Letter Agreement re: Revised Restructuring Plan - UAL Corp., Air Line Pilots Association and International Association of Machinists and Aerospace Workers


     AIR LINE PILOTS ASSOCIATION,     INTERNATIONAL ASSOCIATION OF
     INTERNATIONAL                    MACHINISTS AND AEROSPACE WORKERS
     UAL-MEC                          District Lodge 141
     6400 Shafer Court                321 Allerton Avenue
     Rosemont, IL 60018               South San Francisco, CA 94083    

                                                     December 22, 1993

     Board of Directors
     UAL Corporation
     1200 East Algonquin Road
     Elk Grove Township, IL 60007

     Ladies and Gentlemen:

               We are pleased to propose our revised restructuring

     plan that will provide extraordinary long-term benefits to UAL

     Corporation and its subsidiaries (the "Company"), its employees,

     customers and other constituencies. 

               We believe that our plan will catapult the Company 

     light-years ahead of its competitors by enabling it to serve the

     global community more flexibly and efficiently than any other

     major American carrier and to compete head to head with "low-cost

     carriers" in the short-haul domestic marketplace.  Our plan will

     also provide years of stable labor relations and a workforce

     highly motivated by its ownership stake in the Company, a

     substantial benefit not available to the Company's competitors.

               Pursuant to our restructuring plan (the "Transaction"),

     in exchange for the acquisition by one or more employee stock

     ownership plans ("ESOPs") of securities initially representing

     53% of the common equity interest and voting power of the

     reorganized Company (subject to adjustment as described in

     Section 2), the Company's existing stockholders would receive a

     package comprised of an aggregate of approximately $743 million

     in cash paid by the Company; $900 million of Debentures of the

     Company; $900 million of Preferred Stock of the Company; and

     common stock representing 47% of the equity of the reorganized

     Company at closing.  New corporate governance rules would protect

     the continuing interests of public shareholders while promoting

     employee ownership.

               As a consequence of changes to be made in the

     collective bargaining agreements of the participating unions, the

     new reorganized United will be significantly more agile and

     competitive than the existing Company.  As a part of the

     Transaction, the Company's participating employees -- its pilots,

     IAM- represented employees, and the salaried and management

     employees -- would invest, through a combination of wage

     concessions and collective bargaining agreement modifications, in

     excess of $5 billion of present value.  As a result of these

     contract modifications, the Company will be able for the first

     time to compete effectively with "low-cost" carriers in the

     domestic short-haul market.  Of course, all of these

     contributions by the participating unions are available only in

     the context of the Transaction.

               The participating unions are prepared to work together

     with you and with the Company's management to close the

     Transaction as quickly as possible.  We invite and encourage the 

     participation of the Association of Flight Attendants (the "AFA")

     and their assistance in making the Company the world's number one

     airline.  However, such participation is not a condition to

     proceeding with the Transaction.  As discussed with the Company's

     representatives, the Company would be provided, in the

     Transaction, with the full value of the contemplated employee

     investment by extending the IAM, ALPA and salaried and management

     employee investment for an additional period as described in

     Exhibits E-1, E-2 and E-3.  If the AFA agrees to participate in

     the Transaction prior to the closing as described in Exhibit E-4

     and actually participates at that level from the date of closing,

     the extension of the IAM, ALPA and salaried and management

     employee investment will be rolled back as described in Exhibit

     E-4.

               1.   In order to effect the Transaction, the Company

     and the participating unions will enter into a Reorganization

     Agreement which will provide that holders of shares of the

     Company's Common Stock, par value $5 per share (the "Old Common

     Stock"), will receive, in the aggregate, (i) approximately

     $743 million in cash, (ii) $900 million principal amount of

     Debentures of the Company having the terms described in Exhibit A

     (the "Debentures"), (iii) $900 million liquidation value of a new

     series of Preferred Stock of the Company having the terms

     described in Exhibit B (the "Public Preferred Stock"), and

     (iv) common stock of the reorganized Company which will

     represent, in the aggregate, 47% of the common equity interest

     and voting power of the Company at closing (the foregoing being

     based upon 28.9 million fully-diluted common shares outstanding

     at closing).  The Transaction structure is intended to provide

     the holders of Old Common Stock with capital gains treatment on

     their receipt of cash and Debentures and deferral of gain with

     respect to their receipt of Public Preferred Stock.

               2.   Upon closing, the ESOPs will acquire securities

     representing 53% of the common equity interest and voting power

     of the Company.  The ESOPs will cover the Company's salaried and

     management employees (as defined in Exhibit E-3) and the

     employees represented by the participating unions.  The overall

     structure of the ESOP program is described in Exhibit C-1.  The

     key terms of the principal ESOP are described in Exhibit C-2.  In

     addition, the percentage of the common equity and voting power

     represented by the securities of the Company deposited into the

     ESOPs may be increased to as much as 63% depending on the value

     of the new Common Stock in the public trading markets following

     the closing, as described in Exhibit C-3.  The securities to be

     acquired by the ESOPs will consist of one or more series of a new

     class of convertible preferred stock of the Company having

     substantially the terms set forth in Exhibit D (the "ESOP

     Shares").

               3.   Each of the participating unions will execute a

     new collective bargaining agreement with the Company, effective

     upon the closing of the Transaction, containing the terms set

     forth in Exhibit E-1, in the case of ALPA, and E-2 in the case of

     the IAM.  You have informed us that the Company will establish

     appropriate employment terms for the salaried and management

     employees as described in Exhibit E-3.

               4.   In addition to the wage rate and work rule

     revisions described in Exhibits E-1 through E-3 to this letter,

     all participating employee groups will forego scheduled wage

     increases (other than step, progression program or longevity

     increases) through the investment period.  Instead, the

     participating employee groups may receive wage adjustments, if

     any, as described in Exhibits F-1, F-2 and F-3.

               5.   In connection with the Transaction, ALPA and the

     IAM will permit United, for the first time, to create a high

     frequency, lower cost operation described in Exhibit G, which can

     successfully compete against other high frequency, lower cost

     carriers.

               6.   The reorganized Company will be governed as

     provided in Exhibit H.  In brief, the Board of the reorganized

     Company will be comprised of 12 directors of whom 5 will be

     elected by the public stockholders (3 of whom are intended to be

     existing Company outside directors), 4 will be Independent

     Directors, 2 will be Union Directors and 1 will be a Salaried/

     Management Employee Director.  ALPA and the IAM have selected an

     individual to serve as the CEO of the reorganized Company who we

     are confident will be satisfactory to the Board.  Those

     governance provisions will be given effect through amendments to

     the Company's Certificate of Incorporation and by-laws to be

     approved at a meeting of the Company's existing shareholders.

               7.   The consummation of the Transaction would be

     subject to necessary ratification of the labor agreements by the

     participating unions and the negotiation and execution by each of

     the Company, ALPA and the IAM of definitive documentation

     containing appropriate representations, covenants,

     indemnification and closing conditions (including, without

     limitation, approval of the Transaction by shareholders of the

     Company, no alteration of the status quo as provided in Section

     10 with respect to the participating unions, listing of the

     Company's new Common Stock on the New York Stock Exchange,

     satisfactory opinions of counsel as to the new governance

     structure and receipt by UAL of appropriate bring-down fairness

     opinions).  

               8.   The parties understand that they will be required

     to reach certain mutually acceptable agreements on provisions and

     details necessary or appropriate for the implementation of the

     Transaction and will use their reasonable best efforts to reach

     such agreements in definitive documentation.  The parties further

     understand that the provisions and details to be contained in

     such definitive documentation which are necessary or appropriate

     for implementation of the Transaction are not intended to reduce

     the value of the consideration to be received in the Transaction

     for each share of Old Common Stock.

               9.   The Company hereby agrees to be bound by the

     provisions of Exhibit I.

               10.  Effective upon the signing of this letter, United

     Airlines, Inc. and the Company will not take actions (i) which

     would breach the job protection provisions set forth in Exhibit

     E-1 or Exhibit E-2 hereto as if all references to the date of

     signing, the date of the Agreement, the date of ratification or

     the date of closing in such Exhibits referred to the date of this

     letter, (ii) which are described in the governance provisions set

     forth in Section 13 of Exhibit H hereto or (iii) which would

     breach the conduct provisions set forth in Exhibit J-1 hereto. 

     The provisions set forth in the preceding sentence shall

     terminate unless (1) both ALPA and IAM obtain necessary

     ratification of the provisions of this letter on or before

     January 31, 1994, (2) definitive documentation with respect to

     the Transaction is executed on or before March 15, 1994 and (3) a

     final and complete closing of the Transaction contemplated hereby

     occurs on or before the expiration of four months following the

     date of the filing by the Company of preliminary proxy materials

     relating to the Transaction with the Securities and Exchange

     Commission; but in no event earlier than May 1, 1994 nor later

     than August 31, 1994.  The obligations pursuant to this

     Section 10 will cease if a shareholder vote on the Transaction

     occurs and the shareholders of the Company do not approve the

     Transaction.  The obligation set forth in the first sentence of

     this Section 10 will not, pending the final and complete closing

     of the Transaction, require (a) cessation of any current activity

     or (b) non-renewal of any agreements, in each case set forth on

     Exhibit J-2 hereto.

               11.  The obligations of the parties under this letter

     (other than Section 9) may be terminated by the Board in response

     to a proposal by a third party to acquire control of the Company

     if the Board is advised by its independent legal counsel (who may

     be the Company's regularly engaged independent legal counsel)

     that such action is required by its fiduciary duties. 

     Notwithstanding any other provision hereof, if the Company

     receives any contact from, or indication or expression of

     interest by, a third party with respect to the possible

     acquisition of control of the Company, the Company may discuss or

     negotiate with, and provide information to, such third party, and

     may engage in any other similar activity relating to such

     contact, indication or expression.  The Company will keep the

     participating unions promptly apprised of the relevant details

     relating to such contacts, indications, expressions and

     activities (and provide copies of any written contacts,

     indications, expressions and proposals).

               12.  This letter sets forth the agreement in principle

     between the parties with respect to the transactions contemplated

     hereby.  It is not, however, intended to be, and is not, a

     legally binding agreement, except that the provisions set forth

     in Sections 9, 10, 11 and this Section 12 shall be legally

     binding upon the parties.

               We look forward to working with you to carry this

     transaction to a successful consummation.

                         Very truly yours,

                         AIR LINE PILOTS ASSOCIATION, INTERNATIONAL

                      By: /s/ Roger Hall
                           Name:    Roger Hall
                           Title:   Chairman, UAL - MEC

                         INTERNATIONAL ASSOCIATION
                           OF MACHINISTS AND AEROSPACE
                           WORKERS

                      By: /s/ Ken Thiede
                            Name:     Ken Thiede
                            Title:    President and General Chairman,
                                      District Lodge 141

     Accepted and Agreed to
     this 22 day of December, 1993

     UAL CORPORATION

     By: /s/ Lawrence M. Nagin
        Name:   Lawrence M. Nagin
        Title:  Executive Vice President

        

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                                                            12/22/93

                                                           EXHIBIT A

                        SENIOR UNSECURED DEBENTURES 

                                        
                                     Summary of Terms

        Issuer:                 UAL Corporation (the "Company").

        Principal Amount:       Tranche A - 1/2 of total principal
                                            amount
                                Tranche B - 1/2 of total principal
                                            amount
                                Total       $900 million

        Type of Security:       Senior Unsecured 
                                Debentures - Tranche A
                                             Tranche B

        Maturity:               Tranche A - 10 years.
                                Tranche B - 20 years.

        Coupon:                 The debentures will be priced at the
                                time of execution of definitive
                                documentation (the "First Pricing")
                                to trade at par.  However, two
                                financial advisors, one selected by
                                the Company and one selected by the
                                participating unions, shall mutually
                                determine, not later than five days
                                prior to the shareholder vote on the
                                Transaction, an appropriate coupon
                                rate so that the debentures will be
                                priced, subject to the proviso set
                                forth below, to trade at par on such
                                date.  In the event that the
                                respective financial advisors to
                                each of the Company and the
                                participating unions are unable so
                                to agree on a coupon rate, a
                                mutually acceptable nationally
                                recognized investment banking firm
                                will be appointed to participate in
                                the determination of the coupon rate
                                referred to above.  The coupon rate
                                will equal the average of the two of
                                the three coupon rates referred to
                                above (i.e. the rates selected by
                                the three financial advisors
                                referred to above) that are closest;
                                provided, however, that in no event
                                shall such rate be more than 150
                                basis points higher than the coupon
                                rate in effect at the First Pricing.

        Optional Redemption:    Not callable for five years.
                                Callable at a premium thereafter,
                                declining to par by the end of the
                                tenth year.

