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Exhibit 10.4

UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN

(Effective as of July 12, 1994)

Table of Contents

	 	
Page

	PREAMBLE 	
1

	SECTION 2 	
12

	  2.1 Eligibility for Participation	
12

	  2.2 Participation Not Guarantee of Employment	
12

	  2.3 Transferred Participants	
13

	SECTION 3 	
13

	  3.1 Employer Contributions	
13

	  3.2 Limitation on Contributions	
15

	  3.3 Timing of Contributions	
15

	  3.4 Participant Contributions	
15

	SECTION 4 	
15

	  4.1 Exclusive Benefit of Participants	
16

	  4.2 Investment in Company Stock	
16

	  4.3 Acquisition Loans	
16

	  4.4 Fiduciary Concerns	
16

	SECTION 5 	
17

	  5.1 Accounting for Allocations	
17

	  5.2 Allocation and Crediting of Participants'
ESOPStock Accounts	
17

	  5.3 Allocation and Crediting of Participants'
ESOPCash Accounts	
17

	  5.4 Allocation and Crediting of Employer
Contributions	
18

	  5.5 Limitation on Allocations to Participants	
26

	  5.6 Valuations	
27

	SECTION 6 	
27

	SECTION 7 	
27

	  7.1 Pre-Retirement Diversification Rights	
27

	  7.2 Distributions on Account of Termination
of Employment	
28

	  7.3 Manner and Form of Distributions	
28

	  7.4 Special Distribution Rules	
29

	  7.5 Direct Rollover	
30

	  7.6 Facility of Payment	
30

	  7.7 Interests Not Transferable	
31

	  7.8 Absence of Guaranty	
31

	  7.9 Designation of Beneficiary	
31

	  7.10 Missing Participants or Beneficiaries	
32

	  7.11 Qualified Domestic Relations Order	
32

	SECTION 8 	
32

	  8.1 Voting	
32

	  8.2 Control Transaction	
34

	  8.3 No Illegal Actions	
39

	SECTION 9 	
39

	  9.1 Right of First Refusal	
39

	  9.2 Put Option	
40

	  9.3 Share Legend	
40

	  9.4 Nonterminable Rights	
40

	SECTION 10 	
40

	  10.1 Class 1 Non-Voting Preferred Stock	
40

	  10.2 Other Dividends	
41

	  10.3 Special Allocated Share Rule	
42

	SECTION 11 	
42

	  11.1 General 	
42

	  11.2 Membership and Authority	
42

	  11.3 Delegation by ESOP Committee	
46

	  11.4 Information To Be Furnished to ESOP
Committee	
47

	  11.5 ESOP Committee's Decision Final	
47

	  11.6 Remuneration and Expenses	
47

	  11.7 Indemnification of the ESOP Committee	
47

	  11.8 Resignation or Removal of ESOP Committee
Member	
48

	  11.9 Appointment of Successor ESOP Committee
Members	
48

	  11.10 Interested ESOP Committee Member	
48

	  11.11 Compliance with Laws	
48

	  11.12 Expenses of the Plan and Trust	
48

	SECTION 12 	
49

	  12.1 Written Claim	
49

	  12.2 Notice of Denial	
49

	  12.3 Review Procedure	
49

	  12.4 Notices	
50

	SECTION 13 	
50

	  13.1 Amendment	
50

	  13.2 Termination	
51

	  13.3 Merger and Consolidation of Plan;
Transferof Plan Assets	
51

	  13.4 Distribution on Termination	
52

	SECTION 14 	
52

	  14.1 Top-Heavy Provisions	
52

	  14.2 Amendments	
52

	  14.3 Super Top-Heavy Provisions	
53

	  14.4 Special Rule	
53

	SECTION 15	
53

	  15.1 Qualification	
53

	  15.2 Reversions to Employer	
54

	  15.3 Governing Law	
54

	  15.4 Notices	
54

	  15.5 Evidence	
55

	  15.6 Action by Employer	
55

	  15.7 Execution	
55

	  15.8 Adjustments	
56

 

 

 

 

 

 

 

UAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

(Effective as of July 12, 1994)

PREAMBLE

Nature of Plan

    The Plan has been established to enable Eligible
Employees of the Company and certain of its Affiliates to acquire stock
ownership interests in the Company. The Plan is designed to invest exclusively
in Company Stock (except for de minimis investments of cash pending investment
in Company Stock or pending distribution to Participants) and, to the extent
it is an employee stock ownership plan, primarily in "qualifying employer
securities" (as defined in Code section 4975(e)(8)).

    Subject to Section 13, the Plan is intended to be
permanent and to benefit Eligible Employees of the Company and its participating
Affiliates on the Effective Date, as well as the Eligible Employees entering
employment thereafter.

    The Plan consists of an employee stock ownership
plan and a stock bonus plan. The employee stock ownership plan ("Part A"
hereof) forms a part of the stock bonus plan, includes a money purchase
pension plan and is intended to be qualified under Code sections 401(a)
and 4975(e)(7). With respect to the portion of this Plan that is an employee
stock ownership plan, as a single employee stock ownership plan: (i) the
Initial Acquisition Loan and the Additional Acquisition Loans shall be
a joint obligation of the component plans, (ii) the Plan shall not maintain
separate Loan Suspense Accounts for the stock bonus and money purchase
pension components, (111) dividends paid on Company Stock in either such
component plan shall be used to repay the Initial Acquisition Loan and
the Additional Acquisition Loans to the extent provided in the Plan, and
(iv) separate Accounts shall not be maintained for Participants with respect
to such component plans. The Trust holding the assets of the Trust Fund
is intended to be exempt from taxation under Code section 501(a).

    The Plan consists of two portions, a "leveraged"
portion (Part A) that is intended to be an employee stock ownership plan
and an "unleveraged" portion (Part B). Part A consists of both a stock
bonus plan component and a money purchase pension plan component and Part
B consists solely of a stock bonus plan component. Unless the context otherwise
requires or unless specifically provided, all provisions of this Plan document
shall apply to both Part A and Part B.

Transaction

    The Plan is part of an overall program (which includes
the Supplemental Plan) resulting in the acquisition by Eligible Employees
of a majority ownership stake in the Company as contemplated by the Agreement
and Plan of Recapitalization, among UAL Corporation and Air Line Pilots
Association, International and International Association of Machinists
and Aerospace Workers, as amended (the "Recapitalization Agreement"). Specifically,
on the Effective Date, Eligible Employees will become entitled to receive
55% of the equity and voting power of the Company through the Trust and
the Supplemental Trust. The overall program will be accomplished by the
allocation to individual Participant accounts over the Wage Investment
Period of shares of Class 1 Non-Voting Preferred Stock, Class 2 Non-Voting
Preferred Stock and Voting Preferred Stock under the Trust and Supplemental
Trust (or equivalent fictional book-entry shares under the Supplemental
Plan), which shares shall, in the aggregate, be convertible into shares
of Common Stock in an amount that represents 55% of the Company's equity
and voting power measured as of the Effective Date. In addition, as described
under the paragraph entitled "Additional Shares" below, depending on the
market price per share of the Common Stock during the one-year period commencing
on the Effective Date, up to an additional 8% of the Company's equity and
voting power may be allocated to Participants' accounts under the Plan
and the Supplemental Plan, bringing the total up to 63% of the equity and
voting power of the Company.

    Of the overall Employee stake, 46.23% of the underlying
shares, including the Additional Shares, if any, will be reserved for allocation
to the ALPA Employee Group, 37.13% of the underlying shares will be reserved
for allocation to the IAM Employee Group and 16.64 % of the underlying
shares will be reserved for allocation to the Management and Salaried Employee
Group.

    If there were no Code limitations on compensation
and allocations, all shares to be acquired under the overall program would
be delivered solely under Part A and such shares would be allocated to
Participants of the respective Employee Groups over the Wage Investment
Period in accordance with the percentages set forth in the preceding paragraph.
Because such Code limitations will, in fact, operate to limit the annual
benefits available under Part A, only a portion (expected to be approximately
78.15% of the underlying shares of Preferred Stock) will be acquired by
the Trust from time to time on and after the Effective Date and allocated
to Participants under Part A. To maximize certain employee stock ownership
plan-related tax benefits, the Employee Groups may receive less than their
overall equity ownership interest under Part A, with the balance to be
received under Part B and the Supplemental Plan. Most of the shares allocable
under Part B and the Supplemental Plan will be allocable to the ALPA Employee
Group. (The preceding does not refer to Voting Preferred Stock; it will
be contributed and allocated for all Employee Groups as described below
under the paragraph entitled "Part B: Voting Preferred Stock.")

    Shares not acquired under Part A will be allocated
to appropriate Participant Accounts under Part B, subject to Code limitations,
including Code sections 401(a)(4), 401(a)(17) and 415. To the extent that
shares cannot be allocated under Part B by reason of those Code limitations,
such shares will be allocated to accounts of appropriate Participants in
accordance with the provisions of the Supplemental Plan.

    The combined effect of the allocations under the
overall program (Part A, Part B and the Supplemental Plan) will be to put
each Participant, to the extent possible, in the position such Participant
would have been had all shares, including the Additional Shares, if any,
been delivered to and allocated under Part A.

Part A

    With respect to Part A, it is intended that, on the
Effective Date and from time to time thereafter, the Trustee will enter
into the Initial Acquisition Loan and Additional Acquisition Loans on behalf
of the Trust and use the proceeds thereof to purchase shares of Preferred
Stock, representing approximately 42.9825% of the equity of the Company
(subject to increase due to any Additional Shares issued). The Preferred
Stock purchased will be Class 1 Non-Voting Preferred Stock. The shares
of Class 1 Non-Voting Preferred Stock will be allocated ratably, over the
Wage Investment Period, to the Employee Groups in accordance with the following
percentages:

                           
ALPA Employee Group - 31.759437%

                           
IAM Employee Group - 47.511196%

                           
Management and Salaried Employee Group - 20.729367%

Part B: Class 2 Non-Voting Preferred Stock

    With respect to Part B, it is intended that the Company
will contribute (or will cause the trustee of the Supplemental Trust to
transfer), during the Wage Investment Period, shares of Class 2 Non-Voting
Preferred Stock (including Additional Shares, if any) to the Plan. Subject
to certain Code limitations, Such shares will be allocated to Participants
who receive less than their full entitlement under the overall program
under Part A. In general, the formula for determining the amount of allocations
under Part B to make up for the shortfall of Company Stock delivered under
Part A is set forth in Section 5.4(c).

Part B: Voting Preferred Stock

    With respect to Part B, it is also intended that
the Company will contribute, during the Wage Investment Period, shares
of Voting Preferred Stock to the Plan. The Voting Preferred Stock contributed
will be comprised of three classes. A separate class of Voting Preferred
Stock, representing 25.4265% of the voting power of the Company, will be
reserved for allocation to Participants who are members of the ALPA Employee
Group ("Class P"); a separate class of Voting Preferred Stock, representing
20.4215% of the voting power of the Company, will be reserved for allocation
to Participants who are members of the IAM Employee Group ("Class M");
and a separate class of Voting Preferred Stock, representing 9.152% of
the voting power of the Company, will be reserved for allocation to Participants
who are members of the Management and Salaried Employee Group ("Class S").
(The shares reserved above include shares reserved for allocation to the
respective Employee Groups under the Supplemental Plan and Supplemental
Trust.) Such percentages shall be appropriately adjusted in the event the
initial Employee ownership percentage is increased (up to 63% in the aggregate)
as provided below. It is intended that the number of shares of Voting Preferred
Stock to be allocated to each Participant's Account on each Valuation Date
will equal the number of shares of Preferred Stock allocated to that Participant
under Part A and Part B on such Valuation Date (taking into account the
special Effective Date contribution and allocation described below). The
terms of each class of Voting Preferred Stock provide that the shares outstanding
at any particular time (in combination with any shares of Common Stock
held by the Trustee or trustee under the Supplemental Trust allocable or
allocated to the relevant Employee Group) will command the aggregate voting
power reserved for such Employee Group. Thus, for example, if there are
100 shares of Class P outstanding, each such share will command 1% of the
voting power reserved for the ALPA Employee Group (25.4265%, assuming 55%
ownership by Employees). As additional shares of Class P are issued. the
per share voting power will decrease proportionately.

    As a special Employer Contribution, one share of
each of Class P, Class M and Class S will be contributed by the Company
to Part B on the Effective Date. These three shares will be allocated,
per capita, to the Accounts of the appropriate Participants under Part
B on the Effective Date.

Supplemental Plan and Supplemental Trust

    To the extent that, in any Plan Year during the Wage
Investment Period. shares of Company Stock cannot be allocated to a Participant's
Account by reason of any Code limitations, including Code section 401(a)(17),
Code section 415 and Code section 401(a)(4), appropriate credits will be
made to the accounts of the affected Participants under the Supplemental
Plan (attached hereto as Exhibit A) in accordance with the terms thereof
and shares of Voting Preferred Stock (and in certain circumstances, Class
2 Non-Voting Preferred Stock) used to satisfy the relevant credits will
be held in the Supplemental Trust (attached hereto as Exhibit B) in accordance
with the terms thereof for the benefit of the affected Participants.

Part B: Flowback

    During and after the Wage Investment Period, to the
extent that the allocation of shares of Company Stock under the Plan for
any Participant was limited in a prior Plan Year by reason of the limitations
of Code section 401(a)(17), Code section 415 or Code section 401(a)(4)
(with the result that the Participant received corresponding credits under
the Supplemental Plan), it is intended that the Company will contribute
(or the Company will cause the trustee of the Supplemental Trust to transfer)
to such Participant's Account shares of Class 2 Non-Voting Preferred Stock
and shares of Voting Preferred Stock, as the case may be, in a subsequent
Plan Year, and that such shares will be allocated under this Plan to the
Accounts of the affected Participants in accordance with the terms hereof,
subject to any applicable Code limitations as applied to the subsequent
Plan Year (and corresponding debits will be made under the Supplemental
Plan).

Additional Shares:

    Depending on the fair market value per share of the
Common Stock during the one-year period commencing on the Effective Date,
a number of additional shares determined in accordance with Section 1.6
and Section 1.10 of the Recapitalization Agreement will be allocated to
Participants' Accounts under the Plan and participants' accounts under
the Supplemental Plan over the remainder of the Wage Investment Period.
Such number of shares of Company Stock will be allocated to the Employee
Groups in accordance with the percentages specified in the paragraph above
entitled "Transaction. "

    In general, 78.15% of the Additional Shares which
are Preferred Stock will be Class 1 Non-Voting Preferred Stock; provided,
however, that the portion of the Additional Shares attributable to Preferred
Stock allocated as of December 31, 1994 will be Class 2 Non-Voting Preferred
Stock contributed to Part B or allocated as credits under the Supplemental
Plan as of December 31, 1994. Except as described in the foregoing proviso,
it is intended that such Additional Shares of Class 1 Non-Voting Preferred
Stock will increase, on a pro rata basis, the number of such shares acquired
pursuant to each Additional Acquisition Loan. Unless the parties agree
otherwise, these Class 1 shares will be allocated over the remainder of
the Wage Investment Period in accordance with the percentages set forth
under Part A above.

    Any Additional Shares not sold to the Trustee pursuant
to Part A will be contributed by the Company to Part B or credited to the
Supplemental Plan during the remainder of the Wage Investment Period. Subject
to certain Code limitations, such shares will be allocated to Participants
who receive less than their full entitlement, giving effect to the allocation
of the Additional Shares, of shares of Class 1 Non-Voting Preferred Stock
under Part A. To the extent possible, the formula in Section 5.4(c) will
be applied by assuming all Additional Shares (other than the shares of
Voting Preferred Stock) had been sold to the Trust under Part A on the
Effective Date and allocated ratably over the following 69 months.

SECTION 1

Definitions

    In this Plan (including the preamble), whenever the
context so indicates, the singular or plural number and the masculine or
feminine gender shall be deemed to include the other, the terms "he," "his,"
and "him" shall refer to a Participant or Beneficiary, as the case may
be, and, except as otherwise provided, or unless the context otherwise
requires, the capitalized terms shall have the following meanings:

(a)     "Account" or "Accounts" mean a Participant's
or Beneficiary's ESOP Stock Account and/or his ESOP Cash Account, as the
context so requires.
(b)     "Acquisition Loan" means a loan (or other
extension of credit, including an installment obligation to a party in
interest (as defined in ERISA section 3(14))) incurred by the Trustee in
connection with the purchase of Company Stock.

(c)     "Additional Acquisition Loans" means the
Acquisition Loans entered into from time to time after the Effective Date
between the Trustee and the Company as contemplated by Section 1.6 of the
Recapitalization Agreement.

(d)     "Additional Shares" means the number of
additional shares, if any, of Company Stock to be issued by the Company
in accordance with Section 1.10 of the Recapitalization Agreement. Any
reference herein to additional shares shall only be applicable when, if
and to the extent that additional shares are determined to be issuable
in accordance with Section 1.10 of the Recapitalization Agreement.

(e)     "Affiliate" means any corporation, trade
or business, which, at the time of reference, is together with the Company,
a member of a controlled group of corporations, a group of trades or businesses
(whether or not incorporated) under common control or an affiliated service
group, as described in Code sections 414(b), 414(c) and 414(m), respectively,
or any other organization treated as a single employer under Code section
414(o); provided, however, that, where the context so requires, the ten-n
"Affiliate" shall be construed to give full effect to the provisions of
Code sections 409(1)(4) and 415(h).

(f)     "ALPA" means the Air Line Pilots Association,
International.

(g)     "ALPA Employee Group" means Eligible Employees
in classifications represented by ALPA under the Railway Labor Act who
are either listed on the Pilots' System Seniority List or Second Officer
Eligibility Seniority List.

(h)     "Beneficiary" means the person or persons
to whom a deceased Participant's benefits are payable under the Plan all
as provided in Section 7.9.

(i)     "Board of Directors" means the board of
directors of the Company.

(j)     "Class 1 Non-Voting Preferred Stock" means
the shares of Class 1 ESOP Convertible Preferred Stock issued by the Company
and allocated under Part A.

(k)     "Class 2 Non-Voting Preferred Stock" means
the shares of Class 2 ESOP Convertible Preferred Stock issued by the Company
and allocated under Part B. Any reference to such shares credited under
the Supplemental Plan shall be deemed to be a reference to fictional book-entry
shares of Class 2 Non-Voting Preferred Stock credited under the Supplemental
Plan.

(l)     "Code" means the provisions of the Internal
Revenue Code of 1986, as amended, and all successor laws thereto. Where
the Plan refers to a particular section of the Code, such reference shall
also apply to any successor to that section.

