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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-6033
UAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 36-2675207
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 East Algonquin Road, Elk Grove Township, Illinois 60007
Mailing Address: P. O. Box 66919, Chicago, Illinois 60666
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 700-4000
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class October 31, 1997
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Common Stock ($0.01 par value) 58,782,762
UAL Corporation and Subsidiary Companies Report on Form 10-Q
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For the Quarter Ended September 30, 1997
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Index
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PART I. FINANCIAL INFORMATION Page No.
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Item 1. Financial Statements
Condensed Statements of Consolidated 3
Financial Position - as of September 30,
1997 (Unaudited) and December 31, 1996
Statements of Consolidated Operations 5
(Unaudited) - for the three months and
nine months ended September 30, 1997 and 1996
Condensed Statements of Consolidated 7
Cash Flows (Unaudited) - for the nine
months ended September 30, 1997 and 1996
Notes to Consolidated Financial 8
Statements (Unaudited)
Item 2. Management's Discussion and Analysis 13
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
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Exhibit Index 24
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UAL Corporation and Subsidiary Companies
Condensed Statements of Consolidated Financial Position
(In Millions)
Exhibit 10.1
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UAL CORPORATION 1995 DIRECTORS PLAN
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as amended June 26, 1997
TABLE OF CONTENTS
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Page No.
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1. General 1
1.1 Purpose, History and Effective Date 1
1.2 Participation 1
1.3 Administration 1
1.4 Shares Subject to the Plan 2
1.5 Compliance with Applicable Laws 2
1.6 Director and Shareholder Status 3
1.7 Definition of Fair Market Value 3
1.8 Source of Payments 3
1.9 Nonassignment 3
1.10 Elections 3
2. Awards 3
2.1 Formula Stock Awards 3
2.2 Deferred Stock Units 4
3. Receipt of Stock in Lieu of Eligible Cash Fees 4
3.1 Election to Receive Stock 4
3.2 Revocation of Election to Receive Stock 5
3.3 Election Pursuant to Retirement Plan Resolutions 5
3.4 Equivalent Amount of Stock 5
4. Deferral Elections 6
4.1 Deferrals of Fees 6
4.2 Deferral of Stock Awards and Deferred Stock Units 7
4.3 Crediting and Adjustment of Deferred Amounts 8
4.4 Payment of Deferred Compensation Account 10
4.5 Payments in the Event of Death 11
4.6 Multiple Distribution Dates 11
5. Amendment and Termination 12
UAL CORPORATION
1995 DIRECTORS PLAN
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SECTION 1
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General
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1.1. Purpose, History and Effective Date. UAL Corporation
(the "Company") maintains the UAL Corporation 1992 Stock Plan for
Outside Directors (the "Prior Plan") which provides certain
benefits to non-employee directors of the Company. In order to
(i) encourage stock ownership by directors to further align their
interests with those of the stockholders of the Company, while at
the same time providing flexibility for directors who, due to
their individual circumstances, may be unable to take stock in
lieu of cash compensation, and (ii) add certain deferral features
for fees and stock awards and other items of cash compensation as
determined by the Board of Directors, the Company has authorized
a variety of compensation alternatives, including those set forth
in the Prior Plan, that will be available to Outside Directors
under a new plan to be known as the UAL Corporation 1995
Directors Plan (the "Plan"). The Plan and any and all amendments
thereto shall be effective immediately upon the respective
approval thereof by the Board of Directors, except that
subsections 1.4, 1.5, 1.7, 1.8, 2.1, 3.1, 3.2 and 3.4 and all
references to Stock Awards, Stock Deferrals and the Company Stock
Subaccount shall be effective on July 3, 1995 (the "Effective
Date"). Upon the Effective Date the Prior Plan shall be
terminated (with prior stock deferrals thereunder being treated
as deferrals under subsection 4.2 of the Plan).
1.2. Participation. Only Outside Directors shall be
eligible to participate in the Plan. As of any applicable date,
an "Outside Director" is a person who is serving as a director of
the Company who is not an employee of the Company or any
subsidiary of the Company as of that date.
1.3. Administration. The authority to manage and control
the operation and administration of the Plan shall be vested in
the Executive Committee of the Board (the "Committee"). Subject
to the limitations of the Plan, the Committee shall have the sole
and complete authority to:
(a) interpret the Plan and to adopt, amend and rescind
administrative guidelines and other rules and
regulations relating to the Plan;
(b) correct any defect or omission and to reconcile any
inconsistency in the Plan or in any payment made
hereunder; and
(c) to make all other determinations and to take all other
actions necessary or advisable for the implementation
and administration of the Plan.
The Committee's determinations on matters within its control
shall be conclusive and binding on the Company and all other
persons. Notwithstanding the foregoing, no member of the
Committee shall act with respect to the administration of the
Plan except to the extent consistent with the exempt status of
the Plan under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3").
1.4. Shares Subject to the Plan. Shares of stock which may
be distributed under the plan are shares of common stock of the
Company, par value $.01 per share ("Stock"). The shares of Stock
which shall be available for distribution pursuant to the Plan
shall be treasury shares (including, in the discretion of the
Company, shares purchased in the open market). The number of
shares of Stock to be distributed pursuant to Outside Directors'
elections to receive shares of Stock in lieu of Eligible Cash
Fees (as described in subsection 3.1) shall be determined in
accordance with Section 3. The number of shares of Stock to be
distributed pursuant to awards of Deferred Stock Units (as
described in subsection 2.2) shall be determined in accordance
with subsection 2.2. The number of shares of Stock to be
distributed pursuant to Outside Directors' Deferral Elections (as
described in Section 4) shall be determined in accordance with
Section 4. The number of shares of Stock which are available for
awards under subsection 2.1 shall be 78,800 (1); provided, however,
that:
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(1) Reflects adjustment to shares issuable under the Plan after
giving effect to the stock split in the form of a 300% stock
dividend effective as of that date and the issuance of 300 shares
prior to that date.
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(a) in the event of any merger, consolidation,
reorganization, recapitalization, spinoff, stock split,
reverse stock split, rights offering, exchange or other
change in the corporate structure or capitalization of
the Company affecting the Stock, the number and kind of
shares of Stock available for awards under Section 2
and the annual awards of Stock and Deferred Stock Units
provided thereunder shall be equitably adjusted in such
manner as the Committee shall determine in its sole
judgment;
(b) in determining what adjustment, if any, is appropriate
pursuant to paragraph (a), the Committee may rely on
the advice of such experts as they deem appropriate,
including counsel, investment bankers and the
accountants of the Company; and
(c) no fractional shares shall be granted or authorized
pursuant to any adjustment pursuant to paragraph (a),
although cash payments may be authorized in lieu of
fractional shares that may otherwise result from such
an equitable adjustment.
1.5. Compliance with Applicable Laws. Notwithstanding any
other provision of the Plan, the Company shall have no obligation
to deliver any shares of Stock under the Plan unless such
delivery would comply with all applicable laws and the applicable
requirements of any securities exchange or similar entity. Prior
to the delivery of any shares of Stock under the Plan, the
Company may require a written statement that the recipient is
acquiring the shares for investment and not for the purpose or
with the intention of distributing the shares. If the
redistribution of shares is restricted pursuant to this
subsection 1.5, the certificates representing such shares may
bear a legend referring to such restrictions.
1.6. Director and Shareholder Status. The Plan will not
give any person the right to continue as a director of the
Company, or any right or claim to any benefits under the Plan
unless such right or claim has specifically accrued under the
terms of the Plan. Participation in the Plan shall not create
any rights in a director (or any other person) as a shareholder
of the Company until shares of Stock are registered in the name
of the director (or such other person).
1.7. Definition of Fair Market Value. The "Fair Market
Value" of a share of Stock on any date shall be equal to the
average of the high and low prices of a share of Stock reported
for New York Stock Exchange Composite Transactions for the
applicable date or, if there are no such reported trades for such
date, for the last previous date for which trades were reported.
