UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
(EFFECTIVE AS OF JULY 12, 1994)
TABLE OF CONTENTS
PAGE
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1 Definitions. . . . . . . . . . . . . . . . . . .
SECTION 2 Plan Participation . . . . . . . . . . . . . . .
SECTION 3 Contributions. . . . . . . . . . . . . . . . . .
SECTION 4 Investment of Trust Fund . . . . . . . . . . . .
SECTION 5 Plan Accounting. . . . . . . . . . . . . . . . .
SECTION 6 Vesting. . . . . . . . . . . . . . . . . . . . .
SECTION 7 Distributions. . . . . . . . . . . . . . . . . .
SECTION 8 Voting and Certain Dispositions of Company Stock.
SECTION 9 Rights, Restrictions and Options on Company Stock.
SECTION 10 Dividends . . . . . . . . . . . . . . . . . . . .
SECTION 11 Administration. . . . . . . . . . . . . . . . . .
SECTION 12 Claims Procedure. . . . . . . . . . . . . . . . .
SECTION 13 Amendment and Termination . . . . . . . . . . . .
SECTION 14 Top-Heavy Provisions. . . . . . . . . . . . . . .
SECTION 15 Miscellaneous . . . . . . . . . . . . . . . . . .
UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
(EFFECTIVE AS OF JULY 12, 1994)
PREAMBLE
NATURE OF PLAN
The Plan has been established to enable Eligible
Employees of the Company and certain of its Affiliates to
acquire stock ownership interests in the Company. The Plan
is designed to invest exclusively in Company Stock (except
for de minimis investments of cash pending investment in
Company Stock or pending distribution to Participants) and,
to the extent it is an employee stock ownership plan,
primarily in "qualifying employer securities" (as defined in
Code section 4975(e)(8)).
Subject to Section 13, the Plan is intended to be
permanent and to benefit Eligible Employees of the Company
and its participating Affiliates on the Effective Date, as
well as the Eligible Employees entering employment
thereafter.
The Plan consists of an employee stock ownership plan
and a stock bonus plan. The employee stock ownership plan
("Part A" hereof) forms a part of the stock bonus plan,
includes a money purchase pension plan and is intended to be
qualified under Code sections 401(a) and 4975(e)(7). With
respect to the portion of this Plan that is an employee
stock ownership plan, as a single employee stock ownership
plan: (i) the Initial Acquisition Loan and the Additional
Acquisition Loans shall be a joint obligation of the
component plans, (ii) the Plan shall not maintain separate
Loan Suspense Accounts for the stock bonus and money
purchase pension components, (iii) dividends paid on Company
Stock in either such component plan shall be used to repay
the Initial Acquisition Loan and the Additional Acquisition
Loans to the extent provided in the Plan, and (iv) separate
Accounts shall not be maintained for Participants with
respect to such component plans. The Trust holding the
assets of the Trust Fund is intended to be exempt from
taxation under Code section 501(a).
The Plan consists of two portions, a "leveraged"
portion (Part A) that is intended to be an employee stock
ownership plan and an "unleveraged" portion (Part B). Part A
consists of both a stock bonus plan component and a money
purchase pension plan component and Part B consists solely
of a stock bonus plan component. Unless the context
otherwise requires or unless specifically provided, all
provisions of this Plan document shall apply to both Part A
and Part B.
TRANSACTION
The Plan is part of an overall program (which includes
the Supplemental Plan) resulting in the acquisition by
Eligible Employees of a majority ownership stake in the
Company as contemplated by the Agreement and Plan of
Recapitalization, among UAL Corporation and Air Line Pilots
Association, International and International Association of
Machinists and Aerospace Workers, as amended (the
"Recapitalization Agreement"). Specifically, on the
Effective Date, Eligible Employees will become entitled to
receive 55% of the equity and voting power of the Company
through the Trust and the Supplemental Trust. The overall
program will be accomplished by the allocation to individual
Participant accounts over the Wage Investment Period of
shares of Class 1 Non-Voting Preferred Stock, Class 2
Non-Voting Preferred Stock and Voting Preferred Stock under
the Trust and Supplemental Trust (or equivalent fictional
book-entry shares under the Supplemental Plan), which shares
shall, in the aggregate, be convertible into shares of
Common Stock in an amount that represents 55% of the
Company's equity and voting power measured as of the
Effective Date. In addition, as described under the
paragraph entitled "Additional Shares" below, depending on
the market price per share of the Common Stock during the
one-year period commencing on the Effective Date, up to an
additional 8% of the Company's equity and voting power may
be allocated to Participants' accounts under the Plan and
the Supplemental Plan, bringing the total up to 63% of the
equity and voting power of the Company.
Of the overall Employee stake, 46.23% of the underlying
shares, including the Additional Shares, if any, will be
reserved for allocation to the ALPA Employee Group, 37.13%
of the underlying shares will be reserved for allocation to
the IAM Employee Group and 16.64% of the underlying shares
will be reserved for allocation to the Management and
Salaried Employee Group.
If there were no Code limitations on compensation and
allocations, all shares to be acquired under the overall
program would be delivered solely under Part A and such
shares would be allocated to Participants of the respective
Employee Groups over the Wage Investment Period in
accordance with the percentages set forth in the preceding
paragraph. Because such Code limitations will, in fact,
operate to limit the annual benefits available under Part A,
only a portion (expected to be approximately 78.15% of the
underlying shares of Preferred Stock) will be acquired by
the Trust from time to time on and after the Effective Date
and allocated to Participants under Part A. To maximize
certain employee stock ownership plan-related tax benefits,
the Employee Groups may receive less than their overall
equity ownership interest under Part A, with the balance to
be received under Part B and the Supplemental Plan. Most of
the shares allocable under Part B and the Supplemental Plan
will be allocable to the ALPA Employee Group. (The preceding
does not refer to Voting Preferred Stock; it will be
contributed and allocated for all Employee Groups as
described below under the paragraph entitled "Part B: Voting
Preferred Stock.")
Shares not acquired under Part A will be allocated to
appropriate Participant Accounts under Part B, subject to
Code limitations, including Code sections 401(a)(4),
401(a)(17) and 415. To the extent that shares cannot be
allocated under Part B by reason of those Code limitations,
such shares will be allocated to accounts of appropriate
Participants in accordance with the provisions of the
Supplemental Plan.
The combined effect of the allocations under the
overall program (Part A, Part B and the Supplemental Plan)
will be to put each Participant, to the extent possible, in
the position such Participant would have been had all
shares, including the Additional Shares, if any, been
delivered to and allocated under Part A.
PART A
With respect to Part A, it is intended that, on the
Effective Date and from time to time thereafter, the Trustee
will enter into the Initial Acquisition Loan and Additional
Acquisition Loans on behalf of the Trust and use the
proceeds thereof to purchase shares of Preferred Stock,
representing approximately 42.9825% of the equity of the
Company (subject to increase due to any Additional Shares
issued). The Preferred Stock purchased will be Class 1
Non-Voting Preferred Stock. The shares of Class 1 Non-Voting
Preferred Stock will be allocated ratably, over the Wage
Investment Period, to the Employee Groups in accordance with
the following percentages:
ALPA Employee Group - 31.759437%
IAM Employee Group - 47.511196%
Management and Salaried Employee Group - 20.729367%
PART B: CLASS 2 NON-VOTING PREFERRED STOCK
With respect to Part B, it is intended that the Company
will contribute (or will cause the trustee of the
Supplemental Trust to transfer), during the Wage Investment
Period, shares of Class 2 Non-Voting Preferred Stock
(including Additional Shares, if any) to the Plan. Subject
to certain Code limitations, such shares will be allocated
to Participants who receive less than their full entitlement
under the overall program under Part A. In general, the
formula for determining the amount of allocations under Part
B to make up for the shortfall of Company Stock delivered
under Part A is set forth in Section 5.4(c).
PART B: VOTING PREFERRED STOCK
With respect to Part B, it is also intended that the
Company will contribute, during the Wage Investment Period,
shares of Voting Preferred Stock to the Plan. The Voting
Preferred Stock contributed will be comprised of three
classes. A separate class of Voting Preferred Stock,
representing 25.4265% of the voting power of the Company,
will be reserved for allocation to Participants who are
members of the ALPA Employee Group ("Class P"); a separate
class of Voting Preferred Stock, representing 20.4215% of
the voting power of the Company, will be reserved for
allocation to Participants who are members of the IAM
Employee Group ("Class M"); and a separate class of Voting
Preferred Stock, representing 9.152% of the voting power of
the Company, will be reserved for allocation to Participants
who are members of the Management and Salaried Employee
Group ("Class S"). (The shares reserved above include shares
reserved for allocation to the respective Employee Groups
under the Supplemental Plan and Supplemental Trust.) Such
percentages shall be appropriately adjusted in the event the
initial Employee ownership percentage is increased (up to
63% in the aggregate) as provided below. It is intended that
the number of shares of Voting Preferred Stock to be
allocated to each Participant's Account on each Valuation
Date will equal the number of shares of Preferred Stock
allocated to that Participant under Part A and Part B on
such Valuation Date (taking into account the special
Effective Date contribution and allocation described below).
The terms of each class of Voting Preferred Stock provide
that the shares outstanding at any particular time (in
combination with any shares of Common Stock held by the
Trustee or trustee under the Supplemental Trust allocable or
allocated to the relevant Employee Group) will command the
aggregate voting power reserved for such Employee Group.
Thus, for example, if there are 100 shares of Class P
outstanding, each such share will command 1% of the voting
power reserved for the ALPA Employee Group (25.4265%,
assuming 55% ownership by Employees). As additional shares
of Class P are issued, the per share voting power will
decrease proportionately.
As a special Employer Contribution, one share of each
of Class P, Class M and Class S will be contributed by the
Company to Part B on the Effective Date. These three shares
will be allocated, per capita, to the Accounts of the
appropriate Participants under Part B on the Effective Date.
SUPPLEMENTAL PLAN AND SUPPLEMENTAL TRUST
To the extent that, in any Plan Year during the Wage
Investment Period, shares of Company Stock cannot be
allocated to a Participant's Account by reason of any Code
limitations, including Code section 401(a)(17), Code section
415 and Code section 401(a)(4), appropriate credits will be
made to the accounts of the affected Participants under the
Supplemental Plan (attached hereto as Exhibit A) in
accordance with the terms thereof and shares of Voting
Preferred Stock (and in certain circumstances, Class 2
Non-Voting Preferred Stock) used to satisfy the relevant
credits will be held in the Supplemental Trust (attached
hereto as Exhibit B) in accordance with the terms thereof
for the benefit of the affected Participants.
PART B: FLOWBACK
During and after the Wage Investment Period, to the
extent that the allocation of shares of Company Stock under
the Plan for any Participant was limited in a prior Plan
Year by reason of the limitations of Code section
401(a)(17), Code section 415 or Code section 401(a)(4) (with
the result that the Participant received corresponding
credits under the Supplemental Plan), it is intended that
the Company will contribute (or the Company will cause the
trustee of the Supplemental Trust to transfer) to such
Participant's Account shares of Class 2 Non-Voting Preferred
Stock and shares of Voting Preferred Stock, as the case may
be, in a subsequent Plan Year, and that such shares will be
allocated under this Plan to the Accounts of the affected
Participants in accordance with the terms hereof, subject to
any applicable Code limitations as applied to the subsequent
Plan Year (and corresponding debits will be made under the
Supplemental Plan).
ADDITIONAL SHARES:
Depending on the fair market value per share of the
Common Stock during the one-year period commencing on the
Effective Date, a number of additional shares determined in
accordance with Section 1.6 and Section 1.10 of the
Recapitalization Agreement will be allocated to
Participants' Accounts under the Plan and participants'
accounts under the Supplemental Plan over the remainder of
the Wage Investment Period. Such number of shares of Company
Stock will be allocated to the Employee Groups in accordance
with the percentages specified in the paragraph above
entitled "Transaction."
In general, 78.15% of the Additional Shares which are
Preferred Stock will be Class 1 Non-Voting Preferred Stock;
provided, however, that the portion of the Additional Shares
attributable to Preferred Stock allocated as of December 31,
1994 will be Class 2 Non-Voting Preferred Stock contributed
to Part B or allocated as credits under the Supplemental
Plan as of December 31, 1994. Except as described in the
foregoing proviso, it is intended that such Additional
Shares of Class 1 Non-Voting Preferred Stock will increase,
on a pro rata basis, the number of such shares acquired
pursuant to each Additional Acquisition Loan. Unless the
parties agree otherwise, these Class 1 shares will be
allocated over the remainder of the Wage Investment Period
in accordance with the percentages set forth under Part A
above.
Any Additional Shares not sold to the Trustee pursuant
to Part A will be contributed by the Company to Part B or
credited to the Supplemental Plan during the remainder of
the Wage Investment Period. Subject to certain Code
limitations, such shares will be allocated to Participants
who receive less than their full entitlement, giving effect
to the allocation of the Additional Shares, of shares of
Class 1 Non-Voting Preferred Stock under Part A. To the
extent possible, the formula in Section 5.4(c) will be
applied by assuming all Additional Shares (other than the
shares of Voting Preferred Stock) had been sold to the Trust
under Part A on the Effective Date and allocated ratably
over the following 69 months.
SECTION 1
DEFINITIONS
In this Plan (including the preamble), whenever the
context so indicates, the singular or plural number and the
masculine or feminine gender shall be deemed to include the
other, the terms "he," "his," and "him" shall refer to a
Participant or Beneficiary, as the case may be, and, except
as otherwise provided, or unless the context otherwise
requires, the capitalized terms shall have the following
meanings:
(a) "Account" or "Accounts" mean a Participant's
or Beneficiary's ESOP Stock Account and/or his ESOP
Cash Account, as the context so requires.
(b) "Acquisition Loan" means a loan (or other
extension of credit, including an installment
obligation to a party in interest (as defined in ERISA
section 3(14))) incurred by the Trustee in connection
with the purchase of Company Stock.
(c) "Additional Acquisition Loans" means the
Acquisition Loans entered into from time to time after
the Effective Date between the Trustee and the Company
as contemplated by Section 1.6 of the Recapitalization
Agreement.
(d) "Additional Shares" means the number of
additional shares, if any, of Company Stock to be
issued by the Company in accordance with Section 1.10
of the Recapitalization Agreement. Any reference herein
to additional shares shall only be applicable when, if
and to the extent that additional shares are determined
to be issuable in accordance with Section 1.10 of the
Recapitalization Agreement.
(e) "Affiliate" means any corporation, trade or
business, which, at the time of reference, is together
with the Company, a member of a controlled group of
corporations, a group of trades or businesses (whether
or not incorporated) under common control or an
affiliated service group, as described in Code sections
414(b), 414(c) and 414(m), respectively, or any other
organization treated as a single employer under Code
section 414(o); provided, however, that, where the
context so requires, the term "Affiliate" shall be
construed to give full effect to the provisions of Code
sections 409(l)(4) and 415(h).
(f) "ALPA" means the Air Line Pilots Association,
International.
(g) "ALPA Employee Group" means Eligible Employees
in classifications represented by ALPA under the
Railway Labor Act who are either listed on the Pilots'
System Seniority List or Second Officer Eligibility
Seniority List.
(h) "Beneficiary" means the person or persons to
whom a deceased Participant's benefits are payable
under the Plan all as provided in Section 7.9.
(i) "Board of Directors" means the board of
directors of the Company.
(j) "Class 1 Non-Voting Preferred Stock" means the
shares of Class 1 ESOP Convertible Preferred Stock
issued by the Company and allocated under Part A.
(k) "Class 2 Non-Voting Preferred Stock" means the
shares of Class 2 ESOP Convertible Preferred Stock
issued by the Company and allocated under Part B. Any
reference to such shares credited under the
Supplemental Plan shall be deemed to be a reference to
fictional book-entry shares of Class 2 Non-Voting
Preferred Stock credited under the Supplemental Plan.
(l) "Code" means the provisions of the Internal
Revenue Code of 1986, as amended, and all successor
laws thereto. Where the Plan refers to a particular
section of the Code, such reference shall also apply to
any successor to that section.
(m) "Common Stock" means common stock issued by
the Company that meets the requirements of Code section
409(l), which on the Effective Date includes the common
stock that may be received upon the conversion of the
Preferred Stock and Voting Preferred Stock.
(n) "Company" means UAL Corporation and any
successor corporation or entity to the Company by
merger, consolidation or otherwise.
(o) "Company Stock" means Voting Preferred Stock,
Common Stock and/or Preferred Stock, as the context so
requires.
(p) "Compensation" means (i) the total cash
compensation paid to the Participant, for services
while a Participant and an Eligible Employee, during
the Plan Year for services rendered to his Employer,
including bonuses and overtime pay, plus (ii) elective
deferrals under a plan meeting the requirements of Code
section 401(k) or Code section 125 for such Plan Year,
but excluding reimbursement of moving expenses,
relocation allowances, housing allowances,
reimbursement of membership costs and dues, other
expense reimbursement payments and allowances,
severance pay or other special payments relating to
termination of employment by retirement or otherwise
and cash payments in respect of stock appreciation
rights. With respect to the Management and Salaried
Employee Group only, Compensation shall not include pay
received for vacation time that was accrued but not
actually taken as vacation before termination of
employment by retirement or otherwise. A Participant's
Compensation shall not exceed $150,000 (as adjusted
pursuant to Code section 401(a)(17)); provided,
however, that with respect to Part A, Compensation of a
Participant who is a member of the ALPA Employee Group
shall be limited to an amount equal to four times the
dollar limitation under Code section 415(c)(1)(A) (as
adjusted pursuant to Code section 415). Compensation
for services performed prior to July 13, 1994 or after
the end of the Wage Investment Period shall not be
taken into account under the Plan, except for purposes
of applying any Code limitations.
(q) "Control Transaction" means (a) any tender
offer or exchange offer for Company Stock or any other
opportunity or series of opportunities for the Plan to
dispose of (or convert in connection with a sale,
exchange or disposition) at least 3% of its Company
Stock (other than conversions or dispositions to
effectuate distributions or diversification elections
under the Plan), and (b) any transaction or series of
related transactions pursuant to which any person or
group (as defined in Rule 13d-3 under the Exchange Act)
acquires or seeks to acquire, directly or indirectly,
"control" (as defined in the Exchange Act) of the
Company or of all or a substantial portion of the
tangible or intangible assets of the Company and its
subsidiaries, whether by merger, consolidation, share
exchange, tender offer, exchange offer, sale, lease,
exchange, conversion, voting trust, proxy or otherwise.
For purposes of Plan provisions relating to a "Control
Transaction," "person" means an individual,
corporation, association, partnership, joint venture,
limited liability company, trust, estate,
unincorporated organization, governmental authority,
judicial entity or other entity.
(r) "Effective Date" means July 12, 1994.
(s) "Eligible Employee" means any Employee of an
Employer (other than any employee who is not a member
of an Employee Group and any "leased employee" (as
defined in Code section 414(n))), subject to the
following:
(i) if an Employee is included in a unit of
Employees covered by a collective bargaining
agreement, he shall not be an Eligible Employee
unless the applicable collective bargaining
agreement expressly provides that he shall be
eligible to participate in this Plan. On the
Effective Date, members of the ALPA Employee
Group, the IAM Employee Group, and, if the
Transport Workers Union collective bargaining
agreement so provides, the meteorologist Employees
who are members of a group represented by the
Transport Workers Union (these meteorologists are
members of the Management and Salaried Employee
Group) are Eligible Employees;
(ii) an Employee shall not be an Eligible
Employee if he is a non-resident alien with no
earned income from U.S. sources;
(iii) an Employee shall not be an Eligible
Employee as of the date his Compensation no longer
reflects all of the wage concessions contemplated
as part of the recapitalization of UAL effective
July 12, 1994; and
(iv) with respect to an Employee who is a
member of the Management and Salaried Employee
Group, the Employer may provide in a resolution of
its board of directors, additional limitations for
participation with the consent of the Board of
Directors; provided, however, that any such
limitation shall not have the effect of reducing
the amount of Company Stock intended to be
allocated to the Management and Salaried Employee
Group under Part A or affect the method or pace of
allocations of Company Stock in a manner that
would adversely affect the Plan's projected
ability to meet the requirements of Code section
415(c)(6).
(t) "Employee" means any person, including an
officer or director, who is actually performing
services for the Company or any of its Affiliates in a
common-law, employer-employee relationship and treated
as an employee on the payroll records and any "leased
employee" (within the meaning of Code section 414(n)).
(u) "Employee Group" means each of the ALPA
Employee Group, the IAM Employee Group and the
Management and Salaried Employee Group.
(v) "Employer" means the Company or any of its
Affiliates (or a division or business unit thereof)
that has adopted the Plan with the consent of the Board
of Directors.
(w) "Employer Contribution" means the amount
contributed, whether in cash or in kind, by each
Employer pursuant to the provisions of Section 3.1.
(x) "Entry Date" means, with respect to each
Eligible Employee employed on the Effective Date, the
Effective Date, and with respect to each Eligible
Employee employed after the Effective Date, (i) in the
case of members of the ALPA Employee Group, the
employment commencement date (or reemployment
commencement date), (ii) in the case of members of the
IAM, the first day of the first payroll period
coincident with or next following the date the Eligible
Employee becomes a member of the IAM Employee Group,
and (iii) in the case of members of the Management and
Salaried Employee Group, the first day of the first
payroll period coincident with or next following the
anniversary date of the Eligible Employee's employment
commencement date (or reemployment commencement date);
provided, however, that if such Eligible Employee's
employment with the Employers terminates before he
becomes a Participant and such Eligible Employee
returns to the employ of an Employer within one year of
such termination, the Entry Date shall be the first day
of the first payroll period coincident with or next
following the later of (i) the reemployment
commencement date or (ii) the anniversary date of such
Eligible Employee's employment commencement date. Any
Participant whose employment with the Employers
terminates and who returns to the employ of an Employer
as an Eligible Employee shall become a Participant
immediately.
(y) "ERISA" means the provisions of the Employee
Retirement Income Security Act of 1974, as amended, and
all successor laws thereto. Where the Plan refers to a
particular section of ERISA, such reference shall also
apply to any successor to that section.
(z) "ESOP Cash Account" means the account
established and maintained in the name of each
Participant or Beneficiary to reflect his share of the
Trust Fund, other than Company Stock.
(aa) "ESOP Committee" means the committee
appointed to administer the Plan pursuant to Section
11.
(ab) "ESOP Stock Account" means the account
established and maintained in the name of each
Participant or Beneficiary to reflect his share of
Company Stock.
(ac) "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
(bb) "Financed Shares" means shares of Company
Stock acquired by the Trustee with the proceeds of an
Acquisition Loan, which shall constitute "qualifying
employer securities" under Code section 409(l) and any
shares of Company Stock received upon conversion or
exchange of such shares.
(cc) "IAM" means the International Association of
Machinists and Aerospace Workers.
(dd) "IAM Employee Group" means non-probationary
regular Employees (other than Employees employed on a
temporary basis) who are both (i) classified by the
Company as Mechanic and Related Employees, Ramp and
Stores Employees, Food Services Employees, Security
Officers, Dispatchers, or Communications Employees and
(ii) members of a group of employees represented by the
International Association of Machinists and Aerospace
Workers, AFL-CIO.
(ee) "Initial Acquisition Loan" means the
Acquisition Loan or Acquisition Loans entered into on
the Effective Date between the Trustee and the Company
pursuant to the Preferred Stock Purchase Agreement.
