TRANSACTION
CONFIRMATION
[First Union Logo Appears Here]
Date: April 16, 1998
To: FIRST UNION CORPORATION ("Seller")
Attention: Jon Currier
From: FIRST UNION INVESTORS, INC. ("Buyer")
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the transaction entered into between Buyer and Seller on
the Trade Date specified below (the "Transaction").
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) (the
"1991 Definitions") are hereby incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern. Capitalized terms not otherwise
defined herein shall have the meanings set forth in the 1991 Definitions.
The terms of the Transaction to which this Confirmation relates are as follows:
1. General Terms:
Type of Transaction: Cash Settled Note Call Option
Trade Date: April 16, 1998.
Note Call Option: the "Call Option" as defined in the
Prospectus Supplement dated April 16, 1998 pursuant to
which the Notes have been issued ("Prospectus
Supplement").
Notes: US$200,000,000 6.30% Putable/Callable Subordinated
Notes of Seller due April 15, 2028.
Indenture: The Indenture dated as of March 15, 1986 between Seller
and Harris Trust and Savings Bank, as successor trustee
(the "Trustee"), as amended and supplemented by
supplemental indentures, dated as of August 1, 1990,
November 15, 1992 and February 7, 1996 (as so amended
an supplemented, the "Indenture"), pursuant to which
the Notes were issued.
Aggregate Face
Amount of Notes: US$200,000,000.
Premium Payable by Buyer
for Note Call Option: $10,220,000, which amount is consideration for the
grant to Buyer of the Note Call Option under the terms
of the Notes and the right to receive the Settlement
Amount under this Transaction.
Premium Due Date: April 23, 1998.
Settlement Amount
Payment Date: The earliest to occur of (i) the Coupon Reset Date if
the Floater Option (as defined in the Prospectus
Supplement) is not exercised, (ii) the New Coupon Reset
Date (as defined in the Prospectus Supplement) if both
the Floater Option and the Second Call Option (as
defined in the Prospectus Supplement) are exercised,
and (iii) October 15, 2008.
Coupon Reset Date: April 15, 2008.
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Settlement Amount
Payable by Seller
on the Settlement
Amount Payment Date: The present value of an annuity equal to the positive
difference, if any, of (i) a stream of interest
payments which would have been due on the Notes after
the Coupon Reset Date assuming the Notes were to bear
interest at 6.50% (with a Day Count Fraction of 30/360)
and the Aggregate Face Amount of Notes were to remain
outstanding until April 15, 2028 and (ii) a stream of
corresponding interest payments which would have been
due on the Notes after the Coupon Reset Date assuming
the Notes were to bear interest at the Swap Rate (with
a Day Count Fraction of (30/360) and the Aggregate Face
Amount of Notes were to remain outstanding until April
15, 2028, determined by discounting such interest
payments described in clauses (i) and (ii) from the
respective dates on which such interest payments would
have become due to the Coupon Reset Date using a series
of discount factors which correspond to those dates as
determined by the Calculation Agent from the yield
curve a swap dealer would use on the Swap Rate
Determination Date in valuing a series of swap payments
similar to that annuity.
Settlement Amount
Carrying Costs Payable
by Seller on the
Settlement Amount
Payment Date: The product of (i) the Settlement Amount, (ii)
USD-LIBOR-BBA with a Designated Maturity of three
months and a Day Count Fraction of Actual/360, as
determined and reset with respect to each day in the
period from and including the Coupon Reset Date to but
excluding the Settlement Amount Payment Date ("Carry
Period"), and (iii) the number of days in the Carrying
Period, if any.
Swap Rate: A rate per annum equal to the sum of the Swap
Spread plus the Base Rate.
Swap Spread: The twenty-year swap spread (bid side) determined by
the Calculation Agent as of the Rate Setting Time from
Telerate Page 19901, subject to the Swap Spread
Fallback.
Rate Setting Time: 11:00 a.m. (New York City time) on the
Swap Rate Determination Date.
Swap Rate
Determination Date: Third New York Business Day prior to the Coupon Reset
Date.
Swap Spread Fallback: If the Swap Spread is not reported by Telerate on the
Swap Rate Determination Date, then the Calculation
Agent shall determine the Swap Spread by obtaining bid
quotations for the 20-year interest rate swap spread
(quoted over the Reference Security with a ten-year
maturity) from four Reference Market-markers (selected
in good faith by the Calculation Agent) as of the Rate
Setting Time, and the Swap Spread shall be the
arithmetic mean of the two middle quotations after
discarding the highest and lowest of such quotations.
Base Rate: The yield to maturity (bid side) on the Swap Rate
Determination Date of the then current on-the-run U.S.
Treasury security ("Reference Security") with a
ten-year maturity determined by the Calculation Agent
as of the Rate Setting Time from Telerate Page 500 (or
a successor page), subject to the Base Rate Fallback.