(m)     "Common Stock" means common stock issued
by the Company that meets the requirements of Code section 409(1), which
on the Effective Date includes the common stock that may be received upon
the conversion of the Preferred Stock and Voting Preferred Stock.

(n)     "Company" means UAL Corporation and any
successor corporation or entity to the Company by merger, consolidation
or otherwise.

(o)     "Company Stock" means Voting Preferred Stock,
Common Stock and/or Preferred Stock, as the context so requires.

(p)     "Compensation" means (i) the total cash
compensation paid to the Participant, for services while a Participant
and an Eligible Employee, during the Plan Year for services rendered to
his Employer, including bonuses and overtime pay, plus (ii) elective deferrals
under a plan meeting the requirements of Code section 401(k) or Code section
125 for such Plan Year, but excluding reimbursement of moving expenses,
relocation allowances, housing allowances, reimbursement of membership
costs and dues, other expense reimbursement payments and allowances, severance
pay or other special payments relating to termination of employment by
retirement or otherwise and cash payments in respect of stock appreciation
rights. With respect to the Management and Salaried Employee Group only,
Compensation shall not include pay received for vacation time that was
accrued but not actually taken as vacation before termination of employment
by retirement or otherwise. A Participant's Compensation shall not exceed
$150,000 (as adjusted pursuant to Code section 401(a)(17)); provided, however,
that with respect to Part A, Compensation of a Participant who is a member
of the ALPA Employee Group shall be limited to an amount equal to four
times the dollar limitation under Code section 415(c)(1)(A) (as adjusted
pursuant to Code section 415). Compensation for services performed prior
to July 13, 1994 or after the end of the Wage Investment Period shall not
be taken into account under the Plan, except for purposes of applying any
Code limitations.

(q)     "Control Transaction" means (a) any tender
offer or exchange offer for Company Stock or any other opportunity or series
of opportunities for the Plan to dispose of (or convert in connection with
a sale, exchange or disposition) at least 3% of its Company Stock (other
than conversions or dispositions to effectuate distributions or diversification
elections under the Plan), and (b) any transaction or series of related
transactions pursuant to which any person or group (as defined in Rule
13d-3 under the Exchange Act) acquires or seeks to acquire, directly or
indirectly, "control" (as defined in the Exchange Act) of the Company or
of all or a substantial portion of the tangible or intangible assets of
the Company and its subsidiaries, whether by merger, consolidation, share
exchange, tender offer, exchange offer, sale, lease, exchange, conversion,
voting trust, proxy or otherwise. For purposes of Plan provisions relating
to a "Control Transaction," "person" means an individual, corporation,
association, partnership, joint venture, limited liability company, trust,
estate, unincorporated organization, governmental authority, judicial entity
or other entity.

(r)     "Effective Date" means July 12, 1994.

(s)     "Eligible Employee" means any Employee of
an Employer (other than any employee who is not a member of an Employee
Group and any "leased employee" (as defined in Code section 414(n))), subject
to the following:

    (i)     if an Employee is included
in a unit of Employees covered by a collective bargaining agreement, he
shall not be an Eligible Employee unless the applicable collective bargaining
agreement expressly provides that he shall be eligible to participate in
this Plan. On the Effective Date, members of the ALPA Employee Group, the
IAM Employee Group, and, if the Transport Workers Union collective bargaining
agreement so provides, the meteorologist Employees who are members of a
group represented by the Transport Workers Union (these meteorologists
are members of the Management and Salaried Employee Group) are Eligible
Employees;

    |(ii)     an Employee shall not
be an Eligible Employee if he is a non-resident alien with no earned income
from U.S. sources;

    |(iii)     an Employee shall
not be an Eligible Employee as of the date his Compensation no longer reflects
all of the wage concessions contemplated as part of the recapitalization
of UAL effective July 12, 1994; and

    |(iv)     with respect to an
Employee who is a member of the Management and Salaried Employee Group,
the Employer may provide in a resolution of its board of directors, additional
limitations for participation with the consent of the Board of Directors;
provided, however, that any such limitation shall not have the effect of
reducing the amount of Company Stock intended to be allocated to the Management
and Salaried Employee Group under Part A or affect the method or pace of
allocations of Company Stock in a manner that would adversely affect the
Plan's projected ability to meet the requirements of Code section 415(c)(6).

 (t)     "Employee" means any person, including
an officer or director, who is actually performing services for the Company
or any of its Affiliates in a common-law, employer-employee relationship
and treated as an employee on the payroll records and any "leased employee"
(within the meaning of Code section 414(n)).

(u)     "Employee Group" means each of the ALPA
Employee Group, the IAM Employee Group and the Management and Salaried
Employee Group.

(v)     "Employer" means the Company or any of its
Affiliates (or a division or business unit thereof) that has adopted the
Plan with the consent of the Board of Directors.

(w)     "Employer Contribution" means the amount
contributed, whether in cash or in kind, by each Employer pursuant to the
provisions of Section 3.1.

(x)     "Entry Date" means, with respect to each
Eligible Employee employed on the Effective Date, the Effective Date, and
with respect to each Eligible Employee employed after the Effective Date,
(i) in the case of members of the ALPA Employee Group, the employment commencement
date (or reemployment commencement date), (ii) in the case of members of
the IAM, the first day of the first payroll period coincident with or next
following the date the Eligible Employee becomes a member of the IAM Employee
Group, and (iii) in the case of members of the Management and Salaried
Employee Group, the first day of the first payroll period coincident with
or next following the anniversary date of the Eligible Employee's employment
commencement date (or reemployment commencement date); provided, however,
that if such Eligible Employee's employment with the Employers terminates
before he becomes a Participant and such Eligible Employee returns to the
employ of an Employer within one year of such termination, the Entry Date
shall be the first day of the first payroll period coincident with or next
following the later of (i) the reemployment commencement date or (ii) the
anniversary date of such Eligible Employee's employment commencement date.
Any Participant whose employment with the Employers terminates and who
returns to the employ of an Employer as an Eligible Employee shall become
a Participant immediately.

(y)     "ERISA" means the provisions of the Employee
Retirement Income Security Act of 1974, as amended, and all successor laws
thereto. Where the Plan refers to a particular section of ERISA, such reference
shall also apply to any successor to that section.

(z)     "ESOP Cash Account" means the account established
and maintained in the name of each Participant or Beneficiary to reflect
his share of the Trust Fund, other than Company Stock.

(aa)     "ESOP Committee" means the committee appointed
to administer the Plan pursuant to Section 11.

(bb)     "ESOP Stock Account" means the account
established and maintained in the name of each Participant or Beneficiary
to reflect his share of Company Stock.

(cc)     "Exchange Act" means the Securities Exchange
Act of 1934, as amended.

(bb)     "Financed Shares" means shares of Company
Stock acquired by the Trustee with the proceeds of an Acquisition Loan,
which shall constitute "qualifying employer securities" under Code section
409(1) and any shares of Company Stock received upon conversion or exchange
of such shares.

(cc)     "IAM" means the International Association
of Machinists and Aerospace Workers.

(dd)     "IAM Employee Group" means non-probationary
regular Employees (other than Employees employed on a temporary basis)
who are both (i) classified by the Company as Mechanic and Related Employees,
Ramp and Stores Employees, Food Services Employees, Security Officers,
Dispatchers, or Communications Employees and (ii) members of a group of
employees represented by the International Association of Machinists and
Aerospace Workers, AFL-CIO.

(ee)     "Initial Acquisition Loan" means the Acquisition
Loan or Acquisition Loans entered into on the Effective Date between the
Trustee and the Company pursuant to the Preferred Stock Purchase Agreement.

(ff)     "Loan Suspense Account" means the suspense
account in the Trust to which Financed Shares are initially credited prior
to release for allocation to Participants' ESOP Stock Accounts. Subaccounts
shall be maintained to reflect Financed Shares acquired with the Initial
Acquisition Loan and each applicable Additional Acquisition Loan.

(gg)     "Management and Salaried Employee Group"
means Eligible Employees who perform the functions performed by the salaried
and managerial Employees on the Effective Date (including any functions
that such Employees will perform in the future).

 

Furthermore, Eligible Employees who are meteorologists represented by the
Transport Workers Union are members of the Management and Salaried Employee
Group.

 

(hh)     "Normal Retirement Date" means (i) in
the case of a Participant who is a member of the ALPA Employee Group, the
date on which such Participant attains age 60, and (ii) in the case of
any other Participant, the date on which such Participant attains age 65.
    (ii)     "Part A" means the portion
of the Plan under which benefits are provided for Participants through
the purchase of shares of Class 1 Non- Voting Preferred Stock acquired
with the proceeds of the Initial Acquisition Loan and Additional Acquisition
Loans.

    (jj)     "Part B" means the portion
of the Plan under which benefits are provided for Participants through
the contribution of shares of Class 2 Non-Voting Preferred Stock and Voting
Preferred Stock by the Company or through the transfer of any such shares
from the Supplemental Trust.

(kk)     "Participant" means any Eligible Employee
who has become a Participant in accordance with Section 2 or any other
person with an Account balance under the Plan.

(ll)     "Plan" means the UAL Corporation Employee
Stock Ownership Plan, consisting of Part A and Part B, as amended from
time to time. The Trust created in connection with the Plan shall be incorporated
in, and form a part of, the Plan.

(mm)     "Plan Year" means the calendar year; provided,
however, that the initial Plan Year shall commence on the Effective Date
and end on December 31, 1994.

(nn)     "Preferred Stock" means the Class 1 Non-Voting
Preferred Stock and the Class 2 Non-Voting Preferred Stock.

(oo)     "Preferred Stock Purchase Agreement" means
either (i) the stock purchase agreement, dated as of March 25, 1994, as
amended, effective July 12, 1994, by and between the Company and the Trustee
pursuant to which shares of Class 1 Non-Voting Preferred Stock will be
purchased by the Trustee for allocation under Part A and/or (ii) the stock
purchase agreements by and between the Company and the Trustee pursuant
to which Additional Shares of Class 1 Non-Voting Preferred Stock will be
purchased by the Trustee in connection with Additional Acquisition Loans
for allocation under Part A, as the context so requires.

(pp)     "Supplemental Plan" means the UAL Corporation
Supplemental ESOP, effective July 12, 1994.

(qq)     "Supplemental Trust" means the UAL Corporation
Supplemental ESOP Trust, effective July 12, 1994.

(rr)     "Total Disability" means that, in the opinion
of a physician selected by the ESOP Committee, the Participant is permanently
incapable of performing services for his Employer or any of its Affiliates
due to a disability; provided, however, that for any, member of the ALPA
Employee Group, "Total Disability" shall have the meaning ascribed thereto
in the United Air Lines, Inc. Pilots' Fixed Benefit Retirement Income Plan.

(ss)     "Trust" means the UAL Corporation Employee
Stock Ownership Plan Trust created in connection with the establishment
of the Plan.

(tt)     "Trust Agreement" means the trust agreement
establishing the Trust.

(uu)     "Trust Fund" means the assets held in the
Trust for the benefit of the Participants and their Beneficiaries.

(vv)     "Trustee" means the trustee or trustees
from time to time in office under the Trust Agreement.

(ww)     "Valuation Date" means the last day of
each Plan Year, April 12, 2000 (except for Participants in the IAM Employee
Group) and July 12, 2000 for Participants in the IAM Employee Group and
any other date selected by the ESOP Committee as necessary for the equitable
operation of the Plan.

(xx)     "Voting Preferred Stock" means the shares
of each class of ESOP Voting Junior Preferred Stock issued by the Company.
Such preferred stock consists of Class P, Class M and Class S.

(yy)     "Wage Investment" means, for a member of
the IAM Employee Group, the sum of:

    (i)     The product of (A) the
number of hours for which the Participant is compensated during a Plan
Year, multiplied by (B) the difference between the "book rate of pay" as
in effect immediately prior to the Effective Date and the "actual rate
of pay" as in effect on the Effective Date for services rendered during
a Plan Year; plus

    (ii)     the sum of the following:
(A) the amount determined under item (i) times 7.6% (which represents the
Employers' portion of the FICA tax), (B) the amount determined under item
(i) times .46% (which represents the Employers' portion of the FUTA tax),
(C) the amount determined under item (i) times .05% (which represents the
Employers' contribution for long term disability coverage), and (D) the
amount determined under item (i) times .4% (which represents the Employers'
contribution for life insurance coverage); provided, however, that in the
case of each of the items (A) through (D) above, the members of the ESOP
Committee appointed by the IAM may require the substitution of an alternative
percentage which they deem appropriate and which is uniformly applicable
to each member of the IAM Employee Group; plus

 

                   
(iii)     the book rate of pay as in effect immediately
prior to the Effective Date for each hour, or fraction thereof, of lunch
(or other

                    
meal) periods multiplied by the number of days services are rendered during
a Plan Year.

For purposes hereof, "book rate of pay" means the hourly rate of pay including
increases due to overtime, premium pay and shift differentials that would
have been paid to each IAM Employee Group member on the day immediately
preceding the Effective Date, and as adjusted over the Wage Investment
Period to account solely for increments due based on changes in the scale
or step for each such member, and "actual rate of pay" means the hourly
rate of pay for each IAM Employee Group member on the Effective Date, as
adjusted over the Wage Investment Period to account solely for increments
based on changes in the scale or step and not on account of negotiated
changes effective during the Wage Investment Period. If a member of the
IAM Employee Group changes job classifications (for example, due to a promotion),
then such member's book rate of pay and actual rate of pay shall, following
the change of job classifications, be determined by reference to the member's
new job classification. The calculation of the Wage Investment shall be
made by using the information reasonably available to the Employers under
the Employers' recordkeeping and payroll systems. The Wage Investment may
be calculated by using reasonable estimates, and the members of the ESOP
Committee appointed by the IAM shall adopt any such reasonable estimates
as are necessary for the Wage Investment to be determined. Such members
of the ESOP Committee shall consult with the Employers to calculate the
Wage Investment. Pursuant to Section 11.4, the Employers shall furnish
the members of the ESOP Committee such data and information as may be reasonably
required to calculate the Wage Investment and to formulate such reasonable
estimates. The determination of the Wage Investment based upon such estimates
shall be final and binding for all purposes hereunder.

(zz)     "Wage Investment Period" means the period
commencing on July 13, 1994 and ending on April 12, 2000 (July 12, 2000,
for members of the IAM Employee Group).

SECTION 2
Plan Participation

    2.1     Eligibility for Participation.
Subject to the conditions and limitations of the Plan, each Eligible Employee
of an Employer shall become a Participant on the applicable Entry Date.

    2.2     Participation Not Guarantee
of Employment. Participation in the Plan does not constitute a guarantee
or contract of employment and will not give any Employee the right to be
retained in the employ of his Employer or any of its Affiliates nor any
right or claim to any benefit under the terms of the Plan unless such right
or claim has specifically accrued under the terms of the Plan.

    2.3     Transferred Participants.
If a Participant transfers from one Employee Group to another Employee
Group, the ESOP Committee shall maintain separate Accounts for such Participant,
such Accounts reflecting such Participant's participation in the Plan as
a member of the respective Employee Groups.

SECTION 3

Contributions

    3.1     Employer Contributions.
Subject to the conditions and limitations of the Plan, for each Plan Year,
the Employers shall contribute to the Trust cash equal to, or Company Stock
having an aggregate fair market value equal to, such amount, if any, as
the respective boards of directors of the Employers shall determine by
resolution; provided, however, that:

(a)     Part A.
        (i)    
The Company shall contribute to Part A an amount in cash equal to the amount
required to enable the Trustee (together with dividends used to repay the
Initial Acquisition Loan and the Additional Acquisition Loans in accordance
with Section 10) to pay any principal and interest on the Initial Acquisition
Loan and the Additional Acquisition Loans payable during the Plan Year.
Of the contribution amount required to enable the Trustee to discharge
the aggregate principal and interest on such indebtedness, 60% shall be
made to the money purchase pension plan component of Part A of the Plan.
The balance of the required contribution amount shall be made to the stock
bonus plan component of Part A of the Plan. The Trustee shall apply such
money purchase pension plan component contributions to repay the principal
on each of the respective Acquisition Loans in proportion to the excess
of the principal due on such Acquisition Loan for the Plan Year over the
dividends available to repay the principal on such Acquisition Loan.

        |(ii)    
In lieu of the foregoing, the Company may forgive an amount of indebtedness
equal to the required Employer Contribution (or any portion thereof).

        |(iii)    
On the Effective Date, the Company shall contribute an amount in cash equal
to the aggregate par value of the Company Stock to be acquired under the
Initial Acquisition Loan. In addition, the Company shall contribute an
amount in cash equal to the aggregate par value of the Company Stock, if
any, to be acquired under each Additional Acquisition Loan. Such contributions
shall first be divided, pro rata, among the Employee Groups in accordance
with Section 5.4(a)(i)(A), and then shall be allocated to the ESOP Cash
Accounts of Participants as follows: (A) in the case of the ALPA Employee
Group and the Management and Salaried Employee Group, according to the
Compensation paid to such Participants in such Employee Group for the Plan
Year, and (B) in the case of the IAM Employee Group, according to Wage
Investments of such Participants for the Plan Year. Such contribution shall
be used by the Trustee as partial consideration for the purchase of shares
of Class 1 Non-Voting Preferred Stock under the applicable Preferred Stock
Purchase Agreement, and the ESOP Cash Accounts of the Participants shall
be charged accordingly. Shares of Class 1 Non-Voting Preferred Stock equal
in value (based on the prices per share paid by the Trustee under the applicable
Preferred Stock Purchase Agreement) to the amount of such contribution
shall be allocated, as of the last day of the applicable Plan Year, from
the shares purchased under the applicable Preferred Stock Purchase Agreement
to the ESOP Stock Accounts of the Participants, pro rata, according to
the allocations of such contribution above.

(b)     Part B.