(ff) "Loan Suspense Account" means the suspense
account in the Trust to which Financed Shares are
initially credited prior to release for allocation to
Participants' ESOP Stock Accounts. Subaccounts shall be
maintained to reflect Financed Shares acquired with the
Initial Acquisition Loan and each applicable Additional
Acquisition Loan.
(gg) "Management and Salaried Employee Group"
means Eligible Employees who perform the functions
performed by the salaried and managerial Employees on
the Effective Date (including any functions that such
Employees will perform in the future). Furthermore,
Eligible Employees who are meteorologists represented
by the Transport Workers Union are members of the
Management and Salaried Employee Group.
(hh) "Normal Retirement Date" means (i) in the
case of a Participant who is a member of the ALPA
Employee Group, the date on which such Participant
attains age 60, and (ii) in the case of any other
Participant, the date on which such Participant attains
age 65.
(ii) "Part A" means the portion of the Plan under
which benefits are provided for Participants through
the purchase of shares of Class 1 Non- Voting Preferred
Stock acquired with the proceeds of the Initial
Acquisition Loan and Additional Acquisition Loans.
(jj) "Part B" means the portion of the Plan under
which benefits are provided for Participants through
the contribution of shares of Class 2 Non-Voting
Preferred Stock and Voting Preferred Stock by the
Company or through the transfer of any such shares from
the Supplemental Trust.
(kk) "Participant" means any Eligible Employee who
has become a Participant in accordance with Section 2
or any other person with an Account balance under the
Plan.
(ll) "Plan" means the UAL Corporation Employee
Stock Ownership Plan, consisting of Part A and Part B,
as amended from time to time. The Trust created in
connection with the Plan shall be incorporated in, and
form a part of, the Plan.
(mm) "Plan Year" means the calendar year;
provided, however, that the initial Plan Year shall
commence on the Effective Date and end on December 31,
1994.
(nn) "Preferred Stock" means the Class 1
Non-Voting Preferred Stock and the Class 2 Non-Voting
Preferred Stock.
(oo) "Preferred Stock Purchase Agreement" means
either (i) the stock purchase agreement, dated as of
March 25, 1994, as amended, effective July 12, 1994, by
and between the Company and the Trustee pursuant to
which shares of Class 1 Non-Voting Preferred Stock will
be purchased by the Trustee for allocation under Part A
and/or (ii) the stock purchase agreements by and
between the Company and the Trustee pursuant to which
Additional Shares of Class 1 Non-Voting Preferred Stock
will be purchased by the Trustee in connection with
Additional Acquisition Loans for allocation under Part
A, as the context so requires.
(pp) "Supplemental Plan" means the UAL Corporation
Supplemental ESOP, effective July 12, 1994.
(qq) "Supplemental Trust" means the UAL
Corporation Supplemental ESOP Trust, effective July 12,
1994.
(rr) "Total Disability" means that, in the opinion
of a physician selected by the ESOP Committee, the
Participant is permanently incapable of performing
services for his Employer or any of its Affiliates due
to a disability; provided, however, that for any member
of the ALPA Employee Group, "Total Disability" shall
have the meaning ascribed thereto in the United Air
Lines, Inc. Pilots' Fixed Benefit Retirement Income
Plan.
(ss) "Trust" means the UAL Corporation Employee
Stock Ownership Plan Trust created in connection with
the establishment of the Plan.
(tt) "Trust Agreement" means the trust agreement
establishing the Trust.
(uu) "Trust Fund" means the assets held in the
Trust for the benefit of the Participants and their
Beneficiaries.
(vv) "Trustee" means the trustee or trustees from
time to time in office under the Trust Agreement.
(ww) "Valuation Date" means the last day of each
Plan Year, April 12, 2000 (except for Participants in
the IAM Employee Group) and July 12, 2000 for
Participants in the IAM Employee Group and any other
date selected by the ESOP Committee as necessary for
the equitable operation of the Plan.
(xx) "Voting Preferred Stock" means the shares of
each class of ESOP Voting Junior Preferred Stock issued
by the Company. Such preferred stock consists of Class
P, Class M and Class S.
(yy) "Wage Investment" means, for a member of the
IAM Employee Group, the sum of:
(i) The product of (A) the number of hours
for which the Participant is compensated during a
Plan Year, multiplied by (B) the difference
between the "book rate of pay" as in effect
immediately prior to the Effective Date and the
"actual rate of pay" as in effect on the Effective
Date for services rendered during a Plan Year;
plus
(ii) the sum of the following: (A) the amount
determined under item (i) times 7.6% (which
represents the Employers' portion of the FICA
tax), (B) the amount determined under item (i)
times .46% (which represents the Employers'
portion of the FUTA tax), (C) the amount
determined under item (i) times .05% (which
represents the Employers' contribution for long
term disability coverage), and (D) the amount
determined under item (i) times .4% (which
represents the Employers' contribution for life
insurance coverage); provided, however, that in
the case of each of the items (A) through (D)
above, the members of the ESOP Committee appointed
by the IAM may require the substitution of an
alternative percentage which they deem appropriate
and which is uniformly applicable to each member
of the IAM Employee Group; plus
(iii) the book rate of pay as in effect
immediately prior to the Effective Date for each
hour, or fraction thereof, of lunch (or other
meal) periods multiplied by the number of days
services are rendered during a Plan Year.
For purposes hereof, "book rate of pay" means the
hourly rate of pay including increases due to overtime,
premium pay and shift differentials that would have been
paid to each IAM Employee Group member on the day
immediately preceding the Effective Date, and as adjusted
over the Wage Investment Period to account solely for
increments due based on changes in the scale or step for
each such member, and "actual rate of pay" means the hourly
rate of pay for each IAM Employee Group member on the
Effective Date, as adjusted over the Wage Investment Period
to account solely for increments based on changes in the
scale or step and not on account of negotiated changes
effective during the Wage Investment Period. If a member of
the IAM Employee Group changes job classifications (for
example, due to a promotion), then such member's book rate
of pay and actual rate of pay shall, following the change of
job classifications, be determined by reference to the
member's new job classification. The calculation of the Wage
Investment shall be made by using the information reasonably
available to the Employers under the Employers'
recordkeeping and payroll systems. The Wage Investment may
be calculated by using reasonable estimates, and the members
of the ESOP Committee appointed by the IAM shall adopt any
such reasonable estimates as are necessary for the Wage
Investment to be determined. Such members of the ESOP
Committee shall consult with the Employers to calculate the
Wage Investment. Pursuant to Section 11.4, the Employers
shall furnish the members of the ESOP Committee such data
and information as may be reasonably required to calculate
the Wage Investment and to formulate such reasonable
estimates. The determination of the Wage Investment based
upon such estimates shall be final and binding for all
purposes hereunder.
(zz) "Wage Investment Period" means the period
commencing on July 13, 1994 and ending on April 12,
2000 (July 12, 2000, for members of the IAM Employee
Group).
SECTION 2
PLAN PARTICIPATION
2.1 Eligibility for Participation. Subject to the
conditions and limitations of the Plan, each Eligible
Employee of an Employer shall become a Participant on the
applicable Entry Date.
2.2 Participation Not Guarantee of Employment.
Participation in the Plan does not constitute a guarantee or
contract of employment and will not give any Employee the
right to be retained in the employ of his Employer or any of
its Affiliates nor any right or claim to any benefit under
the terms of the Plan unless such right or claim has
specifically accrued under the terms of the Plan.
2.3 Transferred Participants. If a Participant
transfers from one Employee Group to another Employee Group,
the ESOP Committee shall maintain separate Accounts for such
Participant, such Accounts reflecting such Participant's
participation in the Plan as a member of the respective
Employee Groups.
SECTION 3
CONTRIBUTIONS
3.1 Employer Contributions. Subject to the conditions
and limitations of the Plan, for each Plan Year, the
Employers shall contribute to the Trust cash equal to, or
Company Stock having an aggregate fair market value equal
to, such amount, if any, as the respective boards of
directors of the Employers shall determine by resolution;
provided, however, that:
(a) Part A.
(i) The Company shall contribute to Part A an
amount in cash equal to the amount required to
enable the Trustee (together with dividends used
to repay the Initial Acquisition Loan and the
Additional Acquisition Loans in accordance with
Section 10) to pay any principal and interest on
the Initial Acquisition Loan and the Additional
Acquisition Loans payable during the Plan Year. Of
the contribution amount required to enable the
Trustee to discharge the aggregate principal and
interest on such indebtedness, 60% shall be made
to the money purchase pension plan component of
Part A of the Plan. The balance of the required
contribution amount shall be made to the stock
bonus plan component of Part A of the Plan. The
Trustee shall apply such money purchase pension
plan component contributions to repay the
principal on each of the respective Acquisition
Loans in proportion to the excess of the principal
due on such Acquisition Loan for the Plan Year
over the dividends available to repay the
principal on such Acquisition Loan.
(ii) In lieu of the foregoing, the Company
may forgive an amount of indebtedness equal to the
required Employer Contribution (or any portion
thereof).
(iii) On the Effective Date, the Company
shall contribute an amount in cash equal to the
aggregate par value of the Company Stock to be
acquired under the Initial Acquisition Loan. In
addition, the Company shall contribute an amount
in cash equal to the aggregate par value of the
Company Stock, if any, to be acquired under each
Additional Acquisition Loan. Such contributions
shall first be divided, pro rata, among the
Employee Groups in accordance with Section
5.4(a)(i)(A), and then shall be allocated to the
ESOP Cash Accounts of Participants as follows: (A)
in the case of the ALPA Employee Group and the
Management and Salaried Employee Group, according
to the Compensation paid to such Participants in
such Employee Group for the Plan Year, and (B) in
the case of the IAM Employee Group, according to
Wage Investments of such Participants for the Plan
Year. Such contribution shall be used by the
Trustee as partial consideration for the purchase
of shares of Class 1 Non-Voting Preferred Stock
under the applicable Preferred Stock Purchase
Agreement, and the ESOP Cash Accounts of the
Participants shall be charged accordingly. Shares
of Class 1 Non-Voting Preferred Stock equal in
value (based on the prices per share paid by the
Trustee under the applicable Preferred Stock
Purchase Agreement) to the amount of such
contribution shall be allocated, as of the last
day of the applicable Plan Year, from the shares
purchased under the applicable Preferred Stock
Purchase Agreement to the ESOP Stock Accounts of
the Participants, pro rata, according to the
allocations of such contribution above.
(b) Part B.
(i) On the Effective Date, the Company shall
contribute to Part B, as a special Employer
Contribution, one share of each of Class P, Class
M and Class S.
(ii) As soon as practicable after the end of
each Plan Year, the Company shall contribute (or
shall cause the trustee of the Supplemental Trust
to transfer) to Part B shares of Class 2
Non-Voting Preferred Stock and shares of Voting
Preferred Stock in accordance with Section
5.4(c)(vii); provided, however, that any shares of
Company Stock transferred by the trustee of the
Supplemental Trust in respect of such obligation
shall satisfy, to the extent of such transfer, the
Company's obligation under this Section 3.1(b).
Such contributions may not be used to repay
Acquisition Loan indebtedness and shall be made to
the stock bonus plan component of the Plan.
(iii) If cash dividends have been paid to the
holders of Common Stock during any Plan Year and
if dividends are applied to repay the Initial
Acquisition Loan or any Additional Acquisition
Loan pursuant to Section 10 during that Plan Year,
the Company shall make an additional Employer
Contribution to Part B in the amount, if any, set
forth in the next sentence as soon as practicable
after the last day for that Plan Year (and for the
purpose of this clause (iii), "Plan Year" shall be
defined to include only the period from the
Effective Date to 12/31/94, the five 12-month
periods ending 12/31/95 through 12/31/99, and the
three-month period ending 3/31/2000). The amount
of such contribution shall equal the excess of A
plus B over C; where A equals the least of:
(I) the cash dividends (excluding
dividends that constitute Participating
Dividends and Extraordinary Distributions
with respect to the outstanding Class 1
Non-Voting Preferred Stock) that would have
been received by the Plan during that Plan
Year if the outstanding Class 1 Non- Voting
Preferred Stock had been converted into
Common Stock immediately prior to each
dividend record date, which amount shall be
reduced by the excess, if any, of the amount
described in clause (II) below over the
amount described in clause (III) below;
(II) the Fixed Dividends that have been
paid on the Class 1 Non-Voting Preferred
Stock during that Plan Year; and
(III) the amount of the cash dividends
used to repay the Initial Acquisition Loan
and the Additional Acquisition Loans pursuant
to Section 10.1(a) during such Plan Year;
B equals the cash dividends (excluding dividends
that constitute Extraordinary Distributions with
respect to the Class 1 Non-Voting Preferred Stock)
that would have been received by the Plan during
the Plan Year if the Class 1 Non-Voting Preferred
Stock contemplated for future sale to this Plan as
part of the future Additional Acquisition Loans
had been, immediately prior to each dividend
record date, sold to this Plan and converted into
Common Stock. The number of shares of Class 1
Non-Voting Preferred Stock contemplated for future
sale shall equal 13,813,282 (adjusted for the
issuance of Additional Shares of Class 1
Non-Voting Preferred Stock) reduced by the number
of shares of Class 1 Non-Voting Preferred Stock
sold to this Plan prior to the dividend record
date; and
C equals the amount of cash contributions
previously made pursuant to this clause (iii) with
respect to such Plan Year.
For the purposes of the Plan, "Participating Dividends",
"Extraordinary Distributions" and "Fixed Dividends" shall
have the meanings ascribed to such terms in the Certificate
of Incorporation of the Company, Article Fourth, Part II
relating to Class 1 Non-Voting Preferred Stock.
3.2 Limitation on Contributions. In no event may any
Employer Contributions under Section 3.1 for any Plan Year
exceed the maximum amount deductible as an expense for
federal income tax purposes under Code section 404;
provided, however, that if Employer Contributions are so
limited, appropriate arrangements will be made in accordance
with Section 1.6(l) of the Recapitalization Agreement to
protect the substantive rights of each Employee Group
(hereinafter "Appropriate Arrangements").
3.3 Timing of Contributions. For each Plan Year,
Employer Contributions shall be due no later than the time
prescribed for filing the Employer's federal income tax
return for that Plan Year, including any extensions of time;
provided, however, that Employer Contributions shall be made
at such times as to enable the Trustee to meet its repayment
obligations under the documents governing the Initial
Acquisition Loan, the Additional Acquisition Loans or as
otherwise required by the terms of the Plan.
3.4 Participant Contributions. Contributions by
Participants are neither required nor permitted.
SECTION 4
INVESTMENT OF TRUST FUND
4.1 Exclusive Benefit of Participants. All Employer
Contributions, Company Stock acquired with Employer
Contributions and with proceeds of Acquisition Loans, and
dividends and distributions thereon, shall become a part of
the Trust Fund and shall be held and disbursed by the
Trustee in accordance with the provisions of the Plan and
Trust Agreement. No person shall have any interest in or
right to assets held in the Trust Fund except as provided in
the Plan and Trust Agreement. The Trust Fund shall be held
for the exclusive benefit of the Participants and their
Beneficiaries, and shall be used solely to pay benefits to
such persons. The Trust Fund shall not revert to the benefit
of the Company or any of its Affiliates, except as provided
in Section 15.2.
4.2 Investment in Company Stock. The Trust Fund shall
be invested exclusively in shares of Company Stock, subject
to the Trustee's power to hold cash pending investment in
Company Stock or pending distribution to Participants, and,
accordingly, the Trustee may invest and hold up to 100% of
the Trust Fund in Company Stock.
4.3 Acquisition Loans. In respect of Part A, the
Trustee may incur the Initial Acquisition Loan and the
Additional Acquisition Loans. In addition, the Trustee, with
the consent of the Company, may incur other Acquisition
Loans from time to time to finance the acquisition of
Company Stock for the Trust or to repay a prior Acquisition
Loan. Each Acquisition Loan shall meet all applicable legal
requirements, including those set forth under Code section
4975 and ERISA section 408. Financed Shares shall initially
be credited to the Loan Suspense Account and shall be
released for allocation to the ESOP Stock Accounts of
Participants only as payments of principal and interest, or
principal, on the Acquisition Loan are made by the Trustee.
The number of Financed Shares to be released from the Loan
Suspense Account (or subaccount attributable to that
Acquisition Loan) for allocation to Participants' ESOP Stock
Accounts for each Plan Year shall be based upon either: (x)
the ratio that the payments of principal made on the
Acquisition Loan for that Plan Year bear to the sum of
principal payments during that Plan Year, plus the projected
payments of principal during the remainder of the
Acquisition Loan repayment period, provided that the special
conditions set forth under Treasury Regulation section
54.4975-7(b)(8)(ii) are satisfied, or (y) the ratio that the
payments of principal and interest on the Acquisition Loan
for that Plan Year, bear to the sum of principal and
interest payments during that Plan Year, plus the projected
payments of principal and interest during the remainder of
the Acquisition Loan repayment period. A separate ratio will
be calculated for each Acquisition Loan. The applicable loan
documents will specify whether clause (x) and/or clause (y)
shall apply. Shares released from the Loan Suspense Account
in connection with the Initial Acquisition Loan and the
Additional Acquisition Loans shall be released in accordance
with clause (x) above.
4.4 Fiduciary Concerns. With respect to the exercise
of any fiduciary responsibility with respect to the Plan or
Trust, including, without limitation, the voting, sale,
exchange, other disposition or conversion of Company Stock,
the relevant fiduciary may, to the extent permitted by law,
take into consideration any relevant economic factors
affecting the interests of current and future Participants
(and Beneficiaries), including, but not limited to, the
prospect for continued Employee enfranchisement through the
voting power of Company Stock held in the Plan, the prospect
for future benefits under the Plan as a result of the
prospective release and allocation of Company Stock held in
the Loan Suspense Account and the prospect for future
employment with the Company and its Affiliates.
SECTION 5
PLAN ACCOUNTING
5.1 Accounting for Allocations. The ESOP Committee
shall establish the Accounts (and sub-accounts, if deemed
necessary) for each Participant, and the accounting
procedures for the purpose of making the allocations to the
Participants' Accounts provided for in this Section 5. The
ESOP Committee shall maintain adequate records of the cost
basis of shares of Company Stock allocated to each
Participant's ESOP Stock Account. The ESOP Committee also
shall keep separate records of Financed Shares attributable
to each Acquisition Loan and of Employer Contributions (and
of any earnings thereon) made for the purpose of enabling
the Trust to repay any Acquisition Loan. From time to time,
the ESOP Committee may modify its accounting procedures for
the purposes of achieving equitable and nondiscriminatory
allocations among the Accounts of Participants, in
accordance with the provisions of this Section 5 and the
applicable requirements of the Code and ERISA. In accordance
with Section 11, the ESOP Committee may delegate the
responsibility for maintaining Accounts and records.
5.2 Allocation and Crediting of Participants' ESOP
Stock Accounts. As of each Valuation Date, the ESOP
Committee shall:
(a) First, charge to each Participant's ESOP Stock
Account all distributions and payments made to him
since the last preceding Valuation Date that have not
been previously charged;
(b) Next, credit to each Participant's ESOP Stock
Account the shares of Company Stock, if any, that have
been purchased with amounts from his ESOP Cash Account
since the last preceding Valuation Date, and adjust
such ESOP Cash Account in accordance with the
provisions of Section 5.3; and
(c) Finally, allocate and credit to each
Participant's ESOP Stock Account the shares of Company
Stock representing Employer Contributions made in the
form of Company Stock and the number of Financed Shares
released under Section 4.3 that are to be allocated and
credited as of that date in accordance with the
provisions of Section 5.4.
5.3 Allocation and Crediting of Participants' ESOP
Cash Accounts. As of each Valuation Date, the ESOP Committee
shall adjust the ESOP Cash Accounts to reflect activity
since the last preceding Valuation Date as follows:
(a) First, charge to each Participant's ESOP Cash
Account all distributions and payments made to him that
have not been previously charged;
(b) Next, if Company Stock is purchased with
assets from a Participant's ESOP Cash Account, such
shares shall be credited to the ESOP Stock Account of
such Participant, and the Participant's ESOP Cash
Account shall be charged accordingly;
(c) Next, subject to the dividend provisions of
Section 10, the ESOP Committee shall also credit to the
ESOP Cash Account of each Participant any cash
dividends paid to the Trustee on shares of Company
Stock held in that Participant's ESOP Stock Account (as
of the record date for such cash dividends) and
dividends paid on shares of Company Stock held in the
Loan Suspense Account that have not been used to repay
any Acquisition Loan. Cash dividends and any earnings
that have not been used to repay any Acquisition Loan
and have been credited to a Participant's ESOP Cash
Account shall be applied by the Trustee to the purchase
of shares of Common Stock, which shares shall then be
credited to the ESOP Stock Account of such Participant.
The Participant's ESOP Cash Account shall then be
charged by the amount of cash used to purchase such
Common Stock or used to repay any Acquisition Loan. In
addition, any earnings (i) on ESOP Cash Accounts will
be allocated to Participants' ESOP Cash Accounts, pro
rata, based on such ESOP Cash Account balances and (ii)
on the Loan Suspense Account, other than dividends used
to repay the Acquisition Loan, will be allocated to
Participants' Accounts, pro rata, based on their
Account balances in Part A;
(d) Next, allocate and credit the Employer
Contributions made for the purpose of repaying any
Acquisition Loan in accordance with Section 5.4. Such
amount shall then be used to repay any Acquisition Loan
and such Participant's ESOP Cash Account shall be
charged accordingly; and
(e) Finally, allocate and credit the Employer
Contributions (other than amounts contributed to repay
an Acquisition Loan) that are made in cash for the Plan
Year to the ESOP Cash Account of each Participant
(including Participants whose employment with the
Company and its Affiliates terminated for any reason
during the Plan Year) in accordance with Section
5.4(b).
5.4 Allocation and Crediting of Employer
Contributions. As of the Valuation Date for each Plan Year,
all cash contributions and shares of Company Stock
transferred by each Employer to the Trustee for that Plan
Year under Section 3.1 and the number of Financed Shares
released from the Loan Suspense Account for allocation to
Participants' ESOP Stock Accounts under Section 4.3 (except
as provided under Section 10.3) during the Plan Year shall
be allocated among and credited to the Accounts of
Participants (including Participants whose employment with
the Company and its Affiliates terminated for any reason
during the Plan Year) as follows:
(a) Part A. On each Valuation Date, the cash
contributions used to repay the Acquisition Loan
indebtedness and the shares of Class 1 Non- Voting
Preferred Stock released for that Plan Year shall be
allocated and credited to each Participant's Account as
follows:
(i) First, the Employer Contributions made in
cash used to repay each Acquisition Loan (or
treated as cash due to forgiveness of such
Acquisition Loan indebtedness) shall be allocated
among the Employee Groups as follows:
(A) The allocation percentage for the
Class 1 Non-Voting Preferred Stock released
for that Plan Year shall be as follows: ALPA
Employee Group--31.759437%; IAM Employee
Group--47.511196%; and Management and
Salaried Employee Group--20.729367%. All such
shares released for such Plan Year shall be
allocated to the Employee Groups in
accordance with such allocation percentages.
(B) There shall be calculated for each
Participant an allocation of shares of Class
1 Non-Voting Preferred Stock on account of
dividends paid during the Plan Year on such
Preferred Stock previously allocated to such
Participant's ESOP Stock Account and applied
in accordance with Sections 10.1(a) and 10.3.