1.8. Source of Payments. Except for Stock actually
delivered pursuant to the Plan, the Plan constitutes only an
unfunded, unsecured promise of the Company to make payments or
awards to directors (or other persons) or deliver Stock in the
future in accordance with the terms of the Plan.
1.9. Nonassignment. Neither a director's nor any other
person's rights to payments or awards under the Plan are subject
in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by
creditors of the director.
1.10. Elections. Any notice or document required to be filed
with the Committee under the Plan will be properly filed if
delivered or mailed by registered mail, postage prepaid, to the
Committee, in care of the Company, at the Company's principal
executive offices. The Committee may, by advance written notice
to affected persons, revise such notice procedure from time to
time. Any notice required under the Plan may be waived by the
person entitled thereto.
SECTION 2
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Awards
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2.1. Formula Stock Awards. As of the first business day of
January each year after the Effective Date each Outside Director
shall be awarded 400 (2) shares of Stock ("Stock Award").
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(2) Reflects adjustment to the 100 shares originally authorized
after giving effect to the stock split in the form of a 300%
stock dividend effective as of May 6, 1996.
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2.2. Deferred Stock Units.
(a) As of December 31, 1997, and each December 31st
thereafter, each person who was an Outside Director at
any time during the calendar year ended that date shall
be awarded a fixed number of deferred stock units (each
such unit representing the right to receive a share of
Stock at a future date) ("Deferred Stock Units") equal
to the sum of (i) 139 (i.e., the result obtained by
dividing $8,500 by the average Fair Market Value of a
share of Stock for the twenty consecutive trading days
ending December 31, 1996, and rounding to the nearest
whole number), and (ii) the result obtained by dividing
$2,200 by the average Fair Market Value of a share of
Stock for the twenty consecutive trading days ending
December 31, 1997, and rounding to the nearest whole
number.
(b) Beginning December 31, 1998, and on each December 31
thereafter, the amount of Deferred Stock Units awarded
pursuant to the preceding paragraph (a) shall be
increased by the number of Deferred Stock Units
determined pursuant to clause (ii) of the preceding
paragraph (a).
Notwithstanding the foregoing, the number of Deferred Stock Units
awarded to an Outside Director who is not an Outside Director for
the entire calendar year shall be prorated based on the number of
whole calendar months he or she was an Outside Director during
such calendar year.
SECTION 3
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Receipt of Stock in Lieu of Eligible Cash Fees
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3.1. Election to Receive Stock. Subject to the terms and
conditions of the Plan, including subsection 3.3, each Outside
Director may elect to forego receipt of all or any portion of the
Eligible Cash Fees (as defined below) payable to him or her
during 1995 following the Effective Date (or payable during 1995
prior to the Effective Date and subject to a Deferral Election
made in accordance with Section 4) and during any calendar year
thereafter and instead to receive whole shares of Stock of
equivalent value to the Eligible Cash Fees so foregone
(determined in accordance with subsection 3.4). An election
under this subsection 3.1 to have Eligible Cash Fees paid in
shares of Stock shall be valid only if it is in writing, signed
by the Outside Director, and filed with the Committee in
accordance with uniform and nondiscriminatory rules adopted by
the Committee but, in any event:
(a) at least six months prior to any date in 1995
following the Effective Date or, except as provided in
subsection 3.3 below, subsequent years in which such
Eligible Cash Fees would otherwise be payable; and
(b) prior to January 1, 1995 with respect to any amounts
payable during 1995 prior to the Effective Date and
deferred pursuant to a Deferral Election made in
accordance with Section 4.
For purposes of the Plan, the term "Eligible Cash Fees" means the
retainer fees, meeting fees, committee fees, committee chair
fees, and any other items of cash compensation as designated by
the Board of Directors that would otherwise be payable to the
Outside Director by the Company in cash as established, from time
to time, by the Board or any committee thereof, including without
limitation, the amounts credited to an Outside Director's
Deferred Compensation Account (as hereinafter defined) pursuant
to resolutions (the "Retirement Plan Resolutions") adopted by the
Board on September 26, 1996 in respect of the cessation of
benefit accruals under the UAL Corporation Retirement Plan for
Outside Directors (the "Retirement Plan").
3.2. Revocation of Election to Receive Stock. Once
effective, an election pursuant to subsection 3.1 to receive
Stock shall remain in effect for successive calendar years until
it is revised or revoked. Any such revision or revocation shall
be in writing, signed by the Outside Director and filed with the
Committee and shall be effective, as to Eligible Cash Fees
payable for services rendered during the calendar year next
following the date on which it is received by the Committee, or
such later date specified in such notice; provided, however, that
no revision or revocation shall be effective, as to any Eligible
Cash Fees otherwise receivable, prior to six months from the date
it is made.
3.3. Election Pursuant to Retirement Plan Resolutions.
If no election to have Eligible Cash Fees which have been
credited to an Outside Director's Deferred Compensation Account
pursuant to the Retirement Plan Resolutions deferred in the form
of cash is received on or before December 1, 1996, such Outside
Director shall automatically be deemed to have elected to have
such fees deferred in the form of Stock.
3.4. Equivalent Amount of Stock.
(a) The number of whole shares of Stock to be distributed
to any Outside Director, or credited to his or her
Deferred Compensation Account (as defined in subsection
4.3) pursuant to a Deferral Election made in accordance
with Section 4, by reason of his or her election
pursuant to subsection 3.1 to receive Stock in lieu of
Eligible Cash Fees or pursuant to subsection 3.3 shall
be equal to:
(i) the amount of the Eligible Cash Fees which the Outside
Director has elected to have paid to him or her in
shares of Stock or credited to his or her Company
Stock Subaccount (as defined in subsection 4.3);
DIVIDED BY
(ii) (A)the Fair Market Value of a share of Stock
as of the date on which such Eligible Cash Fees
would otherwise have been payable to the Outside
Director or (B) in the case of Eligible Cash Fees
credited pursuant to the Retirement Plan
Resolutions, the average Fair Market Value of a
share of Stock for the twenty consecutive trading
days ending December 31, 1996.
(b) The Fair Market Value of any fractional share shall
be paid to the Outside Director in cash; provided,
however, that fractional shares subject to a Deferral
Election filed in accordance with subsection 4.1 shall
be deferred and credited to the Company Stock Subaccount.
SECTION 4
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Deferral Elections
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4.1. Deferrals of Fees.
(a) General. Subject to the terms and conditions of the
Plan, each Outside Director, by filing a written
"Deferral Election" with the Committee in accordance
with uniform and nondiscriminatory rules adopted by the
Committee, may elect to defer the receipt of all or any
portion of the Eligible Cash Fees otherwise payable to
him or her for a calendar year commencing on or after
January 1, 1995 (including any Eligible Cash Fees that
he or she has elected to receive in Stock pursuant to
Section 3) until a future date (the "Distribution
Date") specified by the Outside Director in his or her
Deferral Election as of which payment of his or her
Deferred Compensation Account attributable to amounts
deferred pursuant to his or her Deferral Election shall
commence in accordance with subsection 4.4; provided,
however, that in no event shall the Distribution Date
elected pursuant to this subsection 4.1(a) be different
from the Distribution Date, if any, elected by the
Outside Director pursuant to subsection 4.2. If no
Distribution Date is specified in an Outside Director's
Deferral Election or has otherwise been elected by the
Outside Director pursuant to subsection 4.2, the
Distribution Date shall be deemed to be the first
business day in January of the year following the date
on which the Outside Director ceases to be a director
of the Company for any reason. An Outside Director's
Deferral Election shall be effective with respect to
Eligible Cash Fees (including any Eligible Cash Fees
that he or she has elected to receive in Stock pursuant
to Section 3) otherwise payable to him or her for
services rendered after the last day of the calendar
year in which such election is filed with the
Committee; provided, however, that except as provided
in subsection 4.1(b):
(i) a Deferral Election which is filed within 30 days of
the date on which a director first becomes an Outside
Director shall be effective with respect to all
Eligible Cash Fees (including any Eligible Cash
Fees that he or she has elected to receive in
Stock pursuant to Section 3) otherwise payable to
him or her after the date of the Deferral Election; and
(ii) by notice filed with the Committee in accordance
with uniform and nondiscriminatory rules
established by it, a director may terminate or
modify any Deferral Election as to Eligible Cash
Fees payable for services rendered after the last
day of the calendar year in which such notice is
filed with the Committee; provided, however, that
no modification may be made to the Distribution
Date unless the Outside Director shall file such
notice with the Committee at least one year prior
thereto.