        (i)    
On the Effective Date, the Company shall contribute to Part B, as a special
Employer Contribution, one share of each of Class P, Class M and Class
S.

        |(ii)    
As soon as practicable after the end of each Plan Year, the Company shall
contribute (or shall cause the trustee of the Supplemental Trust to transfer)
to Part B shares of Class 2 Non-Voting Preferred Stock and shares of Voting
Preferred Stock in accordance with Section 5.4(c)(vii); provided, however,
that any shares of Company Stock transferred by the trustee of the Supplemental
Trust in respect of such obligation shall satisfy, to the extent of such
transfer, the Company's obligation under this Section 3.1(b). Such contributions
may not be used to repay Acquisition Loan indebtedness and shall be made
to the stock bonus plan component of the Plan.

        |(iii)    
If cash dividends have been paid to the holders of Common Stock during
any Plan Year and if dividends are applied to repay the Initial Acquisition
Loan or any Additional Acquisition Loan pursuant to Section 10 during that
Plan Year, the Company shall make an additional Employer Contribution to
Part B in the amount, if any, set forth in the next sentence as soon as
practicable after the last day for that Plan Year (and for the purpose
of this clause (iii), "Plan Year" shall be defined to include only the
period from the Effective Date to 12/31/94, the five 12-month periods ending
12/31/95 through 12/31/99, and the three-month period ending 3/31/2000).
The amount of such contribution shall equal the excess of A plus B over
C; where A equals the least of:

 

(I)     the cash dividends (excluding dividends
that constitute Participating Dividends and Extraordinary Distributions
with respect to the outstanding Class 1 Non-Voting Preferred Stock) that
would have been received by the Plan during that Plan Year if the outstanding
Class 1 Non- Voting Preferred Stock had been converted into Common Stock
immediately prior to each dividend record date, which amount shall be reduced
by the excess, if any, of the amount described in clause (11) below over
the amount described in clause (III) below;
(II)     the Fixed Dividends that have been paid
on the Class 1 Non-Voting Preferred Stock during that Plan Year; and

(III)     the amount of the cash dividends used
to repay the Initial Acquisition Loan and the Additional Acquisition Loans
pursuant to Section 10.1(a) during such Plan Year;

 

B equals the cash dividends (excluding dividends that constitute Extraordinary
Distributions with respect to the Class 1 Non-Voting Preferred Stock) that
would have been received by the Plan during the Plan Year if the Class
1 Non-Voting Preferred Stock contemplated for future sale to this Plan
as part of the future Additional Acquisition Loans had been, immediately
prior to each dividend record date, sold to this Plan and converted into
Common Stock. The number of shares of Class 1 Non-Voting Preferred Stock
contemplated for future sale shall equal 13,813,282 (adjusted for the issuance
of Additional Shares of Class 1 Non-Voting Preferred Stock) reduced by
the number of shares of Class 1 Non-Voting Preferred Stock sold to this
Plan prior to the dividend record date; and

C equals the amount of cash contributions previously made pursuant to
this clause (iii) with respect to such Plan Year.

For the purposes of the Plan, "Participating Dividends", "Extraordinary
Distributions" and "Fixed Dividends" shall have the meanings ascribed to
such terms in the Certificate of Incorporation of the Company, Article
Fourth, Part II relating to Class 1 Non-Voting Preferred Stock.

    3.2     Limitation on Contributions.
In no event may any Employer Contributions under Section 3.1 for any Plan
Year exceed the maximum amount deductible as an expense for federal income
tax purposes under Code section 404; provided, however, that if Employer
Contributions are so limited, appropriate arrangements will be made in
accordance with Section 1.6(1) of the Recapitalization Agreement to protect
the substantive rights of each Employee Group (hereinafter "Appropriate
Arrangements").

    3.3     Timing of Contributions.
For each Plan Year, Employer Contributions shall be due no later than the
time prescribed for filing the Employer's federal income tax return for
that Plan Year, including any extensions of time; provided, however, that
Employer Contributions shall be made at such times as to enable the Trustee
to meet its repayment obligations under the documents governing the Initial
Acquisition Loan, the Additional Acquisition Loans or as otherwise required
by the terms of the Plan.

    3.4     Participant Contributions.
Contributions by Participants are neither required nor permitted.

SECTION 4

Investment of Trust Fund

    4.1     Exclusive Benefit of
Participants. All Employer Contributions, Company Stock acquired with Employer
Contributions and with proceeds of Acquisition Loans, and dividends and
distributions thereon, shall become a part of the Trust Fund and shall
be held and disbursed by the Trustee in accordance with the provisions
of the Plan and Trust Agreement. No person shall have any Interest in or
right to assets held in the Trust Fund except as provided in the Plan and
Trust Agreement. The Trust Fund shall be held for the exclusive benefit
of the Participants and their Beneficiaries, and shall be used solely to
pay benefits to such persons. The Trust Fund shall not revert to the benefit
of the Company or any of its Affiliates, except as provided in Section
15.2.

    4.2     Investment in Company
Stock. The Trust Fund shall be invested exclusively in shares of Company
Stock, subject to the Trustee's power to hold cash pending investment in
Company Stock or pending distribution to Participants, and, accordingly,
the Trustee may invest and hold up to 100% of the Trust Fund in Company
Stock.

    4.3     Acquisition Loans. In
respect of Part A, the Trustee may incur the Initial Acquisition Loan and
the Additional Acquisition Loans. In addition, the Trustee, with the consent
of the Company, may incur other Acquisition Loans from time to time to
finance the acquisition of Company Stock for the Trust or to repay a prior
Acquisition Loan. Each Acquisition Loan shall meet all applicable legal
requirements, including those set forth under Code section 4975 and ERISA
section 408. Financed Shares shall initially be credited to the Loan Suspense
Account and shall be released for allocation to the ESOP Stock Accounts
of Participants only as payments of principal and interest, or principal,
on the Acquisition Loan are made by the Trustee. The number of Financed
Shares to be released from the Loan Suspense Account (or subaccount attributable
to that Acquisition Loan) for allocation to Participants' ESOP Stock Accounts
for each Plan Yea., shall be based upon either: (x) the ratio that the
payments of principal made on the Acquisition Loan for that Plan Year bear
to the sum of principal payments during that Plan Year, plus the projected
payments of principal during the remainder of the Acquisition Loan repayment
period, provided that the special conditions set forth under Treasury Regulation
section 54.4975-7(b)(8)(ii) are satisfied, or (y) the ratio that the payments
of principal and interest on the Acquisition Loan for that Plan Year, bear
to the sum of principal and interest payments during that Plan Year, plus
the projected payments of principal and interest during the remainder of
the Acquisition Loan repayment period. A separate ratio will be calculated
for each Acquisition Loan. The applicable loan documents will specify whether
clause (x) and/or clause (y) shall apply. Shares released from the Loan
Suspense Account in connection with the Initial Acquisition Loan and the
Additional Acquisition Loans shall be released in accordance with clause
(x) above.

    4.4     Fiduciary Concerns. With
respect to the exercise of any fiduciary responsibility with respect to
the Plan or Trust, including, without limitation, the voting, sale, exchange,
other disposition or conversion of Company Stock, the relevant fiduciary
may, to the extent permitted by law, take into consideration any relevant
economic factors affecting the interests of current and future Participants
(and Beneficiaries), including, but not limited to, the prospect for continued
Employee enfranchisement through the voting power of Company Stock held
in the Plan, the prospect for future benefits under the Plan as a result
of the prospective release and allocation of Company Stock held in the
Loan Suspense Account and the prospect for future employment with the Company
and its Affiliates.

SECTION 5

Plan Accounting

    5.1     Accounting for Allocations.
The ESOP Committee shall establish the Accounts (and sub-accounts, if deemed
necessary) for each Participant, and the accounting procedures for the
purpose of making the allocations to the Participants' Accounts provided
for in this Section 5. The ESOP Committee shall maintain adequate records
of the cost basis of shares of Company Stock allocated to each Participant's
ESOP Stock Account. The ESOP Committee also shall keep separate records
of Financed Shares attributable to each Acquisition Loan and of Employer
Contributions (and of any earnings thereon) made for the purpose of enabling
the Trust to repay any Acquisition Loan. From time to time, the ESOP Committee
may modify its accounting procedures for the purposes of achieving equitable
and nondiscriminatory allocations among the Accounts of Participants, in
accordance with the provisions of this Section 5 and the applicable requirements
of the Code and ERISA. In accordance with Section 11, the ESOP Committee
may delegate the responsibility for maintaining Accounts and records.

    5.2     Allocation and Crediting
of Participants' ESOP Stock Accounts. As of each Valuation Date, the ESOP
Committee shall:

(a)     First, charge to each Participant's ESOP
Stock Account all distributions and payments made to him since the last
preceding Valuation Date that have not been previously charged;
(b)     Next, credit to each Participant's ESOP
Stock Account the shares of Company Stock, if any, that have been purchased
with amounts from his ESOP Cash Account since the last preceding Valuation
Date, and adjust such ESOP Cash Account in accordance with the provisions
of Section 5.3; and

(c)     Finally, allocate and credit to each Participant's
ESOP Stock Account the shares of Company Stock representing Employer Contributions
made in the form of Company Stock and the number of Financed Shares released
under Section 4.3 that are to be allocated and credited as of that date
in accordance with the provisions of Section 5.4.

    5.3     Allocation and Crediting
of Participants' ESOP Cash Accounts. As of each Valuation Date, the ESOP
Committee shall adjust the ESOP Cash Accounts to reflect activity since
the last preceding Valuation Date as follows:

(a)     First, charge to each Participant's ESOP
Cash Account all distributions and payments made to him that have not been
previously charged;
(b)     Next, if Company Stock is purchased with
assets from a Participant's ESOP Cash Account, such shares shall be credited
to the ESOP Stock Account of such Participant, and the Participant's ESOP
Cash Account shall be charged accordingly;

(c)     Next, subject to the dividend provisions
of Section 10, the ESOP Committee shall also credit to the ESOP Cash Account
of each Participant any cash dividends paid to the Trustee on shares of
Company Stock held in that Participant's ESOP Stock Account (as of the
record date for such cash dividends) and dividends paid on shares of Company
Stock held in the Loan Suspense Account that have not been used to repay
any Acquisition Loan. Cash dividends and any earnings that have not been
used to repay any Acquisition Loan and have been credited to a Participant's
ESOP Cash Account shall be applied by the Trustee to the purchase of shares
of Common Stock, which shares shall then be credited to the ESOP Stock
Account of such Participant. The Participant's ESOP Cash Account shall
then be charged by the amount of cash used to purchase such Common Stock
or used to repay any Acquisition Loan. In addition, any earnings (i) on
ESOP Cash Accounts will be allocated to Participants' ESOP Cash Accounts,
pro rata, based on such ESOP Cash Account balances and (ii) on the Loan
Suspense Account, other than dividends used to repay the Acquisition Loan,
will be allocated to Participants' Accounts, pro rata, based on their Account
balances in Part A;

(d)     Next, allocate and credit the Employer Contributions
made for the purpose of repaying any Acquisition Loan in accordance with
Section 5.4. Such amount shall then be used to repay any Acquisition Loan
and such Participant's ESOP Cash Account shall be charged accordingly;
and

(e)     Finally, allocate and credit the Employer
Contributions (other than amounts contributed to repay an Acquisition Loan)
that are made in cash for the Plan Year to the ESOP Cash Account of each
Participant (including Participants whose employment with the Company and
its Affiliates terminated for any reason during the Plan Year) in accordance
with Section 5.4(b).

    5.4     Allocation and Crediting
of Employer Contributions. As of the Valuation Date for each Plan Year,
all cash contributions and shares of Company Stock transferred by each
Employer to the Trustee for that Plan Year under Section 3.1 and the number
of Financed Shares released from the Loan Suspense Account for allocation
to Participants' ESOP Stock Accounts under Section 4.3 (except as provided
under Section 10.3) during the Plan Year shall be allocated among and credited
to the Accounts of Participants (including Participants whose employment
with the Company and its Affiliates terminated for any reason during the
Plan Year) as follows:

(a)     Part A. On each Valuation Date, the cash
contributions used to repay the Acquisition Loan indebtedness and the shares
of Class 1 Non- Voting Preferred Stock released for that Plan Year shall
be allocated and credited to each Participant's Account as follows:
    (i)     First, the Employer Contributions
made in cash used to repay each Acquisition Loan (or treated as cash due
to forgiveness of such Acquisition Loan indebtedness) shall be allocated
among the Employee Groups as follows:

 

(A)     The allocation percentage for the Class
1 Non-Voting Preferred Stock released for that Plan Year shall be as follows:
ALPA Employee Group--31.759437%; IAM Employee Group--47.511196%; and Management
and Salaried Employee Group--20.729367%. All such shares released for such
Plan Year shall be allocated to the Employee Groups in accordance with
such allocation percentages.
(B)     There shall be calculated for each Participant
an allocation of shares of Class 1 Non-Voting Preferred Stock on account
of dividends paid during the Plan Year on such Preferred Stock previously
allocated to such Participant's ESOP Stock Account and applied in accordance
with Sections 10.1(a) and 10.3. The foregoing allocations for each Participant
shall be made out of the Class 1 Non-Voting Preferred Stock allocated to
that Participant's Employee Group under subclause (A) above.

(C)     Employer Contributions to be allocated in
accordance with this clause (i)(C) shall be allocated to each Employee
Group in the proportion that (x) shares of Class 1 Non-Voting Preferred
Stock allocated to that respective Employee Group pursuant to subclause
(A) reduced by the shares allocated to members of that Employee Group pursuant
to subclause (B), bears to (y) all shares of Class 1 Non-Voting Preferred
Stock released for the Plan Year reduced by all shares allocated pursuant
to subclause (B).

 

    (ii)     Second, the allocations
of Employer Contributions under clause (i)(C) shall be reduced by all of
the interest on the Initial Acquisition Loan and the Additional Acquisition
Loans paid during that period. Such reduction shall be made in proportion
to the allocations made under clause (i)(C).

    (iii)     Third, there shall
be tentatively allocated to the Accounts of each Participant in each Employee
Group that portion of the resulting Employer Contributions which such Participant's
Compensation (or, in the case of the [AM Employee Group, such Participant's
Wage Investments) for the Plan Year bears to the aggregate Compensation
(or, in the case of the IAM Employee Group. Wage Investments) for all such
Participants for such Plan Year; provided that such Employer Contributions
shall not be allocated to any Participant's Account to such extent the
allocation would exceed the limitation of Code section 415(c). The amount,
if any, by which the allocation to any such Participant's Account shall
be reduced under the foregoing proviso shall be, subject to the Code section
415(c) limitation, tentatively allocated (and, if necessary, reallocated)
to the Accounts of all other Participants in his Employee Group (x) for
the Management and Salaried Employee Group, in proportion to their Compensation,
(y) in the case of the IAM Employee Group, Wage Investments, and (z) in
the case of the ALPA Employee Group, first in proportion to (but not more
than) the amount of Class 2 Non-Voting Preferred Stock otherwise scheduled
for contribution and allocation to each Participant's Account under Part
B for the current Plan Year (absent this clause (iii)) and otherwise in
proportion to Compensation.

    |(iv)     Fourth, if the total
Employer Contributions tentatively allocated to "highly compensated employees"
(as defined in Code section 414(q)) under clause (iii) do not exceed one-third
of the total Employer Contributions tentatively allocated to the Accounts
of all Participants under clause (iii), the tentative allocations of Employer
Contributions to Participants shall become final. The foregoing limitation
shall be applied by aggregating all Participants in all Employee Groups.

    (v)     Fifth, if the one-third
limitation described in clause (iv) is exceeded, the amount of Employer
Contributions allocated to Accounts of Participants in the ALPA Employee
Group who are highly compensated employees shall be reduced, pro rata,
based on Compensation and reallocated to Participants in the ALPA Employee
Group who are not highly compensated employees, to the extent necessary
to meet the one-third limitation described in clause (iv), subject, however,
to Code section 415(c). The foregoing reallocations to each non-highly
compensated employee shall be allocated in proportion to (but not more
than) the number of shares of Class 2 Non-Voting Preferred Stock otherwise
scheduled for contribution and allocation to his Account under Part B for
the current Plan Year (absent this clause (v)). If and to the extent appropriate
arrangements are made between the Company and ALPA to protect the interests
of the ALPA Employee Group (which arrangements shall be consistent with
Section 13.1 and which the Company agrees to do upon reasonable request
and which shall not require IAM consent), contributions for the highly
compensated ALPA Employee Group members may be reduced, pro rat.T, to meet
the one- third limitation described in clause (iv).

    (vi)     Sixth, if, after the
reallocation of Employer Contributions described in clause (v), the one-third
limitation described in clause (iv) is still exceeded, then the computations
described in foregoing clauses (i) through (v) shall be disregarded. In
lieu thereof the allocation shall be made in accordance with clauses (i)
through (iii), but clause (ii) shall be disregarded. If such allocations
do not result in a violation of Code section 415(c) for all members of
any Employee Group, the tentative allocations shall become final.

    (vii)     Seventh, if the allocation
of Employer Contributions described in clause (vi) results in a violation
of Code section 415(c) for all members of any Employee Group (after reallocating
any excess allocations owing to members of such Employee Group), then clause
(vi) shall be disregarded. The computations described in foregoing clauses
(i) through (v) (including clause (ii)) shall be repeated, but, after applying
clause (v), the amount of Employer Contributions allocated to Accounts
of Participants who are members of the Management and Salaried Employee
Group who are highly compensated employees shall be reduced, pro rata,
based on Compensation, and reallocated to Participants in the Management
and Salaried Employee Group who are not highly compensated employees, pro
rata, based on Compensation, to the extent necessary to meet the one- third
limitation described in clause (iv), subject, however, to Code section
415(c). In making the foregoing reallocations, no non-highly compensated
employee shall be allocated more shares under this clause (vii) than the
number of shares of Class 2 Non-Voting Preferred Stock otherwise scheduled
for contribution and allocation to his Account under Part B for the current
Plan Year (absent this clause (vii)). If and to the extent appropriate
arrangements are made by the Company to protect the interests of the Management
and Salaried Employee Group (which arrangements shall be consistent with
Section 13.1 and which shall not require IAM consent, but which shall require
ALPA consent. which consent shall not be unreasonably withheld), contributions
for the highly compensated Management and Salaried Employee Group members
may be reduced, pro rata, to meet the one-third limitation described in
clause (iv).

    (viii)     Eighth, all shares
of Class 1 Non-Voting Preferred Stock released from the Loan Suspense Account
as of the Valuation Date shall be allocated first in respect of dividends
paid on previously allocated shares of Class 1 Non-Voting Stock in accordance
with Sections 10.1(a)(i) and 10.3 and then allocated in proportion to the
percentage of the Employer Contributions allocated to each Participant's
Account under clauses (i) through (vii) above.

(b)     Special Contributions to Part B.

