such
registration statement, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the “Registration Statement”; the
Basic Prospectus, as amended and supplemented immediately prior to
the Applicable Time (as defined in Section 1(c) hereof), is
hereinafter called the “Pricing Prospectus”; the form
of the final prospectus relating to the Securities filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof is hereinafter called the
“Prospectus”; any reference herein to the Basic
Prospectus, the Pricing Prospectus, any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act, as of the date of such
prospectus; any reference to any amendment or supplement to the
Basic Prospectus, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any post-effective
amendment to the Registration Statement, any prospectus supplement
relating to the Securities filed with the Commission pursuant to
Rule 424(b) under the Act and any documents filed under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and incorporated therein, in each case after the date
of the Basic Prospectus, such Preliminary Prospectus, or the
Prospectus, as the case may be; any reference to any amendment to
the Registration Statement shall be deemed to refer to and include
any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective
date of the Registration Statement that is incorporated by
reference in the Registration Statement; and any “issuer free
writing prospectus” as defined in Rule 433 under the Act
relating to the Securities is hereinafter called an “Issuer
Free Writing Prospectus”);
(b) No order preventing or
suspending the use of any Preliminary Prospectus or any Issuer Free
Writing Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the Trust
Indenture Act of 1939, as amended (the “Trust Indenture
Act”) and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which
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they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by
an Underwriter through J.P. Morgan Securities Inc. expressly for
use therein;
(c) For the purposes of this
Agreement, the “Applicable Time” is 4:09 p.m. (Eastern
time) on the date of this Agreement; the Pricing Prospectus as
supplemented by the final term sheet prepared and filed pursuant to
Section 5(a) hereof, taken together (collectively, the
“Pricing Disclosure Package”) as of the Applicable
Time, did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and each Issuer Free Writing
Prospectus listed on Schedule II(a) hereto does not conflict
with the information contained in the Registration Statement, the
Pricing Prospectus or the Prospectus and each such Issuer Free
Writing Prospectus, as supplemented by and taken together with the
Pricing Disclosure Package as of the Applicable Time, did not
include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation
and warranty shall not apply to statements or omissions made in an
Issuer Free Writing Prospectus in reliance upon and in conformity
with information furnished in writing to the Company by an
Underwriter through J.P. Morgan Securities Inc. expressly for use
therein;
(d) The documents incorporated by
reference in the Pricing Prospectus and the Prospectus, when they
became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the
Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; any
further documents so filed and incorporated by reference in the
Prospectus or any further amendment or supplement thereto, when
such documents become effective or are filed with the Commission,
as the case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with
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information furnished in writing to
the Company by an Underwriter through J.P. Morgan Securities Inc.
expressly for use therein; and no such documents were filed with
the Commission since the Commission’s close of business on
the business day immediately prior to the date of this Agreement
and prior to the execution of this Agreement, except as set forth
on Schedule II(b) hereto;
(e) The Registration Statement
(including Form T-1) conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement and the
Prospectus will conform, in all material respects to the
requirements of the Act and the Trust Indenture Act and the rules
and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to each part of the
Registration Statement and as of the applicable filing date as to
the Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through J.P.