Notwithstanding the provisions of paragraph (ii) next above, the
Committee may, in its sole discretion, after considering all of
the pertinent facts and circumstances, approve a change to the
Distribution Date which is requested by an Outside Director less
than one year prior thereto.
(b) Deferral of Eligible Cash Fees Credited Pursuant to
Retirement Plan Resolutions and Section 2.2.
A Deferral Election shall be deemed to have been made
and be effective automatically without the requirement of a
written Deferral Election for the Eligible Cash Fees credited to
the Plan pursuant to (i) the Retirement Plan Resolutions, the
deferral of which is mandatory pursuant to the terms of such
resolutions, and (ii) Section 2.2, the deferral of which is
mandatory. The Distribution Date for such deferrals shall not be
different than the Distribution Date selected pursuant to
subsections 4.1(a) and 4.2; provided that in no event shall the
Distribution Date for such Eligible Cash Fees be earlier than the
first business day in January of the year following the date on
which the Outside Director ceases to be a director of the Company
for any reason. In no event shall the Distribution Date pursuant
to this subsection 4.1(b) be different from the Distribution Date
for Deferred Stock Units pursuant to subsection 4.2.
4.2. Deferral of Stock Awards and Deferred Stock Units.
Subject to the terms and conditions of the Plan, each Outside
Director, by filing a written "Stock Deferral Election" with the
Committee in accordance with uniform and nondiscriminatory rules
adopted by the Committee, may elect to defer the receipt of all
or any portion of the Stock Award which is otherwise to be made
to him or her for 1996 and subsequent years until the
Distribution Date; provided, however, that if no Distribution
Date has been elected (or is deemed to have been elected)
pursuant to subsection 4.1, the "Distribution Date" shall be the
date specified by the Outside Director in his or her Stock
Deferral Election or, if no such date is specified, the first
business day in January of the year following the date on which
the Outside Director ceases to be a director of the Company for
any reason. An Outside Director's Stock Deferral Election shall
be effective with respect to Stock Awards otherwise to be made to
him or her pursuant to subsection 2.1 after the last day of the
calendar year in which such election is filed with the Committee;
provided, however, that by notice filed with the Committee in
accordance with uniform and nondiscriminatory rules established
by it, an Outside Director may terminate or modify any Stock
Deferral Election as to Stock Awards to be made after the last
day of the calendar year in which such notice is filed with the
Committee. No modification may be made to the Distribution Date
unless the Outside Director shall file such notice with the
Committee at least one year prior thereto. Notwithstanding the
provisions of this section, the Committee may, in its sole
discretion, after considering all of the pertinent facts and
circumstances, approve a change to the Distribution Date which is
requested by an Outside Director less than one year prior
thereto. The Distribution Date for Deferred Stock Units awarded
pursuant to subsection 2.2 shall be established, and may be
modified, in the same manner as the Distribution Date for Stock
Awards as provided in this subsection 4.2; provided that in no
event shall the Distribution Date for Deferred Stock Units be
earlier than the first business day in January of the year
following the date on which the Outside Director ceases to be a
director of the Company for any reason. Subject to the proviso
to the preceding sentence, the Distribution Date for Deferred
Stock Units awarded pursuant to subsection 2.2 shall be the same
as the Distribution Date, if any, for Stock Awards pursuant to
this subsection 4.2.
4.3. Crediting and Adjustment of Deferred Amounts. The
amount of any Eligible Cash Fees (including any Eligible Cash
Fees that he or she has elected to receive in Stock pursuant to
Section 3) deferred pursuant to subsection 4.1 or the Retirement
Plan Resolutions ("Deferred Compensation"), and the amount of any
Stock Award deferred by an Outside Director pursuant to a Stock
Deferral Election and any Deferred Stock Unit (each, a "Stock
Deferral"), shall be credited to a bookkeeping account maintained
by the Company in the name of the Outside Director (the "Deferred
Compensation Account"), which account shall consist of two
subaccounts, one known as the "Cash Subaccount" and the other as
the "Company Stock Subaccount." Any Stock Deferrals and Eligible
Cash Fees that the Outside Director has elected or is deemed to
have elected to receive in Stock pursuant to Section 3 and which
he or she has also elected to defer pursuant to subsection 4.1 or
is required to defer pursuant to subsection 2.2 or the Retirement
Plan Resolutions shall be credited to his or her Company Stock
Subaccount. Any other Deferred Compensation shall be credited to
his or her Cash Subaccount. An Outside Director's Deferred
Compensation Account shall be adjusted as follows:
(a) As of the first day of February, May, August and
November, and as of July 3, 1995 (each such date
referred to herein as an "Accounting Date"), the
Outside Director's Cash Subaccount shall be adjusted as
follows:
(i) first, the amount of any distributions made since
the last preceding Accounting Date and
attributable to the Cash Subaccount shall be
charged to the Cash Subaccount;
(ii) next, the balance of the Cash Subaccount after
adjustment in accordance with subparagraph (i)
above shall be credited with interest for the
period since the last preceding Accounting Date
computed at the prime rate as reported by The Wall
Street Journal for the current Accounting Date, or
if such date is not a business day, for the next
preceding business day, except that, for the
February 1, 1997 Accounting Date, the portion of
the Cash Subaccount representing amounts credited
pursuant to the last sentence of this paragraph
(a) shall be credited with interest for only the
period since December 31, 1996;
(iii) next, on the Accounting Date occurring on July 3,
1995, the balance in the Cash Subaccount shall be
charged with a distribution equal to that portion
of the balance in the Cash Subaccount which is
attributable to Eligible Cash Fees payable prior
to the Effective Date which the Outside Director
has elected to receive in Stock pursuant to
Section 3 and which were credited to the Cash
Subaccount pursuant to the Outside Director's
Deferral Election (as adjusted in accordance with
the terms of the Plan through July 3, 1995); and
(iv) finally, after adjustment in accordance with the
foregoing provisions of this paragraph (a), the
Cash Subaccount shall be credited with the portion
of the Deferred Compensation or Supplemental
Benefit (as defined in the Retirement Plan
Resolutions) otherwise payable to the Outside
Director since the last preceding Accounting Date
or, in the case of the Accounting Date occurring
on February 1, 1995, subsequent to January 1,
1995, which is to be credited to the Cash
Subaccount, excluding amounts previously credited
pursuant to the following sentence.
In addition, as of the close of business on December 31, 1996,
the Cash Subaccount shall be credited with the Eligible Cash Fees
to be credited to such account pursuant to the Retirement Plan
Resolutions which the Outside Director has elected to receive in
cash.