The foregoing allocations for each
Participant shall be made out of the Class 1
Non-Voting Preferred Stock allocated to that
Participant's Employee Group under subclause
(A) above.
(C) Employer Contributions to be
allocated in accordance with this clause
(i)(C) shall be allocated to each Employee
Group in the proportion that (x) shares of
Class 1 Non-Voting Preferred Stock allocated
to that respective Employee Group pursuant to
subclause (A) reduced by the shares allocated
to members of that Employee Group pursuant to
subclause (B), bears to (y) all shares of
Class 1 Non-Voting Preferred Stock released
for the Plan Year reduced by all shares
allocated pursuant to subclause (B).
(ii) Second, the allocations of Employer
Contributions under clause (i)(C) shall be reduced
by all of the interest on the Initial Acquisition
Loan and the Additional Acquisition Loans paid
during that period. Such reduction shall be made
in proportion to the allocations made under clause
(i)(C).
(iii) Third, there shall be tentatively
allocated to the Accounts of each Participant in
each Employee Group that portion of the resulting
Employer Contributions which such Participant's
Compensation (or, in the case of the IAM Employee
Group, such Participant's Wage Investments) for
the Plan Year bears to the aggregate Compensation
(or, in the case of the IAM Employee Group, Wage
Investments) for all such Participants for such
Plan Year; provided that such Employer
Contributions shall not be allocated to any
Participant's Account to such extent the
allocation would exceed the limitation of Code
section 415(c). The amount, if any, by which the
allocation to any such Participant's Account shall
be reduced under the foregoing proviso shall be,
subject to the Code section 415(c) limitation,
tentatively allocated (and, if necessary,
reallocated) to the Accounts of all other
Participants in his Employee Group (x) for the
Management and Salaried Employee Group, in
proportion to their Compensation, (y) in the case
of the IAM Employee Group, Wage Investments, and
(z) in the case of the ALPA Employee Group, first
in proportion to (but not more than) the amount of
Class 2 Non-Voting Preferred Stock otherwise
scheduled for contribution and allocation to each
Participant's Account under Part B for the current
Plan Year (absent this clause (iii)) and otherwise
in proportion to Compensation.
(iv) Fourth, if the total Employer
Contributions tentatively allocated to "highly
compensated employees" (as defined in Code section
414(q)) under clause (iii) do not exceed one-third
of the total Employer Contributions tentatively
allocated to the Accounts of all Participants
under clause (iii), the tentative allocations of
Employer Contributions to Participants shall
become final. The foregoing limitation shall be
applied by aggregating all Participants in all
Employee Groups.
(v) Fifth, if the one-third limitation
described in clause (iv) is exceeded, the amount
of Employer Contributions allocated to Accounts of
Participants in the ALPA Employee Group who are
highly compensated employees shall be reduced, pro
rata, based on Compensation and reallocated to
Participants in the ALPA Employee Group who are
not highly compensated employees, to the extent
necessary to meet the one-third limitation
described in clause (iv), subject, however, to
Code section 415(c). The foregoing reallocations
to each non-highly compensated employee shall be
allocated in proportion to (but not more than) the
number of shares of Class 2 Non-Voting Preferred
Stock otherwise scheduled for contribution and
allocation to his Account under Part B for the
current Plan Year (absent this clause (v)). If and
to the extent appropriate arrangements are made
between the Company and ALPA to protect the
interests of the ALPA Employee Group (which
arrangements shall be consistent with Section 13.1
and which the Company agrees to do upon reasonable
request and which shall not require IAM consent),
contributions for the highly compensated ALPA
Employee Group members may be reduced, pro rata,
to meet the one-third limitation described in
clause (iv).
(vi) Sixth, if, after the reallocation of
Employer Contributions described in clause (v),
the one-third limitation described in clause (iv)
is still exceeded, then the computations described
in foregoing clauses (i) through (v) shall be
disregarded. In lieu thereof the allocation shall
be made in accordance with clauses (i) through
(iii), but clause (ii) shall be disregarded. If
such allocations do not result in a violation of
Code section 415(c) for all members of any
Employee Group, the tentative allocations shall
become final.
(vii) Seventh, if the allocation of Employer
Contributions described in clause (vi) results in
a violation of Code section 415(c) for all members
of any Employee Group (after reallocating any
excess allocations only to members of such
Employee Group), then clause (vi) shall be
disregarded. The computations described in
foregoing clauses (i) through (v) (including
clause (ii)) shall be repeated, but, after
applying clause (v), the amount of Employer
Contributions allocated to Accounts of
Participants who are members of the Management and
Salaried Employee Group who are highly compensated
employees shall be reduced, pro rata, based on
Compensation, and reallocated to Participants in
the Management and Salaried Employee Group who are
not highly compensated employees, pro rata, based
on Compensation, to the extent necessary to meet
the one- third limitation described in clause
(iv), subject, however, to Code section 415(c). In
making the foregoing reallocations, no non-highly
compensated employee shall be allocated more
shares under this clause (vii) than the number of
shares of Class 2 Non-Voting Preferred Stock
otherwise scheduled for contribution and
allocation to his Account under Part B for the
current Plan Year (absent this clause (vii)). If
and to the extent appropriate arrangements are
made by the Company to protect the interests of
the Management and Salaried Employee Group (which
arrangements shall be consistent with Section 13.1
and which shall not require IAM consent, but which
shall require ALPA consent, which consent shall
not be unreasonably withheld), contributions for
the highly compensated Management and Salaried
Employee Group members may be reduced, pro rata,
to meet the one-third limitation described in
clause (iv).
(viii) Eighth, all shares of Class 1
Non-Voting Preferred Stock released from the Loan
Suspense Account as of the Valuation Date shall be
allocated first in respect of dividends paid on
previously allocated shares of Class 1 Non-Voting
Stock in accordance with Sections 10.1(a)(i) and
10.3 and then allocated in proportion to the
percentage of the Employer Contributions allocated
to each Participant's Account under clauses (i)
through (vii) above.
(b) Special Contributions to Part B.
(i) The special Employer Contribution made by
the Company on the Effective Date pursuant to
Section 3.1(b)(i) shall be allocated, per capita,
to the appropriate Participants' ESOP Stock
Accounts under Part B on the Effective Date.
(ii) Employer Contributions made in cash for
the Plan Year under Section 3.1(b)(iii) shall be
allocated under Part B and credited to the ESOP
Cash Accounts of the appropriate Participants to
which those cash contributions relate, as follows:
to the extent that the calculation of the amount
of such contributions refers to shares of Class 1
Non-Voting Preferred Stock held in the Loan
Suspense Account or Class 1 Non-Voting Preferred
Stock contemplated for further sale, divide such
cash contributions among the Employee Groups in
accordance with Section 5.4(a)(i)(A); to the
extent it refers to shares of Class 1 Non-Voting
Preferred Stock allocated to the Participants'
ESOP Stock Accounts, apportion those contributions
to the relevant Employee Group; then, allocate to
the appropriate Participants' Accounts, pro rata,
in the case of (i) the ALPA Employee Group and the
Management and Salaried Employee Group, according
to the Compensation paid to such Participants for
the Plan Year, and (ii) the IAM Employee Group,
according to Wage Investments made by such
Participants for the Plan Year; subject, however,
in all cases to Code section 415(c).
(c) Regular Contributions to Part B. Shares of
Class 2 Non-Voting Preferred Stock and Voting Preferred
Stock contributed to the Plan pursuant to Section
3.1(b) shall be allocated among and credited to the
ESOP Stock Accounts of Participants for that Plan Year
as set forth below, provided, however, that no
allocations (other than allocations under clauses (i)
and (viii) below) shall be made to Accounts of
Participants who are members of the IAM Employee Group:
(i) First, subject to the applicable Code
limitations, one share of Voting Preferred Stock
shall be allocated to the Participant's Account
for each share of Class 1 Non-Voting Preferred
Stock allocated to that Participant under Part A
on that Valuation Date. The shares of Voting
Preferred Stock shall be allocated under Part B
and shall be of the appropriate class for each
such Participant. The special allocation under
Section 5.4(b)(i) shall be credited against the
allocation required pursuant to this clause (i) on
the first Valuation Date.
(ii) Second, for each Participant, a
"hypothetical share number" shall be calculated
for the Valuation Date. Such number shall equal
the number of shares that would have been
allocated to the Participant under Part A on such
Valuation Date if (A) all the shares of Class 1
and Class 2 Non-Voting Preferred Stock to be
issued pursuant to the Recapitalization Agreement
(including, with respect to Valuation Dates
occurring on or after December 31, 1995 and after
the allocation in subsection (viii) below, any
Additional Shares issued or to be issued) had been
(I) purchased by the Trust under a single loan on
the Effective Date and held under the Loan
Suspense Account pursuant to Part A, and (II) in
the case of such Class 2 shares, considered Class
1 Non-Voting Preferred Stock under Part A having
the same fair market value as the Class 1
Non-Voting Preferred Stock; provided, however,
that such Class 2 shares shall not, except as
provided in subclause (E), bear any dividend; (B)
the shares of Class 1 and Class 2 Non-Voting
Preferred Stock were released under Part A ratably
over the 69 months starting on the Effective Date;
(C) Section 5.4(a)(i)(A) were applied by
allocating the Class 1 Non-Voting Preferred Stock
and the Class 2 Non-Voting Preferred Stock among
the Employee Groups as follows: ALPA Employee
Group - 46.23%; IAM Employee Group - 37.13%; and
Management and Salaried Employee Group - 16.64%;
(D) allocations under Part A were made as if: (I)
the limitations of Code sections 401(a)(4),
401(a)(17) and 415 did not apply; (II)
Compensation was based on "compensation" as
defined in the Supplemental Plan and (III) clauses
(ii), (iv), (v), (vi) and (vii) of Section 5.4(a)
did not apply; and (E) each share of Class 2
Non-Voting Preferred Stock that was in fact
allocated on a prior Valuation Date to a
Participant's account under the Supplemental Plan
or under Part B shall, after the date of such
allocation, be considered Class 1 Non- Voting
Preferred Stock held by Part A (bearing the same
Fixed Dividend as the Class 1 Non-Voting Preferred
Stock that was allocated under Part A (but not
bearing any other dividend)). By way of
illustration, assume a member of the ALPA Employee
Group has a total of 130 shares of Class 2
Non-Voting Preferred Stock allocated to his
account under the Supplemental Plan and 70 shares
of Class 2 Non-Voting Preferred Stock allocated to
his Account under Part B. Assume further that each
share of Class 1 Non-Voting Preferred Stock under
Part A has a value of $100, pays an $8 Fixed
Dividend, no dividends are paid on Common Stock
and that each share of Class 2 Non-Voting
Preferred Stock has a $75 value. For purposes of
making the allocations under this subclause (E),
such individual shall be treated as having
received a dividend of $1600 with respect to the
shares of Class 2 Non-Voting Preferred Stock
allocated under the Supplemental Plan and under
Part B. For purposes of calculating the
hypothetical share number, that individual shall
receive an allocation of 16 shares of Class 2
Non-Voting Preferred Stock to make up for such
dividend, notwithstanding the fact that the value
of the shares of Class 2 Non-Voting Preferred
Stock is $75 per share.
(iii) Third, for each ESOP Participant, the
"actual share number" for a Valuation Date shall
be the actual number of shares of Class 1
Non-Voting Preferred Stock that are allocated to
such Participant under Part A on that Valuation
Date.
(iv) Fourth, for each ESOP Participant, the
excess of the hypothetical share number over the
actual share number shall be referred to herein as
the respective "tentative allocation." If the sum
of the tentative allocations (ignoring negative
tentative allocations) for all Participants in an
Employee Group exceeds the number of shares of
Class 2 Non-Voting Preferred Stock released from
the "phantom suspense account" to all such
Participants' accounts for that Employee Group
under Section 2.2 of the Supplemental Plan, each
such tentative allocation for Participants of that
Employee Group shall be proportionately reduced.
(v) Fifth, on each Valuation Date, the number
of shares of each of the Class 2 Non-Voting
Preferred Stock and Voting Preferred Stock, if
any, to be allocated to a Participant under Part B
(excluding Voting Preferred Stock described in
Section 5.4(c)(i) and 5.4(c)(vi)) shall be the
same and shall equal the least of the following
numbers: (A) the maximum number of shares of each
of the Class 2 Non-Voting Preferred Stock and the
Voting Preferred Stock that can be allocated to
the Participant for the Valuation Date under Part
B without violating Code section 415 or Code
section 401(a)(4) (if applicable), (B) the
tentative allocation and (C) the excess of the
hypothetical share number (calculated for this
purpose only by applying the Code section
401(a)(17) limitation) over the actual share
number. The hypothetical share number described in
this subclause (C) shall be determined by
recalculating the allocations made on the current
and all prior Valuation Dates by assuming the
Participant's Compensation for each Plan Year had
been limited to the amount then allowed under Code
section 401(a)(17). Accordingly, for purposes of
calculating the hypothetical share number under
this subclause (C), the Participants' Compensation
in the current Plan Year shall be limited to the
amount provided by Code section 401(a)(17) and the
amount of dividends allocated to each
Participant's Account during the Plan Year shall
be calculated by assuming the allocations of
shares made on earlier Valuation Dates were also
based on Compensation, as limited by Code section
401(a)(17) limitation then in effect. The excess
of the tentative allocations over the amount
allocated under clause (v) shall not be allocated
under Part B, but shall be allocated in accordance
with the terms of the Supplemental Plan.
(vi) Sixth, on the last Valuation Date of
each Plan Year, in addition to the shares of Class
2 Non-Voting Preferred Stock and Voting Preferred
Stock transferred to Part B under clause (v)
above, shares credited under the Supplemental
Plan, in a prior Plan Year, due to the limitations
under Code section 401(a)(4), 401(a)(17) or Code
section 415, shall be allocated to Participants'
Accounts under Part B, subject to applicable Code
limitations in accordance with the following
priorities:
(A) first, by a number of shares, if
any, of Voting Preferred Stock equal to the
excess of the number of shares of Class 1 and
Class 2 Non-Voting Preferred Stock allocated
to his Account over the number of shares of
Voting Preferred Stock allocated to his
Account, to the extent such number may be
contributed by the Company or transferred
from the Supplemental Trust to Part B without
disqualifying the Plan or any other qualified
plan; provided, however, that the number of
shares transferred may include any shares
that were not previously contributed or
transferred to Part B because of the
limitations of Code section 401(a)(17);
(B) second, by the maximum number of
shares of Class 2 Non-Voting Preferred Stock
and Voting Preferred Stock (such numbers to
be the same) that may be contributed by the
Company (or transferred from the Supplemental
Trust) to Part B without disqualifying the
Plan or any other qualified plan; provided,
however, that the number of shares
transferred may include any shares that were
not previously contributed or transferred to
Part B because of the limitations of Code
section 401(a)(17); and
(C) third, by the maximum number of
shares of Common Stock that may be
transferred from the Supplemental Trust to
Part B without disqualifying the Plan or any
other qualified plan; provided, however, that
the number of shares may include any shares
that were not previously contributed or
transferred to Part B because of the
limitations of Code section 401(a)(17).
The reductions described in subclauses (A) through
(C) shall not include any Voting Preferred Stock,
Class 2 Non-Voting Preferred Stock or Common Stock
allocated during the current Plan Year.
(vii) Seventh, the Company shall contribute
(or, to the extent applicable, the Company shall
direct the trustee of the Supplemental Trust to
transfer) a number of shares of Voting Preferred
Stock and Class 2 Non-Voting Preferred Stock and
Common Stock equal to the sum of the number of
such respective shares calculated for each
Participant under clauses (i), (v) and (vi) above
to Part B. Such shares shall be transferred as
soon as practicable after the applicable Valuation
Date.
(viii) Eighth, Prior to the December 31, 1995
Valuation Date, the aggregate hypothetical share
numbers for all Participants for the 1994 Plan
Year shall be retroactively increased by an
additional number equal to X multiplied by Y;
where X is the total number of shares of Preferred
Stock to be issued as Additional Shares and Y is
the release fraction (as defined in the
Supplemental Plan) for December 31, 1994. Such
shares shall be divided among the Employee Groups
(including the IAM Employee Group) in accordance
with Section 5.4(c)(ii)(C) and allocated to
Participants based upon 1994 data (that is, 1994
Compensation and Wage Investments, as applicable.)
The excess of such new hypothetical share number
(including such numbers for the IAM Employee
Group) for the 1994 Plan Year over the
hypothetical share number previously determined
for 1994 shall be allocated hereunder or credited
under the Supplemental Plan in accordance with
clause (v) above, provided that the number in
(v)(A) shall be calculated and credited as if the
contributions were attributable to 1995, rather
than 1994, unless the additional shares calculated
in clause (v) to be contributed to ESOP (Part B)
are in fact contributed to the ESOP no later than
September 15, 1995. The calculations required by
this clause (viii) shall be performed prior to
calculating the regular allocations for the 1995
year. The additional shares of Class 2 Non- Voting
Preferred Stock credited pursuant to this clause
(viii) shall, for all purposes, including Section
5.4(c)(ii)(E), be allocated as of December 31,
1994.
(d) Purpose. The purpose of the foregoing
contribution and allocation provisions is to place each
Participant, to the extent possible, in the same
position such Participant would have been if (i) Code
sections 401(a)(4), 401(a)(17) and 415 did not apply,
(ii) all of the shares of Preferred Stock to be sold to
Part A during the Wage Investment Period had instead
been sold on the Effective Date, (iii) all of the
shares (excluding shares of the Voting Preferred Stock)
contributed to Part B or credited under the
Supplemental Plan during the Wage Investment Period had
instead been purchased by the Trust on the Effective
Date pursuant to Part A as Class 1 Non-Voting Preferred
Stock and (iv) the Preferred Stock and Voting Preferred
Stock had been allocated ratably (over the 69 months
beginning at the Effective Date) to Participants in
their respective Employee Groups in accordance with the
overall program ownership percentages, that is, the
ALPA Employee Group - 46.23%, the IAM Employee Group -
37.13% and the Management and Salaried Employee Group -
16.64%. To the extent any interpretative issues arise
in calculating contributions and allocations, such
issues shall be resolved, if possible, by effectuating
such purpose. To the extent that any shares of Company
Stock are converted into shares of Common Stock prior
to the end of the Wage Investment Period, an
appropriate number of shares of Common Stock will be
contributed (if applicable) and allocated hereunder in
lieu of the shares of the Company Stock that would have
been contributed and/or allocated hereunder and, if
appropriate, the number of Class 1 and/or Class 2
Non-Voting Preferred Stock shares set forth in various
places in this Plan shall be revised; provided, except
to the extent the shares of Voting Preferred Stock are
converted into shares of Common Stock, the calculation
of the number of shares of Voting Preferred Stock to be
contributed and allocated shall continue as if no
shares of Company Stock had been converted.
(e) Special Allocation Provision. For purposes of
making allocations under Section 5.4, the period from
January 1, 2000 through April 12, 2000 shall be treated
as a Plan Year (for the ALPA Employee Group and the
Management and Salaried Employee Group) and the period
from January 1, 2000 through July 12, 2000 shall be
treated as a Plan Year (for the IAM Employee Group).
5.5 LIMITATION ON ALLOCATIONS TO PARTICIPANTS.
(a) General. Subject to the provisions of this Section
5.5, Code section 415, including the effect of any
transitional rule, shall be incorporated by reference into
the terms of the Plan. No allocation shall be made under
Section 5.4 that would result in a violation of Code section
415.
(b) Code Section 415 Compensation. For purposes of this
Section 5.5, Compensation shall be adjusted to reflect the
general rule of Treasury Regulation section 1.415-2(d).
(c) Limitation Year. The "limitation year" (within the
meaning of Code section 415) shall be the calendar year.
(d) Multiple Defined Contribution Plans. In any case
where a Participant also participates in another defined
contribution plan of the Company or its Affiliates, the
appropriate committee of such other plan shall first reduce
the after-tax contributions under any such plan, shall then
reduce any elective deferrals under any such plan subject to
Code section 401(k), shall then reduce all other
contributions under any other such plan and, if necessary,
shall then reduce contributions under this Plan (Part B to
be reduced before Part A); provided, however, in the case of
any Participant who is a member of the ALPA Employee Group,
contributions (excluding after-tax contributions and
elective deferrals) under the United Air Lines, Inc. Pilots'
Directed Account Retirement Income Plan shall be reduced
last.
(e) Combined Plan Limitations. To the extent necessary
to comply with the requirements of Code section 415(e), the
appropriate committee shall first reduce the annual benefit
payable under any defined benefit plan in which the
Participant participates and, if necessary, the ESOP
Committee shall thereafter reduce the contributions under
the defined contribution plans in which such Participant
participates in accordance with Section 5.5(d).
(f) Excess Allocations. If, after applying the
allocation provisions under Section 5.4, allocations under
Section 5.4 would otherwise result in a violation of Code
section 415, the ESOP Committee shall reduce Employer
Contributions for the next limitation year for the affected
Participant or shall hold excess amounts in a suspense
account for allocation in a subsequent Plan Year in
accordance with Reg. section 1.415-6(b)(6)(ii). Such
suspense account, if permitted, will be created before any
reallocation of contributions for the affected individual.
If the limits of Code section 415 would cause total
allocations to each Participant in an Employee Group to
exceed the permitted amount, appropriate arrangements will
be made to protect the interests of that Employee Group,
consistent with the principles of Section 3.2.
5.6 Valuations. All valuations of shares of Company
Stock that are not readily tradeable on an established
securities market shall be valued by an "independent
appraiser" (within the meaning of Code section 170(a)(1)).
SECTION 6
VESTING
A Participant's Account shall be fully vested
(nonforfeitable) at all times, and will be distributed to
him or, in the event of his death, to his Beneficiary, in
accordance with the applicable provisions of Section 7.
SECTION 7
DISTRIBUTIONS
7.1 Pre-Retirement Diversification Rights.
(a) General. Any Participant who has attained age
55 and has 10 years of participation under the Plan
("Qualified Participant") may elect to diversify the
investment of a portion of his Account under this
Section 7.1. During the six-Plan Year period beginning
with the Plan Year in which such Qualified Participant
attains age 55 and has 10 years of participation under
the Plan, such Qualified Participant shall be entitled
to request, within 90 days after the close of each Plan
Year in such period (each such period referred to as an
"Election Period"), the diversification of up to 25% of
the balance of his Account, to the extent such amount
exceeds the amount to which any prior election under
this Section 7.1 applies. During the last Election
Period, the preceding sentence shall be applied by
substituting "50%" for "25%".
(b) Amount. In the case of a Qualified Participant
who has made one or more elections during the period,
the extent to which a subsequent election exceeds the
amount to which any prior election applies shall be (i)
in the case of the Qualified Participant's ESOP Cash
Account, (A) 25% or 50%, as the case may be, of the sum
of the balance of such Account as of the Valuation Date
of the Plan Year with respect to which the subsequent
election is made and the amounts diversified pursuant
to prior elections, less (B) the amounts diversified
pursuant to prior elections; and (ii) in the case of
the Qualified Participant's ESOP Stock Account, (A) 25%
or 50%, as the case may be, of the sum of the number of
shares of Company Stock in the Qualified Participant's
ESOP Stock Account as of the Valuation Date of the Plan
Year with respect to which the subsequent election is
made and the number of shares of Company Stock
diversified pursuant to prior elections, less (B) the
number of shares of Company Stock diversified pursuant
to prior elections. For the purposes of this Section 7,
fractional shares for which a Qualified Participant
might be entitled to receive shall be rounded down to
the nearest whole share. The diversification of a
Participant's Account under this Section 7.1 shall only
be effected within 90 days following the 90-day period
in which the Qualified Participant makes his request.