Morgan Securities Inc. expressly for use therein;
(f) Neither the Company nor any of
its subsidiaries has sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Pricing Prospectus and the Prospectus any material loss or material
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Pricing Prospectus; and,
since the respective dates as of which information is given in the
Registration Statement and the Pricing Prospectus, there has not
been any material change in the capital stock or long term debt of
the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders’ equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Pricing Prospectus;
(g) The Company and its subsidiaries
have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by
them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Pricing Prospectus and
the Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and proposed
to be made of such property by the Company and its
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subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such property and buildings
by the Company and its subsidiaries;
(h) The Company has been duly
incorporated and is validly existing as a corporation under the
laws of the state of Washington, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Pricing Prospectus and the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the
failure to be so qualified in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(i) The Company has an authorized
capitalization as set forth in the Pricing Prospectus and the
Prospectus and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are
fully paid and non-assessable; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable
and (except for directors’ qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(j) The Securities have been duly
authorized and, when issued and delivered pursuant to this
Agreement, will have been duly executed, authenticated, issued and
delivered and will constitute valid and legally binding obligations
of the Company entitled to the benefits provided by the indenture
to be dated as of the Time of Delivery (the
“Indenture”) between the Company and U.S. Bank,
National Association as Trustee (the “Trustee”), under
which they are to be issued, which is substantially in the form
filed as an exhibit to the Registration Statement; the Indenture
has been duly authorized and duly qualified under the Trust
Indenture Act and, when executed and delivered by the Company and
the Trustee, will constitute a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting
creditors’ rights and to general equity principles; and the
Securities and the Indenture will conform to the descriptions
thereof in the Pricing Disclosure Package and the
Prospectus;
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(k) The issue and sale of the
Securities and the compliance by the Company with all of the
provisions of the Securities, the Indenture and this Agreement and
the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for
the issue and sale of the Securities or the consummation by the
Company of the transactions contemplated by this Agreement or the
Indenture except such as have been obtained under the Act and the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(l) Neither the Company nor any of
its subsidiaries is in violation of its Certificate of
Incorporation or By-laws or in default in the performance or
observance of any material obligation, covenant or condition
contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be
bound;
(m) The statements set forth in the
Pricing Prospectus and the Prospectus under the caption
“Description of the Notes”, insofar as they purport to
constitute a summary of the terms of the Securities and under the
caption “Underwriting”, insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate and fair;
(n) Other than as set forth in the
Pricing Prospectus and the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on
the current or future financial position, stockholders’
equity or results of operations of the Company and its
subsidiaries; and, to the best of the Company’s knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
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(o) The Company is not and, after
giving effect to the offering and sale of the Securities and the
application of the proceeds thereof, will not be an
“investment company”, as such term is defined in the
Investment Company Act of 1940, as amended (the “Investment
Company Act”);
(p) (A) (i) At the time of
filing the Registration Statement, (ii) at the time of the
most recent amendment thereto for the purposes of complying with
Section 10(a)(3) of the Act (whether such amendment was by
post-effective amendment, incorporated report filed pursuant to
Section 13 or 15(d) of the Exchange Act or form of
prospectus), and (iii) at the time the Company or any person
acting on its behalf (within the meaning, for this clause only, of
Rule 163(c) under the Act) made any offer relating to the
Securities in reliance on the exemption of Rule 163 under the Act,
the Company was a “well-known seasoned issuer” as
defined in Rule 405 under the Act; and (B) at the earliest
time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer
(within the meaning of Rule 164(h)(2) under the Act) of the
Securities, the Company was not an “ineligible issuer”
as defined in Rule 405 under the Act;
(q) KPMG LLP, who have certified
certain financial statements of the Company and its subsidiaries,
and have audited the Company’s internal control over
financial reporting and management’s assessment thereof are
independent public accountants as required by the Act and the rules
and regulations of the Commission thereunder;
(r) The Company maintains a system
of internal control over financial reporting (as such term is
defined in Rule 13a-15(f) under the Exchange Act) that complies
with the requirements of the Exchange Act and has been designed by
the Company’s principal executive officer and principal
financial officer, or under their supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles. Except as disclosed in the Pricing Prospectus and the
Prospectus, the Company’s internal control over financial
reporting is effective and the Company is not aware of any material
weaknesses in its internal control over financial
reporting;
(s) Except as disclosed in the
Pricing Prospectus and the Prospectus, since the date of the latest
audited financial statements included or incorporated by reference
in the Pricing Prospectus and the Prospectus, there has been no
change in the Company’s internal control
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over financial reporting that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting;
and
(t) The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e)
under the Exchange Act) that comply with the requirements of the
Exchange Act; such disclosure controls and procedures have been
designed to ensure that material information relating to the
Company and its subsidiaries is made known to the Company’s
principal executive officer and principal financial officer by
others within those entities; and such disclosure controls and
procedures are effective.
(u) The Company and its subsidiaries
own, possess or can acquire on reasonable terms, adequate
trademarks, trade names and other rights to inventions, know-how,
patents, copyrights, confidential information and other
intellectual property (collectively, “intellectual property
rights”) necessary to conduct the business now operated by
them, or presently employed by them, and have not received any
notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company or any of it subsidiaries
would, individually or in the aggregate, have a material adverse
effect.
2. Subject to the terms and
conditions herein set forth, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, the
principal amount of Securities at the purchase price as set forth
on Schedule I hereto.
3. Upon the authorization by you of
the release of the Securities, the several Underwriters propose to
offer the Securities for sale upon the terms and conditions set
forth in the Prospectus.