    (i)     The special Employer
Contribution made by the Company on the Effective Date pursuant to Section
3.1(b)(i) shall be allocated, per capita, to the appropriate Participants'
ESOP Stock Accounts under Part B on the Effective Date.

    |(ii)     Employer Contributions
made in cash for the Plan Year under Section 3.1(b)(iii) shall be allocated
under Part B and credited to the ESOP Cash Accounts of the appropriate
Participants to which those cash contributions relate, as follows: to the
extent that the calculation of the amount of such contributions refers
to shares of Class 1 Non-Voting Preferred Stock held in the Loan Suspense
Account or Class 1 Non-Voting Preferred Stock contemplated for further
sale, divide such cash contributions among the Employee Groups in accordance
with Section 5.4(a)(i)(A); to the extent it refers to shares of Class 1
Non-Voting Preferred Stock allocated to the Participants' ESOP Stock Accounts,
apportion those contributions to the relevant Employee Group; then, allocate
to the appropriate Participants' Accounts, pro rata, in the case of (i)
the ALPA Employee Group and the Management and Salaried Employee Group,
according to the Compensation paid to such Participants for the Plan Year,
and (ii) the IAM Employee Group, according to Wage Investments made by
such Participants for the Plan Year; subject, however, in all cases to
Code section 415(c).

(c)     Regular Contributions to Part B. Shares
of Class 2 Non-Voting Preferred Stock and Voting Preferred Stock contributed
to the Plan pursuant to Section 3.1(b) shall be allocated among and credited
to the ESOP Stock Accounts of Participants for that Plan Year as set forth
below, provided, however, that no allocations (other than allocations under
clauses (i) and (viii) below) shall be made to Accounts of Participants
who are members of the IAM Employee Group:

    (i)     First, subject to the
applicable Code limitations, one share of Voting Preferred Stock shall
be allocated to the Participant's Account for each share of Class 1 Non-Voting
Preferred Stock allocated to that Participant under Part A on that Valuation
Date. The shares of Voting Preferred Stock shall be allocated under Part
B and shall be of the appropriate class for each such Participant. The
special allocation under Section 5.4(b)(i) shall be credited against the
allocation required pursuant to this clause (i) on the first Valuation
Date.

    (ii)     Second, for each Participant,
a "hypothetical share number" shall be calculated for the Valuation Date.
Such number shall equal the number of shares that would have been allocated
to the Participant under Part A on such Valuation Date if (A) all the shares
of Class 1 and Class 2 Non-Voting Preferred Stock to be issued pursuant
to the Recapitalization Agreement (including, with respect to Valuation
Dates occurring on or after December 31, 1995 and after the allocation
in subsection (viii) be low, any Additional Shares issued or to be issued)
had been (I) purchased by the Trust under a single loan on the Effective
Date and held under the Loan Suspense Account pursuant to Part A, and (II)
in the case of such Class 2 shares, considered Class 1 Non-Voting Preferred
Stock under Part A having the same fair market value as the Class 1 Non-Voting
Preferred Stock; provided, however, that such Class 2 shares shall not,
except as provided in subclause (E), bear any dividend; (B) the shares
of Class 1 and Class 2 Non-Voting Preferred Stock were released under Part
A ratably over the 69 months starting on the Effective Date; (C) Section
5.4(a)(i)(A) were applied by allocating the Class 1 Non-Voting Preferred
Stock and the Class 2 Non-Voting Preferred Stock among the Employee Groups
as follows: ALPA Employee Group - 46.23%; IAM Employee Group - 37.13%;
and Management and Salaried Employee Group - 16.64%; (D) allocations under
Part A were made as if: (I) the limitations of Code sections 401(a)(4),
401(a)(17) and 415 did not apply; (II) Compensation was based on "compensation"
as defined in the Supplemental Plan and (III) clauses (ii), (iv), (v),
(vi) and (vii) of Section 5.4(a) did not apply; and (E) each share of Class
2 Non-Voting Preferred Stock that was in fact allocated on a prior Valuation
Date to a Participant's account under the Supplemental Plan or under Part
B shall, after the date of such allocation, be considered Class 1 Non-Voting
Preferred Stock held by Part A (bearing the same Fixed Dividend as the
Class 1 Non-Voting Preferred Stock that was allocated under Part A (but
not bearing any other dividend)). By way of illustration, assume a member
of the ALPA Employee Group has a total of 130 shares of Class 2 Non-Voting
Preferred Stock allocated to his account under the Supplemental Plan and
70 shares of Class 2 Non-Voting Preferred Stock allocated to his Account
under Part B. Assume further that each share of Class 1 Non-Voting Preferred
Stock under Part A has a value of $100, pays an $8 Fixed Dividend, no dividends
are paid on Common Stock and that each share of Class 2 Non-Voting Preferred
Stock has a $75 value. For purposes of making the allocations under this
subclause (E), such individual shall be treated as having received a dividend
of $1600 with respect to the shares of Class 2 Non-Voting Preferred Stock
allocated under the Supplemental Plan and under Part B. For purposes of
calculating the hypothetical share number, that individual shall receive
an allocation of 16 shares of Class 2 Non-Voting Preferred Stock to make
up for such dividend, notwithstanding the fact that the value of the shares
of Class 2 Non-Voting Preferred Stock is S75 per share.

    (iii)     Third, for each ESOP
Participant, the "actual share number" for a Valuation Date shall be the
actual number of shares of Class 1 Non-Voting Preferred Stock that are
allocated to such Participant under Part A on that Valuation Date.

    (iv)     Fourth, for each ESOP
Participant, the excess of the hypothetical share number over the actual
share number shall be referred to herein as the respective "tentative allocation."
If the sum of the tentative allocations (ignoring negative tentative allocations)
for all Participants in an Employee Group exceeds the number of shares
of Class 2 Non-Voting Preferred Stock released from the "phantom suspense
account" to all such Participants' accounts for that Employee Group under
Section 2.2 of the Supplemental Plan, each such tentative allocation for
Participants of that Employee Group shall be proportionately reduced.

    (v)     Fifth, on each Valuation
Date, the number of shares of each of the Class 2 Non-Voting Preferred
Stock and Voting Preferred Stock, if any, to be allocated to a Participant
under Part B (excluding Voting Preferred Stock described in Section 5.4(c)(i)
and 5.4(c)(vi)) shall be the same and shall equal the least of the following
numbers: (A) the maximum number of shares of each of the Class 2 Non-Voting
Preferred Stock and the Voting Preferred Stock that can be allocated to
the Participant for the Valuation Date under Part B without violating Code
section 415 or Code section 401(a)(4) (if applicable), (B) the tentative
allocation and (C) the excess of the hypothetical share number (calculated
for this purpose only by applying the Code section 401(a)(17) limitation)
over the actual share number. The hypothetical share number described in
this subclause (C) shall be determined by recalculating the allocations
made on the current and all prior Valuation Dates by assuming the Participant's
Compensation for each Plan Year had been limited to the amount then allowed
und7er Code section 401(a)(17). Accordingly, for purposes of calculating
the hypothetical share number under this subclause (C), the Participants'
Compensation in the current Plan Year shall be limited to the amount provided
by Code section 401(a)(17) and the amount of dividends allocated to each
Participant's Account during the Plan Year shall be calculated by assuming
the allocations of shares made on earlier Valuation Dates were also based
on Compensation, as limited by Code section 401(a)(17) limitation then
in effect. The excess of the tentative allocations over the amount allocated
under clause (v) shall not be allocated under Part B, but shall be allocated
in accordance with the terms of the Supplemental Plan.

    (vi)     Sixth, on the last Valuation
Date of each Plan Year, in addition to the shares of Class 2 Non-Voting
Preferred Stock and Voting Preferred Stock transferred to Part B under
clause (v) above, shares credited under the Supplemental Plan, in a prior
Plan Year, due to the limitations under Code section 401(a)(4), 401(a)(17)
or Code section 415, shall be allocated to Participants' Accounts under
Part B, subject to applicable Code limitations in accordance with the following
priorities:

 

(A)     first, by a number of shares, if any,
of Voting Preferred Stock equal to the excess of the number of shares of
Class 1 and Class 2 Non-Voting Preferred Stock allocated to his Account
over the number of shares of Voting Preferred Stock allocated to his Account,
to the extent such number may be contributed by the Company or transferred
from the Supplemental Trust to Part B without disqualifying the Plan or
any other qualified plan; provided, however, that the number of shares
transferred may include any shares that were not previously contributed
or transferred to Part B because of the limitations of Code section 401(a)(17);
(B)     second, by the maximum number of shares
of Class 2 NonVoting Preferred Stock and Voting Preferred Stock (such numbers
to be the same) that may be contributed by the Company (or transferred
from the Supplemental Trust) to Part B without disqualifying the Plan or
any other qualified plan; provided, however, that the number of shares
transferred may include any shares that were not previously contributed
or transferred to Part B because of the limitations of Code section 401(a)(17);
and

(C)     third, by the maximum number of shares of
Common Stock that may be transferred from the Supplemental Trust to Part
B without disqualifying the Plan or any other qualified plan; provided,
however, that the number of shares may include any shares that were not
previously contributed or transferred to Part B because of the limitations
of Code section 401(a)(17).

The reductions described in subclauses (A) through (C) shall not include
any Voting Preferred Stock, Class 2 Non-Voting Preferred Stock or Common
Stock allocated during the current Plan Year.

    (vii)     Seventh, the Company
shall contribute (or, to the extent applicable, the Company shall direct
the trustee of the Supplemental Trust to transfer) a number of shares of
Voting Preferred Stock and Class 2 Non-Voting Preferred Stock and Common
Stock equal to the sum of the number of such respective shares calculated
for each Participant under clauses (i), (v) and (vi) above to Part B. Such
shares shall be transferred as soon as practicable after the applicable
Valuation Date.

    (viii)     Eighth, Prior to the
December 31, 1995 Valuation Date, the aggregate hypothetical share numbers
for all Participants for the 1994 Plan Year shall be retroactively increased
by an additional number equal to X multiplied by Y, where X is the total
number of shares of Preferred Stock to be issued as Additional Shares and
Y is the release fraction (as defined in the Supplemental Plan) for December
31, 1994. Such shares shall be divided among the Employee Groups (including
the IAM Employee Group) in accordance with Section 5.4(c)(ii)(C) and allocated
to Participants based upon 1994 data (that is, 1994 Compensation and Wage
Investments, as applicable.) The excess of such new hypothetical share
number (including such numbers for the IAM Employee Group) for the 1994
Plan Year over the hypothetical share number previously determined for
1994 shall be allocated hereunder or credited under the Supplemental Plan
in accordance with clause (v) above, provided that the number in (v)(A)
shall be calculated and credited as if the contributions were attributable
to 1995, rather than 1994, unless the additional shares calculated in clause
(v) to be contributed to ESOP (Part B) are in fact contributed to the ESOP
no later than September 15, 1995. The calculations required by this clause
(viii) shall be performed prior to calculating the regular allocations
for the 1995 year. The additional shares of Class 2 Non-Voting Preferred
Stock credited pursuant to this clause (viii) shall, for all purposes,
including Section 5.4(c)(ii)(E), be allocated as of December 31, 1994.

(d)     Purpose. The purpose of the foregoing contribution
and allocation provisions is to place each Participant, to the extent possible,
in the same position such Participant would have been if (i) Code sections
401(a)(4), 401(a)(17) and 415 did not apply, (ii) all of the shares of
Preferred Stock to be sold to Part A during the Wage Investment Period
had instead been sold on the Effective Date, (iii) all of the shares (excluding
shares of the Voting Preferred Stock) contributed to Part B or credited
under the Supplemental Plan during the Wage Investment Period had instead
been purchased by the Trust on the Effective Date pursuant to Part A as
Class 1 Non-Voting Preferred Stock and (iv) the Preferred Stock and Voting
Preferred Stock had been allocated ratably (over the 69 months beginning
at the Effective Date) to Participants in their respective Employee Groups
in accordance with the overall program ownership percentages, that is,
the ALPA Employee Group - 46.23%, the IAM Employee Group - 37.13% and the
Management and Salaried Employee Group - 16.64%. To the extent any interpretative
issues arise in calculating contributions and allocations, such issues
shall be resolved, if possible, by effectuating such purpose. To the extent
that any shares of Company Stock are converted into shares of Common Stock
prior to the end of the Wage Investment Period, an appropriate number of
shares of Common Stock will be contributed (if applicable) and allocated
hereunder in lieu of the shares of the Company Stock that would have been
contributed and/or allocated hereunder and, if appropriate, the number
of Class 1 and/or Class 2 Non-Voting Preferred Stock shares set forth in
various places in this Plan shall be revised; provided, except to the extent
the shares of Voting Preferred Stock are converted into shares of Common
Stock, the calculation of the number of shares of Voting Preferred Stock
to be contributed and allocated shall continue as if no shares of Company
Stock had been converted.

(e)     Special Allocation Provision. For purposes
of making allocations under Section 5.4, the period from January 1, 2000
through April 12, 2000 shall be treated as a Plan Year (for the ALPA Employee
Group and the Management and Salaried Employee Group) and the period from
January 1, 2000 through July 12, 2000 shall be treated as a Plan Year (for
the IAM Employee Group).

    5.5     Limitation on Allocations
to Participants.

(a)     General. Subject to the provisions of
this Section 5.5, Code section 415, including the effect of any transitional
rule, shall be incorporated by reference into the terms of the Plan. No
allocation shall be made under Section 5.4 that would result in a violation
of Code section 415.
(b)     Code Section 415 Compensation. For purposes
of this Section 5.5, Compensation shall be adjusted to reflect the general
rule of Treasury Regulation section 1.415-2(d).

(c)     Limitation Year. The "limitation year" (within
the meaning of Code section 415) shall be the calendar year.

(d)     Multiple Defined Contribution Plans. In
any case where a Participant also participates in another defined contribution
plan of the Company or its Affiliates, the appropriate committee of such
other plan shall first reduce the after-tax contributions under any such
plan, shall then reduce any elective deferrals under any such plan subject
to Code section 401(k), shall then reduce all other contributions under
any other such plan and, if necessary, shall then reduce contributions
under this Plan (Part B to be reduced before Part A); provided, however,
in the case of any Participant who is a member of the ALPA Employee Group,
contributions (excluding after-tax contributions and elective deferrals)
under the United Air Lines, Inc. Pilots' Directed Account Retirement Income
Plan shall be reduced last.

(e)     Combined Plan Limitations. To the extent
necessary to comply with the requirements of Code section 415(e), the appropriate
committee shall first reduce the annual benefit payable under any defined
benefit plan in which the Participant participates and, if necessary, the
ESOP Committee shall thereafter reduce the contributions under the defined
contribution plans in which such Participant participates in accordance
with Section 5.5(d).

(f)     Excess Allocations. If, after applying the
allocation provisions under Section 5.4, allocations under Section 5.4
would otherwise result in a violation of Code section 415, the ESOP Committee
shall reduce Employer Contributions for the next limitation year for the
affected Participant or shall hold excess amounts in a suspense account
for allocation in a subsequent Plan Year in accordance with Reg. section
1.415-6(b)(6)(ii). Such suspense account, if permitted, will be created
before any reallocation of contributions for the affected individual. If
the limits of Code section 415 would cause total allocations to each Participant
in an Employee Group to exceed the permitted amount, appropriate arrangements
will be made to protect the interests of that Employee Group, consistent
with the principles of Section 3.2.

    5.6     Valuations. All valuations
of shares of Company Stock that are not readily tradeable on an established
securities market shall be valued by an "independent appraiser" (within
the meaning of Code section 170(a)(1)).

SECTION 6

Vesting

A Participant's Account shall be fully vested (nonforfeitable) at all
times, and will be distributed to him or, in the event of his death, to
his Beneficiary, in accordance with the applicable provisions of Section
7.

SECTION 7

Distributions

    7.1     Pre-Retirement Diversification
Rights.

(a)     General. Any Participant who has attained
age 55 and has 10 years of participation under the Plan ("Qualified Participant")
may elect to diversify the investment of a portion of his Account under
this Section 7.1. During the six-Plan Year period beginning with the Plan
Year in which such Qualified Participant attains age 55 and has 10 years
of participation under the Plan, such Qualified Participant shall be entitled
to request, within 90 days after the close of each Plan Year in such period
(each such period referred to as an "Election Period"), the diversification
of up to 25% of the balance of his Account, to the extent such amount exceeds
the amount to which any prior election under this Section 7.1 applies.
During the last Election Period, the preceding sentence shall be applied
by substituting "50%" for "25%".
(b)     Amount. In the case of a Qualified Participant
who has made one or more elections during the period, the extent to which
a subsequent election exceeds the amount to which any prior election applies
shall be (i) in the case of the Qualified Participant's ESOP Cash Account,
(A) 25 % or 50 %, as the case may be, of the sum of the balance of such
Account as of the Valuation Date of the Plan Year with respect to which
the subsequent election is made and the amounts diversified pursuant to
prior elections, less (B) the amounts diversified pursuant to prior elections;
and (ii) in the case of the Qualified Participant's ESOP Stock Account,
(A) 25% or 50%, as the case may be, of the sum of the number of shares
of Company Stock in the Qualified Participant's ESOP Stock Account as of
the Valuation Date of the Plan Year with respect to which the subsequent
election is made and the number of shares of Company Stock diversified
pursuant to prior elections, less (B) the number of shares of Company Stock
diversified pursuant to prior elections. For the purposes of this Section
7, fractional shares for which a Qualified Participant might be entitled
to receive shall be rounded down to the nearest whole share. The diversification
of a Participant's Account under this Section 7.1 shall only be effected
within 90 days following the 90-day period in which the Qualified Participant
makes his request. Notwithstanding the foregoing, if the fair market value
of the Company Stock allocated to the ESOP Stock Accounts of a Qualified
Participant is $500 or less as of the Valuation Date immediately preceding
the first day of an Election Period, such Qualified Participant shall not
be entitled to an election under this Section 7.1 for that Election Period.

(c)     Method. A Participant's diversification
election pursuant to this Section 7.1 shall only be effected by having
the ESOP Committee cause the Trustee to transfer the portion of the Account
to be diversified to the Company's Code section 401(k) plan applicable
to such Participant. An equal number of shares of Voting Preferred Stock
and Preferred Stock shall be diversified.

    7.2     Distributions on Account
of Termination of Employment. Subject to the following provisions of this
Section 7, a Participant (or, in the case of a Participant's death, his
Beneficiary) shall become eligible (but shall not be required) to receive
a distribution of the balance of his Account, as of the Valuation Date
coincident with or next following the date the Participant's employment
with the Company and its Affiliates terminates for any reason, provided,
however, that, except as provided in Section 7.4, no distributions shall
be made prior to July 13, 1995.

    7.3     Manner and Form of Distributions.

(a)     Manner. A Participant may elect to receive
a distribution of his Account balance in either of the following methods:
    (i)     By payment in a lump
sum; or

    (ii)     By payment in a series
of five substantially equal annual installments (to consist of equal numbers
of Voting Preferred Stock and Preferred Stock).

