Document:

AMENDED AND RESTATED

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<TYPE> EX-10.1

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Exhibit 10.1

 

 

 

 

 

AMENDED AND RESTATED

AGREEMENT AND PLAN OF RECAPITALIZATION

 

 

dated as of

 

 

March 25, 1994

 

 

among

       UAL CORPORATION

 
  and
 

AIR LINE PILOTS ASSOCIATION,
INTERNATIONAL

and
 

INTERNATIONAL ASSOCIATION OF MACHINISTS
AND AEROSPACE WORKERS

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

 

 

 
	ARTICLE I	THE RECAPITALIZATION	
Page

	Section 1.1 	The Recapitalization	
1

	Section 1.2	Reclassification of Old Shares	
1

	Section 1.3	Redemption	
2

	Section 1.4	Pricing of Specified Securities	
2

	Section 1.5	Surrender and Exchange	
4

	Section 1.6	Other Issuances	
7

	Section 1.7	Stock Options	
12

	Section 1.8	Convertible Company Securities	
13

	Section 1.9	Form of Recapitalization Consideration	
13

	Section 1.10	Addition ESOP Shares	
14

	Section 1.11	Underwriting Alternative	
15

 

 

 

 
	ARTICLE II	THE COMPANY AND UNITED	
Page

	Section 2.1	Certificate of Incorporation	
16

	Section 2.2	Bylaws	
16

	Section 2.3	Directors and Officers	
17

	Section 2.4	United	
17

 

 

 

 
	ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	
Page

	Section 3.1	Corporate Existence and Power	
17

	Section 3.2	Corporate Authorization	
18

	Section 3.3	Governmental Authorization	
18

	Section 3.4	Non-Contravention	
19

	Section 3.5	Capitalization	
19

	Section 3.6	Subsidiaries	
20

	Section 3.7	Securities and Exchange Commission ("SEC") Filings	
21

	Section 3.8	Financial Statements	
21

	Section 3.9	Disclosure Documents	
21

	Section 3.10	Absence of Certain Changes	
22

	Section 3.11	Finders' Fees	
22

	Section 3.12	Board Action	
22

	Section 3.13	Securities	
22

	Section 3.14	Opinion of Financial Advisers	
22

	Section 3.15	Vote Required	
23

	Section 3.16	Limitations	
23

	Section 3.17	Compliance with Status Quo	
23

	Section 3.18	Rights Agreement	
23

 

 

 

 
	ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF THE UNIONS	
Page

	Section 4.1	Existence and Power	
23

	Section 4.2	Authorization	
23

	Section 4.3	Governmental Authorization	
23

	Section 4.4	Non-Contravention	
24

	Section 4.5	Disclosure Documents	
24

	Section 4.6	Finders' Fees	
24

	Section 4.7	Limitations	
24

 

 

 

 
	ARTICLE V	COVENANTS OF THE COMPANY	
Page

	Section 5.1	Conduct of the Company	
24

	Section 5.2	Stockholder Meeting; proxy Material	
26

	Section 5.3	Access	
26

	Section 5.4	Other Potential Transactions	
27

	Section 5.5	Notices of Certain Events	
27

	Section 5.6	Amendment of Rights Agreement	
27

	Section 5.7	Employee Benefit Plans	
28

	Section 5.8	Labor Agreements	
28

	Section 5.9	Solvency Letter	
29

	Section 5.10	Other Transaction Documents	
29

	Section 5.11	Certain Agreements	
29

 

 

 

 
	ARTICLE VI	COVENANTS OF EACH UNION	
Page

	Section 6.1	Confidentiality	
30

	Section 6.2	Labor Agreements	
31

	Section 6.3	No Public Director Nominations	
31

	Section 6.4	Independent Director Vacancies	
31

 

 

 

 
	ARTICLE VII	COVENANTS OF EACH OF THE UNIONS AND THE COMPANY	
Page

	Section 7.1	Best Efforts	
32

	Section 7.2	Certain Filings	
32

	Section 7.3	Participation	
32

 

 

 

 
	ARTICLE VIII	CONDITIONS TO THE RECAPITALIZATION	
Page

	Section 8.1	Conditions to the Obligations of Each Party	
33

	Section 8.2	Conditions to the Obligations of Each of the
Unions	
34

	Section 8.3	Conditions to the Obligations of the Company	
34

 

 

 

 
	ARTICLE IX	TERMINATION	
Page

	Section 9.1	Termination	
35

	Section 9.2	Termination of Status Quo	
36

	Section 9.3	Effect of Termination	
36

 

 

 

 
	ARTICLE X	MISCELLANEOUS	
Page

	Section 10.1	Notices	
37

	Section 10.2	Survival	
38

	Section 10.3	Amendments; No Waivers	
39

	Section 10.4	Fees and Expenses; Indemnification	
39

	Section 10.5	Successors and Assigns	
42

	Section 10.6	Governing Law	
42

	Section 10.7	Counterparts; Effectiveness	
42

	Section 10.8	Parties in Interest	
42

	Section 10.9	Specific Performance	
42

	Section 10.10	Entire Agreement	
43

 

SCHEDULES

 

 

 
	Schedule 1.1	Restated Certificate of Incorporation of the
Company
	Schedule 1.3(a)	Deposit Agreement
	Schedule 1.3(b)	Officers' Certificate Regarding Indenture for
the Debentures
	Schedule 1.6(a)(i)	Trust Agreement for the ESOP Trust
	Schedule 1.6(a)(ii)	ESOP
	Schedule 1.6(a)(iii)	Supplemental ESOP
	Schedule 1.6 (a)(iv)	Trust Agreement for the Supplemental ESOP Trust
	Schedule 1.6(d)	ESOP Stock Purchase Agreement and Amendment
	Schedule 1.6(m)	Class I Preferred Stock Subscription Agreement
	Schedule 1.6(n)	Class Pilot MEC Preferred Stock Subscription
Agreement
	Schedule 1.6(o)	Class IAM Preferred Stock Subscription Agreement
	Schedule 1.6(p)(i)	Class SAM Preferred Stock Subscription Agreement
	Schedule 1.6(p)(ii)	SAM Director Selection Process
	Schedule 1.10	Adjusted Percentage Table
	Schedule 2.2	Restated Bylaws of the Company
	Schedule 2.3(i)	Directors of the Company Resigning at Effective
Time
	Schedule 2.3(ii)	New Directors of the Company
	Schedule 2.4	Provision to be Inserted in United Air Lines,
Inc. Certificate
	Schedule 3.2(i)	UAL 1981 Incentive Stock Program Amendment
	Schedule 3.2(ii)	UAL 1988 Restricted Stock Plan Amendment
	Schedule 3.2(iii)	UAL Incentive Compensation Plan Amendment
	Schedule 3.4	Contraventions and Conflicts
	Schedule 3.6(c)	CRS Company Disclosure
	Schedule 3.17	Status Quo Matters
	Schedule 3.18	Rights Amendment
	Schedule 5.1(i)	Conduct of the Company
	Schedule 5.1(ii)	IAM Job Security Provisions
	Schedule 5.1(iii)	Existing Employee Stock Purchase Policies of
the Company
	Schedule 5.8(i)	ALPA Collective Bargaining Agreement
	Schedule 5.8(ii)	IAM Collective Bargaining Agreement
	Schedule 5.8(iii)	Employment Terms for Employees Performing the
Functions of the Company's Salaried and Management Employees
	Schedule 5.9	Solvency Letter
	Schedule 5.10(i)	Class I Preferred Stock Shareholders Agreement
	Schedule 5.10(ii)	Class SAM Director Shareholders Agreement
	Schedule 5.10(iii)	First Refusal Agreement
	Schedule 6.1	Confidentiality Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AMENDED AND RESTATED

AGREEMENT AND PLAN OF RECAPITALIZATION

AGREEMENT AND PLAN OF RECAPITALIZATION, dated as of March 25, 1994,
as amended and restated (the "Agreement"), among UAL Corporation, a Delaware
corporation (the "Company"), Air Line Pilots Association, International
("ALPA"), pursuant to its authority as the collective bargaining representative
for the crafts or class of pilots employed by United Air Lines, Inc., a
Delaware corporation and a wholly owned subsidiary of the Company ("United"),
and International Association of Machinists and Aerospace Workers ("IAM"
and, together with ALPA, the "Unions"), pursuant to its authority as the
collective bargaining representative for the crafts or classes of mechanics
and related employees, ramp and stores employees, food service employees,
dispatchers and security officers employed by United.

 

 

In consideration of the mutual covenants and agreements contained herein,
the parties hereto agree as follows:

 

 

ARTICLE I
 

THE RECAPITALIZATION
 

SECTION 1.1   The Recapitalization.   Pursuant
to Section 242 of the General Corporation Law of the State of Delaware
("Delaware Law"), as soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions set forth in Article
VIII, the Company will file an amended and restated certificate of incorporation
in form and substance as set forth on Schedule 1.1 (the "Restated Certificate")
with the Secretary of State of the State of Delaware. Except as otherwise
provided herein, the transactions contemplated by this Agreement (collectively,
the "Recapitalization") shall become effective at such time as the Restated
Certificate is duly filed with the Secretary of State of the State of Delaware
or at such later time as may be mutually agreed upon by the Company and
each of the Unions and as is specified in the Restated Certificate (the
"Effective Time").

 

 
SECTION 1.2    Reclassification of Old Shares.
(a) At the Effective Time, subject to Section 1.5(f), each share of common
stock, par value $5.00 per share, of the Company ("Common Stock") outstanding
immediately prior to the Effective Time, including each share of vested
and unvested restricted stock issued pursuant to the UAL 1988 Restricted
Stock Plan, together with each share of Common Stock held by the Company
as treasury stock or owned by any wholly-owned subsidiary of the Company
which is not cancelled immediately prior to the Effective Time pursuant
to Section 1.2(b) (each of the foregoing being referred to herein as an
"Old Share"), shall, without any further action on the part of the holder
thereof, be reclassified (the "Reclassification") as, and converted into:

 

 
(i) 0.5 of a share of common stock, par value $0.01 per share, of
the Company (the "New Shares") having the rights, powers and privileges
described in the Restated Certificate; and

 

 
(ii) one one-thousandth of a share of Series D Redeemable Preferred
Stock of the Company, without par value (the "Redeemable Preferred Stock"),
having the rights, powers and privileges described in the Restated Certificate.

 

 
If the Underwriting Alternative (as defined in Section 1.11 hereof) has
been elected and consummated with respect to the Depositary Shares (as
defined), the Series A Debentures (as defined) and/or the Series B Debentures
(as defined), the terms of the Redeemable Preferred Stock will be modified
as provided in the Restated Certificate.

 

 

(b) Each Old Share held by the Company as treasury stock or owned by
any wholly-owned subsidiary of the Company immediately prior to the Effective
Time (the "Treasury Shares"), up to a maximum of 1,000,000 Treasury Shares
(the "Retained Treasury Shares"), shall be reclassified and converted in
accordance with Section 1.2(a), with all Treasury Shares in excess of 1,000,000
being surrendered for cancellation immediately prior to the Effective Time
and no payment shall be made with respect thereto. Immediately following
the Effective Time, the Company and each of its wholly owned Subsidiaries
(as defined in Section 3.6) shall surrender for cancellation the Redeemable
Preferred Stock received upon Reclassification of the Retained Treasury
Shares and no payment shall be made in respect thereof.

 

 

SECTION 1.3   Redemption.   Following the
Effective Time, all outstanding shares of Redeemable Preferred Stock shall,
to the extent of funds legally available therefor and subject to the provisions
of the Restated Certificate, be redeemed immediately after issuance according
to the terms thereof (the "Redemption"). Pursuant to the Redemption, the
holders of Redeemable Preferred Stock, if any, shall be entitled to receive,
in respect of each one one-thousandth of a share of Redeemable Preferred
Stock, subject to the terms thereof and Section 1.5(f):

 

 

(i) $25.80 in cash;
(ii) either (a) depositary shares (the "Depositary Shares") representing
interests in $31.10 liquidation preference of Series B Preferred Stock
of the Company, without par value (the "Public Preferred Stock"), or (b)
if the Underwriting Alternative with respect to the Depositary Shares is
consummated, a cash payment equal to the Depositary Share Proceeds Amount
(as defined);

 

 
(iii) either (a) $15.55 principal amount of Series A Senior Unsecured
Debentures due 2004 of United issued as provided below (the "Series A Debentures")
or (b) if the Underwriting Alternative with respect to the Series A Debentures
is consummated, a cash payment equal to the Series A Debenture Proceeds
Amount (as defined); and

 

 

(iv) either (a) $15.55 principal amount of Series B Senior Unsecured
Debentures due 2014 of United issued as provided below (the "Series B Debentures"
and, together with the Series A Debentures, collectively, the "Debentures")
or (b) if the Underwriting Alternative with respect to the Series B Debentures
is consummated, a cash payment equal to the Series B Debenture Proceeds
Amount (as defined).

 

 
The Depositary Shares shall be issued pursuant to a Deposit Agreement substantially
in the form set forth on Schedule 1.3(a) (the "Deposit Agreement"). The
Depositary Shares shall be issued only in denominations of $25.00 of liquidation
preference and integral multiples thereof. The Public Preferred Stock shall
have the rights, powers and privileges described in the Restated Certificate,
which shall include a per share liquidation preference of $25,000. The
Debentures shall be issued pursuant to the Indenture, dated as of July
1, 1991, between United arid the Bank of New York, and the Officers' Certificate
(the "Officers' Certificate") in form and substance as set forth on Schedule
1.3(b) (collectively, the "Indenture"). Such Indenture shall be qualified
under the Trust Indenture Act of 1939, and the rules and regulations promulgated
thereunder (the "TIA"). The Debentures shall be issued only in denominations
of $100 and integral multiples thereof or, if the Underwriting Alternative
with respect to either series of Debentures is consummated at or prior
to the Effective Time and the Company so elects, denominations of $1,000
and integral multiple thereof, in which case conforming changes shall be
made to this Agreement and the attachments hereto to take into account
such greater denominations with respect to such series.

 

 

SECTION 1.4   Pricing of Specified Securities.
(a) The parties have agreed that the respective interest and dividend rates
that would be required to be applied to the Debentures and the Public Preferred
Stock, respectively, in order for the Debentures and the Depositary Shares
to trade at 100% of aggregate principal amount (in the case of the Debentures)
or at 100% of aggregate liquidation preference (in the case of the Depositary
Shares) (collectively "par") as of the close of business, New York
time, on the Trading Day (as defined below) immediately preceding the
date hereof (assuming for such purpose that the Debentures and the Depositary
Shares were fully distributed on such date) would be as follows (the "Initial
Pricing"): Series A Dentures--9.00%, Series B Debentures,--9.70% and Public
Preferred Stock-10.25%. Each of the Series A Debentures, the Series B Debentures
and the Public Preferred Stock is referred to herein as a "Specified Security"
and, collectively, as the "Specified Securities."

 

 
(b) On the Trading Day immediately preceding the Announcement Date,
CS First Boston Corporation ("First Boston") (in consultation with Lazard
Freres & Co. ("hazard")) on behalf of the Company and Keilin &
Bloom (or such other investment banking firm as may be reasonably selected
by the Unions) on behalf of the Unions (the "Primary Banking Firms") shall
seek to mutually determine the interest or dividend rates, as applicable
(the "Applicable Rate"), that each of the Specified Securities should bear
in order for such Specified Security (in the case of the Debentures) or
the Depositary Shares (in the case of the Public Preferred Stock) to trade
at par as of the close of business, New York time, on the Trading Day immediately
preceding the Announcement Date, assuming both that an Underwriting Alternative
with respect thereto had and had not been elected and further assuming
in each such case that such Specified Security or Depositary Shares, as
the case may be, were fully distributed on such Trading Day. If the Primary
Banking Firms agree on the Applicable Rate with respect to a Specified
Security, such Specified Security shall bear such rate and such rate shall
be the Applicable Rate with respect to such Specified Security. If the
Primary Banking Firms are unable to agree on the Applicable Rate with respect
to a Specified Security, then (i) Salomon Brothers Inc, or such other firm
as agreed in writing by the Primary Banking Firms (the "Deadlock Firm"),
shall render its opinion, on the Trading Day immediately preceding the
Announcement Date, as to the Applicable Rate with respect to such Specified
Security or Securities, and (ii) the Applicable Rate with respect to such
Specified Security or Securities shall be the average of the two closest
rates specified in the opinions of the Primary Banking Firms and the Deadlock
Firm, rounded to the nearest one one-hundredth of a percent in the case
of the interest rate for the Debentures and to the nearest one one-hundredth
of a percent in the case of the dividend rate for the Public Preferred
Stock; provided however, that, in no event shall the Applicable Rate with
respect to the Specified Securities exceed (x) in the case of the Series
A Debentures, 10.125%; (y) in the case of the Series B Debentures, 10.825%;
and (z) in the case of the Public Preferred Stock, 11.375% (the "Maximum
Pricing").

 

 

(c) On the Announcement Date, the Company shall issue a press release
setting forth the Applicable Rate for each of the Specified Securities,
which press release shall be distributed to major wire services and news
agencies, and shall confirm that the Company Stockholder Meeting (as defined
in Section 5.2) will be held as scheduled, and shall contain such other
information as may be mutually agreed upon by the Company and the Unions.

 

 

(d) "Announcement Date" shall mean a Trading Day which shall be not
fewer than five calendar days nor greater than ten calendar days preceding
the date of the Company Stockholder Meeting, such date to be disclosed
to the Unions not fewer than ten calendar days prior thereto. "Trading
Day" shall mean a day on which the New York Stock Exchange. Inc. ("NYSE")
is open for the transaction of business.

 

 

(e) The parties agree that the Initial Pricing of the Debentures (and
the Maximum Pricing for the Debentures) was based on, and the Applicable
Rates will be based on, the assumption that the Debentures will not be
callable prior to their respective stated maturities. The parties further
agree that the Unions may request, not less than seven days prior to the
Announcement Date, that, in the event that the Underwriting Alternative
is not consummated with respect to either or both series of Debentures,
either or both of the series of Debentures shall be callable prior to stated
maturity. If so requested, immediately following the establishment of the
Applicable Rates and prior to the Announcement Date, an additional procedure
(based on the procedure set forth in Section 1.4(b)) shall be implemented
whereby the Primary Banking Firms shall establish the incremental increase
in pricing resulting from the addition of the call feature on either or
both of the series of Debentures, as the case may be, above the Applicable
Rate, with any disagreement to be resolved in accordance with the procedures
set forth in Section 1.4(b) involving the Deadlock Firm; provided however,
that the Unions may withdraw the request for a call feature at any time
up to the issuance of the press release in accordance with subsection 1.4(c).

 

 

(f) Notwithstanding any provision of this Agreement or the Schedules
or Exhibits hereto to the contrary, if the Underwriting Alternative with
respect to the Depositary Shares or either series of Debentures is consummated,
(i) with respect to the securities that are subject to the Underwriting
Alternative, the Company and United, in consultation with the underwriters,
may set the record dates and payment dates (quarterly and semiannually,
respectively) for the Public Preferred Stock (to which the Depositary Shares
relate) and the Debentures, may select a regular interest payment date
in the year 2004 as the maturity date for the Series A Debentures and may
set a regular interest payment date in the year 2014 as the maturity date
for the Series B Debentures and (ii) the following provisions of this subsection
1.4(f), with respect to the securities that are subject to the Underwriting
Alternative, shall be null and void. If the Company causes a regular quarterly
dividend to be paid on both the Public Preferred Stock and the Prior Preferred
Stock (as defined below) in respect of any regular quarterly dividend payment
date, then the Company shall cause the quarterly record date (and corresponding
dividend payment date) for the payment of such dividend on the Public Preferred
Stock to be the same as the quarterly record date (and corresponding dividend
payment date) for the payment of such dividend on the Series A 6.25% Convertible
Preferred Stock of the Company (the "Prior Preferred Stock"). With respect
to a regular quarterly dividend payment date for the Public Preferred Stock
and the Prior Preferred Stock that coincides with a regular semi-annual
interest payment date for the Debentures, if the Company causes (i) a regular
quarterly dividend to be paid on the Public Preferred Stock or the Prior
Preferred Stock, or both, in respect of any such quarterly dividend payment
date and (ii) a regular semi-annual installment of interest to be paid
on the Debentures in respect of such regular semi-annual interest payment
date, then the Company shall cause the semi-annual record date (and corresponding
interest payment date) for such payment of interest on the Debentures to
be the same as the quarterly record date (and corresponding dividend payment
date) for the payment of such dividend on the Public Preferred Stock or
the Prior Preferred Stock or both, as the case may be.

 

 

SECTION 1.5    Surrender and Exchange.
(a) Prior to the Effective Time, the Company shall enter into an agreement
(the "Exchange Agent Agreement") with First Chicago Trust Company of New
York, as exchange agent (the "Exchange Agent"), for the purpose of exchanging
certificates representing Old Shares for the Recapitalization Consideration
(defined below). The Company will make available to the Exchange Agent,
as needed, in trust for the benefit of holders of Old Shares, the Recapitalization
Consideration (as defined herein) to be distributed in respect of the Old
Shares (without regard to Section 1.5(f)). The cash portion of the Recapitalization
Consideration shall be invested by the Exchange Agent as directed by the
Company (so long as such directions do not impair the rights of holders
of Old Shares), in direct obligations of the United States, obligations
for which the full faith and credit of the United States is pledged to
provide for the payment of principal and interest, commercial paper rated
of the highest quality by Moody's Investors Services, Inc. and Standard
& Poor's Corporation or certificates of deposit issued by a commercial
bank having at least $10,000,000,000 in assets (collectively, "Permitted
Securities"), and any net earnings with respect thereto shall be paid to
the Company. The Exchange Agent shall, pursuant to irrevocable instructions,
make the distributions referred to in Section 1.5(b) and the Recapitalization
Consideration held by the Exchange Agent shall not be used for any other
purpose. As soon as practicable after the Effective Time, the Company will
send, or cause the Exchange Agent to send and otherwise make available,
to each holder of Old Shares at the Effective Time a letter of transmittal,
in form reasonably satisfactory to the Unions and the Company, for use
in such exchange. Such letter of transmittal shall advise such holder of
the effectiveness of the Recapitalization, whether or not any portion of
the Underwriting Alternative has been consummated and, if consummated,
the expected amount of the Proceeds Amount, and the procedures for surrendering
to the Exchange Agent certificates representing Old Shares for exchange
into Recapitalization Consideration and shall specify that the delivery
shall be effected, and the risk of loss and title shall pass, only upon
proper delivery of the certificates representing Old Shares to the Exchange
Agent.

