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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1996
REGISTRATION NOS. 333-14245 AND 333-14245-01
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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UAL CORPORATION CAPITAL TRUST I
(Exact name of Registrant as specified in its charter)
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, ILLINOIS 60007
(847) 700-4000
(Address and telephone number of principal executive offices)
UAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2675207
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, ILLINOIS 60007
(847) 700-4000
(Address and telephone number of principal executive offices)
FRANCESCA M. MAHER
VICE PRESIDENT -- LAW AND CORPORATE SECRETARY
UAL CORPORATION
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, ILLINOIS 60007
(847) 700-4000
(Name, address and telephone number of agent for service)
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Copies to:
ROBERT E. CURLEY VINCENT J. PISANO
MAYER, BROWN & PLATT SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
190 SOUTH LASALLE STREET 919 THIRD AVENUE
CHICAGO, ILLINOIS 60603 NEW YORK, NEW YORK 10022
(312) 782-0600 (212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the Exchange Offer (the "Offer") described in the enclosed
Prospectus have been satisfied or waived.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED(1) PER UNIT(2) PRICE(2) FEE
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Preferred Securities of UAL Corporation 6,266,781
Capital Trust I...................... securities
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Junior Subordinated Debentures of UAL
Corporation.......................... $156,669,525 $33.38(3) $209,153,815.88(3) $63,379.94(3)(4)
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Guarantees of the Preferred Securities
by UAL Corporation................... $156,669,525
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(1) Estimated maximum amount of each class of securities issuable by UAL
Corporation and UAL Corporation Capital Trust I (the "Trust"). Also
registered hereby, in addition to the rights of holders of the Preferred
Securities under the Guarantee and under the Junior Subordinated Debentures,
are the obligations of UAL Corporation in the Indenture relating to the
Junior Subordinated Debentures and in the Amended and Restated Declaration
of Trust, including UAL Corporation's obligation to pay costs, expenses and
certain liabilities of the Trust.
(2) Each holder of a Depositary Share representing 1/1,000 of a share of 12 1/4%
Series B Preferred Stock upon exchange will receive one Preferred Security
issued by the Trust, which will hold Junior Subordinated Debentures for
their benefit.
(3) Calculated in accordance with Rule 457(f) under the Securities Act of 1933
on the basis of the average of the high and low prices reported for the
Depositary Shares on October 10, 1996. Pursuant to Rule 457(n) under the
Securities Act of 1933, no separate fee is payable with respect to the
Guarantees or the Junior Subordinated Debentures.
(4) Previously paid. ---------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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PROSPECTUS
UAL CORPORATION CAPITAL TRUST I
OFFER TO EXCHANGE ITS
13 1/4% TRUST ORIGINATED PREFERRED SECURITIES(SM)("TOPRS(SM)")
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY AND
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY UAL CORPORATION)
FOR ANY AND ALL OUTSTANDING DEPOSITARY SHARES,
EACH REPRESENTING 1/1,000 OF A SHARE OF
12 1/4% SERIES B PREFERRED STOCK
OF
UAL CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON FRIDAY, DECEMBER 20, 1996, UNLESS THE OFFER IS EXTENDED.
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UAL Corporation Capital Trust I, a Delaware statutory business trust (the
"Trust"), hereby offers, upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal" which, together with this Prospectus, constitutes the "Offer"), to
exchange its 13 1/4% Trust Originated Preferred Securities(SM) ("TOPrS(SM)"),
representing preferred undivided beneficial interests in the assets of the Trust
(the "Preferred Securities"), for any and all Depositary Shares ("Depositary
Shares"), each representing 1/1,000 of a share of 12 1/4% Series B Preferred
Stock (the "Series B Preferred") of UAL Corporation, a Delaware corporation
("UAL"), not owned by UAL. Exchanges will be made on the basis of one Preferred
Security for each Depositary Share validly tendered and accepted for exchange in
the Offer. As of the date of this Prospectus, there are 6,266,781 Depositary
Shares not owned by UAL. An aggregate of 16,416,000 Depositary Shares were
issued to investors in a public offering on July 12, 1994, of which UAL has
repurchased 10,149,219 Depositary Shares. Concurrent with the issuance of
Preferred Securities in exchange for Depositary Shares validly tendered in the
Offer, UAL will deposit in the Trust as trust assets its 13 1/4% Junior
Subordinated Debentures due 2026 (the "Junior Subordinated Debentures"), having
an aggregate principal amount equal to the aggregate stated liquidation amount
of the Preferred Securities and the proceeds received upon issuance of the
Common Securities to be issued by the Trust.
(cover page continues)
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SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS RELATING TO THE OFFER" STARTING ON
PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE PREFERRED
SECURITIES THAT SHOULD BE CONSIDERED BY INVESTORS, INCLUDING THE
PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE
JUNIOR SUBORDINATED DEBENTURES AND THE PREFERRED SECURITIES
MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX
CONSEQUENCES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Merrill Lynch & Co. and Smith Barney Inc. have been retained as Dealer
Managers to solicit exchanges of Depositary Shares for Preferred Securities. See
"The Offer -- Dealer Managers; Soliciting Dealers." The Bank of New York has
been retained as Exchange Agent in connection with the Offer. Georgeson &
Company Inc. has been retained to act as Information Agent to assist in
connection with the Offer.
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The Dealer Managers for the Offer are:
MERRILL LYNCH & CO. SMITH BARNEY INC.
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The date of this Prospectus is November 20, 1996.
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(SM)"Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co.
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NONE OF THE BOARD OF DIRECTORS OF UAL, UAL, THE TRUSTEES OR THE TRUST MAKES
ANY RECOMMENDATION TO HOLDERS OF DEPOSITARY SHARES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING IN THE OFFER. HOLDERS OF DEPOSITARY SHARES ARE URGED TO
CONSULT THEIR FINANCIAL AND TAX ADVISORS IN MAKING THEIR DECISIONS ON WHAT
ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
IN ORDER TO PARTICIPATE IN THE OFFER, HOLDERS (AS DEFINED HEREIN) OF
DEPOSITARY SHARES MUST SUBMIT A LETTER OF TRANSMITTAL AND COMPLY WITH THE OTHER
PROCEDURES FOR TENDERING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN
AND IN THE LETTER OF TRANSMITTAL PRIOR TO THE EXPIRATION DATE (AS DEFINED
HEREIN). SEE "THE OFFER -- PROCEDURES FOR TENDERING."
For a description of the other terms of the Offer, see "The Offer -- Terms
of the Offer," "-- Expiration Date; Extensions; Amendments; Termination,"
"-- Withdrawal of Tenders" and "-- Acceptance of Shares." The Preferred
Securities have been approved for listing on the New York Stock Exchange (the
"NYSE") subject to official notice of issuance. In order to satisfy the NYSE
listing requirements, acceptance of Depositary Shares validly tendered in the
Offer is subject to the condition that as of the Expiration Date there be at
least 400 record or beneficial holders of at least 1,000,000 Preferred
Securities to be issued in exchange for such Depositary Shares (the "Minimum
Distribution Condition"), which condition may not be waived. See "The
Offer -- Expiration Date; Extensions; Amendments; Termination" and
"-- Conditions to the Offer."
The Trust expressly reserves the right, in its sole discretion, subject to
applicable law, to (i) terminate the Offer, not accept for exchange any
Depositary Shares and promptly return all Depositary Shares upon the failure of
any of the conditions specified above or in "The Offer -- Conditions to the
Offer," (ii) waive any condition to the Offer (other than the Minimum
Distribution Condition) and accept all Depositary Shares previously tendered
pursuant to the Offer, (iii) extend the Expiration Date (as defined herein) of
the Offer and retain all Depositary Shares tendered pursuant to the Offer until
the Expiration Date, subject, however, to all withdrawal rights of holders, see
"The Offer -- Withdrawal of Tenders," (iv) amend the terms of the Offer, (v)
modify the form of the consideration to be paid pursuant to the Offer or (vi)
not accept for exchange Depositary Shares at any time on or prior to the
Expiration Date, for any reason, including, without limitation, if fewer than
100,000 Depositary Shares would remain outstanding upon acceptance of those
tendered (which condition may be waived by the Trust). Any amendment applicable
to the Offer will apply to all Depositary Shares tendered pursuant to the Offer.
The minimum period during which the Offer must remain open following material
changes in the terms of the Offer or the information concerning the Offer, other
than a change in the percentage of securities sought or the price, depends upon
the facts and circumstances, including the relative materiality of such terms or
information. See "The Offer -- Expiration Date; Extensions; Amendments;
Termination."
UAL will own directly or indirectly all of the securities representing
common undivided beneficial interests in the assets of the Trust (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities"). The Trust exists for the purpose of (a) issuing (i) its Preferred
Securities in exchange for Depositary Shares validly tendered in the Offer and
delivering such Depositary Shares to UAL in consideration for the deposit by UAL
of Junior Subordinated Debentures, having an aggregate stated principal amount
equal to the aggregate stated liquidation amount of such Preferred Securities,
in the Trust as trust assets and (ii) its Common Securities to UAL in exchange
for cash and investing the proceeds thereof in an equivalent amount of Junior
Subordinated Debentures and (b) engaging in such other activities as are
necessary and incidental thereto. The Preferred Securities and the Common
Securities will rank pari passu with each other and will have equivalent terms;
provided that (i) if an Event of Default (as defined herein) under the
Declaration (as defined herein) occurs and is continuing, the holders of
Preferred Securities will have a priority over holders of the Common Securities
with respect to payments in respect of distributions and payments upon
liquidation, redemption or otherwise and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint,
replace or remove Trustees and to increase or
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decrease the number of Trustees upon the occurrence of certain events described
herein. See "Prospectus Summary -- Description of Preferred Securities and
Junior Subordinated Debentures."
Cash distributions on the Preferred Securities will be cumulative from the
first day following the Expiration Date (the "Accrual Date") at an annual rate
of 13 1/4% of the liquidation amount of $25 per Preferred Security, and will be
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, commencing on December 31, 1996 ("distributions"), subject to any
Extension Periods (as defined herein). Cash distributions in arrears will bear
interest thereon at the rate per annum of 13 1/4%, compounded quarterly to the
extent permitted by applicable law. The term "distributions" as used herein
includes such cash distributions and any such interest payable unless otherwise
stated. In addition, holders of the Preferred Securities will be entitled to an
additional cash distribution at the rate of 12 1/4% per annum of the liquidation
amount thereof from November 1, 1996 through the Expiration Date ("Pre-Issuance
Accrued Distribution") in lieu of dividends accumulating and unpaid after
November 1, 1996 on their Depositary Shares accepted for exchange, such
additional distribution to be made on December 31, 1996 to holders of the
Preferred Securities on the record date for such distribution. The distribution
rate and the distribution and other payment dates for the Preferred Securities
will correspond to the interest rate and the interest and other payment dates on
the Junior Subordinated Debentures deposited in the Trust as trust assets. As a
result, if principal or interest is not paid on the Junior Subordinated
Debentures, including as a result of UAL's election to extend the interest
payment period on the Junior Subordinated Debentures as described below, the
Trust will not make payments on the Trust Securities. The Junior Subordinated
Debentures provide that, so long as UAL shall not be in default in the payment
of interest on the Junior Subordinated Debentures, UAL shall have the right to
defer payments of interest on the Junior Subordinated Debentures by extending
the interest payment period from time to time for a period not exceeding 20
consecutive quarterly interest periods (each, an "Extension Period"). No
interest shall be due and payable during an Extension Period and, as a
consequence, distributions on the Trust Securities will also be deferred, but on
the next distribution payment date following such Extension Period UAL shall pay
all interest then accrued and unpaid on the Junior Subordinated Debentures,
together with interest thereon at the rate specified for the Junior Subordinated
Debentures, compounded quarterly to the extent permitted by applicable law
("Compounded Interest"), and corresponding distributions will be paid by the
Trust on the Trust Securities. All references herein to interest shall include
Compounded Interest unless otherwise stated. There could be multiple Extension
Periods of varying lengths up to six Extension Periods of 20 consecutive
quarterly interest periods each or more numerous shorter Extension Periods
throughout the term of the Junior Subordinated Debentures, provided that no
Extension Period may extend beyond the maturity of the Junior Subordinated
Debentures. During any such Extension Period, UAL may not declare or pay
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or any other
securities not senior to the Preferred Securities or the Junior Subordinated
Debentures or make any guarantee payments with respect thereto. Any Extension
Period with respect to payment of interest on the Junior Subordinated
Debentures, other debt securities of UAL under the Indenture or any similar
securities will apply to all such securities and will also apply to
distributions with respect to the Preferred Securities and all other securities
with similar terms. See "Risk Factors and Special Considerations Relating to the
Offer," "Description of the Preferred Securities -- Distributions" and
"Description of the Junior Subordinated Debentures -- Interest" and "-- Option
to Extend Interest Payment Period."
The obligations of UAL under the Junior Subordinated Debentures are
unsecured obligations of UAL and will be subordinate and junior in right of
payment, to the extent set forth herein, to all Senior Indebtedness (as defined
herein) of UAL, except obligations and securities made pari passu or subordinate
by their terms, but senior to all capital stock now existing or hereafter issued
by UAL and to any guarantee now or hereafter entered into by UAL in respect of
its capital stock. Because UAL is a holding company that conducts business
through its subsidiaries, the Junior Subordinated Debentures are effectively
subordinated to all existing and future obligations of UAL's subsidiaries,
including United. As of September 30, 1996, UAL had Senior Indebtedness (on a
consolidated basis) of approximately $13.1 billion and no indebtedness
outstanding that would rank pari passu with the Junior Subordinated Debentures.
UAL's obligations under the Preferred Securities Guarantee (as defined herein)
are unsecured and will rank (i) subordinate and junior in right of payment to
all Senior Indebtedness of UAL, and (ii) senior to all capital stock now or
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hereafter issued by UAL and to any guarantee now or hereafter entered into by
UAL in respect of its capital stock.
The payment of distributions out of moneys held by the Trust and payments
on liquidation of the Trust and the redemption of Preferred Securities, as set
forth below, are guaranteed by UAL on a subordinated basis as and to the extent
not paid by the Trust if, and to the extent that, UAL has made a payment to the
Institutional Trustee (as defined herein) of interest or principal on the Junior
Subordinated Debentures (the "Preferred Securities Guarantee"). See "Description
of the Preferred Securities Guarantee." The Preferred Securities Guarantee
covers distributions and other payments on the Preferred Securities only if and
to the extent that UAL has made a payment of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets. The Preferred
Securities Guarantee, when taken together with UAL's obligation under the Junior
Subordinated Debentures and the Indenture and its obligations under the
Declaration, including its obligation to pay costs, expenses and certain
liabilities of the Trust, constitutes a full and unconditional guarantee of
amounts due on the Preferred Securities.
For a description of redemption rights with respect to the Preferred
Securities, the possible dissolution of the Trust and distribution of Junior
Subordinated Debentures held by the Trust to holders of the Trust Securities and
the liquidation amount on the Preferred Securities, see "Risk Factors and
Special Considerations Relating to the Offer," "Description of the Preferred
Securities -- Special Event Redemption or Distribution" and "-- Liquidation
Distribution Upon Dissolution" and "Description of the Junior Subordinated
Debentures."
The Depositary Shares are listed and principally traded on the NYSE under
the symbol "UAL Pr B." On October 15, 1996, the last full day of trading prior
to the filing of the Registration Statement relating to the Offer, the closing
sales price of the Depositary Shares on the NYSE as reported on the Composite
Tape was $33.75 per share. The closing sales price of the Depositary Shares on
the NYSE on November 20, 1996 was $ per share. HOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE DEPOSITARY SHARES. To the extent that
Depositary Shares are tendered and accepted in the Offer, the terms on which
untendered Depositary Shares could subsequently be sold could be adversely
affected. To the extent that the aggregate market value of the Depositary Shares
tendered and accepted in the Offer results in the number of holders of
outstanding Depositary Shares being less than 100,000, UAL would be required to
delist the Depositary Shares from the NYSE pursuant to NYSE rules and
regulations and the trading market for untendered Depositary Shares could be
adversely affected. See "Listing and Trading of Preferred Securities and
Depositary Shares."
UAL will pay to Soliciting Dealers (as defined herein) designated by the
record or beneficial owner, as appropriate, of Depositary Shares a solicitation
fee of $0.50 per Depositary Share ($0.25 per Depositary Share with respect to
the solicitation of beneficial holders of 10,000 or more shares) validly
tendered and accepted for exchange pursuant to the Offer, subject to certain
conditions. Soliciting Dealers are not entitled to a solicitation fee for
Depositary Shares beneficially owned by such Soliciting Dealer. See "The
Offer -- Dealer Managers; Soliciting Dealers."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY UAL, THE TRUST, THE TRUSTEES OR THE
DEALER MANAGERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF UAL OR THE TRUST SINCE THE RESPECTIVE DATES AS
OF WHICH INFORMATION IS GIVEN HEREIN. THE OFFER IS NOT BEING MADE TO (NOR WILL
TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF DEPOSITARY SHARES IN ANY
JURISDICTION IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD
NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, UAL AND THE
TRUST MAY, AT THEIR DISCRETION, TAKE SUCH ACTION AS THEY MAY DEEM NECESSARY TO
MAKE THE
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OFFER IN ANY SUCH JURISDICTION AND EXTEND THE OFFER TO HOLDERS OF DEPOSITARY
SHARES IN SUCH JURISDICTION. IN ANY JURISDICTION THE SECURITIES LAWS OR BLUE SKY
LAWS OF WHICH REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE
OFFER IS BEING MADE ON BEHALF OF THE TRUST BY THE DEALER MANAGERS OR ONE OR MORE
REGISTERED BROKERS OR DEALERS WHICH ARE LICENSED UNDER THE LAWS OF SUCH
JURISDICTION.
AVAILABLE INFORMATION
UAL is subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). As used herein, "UAL" refers to UAL Corporation and its
subsidiaries unless the context otherwise requires. Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates and from the Commission's worldwide
web site at http://www.sec.gov. Such material can also be inspected and copied
at the offices of the NYSE, 20 Broad Street, New York, New York 10005; the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605; and
the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104 or
618 South Spring Street, Los Angeles, California 90014.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") filed
by UAL and the Trust with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. The
information so omitted may be obtained from the Commission's principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission and from
the Commission's worldwide web site. Statements contained herein concerning the
provisions of any document provide a description of the material terms of the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is subject to and
qualified in its entirety by such reference. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to UAL, the Trust and the securities offered hereby.
No separate financial statements of the Trust have been included or
incorporated by reference herein. UAL and the Trust do not consider that such
financial statements would be material to holders of Preferred Securities
because the Trust is a newly-formed special purpose entity, has no operating
history, has no independent operations and is not engaged in, and does not
propose to engage in, any activity other than its holding as trust assets the
Junior Subordinated Debentures of UAL and its issuance of Trust Securities. The
Trust anticipates that it will not be required to file with the Commission and
it does not intend to distribute to holders of Preferred Securities periodic
reports regarding the Trust. See "UAL Corporation Capital Trust I," "Description
of the Preferred Securities," "Description of the Preferred Securities
Guarantee" and "Description of the Junior Subordinated Debentures." The Trust is
a statutory business trust formed under the laws of the State of Delaware. UAL,
as of the date hereof, beneficially owns all of the beneficial interests in the
Trust.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
UAL's Annual Report on Form 10-K for the year ended December 31, 1995
("UAL's 1995 10-K Report"), UAL's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996, June 30, 1996 (as amended) and September 30, 1996
("UAL's 10-Q Reports") and UAL's Current Reports on Form 8-K dated January 23,
1996, January 29, 1996, March 19, 1996, July 23, 1996, and September 16, 1996
have been filed with the Commission and are incorporated herein by reference.
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All documents filed by UAL pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
Expiration Date shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified and
superseded, to constitute a part of this Prospectus.
UAL undertakes to provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated by reference in this Prospectus, other than exhibits to
such documents. Written or telephonic requests for such documents should be
directed to UAL Corporation, P.O. Box 66919, Chicago, Illinois 60666, Attention:
Francesca M. Maher, Corporate Secretary (telephone number 847-700-4000). In
order to assure timely delivery of the documents, any request should be made not
later than five business days prior to the Expiration Date.
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TABLE OF CONTENTS
PAGE
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Available Information.................................................................. 5
Incorporation of Certain Documents by Reference........................................ 5
Prospectus Summary..................................................................... 8
Certain Potential Benefits and Risks to Investors...................................... 9
The Offer.............................................................................. 12
Risk Factors and Special Considerations Relating to the Offer.......................... 19
Comparison of Preferred Securities and Depositary Shares............................... 23
Capitalization......................................................................... 27
Selected Consolidated Financial and Operating Information.............................. 28
UAL Corporation........................................................................ 30
Recent Developments.................................................................... 30
UAL Corporation Capital Trust I........................................................ 31
The Offer.............................................................................. 34
Listing and Trading of Preferred Securities and Depositary Shares...................... 41
Transactions and Arrangements Concerning the Offer..................................... 42
Fees and Expenses; Transfer Taxes...................................................... 42
Price Range of Depositary Shares....................................................... 42
Description of the Preferred Securities................................................ 43
Description of the Preferred Securities Guarantee...................................... 55
Description of the Junior Subordinated Debentures...................................... 56
Description of the Series B Preferred and Depositary Shares............................ 66
Relationship Between the Preferred Securities, the Junior Subordinated Debentures and
the Preferred Securities Guarantee................................................... 71
Taxation............................................................................... 72
Legal Matters.......................................................................... 77
Experts................................................................................ 77
ERISA Considerations................................................................... 77
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the detailed information contained elsewhere in, or incorporated
by reference in, this Prospectus.
UAL CORPORATION
UAL, a Delaware corporation ("UAL"), is a holding company and its primary
subsidiary is United Air Lines, Inc., a Delaware corporation ("United"), which
is wholly-owned. United is one of the world's largest airlines as measured by
revenue passenger miles and primarily serves the North American, Pacific, Latin
American and European markets. At the end of 1995, United served 144 airports in
the United States and 30 foreign countries. During 1995, United averaged 2,172
departures daily, flew a total of 112 billion revenue passenger miles and
carried an average of 215,521 passengers per day. At the end of 1995, United's
fleet of aircraft totaled 558. United's major hub operations are located at
Chicago, Denver, Los Angeles, San Francisco, Washington, D.C. and Tokyo.
UAL CORPORATION CAPITAL TRUST I
UAL Corporation Capital Trust I is a statutory business trust that was
created under the Delaware Business Trust Act (the "Business Trust Act") on
October 15, 1996. The Trust's original declaration of trust will be amended and
restated in its entirety as of the date the Trust accepts Depositary Shares in
the Offer (as so amended and restated, the "Declaration") substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. See "The Offer -- Terms of the Offer" and "-- Acceptance of
Shares" for information regarding the Trust's acceptance of Depositary Shares in
the Offer. The Declaration will be qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the holders thereof will own all the issued and outstanding
Preferred Securities. UAL has agreed to acquire Common Securities in an amount
equal to at least 3% of the total capital of the Trust and will own, directly or
indirectly, all the issued and outstanding Common Securities. The Preferred
Securities and the Common Securities will have equivalent terms; provided that
(i) if an Event of Default under the Declaration occurs and is continuing, the
holders of Preferred Securities will have a priority over the holders of the
Common Securities with respect to payments of distributions and payments upon
liquidation, redemption or otherwise and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint,
replace or remove Trustees and to increase or decrease the number of Trustees.
The number of trustees (the "Trustees") of the Trust shall initially be
five. Three of the Trustees (the "Regular Trustees") are individuals who are
employees or officers of UAL. The fourth trustee is The First National Bank of
Chicago (the "Institutional Trustee"), which will act as the indenture trustee
under the Declaration for purposes of the Trust Indenture Act and will serve as
the Indenture Trustee (as defined herein) under the Indenture (as defined
herein) for the Junior Subordinated Debentures and the Guarantee Trustee (as
defined herein) under the Preferred Securities Guarantee. The fifth trustee is
First Chicago Delaware Inc. (the "Delaware Trustee"), which has its principal
place of business in the State of Delaware. Pursuant to the Declaration, the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Indenture pursuant to which the Junior Subordinated
Debentures will be issued. The Institutional Trustee, acting on behalf of the
Trust, will promptly make distributions to the holders of the Trust Securities
out of funds in the Trust. The Preferred Securities Guarantee, which will be
separately qualified under the Trust Indenture Act, will be held by The First
National Bank of Chicago, acting in its separate capacity as indenture trustee
with respect to the Preferred Securities Guarantee, for the benefit of the
holders of the Preferred Securities. As used in this Prospectus, the term
"Institutional Trustee" refers to The First National Bank of Chicago acting
either in its capacity as the trustee under the Declaration or in its capacity
as indenture trustee under, and the holder of, the Preferred Securities
Guarantee, as the context may require.
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The Trust exists for the purpose of (a) issuing (i) its Preferred
Securities in exchange for Depositary Shares validly tendered in the Offer and
delivering such Depositary Shares to UAL in consideration for the deposit by UAL
of Junior Subordinated Debentures, having an aggregate stated principal amount
equal to the aggregate stated liquidation amount of such Preferred Securities,
in the Trust as trust assets, and (ii) its Common Securities to UAL in exchange
for cash and investing the proceeds thereof in an equivalent amount of Junior
Subordinated Debentures and (b) engaging in such other activities as are
necessary and incidental thereto. The rights of the holders of the Trust
Securities, including economic rights, rights to information and voting rights,
are as set forth in the Declaration, the Business Trust Act and the Trust
Indenture Act. See "UAL Corporation Capital Trust I" and "Description of the
Preferred Securities." The Declaration does not permit the incurrence by the
Trust of any indebtedness for borrowed money or the making of any investment
other than in the Junior Subordinated Debentures. In the Declaration, UAL has
agreed to pay for all debts and obligations (other than with respect to the
Trust Securities) and all costs and expenses of the Trust, including the fees
and expenses of the Trustees and any income taxes, duties and other governmental
charges, and all costs and expenses with respect thereto, to which the Trust may
become subject, except for United States withholding taxes. See "Risk Factors
and Special Considerations Relating to the Offer," "UAL Corporation Capital
Trust I" and "Description of the Preferred Securities."
CERTAIN POTENTIAL BENEFITS AND RISKS TO INVESTORS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus prior to making a decision regarding the Offer and
should particularly consider the following matters:
POTENTIAL BENEFITS TO EXCHANGING HOLDERS
- The cash distribution rate on the Preferred Securities will be 100 basis
points greater than the dividend rate on the Depositary Shares. See
"Comparison of Preferred Securities and Depositary Shares."
- Although the obligations of UAL under the Junior Subordinated Debentures
and the Preferred Securities Guarantee are unsecured and will be
subordinated and junior in right of payment to all Senior Indebtedness of
UAL, they will be senior to all capital stock of UAL now or hereafter
issued by UAL (including the Series B Preferred underlying the Depositary
Shares).
- While no dividends are required to be paid with respect to the Depositary
Shares, interest payments on the Junior Subordinated Debentures and
therefore distributions on the Preferred Securities may not be deferred
for more than 20 consecutive quarterly interest periods. Any Extension
Period with respect to payment of interest on the Junior Subordinated
Debentures will also apply to distributions with respect to the Preferred
Securities and all other securities with similar terms. Moreover, UAL may
defer interest payments on the Junior Subordinated Debentures only if it
does not declare or pay dividends on, or redeem, purchase, acquire or
make a distribution or liquidation payment with respect to, any of its
common stock or preferred stock (except under certain circumstances). See
"Description of the Preferred Securities." However, to date, UAL has made
each quarterly dividend payment with respect to the Depositary Shares on
the scheduled dividend payment date, and dividends on the Series B
Preferred accrue whether or not such dividends are declared. See
"Description of the Series B Preferred and Depositary Shares -- Series B
Preferred -- Dividends."
- The Offer will allow UAL to achieve certain tax efficiencies because, in
contrast to dividend payments with respect to the Depositary Shares which
are not deductible by UAL, UAL will be able to deduct interest payments
on the Junior Subordinated Debentures for United States federal income
tax purposes. Such tax efficiencies may give rise to incremental cash
flow to UAL. See "The Offer -- Purpose of the Offer."
- So long as payments of interest and other payments are made when due on
the Junior Subordinated Debentures, such payments will be sufficient to
cover cash distributions and other payments made on the Preferred
Securities (and the Common Securities) because (i) the aggregate
principal amount of Junior Subordinated Debentures deposited as trust
assets will be equal to the sum of (x) the aggregate
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stated liquidation amount of the Preferred Securities issued by the Trust
in exchange for the Depositary Shares accepted in the Offer and (y) the
amount of proceeds received by the Trust from the issuance of the Common
Securities to UAL, which proceeds will be used by the Trust to purchase
an equal principal amount of Junior Subordinated Debentures, (ii) the
interest rate and interest and other payment dates on the Junior
Subordinated Debentures will match the distribution rate and distribution
and other payment dates for the Trust Securities, (iii) the Declaration
provides that UAL shall pay for all debts and obligations (other than
with respect to the Trust Securities) and all costs and expenses of the
Trust, and (iv) the Declaration further provides that the Trustees shall
not permit the Trust to, among other things, engage in any activity that
is not consistent with the purposes of the Trust. See "UAL Corporation
Capital Trust I," "Description of the Preferred Securities," "Description
of the Junior Subordinated Debentures" and "Relationship Between the
Preferred Securities, the Junior Subordinated Debentures and the
Preferred Securities Guarantee."
- The Trust will have no independent operations and will exist for the sole
purpose of effecting the Offer and issuing the Trust Securities as
described herein and owning and holding the Junior Subordinated
Debentures. See "UAL Corporation Capital Trust I."
- The Institutional Trustee will have the power to exercise all rights,
powers and privileges under the Indenture with respect to the Junior
Subordinated Debentures, including its rights to enforce UAL's
obligations under the Junior Subordinated Debentures upon the occurrence
of an Indenture Event of Default, and will also have the right to enforce
the Preferred Securities Guarantee on behalf of the holders of the
Preferred Securities. In addition, the holders of the Preferred
Securities will have certain rights to direct the Institutional Trustee
with respect to certain matters under the Declaration and the Preferred
Securities Guarantee. Under certain circumstances, holders of Preferred
Securities may institute a legal proceeding against UAL to enforce its
payment obligations pursuant to the Junior Subordinated Debentures and to
enforce the Preferred Securities Guarantee. See "Description of the
Preferred Securities" and "Description of the Preferred Securities
Guarantee."
POTENTIAL RISKS TO EXCHANGING HOLDERS
- Participation in the Offer will be a taxable event for holders of
Depositary Shares. See "Risk Factors and Special Considerations Relating
to the Offer -- Exchange of Depositary Shares for Preferred Securities is
a Taxable Event."
- The obligations of UAL under the Junior Subordinated Debentures, the
Preferred Securities Guarantee and the Depositary Shares are subordinate
in right of payment to all Senior Indebtedness of UAL, except obligations
or securities made pari passu or subordinate by their terms. See "Risk
Factors and Special Considerations Relating to the Offer -- Ranking of
Subordinated Obligations under Preferred Securities Guarantee and Junior
Subordinated Debentures" and "-- Trust Distributions Dependent on UAL's
Payments on Junior Subordinated Debentures."
- If UAL were to default in its obligation to pay amounts payable on the
Junior Subordinated Debentures, the Trust would lack available funds for
the payment of distributions or amounts payable on redemption of the
Preferred Securities or otherwise. In addition, the interest payment
period on the Junior Subordinated Debentures may be extended from time to
time under certain circumstances by UAL, in its sole discretion, for up
to 20 consecutive quarterly interest periods. See "Risk Factors and
Special Considerations Relating to the Offer -- Ranking of Subordinated
Obligations under Preferred Securities Guarantee and Junior Subordinated
Debentures," "-- Trust Distributions Dependent on UAL's Payments on
Junior Subordinated Debentures," "-- UAL May Defer Interest Payments on
Junior Subordinated Debentures," "-- Tax Consequences of Extension of
Interest Payment Periods," and "-- Potential Market Volatility During
Extension Period."
- Should UAL not make interest or other payments on the Junior Subordinated
Debentures for any reason, including as a result of UAL's election to
defer payments of interest on the Junior Subordinated Debentures by
extending the interest payment period on the Junior Subordinated
Debentures, the Trust will not make distributions or other payments on
the Trust Securities. In such an
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event, holders of the Preferred Securities would not be able to rely on
the Preferred Securities Guarantee since the Preferred Securities
Guarantee covers distributions and other payments on the Preferred
Securities only if and to the extent that UAL has made a payment to the
Trust of interest or principal on the Junior Subordinated Debentures
deposited in the Trust as trust assets. See "Risk Factors and Special
Considerations Relating to the Offer -- Trust Distributions Dependent on
UAL's Payments on Junior Subordinated Debentures."
- If UAL elects to defer payments of interest on the Junior Subordinated
Debentures by extending the interest period on the Junior Subordinated
Debentures, distributions on the Preferred Securities would also be
deferred but the Trust would continue to accrue interest income (as
original issue discount) in respect of such Junior Subordinated
Debentures which would be taxable to beneficial owners of Preferred
Securities. As a result, beneficial owners of Preferred Securities during
an Extension Period would include their pro rata share of the interest in
gross income in advance of the receipt of cash. See "Risk Factors and
Special Considerations Relating to the Offer -- Tax Consequences of
Extension of Interest Payment Periods."
- Holders of Preferred Securities will have limited voting rights and will
not be able to appoint, remove or replace, or to increase or decrease the
number of, Trustees, which rights are vested exclusively in the Common
Securities. See "Risk Factors and Special Considerations Relating to the
Offer -- Limited Voting Rights" and "Description of the Preferred
Securities -- Voting Rights." Holders of Depositary Shares also have
limited voting rights. However, with certain exceptions, in the event
that dividends on any series of preferred stock, including the Series B
Preferred, are in arrears and unpaid for six quarterly dividend periods,
whether or not consecutive, the Board of Directors of UAL is required to
be increased by two directors and the holders of Series B Preferred,
together with the holders of all other series of preferred stock then
entitled to vote thereon, would be entitled to elect two directors of the
expanded board of directors. See "Description of the Series B Preferred
and Depositary Shares -- Series B Preferred -- Voting Rights."
- Under the General Corporation Law of the State of Delaware (the "GCL"),
the directors and officers of UAL, in exercising the powers and
responsibilities of managing UAL, owe UAL and the holders of Depositary
Shares a duty of care, a duty of loyalty and a duty of candor. The
directors and officers of UAL are not, however, liable for errors in
judgment or other acts or omissions made in good faith unless their
actions are found to be grossly negligent. Similarly, under Delaware law,
the trustees of a business trust (such as the Trust) are fiduciaries who
are obligated to act with fidelity and good faith to the trust and the
beneficial owners of the trust. The Business Trust Act does not delineate
the fiduciary duties of trustees of a Delaware business trust but
provides that, to the extent a trustee has fiduciary or other duties to a
business trust or to a beneficial owner, the trustee shall not be liable
for his good faith reliance on provisions of the business trust's
governing instrument, even though the act or omission may be contrary to
a duty or liability that has otherwise been imposed on the trustee at law
or in equity. Thus, the Trustees' duties and liabilities may be expanded
or restricted by the Declaration, although not completely eliminated.
Under the Declaration, the Regular Trustees have duties that are
substantially similar to directors of UAL. In contrast, under the
Declaration, the Institutional Trustee's duties are different from those
of directors of UAL. Under the Declaration, subject to certain
exceptions, the Institutional Trustee is liable for its own negligent
action, its own negligent failure to act and its own willful misconduct.
The Institutional Trustee is also subject to duties imposed by the Trust
Indenture Act. The Delaware Trustee has very limited duties and
obligations under the Declaration. Finally, subject to the Declaration
and the Trust Indenture Act, the Trustees may engage or possess an
interest in other business ventures.
Under the GCL, so long as UAL is solvent, directors of UAL owe duties
only to the holders of Depositary Shares and other shareholders of UAL.
Thus, as long as UAL is solvent, directors of UAL will not owe fiduciary
duties either to the Trust or the holders of Preferred Securities. Under
the GCL, if UAL is clearly insolvent, the directors of UAL will owe
duties to holders of Depositary Shares and the other shareholders of UAL
as well as creditors of UAL. Thus, if UAL becomes clearly insolvent,
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the directors of UAL will owe duties to the Trust as the sole holder of
the Junior Subordinated Debentures.
- The Depositary Shares are redeemable at the option of UAL on or after
July 12, 2004, in whole or in part. The Preferred Securities are
redeemable at the option of UAL on or after July 12, 2004, in whole or in
part.
- While the Depositary Shares are not redeemable prior to July 12, 2004,
the Junior Subordinated Debentures (and thus the Preferred Securities) in
certain circumstances will be redeemable prior to that date upon the
occurrence of a Tax Event (as defined herein). See "Risk Factors and
Special Considerations Relating to the Offer -- Special Event Redemption
or Distribution."
- While dividends with respect to Depositary Shares are eligible for the
dividends received deduction for corporate holders, distributions on the
Preferred Securities are not eligible for the dividends received
deduction for corporate holders.
- While the Preferred Securities have been approved for listing on the NYSE
subject to official notice of issuance, the Preferred Securities are a
new issue of securities with no established trading market. In addition,
liquidity of the Preferred Securities will be affected by the number of
Depositary Shares exchanged in the Offer. See "Risk Factors and Special
Considerations Relating to the Offer -- Lack of Established Trading
Market for Preferred Securities" and "-- Reduced Trading Market for
Depositary Shares."
- Under certain circumstances, the Trust would be dissolved and the Junior
Subordinated Debentures could be distributed to holders of Trust
Securities. In such event, the holders would become holders of Junior
Subordinated Debentures. While UAL will use its best efforts in such a
situation to have the Junior Subordinated Debentures listed on the NYSE,
there is no guarantee that such listing will take place or that a market
will exist for such Junior Subordinated Debentures. See "Risk Factors and
Special Considerations Relating to the Offer -- Special Event Redemption
or Distribution."
POTENTIAL RISKS TO NON-EXCHANGING HOLDERS
- The liquidity and trading market for untendered Depositary Shares could
be adversely affected to the extent Depositary Shares are tendered and
accepted in the Offer. See "Risk Factors and Special Considerations
Relating to the Offer -- Reduced Trading Market for Depositary Shares."
- The Junior Subordinated Debentures and the Preferred Securities Guarantee
will rank senior in right of payment to the untendered Depositary Shares.
See "Risk Factors and Special Considerations Relating to the
Offer -- Ranking of Subordinated Obligations Under Preferred Securities
Guarantee and Junior Subordinated Debentures."
THE OFFER
PURPOSE OF THE OFFER
The purpose of the Offer is to refinance the Depositary Shares with the
Preferred Securities to achieve certain tax efficiencies while preserving UAL's
flexibility with respect to future financings. This refinancing will permit UAL
to deduct interest payable on the Junior Subordinated Debentures for United
States federal income tax purposes; dividends payable on the Depositary Shares
are not deductible. See "The Offer -- Purpose of the Offer."
TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, the Trust hereby offers to exchange its Preferred
Securities for any and all of the Depositary Shares of UAL not owned by UAL.
Exchanges will be made on the basis of one Preferred Security for each
Depositary Share validly tendered and accepted for exchange in the Offer. See
"The Offer -- Terms of the Offer."
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EXPIRATION DATE; WITHDRAWALS
Upon the terms and conditions of the Offer, the Trust will accept for
exchange any and all Depositary Shares validly tendered and not withdrawn prior
to 5:00 p.m., New York City time, on Friday, December 20, 1996, or, if the Offer
is extended by the Trust, in its sole discretion, the latest date and time to
which the Offer has been extended (the "Expiration Date"). Tenders of Depositary
Shares pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless accepted for exchange by the Trust, may be withdrawn
at any time after 40 Business Days (as defined herein) after the date of this
Prospectus. A "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions are
authorized or obligated by law or executive order to close in the place of
payment under the Indenture. See "The Offer -- Expiration Date; Extensions;
Amendments; Termination," "-- Withdrawal of Tenders" and "-- Acceptance of
Shares." Tenders must be made to the Exchange Agent in order to be valid.
CONDITIONS TO THE OFFER; EXTENSIONS; AMENDMENTS; TERMINATION
Consummation of the Offer is conditioned on, among other things, tenders by
a sufficient number of holders of Depositary Shares to meet the Minimum
Distribution Condition, which condition may not be waived. See "The
Offer -- Conditions to the Offer" and "-- Expiration Date; Extensions;
Amendments; Termination."
The Trust expressly reserves the right, in its sole discretion, subject to
applicable law, to (i) terminate the Offer, and not accept for exchange any
Depositary Shares and promptly return all Depositary Shares, upon the failure of
any condition specified above or under "The Offer -- Conditions to the Offer,"
(ii) waive any condition to the Offer (other than the Minimum Distribution
Condition) and accept all Depositary Shares previously tendered pursuant to the
Offer, (iii) extend the Expiration Date of the Offer and retain all Depositary
Shares tendered pursuant to the Offer until the Expiration Date, subject,
however, to all withdrawal rights of holders, see "The Offer -- Withdrawal of
Tenders," (iv) amend the terms of the Offer, (v) modify the form of the
consideration to be paid pursuant to the Offer, or (vi) not accept for exchange
Depositary Shares at any time on or prior to the Expiration Date, for any
reason, including, without limitation, if fewer than 100,000 Depositary Shares
would remain outstanding upon acceptance of those tendered (which condition may
be waived by the Trust). Any amendment applicable to the Offer will apply to all
Depositary Shares tendered pursuant to the Offer. The minimum period during
which the Offer must remain open following material changes in the terms of the
Offer or the information concerning the Offer, other than a change in the
percentage of securities sought or the price, depends upon the facts and
circumstances, including the relative materiality of such terms or information.
See "The Offer -- Conditions to the Offer" and "-- Expiration Date; Extensions;
Amendments; Termination."
PROCEDURES FOR TENDERING
Each Holder of Depositary Shares wishing to participate in the Offer must
(i) properly complete and sign the Letter of Transmittal (or where appropriate
an Agent's Message (as defined herein)) or a facsimile thereof (all references
in this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) in accordance with the instructions contained herein and in
the Letter of Transmittal, together with any required signature guarantees, and
deliver the same to The Bank of New York, as Exchange Agent, at one of its
addresses set forth on the back cover page hereof, prior to the Expiration Date
and either (a) certificates for the Depositary Shares must be received by the
Exchange Agent at such address or (b) such Depositary Shares must be transferred
pursuant to the procedures for book-entry transfer described herein and a
confirmation of such book-entry transfer must be received by the Exchange Agent,
in each case prior to the Expiration Date, or (ii) comply with the guaranteed
delivery procedures described herein. See "The Offer -- Procedures for
Tendering."
IN ORDER TO PARTICIPATE IN THE OFFER, HOLDERS OF DEPOSITARY SHARES MUST
SUBMIT A LETTER OF TRANSMITTAL AND COMPLY WITH THE OTHER PROCEDURES FOR
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TENDERING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN AND IN THE LETTER
OF TRANSMITTAL PRIOR TO THE EXPIRATION DATE.
LETTERS OF TRANSMITTAL, DEPOSITARY SHARES AND ANY OTHER REQUIRED DOCUMENTS
SHOULD BE SENT ONLY TO THE EXCHANGE AGENT -- NOT TO UAL, THE TRUST, THE DEALER
MANAGERS OR THE INFORMATION AGENT.
SPECIAL PROCEDURE FOR BENEFICIAL OWNERS
Any beneficial owner whose Depositary Shares are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender such Depositary Shares should contact such registered Holder promptly
and instruct such registered Holder to tender on such beneficial owner's behalf.
If such beneficial owner wishes to tender on its own behalf, such owner must,
prior to completing and executing a Letter of Transmittal and delivering its
Depositary Shares, either make appropriate arrangements to register ownership of
the Depositary Shares in such owner's name or obtain a properly completed stock
power from the registered Holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the Expiration
Date. See "The Offer -- Procedures for Tendering -- Special Procedure for
Beneficial Owners."
GUARANTEED DELIVERY PROCEDURES
If a Holder desires to accept the Offer and time will not permit a Letter
of Transmittal or Depositary Shares to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected in accordance with the guaranteed
delivery procedures set forth in "The Offer -- Procedures for
Tendering -- Guaranteed Delivery."
ACCEPTANCE OF SHARES
Upon the terms and subject to the conditions of the Offer, including the
Minimum Distribution Condition, the Trust will accept for exchange any and all
Depositary Shares validly tendered and not withdrawn prior to the Expiration
Date.
The Trust expressly reserves the right, in its sole discretion, to delay
acceptance for exchange of Depositary Shares tendered under the Offer and the
delivery of the Preferred Securities with respect to the Depositary Shares
accepted for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act,
which require that the Company consummate the Offer or return the Depositary
Shares deposited by or on behalf of the Holders thereof promptly after the
termination or withdrawal of the Offer), or to amend, withdraw or terminate the
Offer, at any time prior to the Expiration Date for any of the reasons set forth
in "The Offer -- Conditions to the Offer" and "-- Expiration Date; Extensions;
Amendments; Termination."
If the Trust decides, in its sole discretion, to decrease the number of
Depositary Shares sought in the Offer or to increase or decrease the
consideration offered to holders of Depositary Shares, and if the Offer is
scheduled to expire less than ten Business Days from and including the date that
notice of such increase or decrease is first published, sent or given in the
manner specified in "The Offer -- Terms of the Offer" and "-- Expiration Date;
Extensions; Amendments; Termination," then the Offer will remain open for a
minimum of ten Business Days from and including the date of such notice.
All Depositary Shares not accepted pursuant to the Offer will be returned
to the tendering Holders at the Trust's expense as promptly as practicable
following the Expiration Date.
DELIVERY OF PREFERRED SECURITIES
Subject to the terms and conditions of the Offer, the delivery of the
Preferred Securities to be issued pursuant to the Offer will occur as promptly
as practicable following the Expiration Date. See "The Offer -- Terms of the
Offer" and "-- Expiration Date; Extensions; Amendments; Termination."
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DESCRIPTION OF PREFERRED SECURITIES AND JUNIOR SUBORDINATED DEBENTURES
The Preferred Securities evidence preferred undivided beneficial interests
in the assets of the Trust and will have terms equivalent to the Common
Securities; provided that (i) if an Event of Default under the Declaration
occurs and is continuing, the holders of Preferred Securities will have a
priority over holders of the Common Securities with respect to payments in
respect of distributions and payments upon liquidation, redemption or otherwise
and (ii) holders of Common Securities have the exclusive right (subject to the
terms of the Declaration) to appoint, remove and replace Trustees and to
increase or decrease the number of Trustees. The Declaration does not permit the
issuance by the Trust of any securities or beneficial interests in the assets of
the Trust other than the Preferred Securities and the Common Securities, the
incurrence of any indebtedness for borrowed money by the Trust or the making of
any investments other than in the Junior Subordinated Debentures. The
Declaration defines an event of default with respect to the Trust Securities (an
"Event of Default") as the occurrence and continuance of an "event of default"
under the Indenture with respect to the Junior Subordinated Debentures (an
"Indenture Event of Default").
Periodic cash distributions on each Preferred Security will be fixed at a
rate per annum of 13 1/4% of the stated liquidation amount of $25 per Preferred
Security. Distributions in arrears will bear interest thereon at the rate per
annum of 13 1/4%, compounded quarterly to the extent permitted by applicable
law. Distributions on the Preferred Securities will be cumulative, will accrue
from the Accrual Date and, except as otherwise described herein, will be made
quarterly in arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing on December 31, 1996, but only if and to the extent that
interest payments are made in respect of the Junior Subordinated Debentures held
by the Trust. In addition, holders of Preferred Securities will be entitled to
an additional cash distribution at the rate of 12 1/4% per annum of the
liquidation amount thereof from November 1, 1996 through the Expiration Date in
lieu of dividends accumulating and unpaid after November 1, 1996 on their
Depositary Shares accepted for exchange, such additional distribution to be made
on December 31, 1996 to holders of the Preferred Securities on the record date
for such distribution.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and the interest and
other payment dates on the Junior Subordinated Debentures deposited in the Trust
as trust assets. As a result, if principal or interest is not paid on the Junior
Subordinated Debentures, including as a result of UAL's election to extend the
interest payment period on the Junior Subordinated Debentures as described
below, the Trust will not make payments on the Trust Securities. The Junior
Subordinated Debentures provide that, so long as UAL shall not be in default in
the payment of interest on the Junior Subordinated Debentures, UAL has the right
under the Indenture to defer payments of interest on the Junior Subordinated
Debentures by extending the interest payment period from time to time on the
Junior Subordinated Debentures for an Extension Period and, as a consequence,
quarterly distributions on the Preferred Securities would not be made (but would
continue to accrue with interest thereon at the rate of 13 1/4% per annum,
compounded quarterly to the extent permitted by applicable law) by the Trust
during any such Extension Period. During an Extension Period, UAL may not
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its common stock or preferred
stock or any other securities similar to the Preferred Securities or the Junior
Subordinated Debentures or make any guarantee payments with respect thereto. Any
Extension Period with respect to payment of interest on the Junior Subordinated
Debentures will also apply to distributions with respect to the Preferred
Securities and all other securities with similar terms. Prior to the termination
of any such Extension Period, UAL may further extend such Extension Period;
provided that such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarterly interest periods and
provided further that no Extension Period may extend beyond the maturity of the
Junior Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, UAL may commence a new Extension Period,
subject to the above requirements. Consequently, there could be multiple
Extension Periods of varying lengths (up to six Extension Periods of 20
consecutive quarterly interest periods each or more numerous shorter Extension
Periods) throughout the term of the Junior Subordinated Debentures, provided
that no Extension Period may extend beyond the maturity of the Junior
Subordinated Debentures. See "Risk Factors and Special Considerations Relating
to the Offer,"
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"-- Trust Distributions Dependent on UAL's Payments on Junior Subordinated
Debentures" and "-- UAL May Defer Interest Payments on Junior Subordinated
Debentures" and "Description of the Junior Subordinated Debentures -- Interest"
and "-- Option to Extend Interest Payment Period."
UAL shall give the Institutional Trustee notice of its selection of such
Extension Period ten Business Days prior to the earlier of (i) the date the
distributions on the Preferred Securities are payable or (ii) the date the Trust
is required to give notice to the NYSE or other applicable self-regulatory
organization or to holders of the Preferred Securities of the record date or the
date such distribution is payable, but in any event not less than one Business
Day prior to such record date. The Trust shall give notice of UAL's selection of
such Extension Period to the holders of the Preferred Securities. See
"Description of the Junior Subordinated Debentures -- Option to Extend Interest
Payment Period."