 

If a Participant so desires he may direct how his benefits are to be paid
to his Beneficiary. If a deceased Participant did not file a direction
with the ESOP Committee, the Beneficiary may elect to receive a distribution
of the Account in accordance with this Section 7.3.

 

(b)     Form. At the Participant's election, the
ESOP Committee shall direct the Trustee to make distribution of a Participant's
Account in (i) cash, (ii) Company Stock or (iii) in cash equal to the amount
held in such Participant's ESOP Cash Account and in shares of Company Stock
with respect to such Participant's ESOP Stock Account; provided, however,
that Company Stock (if convertible) shall only be distributed in the form
of Common Stock received in the conversion of the Preferred Stock held
in his Account and any fractional share shall be paid in cash. If a Participant
elects to receive a distribution of his ESOP Stock Account in cash, the
Trustee shall be directed to convert (if convertible) the Company Stock
in his ESOP Stock Account into Common Stock and to sell the Common Stock
and any Company Stock that is not convertible; the amount of cash so distributed
shall equal the net proceeds received from the sale of such shares of Common
Stock. If a Participant elects to receive a distribution of his ESOP Cash
Account in Common Stock, the Trustee will be directed to purchase Common
Stock in the open market and the number of shares of Common Stock so distributed
shall equal the number of whole shares purchased with such Participants'
Account balance, with any excess cash distributed to the Participant.

    7.4     Special Distribution Rules.
Notwithstanding any provision herein to the contrary:
(a)     Required Distributions.
    (i)     a Participant whose employment
with the Company and its Affiliates terminates by reason of attainment
of his Normal Retirement Date, death or Total Disability must be eligible
to receive a distribution of his Account balance no later than the end
of the Plan Year following the Plan Year in which such termination occurs;
provided, however, that this provision shall not apply to the shares of
Company Stock held in the Participant's Account acquired with the proceeds
of an Acquisition Loan until the close of the Plan Year in which such Acquisition
Loan has been repaid in full;

    (ii)     unless a Participant
otherwise elects under Section 7.4(b), a Participant whose employment with
the Company and its Affiliates terminates must commence to receive a distribution
of his Account no later than 60 days following the close of the Plan Year
in which the latest of the following occurs; (A) a Participant reaches
his Normal Retirement Date, (B) the Participant's employment with the Company
and its Affiliates terminates and (C) the 10th anniversary of the year
in which the Participant commenced participation in the Plan;

    (iii)     a Participant's Account
balance must commence to be distributed no later than the April 1 of the
calendar year next following the calendar year in which such Participant
attains age 70-1/2. Any amount distributed pursuant to this clause (iii)
shall, in the case of a Participant who is an Employee, be and be limited
to the minimum amount required to be distributed pursuant to Code section
401(a)(9);

    (iv)     If a Participant's employment
with the Company and its Affiliates terminates by reason of death, or if
a Participant dies after his employment terminates but before a distribution
commences from the Plan, then, unless the Participant's spouse is the Beneficiary,
all of the Participant's interest in the Plan must be completely distributed
within five years after the date of his death unless distributions begin
within one year after the Participant's death; and

    (v)     to the extent permitted
by law, Code section 40 1 (a)(9) and any related transitional rule are
incorporated by reference into the terms of the Plan.

(b)     Deferred Distributions. A Participant (or
a spousal Beneficiary) may elect to defer the commencement of his distribution
to any date on or prior to the April I of the calendar year next following
the calendar year in which such Participant attains age 70-1/2.

    7.5     Direct Rollover. To the
extent required by Code section 401(a)(31), the Participant (or a spousal
Beneficiary) shall have the right to elect to have any distribution that
constitutes an "eligible rollover distribution" (as defined in Code section
401(a)(31)(C)) paid directly to an "eligible retirement plan" (as defined
in Code section 401(a)(31)(D)) specified by such Participant (or a spousal
Beneficiary). If a Participant (or a spousal Beneficiary) fails to make
the foregoing election he shall be deemed to have not made such election.
The provisions of this Section 7.5 shall be administered in accordance
with, and subject to, such rules as the ESOP Committee may prescribe, which
rules may include any limitations permitted under Code section 401(a)(31).

    7.6     Facility of Payment.

(a)     General. Subject to Section 7.6(b), if,
in the opinion of the ESOP Committee, a Participant or Beneficiary is under
a legal disability or is in any way incapacitated so as to be unable to
manage his financial affairs, the ESOP Committee may (but shall not be
required to), until claim is made by a conservator or other person legally
charged with the care of his person or of his estate, direct the Trustee
to make payment to a relative or friend of such person for his benefit.
Thereafter, any benefits under the Plan to which such Participant or Beneficiary
is entitled shall be paid to such conservator or other person legally charged
with the care of his person or his estate.
    (b)     Minors. In the event
any amount is payable under the Plan to a minor, payment shall not be made
to the minor, but instead shall be paid (i) to that person's then living
parent(s) to act as custodian, (ii) if that person's parents are then divorced,
and one parent is the sole custodial parent, to such custodial parent,
or (iii) if no parent of that person is then living, to a custodian selected
by the ESOP Committee to hold the funds for the minor under the Uniform
Transfers or Gifts to Minors Act in effect in the jurisdiction in which
the minor resides. If no parent is living and the ESOP Committee decides
not to select another custodian to hold the funds for the minor, payment
shall be made to the duly appointed and currently acting guardian of the
estate for the minor or, if no guardian of the estate for the minor is
duly appointed and currently acting within 60 days after the date the amount
becomes payable, payment shall be deposited with the court having jurisdiction
over the estate of the minor.

    (c)     Discharge. Any payment
made under this Section 7.6 shall fully discharge, to such extent, the
obligation of the Trustee to pay benefits under the Plan with respect to
such Participant, Beneficiary or minor.

    7.7     Interests Not Transferable.
The interests of Participants and their Beneficiaries under the Plan are
not subject to the claims of their creditors and may not be voluntarily
or involuntarily assigned, alienated or encumbered, except as otherwise
provided in Section 7.11.

    7.8     Absence of Guaranty.
The Trustee, the ESOP Committee and the Employers in no way guarantee the
Trust Fund from loss or depreciation. Moreover, the Employers do not guarantee
any payment to any person. The liability of the Trust to make any payment
is limited to the available Trust Fund.

    7.9     Designation of Beneficiary.
In the event of the death of a married Participant, the Participant's Account
balance will be paid to his surviving spouse, except as otherwise provided
below. Each Participant from time to time, by signing a form furnished
by the ESOP Committee, may designate any legal or natural person or persons
(who may be designated contingently or successively) to whom his benefits
are to be paid if he dies before he receives all of his benefits; provided,
however, that if a married Participant designates a Beneficiary other than
his spouse, his spouse must consent in writing to such designation and
acknowledge in writing the effect of such designation, and such consent
and acknowledgement must be witnessed by a notary public. Any designation
by an unmarried Participant shall be rendered ineffective by any subsequent
marriage and any consent of a spouse shall be effective only as to that
spouse.

A Beneficiary designation form will be effective only when the signed
form is filed with the ESOP Committee while the Participant is alive and
will cancel all Beneficiary designation forms signed earlier. If a deceased
Participant fails to designate a Beneficiary as provided above (or if the
designated Beneficiary dies before the Participant or before receiving
complete payment of the Participant's benefits), the ESOP Committee shall
direct the Trustee to pay the Participant's benefits as follows:

(a)     first, to the surviving spouse of the
Participant, if any;
(b)     second, to the children (including any adopted
children) of the Participant, per stirpes; and

(c)     third, if the Participant leaves no surviving
spouse or has no descendants pursuant to paragraph (b) above, to the estate
of the last to die of the Participant or his designated Beneficiary.

Upon the dissolution of marriage of a Participant, any designation of the
Participant's former spouse as a Beneficiary shall be treated as though
the Participant's former spouse had predeceased the Participant, unless
(i) the Participant executes another Beneficiary designation that complies
with this Section 7.9 and that clearly names such former spouse as a Beneficiary,
or (ii) a court order presented to the ESOP Committee prior to distribution
on behalf of the Participant explicitly requires the Participant to continue
to maintain the former spouse as the Beneficiary. In any case in which
the Participant's former spouse is treated under the Participant's Beneficiary
designation as having predeceased the Participant, no heirs or other beneficiaries
of the former spouse shall receive benefits from the Plan as a Beneficiary
of the Participant except as provided otherwise in the Participant's Beneficiary
designation.

    7.10     Missing Participants
or Beneficiaries. Each Participant and each Beneficiary must file with
the ESOP Committee from time to time in writing his post office address
and each change of post office address. Any communication, statement or
notice addressed to a Participant or Beneficiary at his last post office
address filed with the ESOP Committee, or if no address is filed with the
ESOP Committee, then, in the case of a Participant, at his last post office
address as shown on his Employer's records, will be binding on the Participant
and his Beneficiary for all purposes of the Plan. The Employers, the ESOP
Committee and the Trustee will not be required to search for or locate
a Participant or his Beneficiary. In the event that all, or any portion,
of the distribution payable to a Participant or his Beneficiary hereunder
shall, at the expiration of five years after it shall become payable, remain
unpaid solely by reason of the inability of the ESOP Committee, after sending
a communication, statement or notice to the last post office address filed
with the ESOP Committee, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be reallocated in
the same manner as a Company Stock contribution would be allocated under
the provisions of Section 5.4. In the event a Participant or his Beneficiary
is located subsequent to his benefit being reallocated, such benefit shall
be restored first from Trust (including the Supplemental Trust) earnings
and second from an Employer Contribution made solely for restoration purposes.
The allocation and restoration referred to above shall be effected by giving
effect to the class of Company Stock reallocated.

    7.11     Qualified Domestic Relations
Order. In addition to payments made under Section 7 on account of a Participant's
termination of employment, payments may also be made to an Alternate Payee
(as defined below) prior to, coincident with, or after a Participant's
termination of employment if made pursuant to a "qualified domestic relations
order" (as defined in Code section 414(p)). The ESOP Committee shall establish
reasonable procedures to determine the qualified status of domestic relations
orders and to administer distributions under such qualified orders, including,
in its sole discretion, the establishment of segregated accounts for Alternate
Payees. The term "Alternate Payee" means any spouse, former spouse, child
or other dependent of a Participant who is recognized by a Qualified Domestic
Relations Order as having a right to receive all, or a portion of, the
benefits payable under the Plan with respect to the Participant.

SECTION 8

Voting and Certain Dispositions of Company Stock

    8.1     Voting.

(a)     Allocated Shares. Each Participant or
Beneficiary, as a named fiduciary within the meaning of ERISA section 403(a)(1),
in accordance with the procedures hereinafter set forth, may direct the
Trustee with respect to the votes of the shares of Company Stock allocated
to his ESOP Stock Account, and the Trustee shall follow the directions
of those Participants (and Beneficiaries) who provide timely instructions
to the Trustee; provided that, notwithstanding the foregoing, the Trustee
shall vote the shares of Company Stock allocated to the Part B Accounts
of Participants who are (or were) members of the ALPA Employee Group but
are not Employees (or allocated to the Part B Accounts of their Beneficiaries).
(b)     Unallocated and Uninstructed Shares.

    (i)     Part A. Each active Participant
(which shall be defined for purposes of Sections 8.1 and 8.2 to mean a
Participant who is an Employee) who directed the Trustee with respect to
shares allocated to his Account under Part A in accordance with Section
8.1(a) may, again as a named fiduciary, direct the Trustee with respect
to a portion of both the number of shares of Company Stock held in the
Loan Suspense Account and the number of such shares allocated to any Participant's
Account under Part A for which no instructions were timely, received by
the Trustee. Such portion shall be determined as follows:

 

(A)     Such portion shall be limited to the sum
of: (I) the number of shares of Company Stock held in the Loan Suspense
Account reserved for allocation to such Participant's Employee Group, plus
(II) the number of shares of Company Stock allocated to the Accounts of
Participants in such Participant's Employee Group under Part A for which
no instructions were timely received.
(B)     The number of shares of Company Stock determined
under clause (i)(A) shall be multiplied by a fraction, the numerator of
which is the number of shares of Company Stock allocable to Part A that
such Participant directed the Trustee in accordance with Section 8.1(a)
and the denominator of which is the aggregate number of shares allocable
to Part A that were directed by active Participants in the same Employee
Group in accordance with Section 8.1(a).

 

                   
(C)     Such Participant, as a named fiduciary, shall
be entitled to direct the Trustee with respect to the number of shares
determined under clause (i)(B).

(ii)     Part B. Each active Participant who directed
the Trustee with respect to shares allocated to his Account under Part
B in accordance with Section 8.1(a) may, again as a named fiduciary, direct
the Trustee with respect to a portion of the number of such shares allocated
to any Participant's Account under Part B for which no instructions were
timely received by the Trustee. Such portion shall be determined as follows:

(A)     Such portion shall be limited to the number
of shares of Company Stock allocated to the Accounts of Participants in
such Participant's Employee Group under Part B for which no instructions
were timely received.
(B)     The number of shares of Company Stock determined
under clause (ii)(A) shall be multiplied by a fraction, the numerator of
which is the number of shares of Company Stock allocable to Part B that
such Participant directed the Trustee in accordance with Section 8.1(a)
and the denominator of which is the aggregate number of shares allocable
to Part B that were directed by active Participants in the same Employee
Group in accordance with Section 8.1(a).

(C)     Such Participant, as a named fiduciary,
shall be entitled to direct the Trustee, with respect to the number of
shares determined under clause (ii)(B).

 

(c)     Procedure. Such directions shall be provided
directly to the Trustee and shall be held in confidence and not be divulged
or released to any other person. Within a reasonable time prior to each
annual or special meeting of holders of Company Stock, the ESOP Committee
shall furnish to all Participants (and Beneficiaries) entitled to direct
the Trustee as to the voting of shares of Company Stock copies of any proxy
solicitation material provided to holders of voting Company Stock generally
together with appropriate instruction forms or cards and information concerning
the method of providing such instructions to the Trustee. To the extent
permitted by law, if the Trustee cannot follow directions of Participants
(or Beneficiaries), the ESOP Committee shall direct the Trustee.

    8.2     Control Transaction.

(a)     General. The provisions of this Section
8.2 shall apply in the event a Control Transaction is commenced or proposed
by a person or persons. In the event a Control Transaction is commenced
or proposed, the ESOP Committee, promptly after receiving notice, shall
transfer certain of the ESOP Committee's record keeping functions under
the Plan to an independent record keeper (which if the Trustee consents
in writing, may be the Trustee). The functions so transferred shall be
those necessary to preserve the confidentiality of any directions given
by the Participants (and Beneficiaries) 'in connection with the Control
Transaction. Within a reasonable time after a Control Transaction is commenced,
the ESOP Committee shall furnish to all Participants (and Beneficiaries)
entitled, as hereinafter set forth, to direct the Trustee with respect
to the Control Transaction, copies of all offering material provided to
holders of Company Stock generally, together with appropriate instruction
forms or cards and information concerning the method of providing such
instructions to the Trustee. Except as otherwise required by ERISA, the
Trustee shall have no discretion or authority to sell, exchange, transfer,
convert or otherwise dispose of any of shares of Company Stock pursuant
to such Control Transaction except to the extent that the Trustee is timely
directed to do so in writing as follows:
    (i)     Allocated Shares. Each
Participant (or Beneficiary) to whose ESOP Stock Account shares of Company
Stock have been allocated may, as a named fiduciary within the meaning
of ERISA section 403(a)(1), direct the Trustee with respect to the sale,
exchange, transfer, conversion or other disposition of the shares of Company
Stock allocated to his ESOP Stock Account, and the Trustee shall follow
the directions of those Participants (and Beneficiaries) who provide timely
instructions to the Trustee.

    (ii)     Unallocated and Uninstructed
Shares.

 

(A)     Part A. Each active Participant who directed
the Trustee with respect to shares allocated to his Account under Part
A in accordance with Section 8.2(a)(i) may, again as a named fiduciary,
direct the Trustee with respect to a portion of both the number of shares
of Company Stock held in the Loan Suspense Account and the number of such
shares allocated to any Participant's Account under Part A for which no
instructions were timely received by the Trustee. Such portion shall be
determined as follows:

 
(I)     Such portion shall be limited to the sum
of: (x) the number of shares of Company Stock held in the Loan Suspense
Account reserved for allocation to such Participant's Employee Group, plus
(y) the number of shares of Company Stock allocated to the Accounts of
Participants in such Participant's Employee Group under Part A for which
no instructions were timely received.
(II)     The number of shares of Company Stock determined
under clause (ii)(A)(I) shall be multiplied by a fraction, the numerator
of which is the number of shares of Company Stock allocable to Part A that
such Participant directed the Trustee in accordance with Section 8.2(a)(i)
and the denominator of which is the aggregate number of shares allocable
to Part A that were directed by active Participants in the same Employee
Group in accordance with Section 8.2(a)(i).

(III)     Such Participant, as a named fiduciary,
shall be entitled to direct the Trustee with respect to the number of shares
determined under clause (ii)(A)(11).

 

(B)     Part B. Each active Participant who directed
the Trustee with respect to shares allocated to his Account under Part
B in accordance with Section 8.2(a)(i) may, again as a named fiduciary,
direct the Trustee with respect to a portion of the number of such shares
allocated to any Participant's Account under Part B for which no instructions
were timely received by the Trustee. Such portion shall be determined as
follows:

 

(I)     Such portion shall be limited to the number
of shares of Company Stock allocated to the Accounts of Participants in
such Participant's Employee Group under Part B for which no instructions
were timely received.
(II)     The number of shares of Company Stock determined
under clause (ii)(B)(1) shall be multiplied by a fraction, the numerator
of which is the number of shares of Company Stock allocable to Part B that
such Participant directed the Trustee in accordance with Section 8.2(a)(i)
and the denominator of which is the aggregate number of shares allocable
to Part B that were directed by active Participants in the same Employee
Group in accordance with Section 8.2(a)(i).

(III)     Such Participant, as a named fiduciary,
shall be entitled to direct the Trustee with respect to the number of shares
determined under clause (ii)(B)(II).

 

All such instructions from Participants (and beneficiaries) shall be provided
directly to the independent record keeper which, if different from the
Trustee, shall then instruct the Trustee as to the amount of shares to
be sold, tendered, exchanged, transferred, converted or otherwise disposed
of in accordance with the above directions. To the extent the Trustee cannot
follow Participant (or Beneficiary) instructions, the ESOP Committee, as
a named fiduciary, shall direct the Trustee. Except as contemplated by
the foregoing or as required to facilitate the making of Plan distributions
or diversification elections or as required by law, the Trustee shall have
no authority to dispose of Company Stock in a Control Transaction or otherwise.