(b) The Outside Director's Company Stock Subaccount shall
be adjusted as follows:
(i) as of the Effective Date, the Company Stock
Subaccount shall be credited with that number of
stock units ("Stock Units") which is equal to the
amount charged to the Cash Subaccount as of that
date pursuant to subparagraph (a) (iii) next
above, divided by the Fair Market Value of a share
of Stock as of the Effective Date;
(ii) as of any date on or after the Effective Date on
which Eligible Cash Fees would have been payable
to the Outside Director in Stock but for his or
her Deferral Election, and as of December 31,
1996, in the case of the Eligible Cash Fees
credited pursuant to the Retirement Plan
Resolutions which the Outside Director has elected
to take in Stock pursuant to Section 3, the
Company Stock Subaccount shall be credited with a
number of Stock Units equal to the number of
shares of Stock (including any fractional shares)
to which he or she would have been entitled
pursuant to Section 3;
(iii) as of the date on which a Stock Award would be
made to the Outside Director pursuant to
subsection 2.1 but for his or her Stock Deferral
Election, the Company Stock Subaccount shall be
credited with a number of Stock Units equal to the
number of shares of Stock that would have been
awarded to the Outside Director as of such date
but for his or her Stock Deferral Election;
(iv) as of December 31, 1997, and each December 31st
thereafter, the Company Stock Subaccount shall be
credited with a number of Stock Units equal to the
number of Deferred Stock Units awarded pursuant to
subsection 2.2;
(v) as of the date on which shares of Stock are
distributed to the Outside Director in accordance
with subsection 4.4 below, the Company Stock
Subaccount shall be charged with an equal number
of Stock Units; and
(vi) as of the record date for any dividend paid on
Stock, the Company Stock Subaccount shall be
credited with that number of additional Stock
Units which is equal to the number obtained by
multiplying the number of Stock Units then
credited to the Company Stock Subaccount by the
amount of the cash dividend or the fair market
value (as determined by the Board of Directors) of
any dividend in kind payable on a share of Stock
and dividing that product by the then Fair Market
Value of a share of Stock.
In the event of any merger, consolidation, reorganization,
recapitalization, spinoff, stock split, reverse stock split,
rights offering, exchange or other change in the corporate
structure or capitalization of the Company affecting the Stock,
each Outside Director's Company Stock Subaccount shall be equitably
adjusted in such manner as the Committee shall determine in its sole
judgment.
4.4. Payment of Deferred Compensation Account. Except as
otherwise provided in this subsection 4.4 or subsection 4.5, the
balances credited to the Cash Subaccount and Company Stock
Subaccount of an Outside Director's Deferred Compensation Account
shall each be payable to the Outside Director in 10 annual
installments commencing as of the Distribution Date and
continuing on each annual anniversary thereof. Notwithstanding
the foregoing, an Outside Director may elect, by filing a notice
with the Committee at least one year prior to the Distribution
Date, to change the number of payments to a single payment or to
any number of annual payments not in excess of ten. Each such
payment shall include a cash portion, if applicable, and a Stock
portion, if applicable, as follows:
(a) The cash portion to be paid as of the Distribution Date
or any anniversary thereof and charged to the Cash
Subaccount shall be equal to the balance of the Cash
Subaccount multiplied by a fraction, the numerator of
which is one and the denominator of which is the number
of remaining payments to be made, including such
payment.
(b) The Stock portion to be paid as of the Distribution
Date or any anniversary thereof and charged to the
Company Stock Subaccount shall be distributed in whole
shares of Stock, the number of shares of which shall be
determined by rounding to the next lower integer the
product obtained by multiplying the number of Stock
Units then credited to the Outside Director's Company
Stock Subaccount by a fraction, the numerator of which
is one and the denominator of which is the number of
remaining payments to be made, including such payment.
The Fair Market Value of any fractional share of Stock
remaining after all Stock distributions have been made
to the Outside Director pursuant to this paragraph (b)
shall be paid to the Outside Director in cash.
Notwithstanding the foregoing, the Committee, in its sole
discretion, may distribute all balances in any Deferred
Compensation Account to an Outside Director (or former Outside
Director) in a lump sum as of any date. Notwithstanding the
foregoing, the Committee, in its sole discretion, may distribute
all of an Outside Director's Company Stock Subaccount to such
Outside Director (or former Outside Director) in a lump sum as of
any date or, if requested by an Outside Director who has elected
to receive a lump sum, the Committee, in its sole discretion, may
distribute all balances in any Deferred Compensation Account to
an Outside Director (or former Outside Director) in installments
satisfying this subsection 4.4 as requested by the Outside
Director (or former Outside Director).
4.5. Payments in the Event of Death. If an Outside Director
dies before payment of his or her Deferred Compensation Account
commences, all amounts then credited to his or her Deferred
Compensation Account shall be distributed to his or her
Beneficiary (as described below), as soon as practicable after
his or her death, in a lump sum. If an Outside Director dies
after payment of his or her Deferred Compensation Account has
commenced but before the entire balance of such account has been
distributed, the remaining balance thereof shall be distributed
to his or her Beneficiary, as soon as practicable after his or
her death, in a lump sum. Any amounts in the Cash Subaccount
shall be distributed in cash and any amounts in the Company Stock
Subaccount shall be distributed in whole shares of Stock
determined in accordance with subsection 4.4(b), and the Fair
Market Value of any fractional share of Stock shall be
distributed in cash. For purposes of the Plan, the Outside
Director's "Beneficiary" is the person or persons the Outside
Director designates, which designation shall be in writing,
signed by the Outside Director and filed with the Committee prior
to the Outside Director's death. A Beneficiary designation shall
be effective when filed with the Committee in accordance with the
preceding sentence. If more than one Beneficiary has been
designated, the balance in the Outside Director's Deferred
Compensation Account shall be distributed to each such
Beneficiary per capita (with cash distributed in lieu of any
fractional share of Stock). In the absence of a Beneficiary
designation or if no Beneficiary survives the Outside Director,
the Beneficiary shall be the Outside Director's estate.
4.6. Multiple Distribution Dates. If, as a result of the
applicable proviso to the penultimate sentence of subsection
4.1(b) or 4.2 (the "Multiple Distribution Date Rules"), there
shall be more than one Distribution Date for an Outside
Director's Cash Subaccount or Company Stock Subaccount, then the
Company shall take all steps reasonably practicable to divide the
respective subaccount into two separate subaccounts, so that the
credits, charges and payments related to the different
Distribution Dates are kept separate. In the event an Outside
Director has attempted to elect more than one Distribution Date
pursuant to the provisions of subsections 4.1 and 4.2 (other than
under the circumstances contemplated by the preceding sentence),
the following rules of construction shall apply:
(a) the most recent Distribution Date election
received by the Company in accordance with the Plan
shall constitute a revocation of all prior Distribution
Date elections; and
(b) with respect to contemporaneous elections,
elections made pursuant to subsection 4.2 shall take
precedence over elections made pursuant to subsection
4.1, elections made pursuant to subsection 4.1(a) shall
take precedence over elections made pursuant to
subsection 4.1(b), and elections made with respect to
Stock Awards shall take precedence over elections made
with respect to Deferred Stock Units.
SECTION 5
---------
Amendment and Termination
-------------------------
While the Company expects and intends to continue the Plan,
the Board of Directors of the Company reserves the right to, at
any time and in any way, amend, suspend or terminate the Plan;
provided, however, that no amendment, suspension or termination
shall:
(a) be made without shareholder approval to the extent such
approval is required by law, agreement or the rules of
any exchange or automated quotation system upon which
the Stock is listed or quoted;
(b) except as provided in subsection 4.4 (relating to lump
sum payments of amounts held in an Outside Director's
Deferred Compensation Account) or this Section 5,
materially alter or impair the rights of an Outside
Director under the Plan without the consent of the
Outside Director with respect to rights already accrued
hereunder; or
(c) make any change that would disqualify the Plan or any
other plan of the Company intended to be so qualified
from the exemption provided by Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
Exhibit 10.2
------------
As Amended
September 18, 1997
UAL CORPORATION
INCENTIVE COMPENSATION PLAN
I. PURPOSE
In an effort to maintain a position of leadership in the
fast-growing and highly competitive business segments in which
UAL Corporation (the "Company") competes, it is necessary to
promote financial interests of the corporation and its corporate
affiliates (the "subsidiaries"), including its growth, by (A)
attracting and retaining highly qualified executives possessing
outstanding ability, (B) motivating executives by means of
performance related incentives, and (C) providing incentive
compensation opportunities which are competitive with those of
major corporations. The Incentive Compensation Plan (the "Plan")
hereinafter described is designated to assist the Company in
attaining these objectives.