        Mandatory Redemption:   None.


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                                                            12/22/93

                                                           EXHIBIT B

                     SERIES B REDEEMABLE PREFERRED STOCK

                              Summary of Terms

        Issuer:                UAL Corporation (the "Company").

        Securities Offered:    Series B Redeemable Preferred Stock
                               (the "Public Preferred").

        Maturity:              Perpetual.

        Liquidation Value:     $25 per share of Public Preferred.

        Aggregate Amount       Approximately 36 million shares of
        Issuable:              Public Preferred (having an aggregate
                               Liquidation Value of $900 million).  

        Dividends:             The Public Preferred will be priced
                               at the time of execution of
                               definitive documentation (the "First
                               Pricing") to trade at par.  However,
                               two financial advisors, one selected
                               by the Company and one selected by
                               the participating unions, shall
                               mutually determine, not later than
                               five days prior to the shareholder
                               vote on the transaction, an
                               appropriate dividend rate so that the
                               Public Preferred will be priced,
                               subject to the proviso set forth
                               below, to trade at par on such date. 
                               In the event that the respective
                               financial advisors to each of the
                               Company and the participating unions
                               are unable so to agree on a dividend
                               rate, a mutually acceptable
                               nationally recognized investment
                               banking firm will be appointed to
                               participate in the determination of
                               the dividend rate referred to above. 
                               The dividend rate will equal the
                               average of the two of the three
                               dividend rates referred to above
                               (i.e. the rates selected by the three
                               financial advisors referred to above)
                               that are closest; provided, however,
                               that in no event shall such rate be
                               more than 150 basis points higher
                               than the dividend rate in effect at
                               the First Pricing.

        Optional Redemption:   The Public Preferred will not be
                               redeemable prior to the fifth
                               anniversary of the Issue Date. 
                               Thereafter, the Public Preferred will
                               be redeemable at any time at the
                               option of the Company, in whole or in
                               part, at par.

        Vote:                  Non-voting, except that in the event
                               the Company defaults on the
                               equivalent of six quarterly
                               dividends, the holders of Public
                               Preferred shall have the right to
                               elect two additional public directors
                               to the Company's board of directors,
                               such right to remain in effect until
                               dividends have been paid regularly
                               for at least one year.

        Ranking:               The Public Preferred shall rank
                               senior to the ESOP Preferred.


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                                                            12/20/93

                                                         EXHIBIT C-1

                           OVERALL ESOP STRUCTURE

        Overview

               Participating employee groups will be covered by an
        employee stock ownership program, consisting of at least two
        ESOPs (all plans under such program being herein
        collectively referred to as the "ESOP"), the key features of
        which are outlined below, subject to appropriate variations
        for each union group and for salaried and management
        employees.  As presently contemplated, there will be a joint
        ESOP covering all participating employees (including pilots)
        and a supplemental ESOP covering only pilots.  The joint
        ESOP and the pilot-only ESOP will hold one or more series of
        a convertible preferred stock (collectively, "ESOP Preferred
        Shares") of the recapitalized Company.  If and to the extent
        that the required stock deposits cannot be made to tax-
        qualified ESOPs because of tax limitations on deposit
        opportunities, non-qualified ESOPs will be established to
        accept the overflow.  It is contemplated that the ESOP
        program will generate more than $4 billion of tax deductions
        over the life of the program.

        Establishment of the ESOP and Purchase of the ESOP Shares

               One or more independent financial institutions will
        be retained to act as trustee(s) of the ESOP (collectively,
        the "ESOP Trustee").  The ESOP Trustee will in turn retain
        an independent financial advisor(s).  The ESOP Trustee and
        the financial advisor(s) must be satisfactory to the
        participating unions.

               If the ESOP Trustee determines that the ESOP
        transaction is fair from a financial point of view to the
        participants and otherwise consistent with applicable law,
        the ESOP Trustee will purchase, for the joint ESOP, ESOP
        Preferred Shares from the Company.  The ESOP Trustee will
        obtain funds to pay the purchase price with the proceeds of
        a loan (the "ESOP Purchase Loan") made by the Company to the
        ESOP.  The ESOP Purchase Loan will be in a multi-billion
        dollar amount, the exact figure to be negotiated by the
        independent ESOP Trustee.

               The funds advanced to the joint ESOP by the Company
        under the ESOP Purchase Loan will represent a significant
        portion of present value of the labor concessions effected
        by the Labor Agreements.  The amount and terms of the ESOP
        Purchase Loan will depend upon a number of factors,
        including the number of participants in the ESOPS, their
        annual wages and the amount, terms and conditions of the
        ESOP Preferred Shares.

               It is presently intended that stock targeted for the
        pilot-only ESOP will be contributed by the Company to the
        pilot-only ESOP over the wage investment period rather than
        by leveraged purchase at the inception of the transaction. 
        Until contributed, the stock will be held in a nonqualified
        trust, or other arrangements will be made, to protect the
        pilots' voting and dividend rights on the uncontributed
        shares.  (A leveraged pilot-only ESOP with a dividend-paying
        security would be used only if tax efficient.)

        ESOP Operation

               The employee groups will agree to make wage
        investments over the wage investment period as a condition
        to the ESOP's acquisition of its share of the Company's
        common equity.  The ESOP Preferred Shares initially acquired
        by the ESOP will be allocated to ESOP participants' accounts
        as the ESOP pays down the ESOP Purchase Loan (the ESOP's
        acquisition indebtedness) over that period.  Each Union
        group and the salaried and management employees will have
        separate previously agreed to allocation rates.  The joint
        ESOP will pay back the ESOP Purchase Loan with employer
        contributions made by the Company for this purpose and
        dividends received on the ESOP Preferred Shares held by the
        ESOP.

               The ESOP Preferred Shares allocated to participants'
        accounts will be converted into shares of Company Common
        Stock and be distributed from the ESOP to participants after
        their employment ends and when benefits are scheduled to
        start.

        ESOP Eligibility and Vesting

               Eligibility and vesting provisions will be agreed
        upon for each participating Union employee group and
        established for salaried and management employees.

        ESOP Allocation Among Employee Groups

               The ESOP Preferred Shares will be allocated to each
        employee group as follows:

                    ALPA                46.23% of ESOP shares
                    IAM                 37.13% of ESOP shares
                    Salaried/Management 16.64% of ESOP shares(1)

                            
        1/           The allocation will require that the Company
                    implement annual payroll cost reductions for
                    salaried and management employees as described
                    in Exhibit E-3.



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                                                            12/20/93

                                                         EXHIBIT C-2

                      JOINT (LEVERAGED) ESOP TERM SHEET

         Effective Date:       Effective Date of Transaction.

         Trustee:              A large commercial bank or trust
                               company acceptable to the
                               participating unions.
         Plan Administrator:   Committee consisting of
                               representatives, in proportion to
                               equity allocation, of the employee
                               groups.  Administrative issues
                               affecting only one group may be
                               resolved by only that group's
                               representatives.

         Plan Year:            Calendar year.
         Valuation Dates:      Last day of Plan Year and such other
                               dates as the Plan Administrator so
                               determines.

         Eligibility:          To be agreed upon for each
                               participating Union employee group
                               and established for salaried and
                               management employees.

         Entry Date:           Later of Effective date and first
                               day of month after completion of
                               eligibility requirement.
         Vesting:              100% immediate vesting.

         Allocation of         Shares will be allocated in level
         Shares:               allocations over the wage investment
                               period.

                               Shares, in any given year, will be
                               allocated first with respect to
                               dividends paid on previously
                               allocated shares, and then, subject
                               to "Limitations on Allocations"
                               (below), in accordance with
                               Considered Compensation.

         Considered            A Participant's total pay during the
         Compensation:         Plan Year, including bonuses,
                               overtime pay and sections 125 and
                               401(k) deferrals, but excluding
                               travel allowances and imputed
                               income, up to the limits of tax code
                               section 401(a)(17).(1)  

         Limitations on        Lesser of 25% of Considered
         Allocations:          Compensation (excluding sections 125
                               and 401(k) deferrals) and $30,000;
                               provided, that the highly
                               compensated employees, as a group,
                               may not be allocated more than 33-
                               1/3% of the employer contributions
                               during any Plan Year; and provided,
                               further, that the non-highly
                               compensated pilots' allocation rate
                               will be reduced to match that of the
                               highly compensated pilots.
                               For pilots, if defined contribution
                               limits of section 415 operate, the
                               Directed Account Plan will be
                               primary and the ESOP secondary.  If
                               the combined plan limits of
                               section 415 operate, the defined
                               benefit will generally be secondary.

         Accounts:             ESOP stock and ESOP cash accounts
                               will be established and maintained
                               by the Company.
         Employee              None.
         Contributions:

         Investment of         In ESOP Preferred Shares of the
         Contributions:        Company.

         Allocation of         Not applicable.
         Forfeitures:

                            
        1/    To the extent benefits would otherwise accrue based on
             pay in excess of the section 401(a)(17) or in excess of
             section 415 limits, such benefits will accrue under the
             related non-qualified plans.  Corresponding section
             415/401(a)(17) plans will be established/continued for
             the pilot-defined benefit arrangements. 



         Dividends:            To the extent in excess of common
                               dividends, used solely to repay ESOP
                               loan.  To the extent dividends on
                               allocated shares are so used,
                               additional suspense account shares
                               will be allocated to the
                               Participant's account based on the
                               then fair market value.

         Normal Retirement     As under current plans.  
         Age:
         Commencement of       At least as early as IRS minimum
         Distributions:        payout schedules for ESOPs; earlier
                               distribution as determined by the
                               unions.  Former participants may
                               otherwise elect to defer
                               distributions otherwise available,
                               subject to IRS limits on deferred
                               payouts.

         Form of               Benefits will be paid by converting
         Distribution:         the ESOP convertible preferred and
                               distributing the publicly-traded
                               common stock, either (i) in a lump
                               sum or (ii) in five equal annual
                               installments.  At the Participant's
                               request, the ESOP shall, after
                               conversion, sell the common stock in
                               the public market and distribute
                               cash. 
         Put Rights:           None, assuming the common stock is
                               still publicly-traded stock when
                               distributed.

         Right of First        None, assuming the common stock is
         Refusal:              still publicly-traded stock when
                               distributed.

         Diversification       Participants, who have attained age
         Rights:               55 and have completed 10 years of
                               participation, may elect to
                               diversify a percentage (generally
                               25%, though 50% in the last year of
                               the election period) of their
                               Company stock accounts; that is,
                               qualifying Participants will be
                               permitted to (i) invest prescribed
                               amounts in at least three other
                               investment options or (ii) receive
                               early distributions.
         Plan Amendment/       Solely pursuant to collective
         Termination:          bargaining.


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                                                            12/20/93

                                                         EXHIBIT C-3

                  At the Closing, the number of shares of Common
        Stock into which the ESOP Preferred will be convertible (the
        "Initial ESOP Shares") and the corresponding voting power
        shall equal 53% of the sum of (x) the number of fully
        diluted shares of Common Stock on such date (the "Closing
        Date Public Shares") plus (y) the Initial ESOP Shares (the
        sum of (x) and (y) being referred to as the "Initial Sum").

                  If, during the Measuring Period, the Average
        Closing Price exceeds $85.00, then an adjustment shall be
        made such that the number of shares of Common Stock into
        which the ESOP Preferred will be convertible (the "Adjusted
        ESOP Shares") and the corresponding voting power shall equal
        the Adjusted Percentage of the sum of (x) the number of
        fully diluted shares of Common Stock on the last day of the
        Measuring Period (excluding ESOP shares) plus (y) the
        Adjusted ESOP Shares.

                  For purposes of this Exhibit C-3, the following
        terms shall have the following meanings:

                  (a)  The term "Measuring Period" shall mean the
        365 day period commencing on the date of the closing of the
        Transaction.

                  (b)  The term "Average Closing Price" shall mean
        the average closing price of the Common Stock on the New
        York Stock Exchange for each trading day during the
        Measuring Period.

                  (c)  The term "Base Market Value" shall mean the
        Initial Sum multiplied by $85.

                  (d)  The term "Final Market Value" shall mean the
        Initial Sum multiplied by the Average Closing Price.

                  (e)  The term "Market Value Differential" shall
        mean the Final Market Value minus the Base Market Value.

                  (f)  The term "Employee Share" shall equal 93% of
        the Market Value Differential.

                  (g)  The term "Public Share" shall mean 7% of the
        Market Value Differential.

                  (h)  The term "Incremental Public Value" shall
        mean the Public Share divided by the Closing Date Public
        Shares.

                  (i)  The term "Hypothetical Stock Price" shall
        mean $85.00 plus the "Incremental Public Value."