Notwithstanding the foregoing, if the fair market value
of the Company Stock allocated to the ESOP Stock
Accounts of a Qualified Participant is $500 or less as
of the Valuation Date immediately preceding the first
day of an Election Period, such Qualified Participant
shall not be entitled to an election under this Section
7.1 for that Election Period.
(c) Method. A Participant's diversification
election pursuant to this Section 7.1 shall only be
effected by having the ESOP Committee cause the Trustee
to transfer the portion of the Account to be
diversified to the Company's Code section 401(k) plan
applicable to such Participant. An equal number of
shares of Voting Preferred Stock and Preferred Stock
shall be diversified.
7.2 Distributions on Account of Termination of
Employment. Subject to the following provisions of this
Section 7, a Participant (or, in the case of a Participant's
death, his Beneficiary) shall become eligible (but shall not
be required) to receive a distribution of the balance of his
Account, as of the Valuation Date coincident with or next
following the date the Participant's employment with the
Company and its Affiliates terminates for any reason;
provided, however, that, except as provided in Section 7.4,
no distributions shall be made prior to July 13, 1995.
7.3 Manner and Form of Distributions.
(a) Manner. A Participant may elect to receive a
distribution of his Account balance in either of the
following methods:
(i) By payment in a lump sum; or
(ii) By payment in a series of five
substantially equal annual installments (to
consist of equal numbers of Voting Preferred Stock
and Preferred Stock).
If a Participant so desires he may direct how his
benefits are to be paid to his Beneficiary. If a
deceased Participant did not file a direction with the
ESOP Committee, the Beneficiary may elect to receive a
distribution of the Account in accordance with this
Section 7.3.
(b) Form. At the Participant's election, the ESOP
Committee shall direct the Trustee to make
distribution of a Participant's Account in (i)
cash, (ii) Company Stock or (iii) in cash equal to
the amount held in such Participant's ESOP Cash
Account and in shares of Company Stock with
respect to such Participant's ESOP Stock Account;
provided, however, that Company Stock (if
convertible) shall only be distributed in the form
of Common Stock received in the conversion of the
Preferred Stock held in his Account and any
fractional share shall be paid in cash. If a
Participant elects to receive a distribution of
his ESOP Stock Account in cash, the Trustee shall
be directed to convert (if convertible) the
Company Stock in his ESOP Stock Account into
Common Stock and to sell the Common Stock and any
Company Stock that is not convertible; the amount
of cash so distributed shall equal the net
proceeds received from the sale of such shares of
Common Stock. If a Participant elects to receive a
distribution of his ESOP Cash Account in Common
Stock, the Trustee will be directed to purchase
Common Stock in the open market and the number of
shares of Common Stock so distributed shall equal
the number of whole shares purchased with such
Participants' Account balance, with any excess
cash distributed to the Participant.
7.4 Special Distribution Rules. Notwithstanding any
provision herein to the contrary:
(a) Required Distributions.
(i) a Participant whose employment with the
Company and its Affiliates terminates by reason of
attainment of his Normal Retirement Date, death or
Total Disability must be eligible to receive a
distribution of his Account balance no later than
the end of the Plan Year following the Plan Year
in which such termination occurs; provided,
however, that this provision shall not apply to
the shares of Company Stock held in the
Participant's Account acquired with the proceeds
of an Acquisition Loan until the close of the Plan
Year in which such Acquisition Loan has been
repaid in full;
(ii) unless a Participant otherwise elects
under Section 7.4(b), a Participant whose
employment with the Company and its Affiliates
terminates must commence to receive a distribution
of his Account no later than 60 days following the
close of the Plan Year in which the latest of the
following occurs: (A) a Participant reaches his
Normal Retirement Date, (B) the Participant's
employment with the Company and its Affiliates
terminates and (C) the 10th anniversary of the
year in which the Participant commenced
participation in the Plan;
(iii) a Participant's Account balance must
commence to be distributed no later than the April
1 of the calendar year next following the calendar
year in which such Participant attains age 70-
1/2. Any amount distributed pursuant to this
clause (iii) shall, in the case of a Participant
who is an Employee, be and be limited to the
minimum amount required to be distributed pursuant
to Code section 401(a)(9);
(iv) If a Participant's employment with the
Company and its Affiliates terminates by reason of
death, or if a Participant dies after his
employment terminates but before a distribution
commences from the Plan, then, unless the
Participant's spouse is the Beneficiary, all of
the Participant's interest in the Plan must be
completely distributed within five years after the
date of his death unless distributions begin
within one year after the Participant's death; and
(v) to the extent permitted by law, Code
section 401(a)(9) and any related transitional
rule are incorporated by reference into the terms
of the Plan.
(b) Deferred Distributions. A Participant (or a
spousal Beneficiary) may elect to defer the
commencement of his distribution to any date on or
prior to the April 1 of the calendar year next
following the calendar year in which such Participant
attains age 70-1/2.
7.5 Direct Rollover. To the extent required by Code
section 401(a)(31), the Participant (or a spousal
Beneficiary) shall have the right to elect to have any
distribution that constitutes an "eligible rollover
distribution" (as defined in Code section 401(a)(31)(C))
paid directly to an "eligible retirement plan" (as defined
in Code section 401(a)(31)(D)) specified by such Participant
(or a spousal Beneficiary). If a Participant (or a spousal
Beneficiary) fails to make the foregoing election he shall
be deemed to have not made such election. The provisions of
this Section 7.5 shall be administered in accordance with,
and subject to, such rules as the ESOP Committee may
prescribe, which rules may include any limitations permitted
under Code section 401(a)(31).
7.6 Facility of Payment.
(a) General. Subject to Section 7.6(b), if, in the
opinion of the ESOP Committee, a Participant or
Beneficiary is under a legal disability or is in any
way incapacitated so as to be unable to manage his
financial affairs, the ESOP Committee may (but shall
not be required to), until claim is made by a
conservator or other person legally charged with the
care of his person or of his estate, direct the Trustee
to make payment to a relative or friend of such person
for his benefit. Thereafter, any benefits under the
Plan to which such Participant or Beneficiary is
entitled shall be paid to such conservator or other
person legally charged with the care of his person or
his estate.
(b) Minors. In the event any amount is payable
under the Plan to a minor, payment shall not be made to
the minor, but instead shall be paid (i) to that
person's then living parent(s) to act as custodian,
(ii) if that person's parents are then divorced, and
one parent is the sole custodial parent, to such
custodial parent, or (iii) if no parent of that person
is then living, to a custodian selected by the ESOP
Committee to hold the funds for the minor under the
Uniform Transfers or Gifts to Minors Act in effect in
the jurisdiction in which the minor resides. If no
parent is living and the ESOP Committee decides not to
select another custodian to hold the funds for the
minor, payment shall be made to the duly appointed and
currently acting guardian of the estate for the minor
or, if no guardian of the estate for the minor is duly
appointed and currently acting within 60 days after the
date the amount becomes payable, payment shall be
deposited with the court having jurisdiction over the
estate of the minor.
(c) Discharge. Any payment made under this Section
7.6 shall fully discharge, to such extent, the
obligation of the Trustee to pay benefits under the
Plan with respect to such Participant, Beneficiary or
minor.
7.7 Interests Not Transferable. The interests of
Participants and their Beneficiaries under the Plan are not
subject to the claims of their creditors and may not be
voluntarily or involuntarily assigned, alienated or
encumbered, except as otherwise provided in Section 7.11.
7.8 Absence of Guaranty. The Trustee, the ESOP
Committee and the Employers in no way guarantee the Trust
Fund from loss or depreciation. Moreover, the Employers do
not guarantee any payment to any person. The liability of
the Trust to make any payment is limited to the available
Trust Fund.
7.9 Designation of Beneficiary. In the event of the
death of a married Participant, the Participant's Account
balance will be paid to his surviving spouse, except as
otherwise provided below. Each Participant from time to
time, by signing a form furnished by the ESOP Committee, may
designate any legal or natural person or persons (who may be
designated contingently or successively) to whom his
benefits are to be paid if he dies before he receives all of
his benefits; provided, however, that if a married
Participant designates a Beneficiary other than his spouse,
his spouse must consent in writing to such designation and
acknowledge in writing the effect of such designation, and
such consent and acknowledgement must be witnessed by a
notary public. Any designation by an unmarried Participant
shall be rendered ineffective by any subsequent marriage and
any consent of a spouse shall be effective only as to that
spouse.
A Beneficiary designation form will be effective only
when the signed form is filed with the ESOP Committee while
the Participant is alive and will cancel all Beneficiary
designation forms signed earlier. If a deceased Participant
fails to designate a Beneficiary as provided above (or if
the designated Beneficiary dies before the Participant or
before receiving complete payment of the Participant's
benefits), the ESOP Committee shall direct the Trustee to
pay the Participant's benefits as follows:
(a) first, to the surviving spouse of the
Participant, if any;
(b) second, to the children (including any adopted
children) of the Participant, per stirpes; and
(c) third, if the Participant leaves no surviving
spouse or has no descendants pursuant to paragraph (b)
above, to the estate of the last to die of the
Participant or his designated Beneficiary.
Upon the dissolution of marriage of a Participant, any
designation of the Participant's former spouse as a
Beneficiary shall be treated as though the Participant's
former spouse had predeceased the Participant, unless (i)
the Participant executes another Beneficiary designation
that complies with this Section 7.9 and that clearly names
such former spouse as a Beneficiary, or (ii) a court order
presented to the ESOP Committee prior to distribution on
behalf of the Participant explicitly requires the
Participant to continue to maintain the former spouse as the
Beneficiary. In any case in which the Participant's former
spouse is treated under the Participant's Beneficiary
designation as having predeceased the Participant, no heirs
or other beneficiaries of the former spouse shall receive
benefits from the Plan as a Beneficiary of the Participant
except as provided otherwise in the Participant's
Beneficiary designation.
7.10 Missing Participants or Beneficiaries. Each
Participant and each Beneficiary must file with the ESOP
Committee from time to time in writing his post office
address and each change of post office address. Any
communication, statement or notice addressed to a
Participant or Beneficiary at his last post office address
filed with the ESOP Committee, or if no address is filed
with the ESOP Committee, then, in the case of a Participant,
at his last post office address as shown on his Employer's
records, will be binding on the Participant and his
Beneficiary for all purposes of the Plan. The Employers, the
ESOP Committee and the Trustee will not be required to
search for or locate a Participant or his Beneficiary. In
the event that all, or any portion, of the distribution
payable to a Participant or his Beneficiary hereunder shall,
at the expiration of five years after it shall become
payable, remain unpaid solely by reason of the inability of
the ESOP Committee, after sending a communication, statement
or notice to the last post office address filed with the
ESOP Committee, to ascertain the whereabouts of such
Participant or his Beneficiary, the amount so distributable
shall be reallocated in the same manner as a Company Stock
contribution would be allocated under the provisions of
Section 5.4. In the event a Participant or his Beneficiary
is located subsequent to his benefit being reallocated, such
benefit shall be restored first from Trust (including the
Supplemental Trust) earnings and second from an Employer
Contribution made solely for restoration purposes. The
allocation and restoration referred to above shall be
effected by giving effect to the class of Company Stock
reallocated.
7.11 Qualified Domestic Relations Order. In addition to
payments made under Section 7 on account of a Participant's
termination of employment, payments may also be made to an
Alternate Payee (as defined below) prior to, coincident
with, or after a Participant's termination of employment if
made pursuant to a "qualified domestic relations order" (as
defined in Code section 414(p)). The ESOP Committee shall
establish reasonable procedures to determine the qualified
status of domestic relations orders and to administer
distributions under such qualified orders, including, in its
sole discretion, the establishment of segregated accounts
for Alternate Payees. The term "Alternate Payee" means any
spouse, former spouse, child or other dependent of a
Participant who is recognized by a Qualified Domestic
Relations Order as having a right to receive all, or a
portion of, the benefits payable under the Plan with respect
to the Participant.
SECTION 8
VOTING AND CERTAIN DISPOSITIONS OF COMPANY STOCK
8.1 Voting.
(a) Allocated Shares. Each Participant or
Beneficiary, as a named fiduciary within the meaning of
ERISA section 403(a)(1), in accordance with the
procedures hereinafter set forth, may direct the
Trustee with respect to the votes of the shares of
Company Stock allocated to his ESOP Stock Account, and
the Trustee shall follow the directions of those
Participants (and Beneficiaries) who provide timely
instructions to the Trustee; provided that,
notwithstanding the foregoing, the Trustee shall vote
the shares of Company Stock allocated to the Part B
Accounts of Participants who are (or were) members of
the ALPA Employee Group but are not Employees (or
allocated to the Part B Accounts of their
Beneficiaries).
(b) Unallocated and Uninstructed Shares.
(i) Part A. Each active Participant (which
shall be defined for purposes of Sections 8.1 and
8.2 to mean a Participant who is an Employee) who
directed the Trustee with respect to shares
allocated to his Account under Part A in
accordance with Section 8.1(a) may, again as a
named fiduciary, direct the Trustee with respect
to a portion of both the number of shares of
Company Stock held in the Loan Suspense Account
and the number of such shares allocated to any
Participant's Account under Part A for which no
instructions were timely received by the Trustee.
Such portion shall be determined as follows:
(A) Such portion shall be limited to the
sum of: (I) the number of shares of Company
Stock held in the Loan Suspense Account
reserved for allocation to such Participant's
Employee Group, plus (II) the number of
shares of Company Stock allocated to the
Accounts of Participants in such
Participant's Employee Group under Part A for
which no instructions were timely received.
(B) The number of shares of Company
Stock determined under clause (i)(A) shall be
multiplied by a fraction, the numerator of
which is the number of shares of Company
Stock allocable to Part A that such
Participant directed the Trustee in
accordance with Section 8.1(a) and the
denominator of which is the aggregate number
of shares allocable to Part A that were
directed by active Participants in the same
Employee Group in accordance with Section
8.1(a).
(C) Such Participant, as a named
fiduciary, shall be entitled to direct the
Trustee with respect to the number of shares
determined under clause (i)(B).
(ii) Part B. Each active Participant who
directed the Trustee with respect to shares
allocated to his Account under Part B in
accordance with Section 8.1(a) may, again as a
named fiduciary, direct the Trustee with respect
to a portion of the number of such shares
allocated to any Participant's Account under Part
B for which no instructions were timely received
by the Trustee. Such portion shall be determined
as follows:
(A) Such portion shall be limited to the
number of shares of Company Stock allocated
to the Accounts of Participants in such
Participant's Employee Group under Part B for
which no instructions were timely received.
(B) The number of shares of Company
Stock determined under clause (ii)(A) shall
be multiplied by a fraction, the numerator of
which is the number of shares of Company
Stock allocable to Part B that such
Participant directed the Trustee in
accordance with Section 8.1(a) and the
denominator of which is the aggregate number
of shares allocable to Part B that were
directed by active Participants in the same
Employee Group in accordance with Section
8.1(a).
(C) Such Participant, as a named
fiduciary, shall be entitled to direct the
Trustee, with respect to the number of shares
determined under clause (ii)(B).
(c) Procedure. Such directions shall be provided
directly to the Trustee and shall be held in confidence
and not be divulged or released to any other person.
Within a reasonable time prior to each annual or
special meeting of holders of Company Stock, the ESOP
Committee shall furnish to all Participants (and
Beneficiaries) entitled to direct the Trustee as to the
voting of shares of Company Stock copies of any proxy
solicitation material provided to holders of voting
Company Stock generally together with appropriate
instruction forms or cards and information concerning
the method of providing such instructions to the
Trustee. To the extent permitted by law, if the Trustee
cannot follow directions of Participants (or
Beneficiaries), the ESOP Committee shall direct the
Trustee.
8.2 Control Transaction.
(a) General. The provisions of this Section 8.2
shall apply in the event a Control Transaction is
commenced or proposed by a person or persons. In the
event a Control Transaction is commenced or proposed,
the ESOP Committee, promptly after receiving notice,
shall transfer certain of the ESOP Committee's record
keeping functions under the Plan to an independent
record keeper (which if the Trustee consents in
writing, may be the Trustee). The functions so
transferred shall be those necessary to preserve the
confidentiality of any directions given by the
Participants (and Beneficiaries) in connection with the
Control Transaction. Within a reasonable time after a
Control Transaction is commenced, the ESOP Committee
shall furnish to all Participants (and Beneficiaries)
entitled, as hereinafter set forth, to direct the
Trustee with respect to the Control Transaction, copies
of all offering material provided to holders of Company
Stock generally, together with appropriate instruction
forms or cards and information concerning the method of
providing such instructions to the Trustee. Except as
otherwise required by ERISA, the Trustee shall have no
discretion or authority to sell, exchange, transfer,
convert or otherwise dispose of any of shares of
Company Stock pursuant to such Control Transaction
except to the extent that the Trustee is timely
directed to do so in writing as follows:
(i) Allocated Shares. Each Participant (or
Beneficiary) to whose ESOP Stock Account shares of
Company Stock have been allocated may, as a named
fiduciary within the meaning of ERISA section
403(a)(1), direct the Trustee with respect to the
sale, exchange, transfer, conversion or other
disposition of the shares of Company Stock
allocated to his ESOP Stock Account, and the
Trustee shall follow the directions of those
Participants (and Beneficiaries) who provide
timely instructions to the Trustee.
(ii) Unallocated and Uninstructed Shares.
(A) Part A. Each active Participant who
directed the Trustee with respect to shares
allocated to his Account under Part A in
accordance with Section 8.2(a)(i) may, again
as a named fiduciary, direct the Trustee with
respect to a portion of both the number of
shares of Company Stock held in the Loan
Suspense Account and the number of such
shares allocated to any Participant's Account
under Part A for which no instructions were
timely received by the Trustee. Such portion
shall be determined as follows:
(I) Such portion shall be limited
to the sum of: (x) the number of shares
of Company Stock held in the Loan
Suspense Account reserved for allocation
to such Participant's Employee Group,
plus (y) the number of shares of Company
Stock allocated to the Accounts of
Participants in such Participant's
Employee Group under Part A for which no
instructions were timely received.
(II) The number of shares of
Company Stock determined under clause
(ii)(A)(I) shall be multiplied by a
fraction, the numerator of which is the
number of shares of Company Stock
allocable to Part A that such
Participant directed the Trustee in
accordance with Section 8.2(a)(i) and
the denominator of which is the
aggregate number of shares allocable to
Part A that were directed by active
Participants in the same Employee Group
in accordance with Section 8.2(a)(i).
(III) Such Participant, as a named
fiduciary, shall be entitled to direct
the Trustee with respect to the number
of shares determined under clause
(ii)(A)(II).
(B) Part B. Each active Participant who
directed the Trustee with respect to shares
allocated to his Account under Part B in
accordance with Section 8.2(a)(i) may, again
as a named fiduciary, direct the Trustee with
respect to a portion of the number of such
shares allocated to any Participant's Account
under Part B for which no instructions were
timely received by the Trustee. Such portion
shall be determined as follows:
(I) Such portion shall be limited
to the number of shares of Company Stock
allocated to the Accounts of
Participants in such Participant's
Employee Group under Part B for which no
instructions were timely received.
(II) The number of shares of
Company Stock determined under clause
(ii)(B)(I) shall be multiplied by a
fraction, the numerator of which is the
number of shares of Company Stock
allocable to Part B that such
Participant directed the Trustee in
accordance with Section 8.2(a)(i) and
the denominator of which is the
aggregate number of shares allocable to
Part B that were directed by active
Participants in the same Employee Group
in accordance with Section 8.2(a)(i).
(III) Such Participant, as a named
fiduciary, shall be entitled to direct
the Trustee with respect to the number
of shares determined under clause
(ii)(B)(II).
All such instructions from Participants (and beneficiaries)
shall be provided directly to the independent record keeper
which, if different from the Trustee, shall then instruct
the Trustee as to the amount of shares to be sold, tendered,
exchanged, transferred, converted or otherwise disposed of
in accordance with the above directions. To the extent the
Trustee cannot follow Participant (or Beneficiary)
instructions, the ESOP Committee, as a named fiduciary,
shall direct the Trustee. Except as contemplated by the
foregoing or as required to facilitate the making of Plan
distributions or diversification elections or as required by
law, the Trustee shall have no authority to dispose of
Company Stock in a Control Transaction or otherwise.
(b) Records. Following any Control Transaction that has
resulted in the sale or exchange of any shares of Company
Stock held in the Plan, the record keeper shall continue to
maintain on a confidential basis the Accounts of
Participants (and Beneficiaries) to whose Accounts shares of
Company Stock were allocated at any time during such offer,
until complete distribution of such Accounts or such earlier
time as the record keeper determines that the transfer of
the record keeping functions back to the ESOP Committee will
not violate the confidentiality of the directions given by
the Participants (and Beneficiaries). In the event that
there is no sale or exchange of any shares of ESOP Stock
held in the Plan pursuant to the Control Transaction, the
record keeper shall transfer back to the ESOP Committee the
record keeping functions; provided, however, that the record
keeper shall keep confidential any instructions which it may
receive from Participants (and Beneficiaries) relating to
the Control Transaction.
(c) Proceeds. For purposes of allocating the proceeds
of any sale or exchange pursuant to a Control Transaction,
the ESOP Committee or the independent record keeper, as the
case may be, shall determine the portion, expressed as a
percentage, of shares of each class tendered by the Trustee
that were actually sold or exchanged (the "applicable
percentage" for that class). For each class, the ESOP
Committee or the independent record keeper, as the case may
be, shall then treat as having been sold or exchanged from
the portion of the Loan Suspense Account applicable to that
Employee Group and each of the individual Accounts of
Participants (and Beneficiaries) that number of shares (of
that class) that is obtained by multiplying (i) the
applicable percentage for that class, times (ii) the total
number of shares in such Account of that class that were
directed to be tendered, exchanged or sold in connection
with the Control Transaction. The adjustments to individual
Accounts shall be made by the ESOP Committee or the
independent record keeper, as the case may be, on
information supplied by the Company, the ESOP Committee or
the Trustee.
(d) Actions To Be Taken Following a Control
Transaction. Notwithstanding Section 4.2 or any other
provision of this Plan or the Trust Agreement that requires
that the Trust Fund be invested exclusively in shares of
Company Stock, this Section 8.2(d) shall apply if a Control
Transaction results in the sale or exchange or other
disposition of any shares of Company Stock held in the Plan.
If the consideration received by the Trust as a result of
the Control Transaction consists solely of "appropriate
securities" (as defined below), the terms of the Plan, all
outstanding Acquisition Loans, and future sales under
Additional Acquisition Loans, shall continue as if the
Control Transaction had not occurred. If the consideration
received includes cash, property or securities, other than
appropriate securities, the Trustee shall invest the
proceeds in appropriate securities to the extent possible;
if the Trustee is able to reinvest all such proceeds in
appropriate securities, the Plan, all outstanding
Acquisition Loan and future sales under Additional
Acquisition Loans, shall continue as if the Control
Transaction had not occurred; if the Trustee is unable to
reinvest all such proceeds in appropriate securities, then
the Company shall make appropriate arrangements (which shall
be reasonably satisfactory to ALPA and the IAM and shall
take into account and recognize the position that ESOP
Participants would have enjoyed had all of the shares of
Class 1 Non-Voting Stock been sold to the ESOP on the
Effective Date at a price per share equal to the purchase
price with respect to the shares sold on the Effective Date)
to protect the substantive interests of each Employee Group,
provided, however, that it is not currently intended that
such arrangements will consist of forgiveness of any portion
of any Acquisition Loan. For purposes of this Section
8.2(d), "appropriate securities" shall mean stock (i) that
is described in Code section 409(l), (ii) that is either
common stock described in Code section 409 (l)(1) or
preferred stock that converts into such common stock, and
(iii) the issuer of which stock (A) has a Moody's senior
long-term debt rating which is at least as good as the
better of the Moody's senior long-term debt rating of the
Company or United Airlines, Inc. at such time and (B) is a
"public company" as defined in Article Fifth of the Articles
of Incorporation of the Company.