II. ADMINISTRATION OF THE PLAN
1. The Company is responsible for the general
administration of the Plan, except as to matters reserved in this
Plan to the Compensation Administration Committee of the Board of
Directors of the Company for all grants to any "covered employee"
within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder,
and by the Compensation Committee of the Board of Directors of
the Company for all other grants (such committee, as applicable,
herein called the "Committee"). Determinations, decisions and
actions of the Company or the Committee in connection with the
construction, interpretation, administration, or application of
the Plan will be final, conclusive, and binding upon any grantee
of awards under the Plan and any person claiming under or through
such grantee. Neither the Company nor any member of the
Committee will be liable for any determination, decision, or
action made with respect to the Plan or any Incentive Award
granted under the Plan.
2. A Participant's rights and interests in any Incentive
Award made under the Plan may not be assigned or transferred and
are not subject to attachment, garnishment, execution, or other
creditor's processes.
3. This Plan may at any time be amended, modified, or
terminated as the Board, in its discretion, determines, and such
amendment, modification, or termination will not require the
consent, ratification, or approval of any party, including any
Participant hereunder.
4. This Plan and all determinations made and actions taken
pursuant hereto will be governed and construed by the law of the
State of Illinois.
III. DEFINITIONS
1. Award Year--The calendar year for which Incentive
Awards, if any, are calculated under the Plan.
2. Financial Objectives--Financial performance goals
established by the Company and approved by the Committee at the
beginning of an Award Year. Financial Objectives may apply to
overall Company and subsidiaries performance in selected areas
and/or to performance of major business segments of the Company
and subsidiaries.
3. Financial Performance Factor--The numerical factor
determined by the Company shortly after the Award Year by
comparing actual performance during such Award Year to the
applicable Financial Performance Objectives previously
established for such Award Year.
4. Individual Performance Objectives--Goals and objectives
established by the Company (or by the Committee in the case of
the Company's Chairman and its Chief Executive Officer) for each
Participant under the Plan.
5. Individual Performance Factor--The numerical factor
determined with respect to the Plan by the Company (or by the
Committee in the case of the Chairman and the Chief Executive
Officer and officers reporting to either of them) shortly after
the Award Year, based upon an evaluation as to the extent to
which a Participant in the Plan achieved the Individual
Performance Objectives established for him/her. Such evaluation
will be wholly discretionary and subjective on the part of the
Company or the Committee.
6. Incentive Awards--The dollar value of awards made to
Participants under the Plan.
7. Incentive Opportunity--The amount, determined by the
Company and as approved by the Committee as appropriate, that a
Participant may receive as an Incentive Award under the Plan.
The Incentive Opportunity will be stated as a percentage of a
Participant's base salary for an Award Year (prorated for a
partial year's participation). If a Participant held more than
one eligible position in an Award Year, his/her Incentive
Opportunity will be determined on a prorata basis.
IV. PARTICIPATION IN THE PLAN
1. Participants will be determined annually by the Company
from among key employees and senior management employees of the
Company and its subsidiaries. This determination will allow
participation only for the Award Year concerned.
2. The Plan does not constitute a contract of employment,
and participation in the Plan will not give any employee the
right to be retained in the service of the Company or its
subsidiaries.
3. If a Participant's employment with the Company or its
subsidiaries is terminated during an Award Year, the appropriate
Incentive Award under the Plan, if any, for such Participant will
be subject to the sole discretion of the Company's Chairman (or
to the sole discretion of the committee in case of the
termination of employment of the Chairman). A transfer of
employment between the Company and any of its subsidiaries will
not be considered a termination of employment.
V. COMPUTATION OF INCENTIVE AWARDS
The Incentive Award for an Award Year for a Participant will
be the product of a Participant's Incentive Opportunity modified
by the Financial Performance Factor and Individual Performance
Factor, times the Participant's applicable base salary. No
Incentive Award will be made to a Participant for an Award Year
in which his company's Financial Performance Factor is below
threshold level. However, the Chairman, with Committee approval,
may waive the Company's Financial Performance Factor threshold
requirement.
Total payments to all participants of the Incentive
Compensation Plan will be limited to 5% of Pre-Tax Income in any
given year. Should total calculated incentive awards exceed 5%
of Pre-Tax Income, payments will be made on a prorated basis.
VI. PAYMENT OF AWARDS
(A) Standard Procedures--Payment of Incentive Awards will
be made in cash on or about April 1, of the year following the
Award Year; provided, however, that an Incentive Award may be
deferred at the election of a Participant in the manner described
below.
(B) Deferred Awards--Participants may elect, on or before
December 31 of the year preceding an Award Year, to defer receipt
of all or any portion on an Incentive Award to a subsequent
calendar year. A Participant will receive payment of a deferred
Incentive Award in a lump sum in January of the earliest of: (1)
the deferral calendar year selected by the Participant; (2) the
calendar year immediately after the Participant's retirement
under the United Air Lines, Inc. Non-Union Ground Employees'
Retirement Plan; (3) the calendar year after the Participant's
termination of employment with the Company for other reasons,
provided that a transfer of employment from the Company to any of
the Company's affiliates will not be considered a termination of
employment with the Company; (4) the occurrence of an
"Unforeseeable Emergency", provided that a distribution pursuant
to this clause (4) shall not exceed the amount reasonably needed
to satisfy the emergency need, or (5) any other time elected by
the Participant, provided that upon making such an election, the
Participant shall be entitled to receive 90% of the amounts then
credited to him or her under the Plan and shall forfeit the
remaining 10% of such amount. The amounts deferred will be
credited annually with compound interest at the prime rate in
effect during the deferral period at the end of the calendar
quarter, as reported by The Wall Street Journal. All deferred
Incentive Awards will be reflected in the Company's books as
general unsecured and unfunded obligations of the Company. No
trust in favor of any Participant will be implied. Deferral
elections will be irrevocable by a Participant or his or her
beneficiary. For purposes of this Section, "Unforeseeable
Emergency" shall mean a severe financial hardship to the
Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent (as defined in
Section 152(a) of the Code) of the Participant, loss of the
Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Participant. The
circumstances that will constitute an Unforeseeable Emergency
will depend upon the facts of each case, but, in any case,
payment under clause (4) above may not be made to the extent that
such hardship is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of
the Participant's assets, to the extent the liquidation of such
assets would not itself cause severe financial hardship, or (iii)
by cessation of deferrals under the Plan.
VII. SPECIAL RULES
Notwithstanding any other provision of this Plan to the
contrary: Incentive Awards with respect to an Award Year with
respect to any Participant who is a "covered employee" (as
defined in Section 162(m)(3) of the Code) with respect to such
Award Year (I) may not exceed $900,000 and (ii) shall be
determined by reference to a formula which shall define the
Incentive Award by reference to the attainment by the Company of
one or more target levels of pre-tax income (as determined under
generally accepted accounting principles but without regard to
any items (whether gains or losses) otherwise included therein
relating to (1) the UAL Corporation Employee Stock Ownership
Plan, the UAL Corporation Supplemental ESOP, or the trusts
relating thereto, (2) any event or occurrence that the Committee
determines to be either not directly related to the operations of
the Company or not within the reasonable control of the Company's
management, (3) this Plan and (4) the Company's 1988 Restricted
Stock Plan) for such Award Year. Such target level(s) and the
formula referred to above shall be determined by the Committee
prior to the commencement of such Award Year (or at such later
time as may be permissible under Section 162(m) of the Code); the
Committee shall determine and certify whether such target levels
of pre-tax income have been met. Notwithstanding the foregoing,
the Committee may reduce the Incentive Award otherwise determined
pursuant to such formula in its sole discretion.