There will be deposited in the Trust as trust assets (i) Junior
Subordinated Debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities issued by the
Trust in exchange for the Depositary Shares accepted in the Offer and (ii)
Junior Subordinated Debentures having an aggregate principal amount equal to the
amount of proceeds received by the Trust from the sale of the Common Securities
to UAL. Under the Declaration, if and to the extent UAL does make interest
payments on the Junior Subordinated Debentures deposited in the Trust as trust
assets, the Institutional Trustee is obligated to make distributions promptly on
the Preferred Securities. The payment of distributions on the Preferred
Securities and payments on liquidation of the Trust and the redemption of
Preferred Securities, as set forth below, in each case out of moneys held by the
Trust, are guaranteed by UAL on a subordinated basis as and to the extent set
forth under "Description of the Preferred Securities Guarantee." The Preferred
Securities Guarantee covers distributions and other payments on the Preferred
Securities only if and to the extent that UAL has made a payment to the Trust of
interest or principal on the Junior Subordinated Debentures deposited in the
Trust as trust assets. The Preferred Securities Guarantee, when taken together
with UAL's obligations under the Junior Subordinated Debentures and the
Indenture and its obligations under the Declaration, including its obligation to
pay costs, expenses and certain liabilities of the Trust, constitutes a full and
unconditional guarantee of amounts due on the Preferred Securities.
The Preferred Securities and Common Securities are redeemable on a Pro Rata
Basis (as defined below) from time to time, in whole or in part, to the same
extent as the Junior Subordinated Debentures are redeemed by UAL, at any time on
or after July 12, 2004, upon not less than 10 nor more than 60 days' notice, at
$25 per Preferred Security plus accrued and unpaid distributions thereon to the
date of redemption (the "Redemption Price"), including distributions accrued as
a result of UAL's election to defer payments of interest on the Junior
Subordinated Debentures, payable in cash. The Preferred Securities will be
redeemed upon the maturity or earlier redemption of the Junior Subordinated
Debentures. See "Description of the Preferred Securities -- Mandatory
Redemption." As used in this Prospectus, the term "Pro Rata Basis" shall mean
pro rata to each holder of Trust Securities according to the aggregate
liquidation amount of the Trust Securities held by the relevant holder in
relation to the aggregate liquidation amount of all Trust Securities outstanding
unless, in relation to a payment, an Event of Default under the Declaration has
occurred and is continuing, in which case any funds available to make such
payment shall be paid first to each holder of the Preferred Securities pro rata
according to the aggregate liquidation amount of the Preferred Securities held
by the relevant holder in relation to the aggregate liquidation amount of all
Preferred Securities outstanding, and, only after satisfaction of all amounts
owed to the holders of the Preferred Securities, to each holder of Common
Securities pro rata according to the aggregate liquidation amount of the Common
Securities held by the relevant holder in relation to the aggregate liquidation
amount of all the Common Securities outstanding.
In addition, upon the occurrence and during the continuation of a Tax Event
or an Investment Company Event (each as hereinafter defined) arising from a
change in law or a change in legal interpretation or other specified
circumstances, the Trust shall, unless the Junior Subordinated Debentures are
redeemed in the limited circumstances described below and subject to certain
other limited exceptions, be dissolved, with the result that the Junior
Subordinated Debentures will be distributed to the holders of the Preferred
Securities and the Common Securities on a Pro Rata Basis, in lieu of any cash
distribution. In the case of a Tax Event, UAL will have the right in certain
circumstances to redeem the Junior Subordinated Debentures at any time, in which
event the Trust will redeem the Trust Securities on a Pro Rata Basis to the same
extent as the Junior
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Subordinated Debentures are redeemed. If the Junior Subordinated Debentures are
distributed to the holders of the Trust Securities, UAL will use its best
efforts to have the Junior Subordinated Debentures listed on the NYSE or on such
other exchange as the Preferred Securities are then listed. See "Description of
the Preferred Securities -- Special Event Redemption or Distribution."
The Junior Subordinated Debentures will be issued pursuant to an indenture,
to be dated as of December 20, 1996 (the "Indenture"), between UAL and The First
National Bank of Chicago as trustee (the "Indenture Trustee"). See "Description
of the Junior Subordinated Debentures." The Junior Subordinated Debentures will
mature on December 31, 2026 and will bear interest at an annual rate of 13 1/4%
from the Accrual Date. Interest will be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing on December
31, 1996; provided that, as described above, so long as UAL shall not be in
default in the payment of interest on the Junior Subordinated Debentures, UAL
shall have the right to extend the interest payment period from time to time for
a period not exceeding 20 consecutive quarterly interest periods. UAL has no
current intention of exercising its right to extend an interest payment period.
However, should UAL determine to exercise such right in the future, the market
price of the Preferred Securities is likely to be affected. See "Risk Factors
and Special Considerations Relating to the Offer" and "Description of the Junior
Subordinated Debentures -- Option to Extend Interest Payment Period."
The Junior Subordinated Debentures will also accrue interest at the rate of
12 1/4% per annum of the principal amount thereof from November 1, 1996 through
the Expiration Date, payable at the time of the first interest payment on the
Junior Subordinated Debentures to holders of the Junior Subordinated Debentures
on the record date for such distribution. No extension of interest will be
permitted with respect to interest accruing from November 1, 1996 through the
Expiration Date.
UAL shall have the right to redeem the Junior Subordinated Debentures, in
whole or in part, from time to time, on or after July 12, 2004, upon not less
than 10 nor more than 60 days' notice, at a redemption price equal to 100% of
the principal amount to be redeemed, plus any accrued and unpaid interest to the
redemption date, including interest accrued as a result of UAL's election to
defer payments of interest on the Junior Subordinated Debentures, payable in
cash. In addition, upon the occurrence of a Tax Event, UAL will also have the
right if certain conditions are met to redeem the Junior Subordinated Debentures
at any time. If UAL redeems the Junior Subordinated Debentures, then the Trust
will redeem the Trust Securities on a Pro Rata Basis to the same extent as the
Junior Subordinated Debentures are redeemed.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Depositary Shares for Preferred Securities pursuant to the
Offer will be a taxable event. Gain or loss generally will be recognized in an
amount equal to the difference between the fair market value on the Expiration
Date of the holder's pro rata share of the Junior Subordinated Debentures
represented by the Preferred Securities received in the exchange and the
exchanging Holder's tax basis in the Depositary Shares surrendered. For this
purpose, the fair market value of the Junior Subordinated Debentures deemed
issued in exchange for Depositary Shares on the Expiration Date will equal the
fair market value of the Preferred Securities on that date. See
"Taxation -- Exchange of Depositary Shares for Preferred Securities."
The Junior Subordinated Debentures will be treated as issued with "original
issue discount" for United States federal income tax purposes. Holders of
Preferred Securities (each a "Securityholder") will be required to include their
pro rata share of original issue discount in gross income as it accrues on the
Junior Subordinated Debentures in advance of the receipt of cash. Generally, all
of a Securityholder's taxable interest income with respect to the Junior
Subordinated Debentures will be accounted for as "original issue discount" and
actual distributions of stated interest will not be separately reported as
taxable income. See "Taxation -- Accrual of Original Issue Discount and Premium"
and "-- Potential Extension of Payment Period on the Junior Subordinated
Debentures."
While dividends on the Series B Preferred are eligible for the dividends
received deduction for corporate holders, dividends on the Preferred Securities
are not eligible for the dividends received deduction for corporate holders.
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The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A Securityholder who disposes of his Preferred
Securities and does not receive a payment of interest from the Trust for the
period in which the disposition occurs will nevertheless be required to include
accrued but unpaid interest on the Junior Subordinated Debentures through the
date of disposition in income as ordinary income, and to add such amount to the
adjusted tax basis in his pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. Accordingly, such a Securityholder will recognize
a capital loss to the extent the selling price (which may not fully reflect the
value of accrued but unpaid interest) is less than the Securityholder's adjusted
tax basis (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
ACCOUNTING FOR EXCHANGE
The refinancing of the Series B Preferred with the Preferred Securities
will decrease UAL's stockholders' equity and may increase or decrease earnings
applicable to common stockholders during the period of the Offer depending upon
the difference between the fair market value of the Series B Preferred
represented by the Depositary Shares and the liquidation price of the Series B
Preferred at the time of the exchange. The financial statements of the Trust
will be included in the consolidated financial statements of UAL. The Preferred
Securities will be disclosed separately in UAL's consolidated balance sheet
between the liabilities and stockholders' equity sections, and supplemented by
certain disclosures in UAL's notes to the financial statements.
UNTENDERED SHARES
Holders of Depositary Shares who do not tender their Depositary Shares in
the Offer or whose Depositary Shares are not accepted for exchange will continue
to hold such Depositary Shares and will be entitled to all the rights and
preferences, and will be subject to all of the limitations, applicable thereto.
To the extent that Depositary Shares are tendered and accepted in the
Offer, the terms on which untendered Depositary Shares could subsequently be
sold could be adversely affected. See "Risk Factors and Special Considerations
Relating to the Offer -- Reduced Trading Market for Depositary Shares."
EXCHANGE AGENT AND INFORMATION AGENT
The Bank of New York has been appointed as Exchange Agent in connection
with the Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to Georgeson & Company, Inc.
which has been retained by UAL and the Trust to act as Information Agent for the
Offer. The addresses and telephone numbers of the Exchange Agent and the
Information Agent are set forth in "The Offer -- Exchange Agent and Information
Agent" and on the outside back cover of this Prospectus.
DEALER MANAGERS
Merrill Lynch & Co. and Smith Barney Inc. have been retained as Dealer
Managers in connection with the Offer. For information regarding fees payable to
the Dealer Managers and Soliciting Dealers (as defined herein), see "The
Offer -- Dealer Managers; Soliciting Dealers."
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RISK FACTORS AND SPECIAL CONSIDERATIONS RELATING TO THE OFFER
Prospective exchanging holders of Depositary Shares who plan to participate
in the Offer should carefully consider, in addition to the other information set
forth elsewhere in this Prospectus, the following:
EXCHANGE OF DEPOSITARY SHARES FOR PREFERRED SECURITIES IS A TAXABLE EVENT
The exchange of Depositary Shares for Preferred Securities pursuant to the
Offer will be a taxable event. Generally, gain or loss will be recognized in an
amount equal to the difference between the fair market value on the Expiration
Date of the holder's pro rata share of the Junior Subordinated Debentures
represented by the Preferred Securities received in the exchange and the
exchanging Holder's tax basis in the Depositary Shares exchanged therefor. See
"Taxation -- Exchange of Depositary Shares for Preferred Securities." All
Holders of Depositary Shares are advised to consult their tax advisors regarding
the United States federal, state, local and foreign tax consequences of the
exchange of Depositary Shares and the issuance of Preferred Securities. See
"Price Range of Depositary Shares."
CORPORATE HOLDERS OF PREFERRED SECURITIES NOT ENTITLED TO DIVIDENDS RECEIVED
DEDUCTION
While dividends with respect to the Depositary Shares are eligible for the
dividends received deduction for corporate holders, distributions on the
Preferred Securities are not eligible for the dividends received deduction for
corporate holders.
RANKING OF SUBORDINATED OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED
DEBENTURES
The obligations of UAL under the Junior Subordinated Debentures are
unsecured obligations of UAL and will be subordinate and junior in right of
payment, to the extent set forth herein, to all Senior Indebtedness of UAL,
except obligations and securities made pari passu or subordinate by their terms,
but senior to all capital stock now or hereafter issued by UAL and to any
guarantee now or hereafter entered into by UAL in respect of its capital stock.
UAL's obligations under the Preferred Securities Guarantee are unsecured and
will rank (i) subordinate and junior in right of payment to all Senior
Indebtedness of UAL and (ii) senior to all capital stock now or hereafter issued
by UAL and to any guarantee now or hereafter entered into by UAL in respect of
its capital stock. At September 30, 1996, Senior Indebtedness of UAL on a
consolidated basis aggregated approximately $13.1 billion and there was no
indebtedness outstanding that would rank pari passu with the Junior Subordinated
Debentures. The terms of the Preferred Securities, the Junior Subordinated
Debentures or the Preferred Securities Guarantee do not limit the ability of UAL
to incur additional indebtedness or other liabilities, including indebtedness
that ranks senior to or pari passu with the Junior Subordinated Debentures and
the Preferred Securities Guarantee, or the ability of its subsidiaries to incur
additional indebtedness or other liabilities. See "Description of the Preferred
Securities Guarantee -- Status of the Preferred Securities Guarantee" and
"Description of the Junior Subordinated Debentures -- Subordination."
Because UAL is a holding company that conducts business through its
subsidiaries, the Junior Subordinated Debentures are effectively subordinated to
all existing and future obligations of UAL's subsidiaries, including United. Any
right of UAL to participate in any distribution of the assets of any of UAL's
subsidiaries, including United, upon the liquidation, reorganization or
insolvency of such subsidiary (and the consequent right of the holders of the
Junior Subordinated Debentures to participate in those assets) will be subject
to the claims of the creditors (including trade creditors) and preferred
stockholders of such subsidiary, except to the extent that claims of UAL itself
as a creditor of such subsidiary may be recognized, in which case the claims of
UAL would still be subordinate to any security interest in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by UAL.
TRUST DISTRIBUTIONS DEPENDENT ON UAL'S PAYMENTS ON JUNIOR SUBORDINATED
DEBENTURES
The Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon UAL making interest and other
payments on the Junior Subordinated Debentures deposited as trust assets as and
when required. If UAL were not to make distributions or other payments on the
Junior Subordinated Debentures for any reason, including as a result of UAL's
election to defer the payment of
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interest on the Junior Subordinated Debentures by extending the interest period
on the Junior Subordinated Debentures, the Trust will not make payments on the
Trust Securities. In such an event, holders of the Preferred Securities would
not be able to rely on the Preferred Securities Guarantee since distributions
and other payments on the Preferred Securities are subject to such Guarantee
only if and to the extent that UAL has made a payment to the Trust of interest
or principal on the Junior Subordinated Debentures deposited in the Trust as
trust assets. Instead, holders of Preferred Securities would rely on the
enforcement by the Institutional Trustee of its rights against UAL pursuant to
the terms of the Indenture and on their right to bring a direct action to
enforce the payment provisions thereof. However, if the Trust's failure to make
distributions on the Preferred Securities is a consequence of UAL's exercise of
its right to extend the interest payment period for the Junior Subordinated
Debentures, the Institutional Trustee will have no right to enforce the payment
of distributions on the Preferred Securities until an Event of Default under the
Declaration shall have occurred.
The Declaration provides that UAL shall pay for all debts and obligations
(other than with respect to the Trust Securities) and all costs and expenses of
the Trust, including any taxes and all costs and expenses with respect thereto,
to which the Trust may become subject, except for United States withholding
taxes.
For a discussion of the ranking of the Junior Subordinated Debentures, see
"-- Ranking of Subordinated Obligations Under Preferred Securities Guarantee and
Junior Subordinated Debentures."
UAL MAY DEFER INTEREST PAYMENTS ON JUNIOR SUBORDINATED DEBENTURES
So long as UAL shall not be in default in the payment of interest on the
Junior Subordinated Debentures, UAL has the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures by extending the
interest payment period from time to time on the Junior Subordinated Debentures
for an Extension Period not exceeding 20 consecutive quarterly interest periods,
during which no interest shall be due and payable, provided that no Extension
Period may extend beyond the maturity of the Junior Subordinated Debentures. In
such an event, quarterly distributions on the Preferred Securities would not be
made (but would continue to accrue with interest thereon at the rate of 13 1/4%
per annum, compounded quarterly to the extent permitted by applicable law) by
the Trust during any such Extension Period. If UAL exercises the right to extend
an interest payment period, UAL may not during such Extension Period declare or
pay dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred stock
or any other securities similar to the Preferred Securities or the Junior
Subordinated Debentures or make any guarantee payments with respect thereto,
provided, however, that UAL may pay cash in lieu of fractional shares upon the
conversion of any of its preferred stock in accordance with the terms of such
stock. Any Extension Period with respect to payment of interest on the Junior
Subordinated Debentures, other debt securities of UAL under the Indenture or on
any similar securities will apply to all such securities and will also apply to
distributions with respect to the Preferred Securities and all other securities
with similar terms.
Prior to the termination of any Extension Period, UAL may further extend
such Extension Period; provided that such Extension Period together with all
such previous and further extensions thereof may not exceed 20 consecutive
quarterly interest periods. Upon the termination of any Extension Period and the
payment of all amounts then due, UAL may commence a new Extension Period,
subject to the above requirements. Consequently, there could be multiple
Extension Periods of varying lengths (up to six Extension Periods of 20
consecutive quarterly interest periods each or more numerous shorter Extension
Periods) throughout the term of the Junior Subordinated Debentures. See
"Description of the Preferred Securities -- Distributions" and "Description of
the Junior Subordinated Debentures -- Option to Extend Interest Payment Period."
TAX CONSEQUENCES OF EXTENSION OF INTEREST PAYMENT PERIODS
Because UAL has the right to extend the interest payment period up to 20
consecutive quarterly interest periods on various occasions, the Junior
Subordinated Debentures will be treated as issued with "original issue discount"
for United States federal income tax purposes. As a result, holders of Preferred
Securities will be required to include their pro rata share of original issue
discount in gross income as it accrues for United States federal income tax
purposes in advance of the receipt of cash. Generally, all of a Securityholder's
taxable interest income with respect to the Junior Subordinated Debentures will
be accounted for as "original
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issue discount" and actual distributions of stated interest will not be
separately reported as taxable income. See "Taxation -- Accrual of Original
Issue Discount and Premium" and "-- Potential Extension of Payment Period on the
Junior Subordinated Debentures."
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such as
the Junior Subordinated Debentures, issued on or after December 7, 1995. On
March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House
Ways and Means Committee Chairman Bill Archer issued a joint statement (the
"Joint Statement") indicating their intent that the Proposed Legislation, if
adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." In addition, subsequent to the publication of the Joint Statement,
Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles
B. Rangel wrote letters to Treasury Department officials concurring with the
view expressed in the Joint Statement (the "Democrat Letters"). If the
principles contained in the Joint Statement and the Democrat Letters were
followed and the Proposed Legislation were enacted, such legislation would not
apply to the Junior Subordinated Debentures. There can be no assurance, however,
that the effective date guidance contained in the Joint Statement will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of UAL to deduct the interest payable on the Junior Subordinated
Debentures. Accordingly, there can be no assurance that a Tax Event will not
occur. The occurrence of a Tax Event may, among other things, result in a
dissolution of the Trust in which holders of the Preferred Securities may
receive cash, which would be a taxable event to such holders. See "-- Special
Event Redemption or Distribution," "Description of the Preferred
Securities -- Special Event Redemption or Distribution," and
"Taxation -- Disposition of the Preferred Securities."
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, UAL has the right to extend an interest payment period
on the Junior Subordinated Debentures from time to time for periods not
exceeding 20 consecutive quarterly interest periods. If UAL determines to extend
an interest payment period, or if UAL thereafter extends an Extension Period,
the market price of the Preferred Securities is likely to be adversely affected.
In addition, as a result of such rights, the market price of the Preferred
Securities (which represent an undivided interest in Junior Subordinated
Debentures) may be more volatile than other securities on which original issue
discount accrues that do not have such rights. A holder that disposes of its
Preferred Securities during an Extension Period, therefore, may not receive the
same return on its investment as a holder that continues to hold its Preferred
Securities. See "Description of the Junior Subordinated Debentures -- Option to
Extend Interest Payment Period."
LACK OF ESTABLISHED TRADING MARKET FOR PREFERRED SECURITIES
The Preferred Securities constitute a new issue of securities of the Trust
with no established trading market. While the Preferred Securities have been
approved for listing on the NYSE subject to official notice of issuance, there
can be no assurance that an active market for the Preferred Securities will
develop or be sustained in the future on such exchange. Although the Dealer
Managers have indicated to UAL and the Trust that they intend to make a market
in the Preferred Securities following the Expiration Date, as permitted by
applicable laws and regulations prior to the commencement of trading on the
NYSE, they are not obligated to do so and may discontinue any such market-making
at any time without notice. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Preferred Securities. In order to
satisfy the NYSE listing requirements, acceptance of Depositary Shares validly
tendered in the Offer is subject to the Minimum Distribution Condition, which
condition may not be waived by UAL or the Trust. See "Listing and Trading of
Preferred Securities and Depositary Shares."
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REDUCED TRADING MARKET FOR DEPOSITARY SHARES
To the extent Depositary Shares are tendered and accepted in the Offer, the
liquidity and trading market for the Depositary Shares to be outstanding
following the Offer, and the terms upon which such Depositary Shares could be
sold, could be adversely affected. In addition, if the Offer is substantially
subscribed, there would be a significant risk that round lot holdings of
Depositary Shares outstanding following the Offer would be limited. See "Listing
and Trading of Preferred Securities and Depositary Shares."
Under the rules of the NYSE, preferred securities such as the Depositary
Shares are subject to delisting if (i) the aggregate value of publicly-held
shares is less than $2 million and (ii) the number of publicly-held shares is
less than 100,000. There can be no assurance that the Depositary Shares will
continue to meet the NYSE listing standards following the Offer.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and during the continuation of a Tax Event or
Investment Company Event (each as defined herein), which may occur at any time,
the Trust shall, unless the Junior Subordinated Debentures are redeemed in the
limited circumstances described below, be dissolved, with the result that, after
satisfaction of creditors and in the manner described in "Description of the
Preferred Securities -- Liquidation Distribution Upon Dissolution," Junior
Subordinated Debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of, and bearing accrued and unpaid interest
equal to accrued and unpaid distributions on, the Preferred Securities and
Common Securities would be distributed on a Pro Rata Basis to the holders of the
Preferred Securities and Common Securities in liquidation of the Trust. In the
case of a Tax Event, in certain circumstances, UAL shall have the right to
redeem at any time the Junior Subordinated Debentures, in whole or in part, in
which event the Trust will redeem Preferred Securities and Common Securities on
a Pro Rata Basis to the same extent as the Junior Subordinated Debentures are
redeemed. There can be no assurance as to the market prices for Preferred
Securities or the Junior Subordinated Debentures which may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of the Trust
were to occur. Accordingly, the Junior Subordinated Debentures which the
investor may receive on dissolution and liquidation of the Trust may trade at a
discount to the price of the Depositary Shares exchanged. See "Description of
the Preferred Securities -- Special Event Redemption or Distribution" and
"Description of the Junior Subordinated Debentures -- General."
Under current United States federal income tax law, a distribution of the
Junior Subordinated Debentures upon a Tax Event or Investment Company Event
would not be a taxable event to holders of the Preferred Securities. See
"Taxation -- Distribution of Junior Subordinated Debentures to Holders of
Preferred Securities."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will
not be able to appoint, remove or replace, or to increase or decrease the number
of, Trustees, which rights are vested exclusively in the Common Securities. See
"Description of the Preferred Securities -- Voting Rights."
Holders of Depositary Shares also have limited voting rights. However, in
the event that dividends on any series of preferred stock, including the Series
B Preferred, are in arrears and unpaid for six quarterly dividend periods,
whether or not consecutive, the Board of Directors is required to be increased
by two directors and the holders of Series B Preferred, together with the
holders of all other series of preferred stock then entitled to vote thereon,
would be entitled to elect two directors of the expanded Board of Directors with
certain exceptions. See "Description of the Series B Preferred and Depositary
Shares -- Series B Preferred -- Voting Rights."
The Indenture contains no provisions which would afford the holders of
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction involving UAL or a change of control of UAL.
Under the GCL, the directors and officers of UAL, in exercising the powers
and responsibilities of managing UAL, owe UAL and the holders of Depositary
Shares a duty of care, a duty of loyalty and a duty of
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candor. The directors and officers of UAL are not, however, liable for errors in
judgment or other acts or omissions made in good faith unless their actions are
found to be grossly negligent. Similarly, under Delaware law, the trustees of a
business trust (such as the Trust) are fiduciaries who are obligated to act with
fidelity and good faith to the trust and the beneficial owners of the trust. The
Business Trust Act does not delineate the fiduciary duties of trustees of a
Delaware business trust but provides that, to the extent a trustee has fiduciary
or other duties to a business trust or to a beneficial owner, the trustee shall
not be liable for his good faith reliance on provisions of the business trust's
governing instrument, even though the act or omission may be contrary to a duty
or liability that has otherwise been imposed on the trustee at law or in equity.
Thus, the Trustees' duties and liabilities may be expanded or restricted by the
Declaration, although not completely eliminated. Under the Declaration, the
Regular Trustees have duties that are substantially similar to directors of UAL.
In contrast, under the Declaration, the Institutional Trustee's duties are
different from those of directors of UAL. Under the Declaration, subject to
certain exceptions, the Institutional Trustee is liable for its own negligent
action, its own negligent failure to act and its own willful misconduct. The
Institutional Trustee is also subject to duties imposed by the Trust Indenture
Act. The Delaware Trustee has very limited duties and obligations under the
Declaration. Finally, subject to the Declaration and the Trust Indenture Act,
the Trustees may engage or possess an interest in other business ventures.
Under the GCL, so long as UAL is solvent, directors of UAL owe duties only
to the holders of Depositary Shares and other shareholders of UAL. Thus, as long
as UAL is solvent, directors of UAL will not owe fiduciary duties either to the
Trust or the holders of Preferred Securities. Under the GCL, if UAL is clearly
insolvent, the directors of UAL will owe duties to holders of Depositary Shares
and the other shareholders of UAL as well as creditors of UAL. Thus, if UAL
becomes clearly insolvent, the directors of UAL will owe duties to the Trust as
the sole holder of the Junior Subordinated Debentures.
COMPARISON OF PREFERRED SECURITIES AND DEPOSITARY SHARES
The following is a brief summary of certain terms of the Preferred
Securities and the Depositary Shares. For a more complete description of the
Preferred Securities, see "Description of the Preferred Securities." For a
description of the Junior Subordinated Debentures which will be deposited in the
Trust as trust assets and will represent the sole source for the payment of
distributions and other payments on the Preferred Securities, see "Description
of the Junior Subordinated Debentures." For a description of Depositary Shares,
see "Description of the Series B Preferred and Depositary Shares."
DEPOSITARY SHARES/SERIES B
PREFERRED SECURITIES PREFERRED
------------------------------ ------------------------------
Issuer........................ The Trust. Payment of UAL.
distributions and on
liquidation or redemption is
guaranteed on a subordinated
basis, as and to the extent
described herein, by UAL.
Distribution/Dividend Rate.... 13 1/4% per annum distribution 12 1/4% per annum dividend
payable quarterly in arrears payable on the Series B
on March 31, June 30, Preferred on the first
September 30 and December 31 business day of February, May,
of each year, commencing August and November of each
December 31, 1996, from and year, out of funds legally
including the Accrual Date, available therefor, when, as
but only if and to the extent and if declared by UAL's Board
that, interest payments are of Directors. Dividends are
made in respect of the Junior cumulative. Dividends accrue
Subordinated Debentures held whether or not UAL has
by the Trust. earnings, whether or not there
are funds legally available
for the payment of such
dividends and whether or not
such dividends are declared.
UAL has made each quarterly
dividend payment with respect
to the Depositary Shares on
the scheduled dividend payment
date.
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25
DEPOSITARY SHARES/SERIES B
PREFERRED SECURITIES PREFERRED
------------------------------ ------------------------------
Interest Accrual.............. During any Extension Period on Accrued but unpaid dividends
the Junior Subordinated do not bear interest.
Debentures, distribution
payments on the Preferred
Securities will not be made
but would continue to accrue,
and, in the case of
distributions in arrears,
would bear interest at the
rate of 13 1/4% per annum,
compounded quarterly to the
extent permitted by applicable
law.
Maturity/Mandatory and
Optional Redemption......... The Preferred Securities will No maturity or mandatory
be redeemed upon the maturity redemption. The Depositary
or earlier redemption of the Shares are redeemable at the
Junior Subordinated option of UAL on and after
Debentures, at a redemption July 12, 2004, in whole or in
price equal to $25 per part, at a redemption price
Preferred Security to be equivalent to $25 per
redeemed, plus any accrued and Depositary Share to be
unpaid distributions to the redeemed, plus accrued and
redemption date, including unpaid dividends thereon, to
distributions accrued as a the date fixed for redemption.
result of UAL's election to Holders of Depositary Shares
defer payments of interest on have no right to require UAL
the Junior Subordinated to redeem the Depositary
Debentures. The Junior Shares at the option of the
Subordinated Debentures are holders.
redeemable at the option of
UAL, in whole or in part, on
or after July 12, 2004, at a
redemption price equivalent to
$25 per Junior Subordinated
Debenture to be redeemed, plus
accrued and unpaid interest
thereon, to the redemption
date. In the event that the
Junior Subordinated Debentures
are redeemed, upon the
repayment of the Junior
Subordinated Debentures, upon
maturity, upon redemption or
otherwise, the proceeds
thereof will be promptly
applied to redeem the
Preferred Securities and the
Common Securities. The Junior
Subordinated Debentures have a
final maturity of December 31,
2026. See "Description of the
Preferred
Securities -- Special Event
Redemption or Distribution"
and "-- Mandatory Redemption."
Holders of Preferred
Securities have no right to
require UAL to redeem the
Preferred Securities at the
option of the holders.
Subordination................. Subordinated to claims of Subordinated to claims of
creditors of the Trust, if creditors of UAL, including
any. The Preferred Securities the Junior Subordinated
and the Common Securities will Debentures, but senior to all
have equivalent terms; pro- other shares of capital stock
vided that (i) if an Event of of UAL.
Default under the Declaration
occurs and is
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26
DEPOSITARY SHARES/SERIES B
PREFERRED SECURITIES PREFERRED
------------------------------ ------------------------------
continuing, the holders of
Preferred Securities will have
a priority over holders of the
Common Securities with respect
to payments in respect of
distributions and payments
upon liquidation, redemption
or otherwise and (ii) holders
of Common Securities have the
exclusive right (subject to
the terms of the Declaration)
to appoint, remove or replace
Trustees and to increase or
decrease the number of
Trustees.
The Trust is not permitted to
incur any indebtedness for
borrowed money. The
Declaration provides that UAL
shall pay for all debts and
obligations (other than with
respect to the Trust
Securities) and all costs and
expenses of the Trust,
including any income taxes,
duties and other governmental
charges, and all costs and
expenses with respect thereto,
to which the Trust
may become subject, except for
United States withholding
taxes.
The Junior Subordinated Deben-
tures will rank subordinate
and junior to all Senior
Indebtedness of UAL, except
obligations and securities
made pari passu or subordinate
by their terms, and senior to
all capital stock now or here-
after issued by UAL and to any
guarantee now or hereafter
entered into by UAL in respect
of any of its capital stock
(including the Depositary
Shares). UAL's obligations
under the Preferred Securities
Guarantee will rank
subordinate and junior to all
Senior Indebtedness of UAL,
except obligations and
securities made pari passu or
subordinate by their terms,
and senior to all capital
stock now or hereafter issued
by UAL and to any guarantee
now or hereafter entered into
by UAL in respect of any of
its capital stock.
As of September 30, 1996, UAL
had Senior Indebtedness (on a
consolidated basis) of
approximately $13.1 billion
and no indebtedness
outstanding that would rank
pari passu with the Junior
Subordinated Debentures.
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27
DEPOSITARY SHARES/SERIES B
PREFERRED SECURITIES PREFERRED
------------------------------ ------------------------------
Listing....................... The Preferred Securities have The Depositary Shares are
been approved for listing on listed on the NYSE under the
the NYSE under the symbol "UAL symbol "UAL Pr B."
Pr T," subject to official
notice of issuance. In order
to satisfy the NYSE listing
requirements, acceptance of
Depositary Shares validly
tendered in the Offer is
subject to the Minimum
Distribution Condition, which
condition may not be waived.
Dividends Received
Deduction................... Distributions on the Preferred Dividends are eligible for the
Securities are not eligible dividends received deduction
for the dividends received for corporate holders.
deduction for corporate
holders.
Voting Rights/Enforcement..... Holders of Preferred If dividends shall be in
Securities have no voting arrears for six quarterly
rights other than as provided dividend periods, whether or
under the Business Trust Act not consecutive, UAL's Board
or the Trust Indenture Act, of Directors shall be in-
except in the limited creased by two directors and
circumstances discussed below. holders have the right
The Institutional Trustee has (together with other classes
the power to exercise all of preferred stock ranking on
rights under the Indenture a parity with the Series B
with respect to the Junior Preferred either as to
Subordinated Debentures and is dividends or on the
also authorized to enforce the distribution of assets upon
Preferred Securities Guarantee liquidation) to elect two
on behalf of holders of the directors.
Preferred Securities. If the
Trust's failure to make
distributions is a consequence
of UAL's exercise of its right
to extend the interest payment
period for the Junior Sub-
ordinated Debentures as
described under
"Distribution/Dividend Rate,"
the Institutional Trustee will
have no right to enforce the
payment of distributions until
an Event of Default under the
Declaration shall have
occurred. The holders of at
least a majority in
liquidation amount of the
Preferred Securities will have
the right to direct the
Institutional Trustee with
respect to certain matters
under the Declaration and the
Preferred Securities
Guarantee. Under certain
circumstances, holders of
Preferred Securities may
institute a legal proceeding
against UAL to enforce the
Preferred Securities Guarantee
and the payment provisions of
the Indenture. See
"Description of the Preferred
Securities" and "Description
of the Preferred Securities
Guarantee."
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28
CAPITALIZATION
The following table sets forth the consolidated capitalization of UAL at
September 30, 1996 and as adjusted to give effect to the Offer (assuming that
the minimum of 1,000,000 shares and the maximum of all of the shares of the
Depositary Shares not owned by UAL are exchanged).
SEPTEMBER 30, 1996
-------------------------------
AS ADJUSTED
--------------------
ASSUMING ASSUMING
MINIMUM MAXIMUM
ACTUAL EXCHANGE EXCHANGE
------ ------- --------
(DOLLARS IN MILLIONS)
Short-term borrowings, long-term debt maturing within one year and current
obligations under capital leases................................................ $ 198 $ 198 $ 198
------ ------ ------
Long-term debt, excluding portion due within one year:
Secured notes................................................................... 894 894 894
Debentures...................................................................... 942 942 942
Convertible debentures.......................................................... 25 25 25
Promissory notes................................................................ 38 38 38
Unamortized discount on debt.................................................... (9) (9) (9)
------ ------ ------
1,890 1,890 1,890
Long-term obligations under capital leases...................................... 1,354 1,354 1,354
------ ------ ------
Total long-term debt and capital lease obligations........................ 3,244 3,244 3,244
------ ------ ------
Class 2 ESOP Preferred Stock, $.01 par value(a)................................... 97 97 97
------ ------ ------
UAL obligated mandatorily redeemable 13 1/4% preferred securities of subsidiary
trust, the sole assets of which are the Junior Subordinated Debentures of UAL
with a final maturity of December 31, 2026(b)................................... -- 34 210
------ ------ ------
Shareholders' equity:
Series B Preferred Stock, $.01 stated value..................................... -- -- --
Class 1 ESOP Preferred Stock, $.01 par value.................................... -- -- --
Class 2 ESOP Preferred Stock, $.01 par value.................................... -- -- --
Class P, M and S Voting Preferred Stock, $.01 par value......................... -- -- --
Class I, Pilot MEC, IAM and SAM Preferred Stock, $.01
par value..................................................................... -- -- --
Common Stock, $.01 par value.................................................... 1 1 1
Additional capital invested(b).................................................. 2,221 2,187 2,011
Accumulated deficit............................................................. (572) (572) (572)
Unearned ESOP Preferred Stock................................................... (327) (327) (327)
Stock held in treasury.......................................................... (385) (385) (385)
Other........................................................................... (90) (90) (90)
------ ------ ------
Total shareholders' equity................................................ 848 814 638
------ ------ ------
Total capitalization(c)................................................... $4,387 $4,387 $4,387
====== ====== ======
- ---------------
(a) The Class 2 ESOP Preferred Stock committed to be contributed to the
Supplemental ESOP is reported outside of equity because the employees can
elect to receive their "book entry" shares from the Company in cash upon
termination of employment.
(b) Assuming the minimum exchange (1,000,000 Depositary Shares), the Preferred
Securities that will be issued are expected to have an aggregate liquidation
value of $25 million and an aggregate fair market value of $34 million as of
the date of exchange. Assuming the maximum exchange (all of the Depositary
Shares not owned by UAL), the Preferred Securities that will be issued are
expected to have an aggregate liquidation value of $157 million and an
aggregate fair market value of $210 million as of the date of exchange.
The Preferred Securities will be recorded at their fair market value with a
corresponding reduction in Additional Capital Invested. To the extent the
actual aggregate fair market value of the Preferred Securities at the date
of exchange differs from the expected amounts, the balances of the Preferred
Securities and Additional Capital Invested will change accordingly.
In accordance with Generally Accepted Accounting Principles ("GAAP"), the
Series B Preferred stated value and Additional Capital Invested are reduced
by an aggregate amount equal to the fair market value of the Preferred
Securities issued in exchange for the Company's outstanding Series B
Preferred, as represented by the Depositary Shares. At September 30, 1996,
there were outstanding 6,266,781 Depositary Shares representing 6,266.8
shares of Series B Preferred.
(c) As part of the exchange, UAL will purchase all of the Common Securities of
the Trust. Additionally, UAL will incur an obligation for Junior
Subordinated Debentures having an aggregate principal amount equal to (i)
the aggregate stated liquidation amount of the Preferred Securities issued
by the Trust, plus (ii) the amount of proceeds received by the Trust from
the sale of the Common Securities to UAL. The Trust's Common Securities and
UAL's Junior Subordinated Debentures are not presented in the above table
since they are eliminated in consolidation.
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29
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following should be read in conjunction with UAL's Consolidated
Financial Statements and the related notes thereto. The financial information
for each of the years in the three-year period ended December 31, 1995 has been
derived from the consolidated financial statements of UAL previously filed with
the Commission which have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports. Reference is made to said
reports for the years 1994 and 1993 which include an explanatory paragraph with
respect to the changes in methods of accounting for income taxes and
postretirement benefits other than pensions as discussed in the notes to the
consolidated financial statements for such years. See "Incorporation of Certain
Documents by Reference."
The financial information for each of the nine-month periods ended
September 30, 1996 and 1995 has been derived from UAL's unaudited consolidated
financial statements incorporated by reference herein. The information for
interim periods is unaudited, but, in the opinion of management, reflects all
adjustments (which, except for the effects of the employee investment
transaction, include only normal recurring adjustments) necessary for a fair
presentation of the results of operations for such periods. Results for interim
periods should not be considered as indicative of results for any other periods
or for the year. See "Incorporation of Certain Documents by Reference."
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS
AND OPERATING DATA)
STATEMENT OF OPERATIONS DATA:
Operating revenues(a)...................... $ 12,386 $ 11,276 $ 14,943 $ 13,950 $ 13,325
Earnings from operations................... 1,070 807 829 521 263
Earnings (loss) before extraordinary item
and cumulative effect of accounting
changes................................. 580 397 378 77 (31)
Net earnings (loss)........................ 514 397 349 51 (50)
Earnings (loss) per common share before
extraordinary item and cumulative effect
of accounting changes(b)(e)............. 6.20 5.96 5.19 0.19 (0.66)
Net earnings (loss) per common
share(b)(e)............................. 5.40 5.96 4.78 (0.15) (0.85)
STATEMENT OF FINANCIAL POSITION DATA (at end
of period):
Total assets............................... 12,282 12,070 11,641 11,764 12,840
Total long-term debt and capital lease
obligations, including current
portion................................. 3,442 4,314 4,102 4,077 3,735
Shareholders' equity....................... 848 (144) (239) (316) 1,203
Book value per common share(c)(e).......... 11.81 (9.09) (9.06) (24.99) 6.14
OTHER DATA:
Ratio of earnings to fixed charges......... 2.02 1.64 1.44 1.10 (d)
Ratio of earnings to fixed charges and
preferred stock dividends............... 1.94 1.60 1.41 1.09 (d)
UNITED OPERATING DATA:
Revenue passengers (millions).............. 62 59 79 74 70
Average length of a passenger trip in
miles................................... 1,426 1,423 1,419 1,459 1,450
Revenue passenger miles (millions)......... 88,352 84,462 111,811 108,299 101,258
Available seat miles (millions)............ 121,898 118,929 158,569 152,193 150,728
Passenger load factor...................... 72.5% 71.0% 70.5% 71.2% 67.2%
Break even passenger load factor........... 65.3% 65.3% 66.1% 68.2% 65.5%
Revenue per passenger mile................. 12.4cents 11.8cents 11.8cents 11.3cents 11.6cents
Cost per available seat mile............... 9.3cents 8.8cents 8.9cents 8.8cents 8.5cents
Average price per gallon of jet fuel....... 69.6cents 58.0cents 59.5cents 58.8cents 63.6cents
28
30
- ---------------
(a) In the first quarter of 1994, United began recording certain air
transportation price adjustments, which were previously recorded as
commission expense, as adjustments to revenues. Operating revenues and
certain operating statistics for periods prior to 1994 have been adjusted
to conform with the current presentation.
(b) In connection with a recapitalization that occurred in July, 1994, each old
common share was exchanged for one-half share of new common stock. As
required under generally accepted accounting principles for transactions of
this type, the historical weighted average shares outstanding were not
restated (except as discussed in note (e)). Additionally, the 1995 and 1996
periods include the average number of ESOP Preferred Shares considered
outstanding during each respective period. Thus, direct comparisons between
earnings per share amounts are not meaningful.
(c) Book value per common share represents total equity, less the aggregate
liquidation value of preferred stock, divided by actual common shares
outstanding.
(d) Earnings were insufficient to cover both fixed charges and fixed charges and
preferred stock dividends by $98 million in 1993.
(e) On May 6, 1996, UAL effected a four-for-one split in its common stock in the
form of a 300% stock dividend. All share and per share data have been
retroactively restated to give effect to this stock split.
29
31
UAL CORPORATION
UAL Corporation, a Delaware corporation ("UAL"), is a holding company and
its primary subsidiary is United Air Lines, Inc., a Delaware corporation
("United"), which is wholly owned. United is one of the world's largest airlines
as measured by revenue passenger miles and primarily serves the North American,
Pacific, Latin American and European markets. At the end of 1995, United served
144 airports in the United States and 30 foreign countries. During 1995, United
averaged 2,172 departures daily, flew a total of 112 billion revenue passenger
miles and carried an average of 215,521 passengers per day. At the end of 1995,
United's fleet of aircraft totaled 558. United's major hub operations are
located at Chicago, Denver, Los Angeles, San Francisco, Washington, D.C. and
Tokyo.
RECENT DEVELOPMENTS
On October 23, 1996, UAL reported unaudited net earnings of $514 million
for the nine months ended September 30, 1996. Earnings were $580 million before
an after-tax $66 million extraordinary loss on early extinguishment of debt.
Earnings per share were $5.40 on a fully diluted basis including the
extraordinary loss, or $6.20 per share before the loss. For the first nine
months of 1995, UAL reported net earnings of $397 million. Operating earnings
for the 1996 nine-month period were $1,070 million on operating revenues of
$12,386 million. Operating earnings were $807 million for the 1995 nine-month
period on operating revenues of $11,276 million.
UAL also reported that on a pro forma, fully distributed basis (see below
for further explanation of the methodology), net earnings for the nine months
ended September 30, 1996 were $819 million ($5.98 per share), or $885 million
($6.48 per share) before the extraordinary loss. Fully distributed operating
earnings were $1,558 million for the nine-month period. UAL reported that
available seat miles grew 2.5% in 1996 to 121.9 billion from 118.9 billion in
1995. Traffic increased by 4.6% reflecting growth in revenue passenger miles to
88.4 billion from 84.5 billion in 1995. The resulting passenger load factor
increased 1.5 points to 72.5% from 71.0%, while the break-even passenger load
factor (excluding ESOP charges) decreased 0.8 points to 62.1% from 62.9%. Yield
(revenue per passenger mile) increased by 4.8% to 12.38 cents, up from 11.81
cents in 1995.
UAL reported third quarter net earnings of $347 million before an
extraordinary item associated with the early retirement of debt; operating
earnings for the period were $610 million. For the third quarter of 1995, net
earnings were $243 million on operating earnings of $467 million. After
preferred dividends, the 1996 third quarter fully diluted earnings per share
were $3.85 before the extraordinary item, compared to earnings per share of
$3.22 last year.
On a fully distributed basis, UAL third quarter net earnings were $444
million before the extraordinary item compared to $334 million in the prior
year. Fully distributed operating earnings for the quarter were $767 million
versus $606 million in 1995. After preferred dividends, fully distributed
earnings per share were $3.34 before the extraordinary item, compared to 1995's
earnings per share of $2.53.
In addition to reviewing financial statements reported under GAAP, UAL
believes a more complete understanding of its results can be gained by viewing
them on a pro forma, fully distributed basis. This presentation considers all
ESOP shares (which will be issued to employees over the course of the ESOP
period) to be immediately outstanding and thus fully distributed. Consistent
with this presentation, the ESOP compensation expense (which reflects the
commitment of stock to employees) is excluded from fully distributed expenses
and ESOP convertible preferred stock dividends have not been deducted from
earnings attributable to common shareholders.
30
32
UAL CORPORATION CAPITAL TRUST I
The Trust is a statutory business trust that was created under the Business
Trust Act on October 15, 1996 pursuant to a declaration of trust dated October
15, 1996 among the Institutional Trustee, the Delaware Trustee and UAL and the
filing of a certificate of trust with the Secretary of State of Delaware. Such
declaration of trust will be amended and restated in its entirety as of the date
the Trust accepts Depositary Shares in the Offer (see "The Offer -- Terms of the
Offer") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Declaration is qualified
under the Trust Indenture Act. Upon issuance of the Preferred Securities, the
holders thereof will own all of the issued and outstanding Preferred Securities.
UAL has agreed to acquire Common Securities in an amount equal to at least 3% of
the total capital of the Trust and will own, directly or indirectly, all of the
issued and outstanding Common Securities. The Preferred Securities and the
Common Securities will have equivalent terms; provided that (i) if an Event of
Default under the Declaration occurs and is continuing, the holders of Preferred
Securities will have a priority over holders of the Common Securities with
respect to payments in respect of distributions and payments upon liquidation,
redemption or otherwise and (ii) holders of Common Securities have the exclusive
right (subject to the terms of the Declaration) to appoint, remove or replace
Trustees and to increase or decrease the number of Trustees.
The number of Trustees of the Trust shall initially be five. Three of the
Trustees will be the Regular Trustees. The fourth trustee is The First National
Bank of Chicago which will act as the Indenture Trustee for purposes of the
Trust Indenture Act. The fifth trustee is First Chicago Delaware Inc. which will
serve as the Delaware Trustee. Pursuant to the Declaration, the Institutional
Trustee will have the power to exercise all rights, powers and privileges under
the Indenture with respect to the Junior Subordinated Debentures. The
Institutional Trustee will promptly make distributions to the holders of the
Trust Securities out of any funds in the Trust. The Preferred Securities
Guarantee will be separately qualified under the Trust Indenture Act and will be
held by The First National Bank of Chicago, acting in its separate capacity as
indenture trustee with respect to the Preferred Securities Guarantee for the
benefit of the holders of the Preferred Securities.
The Trust exists for the purpose of (a) issuing (i) its Preferred
Securities in exchange for Depositary Shares validly tendered in the Offer and
delivering such Depositary Shares to UAL in consideration of the deposit by UAL
as Trust assets of Junior Subordinated Debentures having an aggregate stated
principal amount equal to the aggregate stated liquidation amount of such
Preferred Securities, and (ii) its Common Securities to UAL in exchange for cash
and investing the proceeds thereof in an equivalent amount of Junior
Subordinated Debentures and (b) engaging in such other activities as are
necessary or incidental thereto. The rights of the holders of the Preferred
Securities, including economic rights, rights to information and voting rights,
are set forth in the Declaration, the Business Trust Act and the Trust Indenture
Act.
Under the Declaration, the Trust shall not, and the Trustees (including the
Institutional Trustee) shall cause the Trust not to, engage in any activity
other than in connection with the purposes of the Trust or other than as
required or authorized by the Declaration. In particular, the Trust shall not
and the Trustees (including the Institutional Trustee) shall not (a) invest any
proceeds received by the Trust from holding the Junior Subordinated Debentures
but shall promptly distribute all such proceeds to holders of Trust Securities
pursuant to the terms of the Declaration and of the Trust Securities; (b)
acquire any assets other than as expressly provided in the Declaration; (c)
possess Trust property for other than a Trust purpose; (d) make any investments,
other than investments represented by the Junior Subordinated Debentures; (e)
possess any power or otherwise act in such a way as to vary the Trust assets or
the terms of the Trust Securities in any way whatsoever; (f) issue any
securities or other evidences of beneficial ownership of, or beneficial
interests in, the Trust other than the Trust Securities; (g) incur any
indebtedness for borrowed money; or (h)(1) direct the time, method and place of
exercising any trust or power conferred upon the Indenture Trustee with respect
to the Junior Subordinated Debentures, (2) waive any past default that is
waivable under Section 5.7 of the Indenture, (3) exercise any right to rescind
or annul any declaration that the principal of all of the Junior Subordinated
Debentures shall be due and payable or (4) consent to any amendment,
modification or termination of the Indenture or the Junior Subordinated
Debentures or the Declaration, in each case where such consent shall be
required, if in the case of this clause (h) such action would cause the Trust to
be
31
33
classified for United States federal income tax purposes as other than a grantor
trust or would cause the Trust to be deemed an "investment company" which is
required to be registered under the 1940 Act.
The books and records of the Trust will be maintained at the principal
office of the Trust and will be open for inspection by a holder of Preferred
Securities or the duly authorized representative of such holder for any purpose
reasonably related to its interest in the Trust during normal business hours.
The Trust anticipates that it will not be required to file with the Commission
or distribute to holders of Preferred Securities periodic reports regarding the
Trust.
Except as provided below or under the Business Trust Act and the Trust
Indenture Act, holders of Preferred Securities will have no voting rights. See
"Description of the Preferred Securities -- Voting Rights."
The Institutional Trustee, for the benefit of the holders of the Trust
Securities, is authorized under the Declaration to exercise all rights under the
Indenture with respect to the Junior Subordinated Debentures and to enforce
UAL's obligations under the Junior Subordinated Debentures upon the occurrence
of an Indenture Event of Default. The Institutional Trustee, as the Guarantee
Trustee, shall also be authorized to enforce the rights of holders of Preferred
Securities under the Preferred Securities Guarantee. If the Trust's failure to
make distributions on the Preferred Securities is a consequence of UAL's
exercise of its right to extend the interest payment period for the Junior
Subordinated Debentures, the Institutional Trustee will have no right to enforce
the payment of distributions on the Preferred Securities until an Event of
Default shall have occurred. Holders of at least a majority in liquidation
amount of the Preferred Securities will have the right to direct the
Institutional Trustee with respect to certain matters under the Declaration and
the Preferred Securities Guarantee. Under certain circumstances, holders of
Preferred Securities may institute a legal proceeding against UAL to enforce the
Preferred Securities Guarantee and the payment obligations under the Indenture.
See "Description of the Preferred Securities -- Voting Rights."
If an Indenture Event of Default occurs and is continuing with respect to
Junior Subordinated Debentures, an Event of Default under the Declaration will
occur and be continuing with respect to the Trust Securities. In such event, the
Declaration provides that the holders of Common Securities will be deemed to
have waived any such Event of Default with respect to the Common Securities
until all Events of Default with respect to the Preferred Securities have been
cured or waived. Until all such Events of Default with respect to the Preferred
Securities have been so cured or waived, the Institutional Trustee will be
deemed to be acting solely on behalf of the holders of the Preferred Securities
and only the holders of the Preferred Securities will have the right to direct
the Institutional Trustee with respect to certain matters under the Declaration
and consequently under the Indenture. If any Event of Default with respect to
the Preferred Securities is waived by the holders of the Preferred Securities as
provided in the Declaration, the holders of Common Securities pursuant to the
Declaration have agreed that such waiver also constitutes a waiver of such Event
of Default with respect to the Common Securities for all purposes under the
Declaration without any further act, vote or consent of the holders of the
Common Securities. See "Description of the Preferred Securities."