(e) Special Funding Rules. (i) If (x) any person or
persons commence (which, for purposes of this paragraph,
shall mean filing a tender offer statement on Schedule 14D-1
(or successor form) with the Securities and Exchange
Commission or mailing appropriate solicitation materials to
the shareholders) a bona fide tender offer or exchange offer
for Company Stock which, if successful, would require the
offeror (if a person other than the Company or any of its
affiliates) to file a Form 13D (or successor form) with the
Securities and Exchange Commission with respect thereto, or
(y) the Board of Directors or shareholders approve a Control
Transaction described in Section 1(q)(b), then all of the
remaining shares of Class 1 Non-Voting Preferred Stock that
are to be issued to the Plan pursuant to the
Recapitalization Agreement shall be sold ("Top-Off Sale") by
the Company to the Plan as soon as possible (and, in all
circumstances, in adequate time to allow the Plan to respond
to such event), pursuant to an Additional Acquisition Loan
(conforming to the first sentence of Section 1.6(g) of the
Recapitalization Agreement, provided that the consent of
ALPA and the IAM required by that sentence shall not apply),
unless and to the extent that ALPA and the IAM jointly
request otherwise in writing. (All disputes between the
Company and ALPA and the IAM as to whether any such tender
offer or exchange offer is bona fide shall be made in
accordance with the arbitration procedures described in
Section 11.2(b)(ii)(G)-(J) hereof.) In the Company's sole
discretion such Top-Off Sale may be made subject to a
condition that prevents, to the extent permitted by law, the
consummation of such Top-Off Sale if the event in question
does not result in the sale, exchange or other disposition
of Company Stock, provided that such contingency does not
materially interfere with the Plan's ability to so respond
to the event in question. The purchase price of the shares
of Class 1 Non-Voting Preferred Stock to be sold pursuant to
this subsection (e) shall be the fair market value of such
shares of Class 1 Non-Voting Preferred Stock.
(ii) (A) If a person or persons make a bona fide
offer to the Plan (not covered by paragraph (e)(i)) to
acquire, directly or indirectly, at least 5% of the
Company Stock held by the Plan (the "Offer"), such
Offer shall be treated as if an event described in
(e)(i) and the resultant Top- Off Sale shall be
effected in accordance with (e)(i), subject, however,
to the provisions of (e)(ii)(B).
(B) In the event of an Offer, the Trustee
shall seek directions from Participants regarding
the Offer, in accordance with the provisions of
this Section 8.2, both as to the actual shares
held by the Plan and as to the additional shares
that would be held in the Loan Suspense Account if
the Top-Off Sale had been effected. If following
those directions as to both actual shares and the
shares that would be acquired in a Top-Off Sale,
and following those directions only as to actual
shares would in each case not result in the direct
or indirect acquisition of any Company Stock
pursuant to the Offer, then the Top-Off Sale shall
not be effected; otherwise, the Top-Off Sale shall
be effected as contemplated by (e)(i) and
(e)(ii)(A).
(C) Subject to the next sentence, the
provisions of (e)(ii)(B) shall not apply and the
Top-Off Sale shall be made in accordance with
(e)(ii)(A) if following the (e)(ii)(B) procedures
could reasonably be expected to prevent a Top-Off
Sale from being effected in adequate time to allow
the Plan to accept the Offer. Under the
circumstances described in this (e)(ii)(C),
however, the Top-Off Sale shall be consummated
immediately before the consummation of the
transaction contemplated by the Offer and shall,
to the extent legally permitted, be subject to the
consummation of the transaction contemplated by
the Offer.
(iii) If a Top-Off Sale required by (e)(i) or
(e)(ii) is not consummated, the Company shall make
appropriate arrangements (which shall be reasonably
satisfactory to ALPA and the IAM) to protect the
substantive interests of the Employee Groups with
respect to the ESOP and the relevant transaction and
the purposes of this subsection (e). The appropriate
arrangements contemplated by the foregoing shall take
into account and recognize the position that
Participants would have enjoyed had all of the shares
of Class 1 Non-Voting Preferred Stock been sold to the
Plan on the Effective Date at a price per share equal
to the purchase price with respect to the shares of
Class 1 Non-Voting Preferred Stock sold on the
Effective Date. The provisions of this subsection (e)
and subsection (d) are not mutually exclusive, provided
that to the extent the sales or other appropriate
arrangements described in this subsection (e) occur,
the future sales in connection with Additional
Acquisition Loans described in subsection (d) shall not
be required.
8.3 No Illegal Actions. Notwithstanding any other
provision of this Plan, the Trustee shall not be obligated
to follow the direction of a named fiduciary unless such
direction is in accordance with the terms of the Plan and is
proper under ERISA section 403(a)(2) and not contrary to
Title I of ERISA.
SECTION 9
RIGHTS, RESTRICTIONS AND OPTIONS ON COMPANY STOCK
9.1 Right of First Refusal. If Company Stock
distributed is not readily tradable on an established market
(within the meaning of Code section 409(h)), any shares of
Company Stock distributed by the Trustee shall be subject to
a "Right of First Refusal." The Right of First Refusal shall
provide that, prior to any subsequent transfer, such shares
of Company Stock must first be offered in writing to the
Trust and, if refused by the Trust, to the Company, at the
greater of its independently appraised value as of the
Valuation Date coinciding with or next preceding such offer,
or the price stated in a bona fide written offer and on the
same terms. The Trustee (on behalf of the Trust) and the
Company, as the case may be, shall have a total of 14 days
(from the date the Trust or the Company, as the case may be,
receives the offer) to exercise the Right of First Refusal.
The ESOP Committee shall determine whether a written offer
from a prospective buyer has been made in good faith. A
Participant (or Beneficiary) entitled to a distribution of
Company Stock may be required to execute an appropriate
stock transfer agreement (evidencing the Right of First
Refusal) prior to receiving a certificate for Company Stock.
9.2 Put Option. If Company Stock distributed is not
readily tradable on an established market (within the
meaning of Code section 409(h)), the Company shall issue a
"Put Option" to each Participant (or his Beneficiary)
receiving a distribution of such Company Stock from the
Plan. The Put Option shall permit the Participant (or his
Beneficiary) to sell such Company Stock to the Company, at
any time during two put option periods (described below), at
the then fair market value, such fair market value to be
determined at least annually as of the respective Valuation
Date by an independent appraiser selected by the ESOP
Committee. The first put option period shall be a period of
at least 60 days beginning on the date of distribution of
Company Stock to the Participant (or his Beneficiary). The
second put option period shall be a period of at least 60
days beginning after the new determination of the fair
market value of Company Stock is made by an independent
appraiser (and notification is given to the Participant or
his Beneficiary) in the next following Plan Year. The
Company shall permit the Trustee, in its discretion, to
purchase the Company Stock tendered to the Company under a
Put Option. If the Company or the Trustee purchases Company
Stock tendered under a Put Option and the Company Stock was
distributed to the Participant (or his Beneficiary) in the
form of a lump sum, the payment, at the discretion of the
Company or Trustee, may be made (a) in five substantially
equal annual installments commencing not later than 30 days
after the exercise of the Put Option; provided, however,
that the purchaser provides adequate security and reasonable
interest (as determined by the ESOP Committee) on unpaid
installments, or (b) in a lump sum. If the Company or
Trustee purchases Company Stock tendered under a Put Option
and the Company Stock was distributed as part of an
installment distribution, the payment, in the form of a lump
sum, must be made not later than 30 days after the exercise
of the Put Option. The Trustee, on behalf of the Trust, may
offer to purchase any shares of Company Stock (which are not
sold pursuant to a Put Option) from any former Participant
or Beneficiary at any time in the future, at its then fair
market value.
9.3 Share Legend. Shares of Company Stock held or
distributed by the Trustee may include such legend
restrictions on transferability as the Company may
reasonably require in order to assure compliance with
applicable federal and state securities laws. Except as
otherwise provided in this Section 9, no shares of Company
Stock held or distributed by the Trustee may be subject to a
put, call or other option, or buy-sell or similar
arrangement.
9.4 Nonterminable Rights. The provisions of this
Section 9 shall continue to be applicable to Company Stock
even if the Plan ceases to be an "employee stock ownership
plan" (as defined under Code section 4975(e)(7)).
SECTION 10
DIVIDENDS
10.1 Class 1 Non-Voting Preferred Stock.
(a) Application of Fixed Dividend.
(i) Allocated Shares. Any cash dividends paid
with respect to shares of Class 1 Non-Voting
Preferred Stock allocated to the Participants'
ESOP Stock Accounts which were acquired with the
proceeds of a particular Acquisition Loan, but
excluding dividends in excess of the Fixed
Dividend paid on such Preferred Stock, shall be
used by the Trustee to pay the principal balance
of such Acquisition Loan.
(ii) Unallocated Shares. Any cash dividends
paid with respect to shares of Class 1 Non-Voting
Preferred Stock held in the Loan Suspense Account
which were acquired with the proceeds of a
particular Acquisition Loan, but excluding
dividends in excess of the Fixed Dividend paid on
such Preferred Stock, shall be used by the Trustee
to pay the principal balance of such Acquisition
Loan.
(iii) Any cash dividends described in clauses
(i) or (ii) in excess of the principal balance of
the Acquisition Loan which are attributable to
prior fixed dividends that are not paid due to a
lack of earnings and profits shall be used to pay
interest on such Acquisition Loan if the Company
made additional contributions to the Plan to make
up for such unpaid fixed dividends.
(iv) Any cash dividends described in clauses
(i) or (ii) above not used to repay the
Acquisition Loan in accordance with clauses (i),
(ii) or (iii) above shall be allocated pursuant to
subsection (b) below as if they were dividends in
excess of the Fixed Dividend.
(b) Application of Excess Dividend.
(i) Allocated Shares. Any cash dividends paid
with respect to shares of Class 1 Non-Voting
Preferred Stock allocated to the Participants'
ESOP Stock Accounts in excess of the Fixed
Dividend paid on such Preferred Stock shall be
allocated to such Accounts, pro rata, according to
the number of shares of such Preferred Stock held
in such Accounts on the dividend record date; such
amounts shall be used by the Trustee to purchase
shares of Common Stock.
(ii) Unallocated Shares. Any cash dividends
paid with respect to shares of Class 1 Non-Voting
Preferred Stock held in the Loan Suspense Account
in excess of the Fixed Dividend paid on such
Preferred Stock shall be allocated among the
Employee Groups in proportion to the allocation
percentages set forth in Section 5.4(a)(i)(A). The
amount allocated to each Employee Group shall then
be allocated to the Participants from that
Employee Group, pro rata, according to their Part
A Account balances on the dividend record date;
such amounts shall be used by the Trustee to
purchase shares of Common Stock.
10.2 Other Dividends. Any other cash dividends paid on
Company Stock (excluding Class 1 Non-Voting Preferred Stock)
shall be used by the Trustee to purchase additional shares
of Company Stock as provided in Section 5.3.
10.3 Special Allocated Share Rule. Any Financed Shares
released from a Loan Suspense Account subaccount by reason
of dividends paid with respect to Company Stock that was
acquired with the proceeds of the Acquisition Loan
applicable to that subaccount shall be allocated in the same
manner as provided in Section 5.4(a) for Employer
Contributions; provided, however, that prior to said
allocation, Financed Shares so released from such subaccount
with a fair market value (on the applicable dividend payment
date) equal to the dividends allocated to Participants' ESOP
Cash Accounts and applied to repay such particular
Acquisition Loan as provided in Section 10.1 shall first be
allocated among and credited to those ESOP Stock Accounts,
pro rata, according to the amount of their dividends so
applied. To the extent that the fair market value of the
shares released from a subaccount is less than the dividends
described in the foregoing proviso, Financed Shares released
from other Loan Suspense Account subaccounts shall be used
to make up the insufficiency (after first applying the
foregoing proviso with respect to Financed Shares released
from such other subaccount). Notwithstanding any provision
of the Plan to the contrary, in any Plan Year the total
dividends allocated to a Participant's ESOP Cash Account
used to repay Acquisition Loan(s) shall not, to the extent
required by law, exceed the fair market value of the
Financed Shares released from the Loan Suspense Account and
allocated to that Participant's Account.
SECTION 11
ADMINISTRATION
11.1 General. The Company shall be the administrator of
the Plan and shall have the rights, duties and obligations
of an "administrator" as that term is defined in ERISA
section 3(16)(A) and of a "plan administrator" as that term
is defined in Code section 414(g). Some administrative
functions have been allocated to the ESOP Committee, which
shall have the rights, duties and obligations set forth
herein. The ESOP Committee shall be the "named fiduciary,"
as described in ERISA section 402, with respect to its
authority under the Plan, except to the extent provided in
Section 8, for which each Participant (or Beneficiary) shall
be the named fiduciary, and except with respect to the
Initial Acquisition Loan and Additional Acquisition Loans
and the use of the proceeds thereof to purchase Preferred
Stock, for which the Trustee shall be the named fiduciary.
11.2 Membership and Authority.
(a) General. The ESOP Committee shall consist of
six members: three members shall be appointed by ALPA,
two members shall be appointed by the IAM and one
member shall be appointed by the Company. Meetings of
the ESOP Committee shall be held at the executive
offices of the Company unless a majority of all members
unanimously agree upon another location. The ESOP
Committee shall have the following powers, rights and
duties:
(i) to adopt such rules of procedure and
regulations for the proper and efficient
administration of the Plan and as are consistent
with the provisions of the Plan;
(ii) to enforce the Plan in accordance with
its terms and with such applicable rules and
regulations as may be adopted by the ESOP
Committee;
(iii) to determine all questions arising
under the Plan, to resolve all ambiguities, to
correct defects, to supply omissions, including
the power to determine the rights or eligibility
of Employees or Participants and their
Beneficiaries and their respective benefits;
provided, however, that the ESOP Committee will
not have jurisdiction or power to add to or
subtract from the Plan or any amendments thereto;
(iv) to give such directions to the Trustee
with respect to the Trust Fund as may be provided
in this Plan or in the Trust Agreement;
(v) to maintain and keep adequate books,
records and other data as shall be necessary to
administer the Plan, except those that are
maintained by the Company or by the Trustee;
(vi) to direct all payments of benefits to
Participants and Beneficiaries, consistent with
the terms of the Plan and the Trust Agreement;
(vii) to establish an investment policy and
objective for the Plan, except that it is
understood that the Plan is designed to invest
exclusively in Company Stock;
(viii) to elect a Chairman and to appoint a
Secretary, who need not be a member of the ESOP
Committee, who shall keep minutes of the
proceedings and have custody of all records and
documents pertaining to administration of the
Plan;
(ix) to be agent for the service of legal
process on behalf of the Plan;
(x) to authorize one or more of its members
to execute any documents on behalf of the ESOP
Committee, in which event the ESOP Committee shall
notify the Trustee in writing of such action. The
certificate of the Secretary or any authorized
member of the ESOP Committee that the ESOP
Committee has taken or authorized any action shall
be conclusive in favor of any person relying on
such certificate;
(xi) to obtain an independent appraisal of
the fair market value of the Company Stock held by
the Trust from an independent appraiser who meets
the requirements of Code section 170(a)(1); and
(xii) to perform any other acts, consistent
with the Plan and Trust Agreement, necessary or
appropriate to the administration of the Plan and
the discharge of its duties.
(b) Special Provisions.
(i) If the ESOP Committee unanimously agrees
that a matter affects members of only one Employee
Group, the matter shall be considered by an ESOP
Committee consisting solely of members who were
appointed on behalf of such Employee Group, which
appointees must act by a majority vote, and the
provisions of this Section 11.2 shall be construed
accordingly. If the ESOP Committee is unable to
agree unanimously that the matter affects only
members of one such Employee Group, the
jurisdictional determination, that is, whether the
matter affects only members of one such Employee
Group, shall be made by a neutral arbitrator
selected in accordance with clause (iii) below.
(ii) As set forth in Section 12.3, the ESOP
Committee will have the exclusive power to hear
and determine all appeals of claims denied under
Section 12.2 of the Plan pursuant to the
procedures hereinafter provided. With respect to
such disputes, the ESOP Committee will function as
a System Board of Adjustment as provided in Title
II of the Railway Labor Act, as amended, and the
following provisions will govern:
(A) The jurisdiction of the ESOP
Committee will be exclusive. Appeals may be
submitted to the ESOP Committee either by a
Participant or a Beneficiary.
(B) The ESOP Committee will establish
rules of procedure for the conduct of appeals
before it, which rules will not be
inconsistent with the provisions of the Plan.
Insofar as possible, such procedures will
follow the procedure of the American
Arbitration Association. The Chairman will
promptly advise the Company, the IAM and ALPA
of such rules of procedure.
(C) All appeals properly referred to the
ESOP Committee for consideration will be
addressed to the Chairman in the form of a
submission as prescribed by the rules of
procedure. Six copies of each submission,
including all papers and exhibits in
connection therewith, will be forwarded to
the Chairman, who will promptly transmit one
copy thereof to each member of the ESOP
Committee. The submission in each dispute
will include the question to be decided by
the ESOP Committee, the provisions of the
Plan involved in the dispute, the position of
the petitioner and all asserted facts
supporting such position.
(D) The submission will state the names
of the parties to whom the petitioner sent
copies of the submission. A copy of the
submission will be served by the petitioner
upon ALPA, the IAM and the Company.
(E) The submission will state whether or
not the petitioner requests both a hearing on
the facts and oral argument, or only oral
argument. The answer of each party may
request a hearing on the facts and oral
argument or only oral argument. If neither
the submission nor any answer requests a
hearing, the ESOP Committee may waive a
hearing and dispose of the dispute on the
basis of the submission and answers.
(F) When a hearing has been requested in
a dispute, the ESOP Committee will fix a date
for such hearing as soon as reasonably
possible after receipt of the submission. The
date for the hearing will not be more than 60
days after receipt of the submission (unless
circumstances require a longer period which
can be no more than 60 days). If two or more
members of the ESOP Committee consider the
question involved in the dispute to be of
sufficient urgency, the ESOP Committee may
fix an earlier date, which will not be less
than ten days after filing of the answer. If
requested by the ESOP Committee or the
Participant, a transcript of each proceeding
will be made and retained in the files of the
ESOP Committee. Such hearing will be heard at
the Company's Executive Offices in Elk Grove
Township, Illinois, unless the entire ESOP
Committee, by a majority vote, otherwise
determines.
(G) Appeals before the ESOP Committee
shall be decided by a majority vote of the
members of the ESOP Committee. However, a
majority of the members of the ESOP Committee
appointed on behalf of any Employee Group has
the power to require that any submission
(except for matters described in subsection
(iv) below) be referred for decision to a
neutral arbitrator. Furthermore, if the ESOP
Committee deadlocks in the case of any vote,
the matter shall be referred for decision to
a neutral arbitrator. In any case in which a
neutral arbitrator is to be appointed, the
parties will, within 10 days after notice of
the need to appoint a neutral arbitrator,
agree upon a neutral arbitrator. If the
parties fail to agree upon the selection of a
mutually acceptable neutral arbitrator the
parties will select an arbitrator by
alternate striking from a panel of
arbitrators supplied by the American
Arbitration Association, preferably a panel
with knowledge of employee stock ownership
plans. When an neutral arbitrator is
selected, the power to take further action
with respect to the dispute shall rest with
the neutral arbitrator until the final
decision is made in the dispute.
(H) When a neutral arbitrator is
selected, any party to a dispute may make a
written request to the neutral arbitrator for
a further hearing or oral argument provided
it is made within 15 days after such
selection. The neutral arbitrator will decide
such requests. If no further hearing or
argument is held, the neutral arbitrator will
consider and review the prior record in the
dispute. The decision of the neutral
arbitrator will be rendered within 30 days
after the close of any further hearing or
argument. The neutral arbitrator shall decide
the matter based upon the record before him
and the terms of the Plan and shall not give
weight to any previous votes of the ESOP
Committee concerning the matter.
(I) The decision of the ESOP Committee,
or neutral arbitrator, if any, will be final
and binding upon the Company, ALPA, the IAM,
a Participant or Beneficiary and any other
person claiming under the Plan.
(J) Subject to Section 11.12, the
expenses and reasonable compensation of the
neutral arbitrator selected as provided
herein shall be borne by the Company.
(iii) Except as provided in Section
11.2(b)(i), for all other purposes under the Plan,
five members of the ESOP Committee will constitute
a quorum, except that to constitute a quorum, one
member appointed on behalf of each Employee Group
must be present. All actions and decisions of the
ESOP Committee under this Section 11 shall be by
(A) the affirmative vote of a majority of the
members present at the meeting at which the vote
is being taken or (B) the unanimous written
consent of all members then in office. However, a
majority of the members of the ESOP Committee
appointed on behalf of any Employee Group has the
power to require that any action or decision
(except as limited in clause (iv) below) be
referred for decision to a neutral arbitrator.
Furthermore, if the ESOP Committee deadlocks in
the case of any vote, the matter shall be referred
for decision to a neutral arbitrator. The
procedures set forth in subsections 11.2(b)(ii)(G)
through (J) shall apply.
(iv) The ESOP Committee is the named
fiduciary with respect to the management and
disposition of assets held in the Trust Fund. The
power of a majority of the members of the ESOP
Committee appointed on behalf of any Employee
Group to require that a matter be referred to a
neutral arbitrator shall not apply to a matter if
it concerns the exercise of authority respecting
management or disposition of assets held in the
Trust Fund. Notwithstanding the preceding
sentence, the power of a majority of the members
of the ESOP Committee appointed on behalf of any
Employee Group to require that a matter be
referred to a neutral arbitrator shall apply if
(A) the matter does not involve a Control
Transaction and (B) it is reasonably determined
that the resolution of such matter might
reasonably be expected to subject the Company to a
material liability. Any dispute with respect to
the application of this clause (iv) shall be
resolved in accordance with the arbitration
procedures described in Section
11.2(b)(ii)(G)-(J).
11.3 Delegation by ESOP Committee. The ESOP Committee
may establish procedures for allocation of fiduciary
responsibilities among its members and delegation of
fiduciary responsibilities to persons other than named
fiduciaries; provided, however, that the delegation of the
power to manage or control the assets of the Trust Fund may
only be delegated to an "investment manager" (as defined in
ERISA section 3(38)). In exercising its authority to control
and manage the operation and administration of the Plan, the
ESOP Committee may employ agents and counsel (who may also
be employed by or represent any Employer) and to delegate to
them such powers as the ESOP Committee deems desirable. Any
such delegation or appointment shall be in writing and shall
reflect the unanimous action of the ESOP Committee members
then acting. The writing contemplated by the foregoing
sentence shall fully describe the advice to be rendered or
the functions and duties to be performed by the delegate.