Exhibit 10.3
------------
SIXTH AMENDMENT
UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
(Effective as of July 12, 1994)
By virtue and in exercise of the amending power
reserved to UAL Corporation (the "Company") under Section 13.1(a)
of the UAL Corporation Employee Stock Ownership Plan (effective
as of July 12, 1994) (the "Plan"), which amending power
thereunder is subject to the approval of the Air Line Pilots
Association International ("ALPA") and the International
Association of Machinists and Aerospace Workers (the "IAM"), the
Company hereby amends the Plan, subject to the approval of ALPA
and the IAM, as follows, effective December 31, 1996.
1. Section 3.1(b) (ii) is amended by replacing the
reference to "Section 5.4 (c) (vii)" with "Sections 5.4 (c) (vii)
and 5.4 (g)".
2. The following new subsection (g) is added to Section 5.4:
"Follow-up Allocations. After the performance of the
allocations described in the foregoing provisions of this
Section 5.4 for a Plan Year, but prior to the time
prescribed for filing of the Employer's federal income tax
return (including any extensions of time) for that Plan
Year, it may be determined that Convertible Shares and/or
Voting Shares which were allocated for such Plan Year to a
Participant under the Supplemental Plan could have been
allocated to Part B for such Plan Year without violating the
limitations imposed by Code Sections 415, 401(a) (17) and
(with respect to members of the Management and Salaried
Employee Group) 401(a) (4). If such a circumstance exists,
the Company shall, to the extent provided below, make a
contribution of shares on behalf of such Participant to Part
B, or, as applicable, direct the trustee of the Supplemental
Trust to transfer shares from the Supplemental Trust to Part
B. Such shares shall be allocated to the account of such
Participant under Part B. The contribution and allocation
referred to in this subsection (g) shall be for the limited
purpose of crediting (in the same Plan Year) shares under
Part B to Participants who were initially allocated such
shares under the Supplemental Plan. The contribution and
allocation of such shares to such a Participant shall not
increase or decrease the aggregate number of shares
allocated to the Participant under this Plan and the
Supplemental Plan. No contribution or allocation shall be
made under this subsection (g) after the time prescribed for
filing the Employer's federal income tax return (including
any extensions of time) for the Plan Year in which the
shares were initially allocated to the Participant under the
Supplemental Plan. Transfers of shares following the
deadline set forth in the preceding sentence from the
Supplemental Plan to this Plan (if any) shall be governed by
Section 5.4 (c)(vi) of this Plan and Section 2.7 (a) of the
Supplemental Plan."
IN WITNESS WHEREOF, the Company has caused this Sixth
Amendment to be executed on August 11, 1997.
----------
UAL CORPORATION
/s/ Douglas A. Hacker
---------------------
APPROVED BY:
AIR LINE PILOTS ASSOCIATION,
INTERNATIONAL
/s/ Michael H. Glawe
--------------------
/s/ J.R. Babbitt
----------------
INTERNATIONAL ASSOCIATION
OF MACHINISTS AND
AEROSPACE WORKERS
/s/ Kenneth W. Thiede
---------------------
Exhibit 10.4
------------
SIXTH AMENDMENT
UAL CORPORATION
SUPPLEMENTAL ESOP
(Effective as of July 12, 1994)
By virtue and in exercise of the amending power reserved to UAL
Corporation (the "Company") under Section 13.1(a) of the UAL Corporation
Supplemental ESOP (effective as of July 12, 1994) (the "Plan"), which
amending power thereunder is subject to the approval of the Air Line
Pilots Association International ("ALPA") and the International Association
of Machinists and Aerospace Workers (the "IAM"), the Company hereby amends
the Plan, subject to the approval of ALPA and the IAM, as follows, effective
as of December 31, 1996.
The following new subsection (d) is hereby added to Section 2.7:
"After the performance of the allocations described in Section 2.4 for a Plan
Year, but prior to the time prescribed for filing of the Employer's federal
income tax return (including any extensions of time) for that Plan Year, it
may be determined that Convertible Shares and/or Voting Shares which were
allocated for such Plan Year to a Participant under this Plan could have been
allocated to the ESOP (Part B) for such Plan Year without violating the
limitations imposed by Code Sections 415, 401(a) (17) and (with respect to
members of the Management and Salaried Employee Group) 401(a) (4). If such
a circumstance exists, the Company shall, to the extent provided in
Section 5.4(g) of the ESOP, make a contribution of shares on behalf of the
Participant to the ESOP (Part B), or, as applicable, direct the Trustee to
transfer shares from the Supplemental Trust to the ESOP (Part B). Such
shares contributed (or transferred) to the ESOP (Part B) on behalf of such
Participant shall reduce the Participant's corresponding shares under this
Plan."
IN WITNESS WHEREOF, the Company has caused this Sixth Amendment to be
executed on August 11, 1997.
UAL CORPORATION
/s/ Douglas A. Hacker
---------------------
APPROVED BY:
AIR LINE PILOTS ASSOCIATION,
INTERNATIONAL
/s/ Michael H. Glawe
--------------------
/s/ J.R. Babbitt
----------------
INTERNATIONAL ASSOCIATION
OF MACHINISTS AND
AEROSPACE WORKERS
/s/ Kenneth W. Thiede
---------------------
Exhibit 10.5
------------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of September 1, 1997 between United Air
Lines, Inc. ("UA") and UAL Corporation ("UAL") (UA and UAL
sometimes collectively referred to as "United") and Joseph
R. O'Gorman residing at P.O. Box 422, Barrington, Illinois
60011 (sometimes referred to as "Executive").
WHEREAS, Executive has served and is presently serving
as Executive Vice President-Fleet Operations and
Administration and as a Director of UA and holds various
other positions and directorships with subsidiaries and
affiliates of UA or UAL (hereinafter collectively referred
to as "Executive Positions"); and
WHEREAS, Executive is desirous of pursuing interests
outside of United; and
WHEREAS, United wishes to facilitate Executive's
desires as stated above but also to retain Executive's
services on the basis described herein; and
WHEREAS, Executive has agreed in this Agreement to
provide such services and to release United from any
liability arising out of his hire and employment with United
and his resignation from his Executive Position;
NOW, THEREFORE, it is agreed by and between United and
Executive as follows:
1. Resignation; Continued Employment: Executive
---------------------------------
hereby resigns from his Executive Positions all effective as
of September 1, 1997 (the "Effective Date"). Thereafter,
Executive will continue to be actively employed by United,
but he will perform services for United by being "on call",
including testifying on behalf on United, and subject to
such assignments consistent with Executive's experience as
may be reasonably requested by United's President and
reasonably acceptable to Executive. Executive and United
hereby agree and affirm that circumstances constituting an
event of "Good Reason" or a termination of employment under
the UAL Agreement (as hereinafter defined) have not arisen
or are otherwise applicable and that this Agreement shall
not constitute such circumstances. The "UAL Agreement"
shall mean, collectively, the 35 page agreement between
Executive and UAL dated as of July 1, 1993, and any and all
amendments or letters of agreement relating thereto.
2. Time Period of Employment: United agrees to
-------------------------
employ Executive and Executive agrees to be employed by
United on the basis stated in Paragraph 1 from September 1,
1997 through July 31, 1998, subject to sooner termination
pursuant to Paragraph 4 (such period, as it may be shortened
pursuant to Paragraph 4, being herein called the "Term").
3. Payments and Benefits: A.(i) During the Term,
---------------------
United will pay Executive a salary of $28,333 per month.