The Declaration provides that the Trustees may treat the person in whose
name a Preferred Security is registered on the books and records of the Trust as
the sole holder thereof and of the Preferred Securities represented thereby for
purposes of receiving distributions and for all other purposes and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such certificate or in the Preferred Securities represented thereby on the part
of any person, whether or not the Trust shall have actual or other notice
thereof. Preferred Securities will be issued in fully registered form. Investors
may elect to hold their Preferred Securities directly or, subject to the rules
and procedures of The Depository Trust Company and Philadelphia Depository Trust
Company (the "Depository Institutions") described under "Description of the
Preferred Securities -- Book-Entry; Delivery and Form," hold interests in a
global certificate registered on the books and records of the Trust in the name
of a Depository Institution or its nominee. Under the Declaration:
(i) the Trust and the Trustees shall be entitled to deal with a
Depository Institution (or any successor depositary) for all purposes,
including the payment of distributions and receiving approvals, or consents
under the Declaration, and except as set forth in the Declaration, shall
have no obligation to persons owning Preferred Securities ("Preferred
Security Beneficial Owners") registered in the name of and held by a
Depository Institution or its nominee; and
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(ii) the rights of Preferred Security Beneficial Owners shall be
exercised only through a Depository Institution (or any successor
depository) and shall be limited to those established by law and agreements
between such Preferred Security Beneficial Owners and a Depository
Institution and/or its participants. See "Description of the Preferred
Securities -- Book-Entry; Delivery and Form." With respect to Preferred
Securities registered in the name of and held by a Depository Institution
or its nominee, all notices and other communications required under the
Declaration shall be given to, and all distributions on such Preferred
Securities shall be given or made to, a Depository Institution (or its
successor).
In the Declaration, UAL has agreed to pay for all debts and obligations
(other than with respect to the Trust Securities) and all costs and expenses of
the Trust, including the fees and expenses of the Trustees and any taxes and all
costs and expenses with respect thereto, to which the Trust may become subject,
except for United States withholding taxes. See "Risk Factors and Special
Considerations Relating to the Offer -- Trust Distributions Dependent on UAL's
Payments on Junior Subordinated Debentures." The foregoing obligations of UAL
under the Declaration are for the benefit of, and shall be enforceable by, any
person to whom any such debts, obligations, costs, expenses and taxes are owed
(a "Creditor") whether or not such Creditor has received notice thereof. Any
such Creditor may enforce such obligations of UAL directly against UAL and UAL
has irrevocably waived any right or remedy to require that any such Creditor
take any action against the Trust or any other person before proceeding against
UAL. UAL has agreed in the Declaration to execute such additional agreements as
may be necessary or desirable in order to give full effect to the foregoing.
THE FOREGOING SUMMARY OF CERTAIN PROVISIONS OF THE DECLARATION IS A
DISCUSSION OF ALL MATERIAL TERMS OF THE DECLARATION WHICH HAS BEEN FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
The business address of the Trust is c/o UAL Corporation, 1200 East
Algonquin Road, Elk Grove Township, Illinois 60007, telephone number (847)
700-4000.
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THE OFFER
PURPOSE OF THE OFFER
The purpose of the Offer is to refinance the Depositary Shares with the
Preferred Securities and to achieve certain tax efficiencies while preserving
UAL's flexibility with respect to future financings. This refinancing will
permit UAL to deduct interest payable on the Junior Subordinated Debentures for
United States federal income tax purposes; dividends payable with regard to the
Depositary Shares are not deductible.
GENERAL
PARTICIPATION IN THE OFFER IS VOLUNTARY AND HOLDERS OF DEPOSITARY SHARES
SHOULD CAREFULLY CONSIDER WHETHER TO ACCEPT. NONE OF THE BOARD OF DIRECTORS OF
UAL, UAL, THE TRUSTEES OR THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING IN THE OFFER. HOLDERS OF DEPOSITARY
SHARES ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISORS IN MAKING THEIR
DECISIONS ON WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
SEE "PRICE RANGE OF DEPOSITARY SHARES."
Unless the context requires otherwise, the term "Holder" with respect to
the Offer means (i) any person in whose name any Depositary Shares are
registered on the books of UAL, (ii) any other person who has obtained a
properly completed stock power from the registered holder, or (iii) any person
whose Depositary Shares are held of record by a Depository Institution.
TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, the Trust will exchange its Preferred Securities for any
and all of the Depositary Shares not owned by UAL. The Offer will be effected on
a basis of one Preferred Security for each Depositary Share validly tendered and
accepted for exchange. See "-- Procedures for Tendering." Upon the terms and
subject to the conditions set forth herein and in the Letter of Transmittal, the
Trust will accept Depositary Shares validly tendered and not withdrawn prior to
the Expiration Date and, unless the Offer has been withdrawn or terminated, will
deliver Preferred Securities in exchange therefor to tendering Holders of
Depositary Shares as promptly as practicable following the Expiration Date. The
Trust expressly reserves the right, in its sole discretion, to delay acceptance
for exchange of Depositary Shares tendered under the Offer and the delivery of
the Preferred Securities with respect to the Depositary Shares accepted for
exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act, which require
that the Trust consummate the Offer or return the Depositary Shares deposited by
or on behalf of the Holders thereof promptly after the termination or withdrawal
of the Offer), or to amend, withdraw or terminate the Offer at any time prior to
the Expiration Date for any of the reasons set forth in "-- Conditions to the
Offer" and "-- Expiration Date; Extensions; Amendments; Termination."
In all cases, except to the extent waived by the Trust, delivery of
Preferred Securities issued with respect to the Depositary Shares accepted for
exchange pursuant to the Offer will be made only after timely receipt by the
Exchange Agent of Depositary Shares (or confirmation of book-entry transfer
thereof), a properly completed and duly executed Letter of Transmittal and any
other documents required thereby.
As of the date of this Prospectus, there are 6,266,781 Depositary Shares
not owned by UAL. This Prospectus, together with the Letter of Transmittal, is
being sent to all registered Holders commencing on or about the date of this
Prospectus.
The Trust shall be deemed to have accepted validly tendered Depositary
Shares (or defectively tendered Depositary Shares with respect to which the
Trust has waived such defect) when, as and if the Trust has given oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of receiving Depositary Shares
from, and remitting Preferred Securities to, tendering Holders who are
participating in the Offer. Upon the terms and subject to the conditions of the
Offer, delivery
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of Preferred Securities to tendering Holders will be made as promptly as
practicable following the Expiration Date.
If any tendered Depositary Shares are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, unless otherwise requested by the Holder under "Special Delivery
Instructions" in the Letter of Transmittal, such Depositary Shares will be
returned, without expense, to the tendering Holder thereof (or in the case of
Depositary Shares tendered by book-entry transfer into the Exchange Agent's
account at a Depository Institution, such Depositary Shares will be credited to
an account maintained at the Depository Institution designated by the
participant therein who so delivered such Depositary Shares), as promptly as
practicable after the Expiration Date or the withdrawal or termination of the
Offer.
Holders of Depositary Shares will not have any appraisal or dissenters'
rights under the Delaware General Corporation Law in connection with the Offer.
The Trust intends to conduct the Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.
Holders who tender Depositary Shares in the Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Depositary Shares
pursuant to the Offer. See "Fees and Expenses; Transfer Taxes."
Holders tendering Depositary Shares held in global form shall receive
Preferred Securities in global form and holders tendering Depositary Shares held
directly in certificated form shall receive Preferred Securities in certificated
form, in each case unless otherwise specified in the Letter of Transmittal. See
"-- Procedures for Tendering."
CONDITIONS TO THE OFFER
Notwithstanding any other provisions of the Offer, or any extension of the
Offer, the Trust will not be required to deliver Preferred Securities in respect
of any properly tendered Depositary Shares and may terminate the Offer by oral
or written notice to the Exchange Agent and the holders of Depositary Shares,
or, at its option, may modify or otherwise amend the Offer (other than with
respect to the Minimum Distribution Condition) with respect to such Depositary
Shares, if any of the following conditions are not satisfied at or prior to the
Expiration Date in the case of clause (a) below or if any of the events
specified in clauses (b) through (d) occurs at or prior to the exchange date for
the Depositary Shares:
(a) tenders by a sufficient number of holders of Depositary Shares to
satisfy the Minimum Distribution Condition;
(b) any action has been taken or threatened, or any statute, rule,
regulation, judgment, order, stay, decree or injunction has been
promulgated, enacted, entered, enforced or deemed applicable to the Offer,
by or before any court or governmental regulatory or administrative agency
or authority or tribunal, domestic or foreign, which (i) challenges the
making of the Offer, or might directly or indirectly prohibit, prevent,
restrict or delay consummation of the Offer, or otherwise and adversely
affect in any material manner the Offer or (ii) could materially adversely
affect the business, condition (financial or otherwise), income,
operations, properties, assets, liabilities or prospects of UAL and its
subsidiaries, taken as a whole, or materially impair the contemplated
benefits of the Offer to UAL;
(c) any event has occurred or is likely to occur affecting the
business or financial affairs of UAL that would or might prohibit, prevent,
restrict or delay consummation of the Offer or that will, or is reasonably
likely to, materially impair the contemplated benefits of the Offer or
might be material to holders of Depositary Shares in deciding whether to
accept the Offer; and
(d) any of the following events shall have occurred: (i) any general
suspension of or limitation on trading in securities on the NYSE or in the
over-the-counter market (whether or not mandatory), (ii) any significant
adverse change in the price of the Depositary Shares or in the United
States securities or financial markets, (iii) a material impairment in the
trading market for debt or equity securities, (iv) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
federal or state
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authorities in the United States (whether or not mandatory), (v) a
commencement of a war, armed hostilities or other national or international
crisis directly or indirectly relating to the United States, (vi) any
limitation (whether or not mandatory) by any governmental authority on, or
other event having a reasonable likelihood of affecting, the extension of
credit by banks or other lending institutions in the United States, or
(vii) any significant adverse change in United States securities or
financial markets generally or in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof.
The foregoing conditions are for the sole benefit of the Trust and UAL and,
except for the Minimum Distribution Condition, may be waived by the Trust and
UAL, in whole or in part, in their sole discretion. Any determination made by
UAL or the Trust concerning an event, development or circumstance described or
referred to above will be final and binding on all parties.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Offer will expire on the Expiration Date. The Trust expressly reserves
the right, in its sole discretion, subject to applicable law, to (i) terminate
the Offer, and not accept for exchange any Depositary Shares and promptly return
all Depositary Shares upon the failure of any of the conditions specified above
in "-- Conditions to the Offer," (ii) waive any condition to the Offer (other
than the Minimum Distribution Condition) and accept all Depositary Shares
previously tendered pursuant to the Offer, (iii) extend the Expiration Date of
the Offer and retain all Depositary Shares tendered pursuant to the Offer until
the Expiration Date, subject, however, to all withdrawal rights of holders, see
"-- Withdrawal of Tenders," (iv) amend the terms of the Offer, (v) modify the
form of the consideration to be paid pursuant to the Offer, or (vi) not accept
for exchange Depositary Shares at any time on or prior to the Expiration Date,
for any reason, including, without limitation, if fewer than 100,000 Depositary
Shares would remain outstanding upon acceptance of those tendered (which
condition may be waived by the Trust). Any amendment applicable to the Offer
will apply to all Depositary Shares tendered pursuant to the Offer. During any
extension of the Offer, all Depositary Shares previously tendered pursuant to
the Offer and not withdrawn will remain subject to the Offer.
If the Trust makes a material change in the terms of the Offer, the Trust
will extend the Offer. The minimum period for which the Offer will be extended
following a material change, other than a change in the amount of Depositary
Shares sought for exchange or an increase or decrease in the consideration
offered to Holders of Depositary Shares, will depend upon the facts and
circumstances, including the relative materiality of the change. With respect to
a decrease in the number of Depositary Shares sought in the Offer or an increase
or decrease in the consideration offered to Holders of Depositary Shares, if
required, the Offer will remain open for a minimum of ten Business Days
following public announcement of such change. In the case of any amendment,
withdrawal or termination of the Offer, a public announcement will be issued no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date of the Offer subject to such extension. If
the Trust withdraws or terminates the Offer, it will give immediate notice to
the Exchange Agent, and all Depositary Shares theretofore tendered pursuant to
the Offer will be returned promptly to the tendering Holders thereof. See
"-- Withdrawal of Tenders." In order to satisfy the NYSE listing requirements,
acceptance of Depositary Shares validly tendered in the Offer is subject to the
Minimum Distribution Condition, which condition may not be waived.
PROCEDURES FOR TENDERING
The tender of Depositary Shares by a Holder thereof pursuant to one of the
procedures set forth below will constitute an agreement between such Holder and
the Trust in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal and the Trust's right to terminate or
withdraw the Offer at any time for any reason.
EACH HOLDER OF DEPOSITARY SHARES WISHING TO PARTICIPATE IN THE OFFER MUST
(I) PROPERLY COMPLETE AND SIGN THE LETTER OF TRANSMITTAL IN ACCORDANCE WITH THE
INSTRUCTIONS CONTAINED HEREIN AND IN THE LETTER OF TRANSMITTAL (EXCEPT WHEN AN
AGENT'S MESSAGE IS APPROPRIATE AND UTILIZED), TOGETHER WITH ANY REQUIRED
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SIGNATURE GUARANTEES, AND DELIVER THE SAME TO THE EXCHANGE AGENT, AT ONE OF ITS
ADDRESSES SET FORTH ON THE BACK COVER PAGE HEREOF PRIOR TO THE EXPIRATION DATE,
AND EITHER (A) CERTIFICATES FOR THE DEPOSITARY SHARES MUST BE RECEIVED BY THE
EXCHANGE AGENT AT SUCH ADDRESS OR (B) SUCH DEPOSITARY SHARES MUST BE TRANSFERRED
PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER DESCRIBED BELOW AND A
CONFIRMATION OF SUCH BOOK-ENTRY TRANSFER MUST BE RECEIVED BY THE EXCHANGE AGENT,
IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR (II) COMPLY WITH THE GUARANTEED
DELIVERY PROCEDURES DESCRIBED BELOW. LETTERS OF TRANSMITTAL, DEPOSITARY SHARES
AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT
TO THE TRUST, UAL, THE DEALER MANAGERS OR THE INFORMATION AGENT.
Special Procedure for Beneficial Owners. Any beneficial owner whose
Depositary Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who wishes to tender should contact
such registered Holder promptly and instruct such registered Holder to tender on
such beneficial owner's behalf. If such beneficial owner wishes to tender on its
own behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering its Depositary Shares, either make appropriate
arrangements to register ownership of the Depositary Shares in such owner's name
or obtain a properly completed stock power from the registered Holder. The
transfer of registered ownership may take considerable time and may not be able
to be completed prior to the Expiration Date.
THE METHOD OF DELIVERY OF DEPOSITARY SHARES AND ALL OTHER DOCUMENTS IS AT
THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT (1)
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, (2) INSURANCE BE OBTAINED,
AND (3) THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Signature Guarantees. If tendered Depositary Shares are registered in the
name of the signer of the Letter of Transmittal and the Preferred Securities to
be issued in exchange therefor are to be issued (and any untendered Depositary
Shares are to be reissued) in the name of the registered Holder, the signature
of such signer need not be guaranteed. If the tendered Depositary Shares are
registered in the name of someone other than the signer of the Letter of
Transmittal, or if Preferred Securities issued in exchange therefor are to be
issued in the name of any person other than the signer of the Letter of
Transmittal, such tendered Depositary Shares must be endorsed or accompanied by
written instruments of transfer in form satisfactory to the Trust and duly
executed by the registered Holder, and the signature on the endorsement or
instrument of transfer must be guaranteed by a financial institution (including
most banks, savings and loans associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program or the Stock
Exchange Medallion Program (any of the foregoing hereinafter referred to as an
"Eligible Institution"). If the Preferred Securities and/or the Depositary
Shares are not exchanged or are to be delivered to an address other than that of
the registered Holder appearing on the register for the Depositary Shares, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
Book-Entry Transfer. The Trust understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish accounts
with respect to the Depositary Shares at a Depository Institution for the
purpose of facilitating the Offer and, subject to the establishment thereof, any
financial institution that is a participant in a Depository Institution's system
may make book-entry delivery of Depositary Shares by causing the Depository
Institution to transfer such Depositary Shares into the Exchange Agent's account
with respect to the Depositary Shares in accordance with such Depository
Institution's Automated Tender Offer Program ("ATOP") procedures for such
book-entry transfers. However, the exchange for the Depositary Shares so
tendered will only be made after timely confirmation (a "Book-Entry
Confirmation") of such Book-Entry Transfer of Depositary Shares into the
Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's
Message (as such term is defined in the next paragraph) and any other documents
required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Depository
Institution and received by the Exchange Agent and forming a part of a
Book-Entry Confirmation, which states that such Depository
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Institution has received an express acknowledgment from a participant tendering
Depositary Shares that is the subject of such Book-Entry Confirmation, that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and that the Trust may enforce such agreement against such
participant.
Guaranteed Delivery. If a Holder desires to participate in the Offer and
time will not permit a Letter of Transmittal or Depositary Shares to reach the
Exchange Agent before the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if the
Exchange Agent has received at one of its addresses on the back cover page
hereof, prior to the Expiration Date, a letter, telegram or facsimile
transmission from an Eligible Institution setting forth the name and address of
the tendering Holder, the name(s) in which the Depositary Shares are registered
and, if the Depositary Shares are held in certificated form, the certificate
numbers of the Depositary Shares to be tendered, and stating that the tender is
being made thereby and guaranteeing that within three NYSE trading days after
the date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Depositary Shares in proper form for transfer together
with a properly completed and duly executed Letter of Transmittal (and any other
required documents), or, in the case of a Depositary Institution, an Agent's
Message, will be delivered by such Eligible Institution. Unless the Depositary
Shares being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents)
or, in the case of a Depositary Institution, in accordance with such Depository
Institution's ATOP procedures (along with a Letter of Transmittal or an Agent's
Message) are received, the Trust may, at its option, reject the tender. In
addition to the copy being transmitted herewith, copies of a Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the purposes
described in this paragraph are available from the Exchange Agent and the
Information Agent.
Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of
Depositary Shares will be determined by the Trust, whose determination will be
final and binding. The Trust reserves the absolute right to reject any or all
tenders not in proper form or the acceptance for exchange of which may, in the
opinion of the Trust's counsel, be unlawful. The Trust also reserves the
absolute right to waive any defect or irregularity in the tender of any
Depositary Shares, and the Trust's interpretation of the terms and conditions of
the Offer (including the instructions in the Letter of Transmittal) will be
final and binding. None of the Trust, the Exchange Agent, the Dealer Managers,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification.
Tenders of Depositary Shares involving any irregularities will not be
deemed to have been made until such irregularities have been cured or waived.
Depositary Shares received by the Exchange Agent that are not validly tendered
and as to which the irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holder (or, in the case of
Depositary Shares tendered by book-entry transfer into the Exchange Agent's
account at a Depository Institution, such Depositary Shares will be credited to
an account maintained at the Depository Institution designated by the
participant therein who so delivered such Depositary Shares), unless otherwise
requested by the Holder in the Letter of Transmittal, as promptly as practicable
after the Expiration Date or the withdrawal or termination of the Offer.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Offer.
The party tendering Depositary Shares for exchange (the "Transferor")
exchanges, assigns and transfers the Depositary Shares to the Trust, and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Depositary Shares to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Depositary
Shares and the underlying Series B Preferred and to acquire Preferred Securities
issuable upon the exchange of such tendered Depositary Shares and that, when
such Transferor's Depositary Shares are accepted for exchange, the Trust will
acquire good and unencumbered title to such
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tendered Depositary Shares and the underlying Series B Preferred, free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The Transferor also warrants that it will, upon request, execute
and deliver any additional documents deemed by the Trust to be necessary or
desirable to complete the exchange, assignment and transfer of tendered
Depositary Shares or transfer ownership of such Depositary Shares on the account
books maintained by the Depository Institution. All authority conferred by the
Transferor will survive the death, bankruptcy or incapacity of the Transferor
and every obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
WITHDRAWAL OF TENDERS
Tenders of Depositary Shares pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date and, unless accepted for exchange by the
Trust, may be withdrawn at any time after 40 Business Days after the date of
this Prospectus.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery or facsimile transmission must be timely received by the Exchange Agent
at one of its addresses set forth on the back cover page hereof. The method of
notification is at the risk and election of the Holder. Any such notice of
withdrawal must specify (i) the Holder named in the Letter of Transmittal as
having tendered Depositary Shares to be withdrawn, (ii) if the Depositary Shares
are held in certificated form, the certificate numbers of the Depositary Shares
to be withdrawn, (iii) that such Holder is withdrawing his election to have such
Depositary Shares exchanged and (iv) the name of the registered Holder of such
Depositary Shares, and must be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal (including any required
signature guarantees) or be accompanied by evidence satisfactory to the Trust
that the person withdrawing the tender has succeeded to the beneficial ownership
of the Depositary Shares being withdrawn. The Exchange Agent will return the
properly withdrawn Depositary Shares promptly following receipt of notice of
withdrawal. If Depositary Shares have been tendered pursuant to the procedure
for book-entry transfer, any notice of withdrawal must specify the name and
number of the account at a Depository Institution to be credited with the
withdrawn Depositary Shares and otherwise comply with such Depository
Institution procedures. All questions as to the validity of notice of
withdrawal, including time of receipt, will be determined by the Trust, and such
determination will be final and binding on all parties. Withdrawals of tenders
of Depositary Shares may not be rescinded and any Depositary Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
Properly withdrawn Depositary Shares, however, may be retendered by following
the procedures therefor described elsewhere herein at any time prior to the
Expiration Date. See "-- Procedures for Tendering."
ACCEPTANCE OF SHARES
Upon the terms and subject to the conditions of the Offer, including the
Minimum Distribution Condition, the Trust will accept for exchange any and all
Depositary Shares that have been validly tendered and not withdrawn prior to the
Expiration Date.
The Trust expressly reserves the right, in its sole discretion, to delay
acceptance for exchange of Depositary Shares tendered under the Offer and the
delivery of the Preferred Securities with respect to the Depositary Shares
accepted for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act,
which require that the Company consummate the Offer or return the Depositary
Shares deposited by or on behalf of the Holders thereof promptly after the
termination or withdrawal of the Offer), or to amend, withdraw or terminate the
Offer, at any time prior to the Expiration Date for any of the reasons set forth
in "The Offer -- Conditions to the Offer" and "-- Expiration Date; Extensions;
Amendments; Termination."
If the Trust decides, in its sole discretion, to decrease the number of
Depositary Shares sought in the Offer or to increase or decrease the
consideration offered to Holders of Depositary Shares, and if the Offer is
scheduled to expire less than ten Business Days from and including the date that
notice of such increase or decrease is first published, sent or given in the
manner specified in "-- Expiration Date; Extensions;
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Amendments; Termination," then the Offer will be extended for a minimum of ten
Business Days from and including the date of such notice.
All Depositary Shares not accepted pursuant to the Offer will be returned
to the tendering Holders at the Trust's expense as promptly as practicable
following the Expiration Date.
EXCHANGE AGENT AND INFORMATION AGENT
The Bank of New York has been appointed as Exchange Agent for the Offer.
THE EXCHANGE AGENT IS:
THE BANK OF NEW YORK
By Hand or Overnight Courier: By Mail:
The Bank of New York (registered or certified mail recommended)
Corporate Debt Operations The Bank of New York
101 Barclay Street Corporate Debt Operations
(7 East) 101 Barclay Street
New York, New York 10286 (7 East)
Attn: Enrique Lopez New York, New York 10286
Attn: Enrique Lopez
By Facsimile:
(For Eligible Institutions Only)
(212) 571-3080
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(212) 815-2742
Attn: Enrique Lopez
Georgeson & Company Inc. has been retained as the Information Agent to
assist in connection with the Offer. Questions and requests for assistance
regarding the Offer, requests for additional copies of this Prospectus, requests
for the Letter of Transmittal and requests for Notice of Guaranteed Delivery may
be directed to the Information Agent.
THE INFORMATION AGENT IS:
(LOGO)
Wall Street Plaza
New York, New York 10005
(800) 223-2064 (Toll-Free)
(212) 440-9800 (Call Collect)
UAL will pay the Exchange Agent and Information Agent reasonable and
customary fees for their services and will reimburse them for all their
reasonable out-of-pocket expenses in connection therewith.
DEALER MANAGERS; SOLICITING DEALERS
Merrill Lynch & Co. and Smith Barney Inc., as Dealer Managers, have agreed
to solicit exchanges of Depositary Shares for Preferred Securities. The maximum
fee payable to the Dealer Managers is approximately $940,000 plus any amount
that the Dealer Managers may be entitled to pursuant to the next paragraph. UAL
will also reimburse the Dealer Managers for certain reasonable out-of-pocket
expenses in connection with the Offer and will indemnify the Dealer Managers
against certain liabilities, including liabilities under the Securities Act. In
certain circumstances relating to the number of Depositary Shares tendered, the
Dealer
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Managers will reimburse UAL for certain fees and expenses. The Dealer Managers
engage in transactions with, and from time to time have performed services for,
UAL, including acting as underwriters for the issuance of the Depositary Shares.
UAL will pay to a Soliciting Dealer a solicitation fee of $0.50 per
Depositary Share ($0.25 per Depositary Share with respect to the solicitation of
beneficial holders of 10,000 or more shares) validly tendered and accepted for
exchange pursuant to the Offer. As used in this Prospectus, "Soliciting Dealer"
includes (i) any broker or dealer in securities, including a Dealer Manager in
its capacity as a broker or dealer, who is a member of any national securities
exchange or of the National Association of Securities Dealers, Inc. (the
"NASD"), (ii) any foreign broker or dealer not eligible for membership in the
NASD who agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as though it were an NASD
member, or (iii) any bank or trust company, any one of which has solicited and
obtained a tender pursuant to the Offer. No solicitation fee shall be payable to
a Soliciting Dealer with respect to the tender of depositary receipts evidencing
Depositary Shares by a Holder unless the Letter of Transmittal accompanying such
tender designates such Soliciting Dealer as such in the box captioned "Solicited
Tenders."
If tendered Depositary Shares are being delivered by book-entry transfer
made to an account maintained by the Exchange Agent with Depository
Institutions, the Soliciting Dealer must return a Notice of Solicited Tenders
(included in the materials provided to brokers and dealers) to the Exchange
Agent within three trading days after the Expiration Date in order to receive a
solicitation fee. No solicitation fee shall be payable to a Soliciting Dealer in
respect of Depositary Shares (i) beneficially owned by such Soliciting Dealer or
(ii) registered in the name of such Soliciting Dealer unless such Depositary
Shares are held by such Soliciting Dealer as nominee and such Depositary Shares
are being tendered for the benefit of one or more beneficial owners identified
on the Letter of Transmittal or the Notice of Solicited Tenders. No solicitation
fee shall be payable to the Soliciting Dealer with respect to the tender of
Depositary Shares by the Holder of record, for the benefit of the beneficial
owner, unless the beneficial owner has designated such Soliciting Dealer.
No solicitation fee shall be payable to a Soliciting Dealer if such
Soliciting Dealer is required for any reason to transfer any portion of such fee
to a tendering Holder (other than itself). No broker, dealer, bank, trust
company or fiduciary shall be deemed to be the agent of UAL, the Trust, the
trustees, the Exchange Agent, the Information Agent or the Dealer Managers for
purposes of the Offer.
Other than as described above, UAL will not pay any solicitation fees to
any broker, dealer, bank, trust company or other person for any Depositary
Shares exchanged in connection with the Offer. UAL will reimburse such persons
for customary handling and mailing expenses incurred in connection with the
Offer.
Additional solicitations may be made by telephone, in person or otherwise
by officers and regular employees of UAL and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders.
LISTING AND TRADING OF PREFERRED SECURITIES AND DEPOSITARY SHARES
The Preferred Securities constitute a new issue of securities with no
established trading market. While the Preferred Securities have been approved
for listing on the NYSE subject to official notice of issuance, there can be no
assurance that an active market for the Preferred Securities will develop or be
sustained in the future on such exchange. Although the Dealer Managers have
indicated to the Trust that they intend to make a market in the Preferred
Securities following the Expiration Date as permitted by applicable laws and
regulations prior to the commencement of trading on the NYSE, they are not
obligated to do so and may discontinue any such market-making at any time
without notice. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Preferred Securities. In order to satisfy the NYSE
listing requirements, acceptance of Depositary Shares validly tendered in the
Offer is subject to the Minimum Distribution Condition, which condition may not
be waived.
To the extent that a certain number of Depositary Shares are tendered and
accepted in the Offer and/or the number of holders of Depositary Shares is
reduced below certain levels, UAL, pursuant to NYSE rules and regulations, would
be required to delist the Depositary Shares from the NYSE, and the trading
market for
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untendered Depositary Shares could be adversely affected. UAL does not believe
that the Offer has a reasonable likelihood of causing the Depositary Shares to
be delisted from the NYSE. In addition, if the Offer is substantially
subscribed, there would be a significant risk that round lot holdings of
Depositary Shares outstanding following the Offer would be limited. See "Risk
Factors and Special Considerations Relating to the Offer -- Lack of Established
Trading Market for Preferred Securities" and "-- Reduced Trading Market for
Depositary Shares."
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OFFER
Except as described herein, there are no contracts, arrangements,
understandings or relationships in connection with the Offer between UAL or any
of its directors or executive officers, the Trust or the Trustees and any person
with respect to any securities of UAL or the Trust, including the Junior
Subordinated Debentures, the Series B Preferred, the Depositary Shares and the
Preferred Securities.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of the Depositary Shares will be borne
by UAL. For compensation to be paid to the Dealer Managers and Soliciting
Dealers, see "The Offer -- Dealer Managers; Soliciting Dealers." The total cash
expenditures to be incurred in connection with the Offer, other than fees
payable to the Dealer Managers and Soliciting Dealers, but including the
expenses of the Dealer Managers, printing, accounting and legal fees, and the
fees and expenses of the Exchange Agent, the Information Agent, the
Institutional Trustee, the Delaware Trustee and the Indenture Trustee, are
estimated to be approximately $500,000
UAL will pay all transfer taxes, if any, applicable to the exchange of
Depositary Shares pursuant to the Offer. If, however, certificates representing
Preferred Securities or Depositary Shares not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered Holder of the Depositary Shares tendered or if a transfer
tax is imposed for any reason other than the exchange of Depositary Shares
pursuant to the Offer, then the amount of any such transfer taxes (whether
imposed on the registered Holder or any other persons) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder.
PRICE RANGE OF DEPOSITARY SHARES
The Depositary Shares are listed and principally traded on the NYSE. The
following table sets forth, for each period shown, the high and low sales prices
of the Depositary Shares as reported on the NYSE Composite Tape. For recent
closing prices of the Depositary Shares, see the cover page of this Prospectus.
HIGH LOW
------ ------
YEAR ENDED DECEMBER 31, 1994
3rd Quarter...................................................... $26.75 $25.00
4th Quarter...................................................... 26.75 25.38
YEAR ENDED DECEMBER 31, 1995
1st Quarter...................................................... 29.00 26.63
2nd Quarter...................................................... 30.75 28.25
3rd Quarter...................................................... 31.38 30.00
4th Quarter...................................................... 33.13 29.88
YEAR ENDING DECEMBER 31, 1996
1st Quarter...................................................... 33.38 31.88
2nd Quarter...................................................... 35.00 31.88
3rd Quarter...................................................... 34.00 32.88
4th Quarter (through November 20)................................
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DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration which will be qualified under the Trust Indenture Act. The First
National Bank of Chicago as the Institutional Trustee, but not the other
Trustees of the Trust, will act as the indenture trustee for purposes of the
Trust Indenture Act. The terms of the Preferred Securities and the Declaration
include those stated in the Declaration and those made part of the Declaration
by the Trust Indenture Act. The description of the Preferred Securities and the
Declaration set forth below summarizes the material terms of the Declaration,
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and is subject to the Business Trust Act and the Trust
Indenture Act.
GENERAL
The Declaration authorizes the Trust to issue the Preferred Securities,
which represent preferred undivided beneficial interests in the assets of the
Trust, and the Common Securities, which represent common undivided beneficial
interests in the assets of the Trust. All of the Common Securities will be
owned, directly or indirectly, by UAL. The Common Securities and the Preferred
Securities will have equivalent terms except that (i) if an Event of Default
under the Declaration occurs and is continuing, the rights of the holders of the
Common Securities to payment in respect of periodic distributions and payments
upon liquidation, redemption or otherwise are subordinated to the rights of the
holders of the Preferred Securities and (ii) holders of Common Securities have
the exclusive right (subject to the terms of the Declaration) to appoint, remove
or replace Trustees and to increase or decrease the number of Trustees. The
Declaration does not permit the issuance by the Trust of any securities or other
evidences of beneficial ownership of, or beneficial interests in, the Trust
other than the Preferred Securities and the Common Securities, the incurrence of
any indebtedness for borrowed money by the Trust or the making of any investment
other than in the Junior Subordinated Debentures. The payment of distributions
out of moneys held by the Trust and payments on redemption of the Preferred
Securities or liquidation of the Trust are guaranteed by UAL on a subordinated
basis as and to the extent described under "Description of the Preferred
Securities Guarantee." The Institutional Trustee will hold the Preferred
Securities Guarantee for the benefit of holders of the Preferred Securities. The
Preferred Securities Guarantee covers distributions and other payments on the
Preferred Securities only if and to the extent that UAL has made a payment to
the Institutional Trustee of interest or principal on the Junior Subordinated
Debentures deposited in the Trust as trust assets. The Preferred Securities
Guarantee, when taken together with UAL's obligations under the Junior
Subordinated Debentures and the Indenture and its obligations under the
Declaration, including its obligation to pay costs, expenses and certain
liabilities of the Trust, constitutes a full and unconditional guarantee of
amounts due on the Preferred Securities.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 13 1/4% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears will bear interest thereon at the rate per annum of
13 1/4%, compounded quarterly to the extent permitted by applicable law. The
term "distributions" as used herein includes any such cash distributions and any
such interest payable unless otherwise stated. The amount of distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months and, for any period shorter than a full quarterly period for which
distributions are computed, the amount of the distribution payable will be
computed on the basis of the actual number of days elapsed in such a 30-day
month.
Distributions on the Preferred Securities will be cumulative, will accrue
from the Accrual Date and, except as otherwise described below, will be payable
quarterly in arrears, on March 31, June 30, September 30 and December 31 of each
year, commencing on December 31, 1996, but only if, and to the extent that,
interest payments are made in respect of Junior Subordinated Debentures held by
the Trust. In addition, holders of Preferred Securities will be entitled to an
additional cash distribution at the rate of 12 1/4% per annum of the liquidation
amount thereof from November 1, 1996 through the Expiration Date in lieu of
dividends accumulating after November 1, 1996 on their Depositary Shares
accepted for exchange, such additional
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distribution to be made on December 31, 1996 to holders of the Preferred
Securities on the record date for such distribution.
So long as UAL shall not be in default in the payment of interest on the
Junior Subordinated Debentures, UAL has the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures by extending the
interest payment period from time to time on the Junior Subordinated Debentures
for a period not exceeding 20 consecutive quarterly interest periods and, as a
consequence, quarterly distributions on the Preferred Securities would not be
made (but would continue to accrue with interest thereon at the rate of 13 1/4%
per annum, compounded quarterly to the extent permitted by applicable law) by
the Trust during any such Extension Period. If UAL exercises the right to extend
an interest payment period, UAL may not, during any such Extension Period,
declare or pay dividends on, or redeem, purchase, acquire or make a distribution
or liquidation payment with respect to, any of its common stock or preferred
stock or any other securities similar to the Preferred Securities or the Junior
Subordinated Debentures or make any guarantee payments with respect thereto;
provided, however, that UAL may pay cash in lieu of fractional shares upon the
conversion of any of its preferred stock in accordance with the terms of such
stock. Any Extension Period with respect to payment of interest on the Junior
Subordinated Debentures will also apply to distributions with respect to the
Preferred Securities and all other securities with similar terms. Prior to the
termination of any such Extension Period, UAL may further extend such Extension
Period; provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 20 consecutive quarterly interest
periods. Upon the termination of any Extension Period and the payment of all
amounts then due, UAL may commence a new Extension Period, subject to the above
requirements. Consequently, there could be multiple Extension Periods of varying
lengths (up to six Extension Periods of 20 consecutive quarterly interest
periods each or more numerous shorter Extension Periods) throughout the term of
the Junior Subordinated Debentures, provided that no Extension Period may extend
beyond the maturity of the Junior Subordinated Debentures. See "Risk Factors and
Special Considerations Relating to the Offer -- UAL May Defer Interest Payments
on Junior Subordinated Debentures" and "Description of the Junior Subordinated
Debentures -- Interest" and "-- Option to Extend Interest Payment Period."
Payments of accrued distributions will be payable to holders of Preferred
Securities as they appear on the books and records of the Trust on the first
record date after the end of an Extension Period. UAL may also pay on any
Interest Payment Date all or any portion of the interest accrued during an
Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Institutional Trustee has cash on hand to permit such
payment. The funds available for distribution to the holders of the Preferred
Securities will be limited to payments received by the Trust in respect of the
Junior Subordinated Debentures that are deposited in the Trust as trust assets.
See "Description of the Junior Subordinated Debentures." If UAL does not make
interest payments on the Junior Subordinated Debentures, the Trust will not make
distributions on the Preferred Securities. Under the Declaration, if and to the
extent UAL does make interest payments on the Junior Subordinated Debentures
deposited in the Trust as trust assets, the Trust is obligated to make
distributions on the Trust Securities on a Pro Rata Basis. The payment of
distributions on the Preferred Securities is guaranteed by UAL on a subordinated
basis as and to the extent set forth under "Description of the Preferred
Securities Guarantee." The Preferred Securities Guarantee covers distributions
and other payments on the Preferred Securities only if and to the extent that
UAL has made a payment to the Trust of interest or principal on the Junior
Subordinated Debentures deposited in the Trust as trust assets. The liquidation
amount of each Common Security is $25 per share.
Distributions on the Preferred Securities will be made to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which will be 15 days prior to the relevant distribution dates,
except that the record date for the payment to be made on December 31, 1996
shall be the date of exchange of the Preferred Securities for the Depositary
Shares. The Declaration provides that the payment dates or record dates for the
Preferred Securities shall be the same as the payment dates and record dates for
the Junior Subordinated Debentures. Distributions payable on any Preferred
Securities that are not punctually paid on any distribution date as a result of
UAL having failed to make the corresponding interest payment on the Junior
Subordinated Debentures will forthwith cease to be payable to the person in
whose name such Preferred Security is registered on the relevant record date,
and such defaulted distribution will instead be
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payable to the person in whose name such Preferred Security is registered on the
special record date established by the Regular Trustees, which record date shall
correspond to the special record date or other specified date determined in
accordance with the Indenture; provided, however, that distributions shall not
be considered payable on any distribution payment date falling within an
Extension Period unless UAL has elected to make a full or partial payment of
interest accrued on the Junior Subordinated Debentures on such distribution
payment date. Distributions on the Preferred Securities will be paid by the
Trust. All distributions paid with respect to the Trust Securities shall be paid
on a Pro Rata Basis to the holders thereof entitled thereto. If any date on
which distributions are to be made on the Preferred Securities is not a Business
Day, then payment of the distribution to be made on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business Day is
in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each a "Special Event") shall occur and be continuing,
the Trust shall, unless the Junior Subordinated Debentures are redeemed in the
limited circumstances described below, be dissolved with the result that, after
satisfaction of creditors of the Trust, Junior Subordinated Debentures with an
aggregate principal amount equal to the aggregate stated liquidation amount of
the Preferred Securities and the Common Securities would be distributed on a Pro
Rata Basis to the holders of the Preferred Securities and the Common Securities
in liquidation of such holders' interests in the Trust, within 90 days following
the occurrence of such Special Event; provided, however, that in the case of the
occurrence of a Tax Event, as a condition of such dissolution and distribution,
the Regular Trustees shall have received an opinion (a "No Recognition Opinion")
of nationally recognized independent tax counsel experienced in such matters,
which opinion may rely on any then applicable published revenue rulings of the
Internal Revenue Service, to the effect that the holders of the Preferred
Securities will not recognize any gain or loss for United States federal income
tax purposes as a result of such dissolution and distribution of Junior
Subordinated Debentures; and, provided further that, if at the time there is
available to the Trust the opportunity to eliminate, within such 90-day period,
the Special Event by taking some ministerial action, such as filing a form or
making an election, or pursuing some other similar reasonable measure, which has
no adverse effect on the Trust or UAL or the holders of the Preferred
Securities, the Trust will pursue such measure in lieu of dissolution.
Furthermore, if, in the case of the occurrence of a Tax Event, (i) the Regular
Trustees have received an opinion (a "Redemption Tax Opinion") of nationally
recognized independent tax counsel experienced in such matters that, as a result
of a Tax Event, there is more than an insubstantial risk that UAL would be
precluded from deducting the interest on the Junior Subordinated Debentures for
United States federal income tax purposes even if the Junior Subordinated
Debentures were distributed to the holders of Preferred Securities and Common
Securities in liquidation of such holders' interests in the Trust as described
above or (ii) the Regular Trustees shall have been informed by such tax counsel
that a No Recognition Opinion cannot be delivered to the Trust, UAL shall have
the right, upon not less than 10 nor more than 60 days' notice, to redeem the
Junior Subordinated Debentures in whole or in part for cash within 90 days
following the occurrence of such Tax Event, and promptly following such
redemption Preferred Securities and Common Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debentures so redeemed will be redeemed by the Trust at the
Redemption Price on a Pro Rata Basis; provided, however, that if at the time
there is available to UAL or the Regular Trustees the opportunity to eliminate,
within such 90-day period, the Tax Event by taking some ministerial action, such
as filing a form or making an election, or pursuing some other similar
reasonable measure, which has no adverse effect on the Trust, UAL or the holders
of the Preferred Securities, UAL, or the Regular Trustees on behalf of the
Trust, will pursue such measure in lieu of redemption and provided further that
UAL shall have no right to redeem the Junior Subordinated Debentures while the
Regular Trustees on behalf of the Trust are pursuing any such ministerial
action. The Common Securities will be redeemed on a Pro Rata Basis with the
Preferred Securities, except that, if an Event of Default under the Declaration
has occurred and is continuing, the Preferred Securities will have a priority
over the Common Securities with respect to payment of the Redemption Price.
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"Tax Event" means that the Regular Trustees shall have obtained an opinion
(a "Dissolution Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters to the effect that on or after the Expiration Date
as a result of (a) any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, (b)
any amendment to, or change in, an interpretation or application of any such
laws or regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the Expiration Date, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90 days
of the date thereof, subject to United States federal income tax with respect to
income accrued or received on the Junior Subordinated Debentures, (ii) the Trust
is, or will be within 90 days of the date thereof, subject to more than a de
minimis amount of other taxes, duties or other governmental charges or (iii)
interest payable by UAL to the Trust on the Junior Subordinated Debentures is
not, or within 90 days of the date thereof will not be, deductible by UAL for
United States federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940 Act"),
that, as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority or by the staff of any such
governmental agency or regulatory authority (a "Change in 1940 Act Law"), there
is more than an insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the 1940 Act,
which Change in 1940 Act Law becomes effective on or after the Expiration Date.
On the date fixed for any distribution of Junior Subordinated Debentures,
upon dissolution of the Trust, (i) the Preferred Securities and the Common
Securities will no longer be deemed to be outstanding and (ii) certificates
representing Trust Securities will be deemed to represent beneficial interests
in the Junior Subordinated Debentures having an aggregate principal amount equal
to the stated liquidation amount of, and bearing accrued and unpaid interest
equal to accrued and unpaid distributions on, such Trust Securities until such
certificates are presented to UAL or its agent for transfer or reissuance.
There can be no assurance as to the market price for the Junior
Subordinated Debentures which may be distributed in exchange for Trust
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Junior Subordinated Debentures which the investor may
subsequently receive on dissolution and liquidation of the Trust may trade at a
discount to the price of the Trust Securities exchanged. If the Junior
Subordinated Debentures are distributed to the holders of Trust Securities upon
the dissolution of the Trust, UAL will use its best efforts to list the Junior
Subordinated Debentures on the NYSE or on such other exchange on which the
Preferred Securities are then listed.
MANDATORY REDEMPTION
Upon the repayment or payment of the Junior Subordinated Debentures, in
whole or in part, whether at maturity, upon redemption or otherwise, the
proceeds from such repayment or payment will be promptly applied to redeem
Preferred Securities and Common Securities having an aggregate liquidation
amount equal to the Junior Subordinated Debentures so repaid, upon not less than
10 nor more than 60 days' notice, at the Redemption Price. The Common Securities
will be entitled to be redeemed on a Pro Rata Basis with the Preferred
Securities, except that if an Event of Default under the Declaration has
occurred and is continuing, the Preferred Securities will have a priority over
the Common Securities with respect to payment of the Redemption Price. Subject
to the foregoing, if fewer than all outstanding Preferred Securities and Common
Securities are to be redeemed, the Preferred Securities and Common Securities
will be redeemed on a Pro Rata Basis. In the event fewer than all outstanding
Preferred Securities are to be redeemed, Preferred
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Securities registered in the name of and held by a Depository Institution or its
nominee will be redeemed pro rata as described under "-- Book-Entry; Delivery
and Form" below.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then immediately prior to the
close of business on the redemption date, provided that UAL has paid to the
Trust a sufficient amount of cash in connection with the related redemption or
maturity of the Junior Subordinated Debentures, distributions will cease to
accrue on the Preferred Securities called for redemption, such Preferred
Securities shall no longer be deemed to be outstanding and all rights of holders
of such Preferred Securities so called for redemption will cease, except the
right of the holders of such Preferred Securities to receive the Redemption
Price, but without interest on such Redemption Price. Neither the Trustees nor
the Trust shall be required to register or cause to be registered the transfer
of any Preferred Securities which have been so called for redemption. If any
date fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If UAL fails to repay Junior Subordinated Debentures
on maturity or on the date fixed for a redemption or if payment of the
Redemption Price in respect of Preferred Securities is improperly withheld or
refused and not paid by the Trust or by UAL pursuant to the Preferred Securities
Guarantee described under "Description of the Preferred Securities Guarantee,"
distributions on such Preferred Securities will continue to accrue from the
original redemption date of the Preferred Securities to the date of payment in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
The Trust shall not be required to (i) issue, register the transfer of or
exchange of any Trust Securities during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of Trust
Securities and ending at the close of business on the day of the mailing of the
relevant notice of redemption or (ii) register the transfer of or exchange of
any Trust Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any Trust Securities being redeemed in part.
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed, UAL
pursuant to the Indenture will only redeem the Junior Subordinated Debentures in
whole and, as a result, the Trust may only redeem the Preferred Securities in
whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), UAL or any of its subsidiaries may at
any time and from time to time purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities and Common
Securities at the date of dissolution, winding-up or termination of the Trust
will be entitled to receive on a Pro Rata Basis solely out of the assets of the
Trust, after satisfaction of liabilities of creditors (to the extent not
satisfied by UAL as provided in the Declaration), an amount equal to the
aggregate of the stated liquidation amount of $25 per Trust Security plus
accrued and unpaid distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, winding-up or termination, Junior Subordinated Debentures in an
aggregate principal amount equal to the aggregate stated liquidation amount of
such Trust Securities, and bearing accrued and unpaid interest in an amount
equal to the accrued and unpaid distributions on such Trust
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Securities, shall be distributed on a Pro Rata Basis to the holders of the
Preferred Securities and Common Securities in exchange therefor.
If, upon any such dissolution, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities and the Common Securities shall be paid on a
Pro Rata Basis.
The holders of the Common Securities will be entitled to receive
distributions upon any such dissolution on a Pro Rata Basis with the holders of
the Preferred Securities, except that if an Event of Default under the
Declaration has occurred and is continuing, the Preferred Securities shall have
a priority over the Common Securities with respect to payment of the Liquidation
Distribution.
Pursuant to the Declaration, the Trust shall terminate: (i) on December 31,
2026, (ii) when all of the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been paid
to the holders of Trust Securities in accordance with the terms of the Trust
Securities, (iii) when all of the Junior Subordinated Debentures shall have been
distributed to the holders of Trust Securities in exchange for all of the Trust
Securities in accordance with the terms of the Trust Securities, (iv) upon the
bankruptcy of UAL or the Trust, (v) upon the filing of a certificate of
dissolution or the equivalent with respect to UAL, the filing of a certificate
of cancellation with respect to the Trust after having obtained the consent of
at least a majority in liquidation amount of the Trust Securities, voting
together as a single class, to file such certificate of cancellation, or the
revocation of the charter of UAL and the expiration of 90 days after the date of
revocation without a reinstatement thereof, or (vi) upon the entry of a decree
of judicial dissolution of UAL or the Trust.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST ONLY UNDER CERTAIN CONDITIONS
The Trust may, with the consent of the Regular Trustees or, if there are
more than two, a majority of the Regular Trustees and without the consent of the
Holders of the Trust Securities, the Delaware Trustee or the Institutional
Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided that: (i) such successor
entity (the "Successor Entity") either: (A) expressly assumes all of the
obligations of the Trust under the Preferred Securities; or (B) substitutes for
the Preferred Securities other securities having substantially the same terms as
the Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities rank with respect to
Distributions and payments upon liquidation, redemption and otherwise; (ii) UAL
expressly appoints a trustee of the Successor Entity that possesses the same
powers and duties as the Institutional Trustee as the holder of the Junior
Subordinated Debentures; (iii) the Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with another
organization on which the Preferred Securities are then listed or quoted; (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization; (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the Holders of the Preferred Securities (including
any Successor Securities) in any material respect (other than with respect to
any dilution of such Holders' interests in the Preferred Securities as a result
of such merger, consolidation, amalgamation or replacement); (vi) such Successor
Entity has a purpose substantially identical to that of the Trust; (vii) such
merger, consolidation, amalgamation or replacement does not vary the investment
of the Holders of the Preferred Securities within the meaning of Treasury
Regulation Section 301.7701-4(c)(i), e.g., does not substitute other assets for
assets of the Trust to which the Preferred Securities relate or add assets to
the Trust to which the Preferred Securities relate; (viii) prior to such merger,
consolidation, amalgamation or replacement, UAL has received an opinion of a
nationally recognized independent counsel to the Trust experienced in such
matters to the effect that: (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the Holders of the Preferred Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the Holders'
interest in the new entity); (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the Successor Entity will be
required to register as an investment company; and (C) following such merger,
consolidation,
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amalgamation or replacement, the Trust (or the Successor Entity) will continue
to be classified as a grantor trust for United States federal income tax
purposes; and (ix) UAL guarantees the obligations of such Successor Entity under
the Successor Securities at least to the extent provided by the Preferred
Securities Guarantee.