                  (j)  The term "Incremental Coalition Value" shall
        mean the Incremental Public Value multiplied by the Initial
        ESOP Shares.

                  (k)  The term "Additional Coalition Shares-New
        Stock Value" shall mean the Employee Share minus the
        Incremental Coalition Value.

                  (l)  The term "Hypothetical New Shares" shall mean
        the Additional Coalition Shares-New Stock Value divided by
        the Hypothetical Stock Price.

                  (m)  The term "Hypothetical Outstanding Shares"
        shall mean the number equal to the sum of the Initial Sum
        plus the Hypothetical New Shares.

                  (n)  The term "Employee New Total Shares" shall
        mean the Hypothetical Outstanding Shares minus the Closing
        Date Public Shares.

                  (o)  The term "Adjusted Percentage" shall mean the
        lesser of (i) the Employee New Total Shares as a percentage
        of the Hypothetical Outstanding Shares or (ii) 63%;
        provided, however, that in no event shall the Adjusted
        Percentage be less than 53%.

                  It is not intended that Non-Dilutive Issuances (as
        defined in Exhibit H) will be effected during the Measuring
        Period.  Any Non-Dilutive Issuances will only be effected
        during the Measuring Period if at least one union director
        agrees that the adjustments reflected in this Exhibit C-3
        have been appropriately revised. 