Base Rate Fallback: If the Base Rate is not reported by Telerate on the
Swap Rate Determination Date, then the Calculation
Agent shall determine the Base Rate from bid quotations
for the Reference Security with a ten-year maturity
from four U.S. government securities dealers (selected
in good faith by the Calculation Agent) as of the Rate
Setting Time, and the Base Rate shall be based on the
arithmetic mean of the yields of the two
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middle quotations after discarding the highest and
lowest of such quotations.
If the Swap Spread reported by Telerate on the Swap
Rate Determination Dates is not based on an underlying
ten-year U.S. Treasury security and is instead based on
interpolation between a ten-year and a thirty-year U.S.
Treasury security , then the Calculation Agent shall
determine the Base Rate by interpolation between a Base
Rate computed on the basis of a Reference Security with
a ten-year maturity and a Base Rate computed on the
basis of a Reference Security with a thirty-year
maturity.
Business Day: As defined in the Prospectus Supplement.
Business Day Convention: Following
Calculation Agent: First Union National Bank
2. Settlement Terms:
(a) If Buyer exercises the Note Call Option in accordance with the terms of the
Notes and Seller does not exercise the Call Option Override (as defined in
the Prospectus Supplement) before 2:00 p.m. (New York City time) on the
Business Day prior to the Coupon Reset Date, then:
(i) Buyer shall be deemed to have assigned and transferred to Seller
all right, title and interest and obligations of Buyer in, to and
under, or resulting from the exercise of, the Note Call Option,
and Seller shall be deemed to have accepted that assignment and
transfer, and be deemed to have assumed those obligations,
automatically and without further action.
(ii) Seller shall pay the Settlement Amount and Settlement Amount
Carrying Costs, if any, to Buyer on the Settlement Amount Payment
Date.
(b) If Buyer exercises the Note Call Option in accordance with the terms of the
Notes and Seller exercises the Call Option Override before 2:00 p.m. (New
York City time) on the fourth Business Day prior to the Coupon Reset Date,
then:
(i) the Note Call Option shall be overridden as provided in the
Notes; and
(ii) notwithstanding such override, Seller shall pay the Settlement
Amount and Settlement Amount Carrying Costs, if any, to Buyer on
the Settlement Amount Payment Date.
(c) If Buyer does not exercise its Note Call Option in accordance with the terms
of the Note, then no Settlement Amount or Settlement Amount Carrying Costs
will be due hereunder.
3. Additional Terms
(a) Additional Termination Event. (i) For purposes of the ISDA Master referred
to below, the following shall be an Additional Termination Event with
respect to this Transaction: before the fifteenth calendar day prior to the
Coupon Reset Date, the Notes fail to be outstanding in an aggregate
principal amount of $200,000,000 or are accelerated pursuant to the terms of
the Indenture or any supplemental indenture thereto.
(ii) For purposes of this Additional Termination Event, this Transaction
shall be the Affected Transaction and Seller shall be the Affected Party.
(iii) Upon the designation of an Early Termination Date under the ISDA
Master for this Additional Termination Event, in addition to any amount
payable by Seller in respect of that Early Termination Date, Buyer shall be
deemed to have assigned and transferred to Seller all right, title and
interest and obligations of Buyer in, to and under, or that would result
from the exercise of, the Note Call Option, and Seller shall be deemed to
have accepted that assignment and transfer, and be deemed to have assumed
those obligations,
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automatically and without further action.
(b) Operational Agent. This Confirmation will be effected through First Union
Capital Markets, a division of First Wheat Securities, Inc. ("Capital
Markets") as agent for the parties, and Capital Markets will be responsible
solely for the operational aspects of this Confirmation, such as record
keeping and reporting. Capital Markets' sole role under this Confirmation is
as an agent of the parties on a disclosed basis, and Capital Markets shall
have no obligation, by guaranty, endorsement or otherwise, with respect to
the performance of either party's obligations under or in connection with
this Transaction.
(c) No Purchase of Notes. Without the prior approval of Buyer, Seller may not
purchase any of the Notes other than as provided in the Notes.
4. Documentation
This Confirmation incorporates by reference the 1992 ISDA Master Agreement
(Local Currency - Single Jurisdiction version) published by the
International Swaps and Derivatives Association, Inc. ("ISDA Master"), and
for that purpose "Loss" and the "Second Method" shall apply under the ISDA
Master as though this paragraph were deemed to be the "Schedule" to the ISDA
Master, and this Confirmation together with the ISDA Master shall form a
binding and complete contract between the parties governed by the law (and
not the law of conflicts) of the State of New York.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to us.
Very truly yours,
FIRST UNION INVESTORS, INC.
/s/ Kenneth R. Stancliff
By: _______________________________
Name: KENNETH R. STANCLIFF
Title: Senior Vice President
FIRST UNION CAPITAL MARKETS,
A DIVISION OF FIRST WHEAT
SECURITIES, INC., as Agent
/s/ William B. Cameron
By: ________________________________
Name: WILLIAM B. CAMERON
Title: Vice President
Accepted and confirmed as of the
date first above-written:
FIRST UNION CORPORATION
/s/ Thomas J. Wurtz
By: ________________________________
Name: THOMAS J. WURTZ
Title: Senior Vice President &
Assistant Treasurer
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