DECLARATION EVENTS OF DEFAULT
An Indenture Event of Default will constitute an Event of Default under the
Declaration; provided that pursuant to the Declaration, the holder of the Common
Securities will be deemed to have waived any such Event of Default with respect
to the Common Securities until all Events of Default with respect to the
Preferred Securities have been cured or waived. Until all such Events of Default
with respect to the Preferred Securities have been cured or waived, the
Institutional Trustee will be deemed to be acting solely on behalf of the
holders of the Preferred Securities, and only the holders of the Preferred
Securities will have the right to direct the Institutional Trustee with respect
to certain matters under the Declaration and consequently under the Indenture.
In the event that any Event of Default with respect to the Preferred Securities
is waived by the holders of the Preferred Securities as provided in the
Declaration, the holders of Common Securities pursuant to the Declaration have
agreed that such waiver also constitutes a waiver of such Event of Default with
respect to the Common Securities for all purposes under the Declaration without
any further act, vote or consent of the holders of the Common Securities. See
"-- Voting Rights."
Upon the occurrence of an Event of Default, the Institutional Trustee or
the holders of at least 25% in aggregate principal amount of the Junior
Subordinated Debentures will have the right under the Indenture to declare the
principal of and interest on the Junior Subordinated Debentures to be
immediately due and payable. In addition, the Institutional Trustee will have
the power to exercise all rights, powers and privileges under the Indenture. If
an Event of Default is attributable to the failure of UAL to pay interest or
principal on the Junior Subordinated Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, the redemption
date), then a holder of Preferred Securities may also directly institute a
proceeding for enforcement of payment to such holder of the principal of or
interest on the Junior Subordinated Debentures having a principal amount equal
to the aggregate liquidation amount of the Preferred Securities of such holder
without first (i) directing the Institutional Trustee to enforce the terms of
the Junior Subordinated Debentures or (ii) instituting a legal proceeding
against UAL to enforce the Institutional Trustee's rights under the Junior
Subordinated Debentures. In connection with such direct action, UAL shall be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by UAL to such holder in such
direct action. See "Description of the Junior Subordinated Debentures."
VOTING RIGHTS
Except as provided under "-- Merger, Consolidation or Amalgamation of the
Trust Only Under Certain Conditions," "-- Modification and Amendment of the
Declaration" and "Description of the Preferred Securities
Guarantee -- Amendments and Assignment" and as otherwise required by the
Business Trust Act, the Trust Indenture Act and the Declaration, the holders of
the Preferred Securities will have no voting rights.
Subject to the requirements of the second to last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right (i) on behalf of all holders of Preferred
Securities, to waive any past default that is waivable under the Declaration and
(ii) to direct the time, method and place of conducting any proceeding for any
remedy available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration; provided,
however, that the holders of the Preferred Securities will vote as a single
class (the "Capital Trust Voting Class") with any holders of any other preferred
undivided beneficial interests of a UAL Corporation Capital Trust, such as the
Preferred Securities, similarly situated with respect to debt securities issued
pursuant to the Indenture (including the Junior Subordinated Debentures) with
respect to the right to direct an Institutional Trustee, to (x) direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee or exercising any trust or power conferred on the Indenture
Trustee with respect to debt securities issued pursuant to the Indenture
(including the Junior Subordinated Debentures), (y) waive any past default and
its consequences that is waivable under Section 5.13 of the Indenture with
respect to debt securities issued
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pursuant to the Indenture (including the Junior Subordinated Debentures) or (z)
exercise any right to rescind or annul a declaration that the principal of all
debt securities issued pursuant to the Indenture (including the Junior
Subordinated Debentures) shall be due and payable; provided that where a consent
under the Indenture would require the consent of (1) holders of debt securities
issued pursuant to the Indenture (including Junior Subordinated Debentures)
representing a specified percentage greater than a majority in principal amount
of such securities or (2) each holder of such securities affected thereby, no
such consent shall be given by any Trustee without the prior consent of, in the
case of clause (1) above, holders of securities in the Capital Trust Voting
Class representing such specified percentage or, in the case of clause (2)
above, each holder of securities in the Capital Trust Voting Class affected
thereby. The Institutional Trustee shall not revoke or take any action
inconsistent with any action previously authorized or approved by a vote of the
holders of Preferred Securities. The Institutional Trustee shall notify all
holders of record of Preferred Securities of any notice of default received from
the Indenture Trustee with respect to the Junior Subordinated Debentures. Other
than with respect to directing the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee or the
Indenture Trustee as set forth above, the Institutional Trustee shall be under
no obligation to take any of the foregoing actions at the direction of the
holders of the Preferred Securities unless the Institutional Trustee shall have
obtained an opinion of nationally recognized independent tax counsel recognized
as expert in such matters to the effect that the Trust will not be classified
for United States federal income tax purposes as an association taxable as a
corporation or a partnership on account of such action and will be treated as a
grantor trust for United States federal income tax purposes following such
action. If the Institutional Trustee fails to enforce its rights under the
Declaration (including, without limitation, its rights, powers and privileges as
a holder of the Junior Subordinated Debentures under the Indenture) to the
fullest extent permitted by law, any holder of Preferred Securities may, upon
such holder's written request to the Institutional Trustee to enforce such
rights, institute a legal proceeding directly against UAL to enforce the
Institutional Trustee's rights under the Declaration, without first instituting
a legal proceeding against the Institutional Trustee or any other Person;
provided that any holder may institute a direct action without prior request to
the Institutional Trustee to enforce UAL's payment obligations on the Junior
Subordinated Debentures.
A waiver of an Indenture Event of Default by the Institutional Trustee at
the direction of holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the Trust
Securities.
In the event the consent of the Trust as the holder of the Junior
Subordinated Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, the Institutional Trustee shall request the direction
of the holders of the Trust Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a majority in liquidation amount of
the Trust Securities voting together in the Capital Trust Voting Class,
provided, however, that where any such amendment, modification or termination of
the Indenture would require the consent of (i) holders of debt securities issued
pursuant to the Indenture representing a specified percentage greater than a
majority in principal amount of such securities or (ii) each holder of such debt
securities, the Trustee may only give such consent at the direction of the
holders of securities in the Capital Trust Voting Class representing such
specified percentage in the case of clause (i) above, or each holder of
securities in the Capital Trust Voting Class affected thereby, in the case of
clause (ii) above; and, provided, further, that the Institutional Trustee shall
be under no obligation to take any such action in accordance with the directions
of the holders of the Trust Securities unless the Institutional Trustee has
obtained an opinion of nationally recognized independent tax counsel recognized
as expert in such matters to the effect that the Trust will not be classified
for United States federal income tax purposes as an association taxable as a
corporation or a partnership on account of such action and will be treated as a
grantor trust for United States federal income tax purposes following such
action.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which
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holders of Preferred Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be mailed to
each holder of record of Preferred Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the holders of Preferred Securities will be required
for the Trust to redeem and cancel Preferred Securities or distribute Junior
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by UAL or by any entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with UAL shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
The procedures by which persons owning Preferred Securities registered in
the name of and held by a Depositary Institution or its nominee may exercise
their voting rights are described under "-- Book-Entry; Delivery and Form"
below.
Holders of the Preferred Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which rights are vested exclusively in the holders of the Common Securities.
MODIFICATION AND AMENDMENT OF THE DECLARATION
The Declaration may be modified and amended on approval of a majority of
the Regular Trustees, provided that, if any proposed modification or amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the
outstanding Trust Securities as a class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a majority in liquidation amount of the
Trust Securities, provided that if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
Trust Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration if such amendment or modification would cause the Trust to be
classified for United States federal income tax purposes as other than a grantor
trust or would cause the Trust to be deemed an "investment company" which is
required to be registered under the 1940 Act, (ii) certain specified provisions
of the Declaration may not be amended without the consent of all of the holders
of the Trust Securities, (iii) no amendment which adversely affects the rights,
powers and privileges of the Institutional Trustee shall be made without the
consent of the Institutional Trustee, (iv) Article IV of the Declaration
relating to the obligation of UAL to purchase the Common Securities and to pay
certain obligations and expenses of the Trust as described under "UAL
Corporation Capital Trust I" may not be amended without the consent of UAL, and
(v) the rights of holders of Common Securities under Article V of the
Declaration to increase or decrease the number of, and to appoint, replace or
remove, Trustees shall not be amended without the consent of each holder of
Common Securities.
The Declaration further provides that it may be amended without the consent
of the holders of the Trust Securities to (i) cure any ambiguity, (ii) correct
or supplement any provision in this Declaration that may be defective or
inconsistent with any other provision of this Declaration, (iii) add to the
covenants, restrictions or obligations of UAL, (iv) preserve the status of the
Trust as a grantor trust for federal income tax purposes, and (v) to conform to
changes in, or a change in interpretation or application of, certain 1940 Act
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requirements by the Commission or its staff, which amendment does not adversely
affect the rights, preferences or privileges of the holders of Trust Securities.
BOOK-ENTRY; DELIVERY AND FORM
Preferred Securities will be issued in fully registered form. Investors may
elect to hold their Preferred Securities directly or, subject to the rules and
procedures of a Depository Institution described below, hold interests in a
global certificate (the "Preferred Securities Global Certificate") registered in
the name of a Depository Institution or its nominee. However, tendering holders
of Depositary Shares held in global form shall initially receive an interest in
the Preferred Securities Global Certificate and tendering holders of Depositary
Shares held directly in certificated form shall initially receive Preferred
Securities in certificated form, in each case unless otherwise specified in the
Letter of Transmittal. See "The Offer -- Procedures for Tendering."
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in a global Preferred
Security.
A Depository Institution holds securities that its participants
("Participants") deposit with the Depository Institution. A Depository
Institution also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations ("Direct Participants").
A Depository Institution is owned by a number of its Direct Participants and by
the NYSE, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the Depository Institution's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to a Depository Institution and its Participants are on file with the
Commission.
Upon issuance of a Preferred Securities Global Certificate, the Depository
Institution will credit on its book-entry registration and transfer system the
number of Preferred Securities represented by such Preferred Securities Global
Certificate to the accounts of institutions that have accounts with the
Depository Institution. Ownership of beneficial interests in a Preferred
Securities Global Certificate will be limited to Participants or persons that
may hold interests through Participants. The ownership interest of each actual
purchaser of each Preferred Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from the Depository Institution of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners.
A Depository Institution has no knowledge of the actual Beneficial Owners
of the Preferred Securities; a Depository Institution's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
are credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of their
customers. So long as a Depository Institution, or its nominee, is the owner of
a Preferred Securities Global Certificate, a Depository Institution or such
nominee, as the case may be, will be considered the sole owner and holder of
record of the Preferred Securities represented by such Preferred Securities
Global Certificate for all purposes.
Conveyance of notices and other communications by a Depository Institution
to Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
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Redemption notices shall be sent to the Depository Institution. If less
than all of the Preferred Securities are being redeemed, the Depository
Institution will reduce pro rata (subject to adjustment to eliminate fractional
Preferred Securities) the amount of interest of each Direct Participant in the
Preferred Securities to be redeemed.
Although voting with respect to the Preferred Securities is limited, in
those instances in which a vote is required, the Depository Institution will not
consent or vote with respect to Preferred Securities. Under its usual
procedures, the Depository Institution would mail an Omnibus Proxy to the Trust
as soon as possible after the record date. The Omnibus Proxy assigns the
Depository Institution's consenting or voting rights to those Direct
Participants to whose accounts the Preferred Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities represented by a
Preferred Series Global Certificate will be made by the Trust to the Depository
Institution. The Depository Institution's practice is to credit Direct
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on a Depository Institution's records unless the
Depository Institution has reason to believe that it will not receive payments
on such payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Participants and not of a Depository Institution, the
Trust or UAL, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to a Depository Institution
is the responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of the Depository Institution, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
A Depository Institution may discontinue providing its services as
securities depository with respect to the Preferred Securities at any time by
giving reasonable notice to the Trust. Under such circumstances, if a successor
securities depository is not obtained, Preferred Security certificates will be
required to be printed and delivered. Additionally, the Trust may decide to
discontinue use of the system of book-entry transfers through the Depository
Institution (or a successor depository). In that event, certificates for the
Preferred Securities will be printed and delivered.
The information in this section concerning the Depository Institution and
the Depository Institution's book-entry system has been obtained from sources
that the Trust and UAL believe to be reliable, but the Trust and UAL take no
responsibility for the accuracy thereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The First National Bank of Chicago or one of its affiliates will act as
registrar and transfer agent for the Preferred Securities. The First National
Bank of Chicago will also act as paying agent and, with the consent of the
Regular Trustees, may designate additional paying agents.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or UAL may require) in respect of any tax or other
governmental charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to a default with respect to the Trust
Securities, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the Institutional Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Preferred Securities, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities which might be incurred
thereby. The Institutional Trustee is not required to expend or risk its own
funds or otherwise incur personal financial liability in the performance of
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its duties if the Institutional Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
UAL and certain of its affiliates maintain deposit accounts and banking
relationships with the Institutional Trustee.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware.
MISCELLANEOUS
The Preferred Securities have been approved for listing on the NYSE subject
to official notice of issuance. The Regular Trustees are authorized and directed
to take such action as they deem reasonable in order that the Trust will not be
deemed to be an "investment company" required to be registered under the 1940
Act or that the Trust will not be classified for United States federal income
tax purposes as an association taxable as a corporation or a partnership and
will be treated as a grantor trust for United States federal income tax
purposes. In this connection, the Regular Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
Declaration, that the Regular Trustees determine in their discretion to be
reasonable and necessary or desirable for such purposes, as long as such action
does not adversely affect the interests of holders of the Trust Securities.
UAL and the Regular Trustees on behalf of the Trust will be required to
provide to the Institutional Trustee annually a certificate as to whether or not
UAL and the Trust, respectively, are in compliance with all the conditions and
covenants under the Declaration.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by UAL for the benefit
of the holders from time to time of Preferred Securities. The Preferred
Securities Guarantee is separately qualified under the Trust Indenture Act and
will be held by The First National Bank of Chicago acting in its capacity as
indenture trustee with respect thereto, for the benefit of the holders of the
Preferred Securities. The terms of the Preferred Securities Guarantee include
those stated in such Guarantee and those made part of the Preferred Securities
Guarantee by the Trust Indenture Act. The summary set forth below is a
description of the material terms of the Preferred Securities Guarantee, which
is filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and is subject to the Trust Indenture Act.
GENERAL
Pursuant to the Preferred Securities Guarantee, UAL will agree, to the
extent set forth therein, to pay in full to the holders of the Preferred
Securities, the Guarantee Payments (as defined below), to the extent not paid by
the Trust, regardless of any defense, right of set-off or counterclaim that the
Trust may have or assert. The following payments or distributions with respect
to the Preferred Securities to the extent not paid or made by the Trust (the
"Guarantee Payments") will be subject to the Guarantee (without duplication):
(i) any accrued and unpaid distributions on the Preferred Securities and the
redemption price, including all accrued and unpaid distributions to the date of
the redemption, with respect to the Preferred Securities called for redemption
by the Trust but only if and to the extent that in each case UAL has made a
payment to the Institutional Trustee of interest or principal on the Junior
Subordinated Debentures and (ii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Debentures to holders of Trust Securities or
the redemption of all of the Preferred Securities upon the maturity or
redemption of the Junior Subordinated Debentures) the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions on
the Preferred Securities to the date of payment, to the extent the Trust has
funds available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to holders of Preferred Securities in liquidation of
the Trust. UAL's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by UAL to the holders of Preferred
Securities or by paying the required amount to the Trust and causing the Trust
to pay such amounts to such holders. The Preferred Securities Guarantee, when
taken together with UAL's obligations under the Junior Subordinated Debentures
and the Indenture and its obligations under the Declaration, including its
obligation to pay costs, expenses and certain liabilities of the Trust,
constitutes a full and unconditional guarantee of amounts due on the Preferred
Securities.
CERTAIN COVENANTS OF UAL
In the Preferred Securities Guarantee, UAL will covenant that, so long as
any Preferred Securities remain outstanding, UAL will not declare or pay any
dividends on, or redeem, purchase, acquire or make a distribution or liquidation
payment with respect to, any of its common stock or preferred stock or any other
securities similar to the Preferred Securities or the Junior Subordinated
Debentures or make any guarantee payment with respect thereto if at such time
(i) UAL shall be in default with respect to its Guarantee Payments or other
payment obligations under the Preferred Securities Guarantee, (ii) there shall
have occurred and be continuing any event of default under the Indenture or
(iii) UAL shall have given notice of its selection of an Extension Period as
provided in the Indenture and such period, or any extension thereof, is
continuing. In addition, so long as any Preferred Securities remain outstanding,
UAL has agreed (i) to remain the sole direct or indirect owner of all of the
outstanding Common Securities and shall not cause or permit the Common
Securities to be transferred except to the extent permitted by the Declaration,
provided that any permitted successor of UAL under the Indenture may succeed to
UAL's ownership of the Common Securities, and (ii) that it will not take any
action which will cause the Trust to cease to be treated as a grantor trust for
United States federal income tax purposes except in connection with a
distribution of Junior Subordinated Debentures.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no consent will be required),
the Preferred Securities Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of the Preferred Securities will be as set forth under "Description of
the Preferred Securities -- Voting Rights." All guarantees and agreements
contained in the Preferred Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of UAL and shall inure to the
benefit of the holders of the Preferred Securities then outstanding. Except in
connection with a consolidation, merger or sale involving UAL that is permitted
under the Indenture, UAL may not assign its obligations under the Preferred
Securities Guarantee.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further
force and effect as to the Preferred Securities upon full payment of the
Redemption Price of all Preferred Securities, or upon distribution of the Junior
Subordinated Debentures to the holders of Preferred Securities in exchange for
all of the Preferred Securities, or upon full payment of the amounts payable
upon liquidation of the Trust. Notwithstanding the foregoing, the Preferred
Securities Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of Preferred Securities must restore
payment of any sums paid with respect to the Preferred Securities or the
Preferred Securities Guarantee.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
UAL's obligations under the Preferred Securities Guarantee to make the
Guarantee Payments will constitute an unsecured obligation of UAL and will rank
(i) subordinate and junior in right of payment to all other liabilities of UAL,
except obligations and securities made pari passu or subordinate by their terms,
and (ii) senior to all capital stock now or hereafter issued by UAL, including
the Depositary Shares, and to any guarantee now or hereafter entered into by UAL
in respect of any of its capital stock. The Declaration provides that each
holder of Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Preferred Securities Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection; thus, any holder of Preferred Securities may institute a
legal proceeding directly against UAL to enforce such holder's rights under the
Preferred Securities Guarantee, without first instituting a legal proceeding
against the Trust or any other person or entity. The Preferred Securities
Guarantee will be deposited with the Institutional Trustee, as Guarantee
Trustee, to be held in trust for the benefit of the holders of the Preferred
Securities. The Institutional Trustee shall enforce the Preferred Securities
Guarantee on behalf of the holders of the Preferred Securities although any
holder of a Preferred Security may bring a direct action against UAL to enforce
the Guarantee without prior notice to the Institutional Trustee. The holders of
not less than a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available in respect of the Preferred Securities
Guarantee, including the giving of directions to the Institutional Trustee.
UAL and certain of its affiliates maintain deposit accounts and banking
relationships with the Institutional Trustee.
GOVERNING LAW
The Preferred Securities Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the Junior Subordinated Debentures
which will be deposited in the Trust as trust assets. The terms of the Junior
Subordinated Debentures include those stated in the Indenture
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to be dated as of December 20, 1996, as supplemented by the officer's
certificate pursuant to board resolutions setting forth certain terms of the
Junior Subordinated Debentures (as so supplemented, the "Indenture") between UAL
and The First National Bank of Chicago, as trustee (the "Indenture Trustee"),
the form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, and those made part of the Indenture by the
Trust Indenture Act. The following description sets forth the material terms and
is qualified in its entirety by reference to the Trust Indenture Act. Whenever
particular provisions or defined terms in the Indenture are referred to herein,
such provisions or defined terms are incorporated by reference herein.
The Indenture provides for the issuance of debentures (including the Junior
Subordinated Debentures), notes or other evidences of indebtedness by UAL in an
unlimited amount from time to time. The Junior Subordinated Debentures
constitute a separate series under the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Junior Subordinated Debentures may
be distributed to the holders of the Trust Securities in liquidation of the
Trust. See "Description of the Preferred Securities -- Special Event Redemption
or Distribution."
GENERAL
The Junior Subordinated Debentures are unsecured, subordinated obligations
of UAL, limited in aggregate principal amount to (i) the aggregate liquidation
preference of the Preferred Securities issued by the Trust in the Offer and (ii)
the proceeds received by the Trust upon issuance of the Common Securities to UAL
(which proceeds will be used to purchase an equal principal amount of Junior
Subordinated Debentures).
The Junior Subordinated Debentures mature on December 31, 2026. The Junior
Subordinated Debentures are not subject to any sinking fund.
If Junior Subordinated Debentures are distributed to holders of Trust
Securities in dissolution of the Trust, such Junior Subordinated Debentures will
be so issued in fully registered certificated form in denominations of $25 and
integral multiples thereof and may be transferred or exchanged at the offices
described below.
Payments of principal and interest on Junior Subordinated Debentures will
be payable, the transfer of the Junior Subordinated Debentures will be
registrable, and Junior Subordinated Debentures will be exchangeable for Junior
Subordinated Debentures of other denominations of a like aggregate principal
amount, at the corporate trust office of the Indenture Trustee in The City of
New York; provided that payments of interest may be made at the option of UAL by
check mailed to the address of the persons entitled thereto and that the payment
of principal with respect to any Junior Subordinated Debenture will be made only
upon surrender of such Junior Subordinated Debenture to the Indenture Trustee.
If the Junior Subordinated Debentures are distributed to the holders of
Trust Securities upon the dissolution of the Trust, UAL will use its best
efforts to list the Junior Subordinated Debentures on the NYSE or on such other
exchange on which the Preferred Securities are then listed.
The Indenture contains no provisions which would afford the holders of
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction involving UAL or a change of control of UAL.
OPTIONAL REDEMPTION
Except as provided below, the Junior Subordinated Debentures may not be
redeemed prior to July 12, 2004. UAL shall have the right to redeem the Junior
Subordinated Debentures, in whole or in part, from time to time, on or after
July 12, 2004, upon not less than 10 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed, plus any
accrued and unpaid interest to the redemption date, including interest accrued
during an Extension Period. UAL will also have the right to redeem the Junior
Subordinated Debentures at any time upon the occurrence of a Tax Event if
certain conditions are met as described under "Description of the Preferred
Securities -- Special Event Redemption or Distribution."
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If UAL gives a notice of redemption in respect of Junior Subordinated
Debentures (which notice will be irrevocable) then, on or before the redemption
date, UAL will deposit irrevocably with the Indenture Trustee funds sufficient
to pay the applicable redemption price and will give irrevocable instructions
and authority to pay such redemption price to the holders of the Junior
Subordinated Debentures. If notice of redemption shall have been given and funds
deposited as required, then, upon the date of such deposit, interest will cease
to accrue on the Junior Subordinated Debentures called for redemption, such
Junior Subordinated Debentures will no longer be deemed to be outstanding and
all rights of holders of such Junior Subordinated Debentures so called for
redemption will cease, except the right of the holders of such Junior
Subordinated Debentures to receive the applicable redemption price, but without
interest on such redemption price. If any date fixed for redemption of Junior
Subordinated Debentures is not a Business Day, then payment of the redemption
price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption. If
payment of the redemption price in respect of Junior Subordinated Debentures is
improperly withheld or refused and not paid by UAL, interest on such Junior
Subordinated Debentures will continue to accrue compounded quarterly, from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the applicable redemption price. If fewer than all of the Junior
Subordinated Debentures are to be redeemed, the Junior Subordinated Debentures
to be redeemed shall be selected by lot or pro rata or in some other equitable
manner determined by the Indenture Trustee.
UAL shall not be required to (i) issue or register the transfer of or
exchange of any Junior Subordinated Debentures during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Junior Subordinated Debentures and ending at the close of business on the day of
the mailing of the relevant notice of redemption or (ii) register the transfer
of or exchange of any Junior Subordinated Debentures so selected for redemption,
in whole or in part, except the unredeemed portion of any Junior Subordinated
Debentures being redeemed in part.
PROPOSED TAX LEGISLATION
Certain tax law changes have been proposed that may, if enacted, deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the Junior Subordinated Debentures. See "Taxation --
Proposed Tax Legislation."
INTEREST
The Junior Subordinated Debentures will bear interest at an annual rate of
13 1/4% from the Accrual Date. In addition, holders of the Junior Subordinated
Debentures will be entitled to Pre-Issuance Accrued Distribution at the rate of
12 1/4% per annum of the principal amount thereof from November 1, 1996 through
the Expiration Date, payable on December 31, 1996 to holders of the Preferred
Securities on the record date for such distribution. Interest will be payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year (each, an "Interest Payment Date"), commencing on December 31, 1996 to the
person in whose name such Junior Subordinated Debenture is registered, subject
to certain exceptions, at the close of business on the fifteenth day next
preceding such Interest Payment Date, except that the record date for the
payment to be made on December 31, 1996 shall be the date of exchange of the
Preferred Securities for the Depository Shares. Interest payable on any Junior
Subordinated Debenture that is not punctually paid or duly provided for on any
Interest Payment Date will forthwith cease to be payable to the person in whose
name such Junior Subordinated Debenture is registered on the relevant record
date, and such defaulted interest will instead be payable to the person in whose
name such Junior Subordinated Debenture is registered on the special record date
or other specified date determined in accordance with the Indenture; provided,
however, that interest shall not be considered payable by UAL on any Interest
Payment Date falling within an Extension Period unless UAL has elected to make a
full or partial payment of interest accrued on the Junior Subordinated
Debentures on such Interest Payment Date.
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The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and, for any period shorter than a
full quarterly period for which interest is computed, the amount of interest
payable will be computed on the basis of the actual number of days elapsed in
such a 30-day month. If any Interest Payment Date is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
ADDITIONAL INTEREST
If the Trust would be required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, then, in any such case, UAL
will pay as additional interest ("Additional Interest") such amounts as shall be
required so that the net amounts received and retained by the Trust after paying
any such taxes, duties, assessments or governmental charges will be not less
than the amounts the Trust would have received had no such taxes, duties,
assessments or governmental charges been imposed.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as UAL shall not be in default in the payment of interest on the
Junior Subordinated Debentures, UAL shall have the right to extend the interest
payment period from time to time for a period not exceeding 20 consecutive
quarterly interest periods. UAL has no current intention of exercising its right
to extend an interest payment period. No extension of interest will be permitted
with respect to interest accruing from November 1, 1996 through the Expiration
Date. No interest shall be due and payable during an Extension Period. During
any Extension Period, UAL shall not declare or pay any dividends on, or redeem,
purchase, acquire or make a distribution or liquidation payment with respect to,
any of its common stock or preferred stock or any other securities similar to
the Preferred Securities or the Junior Subordinated Debentures or make any
guarantee payments with respect thereto, provided, however, that UAL may pay
cash in lieu of fractional shares upon the conversion of any of its preferred
stock in accordance with the terms of such stock. Any Extension Period with
respect to payment of interest on the Junior Subordinated Debentures will also
apply to distributions with respect to the Preferred Securities and all other
securities with similar terms. Prior to the termination of any such Extension
Period, UAL may further extend the interest payment period; provided that such
Extension Period together with all such previous and further extensions thereof
may not exceed 20 consecutive quarterly interest periods. On the next Interest
Payment Date occurring after the end of each Extension Period, UAL shall pay to
the holders of Junior Subordinated Debentures of record on the record date for
such Interest Payment Date (regardless of who the holders of record may have
been on other dates during the Extension Period) all accrued and unpaid interest
on the Junior Subordinated Debentures, together with interest thereon at the
rate specified for the Junior Subordinated Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, UAL may commence a
new Extension Period, subject to the above requirements. UAL may also pay on any
Interest Payment Date during an Extension Period all or any portion of the
interest accrued during an Extension Period. Consequently, there could be
multiple Extension Periods of varying lengths (up to six Extension Periods of 20
consecutive quarterly interest periods each or more numerous shorter Extension
Periods) throughout the term of the Junior Subordinated Debentures provided that
no Extension Period may extend beyond the maturity of the Junior Subordinated
Debentures. The failure by UAL to make interest payments during an Extension
Period would not constitute a default or an event of default under the Indenture
or UAL's currently outstanding indebtedness.
If the Trust shall be the sole holder of the Junior Subordinated
Debentures, UAL shall give the Institutional Trustee and the Indenture Trustee
notice of its selection of such Extension Period ten Business Days prior to the
earlier of (i) the date the distributions on the Preferred Securities are
payable or (ii) the date the Trust is required to give notice to the NYSE or
other applicable self-regulatory organization or to holders of the Preferred
Securities of the record date or the date such distribution is payable, but in
any event
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not less than one Business Day prior to such record date. The Trust shall give
notice of UAL's selection of such Extension Period to the holders of the
Preferred Securities.
If Junior Subordinated Debentures have been distributed to holders of Trust
Securities, UAL shall give the holders of the Junior Subordinated Debentures and
the Indenture Trustee notice of its selection of such Extension Period ten
Business Days prior to the earlier of (i) the next succeeding Interest Payment
Date or (ii) the date UAL is required to give notice to the NYSE (if the Junior
Subordinated Debentures are then listed thereon) or other applicable
self-regulatory organization or to holders of the Junior Subordinated Debentures
of the record or payment date of such related interest payment.
CERTAIN COVENANTS OF UAL APPLICABLE TO THE JUNIOR SUBORDINATED DEBENTURES
In the Indenture, UAL will covenant that, so long as any Preferred
Securities remain outstanding, UAL will not declare or pay any dividends on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its common stock or preferred stock or any other securities
similar to the Preferred Securities or the Junior Subordinated Debentures or
make any guarantee payment with respect thereto if at such time (i) UAL shall be
in default with respect to its Guarantee Payments or other payment obligations
under the Preferred Securities Guarantee, (ii) there shall have occurred any
Indenture Event of Default with respect to the Junior Subordinated Debentures or
(iii) UAL shall have given notice of its selection of an Extension Period as
provided in the Indenture and such period, or any extension thereof, is
continuing. In addition, so long as the Preferred Securities remain outstanding,
UAL has agreed (i) not to cause or permit the Common Securities to be
transferred except to the extent permitted by the Declaration, provided that any
permitted successor of UAL under the Indenture may succeed to UAL's ownership of
the Common Securities, (ii) to comply fully with all of its obligations and
agreements contained in the Declaration and (iii) not to take any action which
would cause the Trust to cease to be treated as a grantor trust for United
States federal income tax purposes except in connection with a distribution of
Junior Subordinated Debentures.
SUBORDINATION
The payment of the principal of and interest on the Junior Subordinated
Debentures will be subordinated to the extent set forth in the Indenture to the
prior payment in full of amounts then due on all Senior Indebtedness (as defined
below). Upon the maturity of any Senior Indebtedness of UAL by lapse of time,
acceleration or otherwise, all obligations with respect thereto shall first be
paid in full, or such payment duly provided for in cash or in a manner
satisfactory to the holders of such Senior Indebtedness, before any payment is
made on account of the principal of or interest on the Junior Subordinated
Debentures or to redeem, retire, purchase, deposit moneys for the defeasance of
or acquire any of the Junior Subordinated Debentures. Upon the happening of (i)
any default in payment of any Senior Indebtedness of UAL or (ii) any other
default on Senior Indebtedness of UAL and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms, then, unless (w) such
default relates to Senior Indebtedness of UAL in an aggregate amount equal to or
less than $20 million, (x) such default shall have been cured or waived or shall
have ceased to exist, (y) any such acceleration has been rescinded, or (z) such
Senior Indebtedness has been paid in full, no direct or indirect payment in
cash, property or securities, by set-off or otherwise (except payment of the
Junior Subordinated Debentures from funds previously deposited in accordance
with the Indenture at any time such deposit was not prohibited by this
Indenture), shall be made or agreed to be made by UAL on account of the
principal of or interest on the Junior Subordinated Debentures, or in respect of
any redemption, retirement, purchase, deposit of moneys for the defeasance or
other acquisition of any of the Junior Subordinated Debentures. In the case of
such a default in Senior Indebtedness of UAL, UAL shall not deposit money for
any such payment or distribution with the Trustee or any paying agent nor shall
UAL (if UAL is acting as its own paying agent) segregate and hold in trust money
for any such payment or distribution. Upon the happening of an event of default
(other than under circumstances set forth above) with respect to any Senior
Indebtedness of UAL pursuant to which the holders thereof are entitled under the
terms of such Senior Indebtedness to immediately accelerate the maturity thereof
(without further notice or expiration of any applicable grace periods), upon
written notice thereof given to each of UAL and the Trustee
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by the trustee for or other representative of the holders of at least $25
million of Senior Indebtedness of UAL (a "Payment Notice"), then, unless and
until such event of default shall have been cured or waived or shall have ceased
to exist, no direct or indirect payment in cash, property or securities, by
set-off or otherwise (except payment of the Junior Subordinated Debentures from
funds previously deposited in accordance with the Indenture at any time such
deposit was not prohibited by this Indenture), shall be made or agreed to be
made by UAL on account of the principal of or interest on the Junior
Subordinated Debentures, or in respect of any redemption, retirement, purchase,
deposit of moneys for the defeasance or other acquisition of any of the Junior
Subordinated Debentures, and UAL shall not deposit money for any such payment or
distribution with the Trustee or any paying agent nor shall UAL or a Subsidiary
(if UAL or such Subsidiary is acting as paying agent) segregate and hold in
trust money for any such payment or distribution (a "Payment Block"); provided,
however, that this provision shall not prevent the making of any payment for
more than 120 days after a Payment Notice shall have been given unless the
Senior Indebtedness in respect of which such event of default exists has been
declared due and payable in its entirety, in which case no such payment shall be
made until such acceleration has been rescinded or annulled or such Senior
Indebtedness has been paid in full in accordance with its terms. Notwithstanding
the foregoing, (i) not more than one Payment Notice shall be given with respect
to a particular event of default (which shall not bar subsequent Payment Notices
for other such events of default), (ii) all events of default under Senior
Indebtedness occurring within any 30-day period shall be treated as one event of
default to the extent that one or more Payment Notices are issued in connection
therewith and (iii) no more than two Payment Blocks shall be permitted within
any period of 12 consecutive months. Any payment made in contravention of these
provisions shall be returned to the Company. Upon any payment or distribution of
assets of UAL of any kind or character, whether in cash, property or securities
(other than securities of UAL or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinated, at least to
the same extent as the Junior Subordinated Debentures, to the payment of all
Senior Indebtedness at the time outstanding and to any securities issued in
respect thereof under such plan of reorganization or readjustment) to creditors
upon any dissolution or winding up or total or partial liquidation or
reorganization of UAL, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all amounts due upon all Senior
Indebtedness shall first be paid in full, or payment thereof provided for in
money or money's worth, before the holders of the Junior Subordinated Debentures
or the Trustee shall be entitled to retain any assets so paid or distributed
(other than the securities described in the first parenthetical of this
sentence) in respect of the Junior Subordinated Debentures (for principal or
interest) or of the Indenture.
The term "Senior Indebtedness" means, with respect to UAL, all Indebtedness
of UAL (other than indebtedness issued pursuant to the Indenture, including the
Junior Subordinated Debentures), unless such Indebtedness, by its terms or the
terms of the instrument creating or evidencing it, is subordinate in right of
payment to or pari passu with the Junior Subordinated Debentures, and, in
particular, the securities issued pursuant to the Indenture, including the
Junior Subordinated Debentures, shall rank pari passu with all other debt
securities and guarantees in respect of those debt securities issued to any
other UAL Corporation Capital Trust or any indebtedness of the Company to a
Subsidiary.
"Indebtedness" of UAL means, without duplication, the principal of, and
premium, if any, and accrued and unpaid interest (including post-petition
interest) on any obligation, whether outstanding on the date hereof or
thereafter created, incurred or assumed, which is (i) indebtedness for money
borrowed, (ii) Indebtedness Guarantees of UAL for indebtedness for money
borrowed by any other person, (iii) indebtedness evidenced by notes, debentures,
bonds or other instruments of indebtedness for payment of which UAL is
responsible or liable, (iv) obligations for the reimbursement of any obligor on
any letter of credit, bankers' acceptance or similar credit transaction, (v)
obligations of UAL under Capital Leases and Flight Equipment leases (the amount
of UAL's obligation under such Flight Equipment leases to be computed in
accordance with Statement of Financial Accounting Standards No. 13 as if such
Flight Equipment leases were Capital Leases), (vi) obligations (net of
counterparty payments) under interest rate and currency swaps, caps, collars,
options, forward or spot contracts or similar arrangements or with respect to
foreign currency hedges, and (vii) commitment and other bank financing fees
under contractual obligations associated with bank debt; provided, however, that
Indebtedness shall not include amounts owed to trade creditors in the ordinary
course of business.
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"Flight Equipment" means (a) aircraft of all types and classes used in
transportation and incidental services, together with all aircraft instruments,
appurtenances, parts and fixtures comprising such aircraft; (b) aircraft engines
of all types and classes used in transportation and incidental services,
together with all accessories, appurtenances, parts and fixtures comprising such
aircraft engines; (c) aircraft communication equipment of all types and classes
used in transportation and incidental services, including radio, radar,
radiophone and other aircraft communication apparatus, together with all
accessories, appurtenances, parts and fixtures comprising such aircraft
communication equipment; (d) miscellaneous flight equipment of all types and
classes (including miscellaneous crew flight equipment) used in transportation
and incidental services; and (e) spare parts, accessories and assemblies held
for use in or repair of the items described in (a) through (d).
"Capital Lease" means any lease obligation of a person incurred with
respect to real property or equipment acquired or leased by such person and used
in its business that is required to be recorded on its balance sheet as a
capitalized lease in accordance with generally accepted accounting principles
consistently applied as in effect on the date hereof.
"Indebtedness Guarantee" by any person means any obligation, contingent or
otherwise, of such person directly or indirectly guaranteeing any Indebtedness
or other obligation of any other person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise, of
such person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment or performance thereof (or payment of damages in the
event of nonperformance) or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term Indebtedness
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.
By reason of the subordination described herein, in the event of the
distribution of assets upon insolvency, creditors of UAL who are not holders of
Senior Indebtedness or of the Junior Subordinated Debentures may recover less,
ratably, than holders of Senior Indebtedness, and may recover more, ratably,
than holders of the Junior Subordinated Debentures.
Because UAL is a holding company that conducts business through its
subsidiaries, the Junior Subordinated Debentures are effectively subordinated to
all existing and future obligations of UAL's subsidiaries, including United. Any
right of UAL to participate in any distribution of the assets of any of UAL's
subsidiaries, including United, upon the liquidation, reorganization or
insolvency of such subsidiary (and the consequent right of the holders of the
Junior Subordinated Debentures to participate in those assets) will be subject
to the claims of the creditors (including trade creditors) and preferred
stockholders of such subsidiary, except to the extent that claims of UAL itself
as a creditor of such subsidiary may be recognized, in which case the claims of
UAL would still be subordinate to any security interest in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by UAL.
The Indenture does not limit the aggregate amount of indebtedness,
including Senior Indebtedness, that may be issued. As of September 30, 1996,
Senior Indebtedness of UAL (on a consolidated basis) aggregated approximately
$13.1 billion and there was no indebtedness outstanding that would rank pari
passu with the Junior Subordinated Debentures. The calculation of the amount of
Senior Indebtedness assumes that UAL is primarily obligated for the present
value of future minimum lease payments under operating leases guaranteed by UAL
but does not include other contingent obligations such as stipulated loss values
or liquidated damages which may be payable under such operating leases. See
"Description of the Preferred Securities Guarantee -- Status of the Preferred
Securities Guarantee."
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
The Indenture provides that UAL may merge or consolidate with or into any
other corporation or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any person, firm or corporation, if
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(i) (a) in the case of a merger or consolidation, UAL is the surviving
corporation or (b) in the case of a merger or consolidation where UAL is not the
surviving corporation and in the case of a sale, conveyance, transfer or other
disposition, the successor corporation is a corporation organized and existing
under the laws of the United States of America or a State thereof and such
corporation expressly assumes by supplemental indenture all the obligations of
UAL under the Junior Subordinated Debentures and under the Indenture, (ii)
immediately after giving effect to such merger or consolidation, or such sale,
conveyance, transfer or other disposition, no Default or Event of Default (as
defined below) shall have occurred and be continuing and (iii) certain other
conditions are met. In the event a successor corporation assumes the obligations
of UAL, such successor corporation shall succeed to and be substituted for UAL
under the Indenture and under the Junior Subordinated Debentures and all
obligations of UAL thereunder shall terminate.
EVENTS OF DEFAULT AND NOTICE THEREOF
The Indenture provides that, if an Event of Default specified therein shall
have occurred and be continuing, either the Trustee or the holders of 25% in
aggregate principal amount of the Junior Subordinated Debentures then
outstanding may, by written notice to UAL (and to the Trustee, if notice is
given by such holders of Junior Subordinated Debentures), declare the principal
of all the Junior Subordinated Debentures to be due and payable. However, at any
time after a declaration of acceleration with respect to the Junior Subordinated
Debentures has been made, but before a judgment or decree based on such
acceleration has been obtained, the holders of a majority in aggregate principal
amount of the Junior Subordinated Debentures then outstanding may, under certain
circumstances, rescind and annul such acceleration.
Events of Default are defined in the Indenture as being: default for thirty
days in payment of any interest installment when due; default for ten days in
payment of principal at maturity or on redemption or otherwise, on the Junior
Subordinated Debentures when due; default for sixty days after notice to UAL by
the Trustee, or to UAL and the Trustee by the holders of at least 25% in
aggregate principal amount of the Junior Subordinated Debentures then
outstanding, in the performance of any other covenant or warranty in the
Indenture; and certain events of bankruptcy, insolvency or reorganization of
UAL.
The Indenture provides that the Trustee shall, within ninety days after the
occurrence of a Default with respect to the Junior Subordinated Debentures, give
to the holders of the Junior Subordinated Debentures notice of all uncured
Defaults known to it; provided that, except in the case of default in payment on
the Junior Subordinated Debentures the Trustee may withhold the notice if and so
long as a Responsible Officer (as defined in the Indenture) in good faith
determines that withholding such notice is in the interests of the holders.
"Default" means any event which is, or after notice or passage of time or both,
would be, an Event of Default.
The Indenture provides that the holders of a majority in aggregate
principal amount of the Junior Subordinated Debentures then outstanding may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, provided that such direction shall not be in conflict with any law or
the Indenture and subject to certain other limitations. The right of any holder
of Junior Subordinated Debentures to institute action for any remedy under the
Indenture (except the right to enforce payment of the principal of and interest
on its Junior Subordinated Debentures when due) is subject to certain conditions
precedent, including a request to the Trustee by the holders of not less than
25% in aggregate principal amount of Junior Subordinated Debentures then
outstanding to take action, and an offer to the Trustee of satisfactory
indemnification against liabilities incurred by it in so doing.
The Indenture includes a covenant that UAL will file annually with the
Trustee a certificate as to UAL's compliance with all conditions and covenants
of the Indenture.
The holders of a majority in aggregate principal amount of the Junior
Subordinated Debentures then outstanding by notice to the Trustee may waive, on
behalf of the holders of all the Junior Subordinated Debentures, any past
Default or Event of Default and its consequences except a Default or Event of
Default in the payment of the principal of or interest on any of the Junior
Subordinated Debentures and certain other defaults.
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If a bankruptcy proceeding is commenced in respect of UAL under the Federal
Bankruptcy Code or if the principal amount of the Junior Subordinated Debentures
is accelerated upon the occurrence of an event of default, the holders of the
Junior Subordinated Debentures may be unable to recover amounts representing the
unamortized portion of any original issue discount at the time such proceeding
is commenced or such acceleration occurs.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides with respect to the Junior Subordinated Debentures
that UAL may elect either (a) to defease and be discharged from any and all
obligations with respect to the Junior Subordinated Debentures (except for the
obligations to register the transfer or exchange of the Junior Subordinated
Debentures, to replace temporary or mutilated, destroyed, lost or stolen Junior
Subordinated Debentures, to maintain an office or agency in respect of the
Junior Subordinated Debentures and to hold moneys for payment in trust) ("legal
defeasance") or (b) to be released from its obligations with respect to the
Junior Subordinated Debentures (except for the obligations set forth as
exceptions in the preceding clause (a) and except for the obligations to pay the
principal of and interest on the Junior Subordinated Debentures, to compensate
and indemnify the Trustee and to appoint a successor Trustee) ("covenant
defeasance"), upon the deposit with the Trustee (or other qualifying trustee),
in trust for such purpose, of money or U.S. Government Obligations (as defined
in the Indenture) which through the payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of and interest on the Junior Subordinated Debentures, and any
mandatory sinking fund or analogous payments thereon, on the due date thereof.
Such a trust may only be established, if, among other things, UAL has delivered
to the Trustee an opinion of counsel (as specified in the Indenture) to the
effect that the holders of the Junior Subordinated Debentures will not recognize
income, gain or loss for Federal income tax purposes as a result of such legal
defeasance or covenant defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same time as would have been the
case if such legal defeasance or covenant defeasance had not occurred. Such
opinion, in the case of legal defeasance under clause (a) above, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable Federal income tax law occurring after the date of the Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting UAL and the Trustee to enter
into one or more supplemental indentures without the consent of the holders of
any of the Junior Subordinated Debentures in order (i) to evidence the
succession of another corporation to UAL and the assumption of the covenants and
obligations of UAL by such successor to UAL; (ii) to add to the covenants of UAL
or surrender any right or power of UAL; (iii) to add additional Events of
Default with respect to any series; (iv) to add or change any provisions to such
extent as necessary to permit or facilitate the issuance of securities pursuant
to the Indenture in bearer form or in global form; (v) to add to, change or
eliminate any provisions affecting securities not yet issued pursuant to the
Indenture; (vi) to secure the Junior Subordinated Debentures; (vii) to establish
the form or terms of Junior Subordinated Debentures of any series; (viii) to
evidence and provide for successor Trustees; (ix) if allowed without penalty
under applicable laws and regulations, to permit payment in respect of Junior
Subordinated Debentures in bearer form in the United States; (x) to correct or
supplement any defective or inconsistent provisions in the Indenture or any
supplemental indenture, to cure any ambiguity or correct any mistake or to make
any other provisions with respect to matters or questions arising under the
Indenture, provided that such action shall not adversely affect the interests of
the holders of the Junior Subordinated Debentures; or (xi) to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act.
The Indenture also contains provisions permitting UAL and the Trustee, with
the consent of the holders of a majority in aggregate principal amount of the
securities of all series adversely affected at the time outstanding, to execute
supplemental indentures adding any provisions to or changing or eliminating any
of the provisions of the Indenture or any supplemental indenture or modifying
the rights of the holders, except that no such supplemental indenture may,
without the consent of each holder of each outstanding security affected
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thereby, (i) change the time for payment of principal or interest on any Junior
Subordinated Debenture; (ii) reduce the principal of, or any installment of
principal of, or interest on any Junior Subordinated Debenture; (iii) change the
coin or currency in which any Junior Subordinated Debenture or interest thereon
is payable; (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any Junior Subordinated Debenture; (v) reduce the
percentage in principal amount of the outstanding Junior Subordinated Debentures
the consent of which holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults; (vi) change the obligation of UAL to maintain
an office or agency in the places and for the purposes specified in the
Indenture; (vii) modify the provisions relating to waiver of certain defaults or
any of the foregoing provisions; (viii) adversely affect the right to convert
Junior Subordinated Debentures; or (ix) modify the provisions with respect to
the subordination of the Junior Subordinated Debentures.
CONCERNING THE INDENTURE TRUSTEE
UAL and its subsidiaries maintain ordinary banking relationships with The
First National Bank of Chicago and its affiliates and a number of other banks.
BOOK-ENTRY AND SETTLEMENT
If any Junior Subordinated Debentures are distributed to holders of Trust
Securities (see "Description of the Preferred Securities"), such Junior
Subordinated Debentures will be issued in fully registered form. In such event,
investors may elect to hold their Junior Subordinated Debentures directly or,
subject to the rules and procedures of a Depository Institution, hold interests
in a global certificate registered in the name of a Depository Institution or
its nominee.
For a description of a Depository Institution and a Depository
Institution's book-entry system, see "Description of the Preferred
Securities -- Book-Entry; Delivery and Form." As of the date of this Prospectus,
the description herein of a Depository Institution's book-entry system and
Depository Institution's practices as they relate to purchases, transfers,
notices and payments with respect to the Preferred Securities apply in all
material respects to any Junior Subordinated Debentures registered in the name
of and held by a Depository Institution or its nominee.
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DESCRIPTION OF THE SERIES B PREFERRED AND DEPOSITARY SHARES
SERIES B PREFERRED
The following is a description of the material terms of the Series B
Preferred and the Depositary Shares as set forth in the provisions of UAL's
Certificate of Incorporation and the Certificate of Designation for the Series B
Preferred and the Deposit Agreement (as defined herein). Whenever defined terms
in the Deposit Agreement are referred to in this "Description of the Series B
Preferred and Depositary Shares," such defined terms are incorporated by
reference herein.
General
The Series B Preferred presently consists of 16,416 shares, of which
6,266.781 are not owned by UAL. The holders of the Series B Preferred do not
have any preemptive rights with respect to any shares of capital stock of UAL or
any other securities of UAL convertible into or carrying rights or options to
purchase any such shares. The Series B Preferred are not subject to any sinking
fund or other obligation of UAL to redeem or retire the Series B Preferred.
Ranking
The Series B Preferred ranks senior with respect to payment of dividends
and amounts payable upon liquidation, dissolution or winding up to all shares of
capital stock of UAL that are presently outstanding.
While any shares of Series B Preferred are outstanding, UAL may not
authorize the creation or issue of any class or series of stock that ranks
senior to the Series B Preferred as to dividends or upon liquidation,
dissolution or winding up without the consent of the holders of 66 2/3% of the
outstanding shares of Series B Preferred. UAL may create additional classes or
series of preferred stock or authorize, or increase the authorized amount of,
any shares of any class or series of preferred stock ranking on a parity with or
junior to the Series B Preferred without the consent of any holder of Series B
Preferred. See "-- Voting Rights."
Dividends
Holders of shares of Series B Preferred are entitled to receive, when, as
and if declared by the Board of UAL out of assets of UAL legally available
therefor, cumulative cash dividends at a rate per annum that has been fixed at
12 1/4% of the $25,000 liquidation preference thereof (or $3.0625 per Depositary
Share) per annum. Dividends on the Series B Preferred are payable quarterly in
arrears on February 1, May 1, August 1 and November 1 of each year (and, in the
case of any accrued but unpaid dividends, at such additional times and for such
interim periods, if any, as determined by the Board), at such annual rate. Each
such dividend is payable to holders of record as they appear on the stock
records of UAL at the close of business on such record dates, which is not more
than 60 days or less than 10 days preceding the payment dates corresponding
thereto, as may be fixed by the Board of Directors of the Company or a duly
authorized committee thereof. Dividends are cumulative, whether or not in any
dividend period or periods there are assets of UAL legally available for the
payment of such dividends. Dividends on the Series B Preferred have been paid
through November 1, 1996.