 

(b)     Records. Following any Control Transaction
that has resulted in the sale or exchange of any shares of Company Stock
held in the Plan, the record keeper shall continue to maintain on a confidential
basis the Accounts of Participants (and Beneficiaries) to whose Accounts
shares of Company Stock were allocated at any time during such offer, until
complete distribution of such Accounts or such earlier time as the record
keeper determines that the transfer of the record keeping functions back
to the ESOP Committee will not violate the confidentiality of the directions
given by the Participants (and Beneficiaries). In the event that there
is no sale or exchange of any shares of ESOP Stock held in the Plan pursuant
to the Control Transaction, the record keeper shall transfer back to the
ESOP Committee the record keeping functions; provided, however, that the
record keeper shall keep confidential any instructions which it may receive
from Participants (and Beneficiaries) relating to the Control Transaction.
(c)     Proceeds. For purposes of allocating the
proceeds of any sale or exchange pursuant to a Control Transaction, the
ESOP Committee or the independent record keeper, as the case may be, shall
determine the portion, expressed as a percentage, of shares of each class
tendered by the Trustee that were actually sold or exchanged (the "applicable
percentage" for that class). For each class, the ESOP Committee or the
independent record keeper, as the case may be, shall then treat as having
been sold or exchanged from the portion of the Loan Suspense Account applicable
to that Employee Group and each of the individual Accounts of Participants
(and Beneficiaries) that number of shares (of that class) that is obtained
by multiplying (i) the applicable percentage for that class, times (ii)
the total number of shares in such Account of that class that were directed
to be tendered, exchanged or sold in connection with the Control Transaction.
The adjustments to individual Accounts shall be made by the ESOP Committee
or the independent record keeper, as the case may be, on information supplied
by the Company, the ESOP Committee or the Trustee.

(d)     Actions To Be Taken Following a Control
Transaction. Notwithstanding Section 4.2 or any other provision of this
Plan or the Trust Agreement that requires that the Trust Fund be invested
exclusively in shares of Company Stock, this Section 8.2(d) shall apply
if a Control Transaction results in the sale or exchange or other disposition
of any shares of Company Stock held in the Plan. If the consideration received
by the Trust as a result of the Control Transaction consists solely of
"appropriate securities" (as defined below), the terms of the Plan, all
outstanding Acquisition Loans, and future sales under Additional Acquisition
Loans, shall continue as if the Control Transaction had not occurred. If
the consideration received includes cash, property or securities, other
than appropriate securities, the Trustee shall invest the proceeds in appropriate
securities to the extent possible; if the Trustee is able to reinvest all
such proceeds in appropriate securities, the Plan, all outstanding Acquisition
Loan and future sales under Additional Acquisition Loans, shall continue
as if the Control Transaction had not occurred; if the Trustee is unable
to reinvest all such proceeds in appropriate securities, then the Company
shall make appropriate arrangements (which shall be reasonably satisfactory
to ALPA and the IAM and shall take into account and recognize the position
that ESOP Participants would have enjoyed had all of the shares of Class
1 Non-Voting Stock been sold to the ESOP on the Effective Date at a price
per share equal to the purchase price with respect to the shares sold on
the Effective Date) to protect the substantive interests of each Employee
Group, provided, however, that it is not currently intended that such arrangements
will consist of forgiveness of any portion of any Acquisition Loan. For
purposes of this Section 8.2(d), "appropriate securities" shall mean stock
(i) that is described in Code section 409(1), (ii) that is either common
stock described in Code section 409 (1)(1) or preferred stock that converts
into such common stock, and (iii) the issuer of which stock (A) has a Moody's
senior long-term debt rating which is at least as good as the better of
the Moody's senior long-term debt rating of the Company or United Airlines,
Inc. at such time and (B) is a "public company" as defined in Article Fifth
of the Articles of Incorporation of the Company.

(e)     Special Funding Rules. (i) If (x) any person
or persons commence (which, for purposes of this paragraph, shall mean-filing
a tender offer statement on Schedule 14D-1 (or successor form) with the
Securities and Exchange Commission or mailing appropriate solicitation
materials to the shareholders) a bona fide tender offer or exchange offer
for Company Stock which, if successful, would require the offeror (if a
person other than the Company or any of its affiliates) to file a Form
13D (or successor form) with the Securities and Exchange Commission with
respect thereto, or (y) the Board of Directors or shareholders approve
a Control Transaction described in Section 1(q)(b), then all of the remaining
shares of Class 1 Non-Voting Preferred Stock that are to be issued to the
Plan pursuant to the Recapitalization Agreement shall be sold ("Top-Off
Sale") by the Company to the Plan as soon as possible (and, in all circumstances,
in adequate time to allow the Plan to respond to such event), pursuant
to an Additional Acquisition Loan (conforming to the first sentence of
Section 1.6(g) of the Recapitalization Agreement, provided that the consent
of ALPA and the IAM required by that sentence shall not apply), unless
and to the extent that ALPA and the IAM jointly request otherwise in writing.
(All disputes between the Company and ALPA and the IAM as to whether any
such tender offer or exchange offer is bona fide shall be made in accordance
with the arbitration procedures described in Section 11.2(b)(ii)(G)-(J)
hereof.) In the Company's sole discretion such Top-Off Sale may be made
subject to a Condition that prevents, to the extent permitted by law, the
consummation of such Top-Off Sale if the event in question does not result
in the sale, exchange or other disposition of Company Stock, provided that
such contingency does not materially interfere with the Plan's ability
to so respond to the event in question. The purchase price of the shares
of Class 1 Non-Voting Preferred Stock to be sold pursuant to this subsection
(e) shall be the fair market value of such shares of Class 1 Non-Voting
Preferred Stock.

    (ii)(A)     If a person or persons
make a bona fide offer to the Plan (not covered by paragraph (e)(i)) to
acquire, directly or indirectly, at least 5% of the Company Stock held
by the Plan (the "Offer"), such Offer shall be treated as if an event described
in (e)(i) and the resultant Top- Off Sale shall be effected in accordance
with (e)(i), subject, however, to the provisions of (e)(11)(B).

 

(B)     In the event of an Offer, the Trustee
shall seek directions from Participants regarding the Offer, in accordance
with the provisions of this Section 8.2, both as to the actual shares held
by the Plan and as to the additional shares that would be held in the Loan
Suspense Account if the Top-Off Sale had been effected. If following those
directions as to both actual shares and the shares that would be acquired
in a Top-Off Sale, and following those directions only as to actual shares
would in each case not result in the direct or indirect acquisition of
any Company Stock pursuant to the Offer, then the Top-Off Sale shall not
be effected; otherwise, the Top-Off Sale shall be effected as contemplated
by (e)(i) and (e)(ii)(A).
(C)     Subject to the next sentence, the provisions
of (e)(ii)(B) shall not apply and the Top-Off Sale shall be made in accordance
with (e)(ii)(A) if following the (e)(ii)(B) procedures could reasonably
be expected to prevent a Top-Off Sale from being effected in adequate time
to allow the Plan to accept the Offer. Under the circumstances described
in this (e)(ii)(C), however, the Top-Off Sale shall be consummated immediately
before the consummation of the transaction contemplated by the Offer and
shall, to the extent legally permitted, be subject to the consummation
of the transaction contemplated by the Offer.

 

(iii)     If a Top-Off Sale required by (e)(i) or (e)(ii)
is not consummated, the Company shall make appropriate arrangements (which
shall be reasonably satisfactory to ALPA and the IAM) to protect the substantive
interests of the Employee Groups with respect to the ESOP and the relevant
transaction and the purposes of this subsection (e). The appropriate arrangements
contemplated by the foregoing shall take into account and recognize the
position that Participants would have enjoyed had all of the shares of
Class 1 Non-Voting Preferred Stock been sold to the Plan on the Effective
Date at a price per share equal to the purchase price with respect to the
shares of Class 1 Non-Voting Preferred Stock sold on the Effective Date.
The provisions of this subsection (e) and subsection (d) are not mutually
exclusive, provided that to the extent the sales or other appropriate arrangements
described in this subsection (e) occur, the future sales in connection
with Additional Acquisition Loans described in subsection (d) shall not
be required.

    8.3     No Illegal Actions. Notwithstanding
any other provision of this Plan, the Trustee shall not be obligated to
follow the direction of a named fiduciary unless such direction is in accordance
with the terms of the Plan and is proper under ERISA section 403(a)(2)
and not contrary to Title I of ERISA.

SECTION 9

Rights, Restrictions and Options on Company Stock

    9.1     Right of First Refusal.
If Company Stock distributed is not readily tradable on an established
market (within the meaning of Code section 409(h)), any shares of Company
Stock distributed by the Trustee shall be subject to a "Right of First
Refusal." The Right of First Refusal shall provide that, prior to any subsequent
transfer, such shares of Company Stock must first be offered in writing
to the Trust and, if refused by the Trust, to the Company, at the greater
of its independently appraised value as of the Valuation Date coinciding
with or next preceding such offer, or the price stated in a bona fide written
offer and on the same terms. The Trustee (on behalf of the Trust) and the
Company, as the case may be, shall have a total of 14 days (from the date
the Trust or the Company, as the case may be, receives the offer) to exercise
the Right of First Refusal. The ESOP Committee shall determine whether
a written offer from a prospective buyer has been made in good faith. A
Participant (or Beneficiary) entitled to a distribution of Company Stock
may be required to execute an appropriate stock transfer agreement (evidencing
the Right of First Refusal) prior to receiving a certificate for Company
Stock.

    9.2     Put Option. If Company
Stock distributed is not readily tradable on an established market (within
the meaning of Code section 409(h)), the Company shall issue a "Put Option"
to each Participant (or his Beneficiary) receiving a distribution of such
Company Stock from the Plan. The Put Option shall permit the Participant
(or his Beneficiary) to sell such Company Stock to the Company, at any
time during two put option periods (described below), at the then fair
market value, such fair market value to be determined at least annually
as of the respective Valuation Date by an independent appraiser selected
by the ESOP Committee. The first put option period shall be a period of
at least 60 days beginning on the date of distribution of Company Stock
to the Participant (or his Beneficiary). The second put option period shall
be a period of at least 60 days beginning after the new determination of
the fair market value of Company Stock is made by an independent appraiser
(and notification is given to the Participant or his Beneficiary) in the
next following Plan Year. The Company shall permit the Trustee, in its
discretion, to purchase the Company Stock tendered to the Company under
a Put Option. If the Company or the Trustee purchases Company Stock tendered
under a Put Option and [he Company Stock was distributed to the Participant
(or his Beneficiary) in the form of a lump sum, the payment, at the discretion
of the Company or Trustee, may be made (a) in five substantially equal
annual installments commencing not later than 30 days after the exercise
of the Put Option- ' provided, however, that the purchaser provides adequate
security and reasonable interest (as determined by the ESOP Committee)
on unpaid installments, or (b) in a lump sum. If the Company or Trustee
purchases Company Stock tendered under a Put Option and the Company Stock
was distributed as part of an installment distribution, the payment, in
the form of a lump sum, must be made not later than 30 days after the exercise
of the Put Option. The Trustee. on behalf of the Trust, may offer to purchase
any shares of Company Stock (which are not sold pursuant to a Put Option)
from any former Participant or Beneficiary at any time in the future, at
its then fair market value.

    9.3     Share Legend. Shares
of Company Stock held or distributed by the Trustee may include such legend
restrictions on transferability as the Company may reasonably require in
order to assure compliance with applicable federal and state securities
laws. Except as otherwise provided in this Section 9, no shares of Company
Stock held or distributed by the Trustee may be subject to a put, call
or other option, or buy-sell or similar arrangement.

    9.4     Nonterminable Rights.
The provisions of this Section 9 shall continue to be applicable to Company
Stock even if the Plan ceases to be an "employee stock ownership plan"
(as defined under Code section 4975(e)(7)).

SECTION 10

Dividends

    10.1     Class 1 Non-Voting Preferred
Stock.

(a)     Application of Fixed Dividend.
    (i)     Allocated Shares. Any
cash dividends paid with respect to shares of Class 1 Non-Voting Preferred
Stock allocated to the Participants' ESOP Stock Accounts which were acquired
with the proceeds of a particular Acquisition Loan, but excluding dividends
in excess of the Fixed Dividend paid on such Preferred Stock, shall be
used by the Trustee to pay the principal balance of such Acquisition Loan.

    (ii)     Unallocated Shares.
Any cash dividends paid with respect to shares of Class 1 Non-Voting Preferred
Stock held in the Loan Suspense Account which were acquired with the proceeds
of a particular Acquisition Loan, but excluding dividends in excess of
the Fixed Dividend paid on such Preferred Stock, shall be used by the Trustee
to pay the principal balance of such Acquisition Loan.

    (iii)     Any cash dividends
described in clauses (i) or (ii) in excess of the principal balance of
the Acquisition Loan which are attributable to prior fixed dividends that
are not paid due to a lack of earnings and profits shall be used to pay
interest on such Acquisition Loan if the Company made additional contributions
to the Plan to make up for such unpaid fixed dividends.

    (iv)     Any cash dividends described
in clauses (i) or (ii) above not used to repay the Acquisition Loan in
accordance with clauses (i), (ii) or (iii) above shall be allocated pursuant
to subsection (b) below as if they were dividends in excess of the Fixed
Dividend.

(b)     Application of Excess Dividend.

    (i)     Allocated Shares. Any
cash dividends paid with respect to shares of Class 1 Non-Voting Preferred
Stock allocated to the Participants' ESOP Stock Accounts in excess of the
Fixed Dividend paid on such Preferred Stock shall be allocated to such
Accounts, pro rata, according to the number of shares of such Preferred
Stock held in such Accounts on the dividend record date; such amounts shall
be used by the Trustee to purchase shares of Common Stock.

    (ii)     Unallocated Shares.
Any cash dividends paid with respect to shares of Class 1 Non-Voting Preferred
Stock held in the Loan Suspense Account in excess of the Fixed Dividend
paid on such Preferred Stock shall be allocated among the Employee Groups
in proportion to the allocation percentages set forth in Section 5.4(a)(i)(A).
The amount allocated to each Employee Group shall then be allocated to
the Participants from that Employee Group, pro rata, according to their
Part A Account balances on the dividend record date; such amounts shall
be used by the Trustee to purchase shares of Common Stock.

    10.2     Other Dividends. Any other
cash dividends paid on Company Stock (excluding Class 1 Non-Voting Preferred
Stock) shall be used by the Trustee to purchase additional shares of Company
Stock as provided in Section 5.3.

    10.3     Special Allocated Share
Rule. Any Financed Shares released from a Loan Suspense Account subaccount
by reason of dividends paid with respect to Company Stock that was acquired
with the proceeds of the Acquisition Loan applicable to that subaccount
shall be allocated in the same manner as provided in Section 5.4(a) for
Employer Contributions; provided, however, that prior to said allocation,
Financed Shares so released from such subaccount with a fair market value
(on the applicable dividend payment date) equal to the dividends allocated
to Participants' ESOP Cash Accounts and applied to repay such particular
Acquisition Loan as provided in Section 10.1 shall first be allocated among
and credited to those ESOP Stock Accounts, pro rata, according to the amount
of their dividends so applied. To the extent that the fair market value
of the shares released from a subaccount is less than the dividends described
in the foregoing proviso, Financed Shares released from other Loan Suspense
Account subaccounts shall be used to make up the insufficiency (after first
applying the foregoing proviso with respect to Financed Shares released
from such other subaccount). Notwithstanding any provision of the Plan
to the contrary, in any Plan Year the total dividends allocated to a Participant's
ESOP Cash Account used to repay Acquisition Loan(s) shall not, to the extent
required by law, exceed the fair market value of the Financed Shares released
from the Loan Suspense Account and allocated to that Participant's Account.

SECTION 11

Administration

    11.1     General. The Company
shall be the administrator of the Plan and shall have the rights, duties
and obligations of an "administrator" as that term is defined in ERISA
section 3(16)(A) and of a "plan administrator" as that term is defined
in Code section 414(g). Some administrative functions have been allocated
to the ESOP Committee, which shall have the rights, duties and obligations
set forth herein. The ESOP Committee shall be the "named fiduciary, " as
described in ERISA section 402, with respect to its authority under the
Plan, except to the extent provided in Section 8, for which each Participant
(or Beneficiary) shall be the named fiduciary, and except with respect
to the Initial Acquisition Loan and Additional Acquisition Loans and the
use of the proceeds thereof to purchase Preferred Stock, for which the
Trustee shall be the named fiduciary.

    11.2     Membership and Authority.

    (a)     General. The ESOP Committee
shall consist of six members: three members shall be appointed by ALPA,
two members shall be appointed by the IAM and one member shall be appointed
by the Company. Meetings of the ESOP Committee shall be held at the executive
offices of the Company unless a majority of all members unanimously agree
upon another location. The ESOP Committee shall have the following powers,
rights and duties:
    (i)     to adopt such rules of
procedure and regulations for the proper and efficient administration of
the Plan and as are consistent with the provisions of the Plan;

    (ii)     to enforce the Plan
in accordance with its terms and with such applicable rules and regulations
as may be adopted by the ESOP Committee-.

    (iii)     to determine all questions
arising under the Plan, to resolve all ambiguities, to correct defects,
to supply omissions, including the power to determine the rights or eligibility
of Employees or Participants and their Beneficiaries and their respective
benefits; provided, however, that the ESOP Committee will not have jurisdiction
or power to add to or subtract from the Plan or any amendments thereto;

    (iv)     to give such directions
to the Trustee with respect to the Trust Fund as may be provided in this
Plan or in the Trust Agreement;

    (v)     to maintain and keep
adequate books, records and other data as shall be necessary to administer
the Plan, except those that are maintained by the Company or by the Trustee;

    (vi)     to direct all payments
of benefits to Participants and Beneficiaries, consistent with the terms
of the Plan and the Trust Agreement;

    (vii)     to establish an investment
policy and objective for the Plan, except that it is understood that the
Plan is designed to invest exclusively in Company Stock;

    (viii)     to elect a Chairman
and to appoint a Secretary, who need not be a member of the ESOP Committee,
who shall keep minutes of the proceedings and have custody of all records
and documents pertaining to administration of the Plan;

    (ix)     to be agent for the
service of legal process on behalf of the Plan;

    (x)     to authorize one or more
of its members to execute any documents on behalf of the ESOP Committee,
in which event the ESOP Committee shall notify the Trustee in writing of
such action. The certificate of the Secretary or any authorized member
of the ESOP Committee that the ESOP Committee has taken or authorized any
action shall be conclusive in favor of any person relying on such certificate;

    (xi)     to obtain an independent
appraisal of the fair market value of the Company Stock held by the Trust
from an independent appraiser who meets the requirements of Code section
170(a)(1); and

    (xii)     perform any other acts,
consistent with the Plan and Trust Agreement, necessary or appropriate
to the administration of the Plan and the discharge of its duties.