11.4 Information To Be Furnished to ESOP Committee. The
Employers shall furnish the ESOP Committee such data and
information as may be reasonably required to administer this
Plan; provided, however, that the preceding phrase shall not
in any case restrict the ability of ESOP Committee members
to see individual Account data with respect to the
Participants in the Employee Groups they represent and,
provided, further, that individualized information shall be
treated in a confidential manner. The ESOP Committee shall
be entitled to rely on any information furnished by the
Employers that is needed for calculation of benefits due
under the Plan, or any matters relating to administration of
the Plan. A Participant or Beneficiary entitled to benefits
under the Plan must furnish to the ESOP Committee such
evidence, data or information as the ESOP Committee
considers desirable to carry out its obligations under the
Plan. Any benefits under the Plan may be conditional upon
the prompt submission of such information.
11.5 ESOP Committee's Decision Final. Except as
otherwise provided herein, to the extent permitted by law,
any interpretation of the Plan and any decision on any
matter within the discretion of the ESOP Committee made by
the ESOP Committee in good faith is binding on all persons.
Except as provided in ERISA section 405, a dissenting member
is not responsible for any action or failure to act if
within a reasonable time he registers his dissent with the
other members, the Company and the Trustee.
11.6 Remuneration and Expenses. No remuneration shall
be paid to any ESOP Committee member who is an Employee of
the Company or an Affiliate for services performed
hereunder. However, subject to Section 11.12, the reasonable
expenses of an ESOP Committee member incurred in the
performance of an ESOP Committee function shall be
reimbursed by the Employers. For purposes of the preceding
sentence, flight pay loss and pay loss for each IAM member
shall be treated as an expense.
11.7 Indemnification of the ESOP Committee. To the
extent permitted by applicable law, the ESOP Committee and
its members and any employee, director, or officer of the
Company or its Affiliates, shall be indemnified by the
Company against any and all liabilities, settlements,
judgments, losses, costs, and expenses (including reasonable
legal fees and expenses) of whatever kind and nature which
may be imposed on, incurred by or asserted against them by
reason of the performance or nonperformance of their duties
in connection with the Plan if such action or inaction did
not constitute gross negligence or willful misconduct.
Furthermore, the Company agrees to indemnify any such
persons against any liability imposed as a result of a claim
asserted by any person or persons under federal or state law
where such persons act in good faith or in reliance on a
written direction or certification of the Company. The
foregoing right of indemnification shall be in addition to
other rights such persons may have by law or by reason of
insurance coverage of any kind. The Company may, at its own
expense, settle any claim asserted or proceeding brought
against any such persons when such settlement appears to be
in the best interests of the Company. If the Company obtains
fiduciary liability insurance to protect the ESOP Committee
or any of its members, the provisions of this Section 11.7
shall be applicable only to the extent that such insurance
coverage is insufficient. The Company shall secure fidelity
bonding for the fiduciaries of the Plan, as required by
ERISA section 412 and shall secure insurance for ESOP
Committee members coextensive with any ERISA insurance
coverage provided to any member of the Board of Directors
or, if more favorable, to any Employee.
11.8 Resignation or Removal of ESOP Committee Member.
An ESOP Committee member may resign at any time by
delivering his written resignation to the Company. Each of
the Company, ALPA and the IAM may remove its ESOP Committee
members for any reason. In addition, the Company, at its
discretion, may remove any ESOP Committee member for cause
upon delivery of written notice to him. Except as provided
in the preceding sentence, such resignation or removal, as
the case may be, shall become effective only upon the
appointment of a qualifying successor member being duly
appointed in accordance with Section 11.9. For purposes
hereof, "cause" shall be construed to mean an action
permitting a member of the Board of Directors to be for
cause.
11.9 Appointment of Successor ESOP Committee Members.
ALPA, the IAM or the Company, as the case may be, shall, in
accordance with the composition of the ESOP Committee
described in Section 11.2, promptly fill any vacancy in the
membership of the ESOP Committee and shall give prompt
written notice thereof to the other ESOP Committee members,
the Company and the Trustee.
11.10 Interested ESOP Committee Member. A member
may not decide or determine any matter or question
concerning his own benefits under the Plan or as to how they
are to be paid to him unless either such decision could be
made by him under the Plan if he were not a member of the
ESOP Committee, or such decision applies to all affected
Participants similarly. If a member is disqualified to act,
and the remaining members of the ESOP Committee cannot agree
on a decision, ALPA, the IAM or the Company, as the case may
be, may appoint a temporary member to exercise the powers of
the interested member concerning the matter as to which he
is disqualified.
11.11 Compliance with Laws. Notwithstanding
anything in the Plan or the Trust Agreement to the contrary,
every individual who is a fiduciary with respect to the Plan
shall exercise his responsibilities with respect to the Plan
in a manner consistent with ERISA and other applicable laws.
11.12 Expenses of the Plan and Trust. All
reasonable expenses of administering the Plan and Trust
shall be charged to and paid by the Employers; provided,
however, that, in the case of a dispute between the Company
and the Committee, the reasonableness of any expense shall
be determined without regard to Sections 11.5 and
11.2(b)(ii)(I), and, provided, further, that in the event of
any disagreement with respect to the reasonableness of an
expense, neither a determination of the ESOP Committee that
an expense is reasonable nor a determination by the Company
that an expense is unreasonable shall be accorded any
presumption of correctness. Unless the Company and ESOP
Committee otherwise agree, such disagreement shall be
resolved through the judicial process and the Company shall
pay the reasonable expenses of litigation (and with regard
to these expenses, the ESOP Committee's determination of
reasonableness shall be conclusive). The reasonableness of
any expense with respect to the Plan or Trust shall be
determined by taking into account, inter alia, (a) the
appropriateness and magnitude of the expense, (b)
comparative reference to the types and amounts of expenses
incurred by other very large employee stock ownership plans
that own a significant portion of the employer's outstanding
stock, (c) the complexity and size of this Plan and (d) the
special purposes for which this Plan was established.
Payment of expenses shall not be deemed to be Employer
Contributions.
SECTION 12
CLAIMS PROCEDURE
12.1 Written Claim. The Company, which may delegate its
authority, shall be the fiduciary for the initial decision
on claims for benefits under the Plan. A Participant (or
Beneficiary) may present a claim to the Company for any
unpaid benefits. The Company shall establish procedures for
action upon claims initially made and the communication of a
decision to the claimant promptly and, in any event, not
later than 90 days after the claim is received, unless
special circumstances require an extension of time for
processing the claim. If an extension is required, notice of
the extension shall be furnished the claimant prior to the
end of the initial 90-day period, which notice shall
indicate the reasons for the extension and the expected
decision date. The extension shall not exceed 90 days. The
claim may be deemed by the claimant to have been denied for
purposes of further review described below in the event a
decision is not furnished to the claimant within the period
described in the three preceding sentences. If the claim for
benefits is wholly or partially denied, the Company shall
notify the Participant (or Beneficiary) in writing of such
denial of benefits within 90 days after the Company
initially received the benefit claim. Such 90-day period may
be extended for an additional 90 days if the Company
provides written notice of the extension to the claimant
prior to the termination of such 90-day period and the
extension is based on special circumstances.
12.2 Notice of Denial. A notice of a denial of benefits
shall advise the Participant (or Beneficiary) of:
(a) the specific reason or reasons for the denial;
(b) the specific provisions of the Plan on which
the denial is based;
(c) any additional material or information
necessary for the Participant (or Beneficiary) to
perfect his claim and an explanation of why such
material or information is necessary; and
(d) the steps which the Participant (or
Beneficiary) must take to have his claim for
benefits reviewed.
12.3 Review Procedure. Each Participant (or
Beneficiary) whose claim for benefits has been denied shall
have the opportunity to file a written request pursuant to
Section 11.2(b)(ii) for a full and fair review of his claim
by the ESOP Committee, to review all documents pertinent to
his claim, and to submit a written statement regarding
issues relative to his claim. Such written request for
review of his claim must be filed pursuant to the procedure
set forth in Section 11.2(b)(ii) by the Participant (or
Beneficiary) within 60 days after receipt of written
notification of the denial of his claim.
12.4 Notices. All notices denying a claim for benefits,
and all decisions on requests for a review of the denial of
a claim for benefits, shall be written in a manner
calculated to be understood by the Participant (or
Beneficiary) filing the claim or requesting the review.
SECTION 13
AMENDMENT AND TERMINATION
13.1 Amendment.
(a) While the Company expects and intends to
continue the Plan, the Company must necessarily
reserve, and does hereby reserve, the right to amend
the Plan, at any time; provided, however, that, subject
to Sections 13.1(b), (c), and (d) hereof and Section
1.6(g) of the Recapitalization Agreement (relating to
skipped dividends), no amendment may be adopted without
the approval of both ALPA and the IAM.
(b) With respect to selected "intra-group
matters," however, the Company may amend the Plan with
respect to the Salaried and Management Group and shall
amend the Plan as reasonably requested by ALPA and the
IAM for their respective Employee Groups. An amendment
relates to an "intra- group matter" only if it relates
to eligibility, or allocation and does not relate to
any other matter, including, without limitation,
withdrawal, loan, voting, vesting or fiduciary
provisions; provided, however, that no amendment may be
made which shall disqualify the Plan or extend
allocations hereunder beyond the year 2000 or affect
the pace of allocations of Company Stock in a manner
that would adversely affect the Plan's projected
ability to meet the requirements of Code Section
415(c)(6) (which last requirement may be waived by
ALPA). Notwithstanding the preceding sentence, with
respect to an intra-group matter, the Company need not
and cannot (without the required consent) adopt any
amendment if it would entail an additional annual
expense in excess of approximately $25,000 or if the
Company reasonably believes the Company will be exposed
to a material liability if the amendment is adopted
and, provided, further, that disputes under this
subsection (b) shall be resolved by the arbitration
procedures of Section 11.2(b)(ii). Finally, the Company
may not adopt with respect to Management and Salaried
Employees and neither ALPA nor the IAM may require the
Company to adopt more than three amendments under this
Section 13.1(b) and, in the case of the ALPA Employee
Group and the Management and Salaried Employee Group,
no amendment may require that allocations be based on
factors other then Compensation, Account balances,
dividends, and dividend credits.
(c) ALPA and the IAM shall be accorded an adequate
opportunity to review any submission referred to in the
first sentence of Section 7(a) of the Preferred Stock
Purchase Agreement, and they shall have the right to
participate in the consideration of any amendment
required by the second sentence of Section 7(a) of the
Preferred Stock Purchase Agreement. If an amendment to
the Plan or Trust is required to result in the issuance
of a determination letter described in such Section
7(a), and if there is more than one form of amendment
that would result in such issuance, the Company, ALPA,
and the IAM shall agree on the form of such amendment;
provided, that if the three persons cannot timely
agree, an arbitrator shall be immediately selected
pursuant to the procedures set forth in Section
11.2(b)(ii). Such arbitrator shall select the amendment
that would result in such issuance and that best
carries out the purposes of this Plan at a reasonable
expense.
(d) Finally, the approval of ALPA and the IAM
shall not be required with respect to an amendment if
such amendment (w) is in connection with an extension
of an Acquisition Loan in accordance with its terms,
(x) extends the allocation period applicable to the
Salaried and Management Group, (y) will not cause any
extension in the allocation period applicable to the
ALPA Employee Group or the IAM Employee Group, and (z)
the failure to adopt the amendment would make it
impossible to successfully complete the steps described
in Section 5.4(a)(i) through (vii) without changing the
percentages set forth in Section 5.4(a)(i)(A). The
Company agrees that its authority to extend an
Acquisition Loan shall be conditioned on enactment of
an amendment accomplishing the goals of the prior
sentence. ALPA and the IAM shall have the unilateral
power to require the Company to extend an Acquisition
Loan and adopt an amendment identical to that described
in the preceding two sentences, so long as the
protections described in the preceding two sentences
are accorded to the Employee Groups for which the
amendment is not required.
(e) An amendment under Subsection (b) or (d) shall
not be effective unless advance notice of at least 10
days before adoption is given to ALPA, the IAM, and the
Board of Directors. Such advance notice may be waived
by the party to whom notice is otherwise due.
13.2 Termination. Subject to the approval of ALPA and
the IAM, the Plan will terminate as to all of the Employers
on any date specified by the Company.
13.3 Merger and Consolidation of Plan; Transfer of Plan
Assets. No merger or consolidation with, or transfer of
assets to, any other plan may be effected without the
consent of ALPA and the IAM. In the case of any merger or
consolidation with, or transfer of assets and liabilities
to, any other plan, provisions shall be made so that each
Participant in the Plan on the date thereof, if the Plan was
then terminated, would receive a benefit immediately after
the merger, consolidation or transfer that is equal to or
greater than the benefit he would have been entitled to
receive immediately prior to the merger, consolidation or
transfer, if the Plan had then terminated. Notwithstanding
the preceding language, in the event of a merger, if the
surviving corporation of the merger agrees to continue the
Plan, no termination or partial termination will be deemed
to have occurred. This Section 13.3 does not apply to
transfers or rollovers described in Sections 7.1 and 7.5.
13.4 Distribution on Termination. If, on termination of
the Plan, a Participant remains an Employee of his Employer
or any of its Affiliates, the amount of the Participant's
benefits may be retained in the Trust until after the
Participant's termination of employment with his Employer
and any of its Affiliates and shall be paid to such
Participant or, in the event of the Participant's death, to
his Beneficiary, in a lump sum. The benefits payable to a
Participant whose employment with his Employer or any of its
Affiliates is terminated coincident with the termination of
the Plan shall be paid to the Participant or, in the event
of the Participant's death, to his Beneficiary, in a lump
sum. All appropriate accounting provisions of the Plan will
continue to apply until the benefits of all affected persons
have been distributed to them. Affected Participants will be
notified of an amendment, termination or partial termination
of the Plan, as required by law.
SECTION 14
TOP-HEAVY PROVISIONS
14.1 Top-Heavy Provisions. If, as of the last day of
the first Plan Year, or thereafter, if as of the day next
preceding the beginning of any Plan Year (the "Determination
Date"), the Plan is a "top-heavy plan" (determined in
accordance with the provisions of Code section 416(g)); that
is, the aggregate present value of the accrued benefits and
account balances of all "Key Employees" (within the meaning
of Code section 416(i) and for this purpose using the
definition of Compensation, as modified under Section
5.5(b)) and their Beneficiaries exceeds 60% of the aggregate
present value of the accrued benefits and account balances
of all Participants and Beneficiaries, the amendments
specified in this Section 14 will automatically become
effective as of the first day of the Plan Year. For purposes
of the above sentence, the aggregate present value of the
accrued benefits and account balances of a Participant who
has not performed any services for the Company or any of its
Affiliates during the five year period ending on the
Determination Date shall not be taken into account. This
calculation shall be made in accordance with Code section
416(g), taking into consideration plans which are considered
part of the Aggregation Group. The term "Aggregation Group"
shall include each plan of the Company or any of its
Affiliates that includes a Key Employee and each plan of the
Company or any of its Affiliates that allows the Plan to
meet the requirements of Code section 401(a)(4) or Code
section 410 and may include any other plan of the Company or
any of its Affiliates, if the Aggregation Group would
continue to meet the requirements of Code sections 401(a)(4)
and 410.
14.2 Amendments.
(a) Minimum Accruals. Section 3 will be modified
to provide that the aggregate amount of Employer
Contributions allocated in each Plan Year to the
Accounts of each Participant who is a Non-Key Employee
(within the meaning of Code section 416(i)(1)), and who
is employed by an Employer as of the last day of the
Plan Year, may not be less than the lesser of:
(i) three percent of his Compensation for
the Plan Year; and
(ii) a percentage of his Compensation equal
to the largest percentage obtained by dividing the
sum of the amount credited to the Accounts of any
Key Employee by that key Employee's Compensation;
and
(b) Code section 415(e). Section 5.5 will be
amended to provide that the dollar limitations in the
denominators of the "defined benefit plan fraction" and
"defined contribution plan fraction" (as such terms are
defined in Code section 415(e)) will be multiplied by
1.0 instead of 1.25. However, the above sentence shall
not apply if "four percent" is substituted for "three
percent" in paragraph (a) above.
The preceding provisions will remain in effect for the
period in which the Plan is top-heavy. If, for any
particular year thereafter, the Plan is no longer
top-heavy, the provisions contained in this Section 14
shall cease to apply, except that any previously vested
portion of any Account balance shall remain
nonforfeitable.
14.3 Super Top-Heavy Provisions. If, as of a
Determination Date, the aggregate present value of the
accrued benefits and Account balances of all "Key Employees"
(within the meaning of Code section 416(i)) and their
Beneficiaries exceeds 90% of the aggregate present value of
the accrued benefits and Account balances of all
Participants and Beneficiaries, paragraph (a) of Section
14.2 will automatically become effective as of the first day
of such Plan Year, except that Section 14.2(b) will be
modified to provide that the dollar limitations in the
denominators of the defined benefit plan fraction and
defined contribution plan fraction in Section 5.5 shall be
multiplied by 1.0 instead of 1.25, whether or not the
minimum benefit is increased under Section 14.2(a).
14.4 Special Rule. The provisions of this Section 14
shall not apply to Employees included in a unit of Employees
covered by a collective bargaining agreement to the extent
provided by Code section 416(i)(4).
SECTION 15
MISCELLANEOUS
15.1 Qualification. The Plan is designed and intended
to comply with the requirements of Code section 401(a) so
that contributions and the income on assets in Participants'
Accounts will be exempt from Federal income tax until
distributed. Accordingly, the adoption of the Plan and the
implementing Trust and contributions hereunder are
contingent upon and subject to obtaining a written
determination of the Internal Revenue Service that the Plan
complies with the requirements of Code section 401(a) and
that the Trust is exempt from taxation under Code section
501(a).
15.2 Reversions to Employer. All contributions
hereunder are expressly conditioned on their deductibility
under Code section 404 and the initial qualification of the
Plan. Notwithstanding anything to the contrary contained in
the Plan, or in any amendment hereto, if (a) any
contribution has been made by an Employer by a mistake of
fact, or (b) the initial qualification of the Plan under
Code section 401(a) has been denied, or (c) any deduction
for a contribution has been disallowed, the Trustee shall
return the entire Trust assets if clause (a) applies or such
contribution (or the value thereof if lower than the amount
of such contribution) to the Company, but in no event shall
any such return be made after the expiration of one year
following (i) the payment thereof in the case of clause (a)
above, (ii) the denial of qualification in case of clause
(b) above, or (iii) the disallowance of the deduction in the
case of clause (c) above; provided, however, that prior to
any such return, Appropriate Arrangements shall be made with
ALPA and the IAM to protect the substantive rights of each
Employee Group under the Plan.
15.3 Governing Law. The Plan shall be construed and
administered according to the laws of the State of Illinois
to the extent that such laws are not preempted by the laws
of the United States of America.
15.4 Notices. Any notice, communication or document
required hereunder to be given to, or filed with, the ESOP
Committee, any union, the Company or any other person shall
be properly given or filed if it is in writing and delivered
in person or by mail (including federal express, telex and
facsimile transmission) addressed,
If to ALPA, to:
UAL-MEC/ALPA
6400 Shafer Court
Suite 700
Rosemont, IL 60018
Telephone: (708) 292-1700
Telecopy: (708) 292-1760
Attention: Captain Roger D. Hall
If to IAM, to:
International Association of Machinists
and Aerospace Workers
9000 Machinists Place
Upper Marlboro, MD 20772-2687
Telephone: (301) 967-4500
Telecopy: (301) 967-4591
Attention: William L. Scheri
IAM District Lodge 141
321 Allerton Avenue
South San Francisco, CA 94080
Telephone: (415) 873-0662
Telecopy: (415) 873-1676
Attention: Kenneth W. Thiede
If to the Company, to:
UAL Corporation
1200 E. Algonquin Road
Elk Grove Township, IL 60007
Telephone: (708) 956-2400
Telecopy: (708) 952-4683
Attention: Chief Executive Officer and
Chief Legal Officer
If to any member of the ESOP Committee, to such member
at his or her home address, with a copy to his or her
respective Union at the address set forth above.
If to any other person, to:
such address or telecopy number as such person may
hereafter specify for such purpose.
or such other address or telecopy number as any of the above
may hereafter specify for such purpose by notice in
accordance with the foregoing. Each such notice, request or
other communication shall be effective (i) if given by
facsimile, when received by the addressee using the
facsimile number specified in this Section, as evidenced by
an automated confirmation receipt from the sending facsimile
machine or (ii) if given by any other means, when delivered
at the address specified in this Section.
15.5 Evidence. Evidence required of anyone under the
Plan may be by certificate, affidavit, document or other
information which the person acting on it considers
pertinent and reliable, and signed, made or presented by the
proper party or parties.
15.6 Action by Employer. Any action required or
permitted to be taken by an Employer under the Plan
(including any power of the Company to amend or to terminate
the Plan as provided herein) shall be by resolution of its
board of directors or by a person or persons authorized by
its board of directors.
15.7 Execution. To record the adoption of this Plan,
the undersigned duly authorized officers of the Company have
caused this document to be executed and to bear the
corporate seal of the Company, all as of the Effective Date.
15.8 Adjustments. This Plan contains various references
to Class 1 and/or Class 2 Non-Voting Preferred Stock. If and
to the extent appropriate, an appropriate revision shall be
made to such references if the outstanding number of shares
of Class 1 and/or Class 2 Non-Voting Preferred Stock is
changed into, or exchanged for, a different number or kind
of shares or securities of the Company through a
reorganization or merger, or through a combination,
recapitalization, reclassification, stock consolidation or
otherwise.
UAL CORPORATION
By: /s/ Joseph R. O'Gorman
_______________________
Title: Executive Vice President
Dated: July 12, 1994
EX-10
3
EXHIBIT 10.2
EXHIBIT 10.2
UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
Between
UAL CORPORATION
and
STATE STREET BANK AND TRUST COMPANY
July 12, 1994
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . .
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . .
ARTICLE II ESTABLISHMENT OF THE TRUST . . . . . . . . .
ARTICLE III POWERS OF TRUSTEE . . . . . . . . . . . . .
ARTICLE IV ADMINISTRATION . . . . . . . . . . . . . . .
ARTICLE V PAYMENTS OF BENEFITS AND EXPENSES . . . . .
ARTICLE VI LIABILITY AND INDEMNIFICATION
OF THE TRUSTEE . . . . . . . . . . . . . .
ARTICLE VII ACCOUNTING OF THE TRUSTEE . . . . . . . . .
ARTICLE VIII REMOVAL AND RESIGNATION OF THE
TRUSTEE . . . . . . . . . . . . . . . . .
ARTICLE IX AMENDMENT AND TERMINATION . . . . . . . . .
ARTICLE X LEVERAGED ACQUISITIONS OF QUALIFYING
STOCK . . . . . . . . . . . . . . . . . .
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . .
UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TRUST AGREEMENT
THIS AGREEMENT has been made as of the 12th day of
July, 1994, between UAL CORPORATION, a corporation organized
under the laws of the State of Delaware with its principal place
of business in Elk Grove Township, Illinois (hereinafter referred
to as the "Company"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company with its principal place of business
at 225 Franklin Street, Boston, Massachusetts (hereinafter
referred to as the "Trustee").