Each share of Series B Preferred issued after the initial issue date of the
Series B Preferred (the "Issue Date") (whether issued upon transfer of or in
exchange for an outstanding share of Series B Preferred or issued for any other
reason) is entitled to receive, when, as and if declared by the Board, dividends
with respect to each dividend period, starting with the Issue Date, for which
full dividends have not been paid prior to the date upon which such share of
Series B Preferred was issued. Any share of Series B Preferred that is issued
after the record date with respect to any dividend payment and before such
dividend is paid is not entitled to receive the dividend paid to holders of
Series B Preferred as of such record date.
Accumulations of dividends on shares of Series B Preferred do not bear
interest. Dividends payable on the Series B Preferred for any period greater or
less than a full dividend period are computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends payable on the Series B Preferred
for each full dividend period are computed by dividing the annual dividend rate
by four.
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Except as provided in the next sentence, no dividend can be declared or
paid or set apart for payment on any Parity Stock (as defined below) unless full
cumulative dividends have been or contemporaneously are declared, paid or set
apart for payment on the Series B Preferred for all prior dividend periods. If
accrued dividends on the Series B Preferred for all prior dividend periods have
not been paid in full or a sum sufficient for such payment has not been set
apart, then any dividend declared on the Series B Preferred for any dividend
period and on any Parity Stock shall be declared ratably in proportion to
accrued and unpaid dividends on the Series B Preferred and such Parity Stock.
UAL cannot (i) declare, pay or set apart funds for the payment of any
dividend or other distribution with respect to any Junior Stock (as defined
below) or (ii) redeem, purchase or otherwise acquire for consideration any
Junior Stock or Parity Stock through a sinking fund or otherwise (except by
conversion into or exchange for shares of Junior Stock and other than a
redemption or purchase or other acquisition of Common Stock made for purposes of
an employee incentive or benefit plan of UAL or any subsidiary), unless all
accrued and unpaid dividends with respect to the Series B Preferred and any
Parity Stock at the time such dividend or other distribution is payable or such
redemption, purchase or acquisition is to occur have been paid or funds have
been set apart for payment of such dividends.
For purposes of the description of the Series B Preferred, (i) the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock, or in options, warrants or rights to holders of Junior Stock to
subscribe for or purchase any Junior Stock, (ii) the term "Parity Stock" means
any class or series of preferred stock ranking on a parity with the Series B
Preferred as to the payment of dividends and amounts payable upon liquidation,
dissolution or winding up and (iii) the term "Junior Stock" means all presently
outstanding classes or series of capital stock of UAL, other than the Series B
Preferred, and any other class or series of capital stock of UAL now or
hereafter issued and outstanding that ranks junior as to the payment of
dividends or amounts payable upon liquidation, dissolution or winding up of the
Series B Preferred.
Optional Redemption
The Series B Preferred is not redeemable prior to July 12, 2004. On and
after such date, the Series B Preferred is redeemable at the option of UAL, in
whole or in part, at the redemption price of $25,000 per share, plus, in each
case, all dividends accrued and unpaid on the Series B Preferred up to the date
fixed for redemption, upon giving notice as provided below.
If fewer than all of the outstanding shares of Series B Preferred are to be
redeemed, the shares to be redeemed will be determined pro rata or by lot or in
such other manner as is prescribed by UAL's Board.
At least 30 days but not more than 60 days prior to the date fixed for the
redemption of the Series B Preferred, a written notice will be mailed to each
holder of record of Series B Preferred to be redeemed, notifying such holder of
UAL's election to redeem such shares, stating the date fixed for redemption
thereof and calling upon such holder to surrender to UAL on the redemption date
at the place designated in such notice the certificate or certificates
representing the number of shares specified therein. On or after the redemption
date, each holder of Series B Preferred to be redeemed must present and
surrender the certificate or certificates for such shares to UAL at the place
designated in such notice and thereupon the redemption price of such shares will
be paid to or on the order of the person whose name appears on such certificate
or certificates as the owner thereof and each surrendered certificate will be
canceled. If fewer than all the shares represented by any such certificate are
redeemed, then a new certificate will be issued representing the shares not
redeemed.
From and after the redemption date (unless UAL defaults in payment of the
redemption price), all dividends on the shares of Series B Preferred designated
for redemption in such notice will cease to accrue, and all rights of the
holders thereof as stockholders of UAL, except the right to receive the
redemption price thereof (including all accrued and unpaid dividends up to the
redemption date), will cease and terminate. Such shares may not thereafter be
transferred (except with the consent of UAL) on UAL's books, and such shares may
not be deemed to be outstanding for any purpose whatsoever. On the redemption
date, the Company must pay any accrued and unpaid dividends in arrears for any
dividend period ending on or prior to
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the redemption date. In the case of a redemption date falling after a dividend
payment record date and prior to the related payment date, the holders of Series
B Preferred at the close of business on such record date will be entitled to
receive the dividend payable on such shares on the corresponding dividend
payment date, notwithstanding the redemption of such shares following such
dividend payment record date. Except as provided for in the preceding sentences,
no payment or allowance will be made for accrued dividends on any shares of
Series B Preferred called for redemption.
At its election, UAL, prior to the redemption date, may deposit the
redemption price of the shares of Series B Preferred so called for redemption in
trust for the holders thereof with a bank or trust company, in which case such
notice to holders of the shares of Series B Preferred to be redeemed will (i)
state the date of such deposit, (ii) specify the office of such bank or trust
company as the place of payment of the redemption price and (iii) call upon such
holders to surrender the certificates representing such shares at such place on
or after the date fixed in such redemption notice (which may not be later than
the redemption date), against payment of the redemption price (including all
accrued and unpaid dividends up to the redemption date). Any moneys so deposited
which remain unclaimed by the holders of Series B Preferred at the end of two
years after the redemption date will be returned by such bank or trust company
to UAL.
Liquidation Preference
The holders of shares of Series B Preferred are entitled to receive, in the
event of any liquidation, dissolution or winding up of UAL, $25,000 per share
plus an amount per share equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon to the date of final distribution to such
holders (for purposes of the description of the Series B Preferred, the
"Liquidation Preference"), and no more.
Until the holders of the Series B Preferred have been paid the Liquidation
Preference in full, no payment may be made to any holder of Junior Stock upon
the liquidation, dissolution or winding up of UAL. If, upon any liquidation,
dissolution or winding up of UAL, the assets of UAL or proceeds thereof,
distributable among the holders of the shares of Series B Preferred are
insufficient to pay in full the Liquidation Preference and the liquidation
preference with respect to any other shares of Parity Stock, then such assets,
or the proceeds thereof, will be distributed among the holders of shares of
Series B Preferred and any such Parity Stock ratably in accordance with the
respective amounts that would be payable on such shares of Series B Preferred
and any such Parity Stock if all amounts payable thereon were paid in full.
Neither a consolidation or merger of UAL with another corporation nor a sale,
lease or transfer of all or substantially all of UAL's assets will be considered
a liquidation, dissolution or winding up, voluntary or involuntary, of UAL.
Voting Rights
Except in the limited circumstances indicated below, or except as otherwise
from time to time required by applicable law, the holders of shares of Series B
Preferred do not have the right to vote for directors or have any other voting
rights, and their consent is not required for taking any corporate action. When
and if the holders of the Series B Preferred are entitled to vote, each share
will be entitled to 1,000 votes.
If the equivalent of six quarterly dividends payable on the Series B
Preferred have not been declared and paid or set apart for payment, whether or
not consecutive, the number of directors of UAL will be increased by two and the
holders of all Series B Preferred and any other series of preferred stock in
respect of which such a default exists, voting as a class without regard to
series, will be entitled to elect two additional directors at the next annual
meeting and each subsequent meeting, until all cumulative dividends on all such
serial preferred stock have been paid in full or set apart for payment at which
time the term of office of such directors shall terminate.
The affirmative vote or consent of the holders of 66 2/3% of the
outstanding shares of the Series B Preferred is required for any amendment of
the Restated Certificate of Incorporation that alters or changes the powers,
preferences, privileges or rights of the Series B Preferred so as to materially
adversely affect the holders thereof. The affirmative vote or consent of the
holders of shares representing 66 2/3% of the outstanding shares of the Series B
Preferred is required to authorize the creation or issue of, or reclassify any
authorized stock of
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UAL into, or issue or authorize any obligation or security convertible into or
evidencing a right to purchase, any additional class or series of stock ranking
senior to the Series B Preferred.
Except as required by law, the holders of Series B Preferred are not
entitled to vote on any merger or consolidation involving UAL or a sale of all
or substantially all of the assets of UAL.
Transfer Agent, Registrar, Dividend Disbursing Agent and Redemption Agent
The transfer agent, registrar, dividend agent and redemption agent for the
shares of Series B Preferred is First Chicago Trust Company of New York (in such
capacities, the "Transfer Agent"). First Chicago Trust Company of New York also
acts as the Depositary (the "Depositary") for the Depositary Shares.
DEPOSITARY SHARES
The Depositary Shares are issued under a Deposit Agreement (the "Deposit
Agreement") between UAL, First Chicago Trust Company of New York, as the
Depositary, and the holders from time to time of the Depositary Receipts. The
summary of terms of the Depositary Shares, the Depositary Receipts and the
Deposit Agreement contained in this Prospectus Supplement does not purport to be
complete.
General
Each Depositary Share represents one one-thousandth of a share of the
Series B Preferred (the equivalent of $25 liquidation preference of Series B
Preferred).
Subject to the terms of the Deposit Agreement, each owner of a Depositary
Share is entitled, in proportion to the applicable fraction of a share of the
Series B Preferred represented by such Depositary Share, to all the rights and
preferences of the shares of the Series B Preferred represented thereby
(including dividend, voting, redemption and liquidation rights).
The Depositary Shares are listed on the New York Stock Exchange.
Dividends and Other Distributions
The Depositary distributes all cash dividends or other cash distributions
received in respect of the shares of the Series B Preferred to the record
holders of Depositary Shares relating to the Series B Preferred in proportion to
the number of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary
distributes property received by it to the record holders of Depositary Shares
in an equitable manner in proportion to the number of such Depositary Shares
owned by such holders, unless the Depositary determines that it is not feasible
to make such distribution, in which case the Depositary may sell such property
and distribute the net proceeds from such sale to such holders.
Redemption of Depositary Shares
If the shares of the Series B Preferred represented by Depositary Shares
are redeemed, the Depositary Shares will be redeemed from the proceeds received
by the Depositary resulting from the redemption, in whole or in part, of such
shares of the Series B Preferred held by the Depositary. The redemption price
per Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to the shares of the Series B Preferred.
Whenever UAL redeems shares of the Series B Preferred held by the Depositary,
the Depositary redeems as of the same redemption date the number of Depositary
Shares representing shares of the Series B Preferred so redeemed. If fewer than
all the Depositary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected by lot, pro rata or by any other equitable method as
may be determined by the Depositary.
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Voting the Shares of the Series B Preferred
Upon receipt of notice of any meeting at which the holders of the Series B
Preferred are entitled to vote, the Depositary mails the information contained
in such notices of meeting to the record holders of the Depositary Shares
relating to such shares of the Series B Preferred. Each record holder of such
Depositary Shares on the record date (which will be the same date as the record
date for the shares of the Series B Preferred) is entitled to instruct the
Depositary as to the exercise of the voting rights pertaining to the fraction of
the shares of the Series B Preferred represented by such holder's Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the amount
of the shares of the Series B Preferred represented by such Depositary Shares in
accordance with such instructions, and UAL will agree to take all reasonable
action that may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting the shares of the
Series B Preferred to the extent it does not receive specific instructions from
the holder of Depositary Shares representing such shares of the Series B
Preferred.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between UAL and the Depositary. However, any amendment that materially and
adversely alters the rights of the holders of Depositary Shares will not be
effective unless the holders of at least a majority of the Depositary Shares
then outstanding approve such amendment. The Deposit Agreement will only
terminate if (i) all outstanding Depositary Shares have been redeemed or (ii)
there has been a final distribution in respect of the shares of the Series B
Preferred in connection with any liquidation, dissolution or winding up of UAL
and such distribution has been distributed to the holders of the Depositary
Receipts.
Charges of Depositary
UAL pays all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. UAL pays charges of
the Depositary in connection with the initial deposit of the shares of the
Series B Preferred and issuance of Depositary Receipts, all withdrawals of
shares of the Series B Preferred by owners of Depositary Shares and any
redemption of the shares of the Series B Preferred. Holders of Depositary
Receipts pay other transfer and other taxes and governmental charges and such
other charges as are expressly provided in the Deposit Agreement to be for their
accounts.
Resignation and Removal of Depositary
The Depositary may resign at any time by delivering to UAL notice of its
election to do so, and may at any time remove the Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Depositary and its acceptance of such appointment. Such successor Depositary
must be appointed within 60 days after delivery of the notice of resignation or
removal and must be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
Miscellaneous
The Depositary forwards all reports and communications from UAL that are
delivered to the Depositary and that UAL is required or otherwise determines to
furnish to the holders of the shares of the Series B Preferred.
Neither the Depositary nor UAL is liable under the Deposit Agreement to
holders of Depositary Receipts other than for its gross negligence, willful
misconduct or bad faith. Neither UAL nor the Depositary is obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares or
Series B Preferred unless satisfactory indemnity is furnished. UAL and the
Depositary may rely upon written advice of counsel or accountants, or upon
information provided by persons presenting shares of the Series B Preferred for
deposit, holders of Depositary Receipts or other persons believed to be
competent and on documents believed to be genuine.
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RELATIONSHIP BETWEEN THE PREFERRED SECURITIES, THE JUNIOR SUBORDINATED
DEBENTURES AND THE PREFERRED SECURITIES GUARANTEE
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and other payments due on the Preferred Securities primarily
because (i) the aggregate principal amount of Junior Subordinated Debentures
held as trust assets will be equal to the sum of the aggregate stated
liquidation amount of the Preferred Securities and the proceeds received by the
Trust upon issuance of the Common Securities to UAL; (ii) the interest rate and
interest and other payment dates on the Junior Subordinated Debentures will
match the distribution rate and distribution and other payment dates for the
Preferred Securities; (iii) the Declaration provides that UAL shall pay for all
debts and obligations (other than with respect to the Trust Securities) and all
costs and expenses of the Trust, including any taxes and all costs and expenses
with respect thereto, to which the Trust may become subject, except for United
States withholding taxes; and (iv) the Declaration further provides that the
Trustees shall not cause or permit the Trust, among other things, to engage in
any activity that is not consistent with the limited purposes of the Trust.
Payments of distributions and other payments due on the Preferred
Securities are guaranteed by UAL on a subordinated basis as and to the extent
set forth under "Description of the Preferred Securities Guarantee." If UAL does
not make interest or other payments on the Junior Subordinated Debentures, the
Trust will not make distributions or other payments on the Preferred Securities.
Under the Declaration, if and to the extent UAL does make interest or other
payments on the Junior Subordinated Debentures, the Institutional Trustee is
obligated to make distributions or other payments on the Preferred Securities.
The Preferred Securities Guarantee covers distributions and other payments on
the Preferred Securities only if and to the extent that UAL has made a payment
of interest or principal on the Junior Subordinated Debentures deposited in the
Trust as trust assets. The Preferred Securities Guarantee, when taken together
with UAL's obligations under the Junior Subordinated Debentures and the
Indenture and its obligations under the Declaration, including its obligation to
pay costs, expenses and certain liabilities of the Trust, constitutes a full and
unconditional guarantee of amounts due on the Preferred Securities.
The Institutional Trustee will have the power to exercise all rights,
powers and privileges under the Indenture with respect to the Junior
Subordinated Debentures, including its rights as the holder of the Junior
Subordinated Debentures to enforce UAL's obligations under the Junior
Subordinated Debentures upon the occurrence of an Indenture Event of Default,
and will also have the right to enforce the Preferred Securities Guarantee on
behalf of the holders of the Preferred Securities. In addition, the holders of
at least a majority in liquidation amount of the Preferred Securities will have
the right to direct the Institutional Trustee with respect to certain matters
under the Declaration and the Preferred Securities Guarantee. Under certain
circumstances, holders of Preferred Securities may institute a legal proceeding
against UAL to enforce the Preferred Securities Guarantee and the Company's
payment obligations on the Junior Subordinated Debentures. See "Description of
the Preferred Securities" and "Description of the Preferred Securities
Guarantee."
If a Special Event shall occur and be continuing, the Trust shall be
dissolved (unless the Junior Subordinated Debentures are redeemed) with the
result that Junior Subordinated Debentures held by the Trust having an aggregate
principal amount equal to the aggregate stated liquidation amount of the
Preferred Securities and Common Securities will be distributed on a Pro Rata
Basis in exchange for the outstanding Preferred Securities and Common
Securities, subject in the case of a Tax Event to UAL's right in certain
circumstances to redeem Junior Subordinated Debentures as described under
"Description of the Preferred Securities -- Special Event Redemption or
Distribution." The Preferred Securities represent preferred undivided beneficial
interests in the assets of the Trust, a statutory business trust which exists
for the purpose of (a) issuing (i) its Preferred Securities in exchange for
Depositary Shares validly tendered in the Offer and delivering such Depositary
Shares to UAL in consideration for the deposit by UAL of Junior Subordinated
Debentures in the Trust as trust assets, and (ii) its Common Securities to UAL
in exchange for cash and investing the proceeds thereof in an equivalent amount
of Junior Subordinated Debentures and (b) engaging in such other activities as
are necessary or incidental thereto.
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Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, after satisfaction of creditors, the holders of Trust Securities will
be entitled to receive the Liquidation Distribution in cash or Junior
Subordinated Debentures and will be entitled to the benefits of the Preferred
Securities Guarantee with respect to any such distribution. See "Description of
the Preferred Securities -- Liquidation Distribution Upon Dissolution." Upon any
voluntary or involuntary liquidation or bankruptcy of UAL, the holders of Junior
Subordinated Debentures would be subordinated creditors of UAL, subordinated in
right of payment to all Senior Indebtedness, but entitled to receive payment in
full of principal, premium, if any, and interest, before any stockholders of UAL
receive payments or distributions.
A default or event of default under any Senior Indebtedness would not
constitute a default or event of default under the Junior Subordinated
Debentures. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness, the subordination provisions of the Junior Subordinated
Debentures provide that no payments may be made in respect of the Junior
Subordinated Debentures. Failure to make required payments on the Junior
Subordinated Debentures would constitute an event of default under the
Indenture.
TAXATION
The following is a general summary of the material United States federal
income tax consequences of the issuance of Preferred Securities in exchange for
the Depositary Shares pursuant to the Offer, and of the ownership and
disposition of Preferred Securities. To the extent it relates to matters of law
or legal conclusions, this summary constitutes the opinion of Mayer, Brown &
Platt, special tax counsel to the Trust. Unless otherwise stated, this summary
deals only with Preferred Securities held as capital assets by Securityholders
who acquire the Preferred Securities pursuant to the Offer ("Initial Holders")
and who hold Depositary Shares as capital assets. This summary does not discuss
all the tax consequences that may be relevant to a particular Securityholder in
light of the Securityholder's particular circumstances and it is not intended to
be applicable in all respects to all categories of Securityholders, some of
whom -- such as insurance companies, tax-exempt persons, financial institutions,
regulated investment companies, dealers in securities or currencies, persons
that hold Depositary Shares or Preferred Securities received in the exchange as
a position in a "straddle," as part of a "synthetic security," "hedge,"
"conversion transaction" or other integrated investment or persons whose
functional currency is other than United States dollars -- may be subject to
different rules not discussed below. In addition, this summary does not address
any state, local or foreign tax considerations that may be relevant to a
Securityholder's decision to exchange Depositary Shares for Preferred Securities
pursuant to the Offer. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change (possibly on a retroactive basis).
ALL HOLDERS OF DEPOSITARY SHARES ARE ADVISED TO CONSULT THEIR TAX ADVISORS
AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OF
DEPOSITARY SHARES FOR PREFERRED SECURITIES AND OF THE OWNERSHIP AND DISPOSITION
OF PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS
THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
EXCHANGE OF DEPOSITARY SHARES FOR PREFERRED SECURITIES
The exchange of Depositary Shares for Preferred Securities pursuant to the
Offer will be a taxable transaction. In the case of an Initial Holder who
actually or constructively owns solely Depositary Shares, or who actually or
constructively owns Depositary Shares and a minimal percentage of any other
class of UAL stock, and who does not exercise any control over the affairs of
UAL, gain or loss will be recognized on an exchange of a Preferred Security for
a Depositary Share in an amount equal to the difference between the fair market
value on the Expiration Date of the Preferred Security (representing an
undivided interest in the Junior Subordinated Debentures) received in the
exchange and the exchanging Holder's tax basis in the Depositary Share exchanged
therefor and will be long-term capital gain or loss if the Depositary Share has
been held for more than one year as of such date. UAL will provide information
concerning such fair market
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value to the Exchange Agent, which will prepare and mail, prior to January 31,
1997, to each holder of record who exchanges Depositary Shares for Preferred
Securities, other than stockholders who demonstrate that they are not U.S.
persons (as described in clause (c) of paragraph (i) under "-- United States
Alien Holders"), a Form 1099-B reporting such information. It is anticipated
that persons who hold such Depositary Shares as nominees for beneficial holders
will provide such information to such beneficial holders in accordance with the
requirements of the New York Stock Exchange and securities regulations. It is
anticipated that persons who hold such Depositary Shares as nominees for
beneficial holders will provide such information to such beneficial holders. A
holder's aggregate tax basis in his or her pro rata share of the underlying
Junior Subordinated Debentures will be equal to his or her pro rata share of
their "issue price" on the Expiration Date as defined below.
Holders of Depositary Shares who actually or constructively own more than a
minimal percentage of any other class of UAL stock are advised to consult their
tax advisors as to the income tax consequences of exchanging Depositary Shares.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, Mayer, Brown &
Platt, special tax counsel to the Trust, will render its opinion generally to
the effect that, under then current law and assuming full compliance with the
terms of the Declaration, the Trust will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, each Securityholder will be considered the owner of a
pro rata portion of the Junior Subordinated Debentures held by the Trust and
will be required to include in gross income his or her pro rata share of the
income accrued on the Junior Subordinated Debentures.
ACCRUAL OF ORIGINAL ISSUE DISCOUNT AND PREMIUM
The Junior Subordinated Debentures will be considered to have been issued
with "original issue discount" and each Securityholder, including a
Securityholder who otherwise uses the cash method of accounting, will be
required to include his or her pro rata share of original issue discount on the
Junior Subordinated Debentures in income as it accrues, in accordance with a
constant yield method based on a compounding of interest, before the receipt of
cash distributions on the Preferred Securities. Generally, all of a
Securityholder's taxable interest income with respect to the Junior Subordinated
Debentures will be accounted for as "original issue discount" and actual
distributions of stated interest will not be separately reported as taxable
income. So long as the interest payment period is not extended, cash
distributions received by an Initial Holder for any quarterly interest period
(assuming no disposition prior to the record date for such distribution) will
equal or exceed the sum of the daily accruals of income for such quarterly
interest period, unless the issue price of the Junior Subordinated Debentures
(as defined below) is less than $25.
The total amount of "original issue discount" on the Junior Subordinated
Debentures will equal the difference between the "issue price" of the Junior
Subordinated Debentures and their "stated redemption price at maturity." Because
UAL has the right to extend the interest payment period of the Junior
Subordinated Debentures, all of the stated interest payments on the Junior
Subordinated Debentures will be includible in determining their "stated
redemption price at maturity." The "issue price" of each $25 principal amount of
the Junior Subordinated Debentures will be equal to the fair market value of a
Preferred Security on the Expiration Date, which may be more or less than $25,
with the result that the total amount of original issue discount on the Junior
Subordinated Debentures may be more or less than the amount of stated interest
payable with respect thereto. The issue price of each $25 principal amount of
the Junior Subordinated Debentures may be reduced by the Pre-issuance Accrued
Distribution. If a Securityholder computes the issue price of his or her pro
rata share of the Junior Subordinated Debentures in this manner, then the
payment of such amount will be treated as a return of capital rather than as an
interest payment. UAL and the Trust may elect to compute the issue price of the
Junior Subordinated Debentures in this manner and, if so, will report the
payment of such amount on IRS Form 1099-B.
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A Securityholder's initial tax basis for his or her pro rata share of the
Junior Subordinated Debentures will be equal to the fair market value on the
Expiration Date of the Preferred Securities held by such Securityholder, and
will be increased by original issue discount accrued with respect thereto, and
reduced by the amount of cash distributions (including the amount of
Pre-issuance Accrued Distribution) paid to such Securityholder. No portion of
the amounts received on the Preferred Securities will be eligible for the
dividends received deduction for corporate holders.
POTENTIAL EXTENSION OF PAYMENT PERIOD ON THE JUNIOR SUBORDINATED DEBENTURES
Securityholders will continue to accrue original issue discount with
respect to their pro rata share of the Junior Subordinated Debentures during an
Extension Period, and any holders who dispose of Preferred Securities prior to
the record date for the payment of interest following such extended interest
payment period will not receive from the Trust any cash related thereto. If (i)
UAL elects to defer interest payments on the Junior Subordinated Debentures and
(ii) the issue price of the Junior Subordinated Debentures is greater than or
less than $25, in general, such deferral could cause the yield used to accrue
OID on the Junior Subordinated Debentures to increase or decrease, respectively,
which in turn would cause a certain amount of OID to accrue earlier or later,
respectively, than would have been the case if there had been no such deferral
of interest payments.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of the Preferred
Securities -- Special Event Redemption or Distribution" will be non-taxable and
will result in the Securityholder receiving directly his or her pro rata share
of the Junior Subordinated Debentures previously held indirectly through the
Trust, with a holding period and tax basis equal to the holding period and
adjusted tax basis such Securityholder was considered to have had in his or her
pro rata share of the underlying Junior Subordinated Debentures prior to such
distribution.
DISPOSITION OF THE PREFERRED SECURITIES
Upon a sale, exchange or other disposition of the Preferred Securities
(including a distribution of cash in redemption of a Securityholder's Preferred
Securities upon redemption or repayment of the underlying Junior Subordinated
Debentures, but excluding the distribution of Junior Subordinated Debentures), a
Securityholder will be considered to have disposed of all or part of his or her
pro rata share of the Junior Subordinated Debentures, and will recognize gain or
loss equal to the difference between the amount realized and the
Securityholder's adjusted tax basis in his or her pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. Gain or loss will
be capital gain or loss (except, in the case of a Securityholder that is not an
Initial Holder, to the extent of any accrued market discount with respect to
such Securityholder's pro rata share of the Junior Subordinated Debentures not
previously included in income). Such gain or loss will be long-term capital gain
or loss if the Preferred Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. In such event, a Securityholder who disposes of
Preferred Securities and does not receive a payment of interest from the Trust
for the period in which the disposition occurs will nevertheless be required to
include accrued but unpaid interest on the Junior Subordinated Debentures
through the date of disposition in income as ordinary income, and to add such
amount to his or her adjusted tax basis in his or her pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. Accordingly, such
a Securityholder will recognize a capital loss to the extent the selling price
(which may not fully reflect the value of accrued but unpaid interest) is less
than the Securityholder's adjusted tax basis (which will include accrued but
unpaid interest). Subject to certain limited exceptions, capital losses cannot
be applied to offset ordinary income for United States income tax purposes.
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UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
beneficial owner of Preferred Securities or Depositary Shares that is not a U.S.
person. For purposes of this discussion, a "U.S. person" means a citizen or
resident of the United States, a corporation or partnership created or organized
in the United States or under the law of the United States or of any State or
political subdivision of the foregoing, any estate whose income is includible in
gross income for U.S. federal income tax purposes regardless of its source or a
"United States Trust." A United States Trust is (a) for taxable years beginning
after December 31, 1996, or if the trustee of a trust elects to apply the
following definition to an earlier taxable year, any trust if, and only if, (i)
a court within the United States is able to exercise primary supervision over
the administration of the trust and (ii) one or more U.S. trustees have the
authority to control all substantial decisions of the trust, and (b) for all
other taxable years, any trust whose income is includible in gross income for
United States Federal income tax purposes regardless of its source.
Except as otherwise described below, under present United States federal
income tax law:
(i) payments by the Trust or any of its paying agents to any holder of
a Preferred Security who or which is a United States Alien Holder will not
be subject to United States federal withholding tax, provided that (a) the
beneficial owner of the Preferred Security does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of UAL entitled to vote, (b) the beneficial owner of the
Preferred Security is not a controlled foreign corporation that is related
to UAL through stock ownership, and (c) either (A) the beneficial owner of
the Preferred Security certifies to the Trust or its agent, under penalties
of perjury, that it is not a U.S. person and provides its name and address
or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution") and holds the Preferred
Security certifies to the Trust or its agent under penalties of perjury
that such statement has been received from the beneficial owner by it or by
a Financial Institution between it and the beneficial owner and furnishes
the Trust or its agent with a copy thereof;
(ii) a United States Alien Holder of a Preferred Security will not be
subject to United States federal withholding tax on any gain realized upon
the sale or other disposition of a Preferred Security; and
(iii) any gain realized by a United States Alien Holder upon the
exchange of Depositary Shares for Preferred Securities will not be subject
to United States federal withholding tax.
Gain recognized by a United States Alien Holder on the exchange of
Depositary Shares for Preferred Securities and gain on the disposition of
Preferred Securities will be subject to United States federal income tax if (i)
such gain is effectively connected with a trade or business conducted by such
United States Alien Holder within the United States (in which case the branch
profits tax may also apply if the United States Alien Holder is a foreign
corporation), (ii) in the case of a United States Alien Holder that is an
individual, such United States Alien Holder is present in the United States for
a period or periods aggregating 183 days or more in the taxable year of the sale
or exchange and certain other conditions are met or (iii) UAL is or has been a
"United States real property holding corporation" for federal income tax
purposes (which UAL does not believe it has been or is currently) and such
United States Alien Holder has held, directly or constructively, more than 5% of
the outstanding Depositary Shares within the five-year period ending on the date
of the sale or exchange, and no treaty exception is applicable.
If a United States Alien Holder is engaged in a trade business within the
United States and interest (including original issue discount) and premium, if
any, on Preferred Securities is effectively connected with the conduct of such
trade or business, such United States Alien Holder may be subject to United
States federal income tax on such interest (including original issue discount)
and premium at ordinary federal income tax rates on a net basis (in which case
the branch profits tax may also apply if the United States Alien Holder is a
foreign corporation).
On April 15, 1996, proposed Treasury Regulations (the "Proposed
Regulations") were issued which, if adopted in final form, could affect the
United States taxation of United States Alien Holders, including
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changing the certification requirements. The Proposed Regulations are generally
proposed to be effective for payments after 1997, regardless of the issue date
of the note with respect to which such payments were made. It cannot be
predicted at this time whether the Proposed Regulations will become effective as
proposed or what, if any, modifications may be made to them.
INFORMATION REPORTING TO HOLDERS
The Trust will report the original issue discount that accrued during the
year with respect to the Junior Subordinated Debentures, and any gross proceeds
received by the Trust from the retirement or redemption of the Junior
Subordinated Debentures, annually on IRS Form 1041 to the holders of record of
the Preferred Securities and the Internal Revenue Service. The Trust currently
intends to deliver such reports to holders of record prior to January 31
following each calendar year. It is anticipated that persons who hold Preferred
Securities as nominees for beneficial holders will report the required tax
information to beneficial holders on IRS Form 1099. As described below under
"-- Backup Withholding," different reporting rules may apply to United States
Alien Holders.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, Preferred Securities may
be subject to a "backup" withholding tax of 31% unless such Securityholder (i)
is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable backup withholding rules. Information
reporting on IRS Form 1099 (including IRS Form 1099-B) and backup withholding at
a rate of 31% will not apply to payments of principal and interest (including
original issue discount) made by the Trust or a paying agent to a United States
Alien Holder on Preferred Securities if the certification described in clause
(c) of paragraph (i) under "-- United States Alien Holders" is received,
provided that the payor does not have actual knowledge that the Securityholder
is a U.S. person. However, interest (including original issue discount) on
Junior Subordinated Debentures beneficially owned by a United States Alien
Holder may be required to be reported annually on IRS Form 1041 and will be
required to be reported annually on IRS Form 1042S. Any withheld amounts will
generally be allowed as a credit against the Securityholder's federal income
tax, provided the required information is timely filed with the Internal Revenue
Service.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such as
the Junior Subordinated Debentures, issued on or after December 7, 1995. On
March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House
Ways and Means Committee Chairman Bill Archer issued a joint statement (the
"Joint Statement") indicating their intent that the Proposed Legislation, if
adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." In addition, subsequent to the publication of the Joint Statement,
Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles
B. Rangel wrote letters to Treasury Department officials concurring with the
view expressed in the Joint Statement (the "Democrat Letters"). If the
principles contained in the Joint Statement and the Democrat Letters were
followed and the Proposed Legislation were enacted, such legislation would not
apply to the Junior Subordinated Debentures. There can be no assurance, however,
that the effective date guidance contained in the Joint Statement will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of UAL to deduct the interest payable on the Junior Subordinated
Debentures. Accordingly, there can be no assurance that a Tax Event will not
occur. The occurrence of a Tax Event may, among other things, result in a
dissolution of the Trust in which holders of the Preferred Securities may
receive cash, which would be a taxable event to such holders. See
"-- Disposition of the Preferred Securities" and "Description of the Preferred
Securities -- Special Event Redemption or Distribution."
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LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon for the Trust by Richards, Layton & Finger,
special Delaware counsel to the Trust and UAL. The validity of the Preferred
Securities Guarantee and the Junior Subordinated Debentures, and certain legal
matters in connection with the Preferred Securities, the Preferred Securities
Guarantee and the Junior Subordinated Debentures, will be passed upon for the
Trust and UAL by Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters
in connection with the Preferred Securities will be passed upon for the Dealer
Managers by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Skadden, Arps, Slate, Meagher & Flom LLP, from time to time, provides legal
services for UAL.
EXPERTS
The consolidated financial statements and related schedules of UAL
Corporation and subsidiary companies as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995, incorporated by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974 ("ERISA"), or Section 4975 of the Code
("Plans"), may purchase Preferred Securities, subject to the investing
fiduciary's determination that the investment in Preferred Securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the Plan.
In any case, UAL and/or any of its affiliates may be considered a "party in
interest" (within the meaning of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code) with respect to certain plans (generally,
Plans maintained or sponsored by, or contributed to by, any such persons). The
acquisition and ownership of Preferred Securities by a Plan (or by an individual
retirement arrangement or other Plans described in Section 4975(e)(i) of the
Code) with respect to which UAL or any of its affiliates is considered a party
in interest or a disqualified person, may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Preferred
Securities are acquired pursuant to and in accordance with an applicable
exemption.
As a result, Plans with respect to which UAL or any of its affiliates is a
party in interest or a disqualified person should not acquire Preferred
Securities. Any other Plans or other entities whose assets include Plan assets
subject to ERISA proposing to acquire Preferred Securities should consult with
their own ERISA counsel.
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Facsimile copies of the Letter of Transmittal will be accepted. Letters of
Transmittal, certificates representing Depositary Shares and any other required
documents should be sent by each Holder of Depositary Shares or his broker,
dealer, commercial bank, trust company or other nominee to the Exchange Agent at
one of the addresses as set forth below:
THE EXCHANGE AGENT IS:
THE BANK OF NEW YORK
By Hand or Overnight Courier: By Mail:
The Bank of New York (registered or certified
Corporate Debt Operations mail recommended)
101 Barclay Street The Bank of New York
(7 East) Corporate Debt Operations
New York, New York 10286 101 Barclay Street
Attn: Enrique Lopez (7 East)
New York, New York 10286
Attn: Enrique Lopez
By Facsimile:
(For Eligible Institutions Only)
(212) 571-3080
Confirm Receipt by Telephone:
(212) 815-2742
Attn: Enrique Lopez
THE INFORMATION AGENT IS:
(LOGO)
Wall Street Plaza
New York, New York 10005
(800) 223-2064 (Toll-Free)
(212) 440-9800 (Call Collect)
Any questions or requests for assistance or additional copies of this
Prospectus, the Letter of Transmittal or for copies of the Notice of Guaranteed
Delivery may be directed to the Information Agent at its telephone number and
location set forth above. You may also contact your broker, dealer, commercial
bank or trust company or other nominee for assistance concerning the Offer.
THE DEALER MANAGERS FOR THE OFFER ARE:
MERRILL LYNCH & CO. SMITH BARNEY INC.
World Financial Center 388 Greenwich Street
North Tower -- Seventh Floor New York, New York 10013
New York, New York 10281 (800) 655-4811 (Toll-Free)
(888) ML4-TNDR (Toll-Free) Attn: Paul S. Galant
(888) 654-8637 (Toll-Free)
Attn: Susan L. Weinberg
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION OF LIABILITY OF DIRECTORS
UAL's Restated Certificate of Incorporation provides that no director of
UAL will be personally liable to UAL or its stockholders for monetary damages
for any breach of fiduciary duty by such director as a director, except for
liability (i) for any breach of the director's duty of loyalty to UAL or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law ("DGCL") or (iv) for any
transaction from which the director derived an improper personal benefit.
The above provision is intended to afford directors additional protection
and limit their potential liability from suits alleging a breach of the duty of
care by a director. As a result of the inclusion of such a provision,
stockholders may be unable to recover monetary damages against directors for
actions taken by them that constitute negligence or gross negligence or that are
otherwise in violation of their fiduciary duty of care, although it may be
possible to obtain injunctive or other equitable relief with respect to such
actions. If equitable remedies are found not to be available to stockholders in
any particular situation, stockholders may not have an effective remedy against
a director in connection with such conduct.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
UAL's Restated Certificate of Incorporation provides that directors and
officers of UAL shall be indemnified against liabilities arising from their
service as directors and officers to the full extent permitted by law.
Section 145 of the DGCL empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145 also empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no such indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless, and only to the extent that, the Court of Chancery or the
court in which such action was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent that a director or officer
of a corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation is empowered to purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out
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of his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
UAL has purchased directors' and officers' liability insurance covering
certain liabilities incurred by its directors and officers in connection with
the performance of their duties.
INDEMNIFICATION OF TRUSTEES
The Declaration provides that no Trustee, affiliate of any Trustee or any
officers, directors, shareholders, members, partners, employees, representatives
or agents of any Trustee or any employee or agent of the Trust or its affiliates
(each, an "Indemnified Person") shall be liable, responsible or accountable in
damages or otherwise to the Trust or any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or its
affiliates, any officer, director, shareholder, employee, representative or
agent of UAL or its affiliates or to any holders from time to time of Trust
Securities of the Trust for any loss, damage or claim incurred by reason of any
act or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably believed
to be within the scope of the authority conferred on such Indemnified Person by
the Declaration or by law, except that an Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Indemnified Person's
gross negligence (or, in the case of the Institutional Trustee, negligence) or
willful misconduct with respect to such acts or omission. The Declaration also
provides that, to the fullest extent permitted by applicable law, UAL shall
indemnify and hold harmless each Indemnified Person from and against any loss,
damage or claim incurred by such Indemnified Person by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by the
Declaration, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Indemnified
Person by reason of gross negligence (or, in the case of the Institutional
Trustee, negligence) or willful misconduct with respect to such acts or
omissions. The Declaration further provides that to the fullest extent permitted
by applicable law, expenses (including legal fees) incurred by an Indemnified
Person in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by UAL prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by UAL of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified
pursuant to the Declaration. The Declaration does not preclude holders of
Preferred Securities from instituting actions under the federal securities laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
A list of exhibits included as part of this Registration Statement is
set forth in an Exhibit Index which immediately precedes such exhibits.
(b) The following financial statement schedules are filed as part of this
Registration Statement:
None.
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the Financial
Statements of the Registrant or Notes thereto.
ITEM 22. UNDERTAKINGS.
Each of the Registrants hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of UAL's Annual Report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the
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Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(3) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or equally prompt means. This
includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date responding to
the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
(5) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(6) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(7) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, UAL Corporation
has duly caused this amended Registration Statement on Form S-4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in Elk Grove Township,
Illinois on the 20th day of November, 1996.
UAL CORPORATION
By: /s/ DOUGLAS A. HACKER
------------------------------
Douglas A. Hacker
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities indicated on the 20th day of November, 1996.
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
* Chairman and Chief Executive Officer
- ---------------------------------------------
Gerald Greenwald
* Senior Vice President and Chief Financial Officer
- --------------------------------------------- (principal financial and accounting officer)
Douglas A. Hacker
* Director
- ---------------------------------------------
John A. Edwardson
* Director
- ---------------------------------------------
Duane D. Fitzgerald
* Director
- ---------------------------------------------
Michael H. Glawe
Director
- ---------------------------------------------
Richard D. McCormick
* Director
- ---------------------------------------------
John F. McGillicuddy
* Director
- ---------------------------------------------
James J. O'Connor
* Director
- ---------------------------------------------
John F. Peterpaul
* Director
- ---------------------------------------------
Paul E. Tierney, Jr.
* Director
- ---------------------------------------------
John K. Van de Kamp
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SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
* Director
- ---------------------------------------------
Joseph V. Vittoria
* Director
- ---------------------------------------------
Paul A. Volcker
*By: /s/ DOUGLAS A. HACKER
- ---------------------------------------------
Douglas A. Hacker
Attorney-in-fact
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
UAL Corporation Capital Trust I, has duly caused this amended Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in Elk Grove Township, Illinois on this 20th day of November,
1996.
UAL CORPORATION CAPITAL TRUST I
By: UAL Corporation, as Sponsor
By: /s/ DOUGLAS A. HACKER
----------------------------------
Name: Douglas A. Hacker
Title: Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT SEQUENTIAL
NO. DOCUMENT PAGE NUMBER
- ----------------------------------------------------------------------------------------------
1 -- Form of Dealer Manager Agreement..................................... *
4.1 -- Form of Indenture between UAL and The First National Bank of Chicago,
as Trustee........................................................... *
4.2 -- Declaration of Trust of UAL Corporation Capital Trust I.............. *
4.3 -- Certificate of Trust of UAL Corporation Capital Trust I.............. *
4.4 -- Form of Amended and Restated Declaration of Trust of UAL Corporation
Capital Trust I......................................................
4.5 -- Form of Preferred Security (included in Exhibit 4.4)
4.6 -- Form of Junior Subordinated Debenture (included in Exhibit 4.8)
4.7 -- Form of Guarantee Agreement with respect to Preferred Securities..... *
4.8 -- Form of Officer's Certificate relating to the Junior Subordinated
Debentures...........................................................
5.1 -- Opinion of Mayer, Brown & Platt...................................... *
5.2 -- Opinion of Richards, Layton & Finger................................. *
8 -- Tax Opinion of Mayer, Brown & Platt (included in Exhibit 5.1)
23.1 -- Consent of Arthur Andersen LLP.......................................
23.2 -- Consent of Mayer, Brown & Platt (included in Exhibit 5.1)
23.3 -- Consent of Richards, Layton & Finger (included in Exhibit 5.2)
24.1 -- Powers of Attorney for UAL Corporation (included on signature page to
the original registration statement)
24.2 -- Power of Attorney for UAL Corporation, as sponsor, to sign this
Registration Statement on behalf of UAL Corporation Capital Trust I
(included in Exhibit 4.2)
25.1 -- Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee under the
Indenture............................................................
25.2 -- Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Institutional
Trustee, under the Amended and Restated Declaration of Trust.........
25.3 -- Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Indenture Trustee,
under the Preferred Securities Guarantee.............................
99.1 -- Form of Letter of Transmittal........................................ *
99.2 -- Form of Notice of Guaranteed Delivery................................ *
99.3 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees................................................... *
99.4 -- Form of Letter to Clients............................................ *
99.5 -- Form of Exchange Agent Agreement.....................................
99.6 -- Form of Information Agent Agreement..................................
99.7 -- Form of UAL Letter to Holders of Depositary Shares representing
12 1/4% Preferred Stock, Series B.................................... *
99.8 -- Questions and Answers Regarding Preferred Securities................. *
99.9 -- Form of Notice of Offer to Exchange.................................. *
- ---------------
* Previously filed.
1
EXHIBIT 4.4
AMENDED AND RESTATED
DECLARATION OF TRUST
of
UAL Corporation Capital Trust I
__________ __, 1996
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of _____________ __, 1996 by the undersigned trustees (together
with all other Persons from time to time duly appointed and serving as trustees
in accordance with the provisions of this Declaration, the "Trustees"), UAL
Corporation, a Delaware corporation, as trust sponsor ("UAL" or the "Sponsor")
and the holders from time to time of undivided interests in the assets of the
Trust (as hereinafter defined).
WHEREAS, the Sponsor and certain of the Trustees entered into a
Declaration of Trust dated as of October 15, 1996 (the "Original Declaration")
in order to establish a statutory business trust (the "Trust") under the
Business Trust Act (as hereinafter defined);
WHEREAS, the Certificate of Trust (the "Certificate of Trust") of the
Trust was filed with the office of the Secretary of State of the State of
Delaware on October 15, 1996;
WHEREAS, the Trustees and the Sponsor desire to continue the Trust
pursuant to the Business Trust Act for the purpose of, as described more fully
in Section 3.3 hereof, (i) issuing Preferred Securities (as hereinafter
defined) representing undivided beneficial interests in the assets of the Trust
in exchange for Depositary Shares ("Depositary Shares") each representing
1/1,000 of a share of 12-1/4% Series B Preferred Stock (as hereinafter defined)
of UAL pursuant to the Offer (as hereinafter defined) and delivering such
Depositary Shares to UAL in consideration for the deposit by UAL as trust
assets of Debentures (as hereinafter defined) of UAL issued under the Indenture
(as hereinafter defined) and (ii) issuing and selling Common Securities (as
hereinafter defined) representing undivided beneficial interests in the assets
of the Trust to UAL in exchange for cash and investing the proceeds thereof in
additional Debentures (as hereinafter defined) of UAL issued under the
Indenture to be held as assets of the Trust; and
NOW, THEREFORE, it being the intention of the parties hereto that the
Trust constitute a business trust under the Business Trust Act, that the
Original Declaration be amended and restated in its entirety as provided herein
and that this Declaration
2
constitute the governing instrument of such business trust, the Trustees
declare that all assets referred to in clauses (i) and (ii) of the previous
recital clause contributed to or purchased by the Trust will be held in trust
for the benefit of the Holders (as hereinafter defined) from time to time, of
the Certificates (as hereinafter defined) representing undivided beneficial
interests in the assets of the Trust issued hereunder, subject to the
provisions of this Declaration.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Amended and Restated Declaration of Trust (including Exhibits A, B and C
hereto (the "Exhibits")) as modified, supplemented or amended from time to
time;
(d) all references in this Declaration to Articles and Sections and
Exhibits are to Articles and Sections of and Exhibits to this Declaration
unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration or
unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
"Book Entry Interest" means a beneficial interest in a Certificate
registered in the name of a Clearing Agency or a nominee thereof, ownership and
transfers of which shall be maintained and made through book entries by such
Clearing Agency as described in Section 9.4.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions are authorized or
obligated by law or executive order to close in the Place of Payment (as such
term is defined in the Indenture).
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"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Sec. 3801 et seq., as it may be amended from time to time.
"Certificate" means a Common Security Certificate or a Preferred
Security Certificate.
"Certificate of Trust" has the meaning set forth in the second Whereas
clause above.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as a
depository for the Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a certificate and which shall
undertake to effect book entry transfers and pledges of the Preferred
Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor legislation. A reference to a specific section of the
Code refers not only to such specific section but also to any corresponding
provision of any federal tax statute enacted after the date of this
Declaration, as such specific section or corresponding provision is in effect
on the date of application of the provisions of this Declaration containing
such reference.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Security" has the meaning specified in Section 7.1(b).
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or its
Affiliates, (ii) any officer, director, shareholder, employee, representative
or agent of UAL or its Affiliates and (iii) the Holders from time to time of
the Securities.
"Dealer Manager Agreement" means the dealer manager agreement entered
into among UAL, the Trust and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Smith Barney Inc. with
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respect to, among other things, the Offer and the Preferred Securities.
"Debenture Trustee" means The First National Bank of Chicago as
trustee under the Indenture until a successor is appointed thereunder and
thereafter means any such successor trustee.
"Debentures" means the series of Junior Subordinated Debentures issued
by UAL under the Indenture to the Trust and entitled the "13 1/4% Junior
Subordinated Debentures due 2026".
"Delaware Trustee" has the meaning set forth in Section 5.1(a)(3).
"Distribution" means a distribution payable to Holders of Securities
in accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Securities means an Indenture
Event of Default has occurred and is continuing in respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"Expiration Date" has the meaning set forth in the Prospectus.
"Fiscal Year" has the meaning specified in Section 11.1.
"Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"Indemnified Person" means any Trustee, any Affiliate of any Trustee,
any officers, directors, shareholders, members, partners, employees,
representatives or agents of any Trustee, or any employee or agent of the Trust
or its Affiliates.
"Indenture" means the Indenture dated as of [______________], 1996
between UAL and the Debenture Trustee as supplemented by the board resolution,
supplemental indenture or officers' certificate pursuant to which the
Debentures are to be issued.
"Indenture Event of Default" means any event or condition defined as
an "Event of Default" with respect to the Debentures under Section 5.1 of the
Indenture has occurred and is continuing.
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"Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.1(c) and having the duties set forth for
the Institutional Trustee herein.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Legal Action" has the meaning specified in Section 3.6(g).
"Liquidation Distribution" has the meaning set forth in Exhibits B and
C hereto establishing the terms of the Securities.
"Majority in liquidation amount of the Securities" means, except as
otherwise required by the Trust Indenture Act and except as provided in the
penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holder(s) of outstanding Preferred Securities or Common Securities
each voting separately as a class, who are the record owners of a relevant
class of Securities whose liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
represents more than 50% of the liquidation amount of all outstanding
Securities of such class.
"Ministerial Action" has the meaning set forth in the terms of the
Securities as set forth in Exhibits B and C hereto.
"Offer" means the offer by the Trust to exchange Preferred Securities
of the Trust for outstanding Depositary Shares of UAL in consideration for the
deposit to the Trust by UAL as trust assets, of Debentures issued under the
Indenture, all as described in the Prospectus.
"Original Declaration" has the meaning set forth in the first recital
clause above.
"Paying Agent" has the meaning specified in Section 3.8(g).
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever
nature.
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"Preferred Guarantee" means the Guarantee Agreement dated as of
[___________], 1996 of UAL in respect of the Preferred Securities.
"Preferred Security" has the meaning specified in Section 7.1(b).
"Preferred Security Beneficial Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive certificate in
fully registered form representing a Preferred Security substantially in the
form of Annex I to Exhibit B.
"Prospectus" means the Prospectus dated November 20, 1996 relating to
the Offer.
"Quorum" means a majority of the Regular Trustees or, if there are
only two Regular Trustees, both such Regular Trustees.
"Regular Trustee" means any Trustee other than the Institutional
Trustee and the Delaware Trustee.
"Related Party" means any direct or indirect wholly owned subsidiary
of UAL or any other Person which owns, directly or indirectly, 100% of the
outstanding voting securities of UAL.
"Resignation Request" has the meaning specified in Section 5.2(d).
"Responsible Officer" means, with respect to the Institutional
Trustee, the chairman of the board of directors, the president, any
vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Institutional Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act or any
successor rule thereunder.