(b)     Special Provisions.

    (i)     If the ESOP Committee
unanimously agrees that a matter affects members of only one Employee Group,
the matter shall be considered by an ESOP Committee consisting solely of
members who were appointed on behalf of such Employee Group, which appointees
must act by a majority vote, and the provisions of this Section 11.2 shall
be construed accordingly. If the ESOP Committee is unable to agree unanimously
that the matter affects only members of one such Employee Group, the jurisdictional
determination, that is, whether the matter affects only members of one
such Employee Group, shall be made by a neutral arbitrator selected in
accordance with clause (iii) below.

    (ii)     As set forth in Section
12.3, the ESOP Committee will have the exclusive power to hear and determine
all appeals of claims denied under Section 12.2 of the Plan pursuant to
the procedures hereinafter provided. With respect to such disputes, the
ESOP Committee will function as a System Board of Adjustment as provided
in Title 11 of the Railway Labor Act, as amended, and the following provisions
will govern:

 

(A)     The jurisdiction of the ESOP Committee
will be exclusive. Appeals may be submitted to the ESOP Committee either
by a Participant or a Beneficiary.
(B)     The ESOP Committee will establish rules
of procedure for the conduct of appeals before it, which rules will not
be inconsistent with the provisions of the Plan. Insofar as possible, such
procedures will follow the procedure of the American Arbitration Association.
The Chairman will promptly advise the Company, the IAM and ALPA of such
rules of procedure.

(C)     All appeals properly referred to the ESOP
Committee for consideration will be addressed to the Chairman in the form
of a submission as prescribed by the rules of procedure. Six copies of
each submission, including all papers and exhibits in connection therewith,
will be forwarded to the Chairman, who will promptly transmit one copy
thereof to each member of the ESOP Committee. The submission in each dispute
will include the question to be decided by the ESOP Committee, the provisions
of the Plan involved in the dispute, the position of the petitioner and
all asserted facts supporting such position.

(D)     The submission will state the names of the
parties to whom the petitioner sent copies of the submission. A copy of
the submission will be served by the petitioner upon ALPA, the IAM and
the Company.

(E)     The submission will state whether or not
the petitioner requests both a hearing on the facts and oral argument,
or only oral argument. The answer of each party may request a hearing on
the facts and oral argument or only oral argument. If neither the submission
nor any answer requests a hearing, the ESOP Committee may waive a hearing
and dispose of the dispute on the basis of the submission and answers.

(F)     When a hearing has been requested in a dispute,
the ESOP Committee will fix a date for such hearing as soon as reasonably
possible after receipt of the submission. The date for the hearing will
not be more than 60 days after receipt of the submission (unless circumstances
require a longer period which can be no more than 60 days). If two or more
members of the ESOP Committee consider the question involved in the dispute
to be of sufficient urgency, the ESOP Committee may fix an earlier date,
which will not be less than ten days after filing of the answer. If requested
by the ESOP Committee or the Participant, a transcript of each proceeding
will be made and retained in the files of the ESOP Committee. Such hearing
will be heard at the Company's Executive Offices in Elk Grove Township,
Illinois, unless the entire ESOP Committee, by a majority vote, otherwise
determines.

(G)     Appeals before the ESOP Committee shall
be decided by a majority vote of the members of the ESOP Committee. However,
a majority of the members of the ESOP Committee appointed on behalf of
any Employee Group has the power to require that any submission (except
for matters described in subsection (iv) below) be referred for decision
to a neutral arbitrator. Furthermore, if the ESOP Committee deadlocks in
the case of any vote, the matter shall be referred for decision to a neutral
arbitrator. In any case in which a neutral arbitrator is to be appointed,
the parties will, within 10 days after notice of the need to appoint a
neutral arbitrator, agree upon a neutral arbitrator. If the parties fail
to agree upon the selection of a mutually acceptable neutral arbitrator
the parties will select an arbitrator by alternate striking from a panel
of arbitrators supplied by the American Arbitration Association, preferably
a panel with knowledge of employee stock ownership plans. When an neutral
arbitrator is selected, the power to take further action with respect to
the dispute shall rest with the neutral arbitrator until the final decision
is made in the dispute,

(H)     When a neutral arbitrator is selected, any
party to a dispute may make a written request to the neutral arbitrator
for a further hearing or oral argument provided it is made within 15 days
after such selection. The neutral arbitrator will decide such requests.
If no further hearing or argument is held, the neutral arbitrator will
consider and review the prior record in the dispute. The decision of the
neutral arbitrator will be rendered within 30 days after the close of any
further hearing or argument. The neutral arbitrator shall decide the matter
based upon the record before him and the terms of the Plan and shall not
give weight to any previous votes of the ESOP Committee concerning the
matter.

(I)     The decision of the ESOP Committee, or neutral
arbitrator, if any, will be final and binding upon the Company, ALPA, the
[AM, a Participant or Beneficiary and any other person claiming under the
Plan.

(J)     Subject to Section 11.12, the expenses and
reasonable compensation of the neutral arbitrator selected as provided
herein shall be borne by the Company.

 

    (iii)     Except as provided in
Section 11.2(b)(i), for all other purposes under the Plan, five members
of the ESOP Committee will constitute a quorum, except that to constitute
a quorum, one member appointed on behalf of each Employee Group must be
present. All actions and decisions of the ESOP Committee under this Section
11 shall be by (A) the affirmative vote of a majority of the members present
at the meeting at which the vote is being taken or (B) the unanimous written
consent of all members then in office. However, a majority of the members
of the ESOP Committee appointed on behalf of any Employee Group has the
power to require that any action or decision (except as limited in clause
(iv) below) be referred for decision to a neutral arbitrator. Furthermore,
if the ESOP Committee deadlocks in the case of any vote, the matter shall
be referred for decision to a neutral arbitrator. The procedures set forth
in subsections 11.2(b)(ii)(G) through (J) shall apply.

    (iv)     The ESOP Committee is
the named fiduciary with respect to the management and disposition of assets
held in the Trust Fund. The power of a majority of the members of the ESOP
Committee appointed on behalf of any Employee Group to require that a matter
be referred to a neutral arbitrator shall not apply to a matter if it concerns
the exercise of authority respecting management or disposition of assets
held in the Trust Fund. Notwithstanding the preceding sentence, the power
of a majority of the members of the ESOP Committee appointed on behalf
of any Employee Group to require that a matter be referred to a neutral
arbitrator shall apply if (A) the matter does not involve a Control Transaction
and (B) it is reasonably determined that the resolution of such matter
might reasonably be expected to subject the Company to a material liability.
Any dispute with respect to the application of this clause (iv) shall be
resolved in accordance with the arbitration procedures described in Section
11.2(b)(ii)(G)-(J).

    11.3     Delegation by ESOP Committee.
The ESOP Committee may establish procedures for allocation of fiduciary
responsibilities among its members and delegation of fiduciary responsibilities
to persons other than named fiduciaries; provided, however, that the delegation
of the power to manage or control the assets of the Trust Fund may only
be delegated to an investment manager" (as defined in ERISA section 3(38)).
In exercising its authority to control and manage the operation and administration
of the Plan, the ESOP Committee may employ agents and counsel (who may
also be employed by or represent any Employer) and to delegate to them
such powers as the ESOP Committee deems desirable. Any such delegation
or appointment shall be in writing and shall reflect the unanimous action
of the ESOP Committee members then acting. The writing contemplated by
the foregoing sentence shall fully describe the advice to be rendered or
the functions and duties to be performed by the delegate.

    11.4     Information To Be Furnished
to ESOP Committee. The Employers shall furnish the ESOP Committee such
data and information as may be reasonably required to administer this Plan;
provided, however, that the preceding phrase shall not in any case restrict
the ability of ESOP Committee members to see individual Account data with
respect to the Participants in the Employee Groups they represent and,
provided, further, that individualized information shall be treated in
a confidential manner. The ESOP Committee shall be entitled to rely on
any information furnished by the Employers that is needed for calculation
of benefits due under the Plan, or any matters relating to administration
of the Plan. A Participant or Beneficiary entitled to benefits under the
Plan must furnish to the ESOP Committee such evidence, data or information
as the ESOP Committee considers desirable to carry out its obligations
under the Plan. Any benefits under the Plan may be conditional upon the
prompt submission of such information.

    11.5     ESOP Committee's Decision
Final. Except as otherwise provided herein, to the extent permitted by
law, any interpretation of the Plan and any decision on any matter within
the discretion of the ESOP Committee made by the ESOP Committee in good
faith is binding on all persons. Except as provided in ERISA section 405,
a dissenting member is not responsible for any action or failure to act
if within a reasonable time he registers his dissent with the other members,
the Company and the Trustee.

    11.6     Remuneration and Expenses.
No remuneration shall be paid to any ESOP Committee member who is an Employee
of the Company or an Affiliate for services performed hereunder. However,
subject to Section 11.12, the reasonable expenses of an ESOP Committee
member incurred in the performance of an ESOP Committee function shall
be reimbursed by the Employers. For purposes of the preceding sentence,
flight pay loss and pay loss for each IAM member shall be treated as an
expense.

    11.7     Indemnification of the
ESOP Committee. To the extent permitted by applicable law, the ESOP Committee
and its members and any employee, director, or officer of the Company or
its Affiliates, shall be indemnified by the Company against any and all
liabilities, settlements, judgments, losses, costs, and expenses (including
reasonable legal fees and expenses) of whatever kind and nature which may
be imposed on, incurred by or asserted against them by reason of the performance
or nonperformance of their duties in connection with the Plan if such action
or inaction did not constitute gross negligence or willful misconduct.
Furthermore, the Company agrees to indemnify any such persons against any
liability imposed as a result of a claim asserted by any person or persons
under federal or state law where such persons act in good faith or in reliance
on a written direction or certification of the Company. The foregoing right
of indemnification shall be in addition to other rights such persons may
have by law or by reason of insurance coverage of any kind. The Company
may, at its own expense, settle any claim asserted or proceeding brought
against any such persons when such settlement appears to be in the best
interests of the Company. If the Company obtains fiduciary liability insurance
to protect the ESOP Committee or any of its members, the provisions of
this Section 11.7 shall be applicable only to the extent that such insurance
coverage is insufficient. The Company shall secure fidelity bonding for
the fiduciaries of the Plan, as required by ERISA section 412 and shall
secure insurance for ESOP Committee members coextensive with any ERISA
insurance coverage provided to any member of the Board of Directors or,
if more favorable, to any Employee.

    11.8     Resignation or Removal
of ESOP Committee Member. An ESOP Committee member may resign at any time
by -delivering his written resignation to the Company. Each of the Company,
ALPA and the IAM may remove its ESOP Committee members for any reason.
In addition, the Company, at its discretion, may remove any ESOP Committee
member for cause upon delivery of written notice to him. Except as provided
in the preceding sentence, such resignation or removal, as the case may
be, shall become effective only upon the appointment of a qualifying successor
member being duly appointed in accordance with Section 11.9. For purposes
hereof, "cause" shall be construed to mean an action permitting a member
of the Board of Directors to be for cause.

    11.9     Appointment of Successor
ESOP Committee Members. ALPA, the IAM or the Company, as the case may be,
shall, in accordance with the composition of the ESOP Committee described
in Section 11.2, promptly fill any vacancy in the membership of the ESOP
Committee and shall give prompt written notice thereof to the other ESOP
Committee members, the Company and the Trustee.

    11.10     Interested ESOP Committee
Member. A member may not decide or determine a,ny matter or question concerning
his own benefits under the Plan or as to how they are to be paid to him
unless either such decision could be made by him under the Plan if he were
not a member of the ESOP Committee, or such decision applies to all affected
Participants similarly. If a member is disqualified to act, and the remaining
members of the ESOP Committee cannot agree on a decision, ALPA, the IAM
or the Company, as the case may be, may appoint a temporary member to exercise
the powers of the interested member concerning the matter as to which he
is disqualified.

    11.11     Compliance with Laws.
Notwithstanding anything in the Plan or the Trust Agreement to the contrary,
every individual who is a fiduciary with respect to the Plan shall exercise
his responsibilities with respect to the Plan in a manner consistent with
ERISA and other applicable laws.

    11.12     Expenses of the Plan
and Trust. All reasonable expenses of administering the Plan and Trust
shall be charged to and paid by the Employers; provided, however, that,
in the case of a dispute between the Company and the Committee, the reasonableness
of any expense shall be determined without regard to Sections 11.5 and
11.2(b)(ii)(1), and, provided, further, that in the event of any disagreement
with respect to the reasonableness of an expense, neither a determination
of the ESOP Committee that an expense is reasonable nor a determination
by the Company that an expense is unreasonable shall be accorded any presumption
of correctness. Unless the Company and ESOP Committee otherwise agree,
such disagreement shall be resolved through the judicial process and the
Company shall pay the reasonable expenses of litigation (and with regard
to these expenses, the ESOP Committee's determination of reasonableness
shall be conclusive). The reasonableness of any expense with respect to
the Plan or Trust shall be determined by taking into account, inter alia,
(a) the appropriateness and magnitude of the expense, (b) comparative reference
to the types and amounts of expenses incurred by other very large employee
stock ownership plans that own a significant portion of the employer's
outstanding stock, (c) the complexity and size of this Plan and (d) the
special purposes for which this Plan was established. Payment of expenses
shall not be deemed to be Employer Contributions.

SECTION 12

Claims Procedure

    12.1     Written Claim. The Company,
which may delegate its authority, shall be the fiduciary for the initial
decision on claims for benefits under the Plan. A Participant (or Beneficiary)
may present a claim to the Company for any unpaid benefits. The Company
shall establish procedures for action upon claims initially made and the
communication of a decision to the claimant promptly and, in any event,
not later than 90 days after the claim is received, unless special circumstances
require an extension of time for processing the claim. If an extension
is required, notice of the extension shall be furnished the claimant prior
to the end of the initial 90-day period, which notice shall indicate the
reasons for the extension and the expected decision date. The extension
shall not exceed 90 days. The claim may be deemed by the claimant to have
been denied for purposes of further review described below in the event
a decision is not furnished to the claimant within the period described
in the three preceding sentences. If the claim for benefits is wholly or
partially denied, the Company shall notify the Participant (or Beneficiary)
in writing of such denial of benefits within 90 days after the Company
initially received the benefit claim. Such 90-day period may be extended
for an additional 90 days if the Company provides written notice of the
extension to the claimant prior to the termination of such 90-day period
and the extension is based on special circumstances.

    12.2     Notice of Denial. A
notice of a denial of benefits shall advise the Participant (or Beneficiary)
of:

(a)     the specific reason or reasons for the
denial;
(b)     the specific provisions of the Plan on which
the denial is based;

(c)     any additional material or information necessary
for the Participant (or Beneficiary) to perfect his claim and an explanation
of why such material or information is necessary; and

(d)     the steps which the Participant (or Beneficiary)
must take to have his claim for benefits reviewed.

    12.3     Review Procedure. Each
Participant (or Beneficiary) whose claim for benefits has been denied shall
have the opportunity to file a written request pursuant to Section 11.2(b)(ii)
for a full and fair review of his claim by the ESOP Committee, to review
all documents pertinent to his claim, and to submit a written statement
regarding issues relative to his claim. Such written request for review
of his claim must be filed pursuant to the procedure set forth in Section
11.2(b)(ii) by the Participant (or Beneficiary) within 60 days after receipt
of written notification of the denial of his claim.

    12.4     Notices. All notices
denying a claim for benefits, and all decisions on requests for a review
of the denial of a claim for benefits, shall be written in a manner calculated
to be understood by the Participant (or Beneficiary) filing the claim or
requesting the review.

SECTION 13

Amendment and Termination

    13.1     Amendment.

(a)     While the Company expects and intends
to continue the Plan, the Company must necessarily reserve, and does hereby
reserve, the right to amend the Plan, at any time; provided, however, that,
subject to Sections 13.1(b), (c), and (d) hereof and Section 1.6(g) of
the Recapitalization Agreement (relating to skipped dividends), no amendment
may be adopted without the approval of both ALPA and the IAM.
(b)     With respect to selected "intragroup matters,"
however, the Company may amend the Plan with respect to the Salaried and
Management Group and shall amend the Plan as reasonably requested by ALPA
and the IAM for their respective Employee Groups. An amendment relates
to an "intra-group matter" only if it relates to eligibility, or allocation
and does not relate to any other matter, including, without limitation,
withdrawal, loan, voting, vesting or fiduciary provisions; provided, however,
that no amendment may be made which shall disqualify the Plan or extend
allocations hereunder beyond the year 2000 or affect the pace of allocations
of Company Stock in a manner that would adversely affect the Plan's projected
ability to meet the requirements of Code Section 415(c)(6) (which last
requirement may be waived by ALPA). Notwithstanding the preceding sentence,
with respect to an intragroup matter, the Company need not and cannot (without
the required consent) adopt any amendment if it would entail an additional
annual expense in excess of approximately $25,000 or if the Company reasonably
believes the Company will be exposed to a material liability if the amendment
is adopted and, provided, further, that disputes under this subsection
(b) shall be resolved by the arbitration procedures of Section 11.2(b)(ii).
Finally, the Company may not adopt with respect to Management and Salaried
Employees and neither ALPA nor the IAM may require the Company to adopt
more than three amendments under this Section 13.1(b) and, in the case
of the ALPA Employee Group and the Management and Salaried Employee Group,
no amendment may require that allocations be based on factors other then
Compensation, Account balances, dividends, and dividend credits.

(c)     ALPA and the IAM shall be accorded an adequate
opportunity to review any submission referred to in the first sentence
of Section 7(a) of the Preferred Stock Purchase Agreement, and they shall
have the right to participate in the consideration of any amendment required
by the second sentence of Section 7(a) of the Preferred Stock Purchase
Agreement. If an amendment to the Plan or Trust is required to result in
the issuance of a determination letter described in such Section 7(a),
and if there is more than one form of amendment that would result in such
issuance, the Company, ALPA, and the IAM shall agree on the form of such
amendment; provided, that if the three persons cannot timely agree, an
arbitrator shall be immediately selected pursuant to the procedures set
forth in Section 11.2(b)(ii). Such arbitrator shall select the amendment
that would result in such issuance and that best carries out the purposes
of this Plan at a reasonable expense.