RECITALS
WHEREAS, the Company has adopted the UAL Corporation
Employee Stock Ownership Plan (the "Plan") for the benefit of
certain employees of the Company and its Affiliates; and
WHEREAS, the Plan consists of two portions, a
"leveraged" portion (Part A) that is intended to be an employee
stock ownership plan and an "unleveraged" portion (Part B); and
WHEREAS, Part A consists of both a stock bonus plan
component and a money purchase pension plan component and Part B
consists solely of a stock bonus component; and
WHEREAS, the Plan provides for the establishment of a
trust (the "Trust") to hold, invest and administer amounts
contributed under both Part A and Part B of the Plan; and
WHEREAS, in order to effectuate the Plan, the Company
desires to establish a Trust, designed to meet the applicable
requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Employee Retirement Income Security Act of
1974, as amended ("ERISA"); and
WHEREAS, Part A and Part B are intended to qualify
under Section 401(a) of the Code and Part A is intended to
qualify under Section 4975(e)(7) of the Code and to meet the
requirements of Section 4975(d)(3) of the Code, and the Trust is
intended to be exempt from federal income taxation under Section
501(a) of the Code; and
WHEREAS, the authority to manage and control the
operation and administration of the Plan is vested in the UAL
Employee Stock Ownership Plan ESOP Committee, as named fiduciary
as provided in the Plan, which named fiduciary shall have such
authorities and shall be subject to such duties with respect to
the Trust as are specified in this Agreement and the Plan; and
WHEREAS, cash, property and/or Company Stock (as
hereinafter defined) will from time to time be contributed to or
purchased by the Trustee, which assets, as and when received by
the Trustee, will constitute a trust fund to be held for the
exclusive benefit of the participating employees under the Plan
or their beneficiaries and to defray reasonable expenses of
administering the Plan; and
WHEREAS, the Company desires the Trustee to hold and
administer such trust fund and the Trustee is willing to hold and
administer such trust fund pursuant to the terms of this
Agreement:
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants herein contained, and intending to be
legally bound hereby, the Company and the Trustee do hereby
covenant and agree as follows:
ARTICLE I
DEFINITIONS
Definitions. All defined terms used herein have the
meaning assigned to them in the Plan, except as otherwise
provided herein, and unless the context otherwise requires or
unless specifically provided, all provisions of this Agreement
shall apply to both Part A and Part B. The following terms as
used in this Agreement have the meaning indicated unless the
context requires otherwise:
1.1 "Affiliate" means any corporation, trade or
business, which, at the time of reference, is together with the
Company, a member of a controlled group of corporations, a group
of trades or businesses (whether or not incorporated) under
common control or an affiliated service group, as described in
Code sections 415(b), 414(c) and 414(m), respectively, or any
other organization treated as a single employer under Code
section 414(o); provided, however, that, where the context so
requires, the term "Affiliate" shall be construed to give full
effect to the provisions of Code sections 409(l)(4) and 415(h).
1.2 "Acquisition Loan" means a loan (or other
extension of credit, including an installment obligation to a
party in interest (as defined in ERISA Section 3(14)) incurred by
the Trustee in connection with the purchase of Qualifying
Employer Securities.
1.3 "Beneficiary" means the person or persons to whom
a deceased Participant's benefits are payable under the Plan.
1.4 "Board of Directors" means the Board of Directors
of the Company.
1.5 "Company" means UAL Corporation and any successor
thereto.
1.6 "Company Stock" means any stock issued by the
Company (or a corporation which is a member of the same
controlled group) which meet the requirements of Section 407 of
ERISA or Section 409(l) of the Code.
1.7 "Employee Group" means "Employee Group" as defined
in the Plan.
1.8 "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and all successor laws thereto.
1.9 "ESOP Committee" means the committee appointed to
administer the Plan pursuant to Section 11 thereof.
1.10 "Fund" means the contributions of cash or property
reasonably acceptable to the Trustee, including, but not limited
to, Company Stock deposited with or purchased by the Trustee and
held under this Trust by the Trustee, any property into which the
same or any part thereof may from time to time be converted, and
any appreciation therein or income thereon less any depreciation
therein, any losses thereon and any distributions or payments
therefrom.
1.11 "Participant" means an employee of the Company or
any Affiliate or any other person who has an account balance
under the Plan.
1.12 "Prohibited Transaction" means a prohibited
transaction under Sections 406 of ERISA and/or Section 4975(c)(1)
of the Code which is not exempt under Section 408 of ERISA or
Sections 4975(c)(2) or 4975(d) of the Code, as the case may be.
1.13 "Qualifying Employer Securities" means shares of
stock, common or preferred, issued by the Company (or a
corporation which is a member of the same controlled group) which
meets the requirements of Section 409(l) of the Code.
ARTICLE II
ESTABLISHMENT OF THE TRUST
2.1 The Company hereby establishes with the Trustee a
trust for the purpose of holding and administering the Fund in
accordance with this Agreement.
2.2 Notwithstanding anything to the contrary in this
Agreement, or in any amendment thereto, except as otherwise
provided under ERISA, the Company, the ESOP Committee and the
Trustee shall discharge their respective duties with respect to
the Fund for, and the Fund shall be used solely for and not
diverted from, the exclusive purposes of providing benefits for
Participants and their Beneficiaries and defraying reasonable
expenses of administering the Plan. Notwithstanding the
preceding sentence, however, contributions shall be returned by
the Trustee to the Company at the direction of the ESOP Committee
if (i) the ESOP Committee certifies in writing to the Trustee
that one or more of the circumstances listed below exist and (ii)
prior to any such return of contributions, appropriate
arrangements shall have been made to protect the substantive
rights of each Employee Group under the Plan:
2.2.1 if a contribution is made by the Company by
reason of a mistake of fact, the contribution or the then
current value thereof, if less, shall be returned to the
Company without interest within one year after it was paid
to the Trustee;
2.2.2. if the deduction of a contribution is
disallowed by the Internal Revenue Service, the
contribution, or the then current value thereof, if less, to
the extent the deduction is disallowed shall be returned to
the Company without interest within one year after the
disallowance; and
2.2.3. if the initial qualification of the Plan under
Sections 401, 409 and 4975(e)(7) of the Code is denied, the
entire Fund or the then current value thereof, if less,
shall be returned to the Company without interest within one
year after such qualification has been denied.
2.3 The Trustee shall receive any contributions paid
to it in cash, in Company Stock or in other property acceptable
to it. All contributions so received, together with the income
therefrom and any other increment thereon, shall be held, managed
and administered by the Trustee pursuant to the terms of this
Agreement without distinction between principal and income and
without liability for the payment of interest thereon. The
Trustee shall not be responsible for the collection of any
contributions to the Plan, or for the determination of the amount
or frequency of any contribution required by the Plan or the
provisions of the Code or ERISA, which responsibilities shall be
borne solely by the ESOP Committee.
ARTICLE III
POWERS OF TRUSTEE
3.1 The Trustee shall maintain books of account and
records with respect to the Fund. The Fund shall be held by the
Trustee in trust and dealt with in accordance with the provisions
of this Agreement. The Trustee shall take all action necessary
to implement any written directions received from the ESOP
Committee and shall conform to procedures established by the ESOP
Committee for disbursement of funds in accordance with the terms
of the Plan.
3.2 It shall be the duty of the Trustee (a) to hold,
invest and reinvest the Fund in accordance with the provisions of
this Agreement, and (b) to pay moneys therefrom in accordance
with the written directions of the ESOP Committee.
3.3 Subject to Paragraphs 3.6, 3.7 and 3.8, at the
direction of the ESOP Committee, the Trustee shall invest the
assets of the Fund exclusively in Company Stock (except for
di minimis investments in cash or cash equivalents pending
investment in Company Stock or pending distributions to
Participants); provided, however, that the portion of the Fund
attributable to Part A of the Plan is intended to be invested
primarily in Qualifying Employer Securities. To the extent that
Company contributions are made in Company Stock, the Trustee
shall retain such Company Stock unless otherwise directed by the
ESOP Committee. To the extent Company contributions are made in
cash and are not used to pay principal or interest on an
Acquisition Loan pursuant to Article X or to pay expenses of the
Fund, the Trustee shall, at the direction of the ESOP Committee,
acquire Company Stock. If at the time Company Stock is to be
purchased, the Company has outstanding more than one class of
Company Stock, the ESOP Committee shall direct the Trustee as to
which class of Company Stock shall be purchased. Subject to
Paragraph 3.8, the Trustee may rely in good faith without
liability upon the valuation of Company Stock as determined by
the ESOP Committee. The Trustee may also, at the direction of
the ESOP Committee, invest the Fund in temporary investments
other than Company Stock, may hold such portion of the Fund in
such investments as may be required under the investment
diversification provision of the Plan, may hold such portion of
the Fund uninvested as the ESOP Committee deems advisable for
making distributions under the Plan, may invest assets of the
Fund in short-term investments bearing a reasonable rate of
interest, including without limitation, deposits in, or
short-term instruments of, the Trustee, or in one or more
short-term collective investment funds administered by the
Trustee as trustee thereof for the collective investment of
assets of employee pension or profit-sharing trusts, as long as
each such collective investment fund constitutes a qualified
trust under the applicable provisions of the Code (and while any
portion of the Fund is so invested, such collective investment
funds shall constitute part of the Plan to the extent of such
investment, and the instrument creating such funds shall
constitute part of this Agreement).
3.4 The Trustee shall have no duty hereunder to
determine or inquire into whether any directions received from
the ESOP Committee in accordance with the terms of this Agreement
represent proper and lawful decisions or result in Prohibited
Transactions. The Trustee shall have no duty to review any
investment to be acquired, held or disposed of pursuant to such
instructions from the ESOP Committee. If the Trustee does not
receive written directions with respect to any part of the Fund
subject to the ESOP Committee's direction (including, without
limitation, income, sale proceeds or contributions), the Trustee
shall, pending receipt of such directions, hold and invest such
amount in short-term securities as provided in Paragraph 3.3
hereof.
3.5 In addition to, and not in limitation of, the
powers now, or which may later become, vested in it, the Trustee
shall have the following powers; provided, however, that the
Trustee's exercise of such powers shall be consistent with and
subject to all other provisions of this Agreement, and provided
further that, subject to the provisions of Paragraph 3.6, 3.7,
and 3.8, the powers set forth in Paragraphs 3.5.1, 3.5.2, 3.5.3,
and 3.5.4 shall be exercised by the Trustee only to the extent
and in the manner directed by the ESOP Committee, a Participant
or a Beneficiary in accordance with the terms of this Agreement,
except as otherwise required by ERISA:
3.5.1 To hold, invest and reinvest the principal or
income of the Trust in bonds, common or preferred stock,
other securities, or other personal, real or mixed tangible
or intangible property, including any securities issued by
the Company or its Affiliates (including investment in
deposits with Trustee which bear a reasonable interest rate,
including without limitation investments in trust savings
accounts, certificates of deposit, time certificates or
similar investments or deposits maintained by the Trustee);
3.5.2 To exercise voting rights either in person or by
proxy, with respect to any securities or other property, and
generally to exercise with respect to the Fund all rights,
powers and privileges as may be lawfully exercised by any
person owning similar property in his own right;
3.5.3 To exercise any options, conversion rights, put
rights, or rights to subscribe for additional stocks, bonds
or other securities appurtenant to any securities or other
property held by it, and to make any necessary payments in
connection with such exercise, and to join in, dissent from,
and oppose the reorganization, consolidation,
recapitalization, liquidation, merger or sale of corporate
property with respect to any corporations or property in
which it may be interested as Trustee;
3.5.4 To compromise, compound, and settle any debt or
obligation owing to or from it as Trustee, and to reduce or
increase the rate of interest on, extend or otherwise
modify, foreclose upon default, or otherwise enforce any
such obligation;
3.5.5 To sue or defend suits or legal proceedings to
enforce or protect any interest of the Trust, and to
represent the Trust in all suits or legal proceedings in any
court or before any other administrative agency, body or
tribunal, provided that the Trustee is indemnified to the
Trustee's satisfaction against liability and expenses;
3.5.6 To hold any property at any place, except that
it shall not maintain the indicia of ownership of any assets
of the Fund outside the jurisdiction of the district courts
of the United States except as permitted by regulations
issued by the Secretary of Labor of the United States under
ERISA Section 404(b);
3.5.7 To make, execute, acknowledge and deliver
assignments, agreements and other instruments;
3.5.8 To register any securities held by it hereunder
in its own name or in the name of a nominee with or without
the addition of words indicating that such securities are
held in a fiduciary capacity, to permit securities or other
property to be held by or in the name of others, to hold any
securities in bearer form and to deposit any securities or
other property in a depository, clearing corporation or
similar corporation, either domestic or foreign; provided,
however, that the records of the Trustee shall at all times
show that any such property held or registered in the name
of another is part of the Fund;
3.5.9 To employ legal counsel, brokers and other
advisors, agents or employees to perform services for the
Fund or to advise it with respect to its duties and
obligations under this Agreement and in connection with the
Trust, and to pay them reasonable compensation from the
Fund, to the extent not paid directly by the Company or an
Affiliate;
3.5.10 In accordance with the applicable provisions of
the Plan and subject to Paragraph 3.8, to obtain an
Acquisition Loan in such amounts and upon such terms and
conditions as shall be deemed advisable or proper to carry
out the purposes of the Trust, and, in connection therewith,
to issue its promissory note as Trustee, to pledge any
securities or other property of the Fund for the repayment
of such Acquisition Loan and to repay from time to time the
principal and interest on, and to take any other action with
respect to, such Acquisition Loan; provided that if such
Acquisition Loan is from, or guaranteed by, a "party of
interest" within the meaning of Section 3(14) of ERISA, the
requirements of Article X shall be satisfied;
3.5.11 To open and make use of banking accounts
including checking accounts, which accounts, if bearing a
reasonable rate of interest or if checking accounts, may be
with the Trustee.
3.6 Voting of Company Stock
3.6.1 Allocated Shares. Each Participant (or
Beneficiary) as a named fiduciary within the meaning of
ERISA section 403(a)(1), in accordance with the procedures
hereinafter set forth, may direct the Trustee with respect
to the votes of the shares of Company Stock allocated to his
ESOP Stock Account, and the Trustee shall follow the
directions of those Participants (and Beneficiaries) who
provide timely instructions to the Trustee; provided that,
notwithstanding the foregoing, the Trustee shall vote the
shares of Company Stock allocated to the Part B Accounts of
the Participants who are (or were) members of the ALPA
Employee Group but who are not Employees (or allocated to
the Part B Accounts of their Beneficiaries.)
3.6.2 Unallocated and Uninstructed Shares.
(i) PART A. Each active Participant (which shall
be defined for purposes of Sections 3.6 and 3.7 to mean
a Participant who is an Employee) who directed the
Trustee with respect to the shares allocated to his
Account under Part A in accordance with Section 3.6.1
may, again as a named fiduciary, direct the Trustee
with respect to a portion of both the number of shares
of Company Stock held in the Loan Suspense Account and
the number of such shares allocated to any
Participant's Account under Part A for which no
instructions were timely received by the Trustee. Such
portion shall be determined as follows:
(A) Such portion shall be limited to the sum
of: (I) the number of shares of Company Stock held in
the Loan Suspense Account reserved for allocation to
such Participant's Employee Group, plus (ii) the number
of shares of Company Stock allocated to the Accounts of
Participants in such Participant's Employee Group under
Part A for which no instructions were timely received.
(B) The number of shares of Company Stock
determined under clause (i)(A) shall be multiplied by a
fraction, the numerator of which is the number of
shares of Company Stock allocable to Part A that such
Participant directed the Trustee in accordance with
Section 3.6.1 and the denominator of which is the
aggregate number of shares allocable to Part A that
were directed by active Participants in the same
Employee Group in accordance with Section 3.6.1.
(C) Such Participant, as a named fiduciary,
shall be entitled to direct the Trustee with respect to
the number of shares determined under clause (i)(B).
(ii) PART B. Each active Participant who directed
the Trustee with respect to shares allocated to his
Account under Part B in accordance with Section
3.6.1(a) may, again as a named fiduciary, direct the
Trustee with respect to a portion of the number of such
shares allocated to any Participant's Account under
Part B for which no instructions were timely received
by the Trustee. Such portion shall be determined as
follows:
(A) Such portion shall be limited to the
number of shares of Company Stock allocated to the
Accounts of Participants in such Participant's Employee
Group under Part B for which no instructions were
timely received.
(B) The number of shares of Company Stock as
determined under clause (ii)(A) shall be multiplied by
a fraction, the numerator of which is the number of
shares of Common Stock allocable to Part B that such
Participant directed the Trustee in accordance with
Section 3.6.1 and the denominator of which is the
aggregate number of shares allocable to Part B that
were directed by active Participants in the same
Employee Group in accordance with Section 3.6.1.
(C) Such Participant, as a named fiduciary,
shall be entitled to direct the Trustee with respect to
the number of shares determined under clause (ii)(B).
3.6.3 Procedure. Such directions shall be provided
directly to the Trustee and shall be held in confidence and
not be divulged or released to any other person. Within a
reasonable time prior to each annual or special meeting of
holders of Company Stock, the ESOP Committee shall furnish
to all Participants (and Beneficiaries) entitled to direct
the Trustee as to the voting of shares of Company Stock,
copies of any proxy solicitation material provided to
holders of voting Company Stock generally together with
appropriate instruction forms or cards and information
concerning the method of providing such instructions to the
Trustee. To the extent permitted by law, if the Trustee
cannot follow directions of Participants (or Beneficiaries),
the ESOP Committee shall direct the Trustee.
Notwithstanding any other provision of this Agreement
or the Plan, the Trustee shall not be obligated to follow
the direction of a named fiduciary unless such direction is
in accordance with the terms of the Plan and is proper
within the meaning of Section 403(a) of ERISA and is not
contrary to ERISA.
3.7 Control Transactions and Certain Dispositions of
Company Stock.
3.7.1 General. The provisions of this Section 3.7
shall apply in the event a Control Transaction is commenced
or proposed by a person or persons. In the event a Control
Transaction is commenced or proposed, the ESOP Committee,
promptly after receiving notice, shall transfer certain of
the ESOP Committee's record keeping functions under the Plan
to an independent record keeper (which if the Trustee
consents in writing, may be the Trustee). The functions so
transferred shall be those necessary to preserve the
confidentiality of any directions given by the Participants
(and Beneficiaries) in connection with the Control
Transaction. Within a reasonable time after a Control
Transaction is commenced, the ESOP Committee shall furnish
to all Participants (and Beneficiaries) entitled, as
hereinafter set forth, to direct the Trustee with respect to
the Control Transaction, copies of all offering material
provided to holders of Company Stock generally, together
with appropriate instruction forms or cards and information
concerning the method of providing such instructions to the
Trustee. Except as otherwise required by ERISA, the Trustee
shall have no discretion or authority to sell, exchange,
transfer, convert or otherwise dispose of any of such shares
of Company Stock pursuant to such Control Transaction,
except to the extent that the Trustee is timely directed to
do so in writing as follows:
(i) Allocated Shares. Each Participant (or
Beneficiary) to whose ESOP Stock Account shares of
Company Stock have been allocated may, as a named
fiduciary within the meaning of ERISA section
403(a)(1), direct the Trustee with respect to the sale,
exchange, transfer, conversion or other disposition of
the shares of Company Stock allocated to his ESOP Stock
Account, and the Trustee shall follow the directions of
those Participants (and Beneficiaries) who provide
timely instructions to the Trustee.
(ii) Unallocated and Uninstructed Shares.
(A) PART A. Each active Participant who directed
the Trustee with respect to shares allocated to his
Account under Part A in accordance with Section
3.7.1(i) may, again as a named fiduciary, direct the
Trustee with respect to a portion of both the number of
shares of Company Stock held in the Loan Suspense
Account and the number of such shares allocated to any
Participant's Account under Part A for which no
instructions were timely received by the Trustee. Such
portion shall be determined as follows:
(I) Such portion shall be limited to the sum
of: (x) the number of shares of Company Stock held in
the Loan Suspense Account reserved for allocation to
such Participant's Employee Group, plus (y) the number
of shares of Company Stock allocated to the Accounts of
Participants in such Participant's Employee Group under
Part A for which no instructions were timely received.
(II) The number of shares of Company Stock
determined under clause (ii)(a)(I) shall be multiplied
by a fraction, the numerator of which is the number of
shares of Company Stock allocable to Part A that such
Participant directed the Trustee in accordance with
Section 3.7.1(i) and the denominator of which is the
aggregate number of shares allocable to Part A that
were directed by active Participants in the same
Employee Group in accordance with Section 3.7.1(i).
(III) Such Participant, as a named fiduciary,
shall be entitled to direct the Trustee with respect to
the number of shares determined under clause
(ii)(A)(II).
(B) PART B. Each active Participant who directed
the Trustee with respect to shares allocated to his
Account under Part B in accordance with Section
3.7.1(i) may, again as a named fiduciary, direct the
Trustee with respect to a portion of the number of such
shares allocated to any Participant's Account under
Part B for which no instructions were timely received
by the Trustee. Such portion shall be determined as
follows:
(I) Such portion shall be limited to the
number of shares of Company Stock allocated to the
Accounts of Participants in such Participant's
Employee Group under Part B for which no
instructions were timely received.
(II) The number of shares of Company Stock
determined under clause (ii)(B)(I) shall be
multiplied by a fraction, the numerator of which
is the number of shares of Company Stock allocable
to Part B that such Participant directed the
Trustee in accordance with Section 3.7.1(a)(i) and
the denominator of which is the aggregate number
of shares allocable to Part B that were directed
by active Participants in the same Employee Group
in accordance with Section 3.7.1(a)(i).
(III) Such Participant, as a named fiduciary,
shall be entitled to direct the Trustee with
respect to the number of shares determined under
clause (ii)(B)(II).
All such instructions from Participants (and
Beneficiaries) shall be provided directly to the
independent record keeper which, if different from the
Trustee, shall then instruct the Trustee as to the
amount of shares to be sold, tendered, exchanged,
converted or otherwise disposed of in accordance with
the above directions. To the extent the Trustee cannot
follow Participant (or Beneficiary) instructions, the
ESOP Committee, as a named fiduciary, shall direct the
Trustee. Except as contemplated by the foregoing or as
required to facilitate the making of Plan distributions
or diversification elections or as required by law, the
Trustee shall have no authority to dispose of Company
Stock in a Control Transaction or otherwise.
Notwithstanding any other provision of this
Agreement or the Plan, the Trustee shall not be
obligated to follow the direction of a named fiduciary
unless such direction is in accordance with the terms
of the Plan and is proper within the meaning of Section
403(a) of ERISA and is not contrary to ERISA.
3.7.2 Records. Following any Control Transaction
that has resulted in the sale or exchange of any shares
of Company Stock held in the Plan, the record keeper
shall continue to maintain on a confidential basis the
Accounts of Participants (and Beneficiaries) to whose
Accounts shares of Company Stock were allocated at any
time during such offer, until complete distribution of
such Accounts or such earlier time as the record keeper
determines that the transfer of the record keeping
functions back to the ESOP Committee will not violate
the confidentiality of the directions given by the
Participants (and Beneficiaries). In the event that
there is no sale or exchange of any shares of Company
Stock held in the Plan pursuant to the Control
Transaction, the record keeper shall transfer back to
the ESOP Committee the record keeping functions;
provided, however, that the record keeper shall keep
confidential any instructions which it may receive from
Participants (and Beneficiaries) relating to the
Control Transaction.