Such payments will be made on the same schedule as actively
employed officers of United from time to time, currently the
15th and last day of each month. Any amounts will be
prorated for any partial month. Executive will not be
entitled to any increase nor subject to any decrease in such
salary payments during the Term.
(ii) In addition to the payments specified in
Paragraph 3.A(i), on March 15, 1998, United will pay
Executive a lump sum severance payment of $183,333.
(iii) All payments under this Paragraph 3.A will be
subject to withholding for taxes and other purposes as
required by applicable law.
B. Notwithstanding what may be provided to other
active employees of United from time to time, the only
benefits that Executive shall be entitled to during the Term
are as follows, in each case subject to the rules and
regulations of United as from time to time are in effect
(except as otherwise stated below in this Paragraph 3.B):
(i) Free and Reduced Rate Transportation: United
shall provide to Executive and his eligibles free
and reduced rate transportation of the type
granted to actively employed officers in
accordance with company regulations as revised
from time to time.
(ii) United Air Lines, Inc. Management and Salaried
Employees' Retirement Plan: Executive shall
continue to participate in (i) the Retirement Plan
and (ii) The United Air Lines, Inc. Supplemental
Retirement Plan in accordance with their terms
(hereinafter collectively the "Retirement Plans").
(iii) Management Medical/Dental: Executive and his
eligible dependents shall continue to be covered
by the Management Medical/Dental Plan in the same
manner as other active employees.
(iv) Group Life Insurance: Executive shall continue to
be covered by Group Life Insurance including
Contributory Life Insurance (if so covered), on
the same basis as other active employees, provided
the appropriate payroll deductions are authorized
and in accordance with the terms of the policies.
(v) Officer's Accidental Death and Dismemberment
Insurance/Split Dollar Life Insurance:
Executive's Officer's Accidental Death and
Dismemberment coverage of $250,000 will continue
until the termination of this Agreement as
provided in Paragraph 4 herein. Executive will
have the option of converting up to $100,000 of
this coverage to a private policy within 31 days
of termination, if Executive so chooses.
Executive will continue to be covered by the
Officer's Split Dollar Life Insurance until July
31, 2003. The terms of Executive's coverage and
option for continuation of the Officer's Split
Dollar Life Insurance thereafter will be explained
in a separate letter by July 31, 2003.
(vi) Disability Income Benefits: Executive, provided
he is qualified under the terms of the Plan, and
provided he makes such payments as may be required
by the Plan Administrator, will be eligible for
any disability income benefits from company
disability insurance plans.
(vii) Stock: Executive shall continue to
participate in the UAL, Inc. 1981 Incentive Stock
Program (the "Program") and the 1988 Restricted
Stock Plan ("1988 Plan"). Termination of
employment pursuant to Paragraph 4 of the
Agreement will be a cessation of employment within
the meaning of the Program and the 1988 Plan.
Nothing in this Agreement will increase or
diminish the right of Executive to exercise any
stock option that becomes exercisable according to
the terms of the Program and the relevant option.
Notwithstanding the foregoing, the parties hereby
agree that the Non-Qualified Stock Option
Agreements with Executive dated as of April 26,
1996 (the "April 1996 Agreement") and May 20, 1997
(the "May 1997 Agreement") and the Restricted
Stock Agreement with Executive dated May 17, 1995
(the "May 1995 Agreement") are hereby amended as
follows:
(a) The unvested options to purchase up to
20,000 shares of UAL common stock that Executive
has remaining under the April 1996 Agreement that
are scheduled to vest after July 31, 1998 will be
forfeited on the Effective Date.
(b) The unvested options to purchase up to
11,775 shares of UAL common stock that Executive
has remaining under the May 1997 Agreement that
are scheduled to vest after July 31, 1998 will be
forfeited on the Effective Date.
(c) The 12,000 restricted shares of UAL
common stock that Executive has under the May 1995
Agreement that are not scheduled to be released
from restrictions until after July 31, 1998 will
be forfeited on the Effective Date.
Executive will not be eligible for any grants made
under the Program or the 1988 Plan after the
Effective Date.
(viii) Other Benefits: Executive will continue to
be eligible to participate in the stock purchase
plan, 401(k) plan, Flexible Spending Account, and
be eligible for payroll savings bonds on the same
basis as other active employees. Executive will
also be eligible to utilize the Credit Union
subject to its rules.
(ix) Vacation and Holidays: Executive agrees to forego
any unused vacation time existing as of September
1, 1997 and no paid vacation or holiday time will
be accrued or taken after September 1, 1997.
(x) UAL Stock Ownership Plan: Because, among other
matters, Executive is receiving compensation pursuant
to this Agreement at a rate greater than that which
he had received after the commencement of the UAL Stock
Ownership Plan ("ESOP"), all parties acknowledge
and agree that Executive will no longer be
eligible to participate in the ESOP after August
31, 1997, and as of September 1, 1997 his
participation with respect to future accruals of
UAL stock shall cease, but he will retain whatever
stock or other benefits rights he may have accrued
prior to that date, all in accordance with the
ESOP's terms and conditions.
(xi) Company Owned Car: Executive will be entitled to
retain the company owned car provided to him by
United. In addition, no later than 31 days
following the Effective Date, United will pay off
all amounts due under the lease pertaining to the
vehicle, and United will cause title in the
vehicle to be conveyed to Executive. To the
extent there is any imputed income as a result of
the conveyance of title or the liquidation of the
lease or both, Executive will be deemed to have
received such imputed income and United may make
withholdings for income taxes and other purposes
as required by applicable law.
C. Each of the benefits enumerated in Paragraph 3.B.
is subject to the practices, rules, and regulations of
United, as in effect from time to time.
D. For purposes of clarity, if an Incentive
Compensation Plan (ICP) award is granted for 1997
performance or thereafter, Executive will not be eligible
under the ICP for any award.
4. Termination of Employment Under Agreement:
-----------------------------------------
A. Non-Election of Executive: Executive's employment
-------------------------
under this Agreement shall terminate and Executive will no
longer have the status of an active employee of United and
will no longer be entitled to any of the benefits of this
Agreement (including the entitlement to the payment and
benefits described in Paragraph 3 (other than those required
by law and otherwise vested)), on the happening of the
earliest of the following events:
(i) Executive's death.
(ii) Executive's discharge for cause.
(iii) Any action or communication by Executive
that adversely reflects upon United or the
service it provides or any action or
communication that causes, induces, or
facilitates others to act adversely to
United.
(iv) 11:59 p.m. on July 31, 1998, at which
time he will be deemed to have elected to
retire.
Notwithstanding such termination, Executive shall
continue to be bound by the provisions of Paragraphs 6
through 12 of this Agreement. Discharge for "cause" shall
mean termination upon (a) willful and continued failure by
Executive to substantially perform the duties set forth in
Paragraph 1 of this Agreement (other than any such failure
resulting from Executive's incapacity due to physical or
mental illness) after written demand for substantial
performance is delivered to Executive by the Board of
Directors of UAL Corporation, which demand specifically
identifies the manner in which that Board believes Executive
has not substantially performed such duties, and reasonable
opportunity of Executive to perform, or (b) the willful
engaging by Executive in conduct which is demonstrably and
materially injurious to United or its subsidiaries or
affiliates monetarily or otherwise, or (c) any willful
breach by Executive of this Agreement. For purposes of this
definition, no act, or failure to act, on Executive's part
shall be deemed "willful" unless done, or omitted to be
done, by Executive not in good faith and without the
reasonable belief that such action or omission was in the
best interest of United or its subsidiaries or affiliate.
B. Upon Retirement: If this Agreement and
---------------
Executive's employment under it have not otherwise
terminated pursuant to Paragraph 4 as of 11:59 p.m. of July
31, 1998, then effective as of that time and day Executive
hereby retires from United and Executive will be entitled to
the benefits of a retired United officer, as such may be
revised from time to time. In addition, United will pay
Executive a supplemental retirement benefit computed and
paid in accordance with the Retirement Plans ( as defined in
Paragraph 3.B.(ii)) but calculating Executive's accrued
benefit (the "Additional Years of Service Credit") as if
Executive had been continuously employed by United from June
27, 1966 to the date of Executive's retirement from United.