 

 
(b) Each holder of Old Shares that have been converted into New Shares
and Redeemable Preferred Stock, upon surrender to the Exchange Agent of
an Old Certificate or Certificates, together with a properly completed
letter of transmittal covering such Old Shares, will be entitled to receive
in respect of such Old Shares, subject to Section 1.5(f):

 

 

(i) a certificate or certificates representing 0.5 of a New Share
for each Old Share formerly represented by such Old Certificate or Certificates
in accordance with Section 1.2;

 

 
(ii) either (a) a depositary receipt or receipts representing Depositary
Shares representing interests in $31.10 liquidation preference of Public
Preferred Stock for each Old Share formerly represented by such Old Certificate
or Certificates in respect of the Redemption or (b) if the Underwriting
Alternative with respect to the Depositary Shares is consummated, a cash
payment equal to the Depositary Share Proceeds Amount in respect of the
Redemption;

 

 

(iii) either (a) $15.55 principal amount of Series A Debentures for
each Old Share formerly represented by such Old Certificate or Certificates
in respect of the Redemption or (b) if the Underwriting Alternative with
respect to the Series A Debentures is consummated, a cash payment equal
to the Series A Debenture Proceeds Amount in respect of the Redemption;

 

 

(iv) either (a) $15.55 principal amount of Series B Debentures for each
Old Share formerly represented by such Old Certificate or Certificates
in respect of the Redemption or (b) if the Underwriting Alternative with
respect to the Series B Debentures is consummated, a cash payment equal
to the Series B Debenture Proceeds Amount in respect of the Redemption;
and

 

 

(v) a cash payment of $25.80 for each Old Share formerly represented
by such Old Certificate or Certificates in respect of the Redemption (the
cash and/or securities distributed pursuant to clauses (i) through (v),
collectively, the "Recapitalization Consideration").

 

 
Until so surrendered, each Old Certificate or Certificates formerly representing
Old Shares shall, after the Effective Time, represent for all purposes
only the right to receive such Recapitalization Consideration.

 

 

(c) If any portion of the Recapitalization Consideration is to be paid
to a person other than the registered holder of the Old Shares formerly
represented by the Old Certificate or Certificates so surrendered in exchange
therefor, it shall be a condition to such payment that the Old Certificate
or Certificates so surrendered shall be properly endorsed or otherwise
be iii proper form for transfer and that the person requesting such payment
shall pay to the Exchange Agent any transfer or other taxes required as
a result of such payment to a person other than the registered holder of
such Old Shares or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.

 

 

(d) In the event any Old Certificate or Certificates shall have been
lost, stolen or destroyed, upon the making of an affidavit to that fact
by the person claiming such certificate to be lost, stolen or destroyed,
the Company will issue in exchange for such lost, stolen or destroyed Old
Certificate or Certificates the Recapitalization Consideration deliverable
in respect thereof in accordance with this Article I. When authorizing
such issue of the Recapitalization Consideration in exchange therefor,
the Company may, in its discretion and as a condition precedent to the
issuance there, require the person claiming ownership of such lost, stolen
or destroyed Old Certificate or Certificates to give the Company a bond
in such sum as it may direct, or otherwise indemnify the Company in a manner
satisfactory to it, against any claim that may be made against the Company
with respect to the Old Certificate or Certificates alleged to have been
lost, stolen or destroyed.

 

 

(e) After the Effective Time, there shall be no further registration
of transfers of Old Shares. If, after the Effective Time, Old Certificate
or Certificates are presented to the Company or its transfer agent, such
Old Certificate or Certificates shall be canceled and exchanged for the
Recapitalization Consideration provided for, and in accordance with the
procedures set forth, in this Article I. All Recapitalization Consideration
to be distributed pursuant to this Section 1.5, if unclaimed on the first
anniversary of the Effective Time, shall be released and paid by the Exchange
Agent to the Company, after which time persons entitled thereto may look,
subject to applicable escheat and other similar laws, only to the Company
for payment thereof.

 

 

(f) Notwithstanding anything to the contrary contained in this Agreement:

 

 

(i) No certificates, debentures or scrip representing fractional New
Shares, depositary receipts representing fractional Depositary Shares (based
upon each whole Depositary Share representing interests in $25 liquidation
preference of Public Preferred Stock) or fractional Debentures shall be
issued as part of the Recapitalization, and such fractional interests will
not entitle the beneficial or record owner thereof to any rights of a stockholder
or creditor of the Company.

 

 
(ii) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (x) the number of whole New Shares
into which all of the Old Shares will be reclassified and converted pursuant
to Section 1.2 over (y) the aggregate number of whole New Shares to be
distributed to holders of Old Shares pursuant to Section 1.5 (such excess
being referred to herein as the "Excess New Shares"); and if the Underwriting
Alternative has not been elected with respect to the Depositary Shares,
the Series A Debentures and/or the Series B Debentures, as the case may
be, or, if elected has not been consummated for any reason at or prior
to the Effective Time, the Exchange Agent shall also determine, as appropriate,
(I) the excess of (a) the number of whole Depositary Shares representing
interests in shares of Public Preferred Stock issuable upon Redemption
in accordance with Article FOURTH, Part I.D, Section 6 of the Restated
Certificate with respect to the Redeemable Preferred Stock into which the
Old Shares will be reclassified and converted pursuant to Section 1.2(a)
over (b) the aggregate number of whole Depositary Shares representing interests
in shares of Public Preferred Stock to be distributed to holders of Old
Shares pursuant to Section 1.5 (such excess being referred to herein as
the "Excess Depositary Shares"); (II) the excess of (a) the number of whole
Series A Debentures issuable upon Redemption in accordance with Article
FOURTH, Part I.D, Section 6 of the Restated Certificate with respect to
the Redeemable Preferred Stock into which the Old Shares will be reclassified
and converted pursuant to Section 1.2(a) over (b) the aggregate number
of whole Series A Debentures to be distributed to holders of Old Shares
pursuant to Section 1.5 (such excess being referred to herein as the "Excess
Series A Debentures"); and/or (III) the excess of (a) the number of whole
Series B Debentures issuable upon Redemption in accordance with Article
FOURTH, Part I.D, Section 6 of the Restated Certificate with respect to
the Redeemable Preferred Stock into which the Old Shares will be reclassified
and converted pursuant to Section 1.2(a) over (b) the aggregate number
of whole Series B Debentures to be distributed to holders of Old Shares
pursuant to Section 1.5 (such excess being referred to herein as the "Excess
Series B Debentures" and, together with the Excess New Shares, the Excess
Depositary Shares and/or the Excess Series A Debentures, as applicable,
collectively, the "Excess Securities"). As soon after the Effective Time
as practicable taking into account market conditions based on consultations
with the Company, the Exchange Agent, as agent for the holders of Old Shares,
shall sell the Excess Securities at then prevailing prices on the principal
national securities exchange, automated quotation system or other trading
market (the "Applicable Exchange") on which the relevant Excess Securities
are listed or admitted for trading (which shall be the NYSE in the case
of the New Shares), all in the manner provided in paragraph (iii) of this
Section.

 

 

(iii) The sale of the Excess Securities by the Exchange Agent shall
be executed on an Applicable Exchange through one or more member firms
of such Applicable Exchange and shall be executed in round lots to the
extent practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of Old Shares, the Exchange Agent will hold
such proceeds in trust for the holders of Old Shares (the "Excess Securities
Trust"). Until distributed as provided below, the Excess Securities Trust
shall be invested, as directed by the Company, in Permitted Securities
and any net earnings with respect thereto shall be paid to the Company.
The Company shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of the Excess Securities.
The Exchange Agent shall determine the portion of the Excess Securities
Trust to which each holder of Old Shares shall be entitled, if any, by
(w) multiplying the amount of the aggregate net proceeds comprising the
Excess Securities Trust attributable to the sale of Excess New Shares by
a fraction, the numerator of which is the amount of the fractional New
Share interest to which such holder of Old Shares would be entitled but
for the application of Section 1.5(f)(i) and the denominator of which is
the aggregate amount of fractional New Share interests to which all holders
of Old Shares would be entitled but for the application of Section 1.5(f)(i);
and if the Underwriting Alternative has not been elected with respect to
the Depositary Shares, the Series A Debentures and/or the Series B Debentures,
as the case may be, or, if elected has not been consummated for any reason
at or prior to the Effective Time, as appropriate, by (x) multiplying the
amount of the aggregate net proceeds comprising the Excess Securities Trust
attributable to the sale of Excess Depositary Shares by a fraction, the
numerator of which is the amount of the fractional Depositary Share interest
to which such holder of Old Shares would be entitled but for the application
of Section 1.5(t)(i) and the denominator of which is the aggregate amount
of fractional Depositary Share interests to which all holders of Old Shares
would be entitled but for the application of Section 1.5(f)(i); (y) multiplying
the amount of the aggregate net proceeds comprising the Excess Securities
Trust attributable to the sale of Excess Series A Debentures by a fraction,
the numerator of which is the amount of the fractional Series A Debenture
interest to which such holder of Old Shares would be entitled but for the
application of Section 1.5(f)(i) and the denominator of which is the aggregate
amount of fractional Series A Debenture interests to which all holders
of Old Shares would be entitled but for the application of Section 1.5(f)(i);
and (z) multiplying the amount of the aggregate net proceeds comprising
the Excess Securities Trust attributable to the sale of Excess Series B
Debentures by a fraction, the numerator of which is the amount of the fractional
Series B Debenture interest to which such holder of Old Shares would be
entitled but for the application of Section 1.5(f)(i) and the denominator
of which is the aggregate amount of fractional Series B Debenture interests
to which all holders of Old Shares would be entitled but for the application
of Section 1.5(f)(i).

 

 

(iv) As soon as practicable after the determination of the total amount
of cash, if any, to be paid to holders of Old Shares in lieu of any fractional
New Share and, if applicable, Depositary Share interests, Series A Debenture
interests and/or Series B Debenture interests, the Exchange Agent shall
make available such amounts to such holders of Old Shares; provided, however,
that such amounts shall be paid to each holder of Old Shares only upon
surrender of such holder's Old Certificate or Certificates together with
a properly completed and duly executed letter of transmittal and any other
required documents. All cash in lieu of fractional interests to be paid
pursuant to this Section 1.5(f), if unclaimed on the first anniversary
of the Effective Time, shall be released and paid by the Exchange Agent
to the Company, after which time persons entitled thereto may look, subject
to applicable escheat and other similar laws, only to the Company for payment
thereof.

 

 
(g) No interest shall be paid or accrued on any portion of the Recapitalization
Consideration or cash in lieu of fractional interests. No dividends or
other distributions declared or made after the Effective Time with respect
to New Shares with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Old Certificate or Certificates with
respect to the New Shares such holder is entitled to receive until the
holder of such Old Certificate or Certificates shall surrender the same
in accordance with this Section 1.5 and unless such holder is a record
holder of such New Shares on such record date.

 

 

Section 1.6    Other Issuances.
In conjunction with the consummation of the Recapitalization, the Company
shall issue the shares described in this Section 1.6.

 

 
(a) During the 69 months following the Effective Time, the "Final Number"
(as defined in subsection (b)) of shares of convertible preferred stock
described below (the "ESOP Convertible Preferred Stock") shall be (i) issued
to State Street Bank and Trust Company, a Massachusetts business trust,
as trustee (the "ESQP Trustee") under a trust to be created pursuant to
the Employee Stock Ownership Trust Agreement between the Company and the
ESOP Trustee in form and substance as set forth on Schedule 1.6(a) (i)
(the "ESOP Trust") and to be established for the benefit of certain employees
of the Company and its Subsidiaries participating in the UAL Corporation
Employee Stock Ownership Plan in form and substance as set forth on Schedule
1.6(a) (ii) (the "ESOP") and, to the extent not so issued, (ii) credited
as book entry credits to the accounts of certain employees of the Company
and its Subsidiaries participating in the UAL Corporation Supplemental
ESOP in form and substance as set forth on Schedule 1.6(a) (iii) (the "Supplemental
ESOP" and together with the ESOP, collectively, the "ESOPs") and in certain
circumstances issued to the ESOP Trustee under a trust (the "Supplemental
ESOP Trust" and together with the ESOP Trust, collectively, the "ESOP Trusts")
to be created pursuant to the Supplemental ESOP Trust Agreement between
the Company and the ESOP Trustee in form and substance as set forth on
Schedule 1.6(a)(iv).

 

 

(b) The number of shares of ESOP Convertible Preferred Stock to be so
issued and credited as contemplated by subsection (a) shall initially be
17,675,345, which is equal to the product of (i) 0.5, (ii) 55/45ths, (iii)
the "Fully Diluted Old Shares" immediately prior to the Effective Time,
and (iv) 0.9999. The "Fully Diluted Old Shares" immediately prior to the
Effective Time shall equal 28,926,185. The total number of shares of ESOP
Convertible Preferred Stock to be so issued and credited is subject to
increase (in accordance with Section 1.10) up to an amount equal to the
sum of (i) 17,675,345 plus (ii) the Additional Shares (as defined in Section
1.10). Such total number of shares, including to the extent, if any, so
increased, is referred to as the "Final Number."

 

 

(c) The ESOP Convertible Preferred Stock shall consist of (i) Class
1 ESOP Convertible Preferred Stock, par value $0.01 per share, of the Company,
with a fixed dollar dividend in a dollar amount (the "Dollar Amount") that
is equal to 7.00%, or such lesser percentage that may be agreed to by the
Company and the ESOP Trustee prior to the Effective Time, of the per share
price at which the Class 1 ESOP Preferred Stock is issued to the ESOP Trustee
at the Effective Time (the "Initial Price"), and having the rights, powers
and privileges set forth in the Restated Certificate (the "ESOP Preferred"),
and (ii) Class 2 ESOP Convertible Preferred Stock, par value $0.01 per
share, of the Company having the rights, powers and privileges set forth
in the Restated Certificate (the "Supplemental ESOP Preferred").

 

 

(d) At the Effective Time, the Company shall issue to the ESOP Trustee
in accordance with a stock purchase agreement and amendment in form and
substance as.set forth on Schedule 1.6(d) (as so amended, the "ESOP Stock
Purchase Agreement"), a number of shares of ESOP Preferred (the "Initial
Shares") equal to the Year 1 Release Shares (as defined), divided by the
Year 1 Decimal (as defined).

 

 

(i) The term "Year 1 Release Shares" shall mean the product of

 

 
(x) 17,675,345,
(y) a fraction (the "First Year Fraction") having a numerator equal to
the number of days from the Effective Time to December 31, 1994 and a denominator
equal to 2,099 (which approximates the number of days in the 69 months
after the Effective Time), and

 

 
(z) 0.7815 (the "Class 1 Decimal").

 

 

(ii) The term "Year 1 Decimal" shall mean one minus the product of

 

 

(xx) the Dollar Amount as a percentage (expressed as a decimal) of
the Initial Price and

 

 
(yy) 5.25.

 

 

The Year 1 Release Shares shall be released from the ESOP suspense account
and allocated to the accounts of ESOP participants as of December 31, 1994.
The balance of the Initial Shares (the "Year 1 Remaining Shares") shall
be released from the ESOP suspense account and allocated to the accounts
of ESOP participants in level installments for each full plan year (and
prorated for the quarter ending March 31, 2000) in the period from January
1, 1995 through March 31, 2000.

 

 

As of December 31, 1994, there shall be credited to the accounts of
Supplemental ESOP participants a number of shares of Supplemental ESOP
Preferred equal to the product of

 

 

(aa) 17,675,345,

 

 
(bb) the First Year Fraction, and

 

 

(cc) one minus the Class 1 Decimal.

 

 

(e) At or about the 365th day following the Effective Time (the "Measuring
Date") and at or about the next four following anniversaries of the Measuring
Date (each a "Measuring Date Anniversary"), the Company shall negotiate
in good faith with the ESOP Trustee to reach an agreement under which the
Company shall issue to the ESOP Trustee shares of ESOP Preferred at an
agreed-upon price per share (for each applicable plan year, the "Purchase
Price"). If such agreement is reached within 30 days of the Measuring Date
or within 30 days of any Measuring Date Anniversary, then, within five
days thereafter, the Company shall sell to the ESOP Trustee, and the ESOP
Trustee shall purchase from the Company, pursuant to an agreement substantially
in the form of Exhibit B to the ESOP Stock Purchase Agreement, a number
of shares of ESOP Preferred (with respect to each such year, the "Subsequent
Shares"), which number of shares shall equal, for each such plan year,
the Subsequent Year Release Shares (as defined) divided by the Subsequent
Year Decimal (as defined).

 

 

(i) The term "Subsequent Year Release Shares" shall mean, for each
such plan year, the excess of

 

 
(xx) the product of

 

 
(A) 12/69ths of the Final Number and

 

 
(B) the Class 1 Decimal, over

 

 

(yy) the number of Year I Remaining Shares and Subsequent Year Remaining
Shares (as defined below) (collectively, "Tail Shares") scheduled to be
released in such plan year.
(ii) The term "Subsequent Year Decimal" shall be calculated separately
for each such plan year and shall mean one minus the product of

 

 

(yy) a fraction (expressed as a decimal) having a numerator equal
to the Dollar Amount and a denominator equal to the Purchase Price for
the plan year in question, and

 

 
(zz) the number of years and fractional years from the end of the plan
year for which such shares are being issued to March 31, 2000.

 

 

The Subsequent Year Release Shares for each such plan year shall be released
from the ESOP suspense account and allocated to the accounts of ESOP participants
as of the end of such plan year. The balance of the Subsequent Shares for
such plan year (the "Subsequent Year Remaining Shares") shall be released
from the ESOP suspense account and allocated to the accounts of ESOP participants
in level installments for each full plan year (and prorated for the quarter
ending March 31, 2000) remaining in the period from the January 1 immediately
following such plan year through March 31, 2000.

 

 

For each of the second through sixth plan years of the Supplemental
ESOP, there shall be credited to the accounts of Supplemental ESOP participants
shares of Supplemental ESOP Preferred equal to the product of (aa) tz/69ths
of the Final Number and (bb) the decimal equal to one minus the Class 1
Decimal.

 

 

(f) Commencing not later than December 1, 1999, the Company shall negotiate
in good faith with the ESOP Trustee to reach an agreement under which the
Company shall issue to the ESOP Trustee shares of ESOP Preferred at an
agreed.upon price (the "Purchase Price" for such year). If such agreement
is reached, then on the first business day in the year 2000, the Company
shall sell to the ESOP Trustee, and the ESOP Trustee shall purchase from
the Company, pursuant to an agreement substantially in the form of Exhibit
B to the ESOP Stock Purchase Agreement, a number of shares of ESOP Preferred
("Final Year Shares"), which number shall equal the excess of

 

 

(A) the product of

 

 
(xx) the Final Number,

(yy) a fraction (the "Final Fraction") equal to one minus the sum of 20/23rds
and the First Year Fraction, and

 

 
(zz) the Class 1 Decimal, over

(B) the number of Tail Shares scheduled to be released in such plan year.

For the seventh plan year of the Supplemental ESOP, there shall be credited
to the accounts of Supplemental ESOP participants shares of Supplemental
ESOP Preferred equal; to the product of (aa) the Final Number, (bb) the
Final Fraction and (cc) a decimal equal to one minus the Class 1 Decimal.

 

 
(g) The Company may, with the consent of the Unions, which shall not
be unreasonably withheld, make all or any part of the sales of ESOP Preferred
to the ESOP Trustee described above at any earlier date or dates, provided
that the timing and amount of the release of such shares to the accounts
of employees in the ESOPs contemplated by subsections (d), (e) and (f)
above shall not be altered by the different date or dates of the sales.
If any sale of Subsequent Shares or Final Year Shares is not consummated
in accordance with subsection (e) or (f) above (if not earlier consummated
pursuant to this subsection (g)), a number of shares of Supplemental ESOP
Preferred as is equal to the number of shares of ESOP Preferred not so
sold shall be contributed to the ESOP (Part B) or credited to the accounts
of participants in the Supplemental ESOP, as applicable. Such contribution
or crediting shall be at such time or times such that the release (or crediting)
of shares to the accounts of employees contemplated by subsections (d),
(e) and (f) above shall not be altered. Notwithstanding anything to the
contrary herein (other than the provisions of this subsection (g) relating
to "catch-up" dividends), the aggregate number of shares of ESOP Convertible
Preferred Stock issued, credited, or contributed under this Section 1.6
and Section 1.10 shall not exceed, or be less than, the Final Shares. In
the event that fixed dividends on the ESOP Preferred attributable to a
particular acquisition loan are not paid when initially due because the
Company lacks sufficient earnings and profits, and such earnings and profits
later become available, it is possible that such dividends (the "skipped
dividends") may then be paid on a catch-up basis, to the ESOP Trustee at
a time when such catch-up dividends (when added to other fixed dividends
payable on shares attributable to such loan) exceed the principal and interest
then payable on the loan to which such dividends relate. In that event,
compliance with the rules applicable to the ESOP may require a portion
of such catch-up dividends to be used to purchase New Shares rather than
pay principal or interest on such acquisition loan. If such purchase causes
the New Shares and ESOP Preferred allocated to participants in that year
to exceed the number of shares that would have been allocable absent payment
of the catch-up dividend, then, notwithstanding the provisions of Section
1.6, the parties agree that they shall negotiate in good faith to determine
whether there is a manner in which the ESOP and the Supplemental ESOP can
be amended so that, in subsequent years, allocations to participants can
be reduced in a manner that results in participants achieving the same
economic position that would have resulted if no such skipped dividends
had occurred; and if the result described in the preceding clause of this
sentence can be achieved without material detriment to any participant
(in relation to the econonuc position such participant would have enjoyed
had the skipped dividend not occurred) and without interference with the
general objectives of the ESOP program, then the Company may, with the
consent of the Unions as to the satisfaction of the standards set forth
in this sentence, which shall not be unreasonably withheld, adopt appropriate
amendments to this Agreement, the ESOP and Supplemental ESOP to effectuate
the intent of this sentence. Achievement of the goal described in the preceding
sentence may require issuance of fewer shares of ESOP Convertible Preferred
Stock in future periods than would have otherwise been the case (because
of the ESOP's unexpected early acquisition of New Shares). All disputes
concerning whether the Unions reasonably withheld a consent in accordance
with the provisions of this subsection (g) shall be resolved in accordance
with the arbitration procedures described in Section 11.2(b)(ii)(G)-(J)
of the ESOP.