3.7.3 Proceeds. For purposes of allocating the
proceeds of any sale or exchange pursuant to a Control
Transaction, the ESOP Committee or the independent
record keeper, as the case may be, shall determine the
portion, expressed as a percentage, of shares of each
class tendered by the Trustee that were actually sold
or exchanged (the "applicable percentage" for that
class). For each class, the ESOP Committee or the
independent record keeper, as the case may be, shall
then treat as having been sold or exchanged from the
portion of the Loan Suspense Account applicable to that
Employee Group and each of the individual Accounts of
Participants (and Beneficiaries) that number of shares
(of that class) that is obtained by multiplying (i) the
applicable percentage for that class, times (ii) the
total number of shares in such Account of that class
that were directed to be tendered or exchanged or sold
in connection with the Control Transaction. The
adjustments to individual Accounts shall be made by the
ESOP Committee or the independent record keeper, as the
case may be, on information supplied by the Company,
the ESOP Committee or the Trustee.
3.8 Notwithstanding any other provisions of this
Agreement or the Plan, the purchase of Qualifying Employer
Securities pursuant to the ESOP Preferred Stock Purchase
Agreement dated March 25, 1994, as amended, or pursuant to any
Additional Acquisition Loans (including loans to effect
Section 8.2(e) of the Plan and Section 1.6(g) of the
Recapitalization Agreement) among the Trustee and the Company
shall be effected by the Trustee without direction from the ESOP
Committee pursuant to the Trustee's determination, in the
exercise of its reasonable judgment after consultation with such
advisors as it reasonably deems necessary, that such transaction
is in the best interests of the Participants and Beneficiaries
and that the purchase transaction and the terms and conditions of
any Acquisition Loan entered into in connection with the above-
described Purchase Agreement are in compliance with all
applicable provisions of the Code and ERISA.
3.9 In addition to, and not in limitation of, the
powers vested and to be vested in it by law or enumerated in this
Article III, the Trustee shall have the power to take any action
with respect to the Fund as is appropriate and helpful in
carrying out the purposes of this Agreement, subject to any
directions of the ESOP Committee or the Participants (or
Beneficiaries) as provided herein.
ARTICLE IV
ADMINISTRATION
4.1 The ESOP Committee shall represent the Company in
dealing with the Trustee under this Agreement. Until it receives
written notice that a person is no longer a member of the ESOP
Committee, the Trustee shall be fully protected in assuming that
the person is still a member of the ESOP Committee. The Company
shall cause to be delivered to the Trustee a specimen signature
of each member as well as that of any designee of the ESOP
Committee appointed pursuant to Paragraph 4.2. The members of
the ESOP Committee shall be "named fiduciaries" within the
meaning of ERISA Section 402(a) with respect to the Plan.
4.2 The Trustee may rely (and shall be fully protected
in relying) on any written communication signed by a majority of
the members of the ESOP Committee as being authorized by, and
reflecting the action of, the ESOP Committee. If the Trustee is
advised in writing by a majority of the members of the ESOP
Committee that directives to the Trustee will be signed by a
person or persons designated by the ESOP Committee, the Trustee
may rely on communications signed by the person or persons so
named as a directive reflecting the action of the ESOP Committee.
4.3 The Trustee shall have only those duties specified
in this Agreement or specified in the Plan and expressly
incorporated herein by reference. In the event of any conflict
between the provisions of the Plan and this Agreement, the
provisions of this Agreement shall control. The Trustee shall
have no responsibility to administer or interpret the Plan, to
enforce payment of any contributions to the Fund or to see that
the Fund is adequate to meet the liabilities of the Plan.
4.4 The Company or anyone acting on its behalf may at
any time employ the Trustee in its corporate capacity as agent to
perform any act or to keep any records in connection with the
administration of the Plan. Any such agency relationship shall
be established by a separate written agreement between the
Company and the Trustee and the existence of such arrangement
shall not affect its responsibility or liability as Trustee under
this Agreement.
4.5 Notwithstanding any other provision of the Plan or
this Agreement, the Trustee shall not be obligated to follow the
direction of a named fiduciary unless such direction is in
accordance with the terms of the Plan or this Agreement and is
proper under ERISA Section 403(a)(2) and not contrary to Title I
of ERISA.
4.6 With respect to the exercise of any fiduciary
responsibility with respect to the Plan or the Trust, including,
without limitation, the voting, sale, exchange, other disposition
or conversion of Company Stock, the Trustee and any other
relevant fiduciary may, to the extent permitted by law, take into
consideration any relevant economic factors affecting the
interests of current and future Participants (and Beneficiaries),
including, but not limited to, the prospect for continued
Employee enfranchisement through the voting power of Company
Stock held in the Trust, the prospect for future benefits under
the Plan as a result of the prospective release and allocation of
Qualifying Employer Securities held in the Loan Suspense Account
and the prospect for future employment with the Company and its
Affiliates.
ARTICLE V
PAYMENTS OF BENEFITS AND EXPENSES
5.1 Except as otherwise provided in Paragraph 5.3, the
Trustee shall pay benefits and administrative expenses under the
Plan only when it receives (and in accordance with) written
instructions from the ESOP Committee, indicating the amount of
the payment and the name and address of the recipient. The
Trustee shall have no duty to inquire into whether any payment
the ESOP Committee instructs it to make is consistent with the
terms of the Plan or applicable law or otherwise proper. Any
payment made by the Trustee in accordance with such instructions
shall be a complete discharge and acquittance to the Trustee. If
the ESOP Committee advises the Trustee that benefits have become
payable respecting a Participant's interest in the Fund, but does
not instruct the Trustee as to the manner of payment, the Trustee
shall hold the Participant's interest in the Trust until it
receives written instructions from the ESOP Committee as to the
manner of payment. The Trustee shall not pay benefits from the
Fund without such instructions, even though it may be informed
from other sources, including, without limitation, a Participant
(or beneficiary), that benefits are payable under the Plan. The
Trustee shall have no responsibility to determine when, to whom,
or in what amounts benefits and expenses are payable under the
Plan.
5.2 The Trustee shall distribute benefits in the
manner described in the Plan and as directed by the ESOP
Committee.
5.3 The Trustee shall receive as compensation for its
services as Trustee such amounts as may, from time to time, be
agreed upon in writing between the Company and the Trustee. Such
compensation and, in accordance with the applicable provisions of
ERISA and the Code, all reasonable and proper expenses incurred
by the Trustee in the administration of the Trust, including
reasonable legal counsel fees, shall be paid by the Company.
5.4 The Company intends that the Plan shall at all
times qualify under Code Sections 401(a), 409 and, to the extent
applicable, 4975(e)(7) and that the Trust hereby established
shall at all times be tax exempt under Section 501(a) of the
Code, or successor provisions. However, any taxes that may be
levied upon or in respect of the Fund shall be paid from the
Fund. The Trustee shall promptly notify the ESOP Committee of
any proposed taxes (other than stock transfer taxes) of which it
receives notice and may assume that any such taxes are lawfully
levied or assessed, unless the ESOP Committee advises it in
writing to the contrary within fifteen (15) days after receiving
the above notice from the Trustee. In such case, the Trustee, if
requested by the ESOP Committee in writing, shall contest the
validity of such taxes in any manner deemed appropriate by the
ESOP Committee; the Company may itself contest the validity of
any such taxes, in which case the ESOP Committee shall so notify
the Trustee and the Trustee shall have no responsibility or
liability respecting such contest. If any party to this
Agreement contests any such proposed levy, the other party shall
provide such information and cooperation as the party conducting
the contest shall reasonably request.
ARTICLE VI
LIABILITY AND INDEMNIFICATION OF THE TRUSTEE
6.1 The Trustee shall not be responsible for computing
or collecting contributions due under the Plan.
6.2 The Trustee in its corporate capacity shall not be
liable for claims of any persons arising under the Plan; such
claims shall be limited to the Fund. The Trustee shall not be
liable to make distributions or payments of any kind unless
sufficient funds are available therefor in the Fund. The Trustee
shall be responsible only for such money and other property as
are actually received by it as Trustee under this Agreement.
6.3 The Trustee may consult with legal counsel with
respect to the meaning and construction of this Agreement or its
powers, obligations and conduct hereunder, and the written
opinion of such counsel will, to the extent permitted by law, be
full and complete protection in respect of any action taken or
omitted by the Trustee hereunder in good faith and in accordance
with the opinion of such counsel.
6.4 The Trustee shall have no liability other than as
imposed by law and this Agreement.
6.5 The Trustee shall be fully protected in acting
upon any instrument, certificate, or paper delivered by the
Company, the ESOP Committee, any Participant, (or Beneficiary)
acting as a named fiduciary and believed by the Trustee to be
genuine and to be signed or presented by the proper person or
persons, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statement contained in any
such writing, but may accept the same as conclusive evidence of
the truth and accuracy of the statements therein contained.
6.6 To the extent permitted by applicable law, the
Trustee shall be indemnified by the Company and UAL against any
and all liabilities, settlements, judgments, losses, costs, and
expenses (including reasonable legal fees and expenses) of
whatever kind and nature which may be imposed on, incurred by or
asserted against the Trustee by reason of the performance or
nonperformance of its trustee function under this Agreement,
except to the extent such action or inaction constituted
negligence, willful misconduct or failure to act in good faith on
the part of the Trustee.
6.7 All notices, requests, demands and other
communications hereunder or with respect hereto shall be in
writing and shall be deemed to have been fully given if
telegraphed, telecopied or telefaxed, mailed by registered or
certified mail, or personally delivered (or delivered by courier)
as follows:
If to the Company, to:
By Mail
UAL Corporation
P.O. Box #66919
Chicago, IL 60666
Attention: Corporate Secretary
By Courier
UAL Corporation
1200 Algonquin Road
Elk Grove Township, IL 60007
Attention: Corporate Secretary
If to the Trustee, to:
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Attention: UAL ESOP Administration
or to such other address or addresses as any party hereto may
furnish to the other party in writing.
6.8 Whenever the Trustee shall deem it desirable for a
matter to be proved or established before taking, permitting or
omitting any act, the matter (unless other evidence in respect
thereof is specifically prescribed in this Agreement) may be
deemed to be conclusively established by a certification signed
by a majority of the members of the ESOP Committee and delivered
to the Trustee, and the Trustee shall be fully protected in
relying on such an instrument.
6.9 If a dispute arises as to the payment of any funds
or delivery of any assets by the Trustee, the Trustee may
withhold such payment or delivery until the dispute is determined
by a court of competent jurisdiction or finally settled in
writing by the parties concerned.
ARTICLE VII
ACCOUNTING OF THE TRUSTEE
7.1 The Trustee shall keep accurate and detailed
accounts of all its transactions (including receipts and
disbursements) under this Agreement. These records shall be open
to inspection and audit during regular business hours of the
Trustee by the ESOP Committee or any person or persons designated
by the ESOP Committee or the Company in a written instrument
filed with the Trustee. If mutually agreed upon in a separate
writing by the ESOP Committee and the Trustee, the Trustee shall
establish and maintain accounts for Participants which shall show
their respective interests, determined in accordance with the
terms of the Plan, in the Fund; provided, however, that to the
extent that such accounts are kept by the Trustee on the basis of
information furnished or caused to be furnished to it by the ESOP
Committee, the Trustee shall have no responsibility for the
accuracy of any information so furnished. All such accounts and
records shall be preserved (in original form, or on microfilm,
magnetic tape or any other similar process) for such period as
the Trustee may determine, but the Trustee may destroy such
accounts and records only after first notifying the ESOP
Committee and the Company in writing at least ninety (90) days in
advance of its intention to do so and transferring to the ESOP
Committee or the Company any such accounts and records requested.
7.2 Within sixty (60) days after the close of each
fiscal year of the Plan, the Trustee's removal or resignation as
Trustee hereunder, or the termination of the Plan or this
Agreement, the Trustee shall file with the ESOP Committee an
account setting forth all its transactions (including all
receipts and disbursements) under this Agreement during such
year, or during the period from the close of the last preceding
fiscal year of the Plan to the effective date of its removal or
resignation or the termination of the Plan or this Agreement, and
showing all property (including its costs and fair market value)
held by it hereunder at the end of such accounting period;
provided, however, that in the event shares of Company Stock are
then held in the Trust and a final valuation report, if
necessary, with respect to such Company Stock for any such
accounting period is not received by the Trustee within thirty
(30) days of the date the Trustee is required to render an
accounting under the foregoing provision, then the Trustee shall
not be required to render such account until thirty (30) days
from the date such valuation report is received by the Trustee.
The ESOP Committee and the Trustee may agree in writing that
similar accounts will be prepared by the Trustee and filed with
the ESOP Committee at more frequent intervals. No person or
persons (including, without limitation, the Company and the ESOP
Committee) shall be entitled to any further or different
accounting by the Trustee, except as may be required by law.
7.3 Twenty-four (24) months after the filing with the
ESOP Committee of the annual accounts for the 1994 and 1995
fiscal years of the Trust and twelve (12) months after the filing
with the ESOP Committee of any other account under Paragraph 7.2,
the Trustee shall be forever released and discharged from any
liability or accountability to the Company and the ESOP Committee
with respect to the transactions shown or reflected on the
account, except with respect to any acts or transactions as to
which the ESOP Committee, within the applicable period, files
written objections with the Trustee. The written approval of the
ESOP Committee of any account filed by the Trustee, or the ESOP
Committee's failure to file written objections within the
applicable period, shall be a settlement of such account as
against the Company and the ESOP Committee, and shall forever
release and discharge the Trustee from any liability or
accountability to the Company and the ESOP Committee with respect
to the transaction shown or reflected on such account. If a
statement of objection is filed by the ESOP Committee and the
ESOP Committee is satisfied that its objections should be
withdrawn or if the account is adjusted to its satisfaction, the
ESOP Committee shall indicate its approval of the account in a
written statement filed with the Trustee and the Trustee shall be
forever released and discharged from all liability and
accountability to the Company and the ESOP Committee in
accordance with the immediately preceding sentence. If an
objection is not settled by the ESOP Committee and the Trustee,
the Trustee may commence a proceeding for a judicial settlement
of the account in any court of competent jurisdiction; the only
parties that need be joined in such a proceeding are the Trustee,
the ESOP Committee, the Company and such other parties whose
participation is required by law.
ARTICLE VIII
REMOVAL AND RESIGNATION OF THE TRUSTEE
8.1 The Trustee may resign as Trustee under this
Agreement at any time by a written instrument delivered to the
Company giving notice of such resignation, which shall be
effective sixty (60) days after receipt or at such other time as
is agreed by the Company and the Trustee. The Trustee may be
removed at any time by the Company (with the consent of the Air
Line Pilot Association, International and the International
Association of Machinists and Aerospace Workers) by an instrument
in writing and delivered to the Trustee, which shall be effective
sixty (60) days after receipt or at such other time as is agreed
between the Company and the Trustee.
8.2 If a vacancy in the office of trustee of the Trust
occurs, the Company (with the consent of the Air Line Pilot
Association, International and the International Association of
Machinists and Aerospace Workers) shall appoint a successor
trustee and shall deliver to the Trustee copies of (a) a written
instrument executed by the Company appointing such successor, and
(b) a written instrument executed by the successor in which it
accepts such appointment. Such instruments shall indicate their
effective date.
8.3 If the Trustee resigns or is removed, it shall
deliver all assets of the Fund in its possession to a successor
trustee as soon as is reasonably practicable after the settlement
of its account or at such earlier time as shall be agreed on by
the Company, the Trustee and the successor trustee.
ARTICLE IX
AMENDMENT AND TERMINATION
9.1 This Agreement may be amended at any time and from
time to time by the Company (with the consent of the Air Line
Pilot Association, International and the International
Association of Machinists and Aerospace Workers) by a written
instrument duly acknowledged and delivered to the Trustee setting
forth the terms of the amendment; provided that no amendment
affecting rights, duties, responsibilities or liability of the
Trustee may be made without the Trustee's consent. The
instrument of amendment shall state to the Trustee that the
amendment does not permit any part of the Fund to be used for or
diverted to purposes other than the exclusive benefit of
Participants and their beneficiaries or the payment of reasonable
expenses of administering the Plan and Trust, as specified in
Paragraph 2.2 hereof. The instrument of amendment shall specify
its effective date and amendments may, with the Trustee's
consent, if applicable, be made effective retroactively.
9.2 If the ESOP Committee certifies to the Trustee
that the Plan is or has been terminated, the Trustee shall hold
and/or dispose of the Fund in accordance with the ESOP
Committee's written instructions. The ESOP Committee shall
certify in writing to the Trustee that the disposition directed:
(a) except as provided in Paragraph 2.2, does not result in any
part of the Fund being used for or diverted to purposes other
than the exclusive benefit of Participants and their
Beneficiaries and the payment of reasonable expenses (including
the repayment of any outstanding Acquisition Loans) of
administering the Plan and Trust, (b) is in accordance with the
applicable provisions of the Code, ERISA and any other applicable
laws, and (c) does not result in a Prohibited Transaction. If
the Plan is terminated with respect to a group of persons under
the Plan, the portion of the Trust attributable to such group
shall be held and disposed of in accordance with the written
instructions of the ESOP Committee which shall be given in
conformity with the provisions of the Plan, the Code and ERISA.
The Trustee may, however, reserve such reasonable sum of money as
it deems advisable for payment for the settlement of its accounts
or for payment of taxes that may be assessed on or in respect of
the Fund or the income thereof. This Agreement shall terminate
upon the termination of the Plan as provided herein and the
disposition of the Fund as provided herein.
ARTICLE X
LEVERAGED ACQUISITIONS OF STOCK
10.1 It is specifically contemplated that the Trust
will operate pursuant to a leveraged employee stock ownership
plan with respect to Part A of the Plan and that the Trustee will
incur several Acquisition Loans in connection with the
acquisition of Qualifying Employer Securities. Any Acquisition
Loan shall meet all of the requirements necessary to constitute
an "exempt loan" within the meaning of Treasury Regulation
Section 54.4975-7(b)(1)(iii) and shall be used primarily for the
benefit of the Participants and their Beneficiaries. The
proceeds of any Acquisition Loan shall be used, within a
reasonable time after the Acquisition Loan is obtained, only to
purchase Qualifying Employer Securities or to repay such
Acquisition Loan or a prior Acquisition Loan. Any Acquisition
Loan shall provide for no more than a reasonable rate of interest
and must be without recourse against the Plan and Trust. The
number of years to maturity under the Acquisition Loan must be
definitely ascertainable at all times. The Acquisition Loan may
not be payable at the demand of any person, except in the case of
a default. The only assets of the Trust that may be given as
collateral for an Acquisition Loan are shares of Qualifying
Employer Securities acquired with the Acquisition Loan, shares of
Qualifying Employer Securities that were used as collateral on
prior Acquisition Loans repaid with the proceeds of the current
Acquisition Loan and all Qualifying Employer Securities received
as consideration pursuant to a Control Transaction or acquired
with proceeds received pursuant to a Control Transaction. In the
event that Qualifying Employer Securities are used as collateral
for an Acquisition Loan, such Qualifying Employer Securities
shall be released from such encumbrance in accordance with the
provisions of the Plan and applicable Treasury Regulations. No
person entitled to payment under an Acquisition Loan shall be
entitled to payment from the Trust other than from shares of
Qualifying Employer Securities acquired with the Acquisition Loan
which are collateral for the Acquisition Loan, Company
contributions made under the Plan for the purpose of satisfying
an Acquisition Loan, earnings attributable to such Qualifying
Employer Securities and such Company contributions (other than
contributions of Qualifying Employer Securities), and such other
assets, if any, as to which recourse may be permitted under
Section 4975 of the Code. Payments of principal and interest on
an Acquisition Loan shall be made by the Trustee only from (1)
Company contributions (other than contributions of Qualifying
Employer Securities) made under the Plan for the purpose of
satisfying such Acquisition Loan, earnings on such contributions
and earnings on shares of Qualifying Employer Securities acquired
with the proceeds of such Acquisition Loan, including, but not
limited to, cash dividends received by the Trust with respect to
such shares of Qualifying Employer Securities, whether or not
allocated to the accounts of Participants (or Beneficiaries), (2)
the proceeds of a subsequent Acquisition Loan made to repay the
prior Acquisition Loan, and/or (3) unless otherwise agreed in the
definitive documentation pertaining to such Acquisition Loan, the
proceeds of the sale of any collateralized shares of Qualifying
Employer Securities acquired with the proceeds of such
Acquisition Loan; provided, however, that the Trustee shall in no
event be required to apply such proceeds of sale to repay
principal and interest on an Acquisition Loan if, in the written
opinion of counsel to the Trustee, such action would constitute a
Prohibited Transaction or a breach of the Trustee's fiduciary
duties under ERISA. In the event of a default under an
Acquisition Loan, the value of Trust assets transferred to the
lender shall not exceed the amount of the default, provided
further that if the lender is a "party in interest" within the
meaning of ERISA Section 3(14) or a "disqualified person" within
the meaning of Section 4975(e)(2) of the Code, a transfer of
Trust assets upon default shall be made only if, and to the
extent of, the Trust's failure to meet the Acquisition Loan's
payment schedule.
ARTICLE XI
MISCELLANEOUS
11.1 This Agreement shall be binding upon, and the
powers granted to the Company and the Trustee, respectively,
shall be exercisable by, the respective successors and assigns of
the Company and the Trustee. Any corporation which shall, by
merger, consolidation, purchase or otherwise, succeed to
substantially all the trust business of the Trustee shall, upon
such succession and without any appointment or other action by
the Company, be and become successor trustee hereunder, upon
notification to the Company.
11.2 No right or claim in or to the Fund or any assets
thereof shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge shall be void and shall not be recognized by the
Trustee, except to such extent as may be legally required (e.g., as
otherwise provided in the Plan with respect to qualified domestic
relations orders). No such right or claim shall be liable for or
subject to the debts, contracts, liabilities, engagements or torts of
the person entitled thereto.
11.3 This Agreement shall be administered, construed and
enforced in accordance with ERISA, and to the extent not governed by
ERISA, in accordance with the laws of the Commonwealth of
Massachusetts.
11.4 One or more of the Company's Affiliates may, with the
approval of the Board of Directors, by resolution of its own board of
directors adopt the Trust if such subsidiary shall have adopted the
Plan or any part thereof. Each such Affiliate which has adopted this
Trust shall be deemed a party to this Agreement and all references
herein to "Company" shall be deemed as to include such Related Company,
except as the context may otherwise require.
11.5 For all purposes of the Plan and Trust, all valuations
of Stock which is not readily tradable on an established securities
market will be made by an "independent appraiser" within the meaning of
Section 401(a)(28)(C) of the Code.
11.6 Headings of Articles are inserted for convenience of
reference. They are not part of this Agreement and shall not be
considered in construing it.
11.7 This Agreement may be executed in any number of
counterparts, each of which shall be considered an original even
through no others are produced.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company and the Trustee have caused
this Agreement to be executed by their duly authorized officers and
their respective corporate seals to be hereunto affixed as of the day
and year first above written.
ATTEST: UAL CORPORATION
BY: /s/ Francesca M. Maher BY: /s/ Joseph R. O'Gorman
_________________________ __________________________
TITLE: Vice President - Law TITLE: Executive Vice President
and Corporate Secretary
ATTEST: STATE STREET BANK AND TRUST
COMPANY
BY: /s/ Denise R. Courcy BY: /s/ Kelly Q. Driscoll
_________________________ __________________________
TITLE: Assistant Vice President TITLE: Vice President
and Associate Counsel
Employee Stock Ownership Plan - UAL Corp.
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