---------------------------

To be read with Exhibit C-3 Illustrative Share Value Matrix Line 1 Pre-Adjustment Stock Price $75.00 $80.00 $85.00 $90.00 $94.00 $98.00 $102.00 $106.00 $110.00 $113.33 Line 2 Initial Sum (1) 61.49 61.49 61.49 61.49 61.49 61.49 61.49 61.49 61.49 61.49 Line 3 Final Market Value $4,611.7 $4,919.2 $5,226.6 (2) $5,534.0 $5,780.0 $6,026.0 $6,271.9 $6,517.9 $6,763.8 $6,968.8 Line 4 Market Value Differential ($614.9) ($307.4) $0.0 $307.4 $553.4 $799.4 $1,045.3 $1,291.3 $1,537.2 $1,742.2 Line 5 Employee Share 93.0% $0.0 $0.0 $0.0 $285.9 $514.7 $743.4 $972.1 $1,200.9 $1,429.6 $1,620.2 Line 6 Public Share 7.0% $0.0 $0.0 $0.0 $21.5 $38.7 $56.0 $73.2 $90.4 $107.6 $122.0 Line 7 Incremental Public Value (Line 6 divided by 28.9) $0.0 $0.0 $0.0 $0.74 $1.34 $1.94 $2.53 $3.13 $3.72 $4.22 Line 8 Hypothetical Stock Price (Line 7 + $85) $75.00 $80.00 $85.00 $85.74 $86.34 $86.94 $87.53 $88.13 $88.72 $89.22 Line 9 Incremental Coalitaion Value (Line 7 x 32.59) $0.0 $0.0 $0.0 $24.3 $43.7 $63.1 $82.5 $101.9 $121.3 $137.5 Line 10 Additional Coalition Shares - New Stock Value (Line 5 - Line 9) $0.0 $0.0 $0.0 $261.7 $471.0 $680.3 $889.6 $1,099.0 $1,308.3 $1,482.7 Line 11 Hypothetical New Shares (Line 10 divided by Line 8) 0.00 0.00 0.00 3.05 5.45 7.83 10.16 12.47 14.75 16.62 Line 12 Hypothetical Outstanding Shares (Line 2 + Line 11) 61.49 61.49 61.49 64.54 66.94 69.31 71.65 73.96 76.23 78.11 Line 13 Employee New Total Shares (Line 12 - 28.9) 0.00 0.00 0.00 35.64 38.04 40.41 42.75 45.06 47.33 49.21 Line 14 Adjusted Percentage (Line 13 as a % of Line 12) 53.00% 53.00% 53.00% 55.2% 56.8% 58.3% 59.7% 60.9% 62.1% 63.0% Line 15 CRAM Distribution $88.00 $88.00 $88.00 $88.00 $88.00 $88.00 $88.00 $88.00 $88.00 $88.00 Line 16 Total Value of UAL Shareholders $163.00 $168.00 $173.00 $173.74 $174.34 $174.94 $175.53 $176.13 $176.72 $177.22 (1) Assumed shares outstanding 28.9 million (2) Base Market Value
--------------------------- 12/20/93 EXHIBIT D ESOP CONVERTIBLE PREFERRED STOCK Summary of Terms Issuer: UAL Corporation (the "Company"). Securities Offered: ESOP Convertible Preferred Stock (the "ESOP Preferred Shares" or "ESOP Preferred"). Series A (and possibly other Series to provide each participating group with a separate Series) will be issued to the joint leveraged ESOP; Series B will be issued to the pilot-only unleveraged ESOP and any nonqualified arrangements. Except for dividends and voting arrangements (See "Vote"), Series A and B (and possibly other Series) shares are identical. Issue Date: The closing date of the Transaction. Maturity: Perpetual. Liquidation Value: Tied to the value of the ESOP Loan. Aggregate Amount A number of shares of ESOP Preferred Issuable: equal to 53% of the number of common shares (fully diluted). Dividends: A fixed rate, expected to be 5%, plus the dividend paid on common shares, for Series A; the fixed guaranteed dividend will stop after a stated period of years, expected to be the term of the joint ESOP loan. Series B gets the dividend paid on common shares. Conversion: Each share of ESOP Preferred is convertible at any time, at the option of the ESOP Trustee acting on instructions of a participant, at a conversion ratio to be determined in accordance with Exhibit C-3. Converts automatically to the publicly-traded common stock upon sale by the ESOP Trustee, other transfer to a third party or distribution from the ESOP to a participant or beneficiary. Redemption: Non-redeemable. Vote: Generally, as provided in the "Governance" term sheet; subject to paragraph 17 of "Governance", ESOP Preferred Shares shall always hold in the aggregate voting power of the Company determined in accordance with Exhibit C-3. (The ESOP Preferred's vote may be assigned to separate, possibly stapled, securities, one for each employee group, to comply with IRS rules governing ESOP loans, to assure delivery of the vote in the agreed proportions and, possibly, to restrict the ESOP Preferred's pass- through vote to active employees.) Subject to paragraph 17 of "Governance," the ESOP Preferred Shares will vote as a single class together with the holders of the Common Stock of the Company on all matters submitted to shareholders other than the election of the "Public Directors" and matters with respect to which the ESOP Preferred Shares would be entitled to a separate class vote as follows: (i) the right to elect and remove three directors to the board of directors (each of the three participating employee groups shall be entitled to elect and remove one director); and (ii) the affirmative vote of holders of a majority of each and every series of ESOP Preferred Shares shall be required for the issuance of any preferred stock having a preference as to dividends or in liquidation over the ESOP Preferred Shares or the adoption of any amendment to the Restated Certificate of Incorporation of the Company if such amendment materially affects any of the rights, preferences or privileges of the holders of ESOP Preferred Shares. Ranking: The ESOP Preferred Shares shall be junior to the Public Preferred in the payment of dividends and in distributions on liquidation. General Overall, the ESOP Preferred Shares Comment: are generally intended to behave like convertible preferred stocks commonly issued to leveraged ESOPs maintained by substantial public companies. --------------------------- 12/20/93 EXHIBIT E-1 TERMS OF THE ALPA INVESTMENT In connection with the transaction described in this letter, ALPA and United agree to amend the current ALPA-United collective bargaining agreement (the "Agreement") as follows: Pilot Wage Rate and B Plan Contribution Revisions 1. Pilot wage rates will be reduced from their current levels by 15.7%. Benefits under the Company's defined benefit retirement and disability plans will not be affected by these wage rate reductions and will continue to be based on existing book rates without regard to the wage rate reductions. 2. The pilot B-Plan contribution will be reduced from 9% of compensation as measured under the B-Plan to 1% of post- investment compensation as measured under the B-Plan. Other Work Rule Revisions The Agreement will also be amended to include certain systemwide pilot work rule revisions in connection with the pilot contribution to the Competitive Action Plan as described in Exhibit G to this letter. Job Security The job security provisions of the Agreement will be revised to incorporate the ALPA/United Job Security Terms dated December 12, 1993, which redraft and combine (1) the 1981 scope side letter signed, (2) section 1 of the Agreement, (3) Letter 91-14 concerning feeder flying, and (4) Letter 91-18 concerning successorship, change in control, and substantial asset transfers into a single job security section of the Agreement. The following is a summary of the central terms of the ALPA/United Job Security Terms (which is the legally controlling document between the parties): 1. The Agreement will state that all commercial flight operations conducted by the Company, UAL or any corporate affiliate they manage or control or hold any equity interest in will be performed by United pilots under the terms of the Agreement. The Agreement will permit: a. feeder flying conducted by carriers that operate small aircraft under Letter 91-18 as updated to the date of the present agreement provided that feeder carriers can operate jet aircraft under limited circumstances, and b. certain domestic code-sharing conducted under the Company's current agreements with Aloha Airlines, Inc. and USAir, Inc. and additional domestic code sharing up to one percent of the Company's total domestic block hours, and c. international code-sharing arrangements with foreign carriers as long as the Company can demonstrate that the arrangements do not cause a reduction in the Company's international flying and the Company does not expand international code sharing once it reduces international flying below a minimum level. 2. The Agreement will provide that the Company cannot transfer aircraft or international routes to other carriers that use the assets to provide feed to the Company pursuant to an agreement with the Company. 3. The Agreement will be revised to explicitly prohibit any successorship transaction unless the successor agrees to adopt the agreement, to employ United pilots pursuant to the agreement, to recognize the Association and, if the successor is an air carrier, to provide the Company's pilots with seniority integration rights. 4. The Agreement will continue to provide the change in control protections contained in the present Letter 91-18. 5. The Agreement will prohibit the furlough of pilots employed by the Company as of the date of the Agreement for 12 months, subject to the present exceptions contained in Letter 91-18, once the Company makes a net disposition of (a) 25% percent or more of its assets or (b) assets which produce 25% or more of the Company's block hours. 6. The Agreement will provide that, if the Company transfers aircraft or route authority which produce 25% or more of the Company's operating revenues or block hours to another air carrier, the Company must require the purchasing carrier to hire and integrate an appropriate number of United pilots into its pilot seniority list. 7. The Agreement will provide that, with certain exceptions, the Company cannot, without the Association's consent, (a) sell, lease, transfer or dispose of the Denver training center, or any successor training center (other than in a sale-lease back or similar financing transaction) or (b) contract with any person or entity other than United employees or former United pilots acting as consultants to United to conduct or supervise United pilot training (other than initial training of United flight instructors on new equipment). 8. The Agreement will prohibit the Company from establishing a pilot domicile (other than a TDY domicile to the extent permitted under the present agreement) outside the United States without the Association's consent. 9. The Agreement will provide that no pilot employed by United on the closing of the Transaction will be furloughed while the new Agreement remains in effect except as a result of explicitly defined circumstances beyond the Company's control. Other Issues 1. Effective December 1, 1994, the hourly twelfth year book rates for A-320 aircraft will be $175.30 (captains) and $119.35 (first officers), with corresponding rates for all other longevity years. Actual rates will be 15.7% below book rates. 2. Subject to the terms of Exhibit H, a process or means will be established that will permit ALPA and the new management to resolve issues creating disharmony between pilots and management on a basis that will not reduce the value of the pilot investment in the Transaction. 3. Subject to other legal obligations, the Company will make reasonable efforts to fill pilot vacancies with the individuals who satisfy United's hiring standards, who have previously worked for carriers represented by ALPA, and who are no longer working for those carriers for economic reasons such as lay-offs or the shut down of that carrier. Duration The amended Agreement described in this Exhibit will become effective on the closing date of the Transaction and will become amendable under the Railway Labor Act five years and nine months following the closing of the Transaction or such lesser period (not less than five years) as may be appropriate as a result of negotiations with the AFA. --------------------------- 12/21/93 EXHIBIT E-2 TERMS OF THE IAM INVESTMENT The IAM agrees to amend the collective bargaining agreements as necessary to incorporate the following: 1. Savings Period. Except as provided in paragraph 16 below, the collective bargaining agreement set forth herein shall take effect on the closing date of the transaction and become amendable six years following the closing of the transaction or such lesser period (not less than five years and three months) as may be appropriate as a result of negotiations with AFA. 2. Basic Wage Reductions. The wage adjustment scheduled for May 1, 1994 shall be cancelled. In addition, IAM represented employees of the Company under all IAM Agreements shall have their straight time hourly rates reduced by 9.7%. Such reductions shall be applicable to base rates of pay excluding license premium, line differentials, skill premiums, shift differentials and longevity allowances. 3. Progression and Longevity. All IAM represented employees shall remain eligible for progression and longevity step increases over the term of the savings period. 4. Hours of Service. The hours of service of all IAM represented full-time employees shall be amended to provide for eight consecutive hours exclusive of one-half hour unpaid meal period. 5. Job Security. No employee on the payroll or on leave of absence as of the date of ratification and no employee currently on furlough with right of recall as of the date of ratification who is subsequently recalled, shall be laid-off during the term of this agreement. This provision does not apply under the following circumstances: a) to an employee who fails to exercise his seniority in his classification on the system in filling a permanent vacancy or bumping an employee not protected by this paragraph in a job he is qualified to perform, or refuses to fill a permanent job in a higher classification that the employee is qualified to perform; b) to part-time or temporary employees; c) to employees who are being laid-off as a direct result of: (i) an act of nature; (ii) a strike or labor dispute; (iii) a reduction of the Company's operations because of a decrease in available fuel supply or other critical materials due to either governmental action or commercial supplier being unable to meet the Company's demands; (iv) a revocation of the Company's operating certificate(s) or the grounding of a substantial number of the Company's aircraft by government action; (v) a declared or undeclared war or national emergency; (vi) compulsion by a government agency, legislative or court action. d) to food service employees who lose their jobs as the result of the sale of the UAL Flight Kitchens to Dobbs or Caterair. 6. The contracts will provide that no IAM work shall be contracted out unless the Company can demonstrate that such contracting out will not result in the lay-off of any IAM represented employee unless the employee fails to exercise his seniority in his classification on the system in filling a permanent vacancy or bumping an employee not protected by paragraph 5 in a job he is qualified to perform, or refuses to fill a permanent job in a higher classification that the employee is qualified to perform. 7. The Ramp & Stores Agreement will provide that all Ramp Serviceman work currently performed at the stations referred to in Article II C shall be performed by Ramp Servicemen represented by the IAM and shall not be contracted out. 8. Article II C of the Ramp & Stores Agreement will be amended to provide that in addition to the stations currently referred to in that article, the Company will assign ramp servicemen to any U.S. location which has a sustained flight level of 40 or more daily departures for a minimum period of 6 months. If the number of daily departures at a location established as a ramp service station pursuant to this provision should drop below 30 for at least 6 months, and if such reduction is forecast to be reasonably permanent in nature, the Company will have a right to reverse the process and reclassify that location to a non-ramp serviceman location. However, if such action is necessary, there will be no lay-off to the street of a ramp serviceman at such locations who has not first been given an option on the system in his/her classification or a higher classification. At locations established as a Ramp Service station pursuant to this paragraph, the number of part-time Ramp Servicemen to be assigned by the Company will not exceed 25% of the total number of full-time Lead Ramp Servicemen and Ramp Servicemen in active service at that station. 9. Modify the Mechanics' Agreement to provide that the Company will not sell, lease or otherwise transfer or dispose of its maintenance facilities at its San Francisco Maintenance Operations Center, Oakland Maintenance Center or Indianapolis Maintenance Center. This includes the Company's engine maintenance facility located in San Francisco. The Company will be permitted to enter into sale / lease back arrangements for financing reasons. Modify the Food Services Agreement to provide that the Company will not sell, lease or otherwise transfer or dispose of the flight kitchen in Miami or the four (4) current employee cafeterias at Chicago O'Hare, the Denver Flight Training Center, the Executive Offices, and San Francisco. The Company will be permitted to enter into sale/lease back arrangements for financing reasons. Notwithstanding the above, the Company may (a) sell, lease or otherwise transfer the above facilities as part of a sale, lease or transfer, within a twelve month period, of all or substantially all the Company's assets, and (b) subject to Union approval, sell, lease or otherwise transfer portions of the above facilities to the extent such portions constitute unused excess capacity, provided that the Union shall not be permitted unreasonably to withhold approval if the "unused excess capacity" condition exists. "Unused excess capacity" does not refer to those facilities or portions of those facilities which are temporarily unused as a result of seasonal or temporary work schedule changes. 10. In the event that any of the facilities specified in paragraph 9 become unavailable due to loss of lease (or other circumstances beyond the Company's control), or become uninhabitable due to a natural disaster, the Company agrees to make every reasonable effort to replace such facility unless it is not financially reasonable to do so. 11. The Company may contract out up to 20% of all maintenance work annually as measured by the sum of the Maintenance Operations Division's gross annual budget plus those portions of stations' total gross annual budgets attributable to building maintenance and ground equipment maintenance, provided however this percentage may be exceeded in the event the Company has fully utilized its existing equipment or facilities. 12. Modify letter 87-7M of the Mechanics' Agreement to add Indianapolis Maintenance Center. 13. Modify the Mechanics' Agreement to provide that the Company shall not perform any regularly scheduled heavy maintenance in a non U.S. location without the Union's approval. 14. Any employee who is involuntarily transferred shall receive moving expenses as currently provided under Company policy for salaried employees. 