The amount of this supplemental retirement benefit shall be
determined without decrement based on age at the time of
retirement, so that such benefit will be determined as if
Executive actually retired at age 65, regardless of the
actual age at which Executive retires. This supplemental
retirement benefit shall be offset by the accrued benefit
payable to Executive under the Retirement Plans, and shall
be paid out of United's general funds pursuant to United's
contractual obligation hereunder, but no funds shall be
placed in trust or otherwise set aside by United to provide
for payments hereunder. Such supplemental retirement
benefit shall be payable at the same time and in the same
manner as Executive elects to receive his benefits under the
Retirement Plans. The Additional Years of Service Credit
shall also apply in determining Executive's eligibility for,
and the amount of, Executive's other retiree benefits.
C. Election of Executive: If, prior to 11:59 p.m. on
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July 31, 1998, Executive elects to terminate his employment
for any reason, Executive will receive a one time lump sum
payment (subject to withholding for taxes and other purposes
as required by applicable laws) in an amount equal to the
sum of the remaining monthly salary payments payable under
this Agreement between the effective date of Executive's
election to terminate his employment under this Agreement
and July 31, 1998 plus, if it has not otherwise been paid,
the lump sum severance payment specified in paragraph 3.
Before Executive's election to terminate under this
paragraph can become effective, Executive must have provided
United seven (7) days' written notice of his election by
registered mail addressed to the President of United at its
principal World Headquarters offices. Executive's
termination of employment will be as of the seventh (7th)
day after receipt by United of such notice, at which time he
will no longer have the status of an active employee of
United (including the entitlement to benefits described in
Paragraph 3).
5. Regulations: During his employment, Executive
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will be governed by applicable United regulations, as in
effect from time to time.
6. Confidentiality:
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A. Executive agrees to keep any proprietary or
confidential information concerning United which he has
gained through his employment confidential. Executive
agrees that money damages could not adequately
compensate United in case of a breach or threatened
breach of this promise of confidentiality and that,
therefore, United would be entitled to injunctive
relief upon such breach. Executive understands that it
is United's intent to have this promise of
confidentiality enforced to its fullest extent.
Accordingly, Executive and United agree that, if any
portion of this promise of confidentiality is
unenforceable, the court should still construe and
enforce this promise of confidentiality to the fullest
extent permitted by law.
B. Executive and United agree to keep the terms
of this Agreement, and of his working arrangement, as
defined herein, confidential except that the source and
amount of his income may be revealed as necessary for
implementation and fulfillment of this Agreement, tax,
loan purposes and the like and for disclosure to legal
counsel to carry out the review of this Agreement in
accordance with Paragraph 7.
C. During the term of this Agreement, United will
not take any action or make any communication that
adversely reflects upon Executive or that causes,
induces, or facilitates others to act adversely to
Executive.
7. Assent and Release: In consideration for the
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payments and benefits provided in this Agreement,
Executive hereby voluntarily, knowingly, willingly,
irrevocably, and unconditionally releases UA and UAL
together with their respective parents, subsidiaries
and affiliates, and each of their respective officers,
directors, employees, representatives, attorneys and
agents, and each of their respective predecessors,
successors and assigns (collectively, the "Releasees")
from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, causes
of action, rights, costs, losses, debts, and expenses
of any nature whatsoever, known or unknown, which
against them Executive or his successors or assigns
ever had, now have or hereafter can, shall or may have
(either directly, indirectly, derivatively or in any
other representative capacity) by reason of any matter,
fact or cause whatsoever arising from the beginning of
time to the date of this Agreement, including without
limitation all claims arising under the UAL Agreement,
Title VII of the Civil Rights Act of 1964, the federal
Age Discrimination in Employment Act of 1967, as
amended, and all other federal, state or local laws,
rules, regulations, judicial decisions or public
policies now or hereafter recognized. This release by
Executive of the Releasees also includes, without
limitation, all claims arising under each employee
pension, employee welfare, and executive compensation
plan of United now in effect or hereafter adopted,
except for any benefits to be provided to Executive
under this Agreement or in the normal course of
Executive's employment through the Effective Date. It
is agreed that this paragraph shall survive termination
of the Agreement.
Executive expressly acknowledges and agrees that, by
entering into this Agreement, Executive is waiving any
and all rights or claims that he may have arising under
the Age Discrimination in Employment Act of 1967, as
amended, which have arisen on or before the date of
execution of this Agreement. Executive further
expressly acknowledges and agrees that:
(i) In return for this Agreement, Executive will
receive compensation beyond that which he was already
entitled to receive before entering into this
Agreement;
(ii) Executive has been advised by United to
consult with an attorney before signing this Agreement;
(iii) Executive was given a copy of this
Agreement on August 5, 1997, and informed that
Executive had twenty-one (21) days within which to
consider the Agreement and, if Executive considers this
Agreement for fewer than 21 days, then Executive agrees
that he has had a reasonable period of time to consider
the Agreement; and
(iv) Executive was informed that Executive had
seven (7) days following the date of execution of the
Agreement in which to revoke the Agreement. After
seven (7) days this Agreement will become effective,
enforceable and irrevocable unless written revocation
is received by the undersigned from Executive on or
before the close of business on the seventh (7th) day
after Executive executed this Agreement. If Executive
revokes this Agreement it shall not be effective or
enforceable and Executive will not receive the
compensation or benefits described in this Agreement.
8. Non-Assignability; Assignment in the Event of
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Acquisition or Merger: This Agreement and the benefits
- - ---------------------
hereunder are not assignable or transferable by Executive;
the rights and obligations of United under this Agreement
will automatically be deemed to by assigned by United to any
corporation or entity into which United may be merged or
consolidate.
9. Applicable Law: This Agreement shall be
--------------
construed in accordance with the laws of the State of
Illinois, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance
with, and governed by the laws of the State of Illinois,
without regard to principles of conflict of laws. Except
for an action seeking injunctive relief under Paragraph 6,
any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois in accordance with the
rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction. Each party shall be
responsible for its own attorneys fees, costs, and expenses
in connection with the arbitration.
10. Paragraph Reference: Any reference to paragraphs
-------------------
or subparagraphs shall be references to paragraphs or
subparagraphs of this Agreement unless expressly stated
otherwise.
11. Severability: If any provision of this Agreement
------------
or the application thereof is held invalid, the invalidity
shall not affect other provisions or applications of this
Agreement which can be given effect without the invalid
provisions or application in accordance with the essential
intent and purpose of this Agreement, and to this end the
provisions of this Agreement are declared to be severable.
12. Supersedes Prior Agreement(s): This Agreement
-----------------------------
supersedes and voids any prior oral or written agreement
relating in any way to Executive's employment with UA or UAL
which may have been entered into between the parties hereto
including, without limitation the UAL Agreement. Any change
to this Agreement after its Effective Date must be in
writing and must be executed by UA, UAL, and Executive.
Executive hereby expressly waives any and all rights to
which he may be entitled under the UAL Agreement.
United and Executive, having read and understood this
Agreement and, having consulted with others as appropriate,
hereby agree to be bound by its terms.
IN WITNESS WHEREOF, the parties have executed this
Agreement effective as of August 8, 1997 at the World
Headquarters of United Air Lines, Inc., 1200 East Algonquin
Road, Elk Grove Twp., Illinois 60007.
UAL Corporation and
United Air Lines, Inc.
By: /s/ G. Greenwald /s/ J.R. O'Gorman
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Gerald Greenwald Joseph R. O'Gorman
Chairman &
Chief Executive Officer