4.(a) The Securities to be purchased
by each Underwriter hereunder will be represented by one or more
definitive global Securities in book-entry form which will be
deposited by or on behalf of the Company with The Depository Trust
Company (“DTC”) or its designated custodian. The
Company will deliver the Securities to J.P. Morgan Securities Inc.,
for the account of each Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire
transfer of Federal (same-day) funds to the account specified by
the Company to J.P. Morgan Securities Inc. at least forty-eight
hours in advance, by causing DTC to credit the Securities to the
account of J.P. Morgan Securities Inc. at DTC. The Company will
cause the certificates representing the Securities to be made
available to J.P. Morgan Securities Inc. for checking at least
twenty-four hours prior to the Time of Delivery (as defined below)
at the office of DTC or
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its designated custodian (the “Designated
Office”). The time and date of such delivery and payment
shall be 9:30 a.m., New York City time, on February 20, 2007
or such other time and date as J.P. Morgan Securities Inc. and the
Company may agree upon in writing. Such time and date are herein
called the “Time of Delivery”.
(b) The documents to be delivered at
the Time of Delivery by or on behalf of the parties hereto pursuant
to Section 8 hereof, including the cross-receipt for the
Securities and any additional documents requested by the
Underwriters pursuant to Section 8(j) hereof, will be
delivered at the offices of Heller Ehrman, 701 Fifth Avenue, Suite
6100, Seattle, Washington 98104 (the “Closing
Location”), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be
held at the Closing Location at 1:00 p.m., Seattle time, on the New
York Business Day next preceding the Time of Delivery, at which
meeting the final drafts of the documents to be delivered pursuant
to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, “New
York Business Day” shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York City are generally authorized or obligated
by law or executive order to close.
5. The Company agrees with each of
the Underwriters:
(a) To prepare the Prospectus in a
form approved by you and to file such Prospectus pursuant to Rule
424(b) under the Act not later than the Commission’s close of
business on the second business day following the date of this
Agreement; to make no further amendment or any supplement to the
Registration Statement, the Basic Prospectus or the Prospectus
prior to the Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly
after it receives notice thereof, of the time when any amendment to
the Registration Statement has been filed or becomes effective or
any amendment or supplement to the Prospectus has been filed and to
furnish you with copies thereof; to prepare a final term sheet,
containing solely a description of the Securities, in a form
approved by you and to file such term sheet pursuant to
Rule 433(d) under the Act within the time required by such
Rule; to file promptly all other material required to be filed by
the Company with the Commission pursuant to Rule 433(d) under the
Act; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and for
so long as the delivery of a prospectus (or in lieu thereof, the
notice referred to in Rule 173(a) under the Act) is required in
connection with the offering or sale of the Securities; to advise
you, promptly after it receives notice thereof, of the issuance by
the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or other
prospectus in respect of the
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Securities, of any notice of objection of the
Commission to the use of the Registration Statement or any
post-effective amendment thereto pursuant to Rule 401(g)(2) under
the Act, of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or
of any order preventing or suspending the use of any Preliminary
Prospectus or other prospectus or suspending any such
qualification, to promptly use its best efforts to obtain the
withdrawal of such order; and in the event of any such issuance of
a notice of objection, promptly to take such steps including,
without limitation, amending the Registration Statement or filing a
new registration statement, at its own expense, as may be necessary
to permit offers and sales of the Securities by the Underwriters
(references herein to the Registration Statement shall include any
such amendment or new registration statement);
(b) If required by Rule 430B(h)
under the Act, to prepare a form of prospectus in a form approved
by you and to file such form of prospectus pursuant to Rule 424(b)
under the Act not later than may be required by Rule 424(b) under
the Act; and to make no further amendment or supplement to such
form of prospectus which shall be disapproved by you promptly after
reasonable notice therereof;
(c) Promptly from time to time to
take such action as you may reasonably request to qualify the
Securities for offering and sale under the securities laws of such
jurisdictions as you may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Securities, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in
any jurisdiction;
(d) Prior to 10:00 a.m., New York
City time, on the New York Business Day next succeeding the date of
this Agreement and from time to time, to furnish the Underwriters
with written and electronic copies of the Prospectus in New York
City in such quantities as you may reasonably request, and, if the
delivery of a prospectus (or in lieu thereof, the notice referred
to in Rule 173(a) under the Act) is required at any time prior to
the expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the
Securities and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made when such Prospectus (or in lieu thereof, the notice referred
to in Rule 173(a) under the Act) is delivered, not misleading, or,
if for any other
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reason it shall be necessary during such same
period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act, the Exchange Act or the
Trust Indenture Act, to notify you and upon your request to file
such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many written and
el
