August 7, 1998
Western Resources, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attn: Xx. Xxxxx X. Xxxxxx
Facsimile: 000-000-0000
Our Reference: Notes Call Option
TRANSACTION CONFIRMATION
The purpose of this letter agreement is to confirm the terms
and conditions of the Transaction entered into between UBS AG, London Branch, a
company organized under the laws of Switzerland ("UBS") and Western Resources,
Inc., a corporation organized under the laws of the State of Kansas
("Counterparty"), on the Trade Date specified below (the "Transaction"). This
letter agreement constitutes a "Confirmation" as referred to in the Agreement as
specified below.
The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap Dealers Association, Inc.)
(the "Definitions") are incorporated into this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.
This Confirmation constitutes a "Confirmation" as referred to
in, and supplements, forms a part of and is subject to, the ISDA Master
Agreement dated as of the date hereof, as amended by the Schedule also dated as
of the date hereof (the "Agreement"), between you and us. All provisions
contained in the Agreement govern this Confirmation except as expressly modified
below.
This Confirmation will be governed and construed in accordance
with the laws of the State of New York, without regard to choice of law
doctrine.
The terms of the Transaction to which this Confirmation
relates are as follows.
General Terms
Trade Date
August 4, 1998.
Option Style
American.
Option Type
Call.
Seller
UBS AG, London Branch, and its successors and assigns.
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Notes
U.S. $400,000,000 6.25% Putable/Callable Notes due August 15, 2018,
Putable/Callable August 15, 2003. Indenture The Indenture dated as of August 1,
1998 between Counterparty and Bankers Trust Company, as Trustee, pursuant to
which the Notes were issued. Trustee The Trustee under the Indenture. Issuer
Counterparty. Aggregate Face Amount of Notes U.S. $400,000,000. Partial Exercise
Inapplicable. Settlement Amount The excess, if any, of (i) the aggregate present
value at August 15, 2003 of the principal and interest payments that would have
been due on the Aggregate Face Amount of Notes after such date if such Notes
bore interest at the rate of 5.44% and remained outstanding until August 15,
2018 determined by discounting, on a semi-annual basis, such principal and
interest payments at the Treasury Rate from the respective dates on which such
payments would have been due, over (ii) the Aggregate Face Amount of Notes.
Treasury Rate The per annum rate equal to the offer side yield to maturity of
the current on-the-run 10-year United States Treasury security per Telerate page
500 on August 12, 2003 at 11:00 a.m., New York time (the "Reset Date") (or such
other date or time that may be agreed upon by Counterparty and the Calculation
Agent), or, if such rate does not appear on Telerate page 500 at such time, the
rates on GovPX End-of-Day Pricing at 3:00 p.m. on the Reset Date. Premium None.
Business Day Any day other than a Saturday, Sunday or a day on which banking
institutions in the City of New York are authorized or obligated by law,
executive order or governmental decree to be closed. Business Day Convention
Following. Calculation Agent Warburg Dillon Read LLC, whose determinations and
calculations shall be binding in the absence of manifest error.
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Procedure for Exercise
Exercise
Period
From (and including) July 31, 2003 to (and including) the Expiration Date.
Condition to Exercise It shall be a condition to exercise of this Option that
the UBS Call Option shall have been exercised. UBS Call Option The call option
on the Notes assigned to UBS pursuant to the Purchase Agreement dated August 4,
1998 between Warburg Dillon Read LLC, as representative of the several
Underwriters, and the Counterparty with UBS joining solely for purposes of the
assignment of such call option. The amount UBS shall pay for the Notes pursuant
to the UBS Call Option shall be 100% of the principal amount thereof and shall
be referred to herein as the Call Price. Exercise Date The date on which notice
of exercise is given during the Exercise Period. Expiration Date August 6, 2003
or if that day is not a Business Day, the first following day that is a Business
Day. Notice of Exercise and Written Confirmation Counterparty must deliver
irrevocable notice to Seller (which may be delivered orally, including by
telephone) of its exercise of the right granted pursuant to this option during
the hours from 9:00 a.m. to 4:00 p.m., New York time, on any Business Day during
the Exercise Period.
If a notice of exercise is delivered orally, Counterparty will execute and
deliver a written confirmation confirming the substance of that notice and
account details or delivery instructions within one Business Day of that notice.
Failure to provide that written confirmation will not affect the validity of
that oral notice. Settlement Terms:
Settlement
Method
Physical.
Settlement
Date
August 15, 2003, or if that day is not a Business Day, the
first following day that is a Business Day.
Physical
Settlement
Terms:
Physical
Settlement
Seller shall deliver to Counterparty an assignment of all its right, title and
interest and obligations in, to and under the UBS Call Option promptly upon
receipt by Seller of a notice of exercise by Counterparty or upon termination of
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this transaction. If physical settlement occurs promptly upon receipt by Seller
of a notice of exercise by Counterparty, Counterparty shall deliver the
Settlement Amount to Seller at the account specified below on the Settlement
Date. Assumption Upon the assignment of the UBS Call Option to Counterparty as
described in "Physical Settlement," Counterparty shall automatically and without
further action assume and be liable for the performance of Seller's obligations
thereunder; provided, that, pursuant to the terms of the Notes, the Counterparty
shall be required to deposit the Call Price with the Trustee in immediately
available funds on or prior to 12:00 noon New York Time on August 15, 2003 as
opposed to on or prior to 2:00 p.m. on the immediately preceding Business Day.
UBS Details for Notices
See attached list of Contact Details.
Counterparty
Details for
Notices
See attached list of Contact Details.