 

 

(h) In consideration of each issuance by the Company of the shares of
ESOP Preferred to the ESOP Trust, the ESOP Trustee, on behalf of the ESOP
Trust, shall (y) pay to the Company an amount of cash equal to the aggregate
par value of the shares of ESOP Preferred so issued and (z) execute and
deliver a promissory note, in the aggregate principal amount equal to the
aggregate ,.purchase price for the ESOP Preferred so issued less the amount
paid pursuant to clause (y), in substantially the form set forth on Exhibit
A to the ESOP Stock Purchase Agreement (each, an "ESOP Note").

 

 

(i) In addition, the Company shall also issue and contribute to the
ESOP Trust at the Effective Time:

 

 
(x) One (1) share of Class P ESOP Voting Junior Preferred Stock, par
value 50.01 per share, of the Company having the rights, powers and privileges
set forth in the Restated Certificate (the "Class P Voting Preferred");

 

 

(y) One (1) share of Class M ESOP Voting Junior Preferred Stock, par
value $0.01 per share, of the Company having the rights, powers and privileges
set forth in the Restated Certificate (the "Class M Voting Preferred");
and

 

 

(z) One (1) share of Class S ESOP Voting Junior Preferred Stock, par
value $0.01 per share, of the Company having the rights, powers and privileges
set forth in the Restated Certificate (the "Class S Voting Preferred" and,
together with the Class P Voting Preferred and the Class M Voting Preferred,
collectively, the "ESOP Voting Preferred Stocks").

 

 
In consideration of the issuance by the Company of the ESOP Voting Preferred
Stocks to the ESOP Trust pursuant to this subsection (i) and (if and to
the extent so issued to the ESOP Trustee and if required by Delaware law)
the issuance by the Company of the Supplemental ESOP Preferred pursuant
to subsections (d), (e) and (f) or (g) above, the ESOP Trustee, on behalf
of the ESOP Trust, shall pay to the Company an amount of cash equal to
the aggregate par value of the shares of ESOP Voting Preferred Stocks and
Supplemental ESOP Preferred so issued.

 

 

(j) In addition, the Company shall also issue and contribute to the
Supplemental ESOP Trust (together with the ESOP Trust, the "ESOP Trusts"),
at the times provided for in the Supplemental ESOP, an aggregate (to give
effect to the 0.5 Common Stock exchange ratio) of: .

 

 

(i) a number of shares of Class P Voting Preferred Stock equal to
the product of (aa) 55/45ths, (bb) .4623, (cc) one half of the Fully Diluted
Old Shares and (dd) .9999, minus one (1.0);

 

 
(ii) a number of shares of Class M Voting Preferred Stock equal to the
product of (aa) 55/45ths, (bb) .3713, (cc) one half of the Fully Diluted
Old Shares and (dd) .9999, minus one (1.0); and

 

 

(iii) a number of shares of Class S Voting Preferred Stock equal to
the product of (aa) 55/45ths, (bb) .1664, (cc) one half of the Fully Diluted
Old Shares and (dd) .9999, minus one (1.0).

 

 
If, pursuant to Section 1.10 and this Section 1.6, the Company is required
to sell, contribute and/or credit on a book entry basis Additional Shares
(as defined in Section 1.10(b)), then, ratably over the 69 months following
the Effective Time, the Company shall also contribute to the ESOP Trust
or the Supplemental ESOP Trust, as appropriate, an aggregate of:

 

 

(aa) a number of shares of Class P Voting Preferred Stock equal to
the product of .4623 and the number of such Additional Shares:

 

 
(bb) a number of shares of Class M Voting Preferred Stock equal to the
product of .3713 and the number of Additional Shares; and

 

 

(cc) a number of shares of Class S Voting Preferred Stock equal to the
product of .1664 and the number of Additional Shares.

 

 
(k) The Company shall not issue any shares of any class of ESOP Convertible
Preferred Stock or ESOP Voting Preferred Stock (collectively the "ESOP
Preferred Stocks" or "ESOP Preferred Stock") other than in accordance with
the terms of Sections 1.6 and 1.10 hereof and the ESOPs.

 

 

(1) The ESOP program is designed to deliver equity ownership and voting
power to the employee groups in pre-negotiated proportions and at a pre-negotiated
pace. If and to the extent that, despite the best and cooperative efforts
of the Unions and the Company, the tax qualified ESOP cannot be implemented
in all material respects or the non-qualified Supplemental ESOP cannot
be implemented in all material respects and without income tax (excluding
the employee portion of FICA, FUTA and Medicare taxes) to participants
prior to actual distributions being made, appropriate arrangements will
be made to effectuate in all material respects the delivery of equity ownership
and voting power in the agreed-upon proportions and at the agreed-upon
pace and to accomplish the purposes contemplated by the ESOP program described
in Schedules 1.6(a)(i)-(iv) and (d). As used herein, the phrase "appropriate
arrangements" shall not (i) require the expenditure of any material amount
of funds by the Company or the issuance of securities to the ESOP Trusts
representing a greater proportion of the equity value or voting power of
the Company than that contemplated by this Agreement or (ii) result in
the diminution of the equity value or voting power of the New Shares held
by the stockholders of the Company other than the ESOP Trusts.

 

 

(m) In accordance with subscription agreements in form and substance
as set forth on Schedule 1.6(m) (the "Class I Preferred Stock Subscription
Agreement"), the Company shall issue one (1) share of Class I Junior Preferred
Stock, par value $0.01 per share, of the Company having the rights, powers
and privileges set forth in the Restated Certificate (the "Class I Preferred")
to each of the persons identified on Schedule 2.3(ii) as the initial "Independent
Directors," provided that each initial Independent Director shall have
paid to the Company an amount of cash equal to the par value of the share
of Class I Preferred to be so issued.

 

 

(n) In accordance with a subscription agreement in form and substance
as set forth on Schedule 1.6(n) (the "Class Pilot MEC Preferred Stock Subscription
Agreement"), the Company shall issue one (1) share of Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Company having the rights,
powers and privileges set forth in the Restated Certificate (the "Class
Pilot MEC Preferred") to the United Air Lines Master Executive Council
of ALPA (the "MEC"), provided that the MEC shall have paid to the Company
an amount of cash equal to the aggregate par value of the share of Class
Pilot MEC Preferred to be so issued.

 

 

(o) In accordance with a subscription agreement in form and substance
as set forth on Schedule 1.6(o) (the "Class IAM Preferred Stock Subscription
Agreement"), the Company shall issue one (1) share of Class IAM Junior
Preferred Stock, par value $0.01 per share, of the Company having the rights,
powers and privileges set forth in the Restated Certificate (the "Class
IAM Preferred") to the IAM or its designee, provided that the IAM or such
designee shall have paid to the Company an amount of cash equal to the
aggregate par value of the share of Class IAM Preferred to be so issued.

 

 

(p) In accordance with a subscription agreement inform and substance
asset forth on Schedule 1.6(p)(i) (the "Class SAM Preferred Stock Subscription
Agreement"), the Company shall issue three (3) shares of Class SAM Junior
Preferred Stock, par value $0.01 per share, of the Company having the rights,
powers and privileges set forth in the Restated Certificate (the "Class
SAM Preferred") as follows: (i) two (2) shares to the person identified
as the Salaried and Management Director on Schedule 2.3(ii) or a replacement
director identified in accordance with the nomination procedures in Schedule
1.6(p)(ii) (the "SAM Director), and (ii) one (1) share to an additional
Class SAM stockholder, defined in Schedule 1.6(p)(i) as the Designated
Stockholder, provided that such persons shall have paid to the Company
an amount of cash equal to the aggregate par value of the shares of Class
SAM Preferred to be so issued.

 

 

(q) If, due to limitations of Section 415 of the Internal Revenue Code
or due to the issuance of Additional Shares, the respective Employee Groups
(as defined in the ESOP) are prevented from reasonably achieving the contemplated
allocations among and within their respective Employee Groups, the parties
agree to cooperate to modify the Class 1 Decimal with respect to sales
contemplated by Section 1.6(e) and Section 1.6(t) and to make appropriate
conforming modifications to the ESOP, Supplemental ESOP and all related
instruments if so requested by the Company, ALPA or the IAM. Such modifications
shall maximize the Class 1 Decimal consistent with achieving with a high
degree of certainty that the limits of the Internal Revenue Code Section
415(c)(6) shall not be exceeded (which condition regarding Section 415(c)(6)
may be waived by ALPA).

 

 

SECTION 1.7    Stock Options.    Each
employee stock option to purchase Old Shares granted under any employee
stock option or compensation plan or arrangement of the Company outstanding
immediately prior to the Effective Time (an "Option") shall remain outstanding
upon and following consummation of the Recapitalization, and each such
Option, whether or not then vested or exercisable immediately prior to
the Effective Time, shall (i) if provided by the terms thereof (or if accelerated
in accordance with the relevant plan) become fully vested and exercisable
at the Effective Time and (ii) after the Effective Time represent the right
to receive, until the expiration thereof and in accordance with its terms,
in exchange for the aggregate exercise price for such Option, without interest,
the Recapitalization Consideration with respect to each Old Share that
such holder would have been entitled to receive had such holder exercised
such Option in full immediately prior to the Effective Time. The Recapitalization
Consideration issuable upon exercise of an Option shall be issued in the
same proportion as holders of Old Shares would be entitled to receive their
Recapitalization Consideration, but for fractional interests, among cash
and New Shares and, if applicable, principal amount of Series A and Series
B Debentures and Depositary Shares representing interests in the $25 liquidation
preference of Public Preferred Stock, except that (i) if the Underwriting
Alternative has not been consummated for any reason at of prior to the
Effective Time with respect to the Depositary Shares, the Series A Debentures
or the Series B Debentures, as the case may be, the total amount of each
of Series A and Series B Debentures and Depositary Shares representing
interests in the $25 liquidation preference of the Public Preferred Stock
to be issued upon exercise of each such Option shall be rounded upwards
to the nearest integral multiple of $100, $100 and $25, respectively (collectively,
the "Option Adjustment"), and the amount of cash payable shall be reduced
by a corresponding amount so that the holder does not receive fractional
Depositary Shares, fractional Series A Debentures or fractional Series
B Debentures (provided, however, if upon exercise of an Option the amount
of cash to be received is less than the Option Adjustment, the total amount
of each of Series A and Series B Debentures and Depositary Shares representing
interests in the $25 liquidation preference of Public Preferred Stock shall
be rounded downwards to the nearest integral multiple of $100, $100 and
$25, respectively, and the amount of cash payable shall be increased by
a corresponding amount so that the holder does not receive fractional Depositary
Shares, fractional Series A Debentures or fractional Series B Debentures)
and (ii) whether or not the Underwriting Alternative has been consummated
at or prior to the Effective Time the total amount of New Shares issuable
to each Option holder in respect of all Options held by such holder shall
be rounded upwards to the nearest whole New Share. Except as specifically
provided in this Section 1.7, the Company shall not make any other adjustments
to the terms of the Options as a result of the issuance of the ESOP Preferred
Stocks or the terms of the ESOP Preferred Stocks (including, without limitation,
the dividend and conversion rights thereof).

 

 

SECTION 1.8    Convertible Company Securities. 
Each share of the Prior Preferred Stock and each of the Air Wis Services,
Inc. 73/4% Convertible Subordinated Debentures, due 2010, and Air Wis Services,
Inc. 8 1/2% Convertible Subordinated Notes, due 1995 (collectively,
the "Air Wis Convertible Debentures"), outstanding immediately prior to
the Effective Time (each, a "Convertible Company Security") shall upon
and following consummation of the Recapitalization remain outstanding,
and each holder of any such Convertible Company Security shall thereafter
have the right to receive, upon conversion, without interest, the Recapitalization
Consideration with respect to each Old Share that such holder would have
been entitled to receive had such holder converted such Convertible Company
Security in full immediately prior to the Effective Time. The Recapitalization
Consideration issuable upon conversion of a Convertible Company Security
shall be issued in the same proportion as holders of Old Shares receive
their Recapitalization Consideration, but for fractional interests, among
cash and New Shares and, if applicable, principal amount of Series A and
Series B Debentures and Depositary Shares representing interests in the
$25 liquidation preference of Public Preferred Stock, except that (i) if
the Underwriting Alternative has not been consummated for any reason at
or prior to the Effective Time with respect to the Depositary Shares, the
Series A Debentures or the Series B Debentures, as the case may be, the
total amount of each of Series A and Series B Debentures and Depositary
Shares to be issued upon conversion of the Convertible Company Security
shall be rounded upwards to the nearest integral multiple of $100, $100
and $25, respectively, (collectively, the "Convertible Company Security
Adjustment") and the amount of cash payable shall be reduced by a corresponding
amount so that the holder does not receive fractional Depositary Shares
representing interests in the $25 liquidation preference of Public Preferred
Stock, fractional Series A Debentures or fractional Series B Debentures
(provided, however; if upon conversion of a Convertible Company Security
the amount of cash to be received is less than the Convertible Company
Security Adjustment, the total amount of each of Series A and Series B
Debentures and Depositary Shares representing interests in the $25 liquidation
preference of Public Preferred Stock shall be rounded downwards to the
nearest integral multiple of $100, $100 and $25, respectively, and the
amount of cash payable shall be increased by a corresponding amount so
that the holder does not receive fractional Depositary Shares, fractional
Series A Debentures of fractional Series B Debentures) and (ii) whether
or not the Underwriting Alternative has been consummated at of prior to
the Effective Time the total amount of New Shares issuable to each holder
of Convertible Company Securities in respect of all Convertible Company
Securities held by such holder shall be rounded upwards to the nearest
whole New Share. Except as specifically provided in this Section 1.8, the
Company shall not make any other adjustments to the terms of the Convertible
Company Securities as a result of the issuance of the ESOP Preferred Stocks
or the terms of the ESOP Preferred Stocks (including, without limitation,
the dividend and conversion rights thereof).

 

 

SECTION 1.9    Form of Recapitalization Consideration. 
Notwithstanding anything in Section 1.7 or 1.8 to the contrary, if
the holder of an Option or a Convertible Company Security exercises such
Option or Convertible Company Security at any time after either series
of Debentures or the Public Preferred Stock has been redeemed, retired
or repaid in full (the securities redeemed, retired or repaid hereinafter
referred to as the "Retired Securities"), the holder of such Option or
Convertible Company Security shall not be entitled to receive any Retired
Securities but shall receive in lieu thereof an amount of cash equal to
the principal amount (without premium regardless of whether a premium is
paid at the time of redemption, retirement or repayment in full) or liquidation
preference (without the amount of accrued dividends regardless of whether
accrued dividends were paid at the time of redemption, retirement or repayment
in full), as the case may be, of or represented by the Retired Securities
that such holder otherwise would have received in respect of the exercise
of such Option or Convertible Company Security.

 

 

SECTION 1.10    Additional ESOP Shares.  
(a) As soon as practicable after the Measuring Date, the Company shall
(x) contribute shares of Supplemental ESOP Preferred Stock to Part B of
the ESOP and (y) provide an allocation of shares of Supplemental ESOP Preferred
Stock on a book entry basis in a manner consistent with the allocation
under the Supplemental ESOP, such that the aggregate number of shares under
(x) and (y) is equal to a fraction of the Additional Shares (as defined
in Section 1.10(b) below), which fraction shall be the First Year Fraction.
All such shares shall be Supplemental ESOP Preferred. To the extent permissible
under the limitations imposed by the Internal Revenue Code, .the shares
determined under this subsection (a) shall be contributed to Part B of
the ESOP, and the remaining shares shall be allocated under the Supplemental
ESOP.

 

 

(b) "Additional Shares" shall mean the number of shares of ESOP
Convertible Preferred Stock determined as the excess of (A) the product
of (w) a fraction, the numerator of which is the Adjusted Percentage (as
defined in Section 1.10(c) below) at the close of business on the Measuring
Date, and the denominator of which is the excess of one over such Adjusted
Percentage (expressed as a decimal), (x) the Fully-Diluted Shares (as defined
in Section 1.10(d) below) at the close of business on the Measuring Date,
(y) a fraction, the numerator of which is one, and the denominator of which
is the Conversion Rate (as defined in Article FOURTH, Part II, Section
6.1 of the Restated Certificate), and (z) .9999, over (B) 17,675,345 ,
provided
that
the number of Additional Shares shall not be less than zero.

 

 

(c) "Adjusted Percentage" shall mean that percentage set forth
under the heading "Adjusted Percentage" on the table set forth on Schedule
1.10 that corresponds to the Average Closing Price (as defined in Section
1.10(e) below) set forth under the heading "Average Closing Price" on such
table, provided that if the Average Closing Price falls between
two entries on the table, the Adjusted Percentage shall be determined by
a straight-line interpolation between the two entries in the "Adjusted
Percentage" column that correspond to the next lowest and next highest
entries in the "Average Closing Price" column, rounded to the nearest 0.00000001
%.

 

 

(d) "Fully-Diluted Shares" shall mean the sum of (i) the excess
of (A) the aggregate number of New Shares outstanding immediately prior
to the close of business on the Measuring Date over (B) the aggregate number
of New Shares issued after the Effective Time other than upon exercise,
conversion or exchange of Options or Convertible Company Securities, (ii)
the aggregate number of New Shares issuable (whether or not from New Shares
held in its treasury) upon the conversion of the Series A Preferred Stock
outstanding immediately prior to the close of business on the Measuring
Date, (iii) the aggregate number of New Shares issuable (whether or not
from New Shares held in its treasury) upon the exercise, conversion or
exchange immediately prior to the close of business on the Measuring Date
of any other Convertible Company Securities with an exercise, conversion
or exchange price equal to or less than the Old Share Equivalent Price
(as defined in Section 1.10(t) below) and (iv) the aggregate number of
New Shares that would be required to be issued by the Company (whether
or not from New Shares held in its treasury) if all Options with an exercise
price less than the Old Share Equivalent Price were exercised in full immediately
prior to the close of business on the Measuring Date and the proceeds from
such Option exercises are used by the Company to repurchase Recapitalization
Consideration (in the open market at the Old Share Equivalent Price) to
be delivered in connection with the Company's obligation to issue Recapitalization
Consideration upon exercise of such Options.

 

 

(e) "Average Closing Price" shall mean the average of the product
of (i) the Current Market Price (as defined in Section l.10(g) below) of
a New Share for each Trading Day (as defined in Section 1.10(h) below)
during the Measuring Period (as defined in Section 1.10(i) below) (or in
case the New Shares are exchanged for or changed, reclassified or converted
into stock, securities or other property (including cash or any combination
thereof), whether or not of the Company, the Fair Market Value (as defined
in Section 1.10(j) below) of such stock, securities or other property into
which a New Share has been exchanged, changed, reclassified or converted)
and (ii) the Conversion Rate in effect on such Trading Day.

 

 

(f) "Old Share Equivalent Price" shall mean the sum of (i) the
product of (x) 0.5 and (y) the Average Closing Price of a New Share, (ii)
either (a) the product of (x) 1.244 and (y) the average of the Current
Market Price of a Depositary Share for each Trading Day during the Measuring
Period or (b) if the Underwriting Alternative with respect to the Depositary
Shares has been consummated, the Depositary Share Proceeds Amount, (iii)
either (a) the product of (x) .1550 and (y) the average of the Current
Market Price of a Series A Debenture for each Trading Day during the Measuring
Period or (b) if the Underwriting Alternative with respect to the Series
A Debentures has been consummated, the Series A Debenture Proceeds Amount,
(iv) either (a) the product of (x) .1550 and (y) the average of the Current
Market Price of a Series B Debenture for each Trading Day during the Measuring
Period or (b) if the Underwriting Alternative with respect to the Series
B Debentures has been consummated, the Series B Debenture Proceeds Amount
and (v) $25.80.

 

 

(g) "Current Marker Price" of publicly traded New Shares or any
other class or series of capital stock or other security of the Company
or any other issuer for any day shall mean the last reported sales price,
regular way on such day, or, if no sale takes place on such day, the average
of the reported closing bid and asked prices on such day, regular way,
in either case as reported on the New York Stock Exchange Composite Tape
or, if such security is not listed or admitted for trading on the New York
Stock Exchange, Inc. ("NYSE"), on the principal national securities exchange
on which such security is listed or admitted for trading or quoted or,
if not listed or admitted for trading or quoted on any national securities
exchange, on the Nasdaq National Market, or, if such security is not quoted
on such National Market, the average of the closing bid and asked prices
on such day in the over-the-counter market as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or, if bid and asked prices for such security on such day shall not have
been reported through NASDAQ, the average of the bid and asked prices on
such day as furnished by any NYSE member firm regularly making a market
in such security selected for such purpose by the Board of Directors of
the Company.

 

 

(h) "Trading Day" shall mean any day on which the securities
in question are traded on the NYSE, or if such securities are not listed
or admitted for trading or quoted on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted, or
if not listed or admitted for trading or quoted on any national securities
exchange, on the Nasdaq National Market, or if such securities are not
quoted on such National Market, in the applicable securities market in
which the securities are traded.

 

 

(i) "Measuring Period" shall mean the period commencing on the
day of the Effective Time and ending on the Measuring Date.