(d)     Finally, the approval of ALPA and the IAM
shall not be required with respect to an amendment if such amendment (w)
is in connection with an extension of an Acquisition Loan in accordance
with its terms, (x) extends the allocation period applicable to the Salaried
and Management Group, (y) will not cause any extension in the allocation
period applicable to the ALPA Employee Group or the IAM Employee Group,
and (z) the failure to adopt the amendment would make it impossible to
successfully complete the steps described in Section 5.4(a)(i) through
(vii) without changing the percentages set forth in Section 5.4(a)(i)(A).
The Company agrees that its authority to extend an Acquisition Loan shall
be conditioned on enactment of an amendment accomplishing the goals of
the prior sentence. ALPA and the IAM shall have the unilateral power to
require the Company to extend an Acquisition Loan and adopt an amendment
identical to that described in the preceding two sentences, so long as
the protections described in the preceding two sentences are accorded to
the Employee Groups for which the amendment is not required.

(e)     An amendment under Subsection (b) or (d)
shall not be effective unless advance notice of at least 10 days before
adoption is given to ALPA, the IAM, and the Board of Directors. Such advance
notice may be waived by the party to whom notice is otherwise due.

    13.2     Termination. Subject to
the approval of ALPA and the IAM, the Plan will terminate as to all of
the Employers on any date specified by the Company.

    13.3     Merger and Consolidation
of Plan; Transfer of Plan Assets. No merger or consolidation with, or transfer
of assets to, any other plan may be effected without the consent of ALPA
and the IAM. In the case of any merger or consolidation with, or transfer
of assets and liabilities to, any other plan, provisions shall be made
so that each Participant in the Plan on the date thereof, if the Plan was
then terminated, would receive a benefit immediately after the merger,
consolidation or transfer that is equal to or greater than the benefit
he would have been entitled to receive immediately prior to the merger,
consolidation or transfer, if the Plan had then terminated. Notwithstanding
the preceding language, in the event of a merger, if the surviving corporation
of the merger agrees to continue the Plan, no termination or partial termination
will be deemed to have occurred. This Section 13.3 does not apply to transfers
or rollovers described in Sections 7.1 and 7.5.

    13.4     Distribution on Termination.
If, on termination of the Plan, a Participant remains an Employee of his
Employer or any of its Affiliates, the amount of the Participant's benefits
may be retained in the Trust until after the Participant's termination
of employment with his Employer and any of its Affiliates and shall be
paid to such Participant or, in the event of the Participant's death, to
his Beneficiary, in a lump sum. The benefits payable to a Participant whose
employment with his Employer or any of its Affiliates is terminated coincident
with the termination of the Plan shall be paid to the Participant or, in
the event of the Participant's death, to his Beneficiary, in a lump sum.
All appropriate accounting provisions of the Plan will continue to apply
until the benefits of all affected persons have been distributed to them.
Affected Participants will be notified of an amendment, termination or
partial termination of the Plan, as required by law.

SECTION 14

Top-Heavy Provisions

    14.1     Top-Heavy Provisions.
If, as of the last day of the first Plan Year, or thereafter, if as of
the day next preceding the beginning of any Plan Year (the "Determination
Date"), the Plan is a "top-heavy plan" (determined in accordance with the
provisions of Code section 416(g)) that is, the aggregate present value
of the accrued benefits and account balances of all "Key Employees" (within
the meaning of Code section 416(i) and for this purpose using the definition
of Compensation, as modified under Section 5.5(b)) and their Beneficiaries
exceeds 60% of the aggregate present value of the accrued benefits and
account balances of all Participants and Beneficiaries, the amendments
specified in this Section 14 will automatically become effective as of
the first day of the Plan Year. For purposes of the above sentence, the
aggregate present value of the accrued benefits and account balances of
a Participant who has not performed any services for the Company or any
of its Affiliates during the five year period ending on the Determination
Date shall not be taken into account. This calculation shall be made in
accordance with Code section 416(g), taking into consideration plans which
are considered part of the Aggregation Group. The term "Aggregation Group"
shall include each plan of the Company or any of its Affiliates that includes
a Key Employee and each plan of the Company or any of its Affiliates that
allows the Plan to meet the requirements of Code section 401(a)(4) or Code
section 410 and may include any other plan of the Company or any of its
Affiliates, if the Aggregation Group would continue to meet the requirements
of Code sections 401(a)(4) and 410.

    14.2     Amendments.

(a)     Minimum Accruals. Section 3 will be modified
to provide that the aggregate amount of Employer Contributions allocated
in each Plan Year to the Accounts of each Participant who is a Non-Key
Employee (within the meaning of Code section 416(i)(1)), and who is employed
by an Employer as of the last day of the Plan Year, may not be less than
the lesser of:
    (i)     three percent of his
Compensation for the Plan Year; and

    (ii)     a percentage of his
Compensation equal to the largest percentage obtained by dividing the sum
of the amount credited to the Accounts of any Key Employee by that key
Employee's Compensation; and

(b)     Code section 415(e). Section 5.5 will be
amended to provide that the dollar limitations in the denominators of the
"defined benefit plan fraction" and "defined contribution plan fraction"
(as such terms are defined in Code section 415(e)) will be multiplied by
1.0 instead of 1.25. However, the above sentence shall not apply if "four
percent" is substituted for "three percent" in paragraph (a) above.

 

The preceding provisions will remain in effect for the period in which
the Plan is top-heavy. If, for any particular year thereafter, the Plan
is no longer top-heavy, the provisions contained in this Section 14 shall
cease to apply, except that any previously vested portion of any Account
balance shall remain nonforfeitable.

    14.3     Super Top-Heavy Provisions.
If, as of a Determination Date, the aggregate present value of the accrued
benefits and Account balances of all "Key Employees" (within the meaning
of Code section 416(i)) and their Beneficiaries exceeds 90% of the aggregate
present value of the accrued benefits and Account balances of all Participants
and Beneficiaries, paragraph (a) of Section 14.2 will automatically become
effective as of the first day of such Plan Year, except that Section 14.2(b)
will be modified to provide that the dollar limitations in the denominators
of the defined benefit plan fraction and defined contribution plan fraction
in Section 5.5 shall be multiplied by 1.0 instead of 1.25, whether or not
the minimum benefit is increased under Section 14.2(a).

    14.4     Special Rule. The provisions
of this Section 14 shall not apply to Employees included in a unit of Employees
covered by a collective bargaining agreement to the extent provided by
Code section 416(i)(4).

SECTION 15

Miscellaneous

    15.1     Qualification. The Plan
is designed and intended to comply with the requirements of Code section
401(a) so that contributions and the income on assets in Participants'
Accounts will be exempt from Federal income tax until distributed. Accordingly,
the adoption of the Plan and the implementing Trust and contributions hereunder
are contingent upon and subject to obtaining a written determination of
the Internal Revenue Service that the Plan complies with the requirements
of Code section 401(a) and that the Trust is exempt from taxation under
Code section 501(a).

    15.2     Reversions to Employer.
All contributions hereunder are expressly conditioned on their deductibility
under Code section 404 and the initial qualification of the Plan. Notwithstanding
anything to the contrary contained in the Plan, or in any amendment hereto,
if (a) any contribution has been made by an Employer by a mistake of fact,
or (b) the initial qualification of the Plan under Code section 401(a)
has been denied, or (c) any deduction for a contribution has been disallowed,
the Trustee shall return the entire Trust assets if clause (a) applies
or such contribution (or the value thereof if lower than the amount of
such contribution) to the Company, but in no event shall any such return
be made after the expiration of one year following (i) the payment thereof
in the case of clause (a) above, (ii) the denial of qualification in case
of clause (b) above, or (iii) the disallowance of the deduction in the
case of clause (c) above; provided, however, that prior to any such return,
Appropriate Arrangements shall be made with ALPA and the IAM to protect
the substantive rights of each Employee Group under the Plan.

    15.3     Governing Law. The Plan
shall be construed and administered according to the laws of the State
of Illinois to the extent that such laws are not preempted by the laws
of the United States of America.

    15.4     Notices. Any notice,
communication or document required hereunder to be given to, or filed with,
the ESOP Committee, any union, the Company or any other person shall be
properly given or filed if it is in writing and delivered in person or
by mail (including federal express, telex and facsimile transmission) addressed,

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

 

If to IAM, to:

International Association of Machinists

and Aerospace Workers

9000 Machinists Place

Upper Marlboro, MD 20772-2687

Telephone: (301) 967-4500

Telecopy: (301) 967-4591

Attention: William L. Scheri
IAM District Lodge 141

321 Allerton Avenue

South San Francisco, CA 94080

Telephone: (415) 873-0662

Telecopy: (415) 873-1676

Attention: Kenneth W. Thiede

                                       
If to the Company, to:

UAL Corporation

1200 E. Algonquin Road

Elk Grove Township, IL 60007

Telephone: (708) 956-2400

Telecopy: (708) 9524683

Attention: Chief Executive Officer and Chief Legal Officer

If to any member of the ESOP Committee, to such member at his or her
home address. With a copy to his or her respective Union at the address
set forth above.
If to any other person, to:

such address or telecopy number as such person may hereafter specify
for such purpose.

or such other address or telecopy number as any of the above may hereafter
specify for such purpose by notice in accordance with the foregoing. 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.

    15.5     Evidence. Evidence required
of anyone under the Plan may be by certificate, affidavit, document or
other information which the person acting on it considers pertinent and
reliable, and signed, made or presented by the proper party or parties.

    15.6     Action by Employer.
Any action required or permitted to be taken by an Employer under the Plan
(including any power of the Company to amend or to terminate the Plan as
provided herein) shall be by resolution of its board of directors or by
a person or persons authorized by its board of directors.

    15.7     Execution. To record
the adoption of this Plan, the undersigned duly authorized officers of
the Company have caused this document to be executed and to bear the corporate
seal of the Company, all as of the Effective Date.

    15.8     Adjustments. This Plan
contains various references to Class 1 and/or Class 2 Non-Voting Preferred
Stock. If and to the extent appropriate, an appropriate revision shall
be made to such references if the outstanding number of shares of Class
1 and/or Class 2 Non-Voting Preferred Stock is changed into, or exchanged
for, a different number or kind of shares or securities of the Company
through a reorganization or merger, or through a combination, recapitalization,
reclassification, stock consolidation or otherwise.

UAL CORPORATION

Dated: July 12, 1994                                     
           
By: J.R. O'Gorman

                                          
                                      
Title: Executive Vice President

 

 

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Exhibit 10.5

 

FIRST AMENDMENT

OF

UAL CORPORATION

EMPLOYEE STOCK OWNERSHIP PLAN

(Effective as of July 12, 1994)

By virtue and in exercise of the amending power reserved to UAL Corporation
(the "Company") under section 13.1(a) of the UAL Corporation Employee Stock
Ownership Plan (Effective as of July 12, 1994) (the "Plan"), which amending
power thereunder is subject to the approval of the Air Line Pilots and
Association, International ("ALPA") and the International Association of
Machinists and Aerospace Workers (the "IAM"), the Company hereby amends
the Plan, as follows, effective July 12, 1994:

1. Section 1(g), defining "ALPA Employee Group" is amended to read as
follows effective July 12, 1994:

"(g) 'ALPA Employee Group' means (i) Eligible Employees who are in
classifications represented by ALPA under the Railway Labor Act who are
listed on the Pilots' System Seniority List or the Second Officer Eligibility
Seniority List, and (ii) notwithstanding the fact that they are not in
classifications represented by ALPA under the Railway Labor Act, Eligible
Employees in the classification of Student Flight Officer who, upon completion
of the necessary training, expect to become listed on the Pilots' System
Seniority List or Second Officer Eligibility Seniority List."

2. Section 1(p), defining "Compensation," is amended by inserting the following
after the first sentence thereof:
"Except as set forth herein, a Participant's Compensation shall be
credited to the Participant for the Plan Year in which the Participant
received payment of such Compensation, even if the services to which the
Compensation relates were performed in a prior Plan Year.
                
(i) With respect to those members of the ALPA Employee Group who are paid
in the month following the month in which their services are performed,
Compensation has the meaning set forth in the preceding two sentences,
with the following modifications: (x) with respect to the 1994 Plan Year,
"Compensation" means Compensation paid during the period beginning August
1, 1994 and ending with the payment of the second regular paycheck of January,
1995 as such Compensation relates to services performed during the period
beginning on July 13, 1994 and ending on December 31, 1994; (y) with respect
to Plan Years 1995 through 1999, "Compensation" means Compensation paid
during the period beginning on the day after the payment of the second
regular paycheck during such Plan Year and ending with the payment of the
second regular paycheck of the next Plan Year as such Compensation relates
to services performed during the Plan Year; and (z) with respect to the
Plan Year 2000, "Compensation" means Compensation paid during the period
beginning with the day after the payment of the second regular paycheck
in such year and ending with the payment of the second regular paycheck
in May, 2000 as such Compensation relates to services performed during
the period beginning on January 1, 2000 and ending on April 12, 2000.

                
(ii) With respect to the members of the Management and Salaried Group and
with respect to those members of the ALPA Employee Group who are not paid
in the month following the month in which their services are performed,
Compensation for a particular Plan Year shall include Compensation paid
in the first and second paychecks received in the next Plan Year to the
extent such Compensation relates to services performed in the earlier Plan
Year. For purposes of the foregoing, the Company shall determine the extent
to which Compensation from the first and second paychecks received in a
Plan Year relate to services performed in a particular Plan Year according
to the Company's month-end time recording documents which are timely received
(according to Company policies and procedures), and if such month-end time
recording documents are not timely received, according to the reasonable
assumptions adopted by the Company. Notwithstanding the previous two sentences,
only Compensation from the first paycheck received in the next Plan Year
shall count as Compensation for the earlier Plan Year if the base pay taken
into account in such first paycheck solely relates to services performed
in the Plan Year in which such paycheck was received.

                
(iii) Notwithstanding anything to the contrary herein, no payment shall
be counted as Compensation in more than one Plan Year."

3. Section 1(gg) is amended by adding the following to the end thereof:

"An Eligible Employee who is represented by the IAM shall be a member
of the Management and Salaried Group (i) from the Effective Date through
October 29, 1994, for each period in which such Eligible Employee's temporary
reclassification as a salaried, managerial or non-union employee is evidenced
by Form UG-100 placed in the personnel record of the Eligible Employee
by the Employer, including an actual change in the job code, but excluding
any period during which a temporary reclassification occurs on a limited
basis and is only evidenced by a payroll certification; and (ii) effective
October 30, 1994, for each hour or fraction thereof during which such Eligible
Employee is temporarily reclassified as a salaried, managerial or non-union
employee."

4. Section 1(yy)(i) is amended to read as follows effective July 12, 1994:
"the product of (A) the number of hours for which the Participant
earns compensation during the Plan Year (up to and including the last day
of each Plan Year), but only to the extent such hours are reflected on
the compensation paid during the Plan Year or on the first and second paychecks
received by the Participant in the Plan Year following the Plan Year in
which the compensation was earned, multiplied by (B) the difference between
the "book rate of pay" as in effect immediately prior to the Effective
Date and the "actual rate of pay" as in effect on the Effective Date for
services performed during a Plan Year; plus"

4. Section 1(yy)(iii) is amended to read as follows effective July 12,
1994:
"the actual rate of pay (including the applicable overtime rates)
for each hour, or fraction thereof, of lunch (or other meal) multiplied
by the sum of (a) the number of days during which at least 3.5 hours are
worked during a Plan Year, plus (b) the number of overtime shifts of at
least two (2) hours worked during a Plan Year, plus (c) the number of overtime
shifts of at least eight (8) hours which immediately precede or follow
a regular full shift. Notwithstanding the foregoing, for any day worked
prior to October 16. 1994, in lieu of the foregoing, the actual rate of
pay shall be multiplied by one half hour for each day worked during the
Plan Year."

6. Section 1(yy) of the ESOP shall be amended by adding the following three
paragraphs to the end thereof:
"If any hours of a Participant for compensation earned in a particular
Plan Year are excluded from the calculation of the Wage Investment for
that Plan Year pursuant to Section 1(yy)(i)(A) because compensation for
such hours was not reflected in pay received during the Plan Year or the
first or second paycheck of the following Plan Year, then such hours shall
be counted towards the calculation of the Participant's Wage Investment
in the Plan Year for which the Participant received payment for such hours.
For purposes of the calculation of the Wage Investment for a particular
Plan Year, the Company shall determine the extent to which compensation
was earned in a particular Plan Year according to the Company's month-end
time recording documents which are timely received (according to Company
policies and procedures), and if such month-end time recording documents
are not timely received, according to the reasonable assumptions adopted
by the Company.
"In clarification of the foregoing provisions of Section 1(yy)(i)(A),
the Wage Investment for a member of the IAM Employee Group shall exclude
(i) from the Effective Date through October 29, 1994, each period in which
the temporary reclassification as a salaried, managerial or non-union employee
of a member of the IAM Employee Group is evidenced by Form UG-100 placed
in the personnel record of such member by the Employer, including an actual
change in the job code, but excluding any periods during which a temporary
reclassification occurs on a limited basis and is only evidenced by a payroll
certification, and (ii) effective October 30, 1994, each hour or fraction
thereof when such member is reclassified and is treated, for payroll and
other purposes, as a salaried, managerial or non-union employee.

"Notwithstanding the foregoing provisions of this Section 1(yy), only
hours reflecting compensation received on the first paycheck received in
the next Plan Year shall count towards calculation of the Wage Investment
for an earlier Plan Year if the base pay taken into account in such first
paycheck solely relates to services performed in the Plan Year in which
such paycheck was received. Notwithstanding anything to the contrary herein,
no hours shall be counted towards calculation of a Participant's Wage Investment
in more than one Plan Year."

7. Section 7.4(b), concerning deferred distributions, is amended by replacing
the phrase "any date" with the phrase "the last day of any month."

IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed on December 28, 1994.

 

                                          
      
UAL CORPORATION

 

                                          
    

/s/ Stuart I. Oran

                                         
      
Stuart I. Oran

                                         
      
Executive Vice President

                                         
      
Corporate Affairs and

                                         
      
General Counsel

Approved by:

AIR LINE PILOTS ASSOCIATION,               
INTERNATIONAL ASSOCIATION

INTERNATIONAL                                       
   
OF MACHINISTS AND AEROSPACE

                                         
                                 
WORKERS

/s/ Harlow B. Osteboe                                     
  

/s/Kenneth W. Thiede

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