"Securities" means the Common Securities and the Preferred Securities.
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"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Series B Preferred Stock" means the 12-1/4% Series B Preferred Stock
of UAL.
"Special Event" has the meaning set forth in the terms of the
Securities as set forth in Exhibits B and C hereto.
"Sponsor" or "UAL" means UAL Corporation, a Delaware corporation, or
any successor entity in a merger or consolidation, in its capacity as sponsor
of the Trust.
"Successor Delaware Trustee" has the meaning specified in Section
5.2(b)(ii).
"Successor Institutional Trustee" means a successor Trustee possessing
the qualifications to act as Institutional Trustee under Section 5.1(c).
"10% in liquidation amount of the Securities" means, except as
otherwise required by the Trust Indenture Act and except as provided in the
penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holder(s) of outstanding Preferred Securities or Common Securities,
voting separately as a class, who are the record owners of a relevant class of
Securities whose liquidation amount (including the stated amount that would be
paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
represents 10% or more of the liquidation amount of all outstanding Securities
of such class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.
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"UAL Corporation Capital Trust" shall mean any statutory business
trust created under the laws of the State of Delaware specified in the
applicable board resolution, supplemental indenture or officers' certificate
establishing a particular series of debt securities pursuant to Section 3.1 of
the Indenture.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall, to
the extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control;
(c) the Institutional Trustee, to the extent permitted by applicable
law and/or the rules and regulations of the Commission, shall be the only
Trustee which is a trustee for the purposes of the Trust Indenture Act; and
(d) the application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Preferred Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of the
Trust shall provide the Institutional Trustee with such information as is
required under Section 312(a) of the Trust Indenture Act at the times and in
the manner provided in Section 312(a); and
(b) the Institutional Trustee shall comply with its obligations under
Sections 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Institutional Trustee.
Within 60 days after May 15 of each year, the Institutional Trustee
shall provide to the Holders of the Securities such reports, if any, as are
required by Section 313 of the Trust Indenture Act in the form, in the manner
and at the times provided by Section 313 of the Trust Indenture Act. The
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Institutional Trustee shall also comply with the requirements of Section 313(d)
of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Institutional Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Institutional Trustee, the Commission and the Holders of
the Securities, as applicable, such documents, reports and information, if any,
as required by Section 314(a)(1)-(3) of the Trust Indenture Act and the
compliance certificates required by Section 314(a)(4) and (c) of the Trust
Indenture Act, any such certificates to be provided in the form, in the manner
and at the times required by Section 314(a)(4) and (c) of the Trust Indenture
Act (provided that any certificate to be provided pursuant to Section 314(a)(4)
of the Trust Indenture Act shall be provided within 120 days of the end of each
Fiscal Year).
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Institutional Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration which relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given pursuant to Section 314(c) shall
comply with Section 314(e) of the Trust Indenture Act.
SECTION 2.6 Events of Default; Waiver.
(a) Subject to Section 2.6(c), Holders of Preferred Securities may by
vote of at least a Majority in liquidation amount of the Preferred Securities,
voting separately as a class, (A) in accordance with the terms of the Preferred
Securities, direct the time, method and place of conducting any proceeding for
any remedy available to the Institutional Trustee, or exercising any trust or
power conferred upon the Institutional Trustee, or (B) on behalf of all Holders
of Preferred Securities waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that if the Event of
Default arises out of an Indenture Event of Default:
(i) which is not waivable under the Indenture, the Event of
Default under this Declaration shall also not be waivable; or
(ii) which requires the consent or vote of (1) holders of
Debentures representing a specified percentage greater than a majority in
principal amount of the Debentures, or (2) each holder of Debentures, the Event
of Default under this Declaration
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may only be waived by, in the case of clause (1) above, the vote of Holders of
Preferred Securities representing such specified percentage of the aggregate
liquidation amount of the Preferred Securities, or, in the case of clause (2)
above, each Holder of Preferred Securities.
Upon such waiver, any such default shall cease to exist, and any Event of
Default with respect to the Preferred Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default with
respect to the Preferred Securities or impair any right consequent thereon.
(b) Subject to Section 2.6(c), Holders of Common Securities may by
vote of at least a Majority in liquidation amount of the Common Securities,
voting separately as a class, (A) in accordance with the terms of the Common
Securities, direct the time, method and place of conducting any proceeding for
any remedy available to the Institutional Trustee, or exercising any trust or
power conferred upon the Institutional Trustee, or (B) on behalf of all Holders
of Common Securities, waive any past Event of Default with respect to the
Common Securities and its consequences, provided that, if the Event of Default
arises out of an Indenture Event of Default:
(i) which is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived such Event of
Default under the Declaration as provided below, the Event of Default under
this Declaration shall also not be waivable; or
(ii) which requires the consent or vote of (1) holders of
Debentures representing a specified percentage greater than a majority in
principal amount of the Debentures or (2) each holder of Debentures, except
where the holders of the Common Securities are deemed to have waived such Event
of Default under this Declaration as provided below, the Event of Default under
this Declaration may only be waived by, in the case of clause (1) above, the
vote of Holders of Common Securities representing such specified percentage of
the aggregate liquidation amount of the Common Securities, or, in the case of
clause (2) above, each Holder of Common Securities; and provided, further that,
each Holder of Common Securities will be deemed to have waived any Event of
Default with respect to the Common Securities and its consequences until all
Events of Default with respect to the Preferred Securities have been cured,
waived by the Holders of Preferred Securities as provided in this Declaration
or otherwise eliminated and, until all Events of Default with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Institutional Trustee will be deemed to be acting solely on behalf of the
Holders of the Preferred Securities and only the Holders of the Preferred
Securities will have the right
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to direct the Institutional Trustee in accordance with the terms of this
Declaration or the Securities. If any Event of Default with respect to the
Preferred Securities is waived by the Holders of Preferred Securities as
provided in this Declaration, the Holders of Common Securities agree that such
waiver shall also constitute the waiver of such Event of Default with respect
to the Common Securities for all purposes under this Declaration without any
further act, vote or consent of the Holders of the Common Securities. Subject
to the foregoing provisions of this Section 2.6(b), upon such waiver, any such
default shall cease to exist and any Event of Default with respect to the
Common Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.
(c) The right of any Holder of Securities to receive payment of
Distributions on the Securities in accordance with this Declaration and the
terms of the Securities set forth in Exhibits B and C on or after the
respective payment dates therefor, or to institute suit for the enforcement of
any such payment on or after such payment dates, shall not be impaired without
the consent of each such Holder.
(d) As provided in the terms of the Securities set forth in Exhibits
B and C hereto, a waiver of an Indenture Event of Default by the Institutional
Trustee at the written direction of the Holders of the Preferred Securities
constitutes a waiver of the corresponding Event of Default under this
Declaration in respect of the Securities.
SECTION 2.7 Disclosure of Information.
The disclosure of information as to the names and addresses of the
Holders of the Securities in accordance with Section 312 of the Trust Indenture
Act, regardless of the source from which such information was derived, shall
not be deemed to be a violation of any existing law, or any law hereafter
enacted which does not specifically refer to Section 312 of the Trust Indenture
Act, nor shall the Institutional Trustee be held accountable by reason of
mailing any material pursuant to a request made under Section 312(b) of the
Trust Indenture Act.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust continued by this Declaration is named "UAL Corporation
Capital Trust I" as such name may be modified from
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time to time by the Regular Trustees following written notice to the Holders of
Securities. The Trust's activities may be conducted under the name of the
Trust or any other name deemed advisable by the Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o UAL
Corporation, 1200 East Algonquin Road, Elk Grove Township, Illinois 60007,
telephone number (847) 700-4000. Upon ten days' written notice to the Holders,
the Regular Trustees may change the location of the Trust's principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are: (a)(i) to issue
Preferred Securities in exchange for Depositary Shares pursuant to the Offer
and to deliver such Depositary Shares to UAL in consideration for the deposit
to the Trust by UAL as trust assets, of Debentures issued under the Indenture
having an aggregate principal amount equal to the aggregate liquidation amount
of the Depositary Shares so delivered; (ii) to enter into such agreements and
arrangements as may be necessary in connection with the Offer and to take all
action, and exercise such discretion, as may be necessary or desirable in
connection with the Offer and to file such registration statements or make such
other filings under the Securities Act, the Exchange Act or state securities or
"Blue Sky" laws as may be necessary or desirable in connection with the Offer
and the issuance of the Preferred Securities; and (iii) to issue and sell
Common Securities to UAL for cash and use the proceeds of such sale to purchase
as trust assets an equal aggregate principal amount of Debentures issued under
the Indenture; and (b) except as otherwise limited herein, to engage in only
those other activities necessary or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, pledge
any of its assets or, at any time while the Securities are outstanding,
otherwise undertake (or permit to be undertaken) any activity that would result
in or cause the Trust to be treated as anything other than a grantor trust for
United States federal income tax purposes.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to the
specific duties of the Institutional Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Institutional Trustee in accordance with its powers shall constitute the act of
and serve to bind the Trust. In dealing
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with the Trustees acting on behalf of the Trust, no Person shall be required to
inquire into the authority of the Trustees to bind the Trust. Persons dealing
with the Trust are entitled to rely conclusively on the power and authority of
the Trustees as set forth in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Unless otherwise provided in this Declaration, legal title to all
assets of the Trust shall be vested in the Trust. The Holders of Certificates
shall not have legal title to any part of the assets of the Trust, but shall
have an individual undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, authority and
duty to cause the Trust, and shall cause the Trust, to engage in the following
activities:
(a) to issue Preferred Securities and Common Securities, in each case
in accordance with this Declaration; provided, however, that the Trust may
issue no more than one series of Preferred Securities and no more than one
series of Common Securities, and, provided further, there shall be no interests
in the Trust other than the Securities and the issuance of Securities shall be
limited to a one-time, simultaneous issuance of both Preferred Securities and
Common Securities;
(b) in connection with the Offer and the issuance of the Preferred
Securities, at the direction of the Sponsor, to effect or cause to be effected
the filings, and to execute or cause to be executed, the documents, set forth
in Section 3.11;
(c) to acquire as trust assets Debentures upon consummation of the
Offer in connection with the exchange of Preferred Securities for Depositary
Shares pursuant to the Offer and to acquire as trust assets additional
Debentures with the proceeds of the sale of the Common Securities;
(d) to cause the Trust to enter into the Dealer Manager Agreement and
such other agreements and arrangements as may be necessary or desirable in
connection with the Offer and the consummation thereof, and to take all action,
and exercise all discretion, as may be necessary or desirable in connection
with the Offer or the consummation thereof;
(e) to give the Sponsor and the Institutional Trustee prompt written
notice of the occurrence of a Special Event, provided that the Regular Trustees
shall consult with the Sponsor and the Institutional Trustee before taking or
refraining to take any Ministerial Action in relation to a Special Event;
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(f) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including for the
purposes of Section 316(c) of the Trust Indenture Act and with respect to
Distributions, voting rights, redemptions, and exchanges, and to issue relevant
notices to Holders of the Preferred Securities and Common Securities as to such
actions and applicable record dates;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort
to legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(c), the Institutional Trustee
has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate to the Institutional Trustee required by
Section 314(a)(4) of the Trust Indenture Act, which certificate may be executed
by any Regular Trustee;
(k) to incur expenses which are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities, the Regular Trustees hereby initially
appointing [____________] for such purposes;
(m) to take all actions and perform such duties as may be required of
the Regular Trustee pursuant to the terms of the Securities set forth in
Exhibits B and C hereto;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) to take all action which may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Securities or
to enable the Trust to effect the purposes for which the Trust has been
created;
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(p) to take all action, not inconsistent with this Declaration or
with applicable law, which the Regular Trustees determine in their discretion
to be reasonable and necessary or desirable in carrying out the activities of
the Trust as set out in this Section 3.6, in order that:
(i) the Trust will not be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) the Trust will not be classified for United States
federal income tax purposes as an association taxable as a corporation or a
partnership and will be treated as a grantor trust for United States federal
income tax purposes; and
(iii) the Trust will comply with any requirements imposed by
any taxing authority on holders of instruments treated as indebtedness for
United States federal income tax purposes;
provided that such action does not adversely affect the interests of Holders;
(q) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust; and
(r) subject to the requirements of Rule 3a-5 and Section 317(b) of
the Trust Indenture Act, to appoint one or more Paying Agents in addition to
the Institutional Trustee.
The Regular Trustees must exercise the powers set forth in this
Section 3.6 in a manner which is consistent with the purposes and functions of
the Trust set out in Section 3.3 and the Regular Trustees shall not take any
action which is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of
the powers nor any of the authority of the Institutional Trustee set forth in
Section 3.8.
SECTION 3.7 Prohibition of Actions by Trust and Trustees.
The Trust shall not, and the Trustees (including the Institutional
Trustee) shall cause the Trust not to, engage in any activity other than as
required or authorized by this Declaration. In particular, the Trust shall not
and the Trustees (including the Institutional Trustee) shall cause the Trust
not to:
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(a) invest any proceeds received by the Trust from holding the
Debentures but shall promptly distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any investments, other than investments represented by the
Debentures;
(e) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial ownership
of, or beneficial interests in, the Trust other than the Securities;
(g) incur any indebtedness for borrowed money; or
(h) (i) direct the time, method and place of exercising any trust or
power conferred upon the Debenture Trustee with respect to the Debentures, (ii)
waive any past default that is waivable under Section 5.7 of the Indenture,
(iii) exercise any right to rescind or annul any declaration that the principal
of all of the Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Debentures, in
each case where such consent shall be required, unless in the case of this
clause (h) the Institutional Trustee shall have received an unqualified opinion
of nationally recognized independent tax counsel recognized as expert in such
matters to the effect that such action will not cause the Trust to be
classified for United States federal income tax purposes as an association
taxable as a corporation or partnership and that the Trust will continue to be
classified as a grantor trust for United States federal income tax purposes.
SECTION 3.8 Powers and Duties of the Institutional Trustee.
(a) The Institutional Trustee shall:
(i) on the receipt of payments of funds made in respect of
the Debentures held by the Trust, without any further acts of the Institutional
Trustee or the Regular Trustees, promptly make payments to the Holders of the
Preferred Securities and Common Securities in accordance with Section 6.1.
Funds held in the Trust may be held uninvested, and without liability for
interest thereon, until disbursed in accordance with this Declaration;
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(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect promptly the redemption of the Preferred
Securities and the Common Securities to the extent the Debentures are
redeemed or mature;
(iii) upon notice of distribution issued by the Regular
Trustees in accordance with the terms of the Preferred Securities and the
Common Securities, engage in such ministerial activities as shall be necessary
or appropriate to effect promptly the distribution pursuant to terms of the
Securities of Debentures to Holders of Securities upon the occurrence of a
Special Event; and
(iv) have the legal power to exercise all of the rights,
powers and privileges of a holder of the Debentures under the Indenture and, if
an Event of Default occurs and is continuing, the Institutional Trustee,
subject to Section 2.6(b), shall for the benefit of the Holders of the
Securities, enforce its rights as holder of the Debentures under the Indenture,
subject to the rights of the Holders of the Preferred Securities pursuant to
the terms of this Declaration and the Trust Indenture Act.
(b) The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities set forth in Exhibits B and C hereto.
(c) The Institutional Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default or the Institutional
Trustee's duties and obligations under this Declaration or the Trust Indenture
Act.
(d) All moneys and all Debentures held by the Trust will not be
subject to any right, charge, security interest, lien or claim of any kind in
favor of, or for the benefit of the Institutional Trustee or its agents or
their creditors.
(e) The Institutional Trustee shall, within 90 days after the
occurrence of a default with respect to the Securities, transmit by mail, first
class postage prepaid, to the Holders of the Securities, as their names and
addresses appear upon the register, notice of all defaults with respect to the
Securities known to the Institutional Trustee, unless such defaults shall have
been cured before the giving of such notice (the term "defaults" for the
purposes of this Section 3.8(e) being hereby defined to be an Indenture Event
of Default, not including any periods of grace provided for in the Indenture
and irrespective of the giving of any notice provided therein); provided that,
except in the case of default in the payment of the principal of (or premium,
if any) or interest on any of the Debentures, the Institutional Trustee shall
be protected in withholding such
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notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or Responsible Officers, of the Institutional
Trustee in good faith determine that the withholding of such notice is in the
interests of the Holders of the Securities. The Institutional Trustee shall
not be deemed to have knowledge of any default, except (i) a default in the
payment of principal, premium or interest on the Debentures or (ii) any default
as to which the Institutional Trustee shall have received written notice or a
Responsible Officer charged with the administration of this Declaration shall
have obtained written notice.
(f) The Institutional Trustee shall not resign as a Trustee unless
either:
(i) the Trust has been completely liquidated and the proceeds
thereof distributed to the Holders of Securities pursuant to the terms of the
Securities; or
(ii) a Successor Institutional Trustee has been appointed and
accepted that appointment in accordance with Article V.
(g) The Institutional Trustee shall act or appoint another Person to
act as paying agent in respect of the Securities and, subject to Section
3.6(r), may authorize one or more Persons (each, a "Paying Agent") to pay
Distributions, redemption payments or liquidation payments on behalf of the
Trust with respect to the Preferred Securities. Any such Paying Agent shall
comply with Section 317(b) of the Trust Indenture Act. Any Paying Agent may be
removed by the Institutional Trustee, after consultation with the Regular
Trustees, at any time and a successor Paying Agent or additional Paying Agents
may be appointed at any time by the Institutional Trustee, subject to Section
3.6(r). The Institutional Trustee hereby initially appoints [___________] as
the Paying Agent.
(h) The Institutional Trustee shall give prompt written notice to the
Holders of the Securities of any notice received by it from UAL of its election
to defer payments of interest on the Debentures by extending the interest
payment period with respect thereto.
(i) Subject to this Section 3.8, the Institutional Trustee shall have
none of the powers or the authority of the Regular Trustees set forth in
Section 3.6.
(j) The Institutional Trustee shall exercise the powers, duties and
rights set forth in this Section 3.8 and Section 3.10 in a manner which is
consistent with the purposes and functions of the Trust set out in Section 3.3
and the Institutional Trustee
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shall not take any action which is inconsistent with the purposes and functions
of the Trust set forth in Section 3.3.
SECTION 3.9 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than
Section 5.1(a)(3), the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Regular Trustees and the Institutional Trustee
described in this Declaration. Except as set forth in Section 5.1(a)(3), the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act. No
implied covenants or obligations shall be read into this Declaration against
the Delaware Trustee.
SECTION 3.10 Certain Rights and Duties of the Institutional Trustee.
(a) The Institutional Trustee, before the occurrence of an Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration, and no implied covenants shall be read into this Declaration
against the Institutional Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6), the Institutional
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve
the Institutional Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Institutional
Trustee shall be determined solely by the express provisions of this
Declaration, and the Institutional Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Declaration, and no implied covenants or obligations shall be read into
this Declaration against the Institutional Trustee; and
(B) in the absence of bad faith on the part of the
Institutional Trustee, the Institutional Trustee may conclusively rely, as to
the truth of the statements and the
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correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Institutional Trustee and conforming to the
requirements of this Declaration; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be furnished
to the Institutional Trustee, the Institutional Trustee shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Declaration;
(ii) the Institutional Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the
Institutional Trustee, unless it shall be proved that the Institutional
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Institutional Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders as provided herein relating to the
time, method and place of conducting any proceeding for any remedy available to
the Institutional Trustee hereunder or under the Indenture, or exercising any
trust or power conferred upon the Institutional Trustee under this Declaration;
and
(iv) no provision of this Declaration shall require the
Institutional Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable ground for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or adequate indemnity against
such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.10(a) and (b):
(i) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part and, if the Trust is excluded from
the definition of Investment Company solely by means of Rule 3a-5, subject to
the requirements of Rule 3a-5, request and rely upon a certificate, which shall
comply with the provisions of Section 314(e) of the Trust Indenture Act, signed
by any two of the Regular Trustees or by an authorized officer of the Sponsor,
as the case may be;
(ii) The Institutional Trustee (A) may consult with counsel
of its choice (which may be counsel to the Sponsor or any of its Affiliates and
may include any of its employees) selected by it in good faith and with due
care and the written advice or
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opinion of such counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice and opinion and (B) shall have the right at any
time to seek instructions concerning the administration of this Declaration
from any court of competent jurisdiction;
(iii) The Institutional Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Institutional Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it in good faith and with due care;
(iv) The Institutional Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any Holders, unless such Holders shall have offered to
the Institutional Trustee reasonable security and indemnity against the costs,
expenses (including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction; provided that
nothing contained in this clause (iv) shall relieve the Institutional Trustee
of the obligation, upon the occurrence of an Event of Default (which has not
been cured or waived) to exercise such of the rights and powers vested in it by
this Declaration, and to use the same degree of care and skill in this
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs; and
(v) Any action taken by the Institutional Trustee or its
agents hereunder shall bind the Holders of the Securities and the signature of
the Institutional Trustee or its agents alone shall be sufficient and effective
to perform any such action; and no third party shall be required to inquire as
to the authority of the Institutional Trustee to so act, or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action.
SECTION 3.11 Registration Statement and Related Matters.
In accordance with the Original Declaration, UAL and the Trustees have
authorized and directed, and hereby confirm the authorization of, UAL, as the
sponsor of the Trust, (i) to file with the Commission and execute, in each case
on behalf of the Trust, (a) the Registration Statement on Form S-4 (File No.
333-14245) (the "1933 Act Registration Statement") and any pre-effective or
post-effective amendments to such Registration Statement, relating to the
registration under the Securities Act of the Preferred Securities of the Trust,
(b) a Registration Statement on Form 8-A or other appropriate form (the "1934
Act
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Registration Statement") (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Preferred Securities of
the Trust under Section 12(b) of the Exchange Act and (c) an Issuer Tender
Offer Statement on Schedule 13E-4 and any other tender offer statement required
to be filed by the Trust with the Commission (including, if necessary, Schedule
14D-1) relating to the Offer (collectively, the "Tender Offer Schedules") and
any amendment or supplement thereto; (ii) to file with the New York Stock
Exchange ("NYSE") and execute on behalf of the Trust a listing application and
all other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred
Securities to be listed on the NYSE; (iii) to file and execute on behalf of the
Trust such applications, reports, surety bonds, irrevocable consents,
appointments of attorney for service of process and other papers and documents
as shall be necessary or desirable to register the Preferred Securities under
the securities or "Blue Sky" laws of such jurisdictions as UAL, on behalf of
the Trust, may deem necessary or desirable and (iv) to execute on behalf of the
Trust the Dealer Manager Agreement, relating to the Offer, substantially in the
form included as Exhibit 1 to the 1933 Act Registration Statement. In the
event that any filing referred to in clauses (i)-(iii) above is required by the
rules and regulations of the Commission, the NYSE or state securities or "Blue
Sky" laws, to be executed on behalf of the Trust by the Trustees, the Regular
Trustees, in their capacities as Trustees of the Trust, are hereby authorized
and directed to join in any such filing and to execute on behalf of the Trust
any and all of the foregoing, it being understood that the Institutional
Trustee and the Delaware Trustee, in their capacities as Trustees of the Trust,
shall not be required to join in any such filing or execute on behalf of the
Trust any such document unless required by the rules and regulations of the
Commission, the NYSE or state securities or "Blue Sky" laws. In connection
with all of the foregoing, each Trustee, solely in its capacity as Trustee of
the Trust, have constituted and appointed, and hereby confirm the appointment
of, UAL Corporation as his, her or its, as the case may be, true and lawful
attorney-in-fact, and agent, with full power of substitution and
resubstitution, for such Trustee or in such Trustee's name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to the 1933 Act Registration Statement, the 1934 Act
Registration Statement and the Tender Offer Schedules and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as such Trustee might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or its substitute, shall
do or cause to be done by virtue hereof.
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SECTION 3.12 Filing of Amendments to Certificate of Trust.
The Certificate of Trust as filed with the Secretary of State of the
State of Delaware on October 15, 1996 is attached hereto as Exhibit A. On or
after the date of execution of this Declaration, the Trustees shall cause the
filing with the Secretary of State of the State of Delaware of such amendments
to the Certificate of Trust as the Trustees shall deem necessary or desirable.
SECTION 3.13 Execution of Documents by Regular Trustees.
Unless otherwise determined by the Regular Trustees and except as
otherwise required by the Business Trust Act with respect to the Certificate of
Trust or otherwise, a majority of, or if there are only two, both of, the
Regular Trustees are authorized to execute and deliver on behalf of the Trust
any documents which the Regular Trustees have the power and authority to
execute or deliver pursuant to this Declaration.
SECTION 3.14 Trustees Not Responsible for Recitals or Issuance of
Securities.
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.15 Duration of Trust.
The Trust, absent termination pursuant to the provisions of Article
VIII hereof, shall have existence until December 31, 2026.
ARTICLE IV
SPONSOR
SECTION 4.1 Purchase of Common Securities by Sponsor.
The Sponsor will purchase Common Securities issued by the Trust at the
same time as the Preferred Securities are issued in exchange for Depositary
Shares pursuant to the Offer, such purchase to be in an amount equal to 3% of
the sum of (i) the aggregate stated liquidation amount of the Preferred
Securities issued in exchange for Depositary Shares pursuant to the Offer and
(ii) the proceeds derived from the sale of the Common Securities.
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SECTION 4.2 Expenses.
(a) The Sponsor shall be responsible for and shall pay for all debts
and obligations (other than with respect to the Securities) and all costs and
expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization of the Trust, the issuance of the Preferred
Securities pursuant to the Offer, the fees and expenses (including reasonable
counsel fees and expenses) of the Trustees (including any amounts payable under
Article X), the costs and expenses relating to the operation of the Trust,
including, without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the disposition of
Trust assets).
(b) The Sponsor will pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.2 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor's obligations under this Section 4.2 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before
proceeding against the Sponsor. The Sponsor agrees to execute such additional
agreements as may be necessary or desirable in order to give full effect to the
provisions of this Section 4.2.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees; Qualifications.
(a) The number of Trustees initially shall be five (5). At any time
(i) before the issuance of the Securities, the Sponsor may, by written
instrument, increase or decrease the number of, and appoint, remove and replace
the, Trustees, and (ii) after the issuance of the Securities, the number of
Trustees may be increased or decreased solely by, and Trustees may be
appointed, removed or replaced solely by, vote of Holders of Common Securities
representing a Majority in liquidation amount of the Common Securities voting
as a class; provided that in any case:
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(1) the number of Trustees shall be at least five (5) unless the
Trustee that acts as the Institutional Trustee also acts as the Delaware
Trustee, in which case the number of Trustees shall be at least three (3);
(2) at least a majority of the Trustees shall at all times be
officers, directors or employees of UAL;
(3) if required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be either a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware and otherwise is permitted
to act as a Trustee hereunder under the laws of the State of Delaware, except
that if the Institutional Trustee has its principal place of business in the
State of Delaware and otherwise is permitted to act as a Trustee hereunder
under the laws of the State of Delaware, then the Institutional Trustee shall
also be the Delaware Trustee and Section 3.9 shall have no application; and
(4) there shall at all times be an Institutional Trustee hereunder
which shall satisfy the requirements of Section 5.1(c).
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed
representatives.
(b) The initial Regular Trustees shall be:
[_______________]
[_______________]
[_______________]
c/o UAL Corporation
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
(c) There shall at all times be one Trustee which shall act as
Institutional Trustee. In order to act as Institutional Trustee hereunder,
such Trustee shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof or of
the District of Columbia, or a Person permitted by the Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000, and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such Person publishes
reports of condition at least annually, pursuant to law or to the
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requirements of the supervising or examining authority referred to above, then,
for the purposes of this Section 5.1(c)(ii), the combined capital and surplus
of such Person shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
If at any time the Institutional Trustee shall cease to satisfy the
requirements of clauses (i)-(ii) above, the Institutional Trustee shall
immediately resign in the manner and with the effect set out in Section 5.2(d).
If the Institutional Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the
Institutional Trustee and the Holders of the Common Securities (as if such
Holders were the obligor referred to in Section 310(b) of the Trust Indenture
Act) shall in all respects comply with the provisions of Section 310(b) of the
Trust Indenture Act. The Preferred Guarantee shall be deemed to be specifically
described in this Declaration for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
The initial Trustee which shall serve as the Institutional Trustee is
The First National Bank of Chicago, whose address is as set forth in Section
14.1(b).
(d) The initial Trustee which shall serve as the Delaware Trustee is
First Chicago Delaware Inc., whose address is as set forth in Section 14.1(c).
(e) Any action taken by Holders of Common Securities pursuant to this
Article V shall be taken at a meeting of Holders of Common Securities convened
for such purpose or by written consent as provided in Section 12.2.
(f) No amendment may be made to this Section 5.1 which would change
any rights with respect to the number, existence or appointment and removal of
Trustees, except with the consent of each Holder of Common Securities.
SECTION 5.2 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.2(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of the Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of the Securities, by vote of the
Holders of a Majority in liquidation amount of the Common Securities voting as
a class.
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(b) (i) The Trustee that acts as Institutional Trustee shall not be
removed in accordance with Section 5.2(a) until a Successor Institutional
Trustee possessing the qualifications to act as Institutional Trustee under
Section 5.1(c) has been appointed and has accepted such appointment by written
instrument executed by such Successor Institutional Trustee and delivered to
the Regular Trustees, the Sponsor and the Institutional Trustee being removed;
and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.2(a) until a successor Trustee possessing
the qualifications to act as Delaware Trustee under Section 5.1(a)(3) (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Regular Trustees, the Sponsor and the Delaware Trustee
being removed.
(c) A Trustee appointed to office shall hold office until his or her
successor shall have been appointed or until his or her death, removal or
resignation.
(d) Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "Resignation Request") in writing
signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided however, that:
(i) no such resignation of the Trustee that acts as the
Institutional Trustee shall be effective until a Successor Institutional
Trustee possessing the qualifications to act as Institutional Trustee under
Section 5.1(c) has been appointed and has accepted such appointment by
instrument executed by such Successor Institutional Trustee and delivered to
the Trust, the Sponsor and the resigning Institutional Trustee; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.
(e) If no Successor Institutional Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.2 within 60 days after delivery to the Sponsor and the Trust of a
Resignation Request, the resigning Institutional Trustee or Delaware Trustee
may petition any court of competent jurisdiction for appointment of a Successor
Institutional Trustee or Successor Delaware Trustee. Such court may thereupon
after such notice, if any, as it may
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deem proper and prescribe, appoint a Successor Institutional Trustee or
Successor Delaware Trustee, as the case may be.
SECTION 5.3 Vacancies Among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1 or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by a majority of the Regular Trustees
shall be conclusive evidence of the existence of such vacancy. The vacancy
shall be filled with a Trustee appointed in accordance with the requirements of
this Article V.
SECTION 5.4 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee, or
any one of them, shall not operate to annul the Trust. Whenever a vacancy in
the number of Regular Trustees shall occur until such vacancy is filled as
provided in this Article V, the Regular Trustees in office, regardless of their
number, shall have all the powers granted to the Regular Trustees and shall
discharge all the duties imposed upon the Regular Trustees by this Declaration.
SECTION 5.5 Meetings.
Meetings of the Regular Trustees shall be held from time to time upon
the call of any Trustee. Regular meetings of the Regular Trustees may be held
at a time and place fixed by resolution of the Regular Trustees. Notice of any
in-person meetings of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meetings of the Regular Trustees or any committee thereof shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a
hard copy by overnight courier) not less than 24 hours before a meeting.
Notices shall contain a brief statement of the time, place and anticipated
purposes of the meeting. The presence (whether in person or by telephone) of a
Regular Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Regular Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity on the ground that the
meeting has not been lawfully called or convened. Unless provided otherwise in
this Declaration, any action of the Regular Trustees may be taken at a meeting
by vote of a majority of the Regular Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting by the unanimous written consent of the
Regular Trustees.
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SECTION 5.6 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any registration statement or amendment
thereto or other document or schedule filed with the Commission or making any
other governmental filing (including, without limitation filings referred to in
Section 3.11).
(b) The Regular Trustees shall have power to delegate from time to
time to such of their number the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Regular
Trustees or otherwise as the Regular Trustees may deem expedient, to the extent
such delegation is not prohibited by applicable law or contrary to the
provisions of the Trust, as set forth herein.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive periodic distributions, redemption payments and
liquidation distributions in accordance with the applicable terms of the
relevant Holder's Securities ("Distributions"). Distributions shall be made to
the Holders of Preferred Securities and Common Securities in accordance with
the terms of the Securities as set forth in Exhibits B and C hereto. If and to
the extent that UAL makes a payment of interest, premium and principal on the
Debentures held by the Institutional Trustee (the amount of any such payment
being a "Payment Amount"), the Institutional Trustee shall and is directed to
promptly make a Distribution of the Payment Amount to Holders in accordance
with the terms of the Securities as set forth in Exhibits B and C hereto.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall issue on behalf of the Trust
securities in fully registered form representing undivided beneficial interests
in the assets of the Trust in accordance with Section 7.1(b) and for the
consideration specified in Section 3.3.
(b) The Regular Trustees shall issue on behalf of the Trust one class
of preferred securities representing undivided
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beneficial interests in the assets of the Trust having such terms as are set
forth in Exhibit B (the "Preferred Securities") which terms are incorporated by
reference in, and made a part of, this Declaration as if specifically set forth
herein, and one class of common securities representing undivided beneficial
interests in the assets of the Trust having such terms as are set forth in
Exhibit C (the "Common Securities") which terms are incorporated by reference
in, and made a part of, this Declaration as if specifically set forth herein.
The Trust shall have no securities or other interests in the assets of the
Trust other than the Preferred Securities and the Common Securities.
(c) The Certificates shall be signed on behalf of the Trust by the
Regular Trustees (or if there are more than two Regular Trustees by any two of
the Regular Trustees). Such signatures may be the manual or facsimile
signatures of the present or any future Regular Trustee. Typographical and
other minor errors or defects in any such reproduction of any such signature
shall not affect the validity of any Security. In case any Regular Trustee of
the Trust who shall have signed any of the Certificates shall cease to be such
Regular Trustee before the Certificate so signed shall be delivered by the
Trust, such Certificate nevertheless may be delivered as though the person who
signed such Certificate had not ceased to be such Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons as, at the
actual date of the execution of such Security, shall be the Regular Trustees of
the Trust, although at the date of the execution and delivery of the
Declaration any such person was not such a Regular Trustee. Certificates shall
be printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the Regular
Trustees may deem appropriate, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which Securities may be listed, or to
conform to usage. Pending the preparation of definitive Certificates, the
Regular Trustees on behalf of the Trust may execute temporary Certificates
(printed, lithographed or typewritten), substantially in the form of the
definitive Certificates in lieu of which they are issued, but with such
omissions, insertions and variations as may be appropriate for temporary
Certificates all as may be determined by the Regular Trustees. Each temporary
Certificate shall be executed by the Regular Trustees on behalf of the Trust
upon the same conditions and in substantially the same manner, and with like
effect, as definitive Certificates. Without unnecessary delay, the Regular
Trustees on behalf of the Trust will execute and furnish definitive
Certificates and thereupon any or all temporary Certificates may be surrendered
to the transfer agent and registrar in exchange therefor (without charge to the
Holders).
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Each Certificate whether in temporary or definitive form shall be countersigned
by the manual signature of an authorized signatory of the Person acting as
registrar and transfer agent for the Securities, which shall initially be
[________________].
(d) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(e) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(f) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and
shall be bound by, this Declaration.
(g) Upon issuance of the Securities as provided in this Declaration,
the Regular Trustees on behalf of the Trust shall return to UAL the $10
constituting initial trust assets as set forth in the Original Declaration.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
The Trust shall terminate:
(i) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been
paid to the Holders of Securities in accordance with the terms of the
Securities; or
(ii) when all of the Debentures shall have been distributed
to the Holders of Securities in exchange for all of the Securities in
accordance with the terms of the Securities; or
(iii) upon the expiration of the term of the Trust as set
forth in Section 3.15, and a certificate of cancellation is filed by the
Trustees with the Secretary of State of the State of Delaware; or
(iv) upon the bankruptcy of UAL or the Trust; or
(v) upon the filing of a certificate of dissolution or
the equivalent with respect to UAL, the filing of a certificate of cancellation
with respect to the Trust after having obtained
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the consent of at least a majority in liquidation amount of the Securities,
voting together as a single class, to file such certificate of cancellation, or
the revocation of the charter of UAL and the expiration of 90 days after the
date of revocation without a reinstatement thereof; or
(vi) upon the entry of a decree of judicial dissolution of
UAL or the Trust.
The Trustees shall file a certificate of cancellation with the
Secretary of State of the State of Delaware after (i) termination of the Trust
in accordance with this Section 8.1, (ii) satisfaction of creditors of the
Trust and (iii) distribution of the Trust's assets in accordance with this
Declaration. The provisions of Sections 3.10 and 4.2 and Article X shall
survive the termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration. Any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.
(b) Subject to this Article IX, Preferred Securities shall be freely
transferable.
(c) Subject to this Article IX, UAL and any Related Party may only
transfer Common Securities to UAL or a Related Party, provided that any such
transfer shall be subject to the condition that the transferor shall have
obtained (1) either a ruling from the Internal Revenue Service or an
unqualified written opinion addressed to the Trust and delivered to the
Trustees of nationally recognized independent tax counsel experienced in such
matters to the effect that such transfer will not (i) cause the Trust to be
treated as issuing a class of interests in the Trust differing from the class
of interests represented by the Common Securities originally issued to UAL,
(ii) result in the Trust acquiring or disposing of, or being deemed to have
acquired or disposed of, an asset, or (iii) result in or cause the Trust to be
treated as anything other than a grantor trust for United States federal income
tax purposes and (2) an unqualified written opinion addressed to the Trust and
delivered to the Trustees of a nationally recognized independent counsel
experienced in such matters that such transfer will not cause the Trust to be
an Investment Company or controlled by an Investment Company.
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SECTION 9.2 Transfer of Certificates.
The Regular Trustees shall provide for the registration of
Certificates and of transfers of Certificates, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other government charges which may be imposed
in relation to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new Certificates to
be issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Regular Trustees
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by this
Declaration. The Trust shall not be required (i) to issue, register the
transfer of or exchange of any Securities during the period beginning at the
opening of 15 business days before the mailing of a notice of redemption of
Securities according to the terms of the Securities and ending at the close of
business on the day of the mailing of the relevant notice of redemption or (ii)
to register the transfer of or exchange of any Security so selected for
redemption, in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall
be registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trustees shall have
actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
The Preferred Securities Certificates, on original issuance, will be
issued in fully registered form. With respect to any Certificates registered
on the books and records of the Trust in the name of a Clearing Agency or the
nominee of a Clearing Agency:
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(i) the Trust and the Trustees shall be entitled to deal with
the Clearing Agency for all purposes of this Declaration (including paying
Distributions on such Certificates and receiving approvals, votes or consents
hereunder) as the Preferred Security Holder and the sole holder of such
Certificates and, except as set forth herein, shall have no obligation to the
Preferred Security Beneficial Owners;
(ii) to the extent that the provisions of this Section 9.4
conflict with any other provisions of this Declaration, the provisions of this
Section 9.4 shall control; and
(iii) the rights of the Preferred Security Beneficial Owners
shall be exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Preferred Security
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants. The Clearing Agency will make book entry transfers among
Clearing Agency Participants and receive and transmit payments of Distributions
on such Certificates to such Clearing Agency Participants; provided, that
solely for the purposes of determining whether the Holders of the requisite
amount of Preferred Securities have voted on any matter provided for in this
Declaration, so long as definitive Preferred Security Certificates have not
been issued (pursuant to Section 9.7 hereof), the Trustees may conclusively
rely on, and shall be protected in relying on, any written instrument
(including a proxy) delivered to the Trustees by the Clearing Agency setting
forth the Preferred Security Beneficial Owners' votes or assigning the right to
vote on any matter to any other Persons either in whole or in part.
SECTION 9.5 Notices to Holders of Certificates.
Whenever a notice or other communication to the Holders is required to
be given under this Declaration, the relevant Trustees shall give such notices
and communications to the Holders and, with respect to any Preferred Security
Certificate registered in the name of a Clearing Agency or the nominee of a
Clearing Agency, the Trustees shall, except as set forth herein, have no
obligations to the Preferred Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depository with respect to the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency
with respect to the Preferred Securities.
SECTION 9.7 Definitive Preferred Securities Certificates.
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If (i) a Clearing Agency elects to discontinue its services as
securities depository with respect to the Preferred Securities and a successor
Clearing Agency is not appointed within 90 days after such discontinuance
pursuant to Section 9.6 or (ii) the Regular Trustees elect after consultation
with the Sponsor to terminate the book entry system through the Clearing Agency
with respect to the Preferred Securities, then upon surrender of the
Certificates representing the Book Entry Interests with respect to the
Preferred Securities by the Clearing Agency, accompanied by registration
instructions, the Regular Trustees shall cause definitive Preferred Security
Certificates to be delivered to Preferred Security Beneficial Owners in
accordance with the instructions of the Clearing Agency. Neither the Trustees
nor the Trust shall be liable for any delay in delivery of such instructions
and each of them may conclusively rely on, and shall be protected in relying
on, such instructions.
SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and (b)
there shall be delivered to the Regular Trustees such security or indemnity as
may be required by them to keep each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
any two Regular Trustees on behalf of the Trust shall execute and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like denomination. In connection with the
issuance of any new Certificate under this Section 9.8, the Regular Trustees
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this Section shall constitute conclusive
evidence of an ownership interest in the relevant Securities, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
ARTICLE X
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 10.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of
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the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Institutional Trustee or the Delaware
Trustee, negligence) or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.
(c) Pursuant to Section 3803 (a) of the Business Trust Act, the
Holders of Securities, in their capacities as Holders, shall be entitled to the
same limitation of liability extended to stockholders of private corporations
for profit organized under the General Corporation Law of the State of
Delaware.
SECTION 10.2 Indemnification.
(a) To the fullest extent permitted by applicable law, the Sponsor
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified Person by
this Declaration, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence (or, in the case of the
Institutional Trustee or the Delaware Trustee, negligence) or willful
misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be advanced
by the Sponsor prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Sponsor of an undertaking by or on
behalf of the Indemnified Person to repay such amount if it shall be determined
that the Indemnified Person is not entitled to be indemnified as authorized in
Section 10.2(a).
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(c) The provisions of this Section 10.2 shall survive the
termination of this Declaration.
SECTION 10.3 Outside Business.
The Sponsor and any Trustee may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and the Trust and
the Holders of Securities shall have no rights by virtue of this Declaration in
and to such independent ventures or the income or profits derived therefrom,
and the pursuit of any such venture, even if competitive with the business of
the Trust, shall not be deemed wrongful or improper. Neither the Sponsor nor
any Trustee, shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and the Sponsor or any
Trustee shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular investment
or other opportunity. Any Trustee may engage or be interested in any financial
or other transaction with the Sponsor or any Affiliate of the Sponsor or may
act as depository for, trustee or agent for, or act on any committee or body of
holders of, securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail each transaction
of the Trust. The books of account shall be maintained on the accrual method
of accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books and records of the Trust,
together with a copy of this Declaration and a certified copy of the
Certificate of Trust, and any amendment thereto, shall at all times be
maintained at the principal office of the Trust and shall be open for
inspection for any examination by any Holder or its duly authorized
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representative for any purpose reasonably related to its interest in the Trust
during normal business hours.
(b) If required by applicable law, the Regular Trustees shall, as soon
as available after the end of each Fiscal Year of the Trust, cause to be
prepared and mailed to each Holder of Securities unaudited financial statements
of the Trust for such Fiscal Year, prepared in accordance with generally
accepted accounting principles, provided that if the Trust is required to
comply with the periodic reporting requirements of Sections 13(a) or 15(d) of
the Exchange Act, such financial statements for such Fiscal Year shall be
examined and reported on by a firm of independent certified public accountants
selected by the Regular Trustees (which firm may be the firm used by the
Sponsor).
(c) The Regular Trustees shall cause to be prepared and mailed to
each Holder of Securities an annual United States federal income tax
information statement, on such form as is required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the
Code to deliver any such statement at a later date, the Regular Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be prepared and filed with
the appropriate taxing authority an annual United States federal income tax
return, on such form as is required by the Code, and any other annual income
tax returns required to be filed by the Regular Trustees on behalf of the Trust
with any state or local taxing authority, such returns to be filed as soon as
practicable after the end of each Fiscal Year of the Trust.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name and for
the sole benefit of the Trust. The sole signatories for such accounts shall be
designated by the Regular Trustees.
SECTION 11.4 Withholding.
The Trust and the Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to
each Holder, and any representations and forms as shall reasonably be requested
by the Trust to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Trust shall file required forms with applicable
jurisdictions and, unless an exemption from withholding is properly established
by a Holder, shall remit amounts withheld with respect to the Holder to
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applicable jurisdictions. To the extent that the Trust is required to withhold
and pay over any amounts to any authority with respect to distributions or
allocations to any Holder, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to the Holder. In the event of
any claimed overwithholding, Holders shall be limited to an action against the
applicable jurisdiction. If the amount to be withheld was not withheld from a
Distribution, the Trust may reduce subsequent Distributions by the amount of
such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may be amended by, and
only by, a written instrument executed by a majority of the Regular Trustees;
provided, however, that (i) no amendment to this Declaration shall be made if
such amendment or modification would cause the Trust to be classified for
United States federal income tax purposes as other than a grantor trust or
would cause the Trust to be deemed an "investment company" which is required to
be registered under the 1940 Act, (ii) at such time after the Trust has issued
any Securities which remain outstanding, any amendment which would adversely
affect the rights, privileges or preferences of any Holder of Securities may be
effected only with such additional requirements as may be set forth in the
terms of such Securities, (iii) Section 4.2, Section 9.1(c) and this Section
12.1 shall not be amended without the consent of all of the Holders of the
Securities, (iv) no amendment which adversely affects the rights, powers and
privileges of the Institutional Trustee shall be made without the consent of
the Institutional Trustee, (v) Article IV shall not be amended without the
consent of the Sponsor and (vi) the rights of Holders of Common Securities
under Article V to increase or decrease the number of, and to appoint, replace
or remove, Trustees shall not be amended without the consent of each Holder of
Common Securities.
(b) Notwithstanding Section 12.1(a)(ii), this Declaration may be
amended without the consent of the Holders of the Securities to (i) cure any
ambiguity, (ii) correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this Declaration,
(iii) add to the covenants, restrictions or obligations of the Sponsor, (iv)
preserve the status of the Trust as a grantor trust for federal income tax
purposes, and (v) conform to any changes in Rule 3a-5 or any change in
interpretation or application of Rule
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3a-5 by the Commission, which amendment does not adversely affect the rights,
preferences or privileges of the Holders.
SECTION 12.2 Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of Preferred Securities and/or Common
Securities may be called at any time by the Regular Trustees (or as provided in
the terms of the Securities) to consider and act on any matter on which Holders
of such class of Securities are entitled to act under the terms of this
Declaration, the terms of the Securities or the rules of any stock exchange on
which the Preferred Securities are listed or admitted for trading. The Regular
Trustees shall call a meeting of Holders of Preferred Securities or Common
Securities, if directed to do so by Holders of at least 10% in liquidation
amount of such class of Securities. Such direction shall be given by
delivering to the Regular Trustees one or more calls in a writing stating that
the signing Holders of Securities wish to call a meeting and indicating the
general or specific purpose for which the meeting is to be called. Any Holders
of Securities calling a meeting shall specify in writing the Certificates held
by the Holders of Securities exercising the right to call a meeting and only
those specified Certificates shall be counted for purposes of determining
whether the required percentage set forth in the second sentence of this
paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provision shall apply to meetings of Holders of
Securities:
(i) Notice of any such meeting shall be given by mail to all
the Holders of Securities having a right to vote thereat not less than 7 days
nor more than 60 days prior to the date of such meeting. Whenever a vote,
consent or approval of the Holders of Securities is permitted or required under
this Declaration or the rules of any stock exchange on which the Preferred
Securities are listed or admitted for trading, such vote, consent or approval
may be given at a meeting of the Holders of Securities. Any action that may be
taken at a meeting of the Holders of Securities may be taken without a meeting
if a consent in writing setting forth the action so taken is signed by Holders
of Securities owning not less than the minimum aggregate liquidation amount of
Securities that would be necessary to authorize or take such action at a
meeting at which all Holders of Securities having a right to vote thereon were
present and voting. Prompt notice of the taking of action without a meeting
shall be given to the Holders of Securities entitled to vote who have not
consented in writing. The Regular Trustees may specify that any written ballot
submitted to the Holders of Securities for the purpose of taking any action
without a meeting shall be
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returned to the Trust within the time specified by the Regular Trustees.
(ii) Each Holder of a Security may authorize any Person to
act for it by proxy on all matters in which a Holder of a Security is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of 11
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Holder of the Security
executing it. Except as otherwise provided herein or in the terms of the
Securities, all matters relating to the giving, voting or validity of proxies
shall be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the Trust
were a Delaware corporation and the Holders of the Securities were stockholders
of a Delaware corporation.
(iii) Each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate.
(iv) Unless otherwise provided in the Business Trust Act,
this Declaration or the rules of any stock exchange on which the Preferred
Securities are then listed or admitted for trading, the Regular Trustees, in
their sole discretion, shall establish all other provisions relating to
meetings of Holders of Securities, including notice of the time, place or
purpose of any meeting at which any matter is to be voted on by any Holders of
Securities, waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Institutional Trustee.
(a) The Trustee which acts as initial Institutional Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Institutional Trustee represents and warrants
to the Trust and the Sponsor at the time of the Successor Institutional
Trustee's acceptance of its appointment as Institutional Trustee, that:
(i) The Institutional Trustee is a national banking
association with trust powers, duly organized, validly existing and in good
standing under the laws of the United States, with trust power and authority to
execute and deliver, and to carry
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out and perform its obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the
Institutional Trustee of this Declaration has been duly authorized by all
necessary corporate action on the part of the Institutional Trustee. The
Declaration has been duly executed and delivered by the Institutional Trustee,
and constitutes a legal, valid and binding obligation of the Institutional
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement
of such remedies is considered in a proceeding in equity or at law).
(iii) The execution, delivery and performance of this
Declaration by the Institutional Trustee do not conflict with or constitute a
breach of the Charter or By-laws of the Institutional Trustee.
(iv) No consent, approval or authorization of, or
registration with or notice to, any banking authority which supervises or
regulates the Institutional Trustee is required for the execution, delivery or
performance by the Institutional Trustee of this Declaration.
(v) The Institutional Trustee satisfies the qualifications
set forth in Section 5.1(c).
(b) The Trustee which acts as initial Delaware Trustee represents and
warrants to the Trust and the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment
as Delaware Trustee, that it satisfies the qualifications set forth in Section
5.1(a)(3).