 

 

(j) "Fair Market Value" shall mean the average of the daily Current
Market Prices of the security in question during the five (5) consecutive
Trading Days before the earlier of the day in question and the "ex" date
with respect to the issuance or distribution requiring such computation.
The term "'ex' date," when used with respect to any issuance or distribution,
means the first day on which the New Shares trade regular way, without
the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current
Market Price. With respect to any asset or security for which there is
no Current Market Price, the Fair Market Value of such asset or security
shall be determined in good faith by the Board of Directors of the Company.

 

 

SECTION 1.11 Underwriting Alternative. Prior to the date that
is ten days after the date of the Company Proxy Statement, but at least
seven days prior to the Announcement Date, the Company may elect to pursue
the underwriting of (a) the Depositary Shares, (b) the Series A Debentures,
(c) the Series B Debentures, or (d) any combination of the foregoing (referred
to collectively herein as the "Underwriting Alternative"), provided that
consummating an underwriting with respect to the Depositary Shares and/or
either or both series of Debentures, as the case may be, shall be in lieu
of issuing Depositary Shares or either or both such series of Debentures
to holders ef Old Shares pursuant to Section 1.5 hereof, to holders of
Options pursuant to Section 1.7 hereof and to holders of Convertible Company
Securities pursuant to Section 1.8 hereof. If the Company elects the Underwriting
Alternative, it may offer pursuant thereto approximately the amounts of
Depositary Shares and/or Debentures which if the Underwriting Alternative
were not elected would be issuable upon the exchange of all outstanding
Old Shares in the Reclassification and upon exercise of Options and conversion
of the Convertible Company Securities reasonably expected to be exchanged
or converted in accordance with Sections 1.7 and 1.8 hereof (at the rate
of $31.10 liquidation preference of Public Preferred Stock as represented
by Depositary Shares, $15.55 principal amount of Series A Debentures and
$15.55 principal amount of Series B Debentures per Old Share), which amounts
shall be rounded up to produce aggregate amounts of Depositary Shares and
Debentures of each series that are consistent with customary aggregate
underwriting denominations. If it so elects to pursue the Underwriting
Alternative, the Company shall use its best efforts to accomplish such
underwritings, including selecting a managing underwriter or underwriters,
filing registration statements with the SEC, and entering into a firm commitment
underwriting agreement or agreements, provided, however, that the
Company may elect to terminate the Underwriting Alternative at any time
prior to the Effective Time. The Unions will cooperate and use their best
efforts to facilitate the underwritings. The Underwriting Alternative will
be effected in accordance with customary underwriting agreements which
may reflect that, if the Company is advised by the managing underwriter
or managing underwriters that the Public Preferred Stock (represented by
Depositary Shares), Series A Debentures or Series B Debentures would be
priced in excess of the Maximum Price applicable to such security (so that
such security, if priced at the applicable Maximum Pricing, could only
be sold at less than par), and is further advised that consistent with
industry practice the Underwriting Alternative would be facilitated by
the sale of such securities at or closer to par, the Company may reduce
the amount of such securities to be sold and increase the dividend or interest
rate above the applicable Maximum Pricing so that such securities may be
sold at or closer to par, provided that the aggregate amount of
dividends payable annually in respect of the Public Preferred Stock (represented
by the Depositary Shares) to be sold, and the aggregate amount of interest
payable annually in respect of either series of Debentures to be sold,
that are priced above the applicable Maximum Pricing may not exceed the
aggregate amount of dividends or interest payable annually in respect of
such security at the applicable Maximum Pricing with respect to the amount
of such securities as originally proposed to be offered. If the Underwriting
Alternative with respect to the Depositary Shares and both series of Debentures
is consummated, the amount of cash payable in respect of each Old Share
shall equal the sum of (i) $25.80 per share and (ii) the gross proceeds
(price to public without deducting any underwriting discount or other costs)
received by the Company for each $31.10 liquidation preference of the Public
Preferred Stock as represented by Depositary Shares in the appropriate
underwriting (the "Depositary Share Proceeds Amount"), (iii) the gross
proceeds (price to public without deducting any underwriting discount or
other costs) received by United for each $15.55 principal amount of Series
A Debentures in the appropriate underwriting (the "Series A Debenture Proceeds
Amount") and (iv) the gross proceeds (price to public without deducting
any underwriting discount or other costs) received by United for each $15.55
principal amount of Series B Debentures in the appropriate underwriting
(the "Series B Debenture Proceeds Amount").

 

 

ARTICLE II
 

THE COMPANY AND UNITED
 

SECTION 2.1    Certificate of Incorporation.  As
of the Effective Time, the certificate of incorporation of the Company
shall be the Restated Certificate.

 

 
SECTION 2.2    Bylaws.    As of
the Effective Time, the bylaws of the Company in effect immediately prior
to the Effective Time shall be amended and restated in accordance with
applicable law and the Restated Certificate, in form and substance as set
forth in Schedule 2.2 (the "Restated Bylaws").

 

 

SECTION 2.3.   Directors and Officers.   Immediately
prior to the Effective Time, the Company shall cause the persons identified
on Schedule 2.3(i) to resign, as of the Effective Time, from the
Board of Directors of the Company (which resignations, for purposes of
all rights and benefits of such directors under all agreements, plans,
policies and arrangements of the Company and United including those identified
in the letter referred to in Section 5.11 hereof, shall be deemed to have
occurred immediately following the Effective Time). From and after the
Effective Time, until their successors are duly elected or appointed and
qualified in accordance with applicable law, the Restated Certificate and
the Restated Bylaws, or until their earlier death, resignation, disqualification
or removal, the persons identified or described on Schedule 2.3(ii)
shall
constitute the entire Board of Directors of the Company (the "New Directors")
and each shall serve in the classes and capacities identified in such Schedule.
Except as provided in the two preceding sentences, or as otherwise provided
in the Restated Certificate or in the Restated. Bylaws, the officers of
the Company immediately prior to the Effective Time (other than the Chairman
and Chief Executive Officer, the President and Chief Operating Officer
and the Executive Vice-President-Corporate Affairs and General Counsel
of the Company (the "Retiring Executives")) shall be the officers of the
Company from and after the Effective Time until their successors are duly
elected or appointed and qualified or until their earlier death, resignation,
disqualification or removal. The Retiring Executives shall retire from
all positions with the Company and the Subsidiaries held by them effective
at or immediately prior to the Effective Time and such retirement shall
be treated as set forth in separate letter agreements to be entered into
at or prior to the Effective Time among each Retiring Executive, on the
one hand, and the Company and United, on the other hand, substantially
in the form and substance provided to the Unions prior to the date hereof.
Other than the Retiring Executives, no other officer of the Company or
United may be terminated for a period of six months following the Effective
Time unless such termination shall be approved, specifically as to such
officer, by at least two of the New Directors identified as "Outside Public
Directors" in Schedule 2.3(ii) and the Chief Executive Officer of the Company
following the Effective Time. At the Effective Time, Gerald Greenwald or
such other person as shall be proposed by the Unions prior to the Effective
Time (and not found unacceptable by the Company) shall be appointed by
the Board of Directors, subject to his being ready, willing and able to
serve, as Chief Executive Officer of the Company and United. Such person
as shall be proposed by the Chief Executive Officer and the Unions following
the Effective Time (and approved in accordance with the provisions of Article
FIFTH, Section 3.6.2 of the Restated Certificate) shall be appointed by
the Board of Directors, subject to his/her being ready, willing and able
to serve, as Chief Operating Officer of the Company and United. From and
after the Effective Time, subject to the fiduciary duties of the Board
of Directors, until the Termination Date the Company shall cause (i) the
Chief Executive Officer of the Company to also be one of the Board's nominees
to serve as a Management Public Director (as defined in the Restated Certificate)
and (ii) the Chief Executive Officer of the Company to also serve as the
Chief Executive Officer of United.

 

 

SECTION 2.4    United.    The Company
shall take all appropriate actions such that, as of the Effective Time,
the certificate of incorporation of United shall be amended to include
the provision set forth in Schedule 2.4 hereto.

 

 

ARTICLE III
 

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY

The Company represents and warrants to each of the Unions that:
SECTION 3.1    Corporate Existence and Power.  
The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and has all corporate
power and authority and all governmental licenses, authorizations, consents
and approvals required to own, operate and lease its assets and to carry
on its business as now conducted except for licenses, authorizations, consents
and approvals the absence of which would not have a Material Adverse Effect
(as defined below). The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes
such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not have a Material Adverse Effect. For
purposes of this Agreement, "Material Adverse Effect" means, individually
or in the aggregate, any change or effect the consequence of which is materially
adverse to (i) the condition (financial or otherwise), business, assets
or results of operations of the Company and the Subsidiaries (as defined
in Section 3.6), taken as a whole, from that in effect on the date of the
Company's Annual Report on Form 10-K, dated March 11, 1994, for the fiscal
year ended December 31, 1993, as amended by Form 10-K/A, dated March 15,
1994, as filed with the Securities and Exchange Commission and previously
furnished to the Unions (the "1993 10-K") (except as otherwise specifically
provided herein) or (ii) the Company's ability to effect any of the transactions
constituting part of the Recapitalization, except for such changes or effects
resulting from, or in connection with, (i) labor relations between the
Company or its Subsidiaries, on the one hand, and employees represented
by the Unions, on the other hand (including a strike or other disruption
in the operations of the Company or its Subsidiaries, which shall not be
regarded as a Material Adverse Effect) or (ii) matters disclosed in this
Agreement or any Schedule, Exhibit or other attachment hereto. The Company
has heretofore delivered to counsel to the Unions true and complete copies
of the Company's Restated Certificate of Incorporation as currently in
effect (the "Certificate of Incorporation"), bylaws and Rights Agreement
(as defined in Section 3.5),:.each as currently in effect. There has been
no change in or amendment of the Certificate of Incorporation or bylaws
of the Company or, except as set forth in Section 5.6, the Rights Agreement
since November 1, 1993. The Company is not in violation of any of the provisions
of the Certificate of Incorporation or its bylaws.

 

 
SECTION 3.2    Corporate Authorization.  
The execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby
are within the Company's corporate powers and, except for (w) any required
approval by the Company's stockholders in connection with the consummation
of the Shareholder Vote Matters (as defined in Section 5.2), (x) the approval
by the Company's stockholders of amendments to each of the Company's 1981
Incentive Stock Program, 1988 Restricted Stock Plan and Incentive Compensation
Plan, in form and substance as set forth on Schedule 3.2(i), Schedule
3.2(ii)
and
Schedule 3.2(iii), respectively (the "Company Plan Matters"), (y) the approval
and ratification of the Company Plan Matters by the New Directors following
the Effective Time and (z) approval by the Board of Directors of the Company
of the filing of the Restated Certificate in accordance with the applicable
provisions of Delaware Law, have been duly authorized by all necessary
corporate action. Prior to the Effective Time, the Board of Directors of
the Company shall approve the filing of the Restated Certificate in accordance
with the applicable provisions of Delaware Law. This Agreement has been
duly executed and delivered by the Company and, assuming due authorization,
execution and delivery by each of the Unions, constitutes a legal, valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms. The Board of Directors of the Company has taken
all necessary and appropriate actions so that the restrictions on "business
combinations" contained in Section 203 of Delaware Law (i) will not apply
with respect to or as a result of the Recapitalization, including, without
limitation, the acquisition of the ESOP Preferred Stock by the ESOPs and
(ii) will not apply prior to the Termination Date (as defined in Article
FIFTH, Section 1.72 of the Restated Certificate) to "business combinations"
(as defined in Section 203 of Delaware Law) involving the Company
or any of its Subsidiaries, on the one hand, and the ESOP Trustee, the
ESOPS or either of the Unions, on the other hand, which otherwise would
be subject to Article FIFTH, Section 3.8 of the Restated Certificate. The
Company has taken all appropriate action to establish each of the ESOPS
effective not later than the Effective Time.

 

 

SECTION 3.3    Governmental Authorization.  The
execution, delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated hereby
require no consent, approval, authorization or other action by or in respect
of, or filing with or notification to, any governmental body, agency, official
or authority other than (i) the filing of the Restated Certificate in accordance
with Delaware Law; (ii) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); (iii) compliance with any applicable requirements of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the "1933 Act"), the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "1934 Act") and the
TIA; (iv) any applicable filings with the United States Department of Transportation
("DOT"); and (v) actions or filings the absence of which would not have
a Material Adverse Effect.

 

 

SECTION 3.4    Non-Contravention.   Except
as set forth on Schedule 3.4, the execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) contravene or
conflict with the Certificate of Incorporation or bylaws of the Company,
(ii) assuming compliance with the matters referred to in Section 3.3, contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable
to the Company, any Subsidiary, or, to the knowledge of the Company, any
of the CRS Companies (as defined in Section 3.6), (iii) constitute a default
under or give rise to a right of termination, cancellation or acceleration
(other than with respect to the acceleration of the exercisability of Options,
the vesting of restricted stock of the Company or the payment of severance
benefits) of any right or obligation of the Company, any Subsidiary or,
to the knowledge of the Company, any of the CRS Companies, or to a loss
of any benefit to which the Company, any Subsidiary or, to the knowledge
of the Company, any of the CRS Companies, is entitled under. any provision
of any agreement, contract or other instrument binding upon the Company,
any Subsidiary or, to the knowledge of the Company, any of the CRS Companies,
or any license, franchise, permit or other similar authorization held by
the Company, any Subsidiary, or, to the knowledge of the Company, any of
the CRS Companies, or (iv) result in the creation or imposition of any
Lien (as defined below) on any asset of the Company, any Subsidiary, or,
to the knowledge of the Company, any of the CRS Companies, which violations,
defaults, rights of termination or Liens could have a Material Adverse
Effect. For purposes of this Agreement, "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset. For purposes of the representations
and warranties relating to the CRS Companies that are qualified by the
knowledge of the Company, "knowledge of the Company" shall mean the knowledge
of the executive officers of the Company, United and Covia Corporation.
There are no (i) consents from holders of Options nor (ii) amendments to
the terms of Options or compensation plans or arrangements, that are necessary
to give effect to the transactions contemplated by Section 1.7.

 

 

SECTION 3.5    Capitalization.    The
authorized capital stock of the Company is set forth in the Certificate
of Incorporation of the Company and consists of (i) 125,000,000 Old Shares
and (ii) 16,000,000 shares of Preferred Stock, without par value, of which
1,250,000 hive been designated as Series C Junior Participating Preferred
Stock ("Junior Preferred Stock") and are reserved for issuance upon exercise
of the Rights (as defined in the Rights Agreement dated as of December
11, 1986 between the Company and First Chicago Trust Company of New York
(formerly Morgan Shareholder Services Trust Company), as amended (the "Rights
Agreement")) and 6,000,000 have been designated as Prior Preferred Stock.
As of March 22, 1994, there were outstanding (a) 24,570,539 Old Shares
(including 119,643 unvested shares issued under the UAL 1988 Restricted
Stock Plan), (b) 6,000,000 shares of Prior Preferred Stock (convertible
into 3,833,866 Old Shares), (c) Rights to purchase 245,710 shares of Junior
Preferred Stock, (d) Options to purchase an aggregate of 1,648,668 Old
Shares (of which 13,927 have tandem stock appreciation rights held by former
employees with an aggregate exercise price of $1,061,872.75 and of which
Options 11,500 are held by ex-employees of the Company with vesting dates
after the expiration of such Options pursuant to such ex-employees' severance
agreements), and (e) $35,535,000 principal amount of Air Wis Convertible
Debentures convertible into 140,134 Old Shares, of which $2,530,000 principal
amount, convertible into 9,765 Old Shares, is held by Air Wis Services,
Inc. All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except
as set forth in this Section 3.5 and except for changes since March 1,
1994 resulting from the exercise of Options or the conversion of Convertible
Company Securities, in each case outstanding on such date, there are outstanding
no (w) shares of capital stock or other voting securities of the Company,
(x) securities of the Company or any Subsidiary convertible into or exchangeable
for shares of capital stock or voting securities of the Company, (y) options,
subscriptions, warrants or other rights, agreements, arrangements or commitments
of any character to acquire from the Company or any Subsidiary any capital
stock, voting securities or securities convertible into or exchangeable
or exercisable for capital stock or voting securities of the Company, or
(z) obligations of the Company or any Subsidiary to issue any capital stock,
voting securities or securities convertible into or exchangeable or exercisable
for capital stock or voting securities of the Company (the items in clauses
(w), (x), (y) and (z) being referred to collectively as the "Company Securities").
Except (i) as set forth above, (ii) for tax withholding and cashless exercise
features of the Options and restricted stock, and (iii) for stock appreciation
rights that do not become exercisable until September 1, 1994 and expire
at the Effective Time, there are no obligations of the Company or any Subsidiary
to repurchase, redeem or otherwise acquire any Company Securities or make
any payments based upon the value of any Company Securities.

 

 

SECTION 3.6    Subsidiaries.
(a) Each Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation,
has all corporate power and authority and all governmental licenses, authorizations,
consents and approvals required to own, operate and lease its assets and
to carry on its business as now conducted (except for those the absence
of which would not have a Material Adverse Effect) and is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it
or the nature of its activities make such qualification necessary, except
for those jurisdictions where failure to be so qualified would not have
a Material Adverse Effect. For purposes of this Agreement, "Subsidiary"
means any entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or indirectly owned
by the Company, but shall in no event include the CRS Companies. A list
of Subsidiaries and their respective jurisdictions of incorporation previously
has been delivered to counsel to the Unions by the Company. Nothing in
this Section 3.6 or Section 5.1 shall be deemed to prohibit the merger
or other consolidation of immaterial wholly-owned Subsidiaries with or
into the Company or any of its wholly-owned Subsidiaries (Covia Corporation
being deemed material for the purpose of this sentence).

 

 
(b) Except for director qualifying shares and similar securities, all
of the outstanding capital stock of, or other ownership interests in, each
Subsidiary is owned by the Company, directly or indirectly, free and clear
of any Lien and free of any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of such
capital stock or other ownership interests). Except for director qualifying
shares and similar securities, there are outstanding no (i) securities
of the Company or any Subsidiary convertible into or exchangeable for shares
of capital stock or other voting securities or ownership interests in any
Subsidiary or (ii) options, subscriptions, warrants or other rights, agreements,
arrangements or commitments of any character to acquire from the Company
or any Subsidiary, and no other obligation of the Company or any Subsidiary
to issue, any capital stock, voting securities or other ownership interests
in, or any securities convertible into or exchangeable or exercisable for
any capital stock, voting securities or ownership interests in, any Subsidiary
(the items in clauses (i) and (ii) being referred to collectively as the
"Subsidiary Securities"). There are no outstanding obligations of the Company
or any Subsidiary to repurchase, redeem or otherwise acquire any outstanding
Subsidiary Securities or make any payments based upon the value of any
Subsidiary Securities.

 

 

(c) Each of Apollo Travel Services Partnership, a Delaware general partnership
("ATS"), Galileo Japan Partnership, a Delaware general partnership ("GJP"),
and Galileo International Partnership, a Delaware general partnership ("GIP"
and, together with ATS and GJP, collectively, the "CRS Companies") is a
general partnership formed under the laws of the State of Delaware, is
validly existing and in good standing under the laws of Delaware, and has
all partnership power and authority and all governmental licenses, authorizations,
consents and approvals required to own, operate and lease its assets and
to carry out its business as now conducted (except for those the absence
of which would not have a Material Adverse Effect). The partnership agreement
establishing each of the CRS Companies, together with _ all exhibits and
amendments thereto has been provided to the Unions, and no Subsidiary that
is party to either such partnership agreement is or has been in any manner
in breach of, or in default under, any provision thereof, nor is the Company,
United or any officer or director of either of them aware of any breach
or default by any other party to either of such partnership agreements
that would or could be reasonably expected to result in a Material Adverse
Effect. Except as set forth on Schedule 3.6(c), all of the outstanding
ownership interests held by Covia Corporation, a Delaware corporation and
wholly owned Subsidiary, of the CRS Companies are free and clear of any
Lien other than as set forth in the partnership agreement with respect
to such entity.

 

 

SECTION 3.7    Securities and Exchange Commission
("SEC") Filings.
(a) The Company has delivered to counsel for each of the Unions (i) its
Annual Reports on Form 10-K for its fiscal years ended December 31, 1993,
1992 and 1991, without exhibits, (ii) all of its Quarterly Reports on Form
10-Q filed with the SEC since December 31, 1992, without exhibits, (iii)
its proxy or information statements relating to meetings of, or actions
taken without a meeting by, the stockholders of the Company since December
31, 1992 and (iv) all of its other reports, statements, schedules and registration
statements filed with the SEC since December 31, 1992, without exhibits.
The reports, statements and schedules referred to in the preceding sentence
are all the documents (other than preliminary material and supplemental
filings, excluding supplemental prospectuses) that the Company was required
to file with the SEC since December 31, 1992. As of its filing date, all
of such reports, statements and schedules,complied in all material respects
with the requirements of the 1933 Act or the 1934 Act, as the case may
be.

 

 
(b) As of its filing date, no such report, statement or schedule filed
pursuant to the 1934 Act contained any untrue statement of a material fact
or omitted to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading.

 

 

(c) No such registration statement, as amended or supplemented, if applicable,
filed pursuant to the 1933 Act as of the date such statement or amendment
became effective contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.

 

 

SECTION 3.8    Financial Statements.   The
audited consolidated financial statements of the Company included in its
Annual Reports on Form 10-K and the unaudited consolidated interim financial
statements included in its Quarterly Reports on Form 10-Q referred to in
Section 3.7 have been prepared in accordance with generally accepted accounting
principles consistently applied and fairly present (except as may be indicated
in the notes thereto) the consolidated financial position -of the Company
and its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject
to normal, immaterial year-end audit adjustments in the case of any unaudited
interim financial statements).