Account Details
Account
Details of
UBS
UBS AG, London Branch, x/x Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, XXX
No. 000-0000-00, for credit to UBS AG, London Branch, Account
No. 00000000, ref: Western Resources, Inc.
Account
Details of
Counterparty
Western Resources, Inc., c/o NationsBank, Dallas, Texas, ABA
No. 000-0000-00, for credit to Western Resources, Inc.,
Account No. 3750954775.
Termination of Option. Upon: (i) an "Event of Default," as
defined in the Indenture, with respect to the Notes having occurred; (ii)
indebtedness for money borrowed of the Counterparty, other than the Notes, being
accelerated at any time after the issue date of the Notes in the amount of
$50,000,000 or more, and such acceleration not having been rescinded or
annulled; or (iii) the Seller not being obligated to pay the Call Price
following exercise of the UBS Call Option by reason of (a) the Counterparty, in
its sole discretion, having determined that a Market Disruption Event has
occurred, (b) at least three Dealers (as defined in the Notes) having failed to
submit timely Bids (as defined in the Notes), or (c) the Counterparty not having
received from counsel to the Counterparty (which counsel may be an employee of
the Counterparty) on or prior to 2:00 p.m. New York time on August 14, 2003 an
opinion of such counsel to the effect that, after giving effect to the Coupon
Reset Process, as described in the Notes (including the establishment of the
Coupon Reset Rate, as described in the Notes as the new interest rate of the
Notes), the Notes will be valid and legally binding obligations of the Company,
this transaction will automatically terminate and the Counterparty shall pay
UBS, or its successor or assignee, the Termination Amount. The Termination
Amount shall be paid within three Business Days of the
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determination of the Termination Amount. UBS will make a payment of $200,000 to
Counterparty on August 7, 1998, which amount represents a reasonable payment for
the right to receive the Termination Amount upon the termination of this
Transaction or the UBS Call Option pursuant to clauses (i)-(iii) above.
Following the termination, UBS shall deliver its rights under the UBS Call
Option as described under "Physical Settlement."
For purposes of this paragraph:
"Market Disruption Event" shall mean any of the following
occurring after the date of the Call Notice (as defined in the Notes): (i) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange or the establishment of minimum prices on such exchange;
(ii) a general moratorium on commercial banking activities declared by either
federal or New York State authorities; (iii) any material adverse change in the
existing financial, political or economic conditions in the United States of
America; (iv) an outbreak or escalation of major hostilities involving the
United States of America or the declaration of a national emergency or war by
the United States of America; or (v) any material disruption of the U.S.
government securities market, U.S. corporate bond market or U.S. federal wire
system.
"Termination Amount" shall mean the fair market value of an
option to receive the Settlement Amount (as defined herein) on the Settlement
Date as of the date of termination of this Transaction. The fair market value
shall be determined by the Calculation Agent by requesting bids from five
Reference Dealers within five Business Days following the termination of this
Transaction. The Calculation Agent will select two Reference Dealers (one of
which may be the Calculation Agent), Counterparty will select two References
Dealers, and a majority of the Reference Dealers so selected will select the
fifth Reference Dealer. The Calculation Agent shall (i) if five bids were made,
disregard the lowest and the highest bid and (ii) average such bids to determine
the fair market value; provided that, if the Calculation Agent has not received
a bid on the second Business Day following the request for such bid, the fair
market value shall be the average of the bids that have been received by 5:00
p.m. on the second Business Day following the request for such bids by the
Calculation Agent; provided further, that if the Termination Amount is due at
any time on or after July 31, 2003, the Termination Amount shall be the
Settlement Amount.
"Reference Dealer" shall mean a market dealer, selected in
good faith by the Calculation Agent, which makes markets in derivative
transactions for corporate and U.S. Treasury securities in the normal course of
business.
UBS shall have the right to assign its right to receive the
Termination Amount hereunder, if any, to an affiliate of UBS, to which
assignment Counterparty hereby agrees, upon giving written notice of such
assignment to Counterparty.
* * * * * * *
Please confirm that the foregoing correctly sets forth the terms of
our agreement by executing this Confirmation and returning it to us. If
returned by facsimile transmission, please reply to Xxxx Xxxxxxx at
(000) 000-0000. When
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sending hard copies, please return them to UBS AG, London Branch, 000 Xxxxxxxxxx
Xxxxxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, Attn: Xxxx Xxxxxxx.
We are happy to have completed this transaction with you.
Very truly yours,
UBS AG, LONDON BRANCH
By: /s/ XXXX XXXXXX
Name: Xxxx Xxxxxx
Title: Associate Director
By: /s/ XXXXXXXX NETANGI
Name: Xxxxxxxx Netangi
Title: Associate Director
Accepted and Confirmed as of the date first above written:
WESTERN RESOURCES, INC.
By: /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Vice President, Finance and Treasurer
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CONTACT DETAILS
UBS AG, London Branch
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Xxxxx Xxxxx Phone: 000-000-0000
Fax: 000-000-0000
Xxxx Xxxxxxx Phone: 000-000-0000
Fax: 000-000-0000
Western Resources, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Xxxxxx X. Kitchen Phone: 000-000-0000
Fax: 000-000-0000
Xxxxx X. Xxxxxx Phone: 000-000-0000
Fax: 000-000-0000
Xxxxxxx X. Xxxxxxx Phone: 000-000-0000
Fax: 000-000-0000
C:\OFFICE\WPWIN\WPDOCS\WR698X10.WPD August 7, 1998 (1:56pm)