15. New York Air language, change of control provisions, code sharing protections and successorship language as agreed upon with ALPA, with those modifications necessary to apply their terms to IAM represented employees. 16. Amend Article XXVII (Effective Date & Duration Clause) of the Mechanics' Agreement and similar provisions of the Ramp and Stores, Food Services', Dispatchers', and Security Officers' Agreements to provide that all portions of the agreements, except those portions pertaining to paragraphs 4, 6, 8, 11 & 25 shall become amendable at the end of the savings period specified in paragraph 1 above. Paragraphs 4, 6, 8, 11 & 25 shall become amendable in 12 years. 17. Revise Article XVII, Paragraph A of the Mechanics' Agreement and similar provisions of the Ramp and Stores, Food Services', Dispatchers', and Security Officers' Agreements to provide: A. Any employee who is to be questioned by Company Representatives in the investigation of an incident which may result in disciplinary action being taken against him, will be informed of his right to have a Union Representative present before such questioning begins. Such Union Representative will not interfere with the Company's questioning of an employee. 18. Amend Article XXI of the Mechanics' Agreement and similar provisions of the Ramp and Stores, Food Services', Dispatchers', and Security Officers' Agreements by the addition of a new paragraph to provide: The Union will be permitted to participate in New- Hire employee orientation or initial training sessions which include Union-represented employees. 19. All letters of agreement will be renewed and appropriate dates modified to conform to the new dates of the collective bargaining agreement. 20. The paycheck stub will reflect sick leave balances when the Company otherwise acquires the technology to do so. The Company will publish the details of each employee's pass travel charges on the paycheck stub within six months of the date of the signing of this Agreement. 21. A. All transfer requests to the Utility Employee classification not filled in accordance with other provisions of the Mechanics' Agreement shall be filled in order of Company Seniority by regular IAM-represented employees who have transfer requests on file and who have the ability to satisfactorily perform the work required for the job in question, ahead of other transfer requests and outside hires. B. At least sixty-seven percent (67%) of all permanent vacancies in the following classifications not filled in accordance with other provisions of the IAM Agreements shall be filled by regular IAM-represented employees who have the appropriate transfer documents on file and who have the ability to satisfactorily perform the work required for the job in question. Vacancies for which no qualified regular IAM- represented employee has a transfer document on file shall not be counted in this calculation. This requirement will be measured by classification on an annual basis. The classifications are: mechanic, seamer, mechanic's helper, ramp serviceman, storekeeper, and vehicle driver. 22. The Company will work with the Union to develop the orderly transition of LHRDD work to IAM-represented dispatchers. This will resolve all current grievances regarding Dispatcher scope issues. 23. In addition to the existing no strike clauses, through the day before the amendable date of the Agreements, neither the IAM nor IAM-represented employees will engage in or cause sympathy strikes or work stoppages, or recognition of picket lines, or an organized job action in support of picket lines established at the Company. This commitment shall become null and void on the day before the amendable date of the Agreements. Once this commitment becomes null and void, it is agreed that the Agreements will contain no contractual prohibition on the ability of the IAM represented employees to honor lawful picket lines at the Company. 24. In addition to the pension increases previously negotiated and effective on January 1, 1994 and November 1, 1994, the monthly pension benefit for Group I, Group II and Group III shall be increased 2.5%, effective on November 1, 1995, 2.5% effective on November 1, 1996, 2.75% effective on November 1, 1997 and 3% effective on November 1, 1998. Any eligible IAM- represented employee who retires on or after December 1, 1993 shall receive all increases in benefits referred to in this paragraph. Any eligible IAM-represented employee who retires during the term of the 1989-94 agreement but before December 1, 1993 shall only receive the future increases in benefits effective on January 1, 1994 and November 1, 1994. 25. Delete Article VII (D) of the Mechanics' Agreement and similar provisions of the Ramp and Stores, Food Services', Dispatchers', and Security Officers' Agreements, except that employees who work overtime on a regularly scheduled day off will have a normal lunch period. 26. UAL Catering Division Labor Protective Provisions Section 1. The fundamental scope and purpose of the conditions hereinafter specified are to provide for compensatory allowances to food service employees who lose their jobs as the result of the sale of Flight Kitchens to Dobbs or Caterair (the "Flight Kitchen sale"). Section 2. The term "employee" as used herein shall mean an employee of United Airlines covered by the IAM Food Services Agreement other than a probationary employee, temporary employee or part-time employee as of November 1, 1993. Section 3. (a) Any employee who is deprived of employment with United as a result of the Flight Kitchen sale, and who applies for but does not receive a job from Dobbs or Caterair, at his current United location, shall be accorded an allowance (hereinafter termed a "dismissal allowance"), based on length of service, which shall be a monthly allowance equivalent in each instance to 60 percent of an amount equal to 173.33 hours times the straight-time rate which would have applied to the employee in question as of November 12, 1993. This dismissal allowance will be made to each eligible employee while unemployed by United during a period beginning at the date the employee is first deprived of employment as a result of the sale (subject to the conditions in Section 5 hereof), and extending in each instance for a length of time determined and limited by the following schedule: Length of Company Seniority Period of Payment Months Years Months 6 Months & less than 1 year 1.5 1 and less than 2 4.5 2 and less than 3 9 3 and less than 5 13.5 5 and less than 10 27 10 and less than 15 36 15 and over 45 (b) Any employee who is deprived of employment with United as a result of the Flight Kitchen sale, and who receives a job offer from Dobbs or Caterair (whether accepted by the employee or not) shall be provided flight passes for two years, retention of recall rights to United, and a lump sum "separation allowance" (and not a dismissal allowance), calculated at the rate of pay as of November 12, 1993, as follows: Years of Service Amount of Months Pay 1 and less than 2 1.5 2 and less than 3 3 3 and less than 5 4.5 5 and over 6 (c) An employee shall not be regarded as deprived of employment in case of resignation, death, or retirement as an active employee in accordance with the agreement, or dismissal for justifiable cause in accordance with the agreement: except that, an employee who is eligible to retire and who elects to retire during the period of December 1, 1993 to February 1, 1994 shall be eligible for the separation allowance as set forth in 3(b) above in addition to his/her contractual severance allowance. (d) An employee covered by Letter 84-15F or Letter 87-10F who elects not to relocate from his/her current United location to maintain a position at United as a result of the Flight Kitchen sale shall be eligible for the separation allowance. (e) As a condition of receiving a dismissal allowance, employees shall keep the carrier informed of their address and the name and address of any other person or entity by whom they may be employed, and must annually provide to United a copy of their federal tax returns. (f) An employee receiving a dismissal allowance may be subject to call to return to service after being notified in accordance with the agreement, and such employee may be required to return to the service of United for other reasonably comparable full time IAM represented employment (whether or not a transfer request has been filed) for which the employee is physically and mentally qualified whether or not such employment requires a relocation, provided that United shall reimburse the employee for a "salaried employee paid move" as presently defined, and provided further that the employee's return to United does not infringe upon the employment rights of other employees under the agreement. Failure of the employee to return to service will result in the termination of the employee's dismissal allowance and benefits (but not the employee's contractual severance allowance), except that an employee who is receiving a dismissal allowance and is offered and declines a position with United that involves a relocation, will be eligible to receive a partial separation allowance equal to the amount, if any, by which b exceeds a, as defined below: a. Dollar amount of dismissal allowance received as of the date he receives the job offer from United plus up to twenty percent (20%) of that amount (to adjust for the value of benefits actually received). b. Dollar amount of the separation allowance the employee would have received if eligible, under Section 3(b). Receipt of a dismissal allowance or failure of the employee to return to service will not result in loss of other contractual rights including seniority rights except as may otherwise be provided for in the agreement. (g) If an employee who is receiving a dismissal allowance returns to service at United, the dismissal allowance shall cease while the employee is so re-employed and the period of time during which the employee is so re-employed shall be deducted from the total period for which the employee is entitled to receive a dismissal allowance. (h) If an employee who is receiving a dismissal allowance obtains other employment, the dismissal allowance shall be reduced to the extent that the sum total of earnings in such employment plus the allowance and any unemployment insurance benefit (or similar benefit) exceed the amount upon which the dismissal allowance is based. (i) The amount of the dismissal allowance will be reduced by amounts received due to contractual severance pay. (j) A dismissal allowance shall cease prior to the expiration of its prescribed period in the event of: 1. Failure without a good cause to return to service after being notified of a position for which the employee is eligible and as provided in paragraphs (f) and (g). 2. Resignation 3. Death 4. Retirement as an active employee in accordance with the agreement 5. Dismissal for justifiable cause. (k) Employees receiving a dismissal allowance will be required as a condition of receiving the allowance to participate in any United and/or government-provided programs (including but not limited to training) designed to assist them in obtaining re-employment, so long as such programs are scheduled at a time and place that does not interfere with employment, job search or other similar obligations. (l) Employees eligible for a dismissal allowance will be entitled to select the separation allowance referenced in subsection 3(b) above in lieu of receiving the dismissal allowance and continuation of benefits as provided in Section 4 below. Section 4. During the period an employee receives a dismissal allowance, the employee shall not be deprived of the following benefits attaching to the employee's previous employment: health care, life insurance and pass benefits, provided that United shall not be required to provide such benefits if they are provided to the employee by another employer. Section 5. The benefits provided under this agreement become effective and payable only when and if the IAM and ALPA ratify the ESOP transaction terms on or before January 31, 1994. The lump sum "separation allowance" will not be paid until a final and complete closing of the transaction. The benefits under this agreement will terminate if: a. Definitive documentation with respect to the transaction is not executed on or before the date referred to in Section 10 of the agreement in principle to which this Exhibit is attached, or b. A final and complete closing of the transaction has not occurred on or before the date referred to in Section 10 of the agreement in principle to which this Exhibit is attached. --------------------------- 12/20/93 EXHIBIT E-3 TERMS OF THE SALARIED AND MANAGEMENT EMPLOYEE INVESTMENT 1. The U.S. salaried and management employee* contribution over the five year and nine month investment period must equal $509 million NPV** through a combination of wage reductions, benefit changes, work practice changes and staffing level changes as long as such changes create equivalent hard dollar value and are reasonably acceptable to the participating unions. If the investment period is reduced by nine (9) months due to participation of the AFA, then the contribution must equal $453 million NPV. The participating unions will have the continuing right to audit the implementation of the salaried and management employee contribution under this paragraph. 2. These investments are only applicable to the Company's U.S. salaried and management employees. In discussions with the Company, we have explored the possibility of inviting the participation of certain foreign employees in the Transaction, although such participation would not increase the aggregate investment of the Company's employees under the Transaction. 3. Management will be responsible for determining the participation levels of specific U.S. salaried and management employees at various pay and job levels in the Company, subject to the requirement of achieving the overall hard dollar value specified in paragraph 1 above. 4. The U.S. salaried and management investment will become effective on the closing date of the Transaction and will continue for five years and nine months thereafter or such lesser period (not less than five years) as may be appropriate as a result of negotiations with the AFA. * The phrase U.S. salaried and management employees refers to all U.S. payroll employees of the Company (i.e., United Air Lines, Inc.) except those represented by a U.S. labor union. ** Assume semi-annual payments, first period not discounted, and annual discount rate of 10%. --------------------------- 12/20/93 EXHIBIT E-4 AFA PARTICIPATION As described in Exhibits E-1, E-2 and E-3, the ALPA, IAM and salaried and management investment period has been extended by nine (9) months beyond the period otherwise agreed upon. If, prior to the closing of the Transaction, the AFA agrees to provide, in the sole judgment of the Company, an investment equal to $416 million (present value in January 1994 dollars for a five year AFA mainline investment and a twelve year AFA U2 Investment)*, (i) the nine (9) month extension of the ALPA, IAM and salaried and management employee investment period shall be eliminated; (ii) ALPA, IAM and salaried and management employees shall make available 12.62 points of their ESOP stock to the AFA- represented employees, on the following basis: 5.83 points of the ALPA stock, 4.69 points of the IAM stock, and 2.10 points of the salaried and management employee stock; and (iii) the parties will discuss appropriate adjustments to other aspects of the Transaction (e.g., governance, ESOP rules) as necessary to accommodate the participation of the AFA. * Assume semi-annual payments, first period not discounted, and annual discount rate of 10%. --------------------------- 12/21/93 EXHIBIT F-1 ALPA WAGE ADJUSTMENT PROCESS Pilot compensation for the fourth and later years of the Agreement (the "Wage Adjustment Period") will be subject to adjustment as follows: 1. At the end of the second year of the Agreement, the parties will meet to establish increases, if any, in both the book rates of pay and the actual rates of pay for the Wage Adjustment Period. If the parties do not reach agreement by the end of the thirtieth month of the Agreement, the increases, if any, in such rates of pay will be determined by expedited arbitration before a neutral arbitrator (it being understood that the Company will retain the right to contend that no increases of any type should be granted). 2. The neutral arbitrator will be selected by mutual agreement of the parties or, in the absence of such agreement, by alternative striking from a panel of nine (9) labor arbitrators of national standing supplied by the National Mediation Board. The arbitration will be completed by the end of the thirty-third month of the Agreement. The neutral arbitrator will issue his decision by the end of the thirty-fourth month of the Agreement. 3. If pay rates are submitted to arbitration under this procedure, the neutral arbitrator will establish the increases, if any, in pilot pay rates for the Wage Adjustment Period as follows: a. The neutral arbitrator will first determine the across-the-board percentage increases, if any, in pilot book wage rates (i.e., the pilot wage rates that do not include the 15.7% wage rates reduction adopted by the Association in connection with the transaction) of the mainline United operation for the Wage Adjustment Period on the basis of (i) airline industry trends, (ii) United's financial performance (including cumulative profitability over the prior three years) and (iii) the book wage rate levels for pilots of Delta Airlines, Inc., American Airlines, Inc., USAir, Inc. and Northwest Airlines, Inc. (collectively referred to as the "Comparison Carriers"). Benefits under the Company's defined benefits retirement and disability plans will be based on these new book rates. b. The neutral arbitrator will apply the percentage increase in book rates determined under paragraph 3.a above, if any, to the actual pilot pay rates (i.e., the pilot wage rates net of the 15.7% wage rate reduction adopted by the Association in connection with the transaction) paid only to pilots at the Mainline operation. c. The interest arbitration process described above (i.e., the same arbitration) shall be applied to determine the increases, if any, to actual pilot pay rates applicable to pilots in the U2 operation, except that the U2 Comparison Carrier shall be (a) Southwest Airlines ("Southwest") or (b) the Short Haul Carrier that operates the largest number of B-737 or equivalent type aircraft at the time of the interest arbitration if that carrier is not Southwest. For the purpose of this provision, a "Short Haul Carrier" is any U.S.