 

 

SECTION 3.9.   Disclosure Documents.
(a) Each document required to be filed by the Company with the SEC in connection
with the transactions contemplated by this Agreement (the "Company Disclosure
Documents"), including, without limitation, the proxy statement of the
Company (the "Company Proxy Statement") (which also is the prospectus of
the Company and United with respect to the New Shares, Depositary Shares,
Public Preferred Stock, Redeemable Preferred Stock and Debentures to be
issued in connection with the Recapitalization (the "Recapitalization Securities")
and is to be included in the Registration Statement on Form S-4 (the "Registration
Statement") to be filed with the SEC by the Company under the 1933 Act
and in the Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3")
to be filed with the SEC by the Company under the 1934 Act), and the registration
statements to be filed with the SEC by the Company and United under the
1933 Act in connection with the underwriting described in Section 1.11
hereof (the "Underwriting Registration Statements") and any amendments
or supplements to any of the foregoing documents will, when filed, when
the Registration Statement and the Underwriting Registration Statements
are declared effective by the SEC, at the time of the distribution thereof
and at the time stockholders vote on the Shareholder Vote Matters comply
as to form in all material respects with the applicable requirements of
the 1933 Act and the 1934 Act.

 

 
(b) At the time the Company Proxy Statement and Schedule 13E-3 or any
amendment or supplement thereto is first mailed to stockholders of the
Company, and at the time such stockholders of the Company vote on the Shareholder
Vote Matters, the Company Proxy Statement and Schedule 13E-3, as supplemented
or amended, if applicable, will not be false or misleading with respect
to any material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
At the time of the filing of the Registration Statement and the Underwriting
Registration Statements and any amendment or supplement thereto, at the
time the same are declared effective by the SEC, at the time of any distribution
under the Registration Statement and the Underwriting Registration Statements,
at the time the stockholders of the Company vote on the Shareholder Vote
Matters and at the Effective Time, such Registration Statement and Underwriting
Registration Statements, as so amended or supplemented, will not be false
or misleading with respect to any material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading. At the time of the filing of any Company Disclosure Document
other than the Company Proxy Statement, Schedule 13E-3, Registration Statement
and the Underwriting Registration Statements and at the time of any distribution
thereof, such Company Disclosure Document will not be false or misleading
with respect to any material fact or omit to state any material fact required
to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties contained in this Section 3.9(b) will
not apply to statements included in or omissions from the Company Disclosure
Documents based upon information furnished to the Company in writing by
either Union specifically for use therein.

 

 

SECTION 3.10    Absence of Certain Changes.   
Except as disclosed in SEC filings referred to in Section 3.7 filed prior
to the date hereof, since December 31, 1993, there has been no event, and
no state of circumstances has existed, that has had or will, or could reasonably
be expected to, have a Material Adverse Effect.

 

 

SECTION 3.11    Finders' Fees.   
Except for First Boston and Lazard, whose fees will be paid by the Company,
and as specifically contemplated herein, there is no investment banker,
broker or finder which has been retained by or is authorized to act on
behalf of the Company, any Subsidiary or, to the knowledge of the Company,
any CRS Company, who might be entitled to any fee or commission from the
Company, either Union or any affiliate of either of them upon consummation
of the transactions contemplated by this Agreement (other than in connection
with the Underwriting Alternative), based upon arrangements made by or
on behalf of the Company. .

 

 

SECTION 3.12.   Board Action.   The Board
of Directors (i) has determined that the transactions contemplated hereby
are fair to and in the best interest of the Company's stockholders, (ii)
has approved the Reclassification, the Recapitalization and this Agreement,
(iii) has approved the Company Plan Matters, subject to ratification by
the Company's stockholders and the New Directors, and (iv) has resolved
to recommend (subject to the provisions of Section 5.4) the approval and
adoption of the Shareholder Vote Matters to the Company's stockholders
at the Company Stockholder Meeting.

 

 

SECTION 3.13    Securities.   The
Recapitalization Securities and the ESOP Preferred Stocks (and the New
Shares into which the ESOP Preferred Stocks are convertible) to be issued
pursuant to Sections 1.2, 1.3, 1.4, 1.6 and 1.10, when so issued in accordance
with such Sections and the Registration Statement and the Underwriting
Registration Statements, if applicable, will be duly authorized and validly
issued and, in the case of such securities other than the Debentures, will
be fully paid and nonassessable.

 

 

SECTION 3.14    Opinion of Financial Advisers.  
The Company has received the respective oral opinions of First Boston and
Lazard to the effect that, as of May 20, 1994, the consideration to be
received in the Recapitalization by the Company's stockholders is fair
to the Company's stockholders from a financial point of view, which opinions
shall be confirmed in writing and delivered to each of the Unions promptly
following receipt (the "Company Fairness Opinions").

 

 

SECTION 3.15    Vote Required.    The
affirmative vote of a majority of the votes that holders of the outstanding
Old Shares are entitled to cast is the only vote of the holders of any
class or series of capital stock of the Company necessary to approve the
Shareholder Vote Matters. The Shareholder Vote Matters are the only matters
required to be approved by holders of capital stock of the Company in connection
with the Recapitalization.

 

 

SECTION 3.16.   Limitations.    As of
the date of this Agreement, the Company has no knowledge of any event or
condition which would preclude it from taking any action necessary to consummate
the transactions contemplated hereby.

 

 

SECTION 3.17.   Compliance with Status Quo.  
The Company has complied in all material respects with its obligations
contained in Sections 10 and 11 of that certain letter setting forth the
principal terms of the Recapitalization, dated December 22, 1993, among
the Company, the IAM and ALPA (the "Letter Agreement"), which apply to
transactions entered into after December 22, 1993 and on or prior to March
15, 1994 (the "Status Quo Provisions"). Except as set forth on Schedule
3.17, neither the Company nor any of its Subsidiaries has taken any action
that would have violated the Status Quo Provisions in any material respect
had the Status Quo Provisions continued to remain in effect through the
date hereof. Except as set forth on Schedule 5.1, the Company has not disclosed
to the Unions any plans of the type referred to in Section 5.1 (e) since
December 22, 1993.

 

 

SECTION 3.18    Rights Agreement.   The
Board of Directors has taken all necessary action to amend the Rights Agreement,
effective at or immediately prior to the Effective Time, in form and substance
as set forth in Schedule 3.18 (the "Rights Amendment").

 

 

 

 

ARTICLE IV
 

REPRESENTATIONS AND WARRANTIES

OF THE UNIONS

Each Union hereby severally, and not jointly, represents and warrants
to the Company that:
SECTION 4.1    Existence and Power.   Such
Union is, in the case of ALPA, an unincorporated association organized
and maintained for purposes of a labor association and the duly authorized
representative of pilots employed by United under the Railway Labor Act,
as amended (the "RLA"), and, in the case of the 1AM, is an incorporated
association organized and maintained for purposes of a labor organization
and is the duly authorized representative of employees employed by United
as mechanics and related employees, ramp and stores employees, food service
employees, dispatchers, and security officers, and has all organizational
powers and all material governmental licenses, authorizations, consents
and approvals required to carry on its business as now conducted.

 

 
SECTION 4.2    Authorization.    The
execution, delivery and performance by such Union of this Agreement and
the consummation by such Union of the transactions contemplated hereby
(including the applicable Labor Agreement) are within the organizational
powers of such Union and have been duly authorized by all necessary organizational
action of such Union. This Agreement has been duly executed and delivered
by such Union and, assuming due authorization, execution and delivery by
the Company and the other Union, constitutes a valid and binding agreement
of such Union, enforceable against such Union in accordance with its terms.

 

 

SECTION 4.3    Governmental Authorization.  
The execution, delivery and performance by such Union of this Agreement
and the consummation by such Union of the transactions contemplated by
this Agreement require no consent, approval, authorization or other action
by or in respect of, or filing with or notification to, any governmental
body, agency, official or authority other than (i) compliance with any
applicable requirements of the HSR Act, (ii) any applicable filings with
DOT, and (iii) actions or filings the absence of which would not, in the
aggregate, have a material adverse effect on such Union or on the ability
of such Union to perform its obligations under this Agreement.

 

 

SECTION 4.4    Non-Contravention   The
execution, delivery and performance by such Union of this Agreement and
the consummation by such Union of the transactions contemplated hereby
do not and will not (i) contravene or conflict with the organizational
documents of-such Union, (ii) assuming compliance with the matters referred
to in Section 4.3, contravene or conflict with any provision of law, regulation,
judgment, order or decree binding upon such Union or (iii) constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of such Union or to a loss of any
benefit to which such Union is entitled under any agreement, contract or
other instrument binding upon such Union, which defaults, terminations,
cancellations, accelerations or losses, could individually or in the aggregate
have a material adverse effect on such Union or on the ability of such
Union to perform its obligations under this Agreement.

 

 

SECTION 4.5.   Disclosure Documents.   The
information with respect to such Union that such Union furnishes to the
Company in writing specifically for use in any Company Disclosure Documents,
taken as a whole, will not be false or misleading with respect to any material
fact of omit to state any material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading (i) in the case of the Company
Proxy Statement and the Schedule 13E-3, at the time it or any amendment
or supplement thereto is first mailed to stockholders of the Company, and
at the time the stockholders vote on adoption of the Shareholder Vote Matters,
(ii) in the case of the Registration Statement and each of the Underwriting
Registration Statements, at the time it or any amendment is filed and is
declared effective by the SEC and is distributed and, in the case of the
Registration Statement, at the time the stockholders vote on the Shareholder
Vote Matters and at the Effective Time, and (iii) in the case of any other
Company Disclosure Document, at the time of the filing thereof and at the
time of any distribution thereof.

 

 

SECTION 4.6    Finders' Fees    Except
as previously disclosed to the Company in writing (and such other persons
that such Union may have selected after the date hereof whose fees will
be paid by such Union or the Company, subject, in the case of payment by
the Company, to the terms of the Fee Letter (as defined in Section 10.4))
or as otherwise contemplated hereby or by their engagement letters, there
is no investment banker, broker, finder or other intermediary who might
be entitled to any fee or commission from the Company, such Union or any
affiliate of either of them upon consummation of the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of such
Union.

 

 

SECTION 4.7.   Limitations.    As of
the date of this Agreement, such Union has no knowledge of any event or
conditions which would preclude it from taking any action necessary to
consummate the transactions contemplated hereby.

 

 

 

 

 

 

ARTICLE V
 

COVENANTS OF THE COMPANY
 

The Company agrees that:
SECTION 5.1    Conduct of the Company.   From
the date hereof until the Effective Time, without the consent of the Unions,
the Company and its Subsidiaries shall, except as specifically provided
in Article 1, Section 5.4 and Section 9.1(dxii) or on Schedule 5.1(i) or
other Schedules, Exhibits or attachments hereto, conduct their business
in the ordinary course consistent with past practice and shall use their
best efforts to preserve intact their business organizations and relationships
with third parties and to keep available the services of their present
officers and employees. Without limiting the generality of the foregoing,
from the date hereof until the Effective Time, neither the Company nor
any Subsidiary shall, without the prior written consent of the Unions,
except as otherwise expressly provided in this Agreement:

 

 
(a) issue, sell, dispose of, pledge or otherwise encumber, or authorize
or propose the issuance, sale, disposition, pledge or other encumbrance
of, any Company Securities or Subsidiary Securities other than pursuant
to the exercise of options outstanding as of December 22, 1993 (or issued
in accordance with the restrictions contained in Letter Agreement) under
the Company's 1981 Incentive Stock Program or the issuance of Rights in
connection with the issuance of Old Shares upon exercise of such options,
or, with respect to securities of Subsidiaries, to the Company;

 

 
(b) reclassify, combine, split, subdivide, redeem, purchase or otherwise
acquire, or propose to purchase or otherwise acquire, any Company Securities
or Subsidiary Securities, except repurchases of Company securities, (x)
pursuant to employee stock purchase, stock option, stock grant or other
employee arrangements or (y) pursuant to rules or requirements under the
Employee Retirement Income Security Act of 1974, as amended;

 

 

(c) declare or pay any dividend or distribution on the Old Shares;

 

 

(d) (i) increase the compensation of any of its directors, officers
or key employees, except in the ordinary course of business and consistent
with past practice or pursuant to the terms of agreements or plans currently
in effect; (ii) pay or agree to pay any pension, retirement allowance or
other employee benefit that is either not required or specifically permissible
by any existing plan, agreement or arrangement to any director, officer
or key employee, other than in the ordinary course of business and consistent
with past practice; (iii)'commit itself to any additional pension, profit-sharing,
bonus, extra compensation, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or
to any employment or consulting agreement with or for the benefit of any
director, officer or key employee whether past or present, except in the
ordinary course of business consistent with past practice; or (iv) except
as required by applicable law, amend in any material respect any such plan,
agreement or arrangement; provided that the foregoing shall not be deemed
to restrict necessary and reasonable actions taken in connection with (aa)
retention of personnel other than executive officers or (bb) promotions
and new hires in the ordinary course of business consistent with past practice;
provided,
further. that nothing herein shall preclude the Company or any of its
Subsidiaries from taking any action reasonably designed to permit any employee
to realize vested benefits under any existing plan, agreement or arrangement
referred to above;

 

 

(e) except in the ordinary course of business and consistent with past
practice and except for refinancings or pursuant to existing plans of the
Company disclosed to the Unions in writing prior to the date hereof (i)
incur any material amount of long-term indebtedness for borrowed money
or issue any material amount of debt securities (other than trade debt
and commercial paper) or assume, guarantee or endorse the obligations of
any other person except for obligations of wholly owned Subsidiaries; (ii)
make any material loans, advances or capital contributions to, or investments
in, any other person (other than to wholly owned Subsidiaries or customary
loans or advances to employees in amounts not material to the maker of
such loan or advance); or (iii) mortgage or pledge any of its material
assets, tangible or intangible, or create or suffer to exist any
lien thereupon, other than any purchase money mortgage or lien; or

 

 

(f) enter into any agreement or arrangement to do any of the foregoing.

 

 
In addition, except as specifically provided in Section 5.4 and Section
9.1(d)(ii), from the date hereof until the Effective Time, without the
prior written consent of the Unions, the Company and its Subsidiaries shall
not take any action (i) which would violate or be inconsistent with the
job protection provisions set forth in Section 1 and Letters 94-1 and 94-2
of the ALPA Labor Agreement (as defined below) or the job protection provisions
of the IAM Labor Agreement (as defined below) set forth on Schedule 5.1(ii)
as if all references to the date of signing, the date of the ALPA and IAM
Labor Agreements, the date of ratification or the date of closing in such
Labor Agreements (including all references therein to July 1, 1994, when
intended to be the date of closing of such Labor Agreements) referred to
the date of this Agreement or (ii) which, either alone or together with
any matters entered into from December 22, 1993 through the date hereof,
would be subject to Article FIFTH, Sections 3.1 through 3.5 of the Restated
Certificate or (iii) except as provided in Section 5.7, to alter or amend
the terms of any of the Company's Board of Directors' resolutions or any
of its policies, practices, procedures or employee benefit plans (as described
on Schedule 5.l(iii)) in any manner which would adversely affect the right
or ability of the employees of the Company or United directly or indirectly
to purchase equity securities of the Company.

 

 

The Flight Kitchen severance package described in paragraph 26 of Exhibit
E-2 to the Letter Agreement shall be restored and benefits described in
that paragraph shall be provided as if the condition described in paragraph
26, section 5(a) of Exhibit E-2 had been fully complied with. Any Food
Service Agreement employee who can demonstrate that his or her job status
at United was adversely affected by his or her detrimental reliance on
United's March 16, 1994 announcement cancelling the Flight Kitchen LPP's
will be entitled to receive a remedy from United for his or her actual
contractual damages, if any. Any disagreement regarding entitlement to
or the nature of such remedy may be submitted to the United-IAM System
Board of Adjustment.

 

 

SECTION 5.2    Stockholder Meeting; Proxy Material.  
Subject to receipt by the Company of updated Company Fairness Opinions
from First Boston and Lazard to the effect that, as of the date of the
Company Proxy Statement, the consideration to be received in the Recapitalization
by the Company's stockholders is fair to the Company's stockholders from
a financial point of view, the Company shall cause a meeting of its stockholders
(the "Company Stockholder Meeting") to be duly called and held as soon
as reasonably practicable after the date on which the Registration Statement
is declared effective by the SEC, for the purpose of voting on the approval
and adoption of each of the Reclassification, the Restated Certificate,
the election of four of the five initial Public Directors to the Board
of Directors of the Company, the Recapitalization and the issuance of the
ESOP Preferred Stock as part of the Recapitalization (such matters are
collectively referred to as the "Shareholder Vote Matters") and the Company
Plan Matters. The Shareholder Vote Matters shall be presented as a single
proposal, or the effectiveness of each such matter shall be conditioned
on the approval of all of such matters. Consistent with its obligations
under Section 7.1, the Company shall be entitled to delay the Company Stockholder
Meeting if the Company does not receive, as of the Announcement Date, updated
Company Fairness Opinions from First Boston and Lazard to the effect that,
as of the Announcement Date, the consideration to be received in the Recapitalization
by the Company's stockholders is fair to the Company's stockholders from
a financial point of view. Subject to Section 5.4, the directors of the
Company shall recommend the approval and adoption of the Shareholder Vote
Matters by the Company's stockholders and shall use its best efforts (as
defined in Section 7.1) in soliciting such approval. Subject to Section
5.4, in connection with such meeting, the Company (i) will promptly prepare
and file with the SEC, will use its best efforts to have cleared by the
SEC and will, subject to the effectiveness of the Registration Statement,
thereafter mail to its stockholders as promptly as practicable, the Company
Proxy Statement (including the information required by the Schedule 13E-3)
and all other proxy materials for such meeting, (ii) will use its best
efforts to obtain the necessary approvals by its stockholders of the Shareholder
Vote Matters and (iii) will otherwise comply with all legal requirements
applicable to such meeting. A reasonable period of time prior to the initial
filing of (or the filing of any amendment of supplement to) any of the
Company Proxy Statement, the Registration Statement, the Underwriting Registration
Statements, the Schedule 13E-3 or any other Company Disclosure Document,
the Company shall provide to each of the Unions, in accordance with the
notice provisions contained in Section 10.1, a copy of the same. The Company
shall provide the Unions with a reasonable opportunity to review and comment
on each of such documents prior to such filing with a view toward the production
and filing of mutually acceptable documents, subject to (1) the Company's
responsibilities under applicable securities laws and (2) other applicable
legal requirements.

 

 

SECTION 5.3    Access. Subject to the absence of a material
breach of Section 6.1, from the date hereof until the Effective Time, the
Company will give each Union, its counsel, financial advisors, auditors
and other designated representatives reasonable access following reasonable
notice during normal business hours (which access shall be coordinated
through a person designated by the Company, which person (or another authorized
person) shall be available during normal business hours) to the offices,
employees, properties, books and records of the Company and the Subsidiaries,
will furnish, if reasonably requested, to each Union, its counsel, financial
advisors, auditors and other authorized representatives such financial
and operating data and other information in connection with the Agreement
and the transactions contemplated hereby as such persons may reasonably
request and will instruct the Company's officers, employees, counsel and
financial advisors to cooperate reasonably with each Union and each Union's
counsel, financial advisors, auditors and other designated representatives
in their investigation of the business of the Company and the Subsidiaries
and to take such steps as may be reasonably requested by each Union and
such counsel, advisors, auditors and other representatives to assist them
in connection with the transactions contemplated by this Agreement; provided
that no investigation pursuant to this Section shall affect any representation,
warranty, covenant or agreement made by the Company to each Union under
this Agreement. Each Union, its counsel, financial advisors, auditors and
other designated representatives shall conduct themselves under this Section
5.3 so as not to interfere with the day-to-day operations of the Company.

 

 

SECTION 5.4    Other Potential Transactions.  
The Company shall not, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide
any information to, any corporation, partnership, person or other entity
or group (other than the Unions or their advisors or the ESOP Trustee or
its advisors) concerning any merger, sale of assets, sale of, or tender
or exchange offer for, shares of capital stock or similar transaction,
involving a change of control of the Company or all or substantially all
of the assets of the Company (an "Acquisition"), except as set forth below.
The Company may, directly or indirectly, furnish information and access,
in each case in response to an unsolicited request therefor, to the same
extent permitted by Section 5.3 hereof, to any corporation, partnership,
person or other entity or group pursuant to appropriate confidentiality
agreements, and may participate in discussions and negotiate with such
entity or group concerning any such transaction, if the entire Board of
Directors of the Company (the "Board") (and, to the extent a director is
a participant in an alternative Acquisition, the disinterested members
of the Board) determine in their good faith judgment, upon advice of independent
legal and financial advisors (who may be the Company's regularly engaged
independent legal and financial advisors), that such action is required
by their fiduciary duties. In addition, the Company's officers and other
appropriate personnel may take such steps as are necessary or appropriate
to provide the Board with sufficient information to make an informed decision
concerning the matters described in the previous sentence and, if the Board
so determines that such actions are required by their fiduciary duties,
the Company may direct its officers and other appropriate personnel to
cooperate with and be reasonably available to consult with any such entity
or group which were the subject of such determination. Nothing herein shall
prevent the Board from taking, and disclosing to the Company's shareholders,
a position contemplated by Rules 14d-9 and 14e-2 promulgated under the
1934 Act with respect to any tender offer or from making such other disclosure
to shareholders or taking such other action which, in the judgment of the
Board, upon advice of such counsel, is required by law to discharge any
fiduciary duty imposed thereby.

 

 

SECTION 5.5    Notices of Certain Events.  
The Company shall notify each Union of, and provide to each Union all
relevant details relating to, and documentation submitted to or by the
Company in respect of, (i) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement, (ii) any notice or
other communication from any governmental or regulatory agency or authority
in connection with the transactions contemplated by this Agreement and
(iii) any proposal for, or contacts and expressions of interest relating
to, an Acquisition or other matter contemplated by Section 5.4 and action
taken by the Company in respect thereof.

 

 

SECTION 5.6    Amendment of Rights Agreement.  
The Company shall amend the Rights Agreement, effective immediately
prior to the Effective Time, in accordance with the Rights Amendment and
to provide that each outstanding share of ESOP Convertible Preferred Stock
following the Effective Time, as well as each Available Unissued ESOP Share
(as defined in Article FIFTH, Section 1.5 of the Restated Certificate),
shall have associated with it and represent that number of Rights (as defined
in the Rights Agreement) as would be associated with the number of New
Shares into which the relevant share of ESOP Convertible Preferred Stock
is then convertible and to cause such Rights to be exercisable by, and
to cause separate certificates representing such Rights to be distributed
to, and be separately transferable by, holders of shares of ESOP Convertible
Preferred Stock (and Available Unissued ESOP Shares) at the time and upon
terms substantially the same as those applicable to the holders of New
Shares.