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at
the Trust's mailing address set forth below (or such
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other address as the Regular Trustees on behalf of the Trust may give notice of
to the Holders of the Securities):
UAL Corporation Capital Trust I
c/o UAL Corporation
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Trustees
Facsimile No: (847) 700-4683
(b) if given to the Institutional Trustee, at the mailing
address of the Institutional Trustee set forth below (or such other address as
the Institutional Trustee may give notice of to the Holders of the Securities):
The First National Bank of Chicago
One First National Plaza, Suite 0216
Chicago, Illinois 60670-0126
Attention: Corporate Trust Department
Facsimile No: (312) 407-1708
(c) if given to the Delaware Trustee, at the mailing address
of the Delaware Trustee set forth below (or such other address as the Delaware
Trustee may give notice of to the Holders of the Securities):
First Chicago Delaware Inc.
300 King Street
Wilmington, Delaware 19801
Facsimile No: (312) 407-1708
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
UAL Corporation
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attention: Corporate Secretary
Facsimile No: (847) 700-4683
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust.
A copy of any notice to the Institutional Trustee or the Delaware
Trustee shall also be sent to the Trust. All notices shall be deemed to have
been given, when received in person, telecopied with receipt confirmed, or
mailed by first class mail, postage prepaid, except that if a notice or other
document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other
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document shall be deemed to have been delivered on the date of such refusal or
inability to deliver.
SECTION 14.2 Undertaking for Costs.
All parties to this Declaration agree, and each Holder of any
Securities by his or her acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, in any suit for the enforcement
of any right or remedy under this Declaration, or in any suit against the
Institutional Trustee for any action taken or omitted by it as Institutional
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 14.2 shall not apply to any suit instituted by the Institutional
Trustee, to any suit instituted by any Holder of Preferred Securities, or group
of Holders of Preferred Securities, holding more than 10% in aggregate
liquidation amount of the outstanding Preferred Securities, or to any suit
instituted by any Holder of Preferred Securities for the enforcement of the
payment of the principal of (or premium, if any) or interest on the Debentures,
on or after the respective due dates expressed in such Debentures.
SECTION 14.3 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE; PROVIDED HOWEVER, THAT THERE
SHALL NOT BE APPLICABLE TO THE TRUST, THE TRUSTEES OR THIS DECLARATION ANY
PROVISIONS OF THE LAWS (STATUTORY OR COMMON) OF THE STATE OF DELAWARE
PERTAINING TO TRUSTS, OTHER THAN THE BUSINESS TRUST ACT, THAT RELATE TO OR
REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF, (I) THE FILING WITH
ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF
TRUSTEE FEES AND CHARGES, (II) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR
TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (III) THE NECESSITY FOR
OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION,
HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (IV) FEES OR OTHER SUMS
PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (V) THE
ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME OR PRINCIPAL, (VI)
RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION
OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER
MANNER OF HOLDING OR INVESTING TRUST ASSETS, OR (VII) THE ESTABLISHMENT OF
FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITIES OR LIMITATIONS ON THE ACTS OR
POWERS OF TRUSTEES, THAT ARE INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES
OR AUTHORITIES AND POWERS OF TRUSTEES AS SET FORTH OR REFERENCED IN THIS
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AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO
THE TRUST.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 14.5 Partial Enforceability.
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder
of this Declaration, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.6 Counterparts.
This Declaration may contain more than one counterpart of the
signature pages and this Declaration may be executed by the affixing of the
signature of the Sponsor and each of the Trustees to one of such counterpart
signature pages. All of such counterpart signature pages shall be read as
though one, and they shall have the same force and effect as though all of the
signers had signed a single signature page.
SECTION 14.7 Intention of the Parties.
It is the intention of the parties hereto that the Trust not be
classified for United States federal income tax purposes an association taxable
as a corporation or partnership but that the Trust be treated as a grantor
trust for United States federal income tax purposes. The provisions of this
Declaration shall be interpreted to further this intention of the parties.
SECTION 14.8 Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.
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IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
UAL Corporation,
as Sponsor
By:_____________________________
Name:
Title:
________________________________
[ ]
as Trustee
________________________________
[ ]
as Trustee
________________________________
[ ]
as Trustee
The First National Bank of Chicago
as Trustee
By:_____________________________
Name:
Title:
First Chicago Delaware Inc.
as Trustee
By:_____________________________
Name:
Title:
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There personally appeared before me [______________] (on behalf of UAL
Corporation ) and [___________] and [__________] who acknowledged the foregoing
instrument to be his, her or its free act and deed and the free act and deed of
UAL Corporation and the Trustees of UAL Corporation Capital Trust I.
Before me,
________________________________
Notary Public
My Commission Expires:
______________________________________________
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There personally appeared before me [____________] (on behalf of
[__________] as Trustee) who acknowledged the foregoing instrument to be his,
her or its free act and deed and the free act and deed of [________________] as
Trustee.
Before me,
________________________________
Notary Public
My Commission Expires:
______________________________________________
There personally appeared before me [_______________] (on behalf of
[_____________], as Trustee) who acknowledged the foregoing instrument to be
his, her or its free act and deed and the free act and deed
of[_______________], as Trustee.
Before me,
________________________________
Notary Public
My Commission Expires:
______________________________________________
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EXHIBIT A
CERTIFICATE OF TRUST
OF
UAL CORPORATION CAPITAL TRUST I
This Certificate of Trust of UAL Corporation Capital Trust I
(the "Trust"), dated October 15, 1996, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del.C. Sec. 3801 et seq.).
1. Name. The name of the business trust formed hereby is UAL
Corporation Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee
of the Trust with a principal place of business in the State of Delaware are
First Chicago Delaware Inc., a Delaware corporation, 300 King Street,
Wilmington, Delaware 19801.
3. Effective Date. This Certificate of Trust shall be effective
as of its filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust
at the time of filing this Certificate of Trust, have executed this Certificate
of Trust as of the date first above written.
The First National Bank of Chicago,
as trustee
By: /s/ Richard D. Manella
----------------------------------
Name: Richard D. Manella
Title: Vice President
First Chicago Delaware Inc.,
as trustee
By: /s/ Steven M. Wagner
----------------------------------
Name: Steven M. Wagner
Title: Vice President
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EXHIBIT B
TERMS OF
PREFERRED SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust of UAL Corporation Capital Trust I dated as of ____________, 1996 (as
amended from time to time, the "Declaration"), the designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Securities are set forth below (each capitalized term used but not
defined herein having the meaning set forth in the Declaration):
1. Designation and Number. Preferred Securities of the Trust with an
aggregate liquidation amount in the assets of the Trust of
___________________________________ (____) and a liquidation amount in the
assets of the Trust of $25 per Preferred Security, are hereby designated as "13
1/4% Trust Originated Preferred Securities." The Preferred Security
Certificates evidencing the Preferred Securities shall be substantially in the
form attached hereto as Annex I, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom or practice or
to conform to the rules of any stock exchange on which the Preferred Securities
are listed. The Preferred Securities shall be issued to former holders of
Depositary Shares ("Depositary Shares") each representing 1/1,000 of a share of
12- 1/4% Series B Preferred Stock (the "Series B Preferred"), of UAL
Corporation ("UAL") in exchange for such Depositary Shares pursuant to the
Offer. In connection with such Offer and the purchase by UAL of the Common
Securities, UAL will deposit in the Trust, and the Trust will purchase,
respectively, as trust assets Debentures of UAL having an aggregate principal
amount equal to $[__________], and bearing interest at an annual rate equal to
the annual Distribution rate on the Preferred Securities and Common Securities
and having payment and redemption provisions which correspond to the payment
and redemption provisions of the Preferred Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each
Preferred Security will be fixed at a rate per annum of 13 1/4% (the "Coupon
Rate") of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears will bear interest at the rate per annum of 13 1/4%
thereof, compounded quarterly to the extent permitted by law. The term
"Distributions" as used in these terms means such periodic cash distributions
and any such interest payable unless otherwise stated. A Distribution will be
made by the Institutional Trustee only to the extent that interest payments are
made in respect of
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the Debentures held by the Trust. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days
elapsed in such a 30-day month.
(b) Distributions on the Preferred Securities will be cumulative,
will accrue from November 1, 1996 and will be payable quarterly in arrears, on
March 31, June 30, September 30 and December 31 of each year, commencing on
December 31, 1996, except as otherwise described below, but only if and to the
extent that interest payments are made in respect of the Debentures held by the
Trust. In addition, Holders of Preferred Securities will be entitled to a cash
distribution at the rate of 12- 1/4% per annum of the liquidation amount
thereof from November 1, 1996 through December 31, 1996, payable on December
31, 1996 ("Pre-Issuance Interest"). With the exception of Pre-Issuance
Interest, so long as UAL shall not be in default in the payment of interest on
the Debentures, UAL has the right under the Indenture for the Debentures to
defer payments of interest by extending the interest payment period from time
to time on the Debentures for a period not exceeding 20 consecutive quarterly
interest periods (each, an "Extension Period") and, as a consequence, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the rate of 13 1/4% per annum, compounded
quarterly to the extent permitted by law during any such Extension Period.
Prior to the termination of any such Extension Period, UAL may further extend
such Extension Period; provided that such Extension Period together with all
such previous and further extensions thereof may not exceed 20 consecutive
quarterly interest periods and provided further that no Extension Period may
extend beyond the maturity of the Debentures. Upon the termination of any
Extension Period and the payment on the next distribution payment date
following such extension period of all amounts then due, UAL may commence a new
Extension Period, subject to the above requirements. Any interest paid on the
Debentures during an Extension Period on an Interest Payment Date shall be paid
pro rata to the Holders of Preferred Securities on the corresponding
distribution payment date. Payments of accrued Distributions will be payable
to Holders of Preferred Securities as they appear on the books and records of
the Trust on the record date for the first payment occurring on or after the
end of the Extension Period.
(c) Distributions on the Preferred Securities will be payable
promptly by the Institutional Trustee (or other Paying Agent) upon receipt of
immediately available funds to the Holders thereof as they appear on the books
and records of the Trust on the relevant record dates, which will be 15
calendar days prior to the relevant Distribution date, which record and payment
dates
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correspond to the record and interest payment dates on the Debentures.
Distributions payable on any Preferred Securities that are not punctually paid
on any Distribution payment date as a result of UAL having failed to make the
corresponding interest payment on the Debentures will forthwith cease to be
payable to the Person in whose name such Preferred Security is registered on
the relevant record date, and such defaulted Distribution will instead be
payable to the Person in whose name such Preferred Security is registered on
the special record date established by the Regular Trustees, which record date
shall correspond to the special record date or other specified date determined
in accordance with the Indenture; provided, however, that Distributions shall
not be considered payable on any Distribution payment date falling within an
Extension Period unless UAL has elected to make a full or partial payment of
interest accrued on the Debentures on such Distribution payment date. Subject
to any applicable laws and regulations and the provisions of the Declaration,
each payment in respect of the Preferred Securities will be made as described
in paragraph 9 hereof. If any date on which Distributions are payable on the
Preferred Securities is not a Business Day, then payment of the Distribution
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
(d) All Distributions paid with respect to the Preferred Securities
and the Common Securities will be paid Pro Rata (as defined herein) to the
Holders thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for under the Declaration, such money or
property shall be distributed Pro Rata among the Holders of the Preferred
Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
voluntary or involuntary dissolution, winding-up or termination of the
Trust, the Holders of the Preferred Securities and Common Securities at the
date of the dissolution, winding-up or termination, as the case may be, will be
entitled to receive Pro Rata solely out of the assets of the Trust available
for distribution to Holders of Preferred Securities and Common Securities after
satisfaction of liabilities to creditors, an amount equal to the aggregate of
the stated liquidation amount of $25 per Preferred Security and Common Security
plus accrued and unpaid Distributions thereon to the date of payment (such
amount
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being the "Liquidation Distribution"), unless, in connection with such
dissolution, winding-up or termination, and after satisfaction of liabilities
to creditors, Debentures in an aggregate principal amount equal to the
aggregate stated liquidation amount of such Preferred Securities and Common
Securities and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on such Preferred Securities and Common
Securities shall be distributed Pro Rata to the Holders of the Preferred
Securities and Common Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Preferred Securities and Common Securities shall be paid on
a Pro Rata basis, except that, if an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to such Liquidation Distribution.
4. Redemption and Distribution of Debentures. The Preferred
Securities and Common Securities may only be redeemed if Debentures having
an aggregate principal amount equal to the aggregate liquidation amount of the
Preferred Securities and Common Securities are repaid, redeemed or distributed
as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part,
whether at maturity, or upon redemption at any time or from time to time on or
after July 12, 2004, the proceeds of such repayment will be promptly applied to
redeem Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures so
repaid or redeemed, upon not less than 10 nor more than 60 days' notice, at a
redemption price of $25 per Preferred and Common Security plus an amount equal
to accrued and unpaid Distributions thereon to the date of redemption, payable
in cash (the "Redemption Price"). The date of any such repayment or redemption
of Preferred Securities and Common Securities shall be established to coincide
with the repayment or redemption date of the Debentures.
(b) The Common Securities will be entitled to be redeemed on a Pro
Rata basis with the Preferred Securities, except that if an Event of Default
has occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities with respect to the payment of the Redemption Price.
If fewer than all the outstanding Preferred Securities and Common Securities
are to be so redeemed, the Preferred Securities and the Common Securities will
be redeemed Pro Rata and the Preferred Securities to be redeemed will be
redeemed as described in paragraph
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4(f)(ii) below. If a partial redemption would result in the delisting of the
Preferred Securities by any national securities exchange or other organization
on which the Preferred Securities are then listed, UAL pursuant to the
Indenture will only redeem Debentures in whole and, as a result, the Trust may
only redeem the Preferred Securities in whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each
as hereinafter defined, and each a "Special Event") shall occur and be
continuing, the Regular Trustees shall, unless the Debentures are redeemed in
the limited circumstances described below, dissolve the Trust and, after
satisfaction of creditors, cause Debentures held by the Institutional Trustee
having an aggregate principal amount equal to the aggregate stated liquidation
amount of and accrued and unpaid interest equal to accrued and unpaid
Distributions on, and having the same record date for payment as, the Preferred
Securities and Common Securities, to be distributed to the Holders of the
Preferred Securities and Common Securities on a Pro Rata basis in liquidation
of such Holders' interests in the Trust, within 90 days following the
occurrence of such Special Event (the "90 Day Period"), provided, however, that
in the case of the occurrence of a Tax Event, as a condition of such
dissolution and distribution, the Regular Trustees shall have received an
opinion (a "No Recognition Opinion") of a nationally recognized independent tax
counsel experienced in such matters , which opinion may rely on any then
applicable published revenue ruling of the Internal Revenue Service, to the
effect that the Holders of the Preferred Securities will not recognize any gain
or loss for United States federal income tax purposes as a result of the
dissolution of the Trust and distribution of Debentures; and provided, further,
that, if and as long as at the time there is available to the Trust the
opportunity to eliminate, within the 90 Day Period, the Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect on
the Trust, UAL, or the Holders of the Preferred Securities ("Ministerial
Action"), the Trust will pursue such measure in lieu of dissolution.
If in the case of the occurrence of a Tax Event, (i) the Regular
Trustees have received an opinion (a "Redemption Tax Opinion") of nationally
recognized independent tax counsel experienced in such matters that, as a
result of a Tax Event, there is more than an insubstantial risk that UAL would
be precluded from deducting the interest on the Debentures for United States
federal income tax purposes even if the Debentures were distributed to the
Holders of Preferred Securities and Common Securities in liquidation of such
Holder's interest in the Trust as described in this paragraph 4(c) or (ii) the
Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion cannot be delivered to the Trust, UAL shall
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have the right at any time, upon not less than 10 nor more than 60 days notice,
to redeem the Debentures in whole or in part for cash at the Redemption Price
within 90 days following the occurrence of such Tax Event, and promptly
following such redemption Preferred Securities and Common Securities with an
aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so redeemed will be redeemed by the Trust at the Redemption Price on
a Pro Rata basis; provided, however, that, if at the time there is available to
UAL or the Regular Trustees on behalf of the Trust the opportunity to
eliminate, within such 90 day period, the Tax Event by taking some Ministerial
Action, UAL or the Regular Trustees on behalf of the Trust will pursue such
measure in lieu of redemption, and provided further that UAL shall have no
right to redeem the Debentures while the Regular Trustees on behalf of the
Trust are pursuing such Ministerial Action. The Common Securities will be
redeemed Pro Rata with the Preferred Securities, except that, if an Event of
Default under the Indenture has occurred and is continuing, the Preferred
Securities will have a priority over the Common Securities with respect to
payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an
opinion (a "Dissolution Tax Opinion") of nationally recognized independent tax
counsel experienced in such matters to the effect that on or after the
Expiration Date as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to, or change in, an interpretation or application
of any such laws or regulations by any legislative body, court, governmental
agency or regulatory authority (including the enactment of any legislation and
the publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the Expiration Date, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date thereof, subject to United States federal income tax with
respect to income accrued or received on the Debentures, (ii) the Trust is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges or (iii) interest payable
by UAL to the Trust on the Debentures is not, or within 90 days of the date
thereof will not be, deductible by UAL for United States federal income tax
purposes.
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"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act that, as a result of the occurrence
of a change in law or regulation or a change in interpretation or application
of law or regulation by any legislative body, court, governmental agency or
regulatory authority or of the staff of such governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after the Expiration Date.
On the date fixed for any distribution of Debentures, upon dissolution
of the Trust, (i) the Preferred Securities will no longer be deemed to be
outstanding and (ii) certificates representing Preferred Securities will be
deemed to represent beneficial interests in the Debentures having an aggregate
principal amount equal to the stated liquidation amount of, and bearing accrued
and unpaid interest equal to accrued and unpaid Distributions on, such
Preferred Securities until such certificates are presented to UAL or its agent
for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid Distributions have been paid on all
Preferred Securities for all quarterly Distribution periods terminating on or
prior to the date of redemption.
(e) If Debentures are distributed to Holders of the Preferred
Securities, UAL, pursuant to the terms of the Indenture, will use its best
efforts to have the Debentures listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities were listed immediately prior to the
distribution of the Debentures.
(f) (i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Preferred Securities and Common Securities (a
"Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Preferred Securities and Common
Securities to be redeemed or exchanged not less than 10 nor more than 60 days
prior to the date fixed for redemption or exchange thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this paragraph (f)(i), a Redemption/Distribution
Notice shall be deemed to be given on the day such notice is first mailed by
first class mail, postage prepaid, to Holders of Preferred Securities and
Common Securities. Each Redemption/ Distribution Notice shall be addressed to
the Holders of
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Preferred Securities and Common Securities at the address of each such Holder
appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with respect
to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding
Preferred Securities are to be redeemed (subject to adjustment to eliminate
fractional Preferred Securities), the Preferred Securities to be redeemed will
be redeemed Pro Rata from each Holder of Preferred Securities, it being
understood that, in respect of Preferred Securities registered in the name of
and held of record by DTC (or successor Clearing Agency) or any other nominee,
the distribution of the proceeds of such redemption will be made to each
Clearing Agency Participant (or Person on whose behalf such nominee holds such
securities) in accordance with the procedures applied by such agency or
nominee.
(iii) If the Trust gives a Redemption/Distribution Notice in
respect of a redemption of Preferred Securities as provided in this paragraph 4
(which notice will be irrevocable) then immediately prior to the close of
business on the redemption date, provided that UAL has paid to the Trust in
immediately available funds a sufficient amount of cash in connection with the
related redemption or maturity of the Debentures, Distributions will cease to
accrue on the Preferred Securities called for redemption, such Preferred
Securities will no longer be deemed to be outstanding and all rights of Holders
of such Preferred Securities so called for redemption will cease, except the
right of the Holders of such Preferred Securities to receive the Redemption
Price, but without interest on such Redemption Price. Neither the Trustees nor
the Trust shall be required to register or cause to be registered the transfer
of any Preferred Securities which have been so called for redemption. If any
date fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption. If payment of the Redemption Price in
respect of Preferred Securities is improperly withheld or refused and not paid
either by the Trust or by UAL pursuant to the Preferred Guarantee,
Distributions on such Preferred Securities will continue to accrue, from the
original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
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(iv) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to the Holders of the Preferred
Securities.
(v) Upon the date of dissolution of the Trust and
distribution of Debentures as a result of the occurrence of a Special Event,
Preferred Security Certificates shall be deemed to represent beneficial
interests in the Debentures so distributed, and the Preferred Securities will
no longer be deemed outstanding and may be canceled by the Regular Trustees.
The Debentures so distributed shall have an aggregate principal amount equal to
the aggregate liquidation amount of the Preferred Securities so distributed.
(vi) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), UAL or any of its
subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
5. Voting Rights. (a) Except as provided under paragraph 5(b) below
and as otherwise required by law and the Declaration, the Holders of the
Preferred Securities will have no voting rights.
(b) If any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust, other than in accordance
with the terms of the Declaration, then the Holders of outstanding Securities
will be entitled to vote on such amendment or proposal as a class and such
amendment or proposal shall not be effective except with the approval of the
Holders of Securities representing a Majority in liquidation amount of such
Securities; provided, however, (A) if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of a Majority in liquidation amount of such
class of Securities and (B) amendments to the Declaration shall be subject to
such further requirements as are set forth in Sections 12.1 and 12.2 of the
Declaration.
In the event the consent of the Institutional Trustee, as the holder
of the Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination. The
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Institutional Trustee shall vote with respect to such amendment, modification
or termination as directed by a Majority in liquidation amount of the
Securities voting together as a single class (and in the case of any other UAL
Corporation Capital Trust holding debt securities issued under the Indenture,
voting with the holders of securities of such other UAL Corporation Capital
Trust); provided that where such amendment, modification or termination of the
Indenture requires the consent or vote of (1) holders of Debentures
representing a specified percentage greater than a majority in principal amount
of the Debentures or (2) each holder of Debentures, the Institutional Trustee
may only vote with respect to that amendment, modification or termination as
directed by, in the case of clause (1) above, the vote of Holders of Securities
representing such specified percentage of the aggregate liquidation amount of
the Securities, or, in the case of clause (2) above, each Holder of Securities;
and provided, further, that the Institutional Trustee shall be under no
obligation to take any action in accordance with the directions of the Holders
of Securities unless the Institutional Trustee shall have received, at the
expense of the Sponsor, an opinion of nationally recognized independent tax
counsel recognized as expert in such matters to the effect that the Trust will
not be classified for United States federal income tax purposes as an
association taxable as a corporation or a partnership on account of such action
and will be treated as a grantor trust for United States federal income tax
purposes following such action.
Subject to Section 2.6 of the Declaration, and the provisions of this
and the next two succeeding paragraphs, the Holders of a Majority in
liquidation amount of the Preferred Securities, voting separately as a class,
shall have the right to (A) on behalf of all Holders of Preferred Securities,
waive any past default, and its consequences, that is waivable under the
Declaration (subject to, and in accordance with, the Declaration) and (B)
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as the holder of the Debentures (and
in the case of any other UAL Corporation Capital Trust holding debt securities
issued under the Indenture, voting with the holders of preferred securities of
such other UAL Corporation Capital Trust), to (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercising any trust or power conferred on the Debenture Trustee
with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under Section 5.7 of the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable; provided that where the taking of any
action under the Indenture requires the consent or vote of (1) holders of
Debentures representing a specified percentage greater than a
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majority in principal amount of the Debentures or (2) each holder of
Debentures, the Institutional Trustee may only take such action if directed by,
in the case of clause (1) above, the vote of Holders of Preferred Securities
representing such specified percentage of the aggregate liquidation amount of
the Preferred Securities, or, in the case of clause (2) above, each Holder of
Preferred Securities. The Institutional Trustee shall not revoke, or take any
action inconsistent with, any action previously authorized or approved by a
vote of the Holders of the Preferred Securities.
Other than with respect to directing the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or the Debenture Trustee as set forth above, the Institutional Trustee shall be
under no obligation to take any of the foregoing actions at the direction of
the Holders of Preferred Securities unless the Institutional Trustee shall have
received, at the expense of the Sponsor, an opinion of nationally recognized
independent tax counsel recognized as expert in such matters to the effect that
the Trust will not be classified for United States federal income tax purposes
as an association taxable as a corporation or a partnership on account of such
action and will be treated as a grantor trust for United States federal income
tax purposes following such action. If the Institutional Trustee fails to
enforce its rights under the Declaration (including, without limitation, its
rights, powers and privileges as a holder of the Debentures under the
Indenture) to the fullest extent permitted by law, any Holder of Preferred
Securities may, upon such Holder's written request to the Institutional Trustee
to enforce such rights, institute a legal proceeding directly against UAL to
enforce the Institutional Trustee's rights under the Declaration, without first
instituting a legal proceeding against the Institutional Trustee or any other
Person; provided that if an Event of Default is attributable to the failure of
UAL to pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, the redemption
date), then a Holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities of such Holder without first (i)
directing the Institutional Trustee to enforce the terms of the Debentures or
(ii) instituting a legal proceeding against UAL to enforce the Institutional
Trustee's rights under the Debentures.
A waiver of an Indenture Event of Default by the Institutional Trustee
at the direction of the Holders of the Preferred Securities will constitute a
waiver of the corresponding Event of Default under the Declaration in respect
of the Securities.
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Any required approval or direction of Holders of Preferred Securities
may be given at a separate meeting of Holders of Preferred Securities convened
for such purpose, at a meeting of all of the Holders of Securities of the Trust
or pursuant to written consent. The Regular Trustees will cause a notice of
any meeting at which Holders of Preferred Securities are entitled to vote, or
of any matter upon which action by written consent of such Holders is to be
taken, to be mailed to each Holder of record of Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such meeting
or the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Debentures in accordance with the Declaration.
Notwithstanding that Holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities at such time that are owned by UAL or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with UAL shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
Holders of the Preferred Securities will have no rights to increase or
decrease the number of Trustees or to appoint, remove or replace a Trustee,
which voting rights are vested solely in the Holders of the Common Securities.
6. Pro Rata Treatment. A reference in these terms of the Preferred
Securities to any payment, distribution or treatment as being "Pro Rata" shall
mean pro rata to each Holder of Securities according to the aggregate
liquidation amount of the Securities held by the relevant Holder in relation to
the aggregate liquidation amount of all Securities outstanding unless, in
relation to a payment, an Event of Default has occurred and is continuing, in
which case any funds available to make such payment shall be paid first to each
Holder of the Preferred Securities pro rata according to the aggregate
liquidation amount of Preferred Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Preferred Securities outstanding,
and only after satisfaction of all amounts owed to the Holders of the Preferred
Securities, to each Holder of Common Securities pro rata according to the
aggregate liquidation amount of Common Securities held by the relevant Holder
relative to the
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aggregate liquidation amount of all Common Securities outstanding.
7. Ranking. The Preferred Securities rank pari passu and payment
thereon will be made Pro Rata with the Common Securities except that, where an
Event of Default occurs and is continuing, the rights of Holders of Preferred
Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise rank in priority to the rights of Holders
of the Common Securities.
8. Mergers, Consolidations or Amalgamations.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described in Sections 3
and 8(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees and without the
consent of the Holders of the Securities, the Delaware Trustee or the
Institutional Trustee, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State; provided
that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations of
the Trust under the Preferred Securities; or
(B) substitutes for the Preferred Securities
other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the Preferred
Securities rank with respect to Distributions and payments
upon liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the holder of the Debentures;
(iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification
of issuance, on any national securities exchange or with another
organization on which the Preferred Securities are then listed or
quoted;
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(iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect (other than with respect
to any dilution of such Holders' interests in the Preferred Securities
as a result of such merger consolidation, amalgamation or
replacement);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) such merger, consolidation, amalgamation or replacement
does not vary the investment of the Holders of the Preferred
Securities within the meaning of Treasury Regulation Section
301.7701-4(c)(1), e.g., does not substitute other assets for assets of
the Trust to which the Preferred Securities relate or add assets to
the Trust to which the Preferred Securities relate;
(viii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such
matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences
and privileges of the Holders of the Preferred Securities
(including any Successor Securities) in any material respect
(other than with respect to any dilution of the Holders'
interest in the new entity);
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will continue to be classified as a grantor trust for
United States federal income tax purposes; and
(ix) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided
by the Preferred Guarantee.
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9. Transfer, Exchange, Method of Payments. Payment of Distributions
and payments on redemption of the Preferred Securities will be payable, the
transfer of the Preferred Securities will be registrable, and Preferred
Securities will be exchangeable for Preferred Securities of other denominations
of a like aggregate liquidation amount, at the principal corporate trust office
of the Institutional Trustee in [the City of New York]; provided that payment
of Distributions may be made at the option of the Regular Trustees on behalf of
the Trust by check mailed to the address of the Persons entitled thereto and
that the payment on redemption of any Preferred Security will be made only upon
surrender of such Preferred Security to the Institutional Trustee.
10. Acceptance of Indenture and Preferred Guarantee. Each Holder of
Preferred Securities, by the acceptance thereof, agrees to the provisions of
(i) the Preferred Guarantee, including the subordination provisions therein and
(ii) the Indenture and the Debentures, including the subordination provisions
of the Indenture.
11. No Preemptive Rights. The Holders of Preferred Securities shall
have no preemptive or similar rights to subscribe to any additional Preferred
Securities or Common Securities.
12. Miscellaneous. These terms shall constitute a part of the
Declaration. The Trust will provide a copy of the Declaration and the
Indenture to a Holder without charge on written request to the Trust at its
principal place of business.
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Annex I
Certificate Number Number of Preferred Securities
B-__ _____________________
CUSIP NO. ______________
Certificate Evidencing Preferred Securities
of
UAL Corporation Capital Trust I
13 1/4% Trust Originated Preferred Securities
(liquidation amount $25 per Preferred Security)
UAL Corporation Capital Trust I, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
_________ (the "Holder") is the registered owner of _____ (______) preferred
securities of the Trust representing undivided beneficial interests in the
assets of the Trust designated the 13 1/4% Trust Originated Preferred
Securities (liquidation amount $25 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designations, rights, privileges, restrictions, preferences and other terms
and provisions of the Preferred Securities are set forth in, and this
certificate and the Preferred Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Amended
and Restated Declaration of Trust of the Trust dated as of [_______________],
1996, as the same may be amended from time to time (the "Declaration")
including the designation of the terms of Preferred Securities as set forth in
Exhibit B thereto. The Preferred Securities and the Common Securities issued
by the Trust pursuant to the Declaration represent undivided beneficial
interests in the assets of the Trust, including the Debentures (as defined in
the Declaration) issued by UAL Corporation, a Delaware corporation ("UAL"), to
the Trust pursuant to the Indenture referred to in the Declaration. The Holder
is entitled to the benefits of the Guarantee Agreement of UAL dated as of
[____________], 1996, as the same may be amended from time to time (the
"Guarantee"), to the extent provided therein. The Trust will furnish a copy of
the Declaration, the Guarantee and the Indenture to the Holder
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without charge upon written request to the Trust at its principal place of
business or registered office.
The Holder of this Certificate, by accepting this Certificate, is
deemed to have (i) agreed to the terms of the Indenture and the Debentures,
including that the Debentures are subordinate and junior in right of payment to
all Senior Indebtedness (as defined in the Indenture) as and to the extent
provided in the Indenture and (ii) agreed to the terms of the Guarantee,
including that the Guarantee is subordinate and junior in right of payment to
all other liabilities of UAL, including the Debentures, except those made pari
passu or subordinate by their terms, and senior to all capital stock now or
hereafter issued by UAL and to any guarantee now or hereafter entered into by
UAL in respect of any of its capital stock.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this
Certificate as of [_______], 1996.
UAL CORPORATION CAPITAL TRUST I
By: _________________________
Name:
Title: Trustee
By: _________________________
Name:
Title: Trustee
Countersigned and Registered:
[___________________]
Transfer Agent and Registrar
By: ___________________________
Authorized Signature
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The Trust will furnish without charge to any registered owner of
Preferred Securities who so requests, copies of the Declaration, the Guarantee
and the Indenture. Any such request should be addressed to UAL Corporation
Capital Trust I, c/o Secretary, UAL Corporation, 1200 East Algonquin Road, Elk
Grove Township, Illinois 60007 or to the Registrar named on the face of this
Certificate.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
UNIF GIFT MIN ACT -- under Uniform Gifts to Minors Act and not as tenants
TENENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survival
Additional abbreviations may also be used though not in the above
list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please insert social security or other identifying number of assignee)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
the within Certificate and all rights and interests represented by the
Preferred Securities evidenced thereby, and hereby irrevocably constitutes and
appoints________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
attorney to transfer the said Preferred Securities on the books of the
within-named Trust with full power of substitution in the premises.
Dated: _________________________
Signature: _____________________
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Note: The signature(s) to this assignment must correspond with the name(s) as
written upon the face of this certificate in every particular, without
alteration or enlargement, or any change whatever.
NOTICE: Signature(s) must be guaranteed by an "eligible guarantor institution"
that is a member or participant in a "signature guarantee program" (i.e., the
Securities Transfer Agents Medallion Program, the Stock Exchange Medallion
Program or the New York Stock Exchange, Inc. Medallion Signature Program).
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EXHIBIT C
TERMS OF COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust of UAL Corporation Capital Trust I dated as of ______________, 1996 (as
amended from time to time, the "Declaration"), the designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth below (each capitalized term used but not
defined herein having the meaning set forth in the Declaration):
1. Designation and Number. Common Securities of the Trust with an
aggregate liquidation amount in the assets of the Trust of ___________________
______________ (_________) and a liquidation amount in the assets of the Trust
of $25 per Common Security, are hereby designated as "13 1/4% Trust Originated
Common Securities." The Common Security Certificates evidencing the Common
Securities shall be substantially in the form attached hereto as Annex I, with
such changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice. The Common Securities are to be issued and
sold to UAL Corporation ("UAL") in consideration of $[_________] in cash. In
connection with the Offer and the purchase by UAL of the Common Securities, UAL
will deposit in the Trust, and the Trust will purchase, respectively, as trust
assets Debentures of UAL having an aggregate principal amount equal to
$[__________], and bearing interest at an annual rate equal to the annual
Distribution rate on the Preferred Securities and Common Securities and having
payment and redemption provisions which correspond to the payment and
redemption provisions of the Preferred Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each Common
Security will be fixed at a rate per annum of 13 1/4% (the "Coupon Rate") of
the stated liquidation amount of $25 per Common Security. Distributions
in arrears for more than one quarter will bear interest at the rate per annum
of 13 1/4% thereof (to the extent permitted by applicable law), compounded
quarterly to the extent permitted by law. The term "Distributions" as used in
these terms means such periodic cash distributions and any such interest
payable unless otherwise stated. A Distribution will be made by the
Institutional Trustee only to the extent that interest payments are made in
respect of the Debentures held by the Trust. The amount of Distributions
payable for any period will be computed for any full quarterly Distribution
period on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarterly Distribution period for which
Distributions are computed,
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Distributions will be computed on the basis of the actual number of days
elapsed in such a 30-day month.
(b) Distributions on the Common Securities will be cumulative, will
accrue from [_____________], 1996 and will be payable quarterly in arrears, on
March 31, June 30, September 30 and December 31 of each year, commencing on
December 31, 1996, except as otherwise described below, but only if and to the
extent that interest payments are made in respect of the Debentures held by the
Trust. In addition, Holders of Common Securities will be entitled to a cash
distribution at the rate of 12- 1/4% per annum of the liquidation amount
thereof from November 1, 1996 through December 31, 1996, payable on December
31, 1996 ("Pre-Issuance Interest"). With the exception of Pre-Issuance
Interest, so long as UAL shall not be in default in the payment of interest on
the Debentures, UAL has the right under the Indenture for the Debentures to
defer payments of interest by extending the interest payment period from time
to time on the Debentures for a period not exceeding 20 consecutive quarterly
interest periods (each, an "Extension Period") and, as a consequence, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the rate of 13 1/4% per annum, compounded
quarterly to the extent permitted by law during any such Extension Period.
Prior to the termination of any such Extension Period, UAL may further extend
such Extension Period; provided that such Extension Period together with all
such previous and further extensions thereof may not exceed 20 consecutive
quarterly interest periods and provided further that no Extension Period may
extend beyond the maturity of the Debentures. Upon the termination of any
Extension Period and the payment on the next distribution payment date
following such Extension Period of all amounts then due, UAL may commence a new
Extension Period, subject to the above requirements. Any interest paid on the
Debentures during an Extension Period on an Interest Payment Date shall be paid
pro rata to the Holders of Preferred Securities on the corresponding
distribution payment date. Payments of accrued Distributions will be payable
to Holders of Common Securities as they appear on the books and records of the
Trust on the record date for the first payment occurring on or after the end of
the Extension Period.
(c) Distributions on the Common Securities will be payable promptly
by the Institutional Trustee (or other Paying Agent) upon receipt of
immediately available funds to the Holders thereof as they appear on the books
and records of the Trust on the relevant record dates, which will be 15
calendar days prior to the relevant Distribution date, which record and payment
dates correspond to the record and interest payment dates on the Debentures.
Distributions payable on any Common Securities that are not punctually paid on
any Distribution payment date as a result of UAL having failed to make the
corresponding interest
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payment on the Debentures will forthwith cease to be payable to the Person in
whose name such Common Security is registered on the relevant record date, and
such defaulted Distribution will instead be payable to the Person in whose name
such Common Security is registered on the special record date established by
the Regular Trustees, which record date shall correspond to the special record
date or other specified date determined in accordance with the Indenture;
provided, however, that Distributions shall not be considered payable on any
Distribution payment date falling within an Extension Period unless UAL has
elected to make a full or partial payment of interest accrued on the Debentures
on such Distribution payment date. Subject to any applicable laws and
regulations and the provisions of the Declaration, each payment in respect of
the Common Securities will be made as described in paragraph 9 hereof. If any
date on which Distributions are payable on the Common Securities is not a
Business Day, then payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) All Distributions paid with respect to the Common Securities and
the Preferred Securities will be paid Pro Rata (as defined herein) to the
Holders thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for under the Declaration, such money or
property shall be distributed Pro Rata among the Holders of the Preferred
Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
voluntary or involuntary dissolution, winding-up or termination of the Trust,
the Holders of the Preferred Securities and Common Securities at the date of
the dissolution, winding-up or termination, as the case may be, will be
entitled to receive Pro Rata solely out of the assets of the Trust available
for distribution to Holders of Preferred Securities and Common Securities,
after satisfaction of liabilities to creditors, an amount equal to the
aggregate of the stated liquidation amount of $25 per Preferred Security and
Common Security plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
connection with such dissolution, winding-up or termination, and after
satisfaction of liabilities to creditors, Debentures in an aggregate principal
amount equal to the aggregate stated
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liquidation amount of such Preferred Securities and Common Securities bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on such Preferred Securities and Common Securities shall be
distributed Pro Rata to the Holders of the Preferred Securities and Common
Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Preferred Securities and Common Securities shall be paid on
a Pro Rata basis, except that, if an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to such Liquidation Distribution.
4. Redemption and Distribution of Debentures. The Preferred
Securities and Common Securities may only be redeemed if Debentures having
an aggregate principal amount equal to the aggregate liquidation amount of the
Preferred Securities and Common Securities are repaid, redeemed or distributed
as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part,
whether at maturity, or upon redemption at any time or from time to time on or
after July 12, 2004, the proceeds of such repayment will be promptly applied to
redeem Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures so
repaid or redeemed, upon not less than 10 nor more than 60 days' notice, at a
redemption price of $25 per Preferred and Common Security plus an amount equal
to accrued and unpaid Distributions thereon to the date of redemption, payable
in cash (the "Redemption Price"). The date of any such repayment or redemption
of Preferred Securities and Common Securities shall be established to coincide
with the repayment or redemption date of the Debentures.
(b) The Common Securities will be entitled to be redeemed on a Pro
Rata basis with the Preferred Securities, except that if an Event of Default
has occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities with respect to the payment of the Redemption Price.
If fewer than all the outstanding Preferred Securities and Common Securities
are to be so redeemed, the Preferred Securities and the Common Securities will
be redeemed Pro Rata and the Common Securities to be redeemed will be redeemed
as described in paragraph 4(e)(ii) below. If a partial redemption would result
in the delisting of the Preferred Securities by any national securities
exchange or other organization on which the Preferred Securities are then
listed, UAL pursuant to the Indenture will only redeem Debentures
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in whole and, as a result, the Trust may only redeem the Common Securities in
whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each
as hereinafter defined, and each a "Special Event") shall occur and be
continuing, the Regular Trustees shall, unless the Debentures are redeemed in
the limited circumstances described below, dissolve the Trust and, after
satisfaction of creditors, cause Debentures held by the Institutional Trustee
having an aggregate principal amount equal to the aggregate stated liquidation
amount of and accrued and unpaid interest equal to accrued and unpaid
Distributions on, and having the same record date for payment as, the Preferred
Securities and Common Securities, to be distributed to the Holders of the
Preferred Securities and Common Securities on a Pro Rata basis in liquidation
of such Holders' interests in the Trust, within 90 days following the
occurrence of such Special Event (the "90 Day Period"), provided, however, that
in the case of the occurrence of a Tax Event, as a condition of such
dissolution and distribution, the Regular Trustees shall have received an
opinion (a "No Recognition Opinion") of a nationally recognized independent tax
counsel experienced in such matters, which opinion may rely on any then
applicable published revenue rulings of the Internal Revenue Service, to the
effect that the Holders of the Preferred Securities will not recognize any gain
or loss for United States federal income tax purposes as a result of the
dissolution of the Trust and distribution of Debentures; and provided, further,
that, if and as long as at the time there is available to the Trust the
opportunity to eliminate, within the 90 Day Period, the Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect on
the Trust, UAL, or the Holders of the Preferred Securities ("Ministerial
Action"), the Trust will pursue such measure in lieu of dissolution.
If in the case of the occurrence of a Tax Event, (i) the Regular
Trustees have received an opinion (a "Redemption Tax Opinion") of nationally
recognized independent tax counsel experienced in such matters that, as a
result of a Tax Event, there is more than an insubstantial risk that UAL would
be precluded from deducting the interest on the Debentures for United States
federal income tax purposes even if the Debentures were distributed to the
Holders of Preferred Securities and Common Securities in liquidation of such
Holder's interest in the Trust as described in this paragraph 4(c) or (ii) the
Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion cannot be delivered to the Trust, UAL shall have the right
at any time, upon not less than 10 nor more than 60 days notice, to redeem the
Debentures in whole or in part for cash at the Redemption Price within 90 days
following the occurrence of such Tax Event, and promptly following such
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redemption Preferred Securities and Common Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures so
redeemed will be redeemed by the Trust at the Redemption Price on a Pro Rata
basis; provided, however, that, if at the time there is available to UAL or the
Regular Trustees on behalf of the Trust the opportunity to eliminate, within
such 90 day period, the Tax Event by taking some Ministerial Action, UAL or the
Regular Trustees on behalf of the Trust will pursue such measure in lieu of
redemption, and provided further that UAL shall have no right to redeem the
Debentures while the Regular Trustees on behalf of the Trust are pursuing such
Ministerial Action. The Common Securities will be redeemed Pro Rata with the
Preferred Securities, except that if an Event of Default under the Indenture
has occurred and is continuing, the Preferred Securities will have a priority
over the Common Securities with respect to payment of the Redemption Price.
"Tax Event" means that the Regular Trustees shall have obtained an
opinion (a "Dissolution Tax Opinion") of nationally recognized independent tax
counsel experienced in such matters to the effect that on or after the
Expiration Date as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to, or change in, an interpretation or application
of any such laws or regulations by any legislative body, court, governmental
agency or regulatory authority (including the enactment of any legislation and
the publication of any judicial decision or regulatory determination), (c) any
interpretation or pronouncement that provides for a position with respect to
such laws or regulations that differs from the theretofore generally accepted
position or (d) any action taken by any governmental agency or regulatory
authority, which amendment or change is enacted, promulgated, issued or
announced or which interpretation or pronouncement is issued or announced or
which action is taken, in each case on or after the Expiration Date, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date thereof, subject to United States federal income tax with
respect to income accrued or received on the Debentures, (ii) the Trust is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges or (iii) interest payable
by UAL to the Trust on the Debentures is not, or within 90 days of the date
thereof will not be, deductible by UAL for United States federal income tax
purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
practice under the Investment Company Act that, as a result of the occurrence
of a change in
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law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority or the staff of such governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than an insubstantial risk that the
Trust is or will be considered an Investment Company which is required to be
registered under the Investment Company Act, which Change in 1940 Act Law
becomes effective on or after the Expiration Date.
On the date fixed for any distribution of Debentures, upon dissolution
of the Trust, (i) the Common Securities will no longer be deemed to be
outstanding and (ii) any certificates representing Common Securities will be
deemed to represent beneficial interests in the Debentures having an aggregate
principal amount equal to the stated liquidation amount of, and bearing accrued
and unpaid interest equal to accrued and unpaid Distributions on, such Common
Securities until such certificates are presented to UAL or its agent for
transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Common
Securities unless all accrued and unpaid Distributions have been paid on all
Common Securities for all quarterly Distribution periods terminating on or
prior to the date of redemption.
(e)(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Preferred Securities and Common Securities (a
"Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Preferred Securities and Common
Securities to be redeemed or exchanged not less than 10 nor more than 60 days
prior to the date fixed for redemption or exchange thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this paragraph (e)(i), a Redemption/Distribution
Notice shall be deemed to be given on the day such notice is first mailed by
first class mail, postage prepaid, to Holders of Preferred Securities and
Common Securities. Each Redemption/Distribution Notice shall be addressed to
the Holders of Preferred Securities and Common Securities at the address of
each such Holder appearing in the books and records of the Trust. No defect in
the Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Common
Securities are to be redeemed, the Common Securities to be redeemed will be
redeemed Pro Rata from each Holder of Common Securities (subject to adjustment
to eliminate fractional Common Securities).
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(iii) If the Trust gives a Redemption/Distribution Notice in
respect of a redemption of Common Securities as provided in this paragraph 4
(which notice will be irrevocable) then immediately prior to the close of
business on the redemption date, provided that UAL has paid to the Trust in
immediately available funds a sufficient amount of cash in connection with the
related redemption or maturity of the Debentures, Distributions will cease to
accrue on the Common Securities called for redemption, such Common Securities
will no longer be deemed to be outstanding and all rights of Holders of such
Common Securities so called for redemption will cease, except the right of the
Holders of such Common Securities to receive the Redemption Price, but without
interest on such Redemption Price. Neither the Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any Common
Securities which have been so called for redemption. If any date fixed for
redemption of Common Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in respect of Common Securities
is improperly withheld or refused and not paid by the Trust, Distributions on
such Common Securities will continue to accrue, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to the Holders of the Common
Securities.
(v) Upon the date of dissolution of the Trust and
distribution of Debentures as a result of the occurrence of a Special Event,
Common Security Certificates shall be deemed to represent beneficial interests
in the Debentures so distributed, and the Common Securities will no longer be
deemed outstanding and may be canceled by the Regular Trustees. The Debentures
so distributed shall have an aggregate principal amount equal to the aggregate
liquidation amount of the Common Securities so distributed.
5. Voting Rights. (a) Except as provided under paragraph 5(b) below
and as otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) Holders of Common Securities have the sole right under the
Declaration to increase or decrease the number of Trustees, and to appoint,
remove or replace a Trustee, any such increase,
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decrease, appointment, removal or replacement to be approved by Holders of
Common Securities representing a Majority in liquidation amount of the Common
Securities.
If any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust, other than in accordance
with the terms of the Declaration, then the Holders of outstanding Securities
will be entitled to vote on such amendment or proposal as a class and such
amendment or proposal shall not be effective except with the approval of the
Holders of Securities representing a Majority in liquidation amount of such
Securities; provided, however, (A) if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of a Majority in liquidation amount of such
class of Securities, (B) the rights of Holders of Common Securities under
Article V of the Declaration to increase or decrease the number of, and to
appoint, replace or remove, Trustees shall not be amended without the consent
of each Holder of Common Securities, and (C) amendments to the Declaration
shall be subject to such further requirements as are set forth in Sections 12.1
and 12.2 of the Declaration.
In the event the consent of the Institutional Trustee, as the holder
of the Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination. The
Institutional Trustee shall vote with respect to such amendment, modification
or termination as directed by a Majority in liquidation amount of the
Securities voting together as a single class (and in the case of any other UAL
Corporation Capital Trust holding debt securities issued under the Indenture,
voting with the holders of securities of such other UAL Corporation Capital
Trust); provided that where such amendment, modification or termination of the
Indenture requires the consent or vote of (1) holders of Debentures
representing a specified percentage greater than a majority in principal amount
of the Debentures or (2) each holder of Debentures, the Institutional Trustee
may only vote with respect to that amendment, modification or termination as
directed by, in the case of clause (1) above, the vote of Holders of Securities
representing such specified percentage of the aggregate liquidation amount of
the Securities, or, in the case of clause (2) above, each Holder of Securities;
and provided, further, that the Institutional Trustee shall be under no
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obligation to take any action in accordance with the directions of the Holders
of the Securities unless the Institutional Trustee shall have received, at the
expense of the Sponsor, an opinion of nationally recognized independent tax
counsel recognized as an expert in such matters to the effect that the Trust
will not be classified for United States federal income tax purposes as an
association taxable as a corporation or a partnership on account of such action
and will be treated as a grantor trust for United States federal income tax
purposes following such action.
Subject to Section 2.6 of the Declaration, and the provisions of this
and the next two succeeding paragraphs, the Holders of a Majority in
liquidation amount of the Common Securities, voting separately as a class,
shall have the right to (A) on behalf of all Holders of Common Securities,
waive any past default, and its consequences, that is waivable under the
Declaration (subject to, and in accordance with, the Declaration) and (B)
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including the
right to direct the Institutional Trustee, as holder of the Debentures, to (i)
direct the time, method and place of conducting any proceeding for any remedy
available to the Debenture Trustee, or exercising any trust or power conferred
on the Debenture Trustee with respect to the Debentures, (ii) waive any past
default and its consequences that is waivable under Section 5.7 of the
Indenture, or (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable; provided that
where the taking of any action under the Indenture requires the consent or vote
of (1) holders of Debentures representing a specified percentage greater than a
majority in principal amount of the Debentures or (2) each holder of
Debentures, the Institutional Trustee may only take such action if directed by,
in the case of clause (1) above, the vote of Holders of Common Securities
representing such specified percentage of the aggregate liquidation amount of
the Common Securities, or, in the case of clause (2) above, each Holder of
Common Securities. The Institutional Trustee shall not revoke, or take any
action inconsistent with, any action previously authorized or approved by a
vote of the Holders of the Preferred Securities, and shall not take any action
in accordance with the direction of the Holders of the Common Securities under
this paragraph if the action is prejudicial to the Holders of Preferred
Securities.
Other than with respect to directing the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or the Debenture Trustee as set forth above, the Institutional Trustee shall be
under no obligation to take any of the foregoing actions at the direction of
the Holders of Common Securities unless the Institutional Trustee shall have
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received, at the expense of the Sponsor, an opinion of nationally recognized
independent tax counsel recognized as expert in such matters to the effect that
the Trust will not be classified for United States federal income tax purposes
as an association taxable as a corporation or a partnership on account of such
action and will be treated as a grantor trust for United States income tax
purposes following such action.
Notwithstanding any other provision of these terms, each Holder of
Common Securities will be deemed to have waived any Event of Default with
respect to the Common Securities and its consequences until all Events of
Default with respect to the Preferred Securities have been cured, waived by the
Holders of Preferred Securities as provided in the Declaration or otherwise
eliminated, and until all Events of Default with respect to the Preferred
Securities have been so cured, waived by the Holders of Preferred Securities or
otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the Holders of Preferred Securities and only the Holders of
the Preferred Securities will have the right to direct the Institutional
Trustee in accordance with the terms of the Declaration or of the Securities.