-flag carrier with an average domestic stage length (i.e., an average miles per departure) of 500 miles or less. d. The increases, if any, in book rates and actual rates awarded by the arbitrator will be effective at the end of the third year of the Agreement, and the arbitrator may (if deemed appropriate) award additional increases to take effect at the end of the fourth year of the Agreement. e. For purposes of this midterm wage adjustment process, the book wage rate of a Comparison Carrier refers to the greater of (i) actual pay rates at the Comparison Carrier or (ii) the pay rates in effect at the Comparison Carrier prior to any reduction from the pay rates in effect at the same Comparison Carrier as of January 1, 1994. 4. In no event will the arbitrator establish (i) any pay rate that is less favorable to the pilots than the pay rates in effect when wage rates for the Wage Adjustment Period are submitted to interest arbitration under this wage adjustment process or (ii) any pay rate in either the fourth or fifth year that is more than five (5) percent above the actual rate in effect in the previous year. 5. In addition, the neutral arbitrator will determine the increase, if any but not to exceed $.25 per hour, in hourly expenses under section 4.A of the Agreement on the basis of (i) airline industry trends, (ii) United's financial performance (including cumulative profitability over the prior three years) and (iii) the hourly expense rates for pilots of the Comparison Carriers. --------------------------- 12/21/93 EXHIBIT F-2 IAM WAGE ADJUSTMENT PROCESS The compensation of IAM-represented employees for the fourth and later years of the Agreement (the "Wage Adjustment Period") will be subject to adjustment as follows: 1. At the end of the second year of the Agreement, the parties will meet to establish increases, if any, in both the book rates of pay and the actual rates of pay for the Wage Adjustment Period. If the parties do not reach agreement by the end of the thirtieth month of the Agreement, the increases, if any, in such rates of pay will be determined by expedited arbitration before a neutral arbitrator (it being understood that the Company will retain the right to contend that no increases of any type should be granted). 2. The neutral arbitrator will be selected by mutual agreement of the parties or, in the absence of such agreement, by alternative striking from a panel of nine (9) labor arbitrators of national standing supplied by the National Mediation Board. The arbitration will be completed by the end of the thirty-third month of the Agreement. The neutral arbitrator will issue his decision by the end of the thirty-fourth month of the Agreement. 3. If IAM pay rates are submitted to arbitration under this procedure, the neutral arbitrator will establish the increases, if any, in pay rates for IAM-represented employees for the Wage Adjustment Period as follows: a. The neutral arbitrator will first determine the across-the-board percentage increases, if any, in IAM book wage rates (i.e., the wage rates of IAM- represented employees that do not include the wage rate reductions adopted by the IAM in connection with the transaction) of the mainline United operation for the Wage Adjustment Period on the basis of (i) airline industry trends, (ii) United's financial performance (including cumulative profitability over the prior three years) and (iii) the book wage rate levels for comparable employees of American Airlines, Inc., USAir, Inc. and Northwest Airlines, Inc. (collectively referred to as the "Comparison Carriers"). b. The neutral arbitrator will apply the percentage increase in book rates determined under paragraph 3.a above, if any, to the actual IAM pay rates (i.e., the wage rates of IAM-represented employees net of the wage rate reductions adopted by the IAM in connection with the transaction) paid to all IAM-represented employees. c. The increases, if any, in book rates and actual rates awarded by the arbitrator will be effective at the end of the third year of the Agreement, and the arbitrator may (if deemed appropriate) award additional increases to take effect at the end of the fourth year of the Agreement. d. For purposes of this midterm wage adjustment process, the book wage rate of a Comparison Carrier refers to the greater of (i) the actual pay rates maintained under the collective bargaining agreements at such carriers or (ii) the pay rates in effect at the Comparison Carrier prior to any reduction from the pay rates in effect at the same Comparison Carrier as of January 1, 1994. 4. In no event will the arbitrator establish (i) any pay rate that is less favorable to IAM-represented employees than the pay rates in effect when wage rates for the Wage Adjustment Period are submitted to interest arbitration under this wage adjustment process or (ii) any pay rate in either the fourth or the fifth year that is more than five (5) percent above the actual rate in effect in the previous year. --------------------------- 12/21/93 EXHIBIT F-3 SALARIED AND MANAGEMENT EMPLOYEE WAGE ADJUSTMENT PROCESS The Company's U.S. Salaried and Management employees may receive an appropriate wage rate increase beginning in the fourth year (and, if applicable, fifth year) following the closing of the Transaction, if any, through a program determined by management whose criteria are consistent with the standards stated in paragraph 3.a of the Wage Adjustment Process provided for Union-represented employees pursuant to Exhibits F-1 and F-2, taking into account the wage rate increases, if any, provided IAM-represented and ALPA-represented employees pursuant to Exhibits F-1 and F-2. The average per capita increase due to a wage rate increase, if any, for U.S. Salaried and Management Employees pursuant to this Exhibit F-3 may not exceed five percent in either the fourth or fifth year (i.e., the increase each year may not exceed five percent of the total U.S. salaried and management employee payroll in effect when the increase is granted). Management will be responsible for determining the participation levels in any such wage rate adjustment of specific U.S. salaried and management employees at various pay and job levels in the Company. --------------------------- 12/20/93 EXHIBIT G THE ALPA/IAM COMPETITIVE ACTION PLAN ALPA and the IAM at United Airlines are prepared to reach an agreement with the company on the terms of the Competitive Action Plan. This agreement would be subject to completing the transaction for substantial majority employee ownership of United and subject to union ratification procedures with regard to that transaction. In connection with a transaction providing substantial majority employee ownership of United, ALPA and the IAM would modify existing collective bargaining agreements with United to permit United, for the first time, to create a high frequency, lower cost operation which could successfully compete against other high frequency, lower cost carriers. The agreements would produce dramatically reduced labor costs for this type of operation, even compared to the labor costs already proposed by ALPA and the IAM for the mainline operation under this transaction. The inauguration of this new service would not be limited by employee attrition from mainline United. Rather, the ALPA/IAM proposal will make sufficient employees available to commence a fully ramped-up high frequency, lower cost operation, up to the maximum authorized operating level, promptly following the closing of the transaction. The agreements between ALPA/IAM and the Company would permit management to build a new lower cost operation that would have the following characteristics: 1. ALPA and IAM will amend existing agreements with United to permit the operation of a new short-haul operation characterized by high frequency, simplified cabin and ramp service, rapid turn-arounds and high rates of aircraft utilization. This operation is called "U2" in this document. The agreements will result in dramatically reduced labor costs in contrast to status quo United, and even in comparison to the post-transaction mainline United operation. The terms of each Union's contractual modifications for the U2 operation as well as the contributions of the Company's salaried and management employees are summarized on pages four through ten of this Exhibit. 2. The Company would be authorized to establish the new U2 operation as a distinct corporate division of United Airlines, which will remain a single carrier for FAA and RLA purposes. Employees in the U2 operation will be United Airlines employees represented by the Coalition Unions in the respective United Airlines crafts and classes. 3. Ramp-up of the new U2 operation would not be constrained by mainline attrition. United would be authorized to staff the operation by incumbent United employees and new hires in accordance with each union's attached summary of terms. United employees represented by ALPA and IAM as of the date of closing would not be subject to furlough while U2 is in operation. 4. For all years of the U2 operation, United would be authorized to operate annual block hour levels in the U2 operation as follows: (a) 20 percent of the consolidated systemwide block hours of United inclusive of U2 up to and including 2,000,000 block hours per year; and (b) 25 percent of the consolidated systemwide block hours of United inclusive of U2 in excess of 2,000,000 block hours per year. For years 6 through 12 following the closing of the Transaction, United would be authorized to add additional U2 operations ("Additional U2 Flying") -- i.e., operations in addition to the level of U2 described in the preceding sentence -- in any city pairs other than city pairs that were served by mainline United on a nonstop basis at any time during the twenty-four months prior to the introduction of U2 into that city pair. 5. United will be required to maintain 95 percent of the annual consolidated systemwide wide body block hours as identified in its October 1993 five year fleet plan. For the purposes of this agreement, wide body aircraft shall include B-757,B-767, DC-10, B-777, B-747, B-747-400 and any other aircraft operated by United not identified in its October 1993 fleet plan which have an average seating configuration larger than the B-757 aircraft. If the annual wide body block hours flown by United for a twelve month period falls below such thresholds, United will be required to reduce the annual block hours flown in the U2 operation over the subsequent 12 month period by such shortfall in wide body block hours. 6. United would be authorized to operate up to ninety percent (90%) of the U2 monthly block hours, exclusive of any Additional U2 Flying as defined in paragraph 4 above, in city pairs that were served by mainline United on a nonstop basis at any time during the twenty-four months prior to the introduction of U2 into that city pair. 7. U2 would be authorized to operate nonstop service in city pairs anywhere in the contiguous forty-eight states, with stage lengths up to and including 750 miles, other than service between current or future United hub or international gateway cities (currently these cities are Chicago, Denver, New York Area, Los Angeles Basin, San Francisco Bay, Miami, Washington, D.C. Area). Nonetheless, U2 would be permitted to operate between the San Francisco Bay airports and the Los Angeles Basin airports pursuant to the terms of this proposal. 8. U2 would be authorized to utilize aircraft having any gross weight and seating capacity up to the gross weight and seating capacity of the Company's B-737-300 series aircraft. Management would be free to determine whether such aircraft would constitute a separate fleet from the mainline fleet. SUMMARY OF ALPA U2 TERMS 1. The rates of pay, rules and working conditions for United pilots in the U2 operation that differ from those of the United pilots in the Mainline operation will be established in a separate Supplemental Agreement to the new ALPA-United collective bargaining agreement (the "U2 Supplement"). All pilots in the employ of the Company, including the U-2 operations, shall be on a single seniority list. 2. United pilots in the U2 operation will receive the same fringe benefits (e.g., life insurance, long-term disability, sick leave, medical/dental, workers compensation, A Plan and B Plan) as pilots in the Mainline operation and will receive stock allocation and profit sharing rights in connection with the transaction. 3. The Company will establish separate bid positions for the U2 operation. United pilots shall be afforded the following bid opportunities with respect to the U2 operation: a. All U2 Captain vacancies would be open for bid by all United pilots. b. All U2 First Officer vacancies would be open for bid by probationary pilots and by pilots who are incumbent B-727 Second Officers as of the date of the closing. 4. Training freezes for all United pilots would be established as follows: a. All United bids that require training of 12 days or more will result in a 24 month freeze from bid award. b. All United bids that require training of less than 12 days will result in a 12 month freeze from bid award. c. Pilots who voluntarily go to U2 will incur a freeze of 24 months. Freezes will be served cumulatively except any combined freeze will not exceed 36 months. d. Pilots who are involuntarily displaced shall not incur a freeze. e. These freezes shall not prevent a pilot from bidding and receiving passover pay. 5. Incumbent United pilots (i.e., pilots employed by United on the date of closing) may be displaced into U2 positions under existing contractual displacement rules. All such displaced pilots (a) will be "red circled" so that their monthly yield in the U2 operation is no less than the monthly yield they would have earned if not displaced from their Mainline position and (b) will not be subject to any restrictions on their ability to bid back into the Mainline vacancies. However, if such displaced pilots choose to bypass bidding opportunities into Mainline vacancies and to remain in the U2 operation, they will become subject to the pay rates and bidding restrictions applicable to U2 pilots. A displaced pilot will be identified as having bypassed bidding to the Mainline if such pilot chooses not to bid into an open position which would produce a monthly yield equal to or greater than the pilot's red circled yield in the domicile in at least the same status from which the pilot was originally displaced. 6. Pilots hired directly into the Mainline operation following the closing may also be displaced into the U2 operation under the current displacement rules. All such displaced pilots will be subject to the U2 Supplement in its entirety. 7. United pilots in the U2 operation will receive hourly pay rates for the B-737 aircraft equivalent to 78/84ths of the post-transaction United B-737 hourly pay rates. 8. The following terms will be incorporated into the U2 Supplement: a. Lineholders and reserves shall receive a guarantee of 78 hours per month. b. Lines of flying should be constructed to a maximum of 85 credit hours per month. c. Lineholders can pick up flying up to 90 credit hours per month, but cannot schedule himself below 12 days off per month. d. Lines of flying in the U2 operation shall be constructed with a minimum of 14 days free of duty per month. Additionally, the average number of days free of duty per month in line construction will be 16. e. U2 schedules shall contain a minimum of 5.5 hours of flight time credit average for each duty period. f. Reserve lines of flying in the U2 operation shall be constructed with a minimum of 14 days free of duty per month. g. Reserve pilots shall be able to pick up flying on one of his days off. Such flying shall contain a minimum of 5.5 hours of flight time credit average. h. Modified 8 in 24 rest requirements to eliminate 2 for 1 requirement, maintaining all other contractual rest provisions. 9. The vacation accrual schedule in the United collective bargaining agreement shall be adjusted to equal the Southwest vacation accrual schedule for U2 and Mainline pilots in their first ten years of longevity. 10. The initial U2 Supplement will be amendable on the amendable date of the new ALPA-United agreement (the "Basic Agreement"). Following the amendable date of the Basic Agreement and the U2 Supplement, the terms of the U2 Supplement governing U2 pay rates and U2 work rules that are unique to U2 and that differ from the pay rates and work rules applicable to the Mainline -- i.e., the pay rates and work rules described in paragraphs 4.c, 7 and 8 above plus the work rules in sections 4.A, 4.E (expense reimbursement), 5 (hours of service), 11 (vacation), and 20 (scheduling) of the Basic Agreement as and to the extent they apply to the pilots in the U2 operation (such terms being referred to in the aggregate as the "U2 Terms") -- will be determined as follows: a. Upon the amendable date of the Basic Agreement and the U2 Supplement (the "First Amendable Date"), the parties will meet and attempt to negotiate the first successor agreement governing the U2 Terms (the "First U2 Successor Agreement"). If the parties cannot reach agreement on the First U2 Successor Agreement within four (4) months following the First Amendable Date, the parties will submit the unresolved U2 Terms to interest arbitration under the following terms: (1) The arbitrator will establish the unresolved U2 Terms on the basis of the comparable pay rates and/or work rules in effect at the time of the interest arbitration (including future pay rate increases scheduled at the time of the interest arbitration) at (a) Southwest Airlines ("Southwest") or (b) the Short Haul Carrier that operates the largest number of B-737 or equivalent type aircraft at the time of the interest arbitration if that carrier is not Southwest. For the purpose of this provision, a "Short Haul Carrier" is any U.S.