 

 

SECTION 5.7    Employee Benefit Plans.  
The Company shall take such action to amend, in form reasonably satisfactory
to each Union, the directed account plans and 401(k) plans maintained by
the Company or United for the benefit of employees, and shall take all
other reasonable action, so as to permit investment of the funds held thereunder
at the individual direction of the beneficiaries of such plans to purchase
the Company's common stock, preferred stock, Depositary Shares and/or debt
securities in the open market, subject to rules and regulations under the
1934 Act. The Company shall take such action to amend the stock purchase
plans maintained by the Company or United for the benefit of employees
so as to require the distribution of the consideration received upon redemption
of the Redeemable Preferred Stock in accordance with Section 1.3 to be
received by such plans in the Reclassification, or the cash proceeds from
the sale thereof, to participants, subject to applicable law. Consistent
with existing Company policy with respect to purchases of Old Shares, the
aforementioned plan amendments to the directed account plans and the 401(k)
plans, and the stock purchase plans, shall permit employees of the Company
and United following the Effective Time to acquire, in addition to amounts
held in the ESOPs, the following securities: (X) up to the lesser of (i)
30% of the outstanding New Shares held by persons other than the ESOPs
and (ii) 20% of the aggregate number of outstanding New Shares and New
Shares issuable upon conversion of the ESOP Preferred Stock outstanding
or issuable to Sections 1.6 or 1.10 hereof (including Available Unissued
ESOP Shares) and (Y) except with respect to the stock purchase plan, up
to (i) 20% of the outstanding Depositary Shares, (ii) 20% of the outstanding
principal amount of Series A Debentures and (iii) 20% of the outstanding
principal amount of Series B Debentures; subject to the following additional
limits: (A) no employee group of the Company or its Subsidiaries (which,
for this purpose, shall mean employees represented by each of ALPA, the
IAM, and the AFA (as defined in Section 7.3) and the Salaried and Management
Employees (as defined in Section 5.8(b)) (each, an "Employee Group") may
individually acquire more than 10% of the outstanding shares or amount
of any class of securities referred to in clause (X) and (Y) above through
such plans; (B) in the case of the directed account plans, no Employee
Group may individually acquire more than 2% of the outstanding shares or
amount of any such class of securities in any monthly subscription period
through such plans; (C) no Employee Group may individually acquire more
than 2% of the outstanding New Shares held by persons other than the ESOPs
(in addition to New Shares received in the Reclassification) through such
plans during the six month period beginning at the Effective Time; and
(D) no New Shares may be acquired through such plans during the six month
period ending on the last day of the Measuring Period, as defined in Section
1.10.

 

 

The Company shall not be required to expand the scope of any third party
indemnity in a manner adverse to the Company in order to implement the
amendments referred to in clause (Y) above.

 

 

SECTION 5.8    Labor Agreements.
(a) The Company shall cause United, at the Effective Time, to execute and
deliver new collective bargaining agreements (or amendments to existing
collective bargaining agreements) with each of ALPA and the IAM, each in
form and substance as set forth on Schedules 5.8(i) and 5.8(ii), respectively.
The agreement set forth on Schedule 5.8(i) is referred to herein as the
"ALPA Labor Agreement," the agreements set forth on Schedule 5.8(ii)
are collectively referred to herein as the "IAM Labor Agreement" and the
ALPA Labor Agreement and the IAM Labor Agreement are collectively referred
to herein as the "Labor Agreements."

 

 
(b) The Company shall also establish and cause United to establish appropriate
employment terms for the employees of the Company and United who perform
the functions currently performed by the salaried and management employees
of the Company and United (including any functions which such group of
employees begin performing in the future) (the "Salaried and Management
Employees"), in form and substance as set forth on Schedule 5.8(iii), effective
at the Effective Time. From and after the date hereof, the Company shall
provide the Unions and their respective counsel, financial advisors, auditors
and other representatives with the access and information necessary to
confirm the Company's continuing implementation of the provisions of this
Section 5.8(b).

 

 

SECTION 5.9    Solvency Letter.   The
Company has retained American Appraisal Associates (the "Appraiser") to
provide, at or prior to the Effective Time, opinion in writing to the Company
and the Board substantially similar to the letter set forth on Schedule
5.9 (the "Solvency Letter"). If the Solvency Letter is delivered to the
effect that sufficient surplus is available to permit the consummation
of the Recapitalization consistent with Delaware Law, the Board shall take
all lawful and appropriate action, effective as at the Effective Time,
to revalue the Company's assets and liabilities to permit the consummation
of the Recapitalization in accordance with Delaware Law.

 

 

SECTION 5.10    Other Transaction Documents.  
The Company hereby agrees that at the Effective Time it will execute
the form of employment agreement (the "Employment Agreement") between the
Company and Gerald Greenwald in the form attached to the agreement (the
"Retention Agreement") between the Unions and Gerald Greenwald providing
for his employment by the Company from and after the Effective Time on
the terms set forth in the Employment Agreement. The Comply hereby agrees
from and after execution by Gerald Greenwald of the Employment Agreement
at the Effective Time to perform all of its obligations, whether or not
due and owing, under the Employment Agreement. The Retention Agreement
may not be amended without the written consent of the Company. A true and
correct copy of the Retention Agreement (with the attached form of the
Employment Agreement) has been delivered by the Unions to the Company.
In addition, immediately prior to the Effective Time, the Company shall
execute and deliver (or shall have theretofore executed and delivered)
the following documents and agreements: the Officers' Certificate relating
to the Indenture, the Deposit Agreement, the initial ESOP Stock Purchase
Agreement, the ESOP Trusts, the Exchange Agent Agreement, the Rights Amendment,
the Class I Preferred Stock Subscription Agreement, the Class Pilot MEC
Preferred Stock Subscription Agreement, the Class IAM Preferred Stock Subscription
Agreement, the Class SAM Preferred Stock Subscription Agreement, a shareholders
agreement with the initial Independent Directors in form and substance
as set forth on Schedule 5.10 (i) (the "Class I Preferred Stock Shareholders
Agreement"), a shareholder agreement with the holders of the Class SAM
Preferred Stock in form and substance as set forth on Schedule 5.10(ii),
and a First Refusal Agreement between the Company, the Unions and the SAM
Director, in form and substance as set forth on Schedule 5.10(iii) (collectively,
the "Closing Agreements").

 

 

SECTION 5.11    Certain Agreements.   Without
limiting in any respect the Company's and United's rights or obligations
under any other agreement, arrangement or understanding to which it is
a party, the Company specifically confirms, and shall cause United to confirm,
their respective obligations under the employee and director benefit plans,
agreements, policies and arrangements maintained by the Company and/or
United or to which the Company and/or United is a party, in each case as
in effect on the date hereof (subject to revision in accordance with Section
5.1), identified in a letter to the Unions dated the date hereof (the "Officer
and Director Arrangements"); provided, that the provisions of this Section
5.11 (a) shall be subject to Section 5.1 prior to the Effective Time and
(b) shall not restrict the Company's or United's ability to terminate,
revise or replace any Officer and Directors Arrangements after the Effective
Time so long as such action does not reduce or otherwise adversely affect
rights of any beneficiary under any such Officers and Directors Arrangements
that the Company or United is obligated to provide following the Effective
Time without his or her consent.

 

 

 

 

 

 

ARTICLE VI
 

COVENANTS OF EACH UNION
 

Each Union agrees that:

 

 
SECTION 6.1    Confidentiality.

 

 
(a) Prior to the Effective Time and after any termination of this Agreement,
each Union agrees that, except as provided herein, it will not at any time
after its receipt of any Confidential Information (as defined below), directly
or indirectly, divulge to any person or entity any of the Confidential
Information or any information, report, analysis, compilation, study, interpretation,
forecast, record or other material prepared by such Union or its Representatives
(as defined below) (including, if maintained in some written or other form,
in whatever form maintained, whether documentary, computer storage or otherwise)
containing, in whole or in part, any Confidential Information. "Confidential
Information" shall include all confidential written or oral information
concerning the Company and the Subsidiaries furnished to such Union in
connection with the transaction contemplated by this Agreement, except
to the extent that such information does not include information which
is or becomes (i) generally available to the public other than as a result
of disclosure by a Union or its Representatives in violation of this Agreement,
(ii) was available to a Union or one of its Representatives on a non-confidential
basis prior to its disclosure to them by the Company or (iii) known or
available to a Union or' its Representatives on a non-confidential basis
from a source (other than the Company) who, insofar as is known to such
Union or its Representatives after due inquiry, is not prohibited from
transmitting the information to such Union or its Representatives by a
contractual, legal or fiduciary duty. The term "person" shall be broadly
interpreted to include, without limitation, any individual, corporation,
company, unincorporated association, partnership, group or other entity.

 

 

(b) Each Union shall limit access to the Confidential Information to
its officials and Representatives who in the reasonable judgment of such
Union need to know the Confidential Information for purposes of participating
in making decisions concerning, or advising it with respect to, the Confidential
Information ("informed officials and Representatives"). Disclosure of Confidential
Information may be made only to officers, directors, employees, accountants,
counsel, consultants, advisors and agents of one of the Unions who executes
a Confidentiality Statement (a "Representative"), in the form attached
either to this Agreement as Schedule 6.1 or as an attachment to a confidentiality
agreement between the Company and such Union entered into prior to the
date hereof (a "Confidentiality Statement"). An executed original of each
such Confidentiality Statement shall be provided to the Company by the
Union obtaining it. Each Union and its Representatives tray discuss with
the informed officials and Representatives of each other Union the Confidential
Information which such Union has been provided pursuant to this Agreement
or any prior confidentiality agreement between the Company afar such Union
relating to the Confidential Information provided that such Confidential
Information shall continue to be subject to this Agreement and any other
applicable confidentiality agreement. In all events, each Union shall be
responsible for any actions by its Representatives which are not in accordance
with the provisions hereof and of any Confidentiality Statement executed
by a Representative but shall not be responsible for such actions of any
informed official or Representative of the other Union. ..

 

 

(c) In the event that a Union, its Representatives or anyone to whom
a Union or its Representatives supply Confidential Information are requested
or required through legal process (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand,
any informal or formal investigation by any government or governmental
agency or authority or otherwise) to disclose any Confidential Information,
the Union will, upon learning of such request or requirement, (i) immediately
notify the Company of the existence, terms and circumstances surrounding
such a request, (ii) consult with the Company on the advisability of taking
legally available steps to resist or narrow such request and (iii) if disclosure
of such information is required, furnish only that portion of the Confidential
Information which, in the opinion of the Union's legal counsel, it is legally
compelled to disclose and cooperate with any action by the Company to obtain
an appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information.

 

 

(d) Except in respect of any Confidential Information that is in this
Agreement (or may in the future be) the subject of an express representation
by the Company, (i) neither the Company nor its employees, agents, affiliates
or representatives (collectively hereinafter referred to as the "Company
Representatives") makes any express or implied representation as to the
accuracy or completeness of the Confidential Information and (ii) each
Union and its Representatives agree that neither the Company nor any Company
Representative shall have any liability to such Union or its Representatives
resulting from the use by such Union or its Representatives of Confidential
Information. So long as neither Union is in material breach of its obligations
under this Section 6.1, nothing in this Section 6.1(d) is intended to limit
Section 5.3.

 

 

(e) Each Union hereby acknowledges that it is aware, and that it will
advise its Representatives who are informed in accordance with the terms
of this Agreement, as to the matters which are the subject of this Agreement,
that the United States securities laws prohibit any person who has received
from an issuer material, non-public information concerning the matters
which are the subject of this Agreement from purchasing or selling securities
of such issuer due to the receipt of Confidential Information or from communicating
such information to any other person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell such
securities due to the receipt of Confidential Information.

 

 

(f) Each Union expressly acknowledges that (i) the preservation of the
confidentiality of the Confidential Information has highly important commercial
significance for the Company and (ii) its unauthorized disclosure could
have serious and irreparable adverse commercial, financial and legal consequences
for the Company. It accordingly agrees that the Company shall be entitled
to injunctive relief to prevent breaches of this Agreement and to specifically
enforce the terms and provisions of this Section, in addition to any other
remedy to which the Company may be entitled, at law or in equity or pursuant
to this Agreement.

 

 

(g) Each Union and its Representatives hereby acknowledge that the Confidential
Information is being furnished to them solely in connection with a review
in connection with the transactions contemplated by this Agreement and
analysis of the Company's business and financial condition and none of
such Unions or their Representatives shall use the Confidential Information
other than in connection with such review and analysis and potential responses
thereto made directly to the Company (which may be discussed among and
be made by the Unions). No right or license, express or implied, under
any patent, copyright, trademark, trade secret, or other proprietary right
in the Confidential Information is granted hereunder by United to a Union
or its Representatives.

 

 

(h) Each Union will keep a record of the location of the Confidential
Information. If the Agreement is terminated prior to the Effective Time,
each Union agrees for itself and for its Representatives who reviewed the
Confidential Information, to return to the Company or destroy all documents
reflecting the Confidential Information and to certify in writing to the
Company that such documents have been so returned or destroyed.

 

 

SECTION 6.2    Labor Agreements.   Such
Union shall execute and deliver, at the Effective Time, the relevant Labor
Agreement.

 

 

SECTION 6.3    No Public Director Nominations.  
Such Union shall not, directly or indirectly, nominate or cause to
be nominated any individual for election as an Outside- Public Director
(as defined in Article FIFTH, Section 2.3 of the Restated Certificate)
of the Company; provided, however, that any such nomination by an
employee of the Company or United, acting in his or her individual capacity
as a shareholder of the Company, shall not be deemed to violate this Section
6.3 so long as such nomination was not made with the advice, support, or
assistance of any officer of such Union.

 

 

SECTION 6.4    Independent Director Vacancies. 
The Unions agree to use their best efforts to cause any Independent
Director vacancy resulting after the Effective Time promptly to be filled
in accordance with Article FIFTH, Section 4.1.6 of the Restated Certificate.

 

 

 

 

ARTICLE VII
 

COVENANTS OF EACH OF THE UNIONS

AND THE COMPANY

The parties hereto agree that:
SECTION 7.1    Best Efforts.   Subject
to the terms and conditions of this Agreement, including Section 5.4, each
party (a) will use its best efforts, and will cause all of its directors,
officers and advisors retained by such party to use their best efforts,
to take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
that may be necessary or useful, to consummate the transactions contemplated
by this Agreement and (b) will, and will cause its directors, officers
and advisors retained by such party to, refrain from taking any actions
detrimental to or inconsistent with the foregoing. In the event that any
action, suit, proceeding or investigation relating hereto or to the transactions
contemplated hereby is commenced, whether before or after the Effective
Time, the parties hereto agree to cooperate and use their best efforts
to defend against the same and respond thereto. As used in this Agreement,
the term "best efforts" shall mean efforts of a type that a prudent person
desirous of achieving a result would use in similar circumstances in seeking
to achieve such result reasonably promptly in light of the Outside Termination
Date (as defined in Section 9.1); provided, however, that a party required
to use its best efforts under this Agreement will not be required to take
actions that would not normally be taken by the parties in similar circumstances
or that would result in a materially adverse change in the benefits intended
to be conferred upon such party pursuant to this Agreement and the transactions
contemplated hereby.

 

 
SECTION 7.2    Certain Filings.   The
Company and each of the Unions shall cooperate with one another (a) in
connection with any preparation of the Company Disclosure Documents, the
Company Proxy Statement, the Schedule 13E-3, the Registration Statement
and the Underwriting Registration Statements, (b) in determining whether
any action by or in respect of, or filing with, any governmental body,
agency, official or authority is required, or any actions, consents, approvals
or waivers are required to be obtained from parties to any material contracts,
permits, licenses and franchises, in connection with the consummation of
the transactions contemplated by this Agreement and (c) in seeking any
such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the Company
Disclosure Documents, the Company Proxy Statement, the Schedule 13E-3,
the Registration Statement or the Underwriting Registration Statements,
and seeking timely to obtain any such actions, consents, approvals or waivers.
As soon as practicable after the date hereof, the Company shall, in accordance
with Section 5.2, (a) file with the SEC the Company Proxy Statement, the
Schedule 13E-3 and the Registration Statement, (b) obtain and furnish the
information required to be included therein, (c) after consultation with
each Union, respond promptly to comments made by the SEC with respect to
the Company Proxy Statement, the Schedule 13E-3 and Registration Statement
and any preliminary version thereof and (d) cause the Registration Statement
to become effective and the Company Proxy Statement to be mailed to the
Company's stockholders at the earliest practicable date. Prior to the effective
date of the Registration Statement, the Company shall obtain all necessary
state securities laws or "blue sky" permits and approvals required to carry
out the Recapitalization and the transactions contemplated by this Agreement.

 

 

SECTION 7.3    Participation.    If,prior
to the Effective Time, the Association of Flight Attendants ("AFA") agrees
to provide, in the sole judgment of the Company, an investment equal to
$416 million (present value in January 1994 dollars for a five year AFA
mainline investment and a twelve year AFA Competitive Action Plan (as defined
in Schedule 1.1) investment and assuming semi-annual payments, first period
not discounted, and annual discount rate of 10%) then, provided that the
parties hereto agree upon all aspects of the AFA's participation in the
transactions contemplated hereby (e.g. governance provisions set forth
in Schedule 1.1, ESOP provisions set forth in Section 1.6 and related schedules)
other than the matters described in clauses (i) and (ii) below, the parties
hereto shall revise all applicable documents such that (i) the employee
investment period with respect to ALPA, IAM and salaried and management
employees shall be reduced by nine months; and (ii) 12.62% of the ESOP
Preferred Stock otherwise to be allocated to ALPA-represented employees,
IAM-represented employees and Salaried and Management Employees (the "Allocated
Shares") shall be made available for allocation to the AFA-represented
employees, such that after such allocation, 40.4% of the Allocated Shares
shall be allocated to ALPA-represented employees, 32.44% of the Allocated
Shares shall be allocated to the IAM-represented employees, 14.54% of the
Allocated Shares shall be allocated to the Salaried and Management Employees
and 12.62% of the Allocated Shares shall be allocated to the AFA-represented
employees.

 

 

 

 

ARTICLE VIII
 

CONDITIONS TO THE RECAPITALIZATION
 

SECTION 8.1    Conditions to the Obligations of Each
Party.   The obligation of the Company to file the Restated
Certificate at the Effective Time pursuant to Section 1.1 and the obligations
of each of the Unions to enter into the Labor Agreements at the Effective
Time are subject to the satisfaction of the following conditions:
(i) the Shareholder Vote Matters shall have been approved and adopted
by the stockholders of the Company in accordance with the Certificate of
Incorporation and Bylaws of the Company and in accordance with Delaware
Law;

 

 
(ii) any applicable waiting period under the HSR Act relating to the
Recapitalization shall have expired or been terminated;

 

 

(iii) the Registration Statement shall have become effective under the
1933 Act and shall not be the subject of any stop order or governmental
proceedings seeking a, stop order;

 

 

(iv) all material actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation
of the Recapitalization shall have been obtained;

 

 

(v) the New Shares issuable as part of the Recapitalization (including
New Shares issuable upon conversion of the ESOP Preferred Stock and upon
conversion of the Convertible Company Securities) shall have been authorized
for listing on the NYSE subject to official notice of issuance;

 

 

(vi) there shall have been no change in Delaware Law enacted or any
applicable decision of a court of competent jurisdiction decided after
the date hereof and prior to the Effective Time that would cause the Restated
Certificate or Restated Bylaws to fail to comply in any material respect
with the applicable provisions of Delaware Law;

 

 

(vii) the ESOP Trustee shall have received the written opinion of Houlihan,
Lokey, Howard & Zukin to the effect that, as of the Effective Time,
the acquisition of the ESOP Preferred Stock pursuant to Section 1.6(d)
hereof by the ESOPs is fair, from a financial point of view, to the ESOP
participants;

 

 

(viii) the Board of Directors of the Company shall have received the
Solvency Letter; and

 

 

(ix) (A) there shall not be instituted or pending any action, proceeding,
application, claim, or counterclaim by any United States federal, state
or local government or governmental authority or agency, including the
DOT, before any court or governmental regulatory or administrative agency,
authority or tribunal, which (x) restrains or prohibits or is reasonably
likely to restrain or prohibit the making or consummation of, or is reasonably
likely to recover material damages or other relief as a result of, the
Recapitalization, or the receipt by holders of the Old Shares of the full
amount of the Recapitalization Consideration, or restrains or prohibits
or is reasonably likely to restrain or prohibit the performance of, or
is reasonably likely to recover material damages or other relief as a result
of, this Agreement or any of the transactions contemplated hereby or (y)
prohibits or limits or seeks to prohibit or limit the ownership or operation
by either Union, the ESOP Trustee, any of the ESOPs or any participant
therein of all or any substantial portion of the capital stock, business
or assets of the Company or any of its Subsidiaries or compels or seeks
to compel either Union, the ESOP Trustee, any of the ESOPs or any participant
therein to dispose of or hold separate aA or any substantial portion of
the capital stock, business or assets of the Company or any of its Subsidiaries
or imposes or seeks to impose any material limitation on the ability of
either Union, the ESOP Trustee, any of the ESOPs or any participant therein,
to conduct such business or own such assets, (B) there shall not have been
instituted or be pending any action, proceeding, application, claim or
counterclaim by any other person, before any such body, that is reasonably
likely to result in any of the consequences referred to in clauses (A)(x)
or (A)(y) above, and (C) there shall not be any United States federal,
state or local statute, rule, regulation, decree, order or injunction promulgated,
enacted, entered, or enforced by any United States federal, state or local
government agency or authority or court, that has any of the effects referred
to in clauses (A)(x) or (A)(y) above;

 

 

(x) all conditions to the obligations of the parties to the Closing
Agreements to consummate such transactions shall have been satisfied or
are capable of being satisfied concurrently upon the occurrence of the
Effective Time;

 

 

(xi) the Closing Agreements shall be legal, valid and binding agreements
of the Company and the other parties thereto from and after the Effective
Time, enforceable against the Company and such other parties in accordance
with their terms; and

 

 

(xii) Gerald Greenwald (or such other person as shall be proposed by
the Unions prior to the Effective Time and not found unacceptable by the
Company) shall be ready, willing and able to assume the office of Chief
Executive Officer of the Company and United.

 

 
SECTION 8.2    Conditions to the Obligations of each
of the Unions.    The obligations of each of the Unions
to enter into the Labor Agreements at the Effective Time are subject to
the satisfaction of the following further conditions:

 

 

(i) the Company shall have performed, both individually and collectively,
in all material respects all of its covenants, agreements or other obligations
hereunder required to be performed by it at or prior to the Effective Time;
and

 

 
(ii) the representations and warranties of the Company set forth in
this Agreement shall be true and correct, both individually and- collectively,
in all material respects at and as of the Effective Time as if made at
and as of such time; provided that the representations and warranties of
the Company set forth in Section 3.10 and each representation and warranty
of the Company set forth in this Agreement that is qualified by a "materiality"
or similar standard (including, Material Adverse Effect), shall be true
in all respects (taking into account all "materiality" and similar qualifications
(including; Material Adverse Effect) contained in such representation or
warranty) at and as of the Effective Time, as if trade at and as of such
time.

 

 
SECTION 8.3    Conditions to the Obligations of the Company.  
The obligation of the Company to file the Restated Certificate at the
Effective Time pursuant to Section 1.1 is subject to the satisfaction of
the following further conditions:

 

 

(i) Each Union shall have performed, both individually and collectively,
in all material respects all of its covenants, agreements or other obligations
hereunder required to be performed by it at or prior to the Effective Time;

 

 
(ii) the representations and warranties of the Unions set forth in this
Agreement shall be true and correct, both individually and collectively,
in all material respects at and as of the Effective Time as if made at
and as of such time; provided that each representation and warranty of
the Unions set forth in this Agreement that is qualified by a "materiality"
or similar standard shall be true in all respects (taking into account
all "materiality" and similar qualifications contained in such representation
or warranty) at and as of the Effective Time, as if made at and as of such
time;

 

 

(iii) the Board of Directors of the Company shall have received the
written opinions of each of First Boston and Lazard, each dated as of the
Announcement Date, confirming their earlier opinions, to the effect that
the Recapitalization is fair from a financial point of view to the holders
of Old Shares; and

 

 

(iv) the Labor Agreements shall have been executed and delivered by
the Unions and shall be in full force and effect as of the Effective Time.

 

 

(v) the Board of Directors of the Company shall have received the written
opinions of Skadden, Arps, Slate, Meagher & Flom to the effect that
(A) when issued, all New Shares, all Depositary Shares and all shares of
Public Preferred Stock represented thereby will be duly authorized, validly
issued, fully paid and nonassessable, (B) the revaluation of the Company's
and United's assets contemplated by Section 5.9 hereof may be effected
in connection with the Recapitalization consistent with Delaware Law, (C)
when issued, the Debentures will be validly issued and enforceable obligations
of United, (D) the consummation of the transactions contemplated by Section
1.6(d) hereof will not result in a non-exempt prohibited transaction under
Section 4975(c)(1) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), or Section 406(a) of the Employee Retirement
Income Security Act of 1974, (E) the Recapitalization and Reclassification
will not result in the recognition of income, gain or loss to the Company
for United States federal income tax purposes and (F) the contributions
made by the Company to the ESOPs and, assuming the Company has sufficient
earnings and profits, the dividends paid on the ESOP Preferred Stock that,
in each case, are used to repay the debt evidenced by the ESOP Note issued
in connection with the transactions contemplated by Section 1.6(d) hereof
will be deductible under Section 404 of the Internal Revenue Code;

 

 

(vi) the Company shall have determined that it is reasonably likely
to have sufficient earnings and profits such that, based on the opinion
of counsel described in Section 8.3(v)(F) above, the dividends paid on
the ESOP Preferred Stock that are used to repay the debt evidenced by the
ESOP Note issued in connection with the transactions contemplated by Section
1.6(d) hereof are reasonably likely to be deductible under Section 404
of the Internal Revenue Code; and

 

 

(vii) the Company shall have determined that the Company will be reasonably
likely to have sufficient surplus (whether revaluation surplus or earned
surplus) or net profits under Delaware Law to permit the legal payment
of dividends on the ESOP Preferred Stock and the Public Preferred Stock
when due.

 

 

 

 

 

 

 

 

 

 

ARTICLE IX
 

        TERMINATION
 

SECTION 9.1    Termination.    This
Agreement shall terminate and the Recapitalization shall be abandoned (notwithstanding
any approval of the Shareholder Vote Matters by the stockholders of the
Company, any legal action or otherwise) if the Effective Time shall not
have occurred by 11:59 p.m. on August 31, 1994 (the "Outside Termination
Time"). In addition, this Agreement may be terminated and the Recapitalization
may be abandoned at any time prior to the Outside Termination Time and
prior to the Effective Time (notwithstanding any approval of the Shareholder
Vote Matters by the stockholders of the Company):

 

 
(a) by mutual written consent of each of the Unions and the Company;
(b) by either of the Unions or the Company if (i) the stockholders of the
Company shall not have approved the Shareholder Vote Matters at the Company
Stockholder Meeting; or (ii) any court of competent jurisdiction in the
United States or other United States federal, state or local governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Recapitalization and
such order, decree, ruling or other action shall have become final and
nonappealable;

 

 
(c) by either Union if (i) the Board shall have withdrawn or modified
in a manner materially adverse to such Union its approval or recommendation
of the Recapitalization or the Shareholder Vote Matters or shall have recommended,
or shall have failed to recommend against, another Acquisition, (ii) the
Board shall have resolved to do any of the foregoing, (iii) the Company
shall have breached, either individually or collectively, in any material
respect any of its material representations, warranties, covenants or other
agreements contained in this Agreement, (iv) any person shall have acquired
"beneficial ownership" (as defined in the Rights Agreement) or the right
to acquire beneficial ownership of, or any "group" (as such term is defined
in Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder) shall have been formed which beneficially owns, or has the
right to acquire beneficial ownership of, more than 15% of the then outstanding
Old Shares, or shall have become an "Acquiring Person" under the Rights
Agreement, or (v) there shall have occurred a "Share Acquisition Date"
or "Distribution Date" under the Rights Agreement; or

 

 

(d) by the Company if (i) either Union shall have breached, either individually
or collectively, in any material respect any of its material representations,
warranties, covenants or other agreements contained in this Agreement or
(ii) the Board, in accordance with Section 5.4, shall have withdrawn or
modified in a manner adverse to either Union its approval or recommendation
of the Recapitalization or shall have recommended another Acquisition,
or shall have resolved- to do any of the foregoing.

 

 
SECTION 9.2    Termination of Status Quo.   
If the Effective Time shall not have occurred on or before the earlier
of expiration of four months following the date of the filing by the Company
of the preliminary Company Proxy Statement with the SEC and August 31,
1994, the Company may, by written notice to each of the Unions, terminate
its obligations under Section 5.1 of this Agreement; provided that the
Company's right to so terminate its obligations under Section 5.1 shall
not be available in the event the Company's failure to fulfill any obligation
under this Agreement has been the cause of or resuited in the failure of
the Effective Time to occur on or before such date. In the event the Company
elects to terminate its obligations under Section 5.1 in accordance with
the preceding sentence, either of the Unions may terminate this Agreement.

 

 

SECTION 9.3    Effect of Termination.  
Except as provided in the next sentence, if this Agreement is terminated
pursuant to Section 9.1 or 9.2, this Agreement shall become void and of
no effect with no liability on the part of any party hereto, except that
the agreements contained in Sections 6.1, 9.3 and 10.4 shall survive the
termination hereof. Notwithstanding the preceding sentence, if the failure
of the Effective Time to occur on or prior to the Outside Termination Date
results directly from either (i) a material breach of a specific material
representation or warranty contained in this Agreement by one of the parties
hereto under circumstances where the breaching party had actual knowledge
at the date of this Agreement that such representation or warranty was
materially false or misleading or (ii) a material breach of a specific
material covenant (a breach described in clause (i) or (ii), as modified
by proviso (A) hereto, being called a "Willful Breach"), and one of the
other parties hereto has established, as determined by a court of competent
jurisdiction, that such Willful Breach has occurred, the breaching party
shall be liable to the other parties hereto for proximate and provable
damages resulting from such Willful Breach (which shall include the reasonable
fees and expenses of such non-breaching parties, including reasonable attorney's
fees and expenses, incurred in connection with the transactions contemplated
hereby other than in connection with any litigation or other dispute between
or among parties hereto); provided (A) to the extent that the material
breach of a specific material covenant is not determinable solely by an
objective fact (e.g. any best efforts obligation or requirement of reasonableness)
such breach shall be actionable hereunder only if the breaching party knew
(or demonstrated reckless disregard for whether) its action or failure
to act was in violation of such covenant; and (B) such calculation of damages
shall not include consequential or punitive damages and shall be the sole
and exclusive remedy of the non-breaching parties in the event of a Willful
Breach. With respect to a Willful Breach, "knowledge" (or any corollary
thereof) or "reckless disregard" shall mean the knowledge or reckless disregard
of the senior executives or officials of the Company and United or the
Unions, as the case may be, each of whom shall conclusively be deemed to
have read this Agreement.

 

 

 

 

 

 

ARTICLE X
 

    MISCELLANEOUS
 

SECTION 10.1    Notices.    All notices,
requests and other communications to any party hereunder shall be in writing
(including telex or similar writing) and shall be given,

 

 
if to ALPA, to:

 

 
UAL-MEC/ALPA
6400 Shafer Court

Suite 700

Rosemont, IL 60018

Telephone: (708) 292-1700

Telecopy: (708) 292-1760

 

 

Attention: Captain Roger D. Hall

 

 
and copies to:,

 

 

Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas

New York, NY 10019

Telephone: (212) 373-3000

Telecopy: (212) 757-3990

 

 

Attention: Stuart I. Oran, Esq.

 

 
and to:

 

 

Cohen, Weiss and Simon
330 West 42nd Street

New York, NY 10036

Telephone: (212) 563-4100

Telecopy: (212) 695-5436

 

 

Attention: Stephen Presser, Esq.

 

 
If to IAM, to:

 

 

International Association of Machinists and Aerospace Workers Machinists
Building 1300 Connecticut Avenue Washington, D.C. 20036 Telephone: (202)
857-5200 Telecopy: (202) 331-9076
Attention: William L. Scheri

 

 
IAM Local 1487

321 Allerton Avenue

San Francisco, CA 94080

Telephone: (415) 873-0662

Telecopy: (415) 873-1676

 

 

Attention: Ken Theide

 

 
and copies to:

 

 

Taylor Roth Bush & Geffner
3500 W. Olive, Suite 1100

Burbank, CA 91505

Telephone: (818) 973-3200

Telecopy: (818) 973-3201

 

 

Attention: Robert A. Bush, Esq.

 

 

 

 

 

 

 

 

Lowenstein Sandler Kohl Fisher & Boylan

65 Livingston Avenue

Roseland, New Jersey 07068

Telephone: (201) 992-8700

Telecopy: (201) 992-5820

 

 

Attention: Peter H. Ehrenberg, Esq.

 

 
If to the Company to:

 

 

UAL Corporation
1200 E. Algonquin Road

Elk Grove Township, Illinois 60007

Telephone: (708) 956-2400

Telecopy: (708) 952-4683

 

 

Attention: Stephen M. Wolf and

Lawrence M. Nagin, Esq.

with a copy to:

 

 
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue

New York, NY 10022

Telephone: (212) 735-3000

Telecopy: (212) 735-2000

 

 

Attention: Peter Allan Atkins, Esq.

 

 

or such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
when received by the addressee using the facsimile number specified in
this Section, as evidenced by an automated confirmation receipt from the
sending facsimile machine or (ii) if given by any other means, when delivered
at the address specified in this Section.

 

 

SECTION 10.2    Survival.    The
representations and warranties contained herein and in any certificate
or other writing delivered pursuant hereto shall not survive the Effective
Time. The agreements of the parties contained herein and in any certificate
or other writing delivered pursuant hereto shall not survive the Effective
Time unless expressly provided in such agreement (it being understood that,
without limiting the survival of any other agreements contained herein
the survival of which is expressly provided for in such agreement, the
following agreements shall survive the Effective Time: Sections 1.2, 1.3,
1.5, 1.6, 1.7, 1.8, 1.9, 1.10, 2.3, 2.4, clause (iii) of the last sentence
of Section 5.1, 5.7, 5.8(b), 5.10, 5.11, 6.3, 6.4, 10.2 and 10.4) (all
such surviving agreements being referred to herein as the "Express Agreements").
Except with respect to any Collective Bargaining Agreement (as defined
in the Restated Certificate) and the Express Agreements, from and after
the consummation of each of the transactions contemplated to take place
at or about the Effective Time, each of the parties hereto (in their capacities
as such) fully releases, discharges, waives, and renounces (collectively
"Releases") any and all claims, controversies, demands, rights, disputes
and causes of action it may have had at or prior to the Effective Time
against, and agrees not to initiate any suit, action or other proceeding
involving, each of the other parties hereto, its officials, officers, directors,
employees, accountants, counsel, consultants, advisors and agents and,
if applicable, security holders relating to or arising out of this Agreement
or the transactions contemplated hereby (including, but not limited to,
matters contemplated under Section 5.11 and matters involving claims, controversies,
demands, rights, disputes or cause of action based on securities laws,
ERISA, common law tort theory or any other similar bodies of law); provided
that the foregoing Releases shall not apply to any claims, controversies,
demands, rights, disputes and causes of action arising from and after the
Effective Time (and based on facts and circumstances arising from and after
the Effective Time) under any of the documents, instruments or transactions
entered into, filed or effected in connection with the Recapitalization
(other than this Agreement, to the extent provided in this Section 10.2).

 

 

SECTION 10.3    Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the
Effective Time (including, without limitation, an amendment to this Agreement
to extend the Outside Termination Time) if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by the
Company and each Union or in the case of a waiver, by the party against
whom the waiver is to be effective; provided that no amendment to or waiver
of an Express Agreement shall be effective against a person entitled to
enforce such Express Agreement pursuant to Section 10.8 unless agreed to
in writing by such person; and provided, further, that after the
adoption of the Shareholder Vote Matters by the stockholders of the Company,
no such amendment or waiver shall, without the further approval of such
stockholders if and to the extent such approval is required by Delaware
Law, alter or change (i) the amount or kind of consideration to be received
in connection with the Recapitalization, (ii) any term of the Restated
Certificate or (iii) any of the terms or conditions of this Agreement if
such alteration or change would materially adversely affect the holders
of any shares of capital stock of the Company.

 

 
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.

 

 

SECTION 10.4    Fees and Expenses; Indemnification.

 

 

(a) Except as provided in the fee letter agreement, dated the date hereof,
among the Company and the Unions (the "Fee Letter"), or hereafter agreed
by the parties in writing or as set forth in this Section, all fees, costs
and expenses incurred in connection with this Agreement shall be paid by
the party incurring such fee, cost or expense. The parties agree that the
fees, costs and expenses of the Deadlock Firm and the Solvency Firm shall
be paid by the Company. The Company represents and agrees that the fees
of its principal financial and legal advisors to be incurred by the Company
in connection with the transactions contemplated by this Agreement other
than fees in connection with the underwriting described in Section 1.11
hereof shall not exceed $25 million.

 

 

(b) Upon the occurrence of a Triggering Event (as defined below), the
Company shall promptly pay to or at the direction of the Unions any amounts
the Company would otherwise have been required to pay pursuant to the Fee
Letter had the Effective Time occurred at the time of the occurrence of
such Triggering Event. Such amounts shall be exclusive of any amounts paid
or payable pursuant to indemnification or contribution arrangements. For
purposes of this paragraph (b), "Triggering Event" shall mean the occurrence
of each of the following: (i)(A) following the public announcement of a
proposal for an Acquisition, either the stockholders of the Company shall
not have approved the Shareholder Vote Matters at the Company Stockholder
Meeting or (B) the Board shall have withdrawn or modified in a manner materially
adverse to the Unions its approval or recommendation of the Recapitalization
or the Shareholder Vote Matters or shall have recommended, or failed to
recommend against, another Acquisition; (ii) subsequent to the stockholder
or Board action referred to in clause (i) above, this Agreement shall have
been terminated by the Company pursuant to Sections 9.1(b)(i) or 9.1(d)(ii)
or by either Union pursuant to Sections 9.1(b)(i) or 9.1(c)(i); and (iii)
within 12 months of the termination of the Agreement in accordance with
clause (ii) above, an Acquisition shall have been consummated.

 

 

(c) All amounts payable by the Company to either Union under this Section
10.4 shall be paid directly to such Union or directly to persons designated
in writing by such Union as such Union may specify.

 

 

(d) To the extent that the Company shall make payments to, or on behalf
of, either Union under this Section 10.4 and such Union is reimbursed by
another source (or otherwise receives a refund of the amount paid), such
Union shall return such amounts to the Company to the extent of such reimbursement
(or refund).

 

 

(e) The Company (the "Indemnitor") shall indemnify the Unions, their
controlling persons, and their respective directors, trustees, officers,
partners, affiliates, agents, representatives, advisors and employees (a
"Union Indemnified Person") against and hold each Union Indemnified Person
harmless from any and all liabilities, losses, claims, damages, actions,
proceedings, investigations or threats thereof (all of the foregoing, and
including expenses (including reasonable attorneys' fees, disbursements
and other charges) incurred in connection with the defense thereof, except
as set forth below, being referred to as "Liabilities") based upon, relating
to or arising out of the execution, delivery or performance of this Agreement
or the transactions contemplated hereby (including, without limitation,
the underwriting described in Section 1.11 hereof); provided, however,
that
the Indemnitor shall not be liable in any such case to the extent that
any such Liability arises out of any inaccurate information supplied by
any such Union Indemnified Person specifically for inclusion in the proxy
materials related to such transactions or any other filings made by the
Company or any Union Indemnified Person with any federal or state governmental
agency in connection therewith (including without limitation the prospectuses
relating to the underwriting described in Section 1.11 hereof) or if any
such Liability is finally judicially determined, not subject to further
appeal, to have resulted from bad faith, willful misconduct or negligence
on such Union Indemnified Person's part. Notwithstanding anything to the
contrary contained herein, "Liabilities" shall not include any losses,
claims, damages or expenses (including attorneys' fees, disbursements and
other charges) based upon, relating to or arising out of any action, claim,
proceeding, investigation or threat thereof (i) brought by a Union against
the other Union, (ii) brought by any employee of the Company or a subsidiary
of the Company, as such, represented by a Union or any member of a Union
(whether or not an employee of the Company or a subsidiary of the Company),
in his or her capacity as such, if, and only if, the underlying action,
claim, proceeding or threat is made against (1) his or her Union or (2)
against the other Union, (iii) brought by any Union or any Union Indemnified
Person against the Company or any controlling persons, directors, officers,
partners, agents, representatives, advisors or employees of the Company
(a "Company Related Person") or by the Company or any Company Related Person
against any Union or Union Indemnified Person or (iv) which arise primarily
as a result of acts by a Union Indemnified Person following the Effective
Time.

 

 

(f) In connection with the Indemnitor's obligation to indemnify for
expenses as set forth above in subsection (e) of this Section, the Indemnitor
further agrees to reimburse each Union Indemnified Person for all such
expenses (including reasonable attorneys' fees, disbursements and other
charges) as they are incurred by such Union Indemnified Person, provided,
however, that if a Union Indemnified Person is reimbursed hereunder for
any such expenses, such reimbursement of expenses shall be refunded to
the extent it is finally judicially determined, not subject to further
appeal, that the Union Indemnified Person is not entitled to indemnification
by reason of the proviso clause in the first sentence or the last sentence
of subsection (e) of this Section. The Company shall not be required to
reimburse any Union Indemnified Person for the reasonable attorney's
fees, disbursements or other charges of more than one counsel (plus local
counsel, if appropriate), or of more than one counsel (plus local counsel,
if appropriate) for any one Union (together with Union Indemnified Persons
who are controlling persons, directors, officers, partners, affiliates,
agents, representatives, advisors and employees of such Union) who can
be represented by common counsel so long as no conflict of interest or
different or additional colorable defenses are reasonably believed by such
Indemnified Persons to exist between or among them relative to the claims
asserted.

 

 

(g) Promptly after receipt by a Union Indemnified Person of notice of
any claim or the commencement of any action, proceeding or investigation
in respect of which indemnity or reimbursement may be sought as provided
in this Section, such Union Indemnified Person will notify the Indemnitor
in writing of the receipt or commencement thereof, but the failure to so
notify shall not relieve the Indemnitor from any obligation or liability
which it may have pursuant to this Section or otherwise except to the extent
that the Indemnitor is materially prejudiced thereby. In case any such
action, proceeding or investigation is brought or threatened against a
Union Indemnified Person, the Indemnitor will be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof,
with counsel selected by the Indemnitor and approved by the Union Indemnified
Person (such approval not to be unreasonably withheld). After notice from
the Indemnitor to such Union Indemnified Person of its election to assume
the defense thereof, the Indemnitor will not be liable to such Union Indemnified
Person for any legal expense subsequently incurred for services rendered
by any other counsel retained by such Union Indemnified Person in connection
with the defense unless such Union Indemnified Person, in the opinion of
its counsel, has colorable defenses which are different from or in addition
to defenses available to the Indemnitor or the Indemnitor has an interest
which conflicts with the interests of such Union Indemnified Person and
which makes separate representation advisable, in which event all legal
expenses of such Union Indemnified Person (subject to the last sentence
of subsection (f) above) shall continue to be paid by the Indemnitor. Notwithstanding.
Section 10.4(f), the indemnification provided for in this Section 10.4
shall include reimbursement for all expenses (including reasonable attorneys'
fees, disbursements and other charges) incurred by Union Indemnified Persons
to enforce their rights under this Section 10.4. The Indemnitor shall not
settle any action, claim, proceeding or investigation which is the subject
of this Section 10.4 without the prior written approval of the Union Indemnified
Person (such approval not to be unreasonably withheld), unless such settlement
involves solely the payment of money and the Indemnitor is not contesting
any right of a Union Indemnified Person to receive. indemnification hereunder.
References to Union Indemnified Persons shall in all cases include the
controlling persons, directors, officers, affiliates, agents, representatives,
advisors and employees of each Union Indemnified Person.