-flag carrier with an average domestic stage length (i.e., an average miles per departure) of 500 miles or less. (2) If U2 pay rates are submitted to interest arbitration under this provision, the arbitrator will determine 12th year captain and 12th year first officer rates pursuant to the standard established in paragraph 10.a(1) above and will apply the percentage increase, if any, in twelfth year rates to years one through eleven on the U2 longevity scale. (3) In no event shall the arbitrator establish any U2 Term that is less favorable to the pilots than the U2 Term in effect when U2 Terms are submitted to interest arbitration. (4) The interest arbitration proceeding for the First U2 Successor will commence no later than four (4) months following the First Amendable Date; the proceeding will be concluded no later than five (5) months following the First Amendable Date; and the arbitrator will render his or her decision no later than six (6) months following the First Amendable Date. (5) The First U2 Successor Agreement will become effective as of the First Amendable Date and will be amendable (a) 42 months following the First Amendable Date if the First Amendable Date is five (5) years following the closing of the Transaction or (b) 37.5 months following the First Amendable Date if the First Amendable Date is five (5) years and nine (9) months following the closing of the Transaction. b. Upon the amendable date of the First U2 Successor Agreement (the "Second Amendable Date"), the parties will meet and attempt to negotiate the second successor agreement governing the U2 Terms (the "Second U2 Successor Agreement"). If the parties cannot reach agreement on the Second U2 Successor Agreement within four (4) months following the First Amendable Date, the parties will submit the unresolved pay rates and/or work rules of U2 Terms for the term of the Second U2 Successor Agreement to interest arbitration under the interest arbitration terms applicable to the First U2 Successor Agreement except that the Second U2 Successor Agreement will become effective as of the First Amendable Date and will be amendable (a) 42 months following the First Amendable Date if the First Amendable Date is five (5) years following the closing of the Transaction or (b) 37.5 months following the Second Amendable Date if the First Amendable Date is five (5) years and nine (9) months following the closing of the Transaction. c. Neither party will take self-help of any kind over the U2 Terms subject to the negotiation/interest arbitration process established in this paragraph, provided that nothing in this paragraph shall prohibit U2 pilots from engaging in self-help over rates of pay, rules and working conditions other than U2 Terms. SUMMARY OF IAMAW U2 TERMS 1. The employees assigned to U2 will remain covered by the same collective bargaining agreements as cover current IAM- represented employees. Assignment of employees to either the mainline United operation or the U2 operation shall be made to maximize capital utilization and manpower utilization, but that assignment will be in accordance with the terms of the collective bargaining agreements. The IAM will modify those agreements as indicated below. 2. The hours of service of all IAM represented full-time employees shall be amended to provide for eight consecutive hours exclusive of one-half hour unpaid meal period. This provision shall not be amendable for 12 years. 3. Article II (C) of the Ramp and Stores Agreement will be amended to provide that in addition to the stations currently referred to in that article, the Company will assign ramp servicemen to any U.S. location which has a sustained flight level of 40 or more daily departure for a minimum period of 6 months. If the number of daily departures at a location established as a ramp service station pursuant to this provision should drop below 30 for at least 6 months, and if such reduction is forecast to be reasonably permanent in nature, the Company will have a right to reverse the process and reclassify that location to a non-ramp serviceman location. However, if such action is necessary, there will be no lay-off to the street of a ramp serviceman at such locations who has not first been given an option on the system in his/her classification or a higher classification. At locations established as a Ramp Service station pursuant to this paragraph, the number of part-time Ramp Servicemen to be assigned by the Company will not exceed 25% of the total number of full-time Lead Ramp Servicemen and Ramp Servicemen in active service at the station. This provision shall not be amendable for 12 years. 4. The company may contract out up to 20% of all maintenance work annually as measured by the sum of the Maintenance Operations Division's gross annual budget plus those portions of stations' total gross annual budgets attributable to building maintenance and ground equipment maintenance, provided however this percentage may be exceeded in the event the Company has fully utilized its existing equipment or facilities. This provision shall not be amendable for 12 years. 5. Delete Article VII (D) of the Mechanic's Agreement and similar provisions of the Ramp and Stores, Food Services', Dispatchers', and Security Officers' Agreements, except that employees who work overtime on a regular scheduled day off will have a normal lunch period. This provision shall not be amendable for 12 years. SUMMARY OF SALARIED AND MANAGEMENT EMPLOYEE U2 TERMS The Company's salaried and management employees will make a contribution to the Competitive Action Plan which is fair and equitable in relation to the contributions to the Competitive Action Plan made by employees represented by ALPA and the IAMAW. --------------------------- 12/22/93 EXHIBIT H GOVERNANCE TERMS 1. Board to be comprised of 12 directors (subject to the rights of preferred stockholders upon default): 5 Public Directors elected solely by the public stockholders (intended to include the CEO, one other member of management and three other individuals who are existing outside directors); 4 Independent Directors nominated as provided in paragraph 5 below and elected by a class of shares held solely by the Independent Directors (who will be bound by a Stockholders Agreement with the employee groups to elect the persons so nominated); 2 Union Directors (selected by each of the two participating unions); and 1 Salaried/Management Director (an additional director selected solely by the salaried and management employees). The initial Public Directors (excluding the CEO and the other member of management serving as a Public Director, "Outside Public Directors") will be selected by the existing Board of Directors of UAL and may be from among the existing outside directors (excluding employees and others who have provided professional services to the Company). If any Outside Public Directors are selected other than from the existing outside directors, such persons will be selected prior to execution of definitive documentation. At the expiration of the term of each Outside Public Director and to fill vacancies, Outside Public Directors would be nominated or appointed, as appropriate, by a "Public Director Nomination Committee" comprised of the Outside Public Directors. The amendment of the terms or authority of the Public Director Nomination Committee and the deletion of any governance provision that requires the inclusion of an Outside Public Director as a member of a Board Committee or that affects their power, authority or position on any committee shall, in addition to the approval required under paragraph 13, require the concurrence of a majority of the Outside Public Directors. 2. The IAM and ALPA shall identify the initial Independent Directors and CEO prior to the signing of definitive documentation and such identified persons shall have agreed to serve and, in the case of the Independent Directors, shall have agreed to enter into the Stockholders Agreement referred to above. 3. Each initial and replacement Independent Director shall be a person of appropriate stature and experience and may neither have a current or prior material affiliation or business relationship with the Company nor be an officer, director or trustee of any organized labor group. In addition, at least 2 of the 4 Independent Directors at the time of their initial nomination or appointment to the Board shall have satisfied either or both of the following criteria: (i) be a senior executive officer of a private or public company with revenues in excess of $1 billion or (ii) be a member of the board of directors of at least one other public company with a market capitalization in excess of $1 billion. 4. In the event of a vacancy in the ranks of the Independent Directors, they shall as a group continue to have 4 votes (divided equally among the remaining Independent Directors). 5. At the expiration of each Independent Director term and to fill vacancies, Independent Directors would be nominated or appointed, as appropriate, by an "Independent Director Nomination Committee" comprised of the Independent Directors and the three employee-elected directors (approval of such nomination or appointment requiring a majority of the Independent Directors plus at least one Union Director). 6. A quorum at a Board meeting will exist if (a) directors with at least a majority of the votes are present (7 votes), and (b) unless waived by the two Union Directors, if less than all votes are present, the number of votes constituting a majority of the votes present is no greater than the sum of (i) two plus (ii) the number of Independent Director votes present at the meeting. 7. Except in those limited circumstances described in paragraph 13 as "Extraordinary Matters", approval of all Board action shall require a majority vote of the total number of director votes present at a meeting (a quorum being present). The same principle would apply to Committee votes. Notwithstanding the foregoing, any purchases of shares of Common Stock by the Company or sales of shares of Common Stock by the Company to employee benefit trusts (other than pursuant to the first refusal rights provided for in paragraph 13(h) or in connection with the creation and operation of the ESOP as contemplated by Exhibit C-1), whether for cash or non-cash consideration, including, without limitation, concessions, must be approved by a majority of the Board, including a majority of the Outside Public Directors. 8. Directors may not be removed from office except (i) by the class of stockholders that selected them, without cause, or (ii) "for cause" as determined under Delaware law by stockholders entitled to vote thereon. The Shareholders Agreement will provide that any Independent Director who fails to execute and deliver a 10 year extension of the Shareholders Agreement within 30 days following the eighth anniversary of the closing date shall be removed. 9. The "Executive Committee" and the "Compensation Committee" shall be comprised of two Independent Directors, two Public Directors (the CEO and one Outside Public Director) and two Union Directors; a quorum would require the presence of (a) four directors and (b) at least one Independent Director. The Executive Committee would not have the authority to act with respect to any of the "Extraordinary Matters." The number of director votes that shall constitute a majority of each Board Committee, other than the Executive, Compensation, Independent Director Nomination, Public Director Nomination, Labor, CAP and Transaction Committees, shall not be greater than the sum of (a) the number of Independent Director votes on such Committee, plus (b) one. Except as otherwise provided herein, each Board Committee shall include at least one Union Director (on a rotating basis), one Independent Director and one other Board member. The "Labor Committee" (which shall include one Outside Public Director) shall have the sole authority to approve changes to the Company's collective bargaining agreements on behalf of the Company (and not on behalf of the Company's represented employees) and shall not contain any Union or Salaried/Management Directors. No Board Committee shall have authority to act with respect to any of the "Extraordinary Matters". 10. All decisions as to hiring or firing of senior management will be taken by the Board of Directors or pursuant to the revocable authority typically delegated by it to the Chief Executive Officer. Approval of the hiring of a new CEO (including a successor CEO) will require the approval of a majority of the Board following an affirmative recommendation by at least 4 of the members of the Executive Committee (which shall act as the search committee), excluding the departing CEO. If, at the first meeting of shareholders following the hiring of a new CEO (including a successor CEO) such CEO is not elected to the Board by the public stockholders, such CEO shall be removed from office and a successor CEO shall be selected in accordance with the preceding sentence. Any such successor CEO shall be appointed to fill the vacancy in the Board resulting from the removal of the predecessor CEO. No officer (other than an officer who is a director of the Company) may be terminated for a period of six months following the closing date of the Transaction unless such termination shall be approved, specifically as to such officer, by at least two Outside Public Directors and the CEO. 11. Shareholder approval shall not be a condition to any action except as required by Delaware law or pursuant to paragraph 13. 12. Allocated shares held by the ESOPs shall be voted on a confidential pass through basis. Unallocated shares will be voted in proportion to allocated shares. 13. In addition to the requirements of paragraphs 7 and 10, the following Extraordinary Matters shall require the approval of either (a) three-quarters of the entire Board, including at least one of the Union Directors or (b) 75% of the voting stock present and voting (except with respect to approval of a "business combination" referred to in clause (e) below, in which case the vote of at least 66-2/3% of the outstanding voting stock which is not owned by an "interested stockholder" shall be required under this clause (b), as provided by SECTION 203 of the Delaware G.C.L.): (a) Those matters upon which the approval of UAL's Stockholders is required under the Delaware General Corporation Law (such as amendments to the Certificate of Incorporation, mergers, consolidations, etc.); (b) Substantive amendment of the By-laws;(1) (c) Entry into any new line of business, or the making of any significant investments, outside the airline business; (d) The making of any airline acquisition, or any material investment in another airline; (e) Approval by the Board or stockholders of a "business combination" or approval by the Board a transaction in which a stockholder becomes an "interested stockholder" under SECTION 203 of Delaware G.C.L.; (f) Redemption of rights under the Shareholders Rights Plan; (g) Approval of the sale, lease or other disposition, in any 12-month period, of assets (including stock of subsidiaries or the assets thereof) for gross proceeds of more than $200 million (net of taxes and sale expense). Such approval would not be required for (i) secured aircraft financing; (ii) aircraft sale-leasebacks for financing purposes; (iii) foreclosure sales of assets subject to security interests or (iv) other sales of assets if replacement 1/ Bylaws to be agreed upon prior to the Closing, including definition of "substantive" amendment. assets have been or will be acquired within a reasonable period before or after such disposition; or (v) asset sales providing gross proceeds (net of taxes and sales expense) in an amount up to 10% of the carrying value (net of depreciation) of the Company's fixed assets if (A) three-quarters of the Board (including all four Independent Directors) determines that such asset sale is necessary to (i) cure a default under material financing agreements binding upon the Company, (ii) avoid an impending default thereunder, or (iii) remedy a material adverse development in the Company's business or condition and (B) the net proceeds of such asset sale are used to remedy the condition referred to in clause (A); provided, that the exception contained in clause (v) shall be available not more than once in any rolling five-year period; and (h) Approval of the issuance of equity or equity equivalent securities (including convertible debt, but excluding non-voting, non-convertible preferred stock the issuance of which shall be permitted without limit); provided, that if three-quarters of the entire Board (including all four of the Independent Directors) determines that it is in the best interests of the Company to issue common equity of the Company, then the Company may issue shares of common stock (and equivalents) of the same class as that held by the public stockholders (a "Non-Dilutive Issuance"), subject to the following conditions: (i) the shares issued in accordance with this paragraph shall not be included in calculating the percentage of the Company's outstanding common equity represented by the ESOP Preferred for purposes of the "sunset" provision of paragraph 17; and (ii) each of the three participating employee groups (and their retirement plans) would have a right of first refusal to acquire all or any such shares on the same terms; and provided, further, that if three-quarters of the entire Board (including all four Independent Directors) determines that the Company is bankrupt*/ (or, absent a material positive change in the Company's results of operations over the immediately succeeding 90 days from the results contained in the Company's regularly prepared projections, that the Company will become bankrupt within 90 days), which determination is confirmed by written opinions of two nationally recognized investment banking firms that further opine (giving effect to the facts and circumstances applicable to the Company, including discussions with prospective equity investors) that the sale of equity securities that would dilute the voting power of the ESOP Preferred is necessary to avoid or remedy such insolvency (the "Bankruptcy Opinions"), then the Board may authorize */ "Bankrupt" shall have the same meaning as "insolvent" under Section 101(32) under the Bankruptcy Code. the issuance of additional common equity (and equivalents) of the type held by the public (the "Permitted Bankruptcy Equity") if it further determines by vote of 75% of the Board (including all four Independent Directors) that, after giving effect to the proposed issuance, the Company would no longer be "insolvent" in the time frame referred to in the Bankruptcy Opinions (the "Board Determination"). However, the Company will only be permitted to issue Permitted Bankruptcy Equity in an amount reasonably necessary to obtain sufficient equity investor participation so as to allow the Board to make the Board Determination and only if a binding commitment for the sale of such Permitted Bankruptcy Equity is entered into within 90 days of the delivery of the Bankruptcy Opinions. Any Permitted Bankruptcy Equity issued in accordance with this provision (i) may be included in calculating the percentage of the Company's outstanding common equity represented by the ESOP Preferred for purposes of the "sunset" provision of paragraph 17 and (ii) shall be subject to the right of first refusal of each of the three participating employee groups (and their retirement plans) to acquire all or any such shares on the same terms. 14. Exercise of "Shareholders' Rights" triggered by 15% "interested stockholder"; Stockholder Rights Plan "carveout" for employee trusts from the definition of 15% interested stockholder. 15. The employee stock trusts will continue to hold the percentage of voting power determined in accordance with Exhibit C-3; provided that the rights, powers and privileges of a class or series of stock held in the employee trusts (including voting rights) may be reduced by the majority vote of such class or series, following appropriate Board approval. 16. In addition to the requirements of Section 13, (a) the merger or consolidation with, sale of substantial assets to, or material business transaction (other than the entering into of a collective bargaining agreement, which shall be subject to the authority of the Labor Committee) with, (i) any entity formed by or affiliated with one or more organized labor groups representing employees of the Company or (ii) any entity of which a substantial group of employees of the Company own a majority ownership interest, and (b) amendment of the charter or bylaws, shall also require the affirmative vote of either six directors (other than Union and Salaried/Management Directors) or a majority of shares not held by employee trusts. The Board shall establish a "Transaction Committee," composed solely of Outside Public and Independent Directors, to evaluate any transaction referred to in clause (a) above, and such Committee shall have the authority to retain independent counsel and a financial advisor at Company expense for purposes of evaluating such a transaction. 17. If the economic interests of the employee trusts and other Company sponsored retirement plans, in the aggregate, are reduced below 20% of the Company's outstanding common equity (including in the calculation the common equity represented by the ESOP Preferred Shares then outstanding and the Permitted Bankruptcy Equity but excluding from the calculation reductions resulting from the issuance of stock in connection with a Non-Dilutive Issuance), the corporate governance provisions shall all revert to a "plain" charter, and there shall be no special director or voting rights, except that (a) in addition to voting together with all other holders of common stock, two director seats will be reserved for and elected by the Union stockholders; and (b) the Union Directors would continue to serve on Committees as provided above. 18. Listing of the pro forma common stock on the New York Stock Exchange and opinions from Delaware counsel that governance provisions are valid under the Delaware General Corporation Law shall be closing conditions. 19. A "CAP Committee" comprised of four Public Directors (the three Outside Public Directors and the CEO), two Independent Directors and two Union Directors shall serve as a committee to oversee the implementation of the Competitive Action Plan. Such Committee shall have the sole authority to approve changes in the Competitive Action Plan on behalf of the Company (and not on behalf of the Company's represented employees) and consistent with the protection of the interests of the public shareholders. The two Union Directors on such Committee shall be entitled to vote with respect to changes to and implementation of the Competitive Action Plan but shall not be entitled to vote with respect to the Company's position on changes to collective bargaining agreement provisions that relate to the Competitive Action Plan. Such Committee shall also have authority to retain independent counsel and a financial advisor at Company expense for purposes of evaluating such changes. --------------------------- 12/21/93 EXHIBIT I (a) The Company (the "Indemnitor") shall indemnify the International Association of Machinists and Aerospace Workers and Air Line Pilots Association, International (collectively, the "Unions"), their controlling persons, and their respective directors, officers, partners, affiliates, agents, representatives, advisors and employees (an "Indemnified Person") against and hold each Indemnified Person harmless from any and all liabilities, losses, claims, damages, actions, proceedings, investigations or threats thereof (all of the foregoing, and including expenses (including reasonable attorneys' fees, disbursements and other charges) incurred in connection with the defense thereof, except as set forth below, being referred to as "Liabilities") based upon, relating to or arising out of the execution, delivery or performance of this letter or the transactions contemplated hereby; provided, however, that the Indemnitor shall not be liable in any such case to the extent that any such Liability arises out of any inaccurate information supplied by any such Indemnified Person specifically for inclusion in the proxy materials related to such transactions or any other filings made by the Company or any Indemnified Person with any federal or state governmental agency in connection therewith or if any such Liability is finally judicially determined, not subject to further appeal, to have resulted from bad faith, willful misconduct or negligence on such Indemnified Person's part. Notwithstanding anything to the contrary contained herein, "Liabilities" shall not include any losses, claims, damages or expenses (including attorneys' fees, disbursements and other charges) based upon, relating to or arising out of any action, claim, proceeding, investigation or threat thereof (i) brought by a Union against the other Union, (ii) brought by any employee of the Company or a subsidiary of the Company, as such, represented by a Union or any member of a Union (whether or not an employee of the Company or a subsidiary of the Company), in his or her capacity as such, if, and only if, the underlying action, claim, proceeding or threat is made against (1) his or her Union or (2) against the other Union, (iii) brought by any Union or any Indemnified Person against the Company or any controlling persons, directors, officers, partners, agents, representatives, advisors or employees of the Company (a "Company Related Person") or by the Company or any Company Related Person against any Union or Indemnified Person or (iv) which arise primarily as a result of acts by an Indemnified Person following the closing of the Transaction. (b) In connection with the Indemnitor's obligation to indemnify for expenses as set forth above in subsection (a) of this Section, the Indemnitor further agrees to reimburse each Indemnified Person for all such expenses (including reasonable attorneys' fees, disbursements and other charges) as they are incurred by such Indemnified Person, provided, however, that if an Indemnified Person is reimbursed hereunder for any such expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined, not subject to further appeal, that the Indemnified Person is not entitled to indemnification by reason of the proviso clause in the first sentence or the last sentence of subsection (a) of this Section. The Company shall not be required to reimburse any Indemnified Person for the reasonable attorney's fees, disbursements or other charges of more than one counsel (plus local counsel, if appropriate), or of more than one counsel (plus local counsel, if appropriate) for any one Union (together with Indemnified Persons who are controlling persons, directors, officers, partners, affiliates, agents, representatives, advisors and employees of such Union) who can be represented by common counsel so long as no conflict of interest or different or additional colorable defenses are reasonably believed by such Indemnified Persons to exist between or among them relative to the claims asserted. (c) Promptly after receipt by an Indemnified Person of notice of any claim or the commencement of any action, proceeding or investigation in respect of which indemnity or reimbursement may be sought as provided in this Section, such Indemnified Person will notify the Indemnitor in writing of the receipt or commencement thereof, but the failure to so notify shall not relieve the Indemnitor from any obligation or liability which it may have pursuant to this Section or otherwise except to the extent that the Indemnitor is materially prejudiced thereby. In case any such action, proceeding or investigation is brought or threatened against an Indemnified Person, the Indemnitor will be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel selected by the Indemnitor and approved by the Indemnified Person (such approval not to be unreasonably withheld). After notice from the Indemnitor to such Indemnified Person of its election to assume the defense thereof, the Indemnitor will not be liable to such Indemnified Person for any legal expense subsequently incurred for services rendered by any other counsel retained by such Indemnified Person in connection with the defense unless such Indemnified Person, in the opinion of its counsel, has colorable defenses which are different from or in addition to defenses available to the Indemnitor or the Indemnitor has an interest which conflicts with the interests of such Indemnified Person and which makes separate representation advisable, in which event all legal expenses of such Indemnified Person (subject to the last sentence of subsection (b) above) shall continue to be paid by the Indemnitor. The indemnification provided for in this Section shall include reimbursement for all expenses (including reasonable attorneys' fees, disbursements and other charges) incurred by Indemnified Persons to enforce their rights under this Section. The Indemnitor shall not settle any action, claim, proceeding or investigation which is the subject of this Section without the prior written approval of the Indemnified Person (such approval not to be unreasonably withheld), unless such settlement involves solely the payment of money and the Indemnitor is not contesting any right of an Indemnified Person to receive indemnification hereunder. References to Indemnified Persons shall in all cases include the controlling persons, directors, officers, affiliates, agents, representatives, advisors and employees of each Indemnified Person. (d) If the indemnification provided for in this Section is finally judicially determined, not subject to further appeal, to be unavailable to an Indemnified Person, then the Indemnitor shall, in lieu of indemnifying such Indemnified Person, contribute to the amount paid or payable in respect of any Liability by such Indemnified Person in such proportion as shall be fair and equitable after taking into account the relative benefits received by the parties, the relative fault of the parties and such other equitable considerations as any court of competent jurisdiction shall determine. For purposes of the preceding sentence, the benefits received by an Indemnified Person that is an advisor shall not be deemed to exceed the amount of fees payable to such Indemnified Person. The rights accorded to the Indemnified Persons under this Exhibit I shall be in addition to any rights that any Indemnified Person may have at common law, by separate agreement or otherwise. --------------------------- 12/14/93 EXHIBIT J-1 Conduct of the Company. From the date hereof until the closing of the Transaction, without the consent of the Unions, the Company and its Subsidiaries shall, except as specifically provided below, conduct their business in the ordinary course consistent with past practice and shall use their best efforts to preserve intact their business organizations and relationships with third parties and to keep available the services of their present officers and employees. Without limiting the generality of the foregoing, from the date hereof until the closing of the transaction, neither the Company nor any Subsidiary shall, without the prior written consent of the Unions, except as otherwise expressly provided in this agreement in principle: (a) issue, sell, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, disposition, pledge or other encumbrance of, any shares of capital stock or any other direct or indirect ownership or voting interest in the Company or any Subsidiary other than pursuant to the exercise of options outstanding as of the date hereof under the Company's 1981 Incentive Stock Program or the issuance of Rights in connection with the issuance of Shares upon exercise of such options, or, with respect to securities of Subsidiaries, to the Company; (b) reclassify, combine, split, subdivide, redeem, purchase or otherwise acquire, or propose to purchase or otherwise acquire, any capital stock or any other direct or indirect ownership or voting interest in the Company or any Subsidiary; except repurchases of Company securities, (x) pursuant to employee stock purchase, stock option, stock grant or other employee arrangements and (y) pursuant to rules or requirements under the Employee Retirement Income Security Act of 1974, as amended; (c) declare or pay any dividend or distribution on the Shares; (d) (i) increase the compensation of any of its directors, officers or key employees, except in the ordinary course of business and consistent with past practice or pursuant to the terms of agreements or plans currently in effect; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit that is either not required or specifically permissible by any existing plan, agreement or arrangement to any director, officer or key employee, other than in the ordinary course of business and consistent with past practice; (iii) commit itself to any additional pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or to any employment or consulting agreement with or for the benefit of any director, officer, or key employee whether past or present, except in the ordinary course of business consistent with past practice; or (iv) except as required by applicable law, amend in any material respect any such plan, agreement or arrangement; provided that the foregoing shall not be deemed to restrict necessary and reasonable actions taken in connection with (aa) retention of personnel other than executive officers or (bb) promotions and new hires in the ordinary course of business consistent with past practice; provided, further, that nothing herein shall preclude the Company or any of its subsidiaries from taking any action reasonably designed to permit any employee to realize vested benefits under any existing plan, agreement or arrangement referred to above. (e) except in the ordinary course of business and consistent with past practice and except for refinancings or pursuant to existing plans of the Company disclosed to the Unions in writing prior to the execution of this agreement in principle (i) incur any material amount of long-term indebtedness for borrowed money or issue any material amount of debt securities (other than trade debt and commercial paper) or assume, guarantee or endorse the obligations of any other person except for obligations of wholly owned Subsidiaries; (ii) make any material loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned Subsidiaries or customary loans or advances to employees in amounts not material to the maker of such loan or advance); or (iii) mortgage or pledge any of its material assets, tangible or intangible, or create or suffer to exist any lien thereupon, other than any purchase money mortgage or lien; or (f) enter into any agreement or arrangement to do any of the foregoing. --------------------------- 12/21/93 EXHIBIT J-2 1. Purchase and financing of two B747-400 aircraft 2. Any sale, lease, pledge, conditional sale, or other financing arrangements (including arrangements that may be deemed loans by United) associated with the sale, leaseback, or other transfer for value of aircraft or their related spare engines and parts not in the active fleet or scheduled for release from the active fleet 3. Advance purchases of Air Wisconsin convertible bonds for sinking fund or other purposes 4. Repurchase or hedging (via derivatives) of outstanding convertible preferred stock 5. Recognition of unrealized gains or losses on portfolio in the equity accounts required by FASB 115 6. Sale of remaining portion of Air Wisconsin 7. Payment of scheduled dividends on preferred stock 8. Payment of scheduled payments on Air Wisconsin convertible bonds 9. Issuance of asset-based intermediate debt securitizing existing mortgages (which may remain outstanding in a pass-through trust) 10. Issuance of unsecured medium-term notes, or asset- backed securities (secured by receivables), with maturities not in excess of seven years 11. Planned defeasance of up to $25 million of debt into German leveraged lease 12. Planned financing (with SNECMA - supported debt) of three B737s delivered earlier in 1993 13. Any "refinancing" of existing debt, which includes different terms and conditions or maturities, but also includes any increase in the amount of debt (not to exceed lessor's cost) into a leveraged lease (to the extent such increase results from optimization of tax benefits of the interim structures) 14. Any obligations related to interest rate swaps (including collateralization obligations) on existing debt or refinancings or debt permitted by the status quo provisions of the Agreement 15. Any obligations relating to foreign exchange hedging activities (of a type customary for companies of the same size and type as United) to hedge accounting and economic foreign exposures (which may include loans in one currency with offsetting deposits in another currency, swaps, options, and other derivatives) 16. Return of capital distributions to Galileo partnership pursuant to Section 6.2 of Galileo partnership agreement 17. Deletion of Sydney-Brisbane tag flight and Taipei- Bangkok, Paris-Geneva, Paris-Athens flights to be replaced by code shares, provided that all such code-sharing activity will be subject to the ALPA-United Job Security Terms dated December 12, 1993 18. Stay, toll or dismiss without prejudice the Lufthansa litigation and any grievances over code-sharing 19. Other arrangements similar to or for the same purposes or objectives as the arrangements described in items 1-5 and 7-16 above which are reasonable or appropriate in the judgment of management 20. Conversion of UAL convertible preferred stock and Air Wisconsin convertible debentures outstanding on the date hereof and the issuance of shares of Old Common Stock to each member of the Board of Directors pursuant to the 1992 Stock Plan for Outside Directors consistent with past practice. 21. Issuance of an aggregate of up to 20,000 shares of Old Common Stock and/or options to buy shares of Old Common Stock under the 1988 Restricted Stock Plan and the 1981 Incentive Stock Program, in each case in the ordinary course of business and consistent with past practice in connection with new hires and promotions (other than officers and directors).