 

 

(h) If the indemnification provided for in this Section 10.4 is finally
judicially determined, not subject to further appeal, to be unavailable
to a Union Indemnified Person, then the Indemnitor shall, in lieu of indemnifying
such Union Indemnified Person, contribute to the amount paid or payable
in respect of any Liability by such Union Indemnified Person in such proportion
as shall be fair and equitable after taking into account the relative benefits
received by the parties, the relative fault of the parties and such other
equitable considerations as any court of competent jurisdiction shall determine.
For purposes of the preceding sentence, the benefits received by a Union
Indemnified Person that is an advisor shall not be deemed to exceed the
amount of fees payable to such Union Indemnified Person. The rights accorded
to the Indemnified Persons under this Section 10.4 shall be in addition
to any rights that any Union Indemnified Person may have at common law,
by separate agreement or otherwise.

 

 

(i) All rights to indemnification existing in favor of the present or
former directors, officers, employees, fiduciaries and agents of the Company
or any of its Subsidiaries (collectively, the "Company Indemnified Persons")
as provided in the Company's Certificate of Incorporation or By-laws or
other agreements or arrangements, or articles of incorporation or by-laws
(or similar documents) or other agreements or arrangements of any Subsidiary
as in effect as of the date hereof with respect to matters occurring at
or prior to the Effective Time shall survive the Effective Time and shall
continue in full force and effect. In addition, the Company shall provide,
for a period of not less than six years following the Effective Time, for
directors' and officers' liability insurance for the benefit of directors
and officers of the Company immediately prior to the Effective Time with
respect to matters occurring at or prior to the Effective Time by electing,
in its sole discretion, one of the two alternatives set forth below (which
election shall be reported to the Unions prior to the Effective Time):
(i) maintain for a period of not less than six years following the Effective
Time, the current policies of directors' and officers' liability insurance
with respect to matters occurring at or prior to the Effective Time, provided
that in satisfying its obligation under this clause (i), the Company shall
not be obligated to pay premiums in excess of 150% of the amount per annum
the Company paid for the policy year ending during calendar year 1994,
which amount has been disclosed to the Unions or (ii) purchase, prior to
the Effective Time, run-off coverage for the benefit of directors and officers
of the Company immediately prior to the Effective Time for matters occurring
at or prior to the Effective Time, which coverage shall provide for a separate
insurance pool for such directors and officers of at least $75 million
in coverage, provided, that in satisfying the obligations under this clause
(ii), the Company shall not pay in excess of an amount set forth in a letter
previously delivered by the Company to counsel to the Unions. The Company
shall also maintain for a period of not less than six years following the
Effective Time, the current fiduciaries' liability insurance with respect
to matters occurring at or prior to the Effective Time.

 

 

SECTION 10.5   Successors and Assigns.   The
provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; provided
that no party may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the written consent of the
other parties hereto. In the event the Company or any of its successors,
transferees or assigns (i) consolidates with or merges with or into any
other person and shall not be the continuing or surviving entity of such
consolidation or merger, (ii) transfers or conveys all or substantially
all of its properties or assets to any transferee or (iii) engages in any
similar transaction with any person, then, as a condition to the consummation
of such transaction, proper provision shall be made so the successor, transferee
or assignee of the Company pursuant to such transaction assumes the obligations
of the Company set forth in each of the Express Agreements.

 

 

SECTION 10.6    Governing Law.    This
Agreement shall be construed in accordance with and governed by the law
of the State of Delaware, without regard to the conflicts of laws principles
thereof. The parties agree that this Agreement (including the Schedules
and other attachments hereto), other than Schedules 1.6(a)(i), 1.6(a)(ii),
1.6(a)(iii), 1.6(a)(iv), 5.8(i) and 5.8(ii) (to the extent
such Schedules relate to employees of the Company and its Subsidiaries
represented by the Unions), shall not be subject to the jurisdiction of
any System Board of Adjustment under the Railway Labor Act.

 

 

SECTION 10.7    Counterparts; Efectiveness.  
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received counterparts hereof signed by
all of the other parties hereto.

 

 

SECTION 10.8   Parties in Interest.    This
Agreement shall be binding upon and inure solely, other than the provisions
of Section 10.4, to the-benefit of the parties hereto, and, except for
the Express Agreements, nothing in the Agreement, express or implied, is
intended to confer upon any other person any rights, benefits or remedies.
With respect to the Express Agreements, the agreements set forth in the
following Sections are for the benefit of, and may be enforced by, the
following parties: Sections 1.2, 1.3, 1.5, 6.3 and 6.4: the holders
of New Shares; Section 1.7: holders of Options; Section 1.8: holders of
Company Convertible Securities; Sections 2.3 (other than the last sentence
thereof) and 5.11: officers and directors of the Company prior to the Effective
Time; the first sentence of Section 5.8(b): the ESOP Trustee; the first
sentence of Section 5.10: Gerald Greenwald; Section 10.4(c)-(h): Union
Indemnified Persons; and Section 10.4(i): Company Indemnified Persons.

 

 

SECTION 10.9    Specific Performance.  
Prior to the Effective Time or the termination of this Agreement, the
parties agree that in the event a Willful Breach is established by a court
of competent jurisdiction, the other parties hereto shall be entitled to
specific performance of the terms hereof which were the subject of such
Willful Breach; provided, however, in no event shall such remedy
of specific performance in any way extend or modify the Outside Termination
Date. The parties acknowledge that in the event of a Willful Breach, irreparable
damage would occur, no adequate remedy at law would exist and damages would
be difficult to determine. No other remedy shall be available prior to
the Effective Time or the termination of this Agreement except that the
remedy of damages shall be available if such remedy (including the amount
of damages) would be available after termination pursuant to the terms
of Section 9.3 hereof.

 

 

SECTION 10.10    Entire Agreement.   Except
as otherwise explicitly set forth in this Agreement, or in other writings
signed concurrently herewith, this Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day
and year first above written.

 

 

UAL CORPORATION

 

 
By  /S/   STEPHEN M. WOLF

Name:  Stephen M. Wolf
Title:  Chairman and Chief

Executive Officer

 

 
AIR LINE PILOTS ASSOCIATION, INTERNATIONAL

 

 

By  /S/   ROGER D. HALL

Name:  Roger D. Hall
Title:   Chairman, UAL-MEC

 

 

INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS

 

 
By  /S/   KEN THIEDE

Name:    Ken Thiede

Title:    President and General Chairman, District Lodge
141

</HTML>

</TEXT>

</DOCUMENT>EXHIBIT 10

<DOCUMENT>

<TYPE> EX-10.2

<TEXT>

<HTML>
                                       
                                          
                                          
       
Exhibit 10.2

SECOND AMENDMENT TO THE AGREEMENT

AND PLAN OF RECAPITALIZATION

Second Amendment (this "Amendment"), dated as of June 29,
1994, to the Agreement and Plan of Recapitalization (as amended,
the "Plan of Recapitalization"), dated as of March 25, 1994,
by
and among UAL Corporation, a Delaware corporation (the "Company"), Air
Line Pilots Association, International, pursuant to its authority as the
collective bargaining representative for the crafts or class of pilots
employed by United Air Lines, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("United"), and the International Association
of Machinists and Aerospace Workers, pursuant to its authority as the collective
bargaining representative for the crafts or classes of mechanics and related
employees, ramp and stores employees, food service employees, dispatchers
and security officers employed by United, as amended by the First Amendment
to the Plan of Recapitalization, dated as of June 2, 1994.

 

 

W I T N E S S ET
H

WHEREAS, the parties hereto desire to amend the Plan of Recapitalization
and certain Schedules thereto; and

 

 

WHEREAS, Section 10.3 (a) of the Plan of Recapitalization permits amendments
to the Plan of Recapitalization and the Schedules thereto by written instrument
signed by all parties;

 

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree an follows:

 

 

1. Section 1.3 of the Plan of Recapitalization is hereby amended and
restated in its entirety in the form attached to this Amendment asExhibit
A.

 

 

2. Section 1.5(b) of the Plan of Recapitalization in hereby amended
and restated in its entirety in the form attached to this Amendment as
Exhibit B.

3. Section 1.11 of the Plan of Recapitalization is hereby amended and
restated in its entirety in the form attached to this Amendment as Exhibit
C.

 

 

4. Article FOURTH, Part I.D, Section 2.5 of the Restated Certificate
is hereby amended and restated in its entirety in the form attached to
this Amendment as Exhibit D.

 

 

Miscellaneous

A. Definitions. Capitalized terms used in this Amendment and
not defined herein shall have the meanings ascribed to them in the Plan
of Recapitalization or the Schedules or other attachments thereto.

 

 

B. Entire Plan of Recapitalization; Restatement. The Plan of
Recapitalization, as amended by this Amendment, is the entire agreement
of the parties with respect to the subject matter hereof and the parties
hereto hereby agree that the Plan of Recapitalization and all Schedules
thereto may be restated to reflect all amendments provided for in this
Amendment.

 

 

C. Governing Law. This Amendment shall be deemed to be made in
and in all respects shall be interpreted, governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of laws principles thereof.

 

 

D. Counterparts. This Amendment may be executed in counterparts,
each of which shall be an original and all of which shall together constitute
one and the same instrument.

 

 

Second Amendment to the Agreement

and Plan of Recapitalization

IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by their respective officers thereunto duly
authorized on the date first above written.

 

 

UAL CORPORATION

 

 
By: /s/ Stephen M. Wolf

Name: Stephen M. Wolf

Title: Chairman and Chief

       Executive Officer

 

 

AIR LINE PILOTS ASSOCIATION,

INTERNATIONAL

 

 

By: /s/ Roger D. Hall

Name: Roger D. Hall

Title: Chairman, UAL-MEC

 

 

INTERNATIONAL ASSOCIATION OF

MACHINISTS AND AEROSPACE WORKERS

 

 

By: /s/ Ken Thiede

Name: Ken Thiede

Title: President and

       General Chairman,

       District Lodge 141

 

 

 

EXHIBIT INDEX

 

Exhibit A - Section 1.3 of the Plan of Recapitalization
 

 

Exhibit B - Section 1.5 (b) of the Plan of Recapitalization
 

 

Exhibit C - Section 1.11 of the Plan of Recapitalization
 

Exhibit D - Article FOURTH, Part I.D, Section 2.5 of the Restated Certificate

 

 

 
EXHIBIT A

 SECTION 1.3 Redemption. Following the Effective Time, all
outstanding shares of Redeemable Preferred Stock shall, to the extent of
funds legally available therefor and subject to the provisions of the Restated
Certificate, be redeemed immediately after issuance according to the terms
thereof (the "Redemption"). Pursuant to the Redemption, the holders of
Redeemable Preferred Stock, if any, shall be entitled to receive, in respect
of each one one-thousandth of a share of Redeemable Preferred Stock, subject
to the terms thereof and Section 1. 5(f):

 

 

(i) 25.80 in cash;
 

(ii) either (a) if the Underwriting Alternative with respect to depositary
shares (the "Depositary Shares") representing interests in Series B Preferred
Stock of the Company, without par value (the "Public Preferred Stock"),
is not consummated, both (I) an additional cash payment equal to $12.20,
plus (II) Depositary Shares representing interests in a liquidation preference
of Public Preferred Stock equal to the excess of (xx) $31.10 over (yy)
the product of $12.20 and a fraction (but in no event less than one) the
numerator of which is the Applicable Rate with respect to the Depositary
Shares assuming that the Underwriting Alternative with respect to the Depositary
Shares is consummated, and the denominator of which is 11.375%, or (b)
if the Underwriting Alternative with respect to the Depositary Shares
is consummated, a cash payment equal to the Depositary Share Proceeds Amount
(as defined in Section 1.11 below);

 

 
(iii) either (a) $15.55 principal amount of Series A Senior Unsecured
Debentures due 2004 of United issued as provided below (the "Series A Debentures")
or (b) if the Underwriting Alternative with respect to the Series A Debentures
is consummated, a cash payment equal to the Series A Debenture Proceeds
Amount (as defined in Section 1.11 below); and

(iv) either (a) $15.55 principal amount of Series B Senior Unsecured
Debentures due 2014 of United issued as provided below (the "Series B Debentures"
and, together with the Series A Debentures, collectively, the "Debentures")
or (b) if the underwriting Alternative with respect to the Series B Debentures
is consummated, a cash payment equal to

the Series B Debenture Proceeds Amount (as defined in Section 1.11
below).

 

The Depositary Shares shall be issued pursuant to a Deposit Agreement substantially
in the form set forth on Schedule 1.3 (a) (the "Deposit Agreement"). The
Depositary Shares shall be issued only in denominations of $25.00 of liquidation
preference and integral multiples thereof. The Public Preferred Stock shall
have the rights, powers and privileges described in the Restated Certificate,
which shall include a per share liquidation preference of $25,000. The
Debentures shall be issued pursuant to the Indenture, dated as of July
1, 1991, between United and the Bank of New York, and the Officers' Certificate
(the "Officers' Certificate") in form and substance as set forth on Schedule
1.3 (b) (collectively, the "Indenture"). Such Indenture shall be qualified
under the Trust Indenture Act of 1939, and the rules and regulations
promulgated thereunder (the "TIA"). The Debentures shall be issued only
in denominations of $100 and integral multiples thereof or, if the Underwriting
Alternative with respect to either series of Debentures is consummated
at or prior to the Effective Time and the Company so elects, denominations
of $1,000 and integral multiple thereof, in which case conforming changes
shall be made to this Agreement and the attachments hereto to take into
account such greater denominations with respect to such series.

 

 

 

 
EXHIBIT B

 
[SECTION 1.5 Surrender and Exchange.]

 

(b) Each holder of Old Shares that have been converted into New Shares
and Redeemable Preferred Stock, upon surrender to the Exchange Agent of
an Old Certificate or Certificates, together with a properly completed
letter of transmittal covering such Old Shares, will be entitled to receive
in respect of such Old Shares, subject to Section 1.5(f):

 

 
(i) a certificate or certificates representing 0.5 of a New Share
for each Old Share formerly represented by such Old Certificate or Certificates
in accordance with Section 1.2:

 

 
(ii) either (a) if the Underwriting Alternative with respect to Depositary
Shares representing interests in the Public Preferred Stock is not consummated,
for each Old Share formerly represented by such Old Certificate or Certificates
in respect of the Redemption, both (I) a cash payment equal to $12.20,
plus (II) a depositary receipt or receipts representing Depositary Shares
representing interests in a liquidation preference of Public Preferred
Stock equal to the excess of (xx) $31.10 over (yy) the product of $12.20
and a fraction (but in no event less than one) the numerator of which is
the Applicable Rate with respect to the Depositary Shares assuming that
the Underwriting Alternative with respect to the Depositary Shares is consummated,
and the denominator of which is 11.375%, or (b) if the Underwriting Alternative
with respect to the Depositary Shares is consummated, a cash payment equal
to the Depositary Share Proceeds Amount in respect of the Redemption;

 

 

(iii) either (a) $15.55 principal amount of Series A Debentures for
each old Share formerly represented by such Old Certificate or Certificates
in respect of the Redemption or (b) if the Underwriting Alternative with
respect to the Series A Debentures is consummated, a cash payment equal
to the Series A Debenture Proceeds Amount in respect of the Redemption;

(iv) either (a) $15.55 principal amount of Series B Debentures for each
Old Share formerly represented by such Old Certificate or Certificates
in respect of the Redemption or (b) if the Underwriting Alternative with
respect to the Series B Debentures is consummated, a cash payment equal
to the Series B Debenture Proceeds Amount in respect of the Redemption;
and

 

 

(v) a cash payment of $25.80 for each Old Share formerly represented
by such Old Certificate or Certificates in respect of the Redemption (the
cash and/or securities distributed pursuant to clauses (i) through (v),
collectively, the "Recapitalization Consideration").

 

 

Until so surrendered, each Old Certificate or Certificates formerly representing
Old Shares shall, after the Effective Time, represent for all purposes
only the right to receive such Recapitalization Consideration.

 

 

 

 

EXHIBIT C

 Section 1.11 Underwriting Alternative

 

 

The Company has elected to pursue the underwriting of (a) a number of
Depositary Shares calculated as provided in the next sentence, (b) $382.5
million principal amount of Series A Debentures, subject to reduction as
described below, and (c) $382.5 principal amount of Series B Debentures,
subject to reduction as described below (referred to collectively herein
as the "Underwriting Alternative"), and the consummation of the underwritings
with respect to the Depositary Shares and the Debentures shall be in lieu
of issuing Depositary Shares and Debentures to holders of Old Shares pursuant
to Section 1.5 hereof, to holders of Options pursuant to Section 1.7 hereof
and to holders of Convertible Company Securities pursuant to Section 1.8
hereof. The number of Depositary Shares that shall be subject to the Underwriting
Alternative (which may be rounded up to produce an aggregate amount of
Depositary Shares that is consistent with customary aggregate underwriting
denominations) shall equal one twenty-fifth of the excess of (I)
the product of $765 million and a fraction (such fraction, which shall
in no event be greater than one, is referred to herein as the "Liquidation
Preference Fraction"), the numerator of which is 11.375%, and the denominator
of which is the Applicable Rate with respect to the Depositary Shares assuming
that the Underwriting Alternative with respect to the Depositary
Shares is consummated, over (II) $300 million. The Company shall use its
best efforts to accomplish such underwritings, including entering into
a firm commitment underwriting agreement or agreements, provided, however,
that the Company may elect to terminate the Underwriting Alternative at
any time prior to the Effective Time. The Unions will cooperate and use
their respective best efforts to facilitate the underwritings. The Underwriting
Alternative will be effected in accordance with customary underwriting
agreements which may reflect that, if the Company is advised by the managing
underwriter or managing underwriters that the Series A Debentures or Series
B Debentures would be priced in excess of the maximum price applicable
to such security (so that such security, if priced at the applicable Maximum
Pricing, could only be sold at less than par), and is further advised that
consistent with industry practice the Underwriting Alternative will be
facilitated by the sale of such securities at or closer to par, the Company
may reduce the amount of such securities to be sold and increase the interest
rate above the applicable Maximum Pricing so that such securities may be
sold at or closer to par, provided that (1) the yield to maturity
of the reduced par amount of Debentures will not exceed the yield to maturity
that would result if the unreduced par amount of such Debentures were priced
at a discount to par using the Maximum Pricing for the respective Debenture
and (2) the proceeds from the issuance of the reduced par amount of Debentures
will equal the proceeds that would result if the unreduced par amount of
such Debentures were priced at a discount to par using the Maximum Pricing
for the respective Debenture. If the Underwriting Alternative is consummated,
the amount of cash payable in respect of each Old Share shall equal the
sum of (i) $25.80 per share, (ii) the sum of $12.20 and the
gross proceeds (price to the public without deducting any underwriting
discount or other cost) received by the Company from the sale of the "Underwriting
Liquidation Preference" of Public Preferred Stock as represented by Depositary
Shares in the Underwriting Alternative (collectively, the "Depositary Share
Proceeds Amount"), (iii) the gross proceeds (price to the public without
deducting any underwriting discount or other costs) received by United
from the sale of each $15.55 principal amount of Series A Debentures in
the Underwriting Alternative (subject to adjustment as described in the
immediately preceding sentence, the "Series A Debenture Proceeds Amount")
and (iv) the gross proceeds (price to the public without deducting any
underwriting discount or other costs) received by United from the sale
of each $15.55 principal amount of Series B Debentures in the Underwriting
Alternative (subject to adjustment as described in the immediately preceding
sentence, the "Series B Debenture Proceeds Amount"). The "Underwriting
Liquidation Preference" shall equal the excess of (I) the product of $31.10
and the Liquidation Preference Fraction over (III) $12.20.

 

 

 

 

 

 

EXHIBIT D

[D. DESIGNATION, PREFERENCES AND RIGHTS OF

    SERIES D REDEEMABLE PREFERRED STOCK]

 

2.5 "Redemption Consideration" shall mean (subject to Section 6
hereof) (i) $25.80 in cash, (ii)$15.55 principal amount of Series A Debentures,*
(iii)

$15.55 principal amount of Series B Debentures** and (iv) an additional
$12.20 in cash and Depositary Shares representing interests in $ ***
in liquidation preference of shares of Series B Preferred Stock, which
Preferred Stock shall be issued in the name of the Depositary

pursuant to the Deposit Agreement and against which the Depositary
shall issue Depositary Shares to the holder of the fraction of a share
of the Series D Preferred Stock being redeemed, as provided in the Deposit
Agreement,**** such Redemption Consideration to be distributed by the

Corporation in respect of each 1/1,OOOth of a share of Series D Preferred
Stock to the holder thereof upon the redemption of such fraction of a share
as provided in Section 6 hereof and as adjusted as provided in Section
6

hereof.

 

 
* If the Underwriting Alternative with respect to the Series A Debentures
is consummated, delete clause (ii), increase the cash payment in clause
(i) by the Series A Debenture Proceeds Amount and revise definitions as
appropriate.

 

 
** If the Underwriting Alternative with respect to the Series B Debentures
is consummated, delete clause (iii), increase the cash payment in clause
(i) by the Series B Debenture Proceeds Amount and revise definitions as
appropriate.

 

 

*** Amount to be calculated in accordance with Plan of Recapitalization.

 

 

**** If the Underwriting Alternative with respect to the Depositary
Shares is consummated, delete clause (iv), increase the cash payment in
clause (i) by the Depositary Share Proceeds Amount and revise definitions
as appropriate.

 

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