In the event that any Event of Default with respect to the Preferred Securities
is waived by the Holders of Preferred Securities as provided in the
Declaration, the Holders of Common Securities agree that such waiver shall also
constitute the waiver of such Event of Default with respect to the Common
Securities for all purposes under the Declaration without any further act, vote
or consent of the Holders of the Common Securities.
A waiver of an Indenture Event of Default by the Institutional Trustee
at the direction of the Holders of the Preferred Securities will constitute a
waiver of the corresponding Event of Default under the Declaration in respect
of the Securities.
Any required approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for
such purpose, at a meeting of all of the Holders of Securities of the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
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No vote or consent of the Holders of Common Securities will be
required for the Trust to redeem and cancel Common Securities or distribute
Debentures in accordance with the Declaration.
6. Pro Rata Treatment. A reference in these terms of the Common
Securities to any payment, distribution or treatment as being "Pro Rata" shall
mean pro rata to each Holder of Securities according to the aggregate
liquidation amount of the Securities held by the relevant Holder in relation to
the aggregate liquidation amount of all Securities outstanding unless, in
relation to a payment, an Event of Default has occurred and is continuing, in
which case any funds available to make such payment shall be paid first to each
Holder of the Preferred Securities pro rata according to the aggregate
liquidation amount of Preferred Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Preferred Securities outstanding,
and only after satisfaction of all amounts owed to the Holders of the Preferred
Securities, to each Holder of Common Securities pro rata according to the
aggregate liquidation amount of Common Securities held by the relevant Holder
relative to the aggregate liquidation amount of all Common Securities
outstanding.
7. Ranking. The Common Securities rank pari passu and payment
thereon will be made Pro Rata with the Preferred Securities except that,
where an Event of Default occurs and is continuing, the rights of Holders of
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise are subordinate to the rights of Holders
of the Preferred Securities.
8. Mergers, Consolidations or Amalgamations.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described in Sections 3
and 8(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees and without the
consent of the Holders of the Securities, the Delaware Trustee or the
Institutional Trustee, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State; provided
that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the obligations of
the Trust under the Preferred Securities; or
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(B) substitutes for the Preferred Securities
other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as
the Successor Securities rank the same as the Preferred
Securities rank with respect to Distributions and payments
upon liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the
Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the holder of the Debentures;
(iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification
of issuance, on any national securities exchange or with another
organization on which the Preferred Securities are then listed or
quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the Holders of the Preferred Securities (including any
Successor Securities) in any material respect (other than with respect
to any dilution of such Holders' interests in the Preferred Securities
as a result of such merger consolidation, amalgamation or
replacement);
(vi) such Successor Entity has a purpose substantially
identical to that of the Trust;
(vii) such merger, consolidation, amalgamation or replacement
does not vary the investment of the Holders of the Preferred
Securities within the meaning of Treasury Regulation Section
301.7701-4(c)(1), e.g., does not substitute other assets for assets of
the Trust to which the Preferred Securities relate or add assets to
the Trust to which the Preferred Securities relate;
(viii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such
matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences
and privileges of the Holders of the
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Preferred Securities (including any Successor Securities) in
any material respect (other than with respect to any
dilution of the Holders' interest in the new entity);
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor the
Successor Entity will be required to register as an Investment
Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) will continue to be classified as a grantor trust for
United States federal income tax purposes; and
(ix) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided
by the Preferred Guarantee.
9. Transfers, Exchanges, Method of Payments. Payment of Distributions
and payments on redemption of the Common Securities will be payable, the
transfer of the Common Securities will be registrable, and Common Securities
will be exchangeable for Common Securities of other denominations of a like
aggregate liquidation amount, at the principal corporate trust office of the
Institutional Trustee in [the City of New York]; provided that payment of
Distributions may be made at the option of the Regular Trustees on behalf of
the Trust by check mailed to the address of the Persons entitled thereto and
that the payment on redemption of any Common Security will be made only upon
surrender of such Common Security to the Institutional Trustee. Notwithstanding
the foregoing, transfers of Common Securities are subject to conditions set
forth in Section 9.1(c) of the Declaration.
10. Acceptance of Indenture. Each Holder of Common Securities, by
the acceptance thereof, agrees to the provisions of the Indenture and the
Debentures, including the subordination provisions thereof.
11. No Preemptive Rights. The Holders of Common Securities shall
have no preemptive or similar rights to subscribe to any additional Common
Securities or Preferred Securities.
12. Miscellaneous. These terms shall constitute a part of the
Declaration. The Trust will provide a copy of the Declaration and the
Indenture to a Holder without charge on written request to the Trust at its
principal place of business.
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Annex I
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
C-1 ________
Certificate Evidencing Common Securities
of
UAL Corporation Capital Trust I
13 1/4% Trust Originated Common Securities
(liquidation amount $25 per Common Security)
UAL Corporation Capital Trust I, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby certifies that
UAL Corporation (the "Holder") is the registered owner of ____________________
_________ (______) common securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 13 1/4% Trust
Originated Common Securities (liquidation amount $25 per Common Security) (the
"Common Securities"). The Common Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer and
satisfaction of the other conditions set forth in the Declaration (as defined
below) including, without limitation, Section 9.1(c) thereof. The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Common Securities are set forth in, and this certificate and the Common
Securities represented hereby are issued and shall in all respects be subject
to the terms and provisions of, the Amended and Restated Declaration of
Trust of the Trust dated as of [_____________], 1996, as the same may be
amended from time to time (the "Declaration") including the designation of the
terms of Common Securities as set forth in Exhibit C thereto. The Common
Securities and the Preferred Securities issued by the Trust pursuant to the
Declaration represent undivided beneficial interests in the assets of the
Trust, including the Debentures (as defined in the Declaration) issued by UAL
Corporation, a
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Delaware corporation, to the Trust pursuant to the Indenture referred to in the
Declaration. The Trust will furnish a copy of the Declaration and the
Indenture to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
The Holder of this Certificate, by accepting this Certificate, is
deemed to have agreed to the terms of the Indenture and the Debentures,
including that the Debentures are subordinate and junior in right of payment to
all Senior Indebtedness (as defined in the Indenture) as and to the extent
provided in the Indenture.
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Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this
certificate as of [____], 1996.
UAL CORPORATION CAPITAL TRUST I
By: _________________________
Name:
Title: Trustee
By: _________________________
Name:
Title: Trustee
Countersigned and Registered:
[__________________],
Transfer Agent and Registrar
By: ___________________________
Authorized Signature
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfer this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably constitutes and appoints
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________ attorney to transfer this Common Security Certificate on
the books of the within-named Trust with full power of substitution in the
premises.
Dated: ____________________________
Signature: ________________________
Note: The signature(s) to this assignment must correspond with the name(s) as
written upon the face of this certificate in every particular, without
alteration or enlargement, or any change whatever.
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EXHIBIT 4.8
UAL CORPORATION
OFFICER'S CERTIFICATE
________________________
Pursuant to Sections 2.1 and 3.1 of the Indenture, dated as of __________ _,
1996 (the "Indenture"), between UAL Corporation, a Delaware corporation (the
"Company"), and the First National Bank of Chicago, a national banking
association, as trustee (the "Trustee"), the undersigned officer of the Company
hereby certifies on behalf of the Company as follows:
1. Authorization. The establishment of a series of Securities of
the Company has been approved and authorized in accordance with the provisions
of the Indenture pursuant to resolutions of the Board of Directors of the
Company adopted on June 27, 1996 and September 26, 1996 (together the "Board
Resolutions") and the action taken by Gerald Greenwald and John A. Edwardson in
their capacity as members of the Series B Committee referred to in the Board
Resolutions.
2. Compliance with Covenants and Conditions Precedent. All
conditions precedent, if any, provided for in the Indenture relating to the
establishment of a series of Securities have been complied with.
3. Terms. The terms of the series of Securities established
pursuant to this Officer's Certificate will be as follows:
(i) Title. The title of the Securities is "13 1/4% Junior
Subordinated Debentures Due 2026" (the "Junior
Subordinated Debentures")
(ii) Aggregate Principal Amount. The Junior Subordinated
Debentures shall be limited in aggregate principal
amount to $_____________ (except for Junior
Subordinated Debentures authenticated and delivered
upon registration of transfer of, or in exchange for,
or in lieu of, other Debentures pursuant to Sections
3.4, 3.5, 3.6, 8.6 or 10.7 of the Indenture and except
for any Junior Subordinated Debentures that, pursuant
to the last paragraph of Section 3.3 of the
2
Indenture, are deemed never to have been authenticated
and delivered under the Indenture).
(iii) Stated Maturity. The date on which the principal of
the Junior Subordinated Debentures is payable is
December 31, 2026.
(iv) Rate of Interest; Interest Payment Dates; Regular
Record Dates. Each Junior Subordinated Debenture will
bear interest from _____________, 1996 or from the most
recent Interest Payment Date to which interest has been
paid or duly provided for, quarterly in arrears on
March 31, June 30, September 30 and December 31 of each
year (each, an "Interest Payment Date") (subject to
extension as provided in the form of Junior
Subordinated Debenture attached hereto as Exhibit A),
commencing on December 31, 1996, at the rate of 13 1/4%
per annum until the principal thereof is paid or made
available for payment, and (to the extent that the
payment of such interest shall be legally enforceable)
at the rate of 13 1/4% per annum, compounded quarterly,
on any overdue principal and premium and on any overdue
installment of interest. Except as set forth below,
the interest so payable shall be paid to the person in
whose name such Junior Subordinated Debenture (or one
or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such
interest, which, except as set forth below, shall be
the close of business 15 calendar days prior to the
such Interest Payment Date. In addition, each Junior
Subordinated Debenture will bear interest from November
1, 1996 through ___________, 1996 at the rate of 12-
1/4% per annum (the "Pre-Issuance Accrued
Distribution"), payable on December 31, 1996 to the
person in whose name such Junior Subordinated Debenture
is registered at the close of business on the Regular
Record Date for such Interest Payment Date. With the
exception of the interest payment described in the
immediately preceding sentence, any such interest not
so punctually paid or duly provided for shall forthwith
cease to be payable to the registered holder on such
Regular Record Date and may either be paid to the
person in whose name such Junior Subordinated Debenture
(or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to the
registered
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holder of such Junior Subordinated Debenture not less
than 10 days prior to such Special Record Date, or may
be paid at any time in any other lawful manner not
inconsistent with the requirements of any
securities exchange on which the Junior Subordinated
Debentures may be listed, and upon such notice as may
be required by such exchange, all as more fully
provided in the Indenture.
The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve
30-day months and, for any period shorter than a full
quarterly interest period for which interest is
computed, the amount of interest payable will be
computed on the basis of the actual number of days
elapsed in such a 30-day month. In the event that any
Interest Payment Date is not a business day, then
payment of interest payable on such date will be made
on the next succeeding business day (and without any
interest or other payment in respect of any such
delay), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such
date.
(v) Place of Payment. Principal and interest on the Junior
Subordinated Debentures will be payable, the transfer
of such Junior Subordinated Debentures will be
registrable and such Junior Subordinated Debentures
will be exchangeable for Junior Subordinated Debentures
bearing identical terms and provisions at the office or
agency of the Company maintained for that purpose in
the Borough of Manhattan, the City and State of New
York; provided, however, that, at the option of the
Company, payments of interest may be made by check
mailed to the registered holder at such address as
shall appear in the Security Register and that the
payment of principal with respect to any Junior
Subordinated Debenture will only be made upon surrender
of such Junior Subordinated Debenture to the Trustee.
(vi) Optional Redemption. Junior Subordinated Debentures
may be redeemed at the option of the Company as set
forth in the form of Junior Subordinated Debenture
attached hereto as Exhibit A.
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(vii) Mandatory Redemption. The Junior Subordinated
Debentures will be subject to mandatory redemption
under the conditions and in the manner set forth in the
form of Junior Subordinated Debenture attached hereto
as Exhibit A.
(viii) Denominations. The Junior Subordinated Debentures will
be issuable in denominations of $25 and integral
multiples thereof.
(ix) Currency. The Junior Subordinated Debentures will be
denominated in Dollars and the principal of, premium,
if any, and interest on the Junior Subordinated
Debentures will be payable in Dollars. The Junior
Subordinated Debentures will be satisfied and
discharged as provided in Article 4 of the Indenture.
(x) Payment Currency. The principal of, premium, if any,
and interest on the Junior Subordinated Debentures will
not be payable in a currency other than Dollars.
(xi) Formula. The amount of payments of principal of and
interest on the Junior Subordinated Debentures will not
be determined with reference to an index, formula or
other method.
(xii) Amount Payable Upon Acceleration. The principal amount
of the Junior Subordinated Debentures will be payable
upon declaration of acceleration pursuant to Section
5.2 of the Indenture.
(xiii) Payment of Interest. The payment of interest on the
Junior Subordinated Debentures will be governed by
Sections 2.3 and 3.7 of the Indenture.
(xiv) Special Rights. There are no provisions granting
special rights to the Holders upon the occurrence of
specified events.
(xv) Covenants; Events of Default. There shall be no
deletions from, modification s or additions to he
Events of Default set forth in Section 5.1 of the
Indenture or covenants of the Company set forth in
Article 9 with respect to the Junior Subordinated
Debentures.
(xvi) Additional Amounts. The Company will not pay
additional amounts on the Junior Subordinated
Debentures held by a Person that is not a U.S.
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5
Person in respect of taxes or similar charges withheld
or deducted.
(xvii) Registered Securities. The Junior Subordinated
Debentures will be issuable in definitive form as
Registered Securities, without interest coupons.
Section 3.5 of the Indenture will govern the Junior
Subordinated Debentures.
(xviii) Bearer Securities; Temporary Global Security. The
Junior Subordinated Debentures will not be Bearer
Securities or represented by a temporary global
Security.
(xix) Defeasance and Covenant Defeasance. Sections 4.4 and
4.5 of the Indenture will not apply to the Junior
Subordinated Debentures.
(xx) Registrar; Paying Agent. The Trustee will be the
Registrar and the Paying Agent for the Junior
Subordinated Debentures.
(xxi) Warrants. No warrants will be issued in connection
with the Junior Subordinated Debentures.
(xxii) Exchange Rate Agent. There will be no Exchange Rate
Agent with respect to the Junior Subordinated
Debentures.
(xxiii) Permanent Global Form. The Junior Subordinated
Debentures will not be issued in permanent global form.
(xxiv) Conversion. The Junior Subordinated Debentures will
not be convertible into any other security of the
Company.
(xxv) Subordination. Article 12 of the Indenture will govern
the terms and conditions under which the Junior
Subordinated Debentures are subordinate to the Senior
Indebtedness of the Company.
(xxvi) Other Terms. The Junior Subordinated Debentures will
have the other terms and will be substantially in the
form set forth in the form of Junior Subordinated
Debenture attached hereto as Exhibit A. In case of any
conflict between this certificate and the Junior
Subordinated Debentures in the form attached hereto as
Exhibit A, or between the Resolutions and the Junior
Subordinated
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Debentures in such form, the Junior Subordinated
Debentures will control.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to those terms in the Indenture.
The undersigned, for himself, states that he has read and is familiar
with the provisions of Article 2 of the Indenture relating to the establishment
of the form of Security representing a series of Securities thereunder and
Article 3 of the Indenture relating to the establishment of a series of
Securities thereunder, and in each case, the definitions therein relating
thereto; that he is generally familiar with the other provisions of the
Indenture and with the affairs of the Company and its acts and proceedings and
that the statements and opinions made by him in this Certificate are based upon
such familiarity; that, in his opinion, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as
to whether or not the covenants and conditions referred to above have been
complied with; and, that in his opinion, the covenants and conditions referred
to above have been complied with.
Insofar as this Certificate relates to legal matters, it is based, as
provided for in Section 1.3 of the Indenture, upon the opinion of Counsel
delivered to the Trustee contemporaneously herewith pursuant to Section 3.3 of
the Indenture and relating to the Junior Subordinated Debentures.
IN WITNESS WHEREOF, the undersigned has hereunto signed this
Certificate on behalf of the Company this ___ day of December 1996.
UAL CORPORATION
By: ______________________________
Name: Douglas A. Hacker
Title: Senior Vice
President - Finance
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sec EXHIBIT A
No. CUSIP NO.
UAL CORPORATION
13 1/4% JUNIOR SUBORDINATED DEBENTURE DUE 2026
UAL CORPORATION, a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which
term includes any successor under the Indenture hereinafter referred to),
hereby promises to pay to Cede & Co. or registered assigns, the principal sum
of ________________ Dollars, on December 31, 2026.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if fully set forth at this place.
Unless the Certificate of Authentication hereon has been
executed by the Trustee referred to on the reverse side hereof by manual
signature, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be
duly executed in its corporate name by the manual or facsimile signature of its
Chairman of the Board or its President and Chief Executive Officer and
impressed or imprinted with its corporate seal or facsimile thereof, attested
by the manual or facsimile signature of its Secretary.
UAL CORPORATION
By__________________________________
Title:
Attest:
___________________________
Secretary
This is one of the Securities of a series issued under the within-mentioned
Indenture.
Dated: THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By:_____________________________________
Authorized Signatory
A-1
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(REVERSE OF SECURITY)
(1) Indenture. This Security is one of a duly authorized
issue of securities of the Company (herein called the "Securities") issued and
to be issued in one or more series under an indenture (the "Indenture"), dated
as of _____________, 1996, between the Company and the First National Bank of
Chicago, a national banking association, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture with
respect to the series of which this Security is a part), to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Securities and, to the
extent specifically set forth in the Indenture, the holders of Senior
Indebtedness and Preferred Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date upon which the Debentures are
first issued under the Indenture (the "Issue Date"). The Securities are
unsecured general obligations of the Company. This Security is one of the
series designated on the face hereof, limited in aggregate principal amount to
$________________. All capitalized terms used in this Security and not defined
herein will have the meanings assigned to them in the Indenture.
(2) Interest. The Company promises to pay interest on said
principal amount in cash from __________ __, 1996 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
quarterly in arrears (subject to deferral for up to 20 consecutive quarters as
described in Section 3 hereof) on March 31, June 30, September 30 and December
31 of each year, commencing December 31, 1996, at the rate of 13 1/4% per annum
of the principal amount at stated maturity plus Compounded Interest and
Additional Interest (as defined below), if any, until the principal hereof is
paid or made available for payment, and (to the extent that the payment of such
interest shall be legally enforceable) at the rate of 13 1/4% per annum,
compounded quarterly, on any overdue principal and premium and on any overdue
installment of interest. In addition, the Company promises to pay to the
Holder or registered assigns interest from November 1, 1996 through
___________, 1996 at the rate of 12-1/4% per annum (the "Pre-Issuance Accrued
Distribution"), payable on December 31, 1996. The amount of interest payable
on any Interest Payment Date shall be computed on the basis of a 360-day year
of twelve 30-day months, and for any period shorter than a full quarterly
interest period for which interest is computed, the amount of interest payable
will be computed on the basis of
A-2
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the actual number of days elapsed in such a 30-day month. In the event that
any Interest Payment Date is not a business day, then payment of interest
payable on such date will be made on the next succeeding day which is a
business day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest installment,
which shall be the close of business 15 calendar days prior to the such
Interest Payment Date. With the exception of the Pre-Issuance Accrued
Distribution, any such interest not so punctually paid or duly provided for
shall bear interest at a rate equal to 13 1/4% per annum to the extent lawful)
and will forthwith cease to be payable to the Holder on such Regular Record
Date and may either be paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or may be paid at any time in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture. The Company shall pay as additional interest on the Securities such
amounts as shall be required so that the net amounts received and retained by
the Trust after paying any taxes, duties, assessment so other governmental
charges of whatever nature (other than withholding taxes) imposed on the Trust
by the United states or any other taxing authority ("Additional Interest") will
be not less than the amounts the Trust would have received had no such taxes,
duties, assessment or governmental charges been imposed.
(3) Extension of Interest Payment Period. So long as the
Company is not in default in the payment of interest on the Securities of this
series, the Company shall have the right, at any time during the term of the
Securities of this series, from time to time to extend the interest payment
period of such Securities (other than with respect to the Pre-Issuance Accrued
Distribution) for up to 20 consecutive quarterly interest periods (the
"Extended Interest Payment Period"); provided, no Extended Interest Payment
Period may extend beyond the maturity date of the Securities. At the end of
each such period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate of 13 1/4% per annum compounded
quarterly to
A-3
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the extent permitted by applicable law ("Compounded Interest")). During such
Extended Interest Payment Period, the Company shall not declare or pay any
dividends on, or redeem, purchase, acquire or make a distribution or
liquidation payment with respect to, any of its common stock or preferred stock
or any other securities similar to the Preferred Securities or the Securities,
or make any guarantee payments with respect thereto; provided, however, that
the Company may pay dividends (and cash in lieu of fractional shares) upon the
conversion, other than at the Company's option, of any of its preferred stock
in accordance with the terms of such stock. Prior to the termination of any
such Extended Interest Payment Period, the Company may pay all or any portion
of the interest accrued on the Securities on any Interest Payment Date to
holders of record on the Regular Record Date for such Interest Payment Date or
from time to time further extend such Extended Interest Payment Period,
provided that such Extended Interest Payment Period, together with all previous
and further extensions thereof, shall not exceed 20 consecutive quarterly
interest periods and shall not extend beyond the maturity of the Securities.
At the termination of any such Extended Interest Payment Period and upon the
payment of all accrued and unpaid interest then due, together with Compounded
Interest, the Company may select a new Extended Interest Payment Period,
subject to the foregoing requirements. No interest on this Security shall be
due and payable during an Extended Interest Payment Period, except at the end
thereof. At the end of the Extended Interest Payment Period, the Company shall
pay all interest accrued and unpaid on the Securities including any Compounded
Interest which shall be payable to the holders of the Securities in whose names
the Securities are registered in the Security Register on the Regular Record
Date for the first Interest Payment Date occurring on or after the end of the
Extended Interest Payment Period.
If the Trust is the sole holder of the Securities at the time
the Company selects an Extension Period, the Company shall give notice to the
Indenture Trustee and the Institutional Trustee of its selection of such
Extension Period at least ten Business Days prior to the earlier of (i) the
date the distributions on the Preferred Securities are payable or (ii) if the
Preferred Securities are listed on the New York Stock Exchange or other stock
exchange or quotation system, the date the Trust is required to give notice to
the New York Stock Exchange or other applicable self-regulatory organization or
to the holders of the Preferred Securities on the record date or the date such
distributions are payable, but in any even not less than one Business Day prior
to such record date. The Company shall cause the Trust to give notice of the
Company's selection of such Extension Period to the holders of the Preferred
Securities.
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If the Trust is not the sole holder of the Securities at the
time the Company selects an Extension Period, the Company shall give the
Holders of these Securities notice of is selection of an Extension Period at
least ten Business Days prior to the earlier of (i) the next succeeding
Interest Payment Date or (ii) if the Preferred Securities are listed on the New
York Stock Exchange or other stock exchange or quotation system, the date the
Company is required to give notice to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Securities on the
record or payment date of such related interest payment, but in any event not
less than two Business Days prior to such record date.
The quarter in which such notice is given pursuant to the second and
third paragraphs of this section shall be counted as one of the 20 quarters
permitted in the maximum Extension Period permitted under the first paragraph
of this Section.
(4) Method of Payment. Payment of the principal of (and
premium, if any, on) and any such interest on this Security will be made at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, the City and State of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company, payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register
and, provided further, that the payment of principal will only be made upon the
surrender of this Security to the Trustee. Notwithstanding the foregoing, so
long as the owner and record holder of this Security is UAL Corporation Capital
Trust I (the "Trust"), the payment of the principal of (and premium, if any,
on) and interest (including Compounded Interest, if any) on this Security will
be made at such place and to such account of the Trust as may be designated by
the institutional trustee of the Trust.
(5) Redemption. Except as provided in the next paragraph,
the Securities of this series may not be redeemed by the Company prior to July
12, 2004. The Securities of this series are subject to redemption upon not
less than 10 nor more than 60 days' notice by mail, at any time on or after
July 12, 2004, as a whole or in part, at the election of the Company (an
"Optional Redemption"), at a Redemption Price equal to 100% of the principal
amount together with any accrued but unpaid interest, including Compounded
Interest, if any, to the Redemption Date (the "Optional Redemption Price").
If, at any time, a Tax Event (as defined below) shall occur
and be continuing and (i) the regular trustees (the "Regular Trustees") of the
Trust shall have received an opinion
A-5
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(a "Redemption Tax Opinion") of a nationally recognized independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Securities of this series for United States federal income
tax purposes even if the Securities were distributed to the holders of
Preferred Securities and Common Securities in liquidation of such holder's
interest in the Trust as set forth in the Declaration of Trust or (ii) the
Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion (as defined below) cannot be delivered to the Trust, the
Company shall have the right at any time, upon not less than 10 nor more than
60 days' notice, to redeem the Securities in whole or in part for cash at the
Optional Redemption Price within 90 days following the occurrence of such Tax
Event; provided, however, that, if at the time there is available to the
Company or the Regular Trustees on behalf of the Trust the opportunity to
eliminate, within such 90 day period, the Tax Event by taking some ministerial
action ("Ministerial Action"), such as filing a form or making an election, or
pursuing some other similar reasonable measure, which has no adverse effect on
the Trust, the Company or the holders of the Preferred Securities, the Company
or the Regular Trustees on behalf of the Trust will pursue such measure in lieu
of redemption and, provided further, that the Company shall have no right to
redeem the Securities while the Regular Trustees on behalf of the Trust are
pursuing any such Ministerial Action.
"Tax Event" means that the Regular Trustees shall have
obtained an opinion (a "Dissolution Tax Opinion") of nationally recognized
independent tax counsel experienced in such matters to the effect that on or
after ___________, 1996, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision
or regulatory determination), (c) any interpretation or pronouncement that
provides for a position with respect to such laws or regulations that differs
from the theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after ______________, 1996, there is more than an insubstantial risk that
(i) the Trust is, or will be within 90 days of the date thereof, subject to
United States federal income tax with respect to income accrued or received on
the Securities, (ii) the Trust
A-6
13
is, or will be within 90 days of the date thereof, subject to more than a de
minimis amount of taxes, duties or other governmental charges or (iii) interest
payable by the Company to the Trust on the Securities is not, or within 90 days
of the date thereof will not be, deductible by the Company for United States
federal income tax purposes.
"No Recognition Opinion" means an opinion of a nationally
recognized independent tax counsel experienced in such matters, which opinion
may rely on any then applicable published revenue ruling of the Internal
Revenue Service, to the effect that the holders of the Preferred Securities
will not recognize any gain or loss for United States federal income tax
purposes as a result of a dissolution of the Trust and distribution of the
Securities as provided in the Declaration of Trust.
If the Securities of this Series are only partially redeemed
by the Company pursuant to an Optional Redemption or as a result of a Tax Event
as described above, the Securities of this series will be redeemed pro rata or
by lot or by any other method as the Trustee shall deem fair and appropriate.
Notwithstanding the foregoing, if a partial redemption of the Securities of
this series would result in the delisting of the Preferred Securities by any
national securities exchange or other organization on which the Preferred
Securities are then listed, the Company shall not be permitted to effect such
partial redemption and will only redeem the Securities of this series as a
whole.
In the event of redemption of this Security in part only, a
new Security or Securities of this series for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
(6) Defeasance. The Securities are subject to the defeasance
and covenant defeasance provisions set forth in Article Four of the Indenture.
(7) Denominations, Transfer, Exchange. The Securities are
issuable only as registered Securities without coupons in the denominations of
$1,000 and any integral multiple thereof. As provided in the Indenture, and
subject to certain limitations therein set forth, Securities are exchangeable
for a like aggregate principal amount of Securities of different authorized
denominations as requested by the Holder surrendering the same and upon
surrender of the Security for registration of transfer at the office or agency
of the Company in the City of New York, the Company will execute, and the
Trustee will authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Securities, of authorized denominations and of
a like aggregate principal amount and tenor. Every Security
A-7
14
surrendered for registration of transfer or exchange will, if required by the
Company, the Registrar or the Trustee, be duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company, the
Registrar and the Trustee duly executed by, the Holder hereof or his attorney
duly authorized in writing. No service charge will be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
(8) Persons Deemed Owners. Prior to due presentment for
registration of transfer of this Security, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes whatsoever, whether or not this
Security is overdue, and neither the Company, the Trustee nor any such agent
will be affected by notice to the contrary.
(9) Defaults and Remedies. If an Event of Default as defined
in the Indenture shall occur, the principal of all Securities may be declared
due and payable in the manner and with the effect provided in the Indenture.
(10) Subordination. The Company and each Holder, by
acceptance hereof, agrees that the payment of the principal of, and premium, if
any, and interest on the Securities is subordinated, to the extent and in the
manner provided in the Indenture, to the prior payment in full of the Senior
Indebtedness of the Company as defined in the Indenture and this Security is
issued subject to the provisions of the Indenture with respect thereto. Each
Holder of this Security, by accepting the same, authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary or
appropriate in the discretion of the Trustee to effectuate the subordination so
provided and appoints the Trustee his attorney-in-fact for such purpose.
(11) Indebtedness. The Company and, by its acceptance of
this Security or a beneficial interest herein, the Holder of, and any Person
that acquires a beneficial interest in, this Security agree that for United
States federal, state and local tax purposes it is intended that this Security
constitute indebtedness.
(12) Amendments and Waivers. The Indenture permits, with
certain exceptions as therein provided, the Company and the Trustee, with the
consent of the Holders of not less than a majority in aggregate principal
amount of the Securities of all series affected at the time outstanding, as
defined in the Indenture (and, in the case of any series of Securities held as
A-8
15
trust assets of a UAL Corporation Capital Trust and with respect to which a
Security Exchange has not theretofore occurred, such consent of holders of the
Preferred Securities and the Common Securities of such UAL Corporation Capital
Trust as may be required under the Declaration of Trust of such UAL Corporation
Capital Trust), to execute supplemental indentures for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders of the Securities; provided, however, that
no such supplemental indenture shall, without the consent of the holder of each
Security so affected, (i) change the time for payment of principal, premium, if
any, or interest on any Security; (ii) reduce the principal of, or any
installment of principal of, or interest on any Security; (iii) reduce the
amount of premium, if any, payable upon the redemption of any Security; (iv)
reduce the amount of principal payable upon acceleration of the maturity of an
Original Issue Discount Security (as defined in the Indenture); (v) change the
coin or currency in which any Security or any premium or interest thereon is
payable; (vi) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security; (vii) reduce the percentage in
principal amount of the outstanding Securities the consent of whose holders is
required for modification or amendment of the Indenture or for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults; (viii) change the obligation of the Company to maintain an office or
agency in the places and for the purposes specified in the Indenture; (ix)
modify the provisions relating to waiver of certain defaults or any of the
foregoing provisions; (x) adversely affect the right to convert the Securities
or (xi) modify the provisions with respect to the subordination of the
Securities. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the securities of all series at the
time outstanding affected thereby (subject, in the case of any series of
Securities held as trust assets of a UAL Corporation Capital Trust and with
respect to which a Security Exchange has not theretofore occurred, to such
consent of holders of Preferred Securities and Common Securities of such UAL
Corporation Capital Trust as may be required under the Declaration of Trust of
such UAL Corporation Capital Trust), on behalf of the Holders of the Securities
of such series, to waive compliance by the Company with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security
(unless revoked as provided in the Indenture) shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Security.
A-9
16
(13) Obligation Absolute. No reference herein to the
Indenture and no provision of this Security or of the Indenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of (and premium, if any) and interest on this Security at the
times, place and rate, and in the coin or currency, hereto prescribed.
(14) No Recourse Against Others. No recourse for the payment
of the principal of or interest on this Security, or for any claim based hereon
or on the Indenture and no recourse under or upon any obligation, covenant or
agreement of the Company in the Indenture or any indenture supplemental thereto
or in any Security, or because of the creation of any indebtedness represented
hereby, shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
(15) Governing Law. THIS SECURITY WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
____________________
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to: UAL
Corporation, P.O. Box 66100, Chicago, Illinois 60666, Attention: Treasurer.
A-10
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 of our report dated
February 28, 1996, included in the UAL Corporation Annual Report on Form 10-K
for the year ended December 31, 1995, and to all references to our Firm included
in this Registration Statement on Form S-4.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 20, 1996
1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
------
-----------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-----------------------------------
UAL CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2675207
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, ILLINOIS 60007
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
JUNIOR SUBORDINATED DEBENTURES
(TITLE OF INDENTURE SECURITIES)
2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of
Governors of the Federal Reserve System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST
POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the trustee now
in effect.*
2. A copy of the certificates of authority of the trustee to
commence business.*
3. A copy of the authorization of the trustee to exercise
corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by Section 321(b) of
the Act.
2
3
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 19th day of November, 1996.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
*EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
November 19, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between UAL Corporation
and The First National Bank of Chicago, the undersigned, in accordance with
Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents
that the reports of examinations of the undersigned, made by Federal or State
authorities authorized to make such examinations, may be furnished by such
authorities to the Securities and Exchange Commission upon its request
therefor.
VERY TRULY YOURS,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
4
5
EXHIBIT 7
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
---------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
C400 <-
DOLLAR AMOUNTS IN --------- -----
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . 0081 3,572,641 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . 0071 6,958,367 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)............ 1773 1,448,974 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 0276 5,020,878 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . . 0277 918,688 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 19,125,160 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . RCFD 3123 379,232 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . . 2125 18,745,928 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . 3545 9,599,172 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . . 2145 623,289 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . 2150 8,927 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . 2130 57,280 8.
9. Customers' liability to this bank on acceptances outstanding . . . . . 2155 632,259 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . 2143 156,715 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . 2160 1,592,088 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . 2170 49,335,206 12.
- -----------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
6
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
---------
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
----------------- ------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . . RCON 2200 16,878,870 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . . . RCON 6631 7,855,880 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . . RCON 6636 9,022,990 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . . . . . . . RCFN 2200 12,677,057 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . . . RCFN 6631 766,936 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . . RCFN 6636 11,910,121 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . . . RCFD 0278 1,318,968 14.a.
b. Securities sold under agreements to repurchase . . . . . . . . RCFD 0279 1,197,589 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . RCON 2840 104,546 15.a.
b. Trading Liabilities............................................... RCFD 3548 6,431,784 15.b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . . . RCFD 2332 4,437,636 16.a.
b. With original maturity of more than one year . . . . . . . . RCFD 2333 75,308 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 283,041 17.
18. Bank's liability on acceptance executed and outstanding . . . . RCFD 2920 632,259 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . RCFD 3200 1,275,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . RCFD 2930 892,947 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . RCFD 2948 46,205,005 21.
22. Limited-Life preferred stock and related surplus . . . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) . . . . RCFD 3839 2,349,164 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . RCFD 3632 584,878 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 (3,951) 26.b.
27. Cumulative foreign currency translation adjustments . . . . . . RCFD 3284 (748) 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . RCFD 3210 3,130,201 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) . . . . . . . . . . . . . . RCFD 3300 49,335,206 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external
Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . ....RCFD 6724 ...../N/A / M.1.
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed
with generally accepted auditing standards by a certified by other external auditors (may be required
public accounting firm which submits a report on the bank by state chartering authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by
conducted in accordance with generally accepted auditing external auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial
submits a report on the consolidated holding company statements by external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax
3 = Directors' examination of the bank conducted in preparation work)
accordance with generally accepted auditing standards 8 = No external audit work
by a certified public accounting firm (may be required by
state chartering authority)
- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
1
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _____
___________________
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
____________________
UAL CORPORATION CAPITAL TRUST I
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, ILLINOIS 60007
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
PREFERRED SECURITIES
(TITLE OF INDENTURE SECURITIES)
2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
3
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 19th day of November, 1996.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
* EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
November 19, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a Amended and Restated Declaration of
Trust of UAL Corporation Capital Trust I, the undersigned, in accordance with
Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents
that the reports of examinations of the undersigned, made by Federal or State
authorities authorized to make such examinations, may be furnished by such
authorities to the Securities and Exchange Commission upon its request
therefor.
VERY TRULY YOURS,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
4
5
EXHIBIT 7
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
C400 <-
DOLLAR AMOUNTS IN ------------ -----
THOUSANDS RCFD BIL MIL THOU
---------------- ---- ------------
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . 0081 3,572,641 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . 0071 6,958,367 1.b.
2. Securities
a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) . . . . 1773 1,448,974 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 0276 5,020,878 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . . 0277 918,688 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 19,125,160 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . RCFD 3123 379,232 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . . 2125 18,745,928 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . 3545 9,599,172 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . . 2145 623,289 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . . 2150 8,927 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . 2130 57,280 8.
9. Customers' liability to this bank on acceptances outstanding . . . . . 2155 632,259 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . . 2143 156,715 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . 2160 1,592,088 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . . 2170 49,335,206 12.
___________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
6
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- ------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . . . . RCON 2200 16,878,870 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . . . . RCON 6631 7,855,880 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . . . RCON 6636 9,022,990 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . . . . . . . . RCFN 2200 12,677,057 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . . . . RCFN 6631 766,936 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . . .
RCFN 6636 11,910,121 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . . . . RCFD 0278 1,318,968 14.a.
b. Securities sold under agreements to repurchase . . . . . . . . . RCFD 0279 1,197,589 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . RCON 2840 104,546 15.a.
b. Trading Liabilities . . . . . . . . . . . . . . . . . . . . . . RCFD 3548 6,431,784 15.b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . . . . RCFD 2332 4,437,636 16.a.
b. With original maturity of more than one year . . . . . . . . . RCFD 2333 75,308 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 283,041 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 632,259 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . RCFD 3200 1,275,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . RCFD 2930 892,947 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . . RCFD 2948 46,205,005 21.
22. Limited-Life preferred stock and related surplus . . . . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) . . . . . RCFD 3839 2,349,164 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . . RCFD 3632 584,878 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 (3,951) 26.b.
27. Cumulative foreign currency translation adjustments . . . . . . . . RCFD 3284 (748) 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . . . . RCFD 3210 3,130,201 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) . . . . . . . . . . . . . . . RCFD 3300 49,335,206 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 6724 . . N/A M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
____________________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
1
EXHIBIT 25.3
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _____
_________________________________
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
___________________________________
UAL CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2675207
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1200 EAST ALGONQUIN ROAD
ELK GROVE TOWNSHIP, ILLINOIS 60007
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF PREFERRED SECURITIES OF
UAL CORPORATION CAPITAL TRUST I
(TITLE OF INDENTURE SECURITIES)
2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
3
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 19th day of November, 1996.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /s/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
*EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
November 19, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of Guarantee Agreement of UAL Corporation,
the undersigned, in accordance with Section 321(b) of the Trust Indenture Act
of 1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ RICHARD D. MANELLA
RICHARD D. MANELLA
VICE PRESIDENT
4
5
EXHIBIT 7
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
---------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
C400
DOLLAR AMOUNTS IN ------------
THOUSANDS RCFD BIL MIL THOU
ASSETS ------------------ ------ -------------
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . 0081 3,572,641
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . 0071 6,958,367
2. Securities
a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . 1754 0
b. Available-for-sale securities (from Schedule RC-B, column D)........ 1773 1,448,974
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 0276 5,020,878
b. Securities purchased under agreements to resell . . . . . . . . . . 0277 918,688
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 19,125,160
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . RCFD 3123 379,232
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . RCFD 3128 0
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . . 2125 18,745,928
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . 3545 9,599,172
6. Premises and fixed assets (including capitalized leases) . . . . . . . 2145 623,289
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . . 2150 8,927
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . 2130 57,280
9. Customers' liability to this bank on acceptances outstanding . . . . . 2155 632,259
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . . 2143 156,715
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 1,592,088
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . . 2170 49,335,206
<-
-----
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . 1.b.
2. Securities
a. Held-to-maturity securities (from Schedule RC-B, column A) . . . . . 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........ 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . . 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . . 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . . 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . . 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . 8.
9. Customers' liability to this bank on acceptances outstanding . . . . . 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . . 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . . 12.
__________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
6
Legal Title of Bank: The First National Bank of Chicago Call Date: 06/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
---------
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
---------------- ------------
LIABILITIES
C>
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . RCON 2200 16,878,870 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . RCON 6631 7,855,880 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCON 6636 9,022,990 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . . . . . RCFN 2200 12,677,057 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . RCFN 6631 766,936 13.b.(1)
(2) Interest-bearing RCFN 6636 11,910,121 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . RCFD 0278 1,318,968 14.a.
b. Securities sold under agreements to repurchase . . . . . . RCFD 0279 1,197,589 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . RCON 2840 104,546 15.a.
b. Trading Liabilities........................................ RCFD 3548 6,431,784 15.b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . RCFD 2332 4,437,636 16.a.
b. With original maturity of more than one year . . . . . . RCFD 2333 75,308 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 283,041 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 632,259 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . RCFD 3200 1,275,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . RCFD 2930 892,947 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . RCFD 2948 46,205,005 21.
22. Limited-Life preferred stock and related surplus . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,349,164 25.
26. a. Undivided profits and capital reserves . . . . . . . . . RCFD 3632 584,878 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 (3,951) 26.b.
27. Cumulative foreign currency translation adjustments . . . . RCFD 3284 (748) 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 3,130,201 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) . . . . . . . . . . . RCFD 3300 49,335,206 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work
performed for the bank by independent external Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . . . . ....RCFD 6724 .... N/A M.1.
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
___________________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
1
EXHIBIT 99.5
EXCHANGE AGENT AGREEMENT
The Bank of New York
101 Barclay Street - 22nd Floor
New York, NY 10286
Ladies and Gentlemen:
UAL Corporation Capital Trust I, a Delaware business trust (the "Trust"),
proposes to make an offer (the "Exchange Offer") to exchange its 13 1/4% Trust
Originated Preferred Securities ("TOPrS") for any and all outstanding Series B
Depositary Shares, each representing 1/1,000 of a share of 12 1/4% Series B
Preferred Stock of UAL Corporation ("UAL"), not owned by UAL. The terms and
conditions of the Exchange offer as currently contemplated are set forth in a
prospectus, dated November 20, 1996 (the "Prospectus"), a copy of which is
attached to this Agreement as Attachment A, proposed to be distributed to all
record holders of the Depositary Shares.
The Trust hereby appoints The Bank of New York to act as Depositary in
connection with the Exchange Offer. References hereinafter to "you" shall
refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Trust on or about
November 21, 1996. The Letter of Transmittal, a copy of which is attached to
this Agreement as Attachment B, accompanying the Prospectus is to be used by
the holders of the Depositary Shares to accept the Exchange Offer, and contains
instructions with respect to the delivery of certificates for Depositary Shares
tendered.
The Exchange Offer shall expire at 5:00 p.m., New York City time, on December
20, 1996 (the "Initial Expiration Date"), or on such later date or time to
which the Trust may extend the Exchange Offer. Subject to the terms and
conditions set forth in the Prospectus, the Trust expressly reserves the right
to extend the Exchange Offer from time to time. If the Trust extends the
Exchange Offer, the Trust will give you oral (confirmed in writing) or written
notice before 9:00 a.m., New York City time, on the business day following the
scheduled Expiration Date. The later of the Initial Expiration Date or the
latest time and date to which the Exchange Offer may be so extended is
hereinafter referred to as "The Expiration Date."
In carrying out your duties as Depositary, you are to act in accordance with
the following instructions:
2
1. You will perform such duties and only such duties as are specifically set
forth in the section of the Prospectus captioned "The Offer" or as specifically
set forth herein; provided, however, that in no way will your general duty to
act in good faith be discharged by the foregoing.
2. You will establish and maintain a book-entry account in respect of the
Depositary Shares at the Depository Trust Company ("DTC"), and the Philadelphia
Depository Trust Company ("PHDTC"), in connection with the Exchange Offer, in
accordance with Rule 17aD-14 under the Securities Exchange Act of 1934, as
amended. Any financial institution that is a participant in the DTC or PHDTC
system may make book-entry delivery of the Depositary Shares by causing DTC or
PHDTC to transfer such Depositary Shares into the account maintained by you,
pursuant to this paragraph, in accordance with DTC's or PHDTC's procedure for
such transfer, and you may effect a withdrawal of Depositary Shares through
such account by book-entry movement. However, although delivery of Depositary
Shares may be effected through book-entry transfer at DTC or PHDTC the Letter
of Transmittal (or facsimile thereof) with any required signature guarantees
and any other documents must, in any case, be received by you in order for
Depositary Shares to be properly tendered. The accounts shall be maintained
until all Depositary Shares tendered pursuant to the Exchange Offer shall have
been either accepted for payment or returned.
3. You are to examine each of the Letters of Transmittal and certificates for
Depositary Shares (or confirmation of book-entry transfer into your account at
DTC or PHDTC) and any other documents delivered or mailed to you by or for
holders of Depositary Shares to ascertain whether; (i) the Letters of
Transmittal and any such other documents are duly executed and properly
completed in accordance with instructions set forth therein and (ii) the
Depositary Shares have otherwise been properly tendered. In each case where
the Letter of Transmittal or any other document has been improperly completed
or executed or any of the certificates for Depositary Shares are not in proper
form for transfer or some other irregularity in connection with the acceptance
of the Exchange Offer exists, you will endeavor to inform the presenters of the
need for fulfillment of all requirements and to take any other action as may be
necessary or advisable to cause such irregularity to be corrected.
4. With the approval of the Trust (such approval, if given orally, to be
confirmed in writing), or any other party designated by the Trust in writing,
you are authorized to waive any irregularities in connection with any tender of
Depositary Shares pursuant to the Exchange Offer.
5. Tenders of Depositary Shares may be made only as set forth in the Letter
of Transmittal and in the section of the
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Prospectus captioned "The Offer -- Procedures for Tendering," and Depositary
Shares shall be considered properly tendered to you only when tendered in
accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Depositary Shares which
the Trust shall approve as having been properly tendered shall be considered to
be properly tendered (such approval, if given orally, shall be confirmed in
writing).
6. You shall advise the Trust with respect to any Depositary Shares received
subsequent to the Expiration Date and accept its instructions with respect to
disposition of such Depositary Shares.
7. You shall accept tenders:
(a) in cases where the Depositary Shares are registered in two or more names
only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Depositary Shares
provided that customary transfer requirements, including any applicable
transfer taxes, are fulfilled.
You shall accept partial tenders of Depositary Shares where so indicated and
as permitted in the Letter of Transmittal and deliver certificates for
Depositary Shares to the transfer agent for split-up and return any untendered
Depositary Shares to the holder (or to such other person as may be designated
in the Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Trust will notify you (such notice if given orally, to be confirmed
in writing) of its acceptance, promptly after the Expiration Date, of all
Depositary Shares properly tendered and you, on behalf of the Trust, will
exchange such Depositary Shares for TOPrS and cause such Depositary Shares to
be transferred to the Trust. Delivery of TOPrS will be made on behalf of the
Trust by you at the rate of one TOPrS for each Depositary Share properly
tendered promptly after notice (such notice if given orally, to be confirmed in
writing) of acceptance of said Depositary Shares by the Trust; provided,
however, that in all cases, Depositary Shares tendered pursuant to the Exchange
Offer will be exchanged only after timely receipt by you of certificates for
such Depositary Shares (or confirmation of book-entry transfer into your
account at the DTC or PHDTC), a properly completed and
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duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other required documents.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and
the Letter of Transmittal, Depositary Shares tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date.
10. The Trust shall not be required to exchange any Depositary Shares
tendered if any of the conditions set forth in the Prospectus are not met.
Notice of any decision by the Trust not to purchase or pay for any Depositary
Shares tendered shall be given (and confirmed in writing) by the Trust to you.
11. If, pursuant to the Exchange Offer, the Trust does not accept for
exchange all or part of the Depositary Shares tendered, you shall as soon as
practicable after the expiration or termination of the Exchange Offer return
those certificates for unaccepted Depositary Shares (or effect appropriate
book-entry transfer), together with any related required documents and the
Letters of Transmittal relating thereto that are in your possession, to the
persons who deposited them.
12. All certificates for reissued Depositary Shares, for unaccepted
Depositary Shares or for TOPrS shall be forwarded by (a) first-class mail,
return receipt requested, under a blanket surety bond protecting you and the
Trust from loss or liability arising out of the non-receipt or non-delivery of
such certificates or (b) by registered mail insured separately for the
replacement value of such certificates.
13. You are not authorized to offer to pay any concessions, commissions or
solicitation fees to any broker, dealer, bank or other persons or to engage or
utilize any person to solicit tenders.
14. As Depositary hereunder you:
(a) shall have no duties or obligations other than those specifically set
forth herein or as may be subsequently agreed to in writing between you and the
Trust;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any
of the certificates or the Depositary Shares represented thereby deposited with
you pursuant to the Exchange Offer, and will not be required to and will make
no representation as to the validity, value or genuineness of the Exchange
Offer;
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(c) shall not be obligated to take any legal action hereunder which might in
your judgment involve any expense or liability, unless you shall have been
furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting in reliance upon
any certificate, instrument, opinion, notice, letter, telegram, or other
document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request, comment,
agreement, or other instrument whatsoever not only as to its due execution and
validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein, which you shall in good faith
believe to be genuine or to have been signed or represented by a proper person
or persons;
(f) may rely on and shall be protected in acting upon written or oral
instructions from the Trust;
(g) may consult with your counsel with respect to any questions relating to
your duties and responsibilities and the opinion of such counsel shall be full
and complete authorization and protection in respect to any action taken,
suffered or omitted by you hereunder in good faith and in accordance with the
opinion of such counsel; and
(h) shall not advise any person tendering Depositary Shares pursuant to the
Exchange Offer as to the wisdom of making such tender or as to the market value
or decline or appreciation in market value of any Depositary Shares.
15. You shall take such action as may from time to time be requested by the
Trust or it's counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and
Notice of Guaranteed Delivery (as defined in the Prospectus) or such other
forms as may be approved from time to time by the Trust, to all persons
requesting such documents and to accept and comply with telephone requests for
information relating to the Exchange Offer, provided that such information
shall relate only to the procedures for accepting (or withdrawing from) the
Exchange Offer. The Trust will furnish you with copies of such documents at
your request. All other requests for information relating to the Exchange
Offer shall be directed to Georgeson & Company, Inc., which has been retained
by the Trust as Information Agent, at the address set forth in the Prospectus.
16. You are authorized to cooperate with and to furnish information to any
organization (and its representatives) designated from time to time by the
Trust in any manner reasonably
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requested by it in connection with the Exchange Offer and any tenders
thereunder.
17. You shall, at the direction of the Trust, advise by facsimile
transmission or telephone, and promptly thereafter confirm in writing to the
Trust (at the address and telephone or other number set forth on Schedule I
hereto) and such other person or persons as the Trust may request, daily (or
more frequently if requested) up to and including the Expiration Date, (i) the
number of Depositary Shares which have been tendered pursuant to the Exchange
Offer and the items received by you pursuant to this Agreement, separately
reporting and giving cumulative totals as to items properly received, items
improperly received and items covered by Notice of Guaranteed Delivery. In
addition, you will also inform, and cooperate in making available to, the
aforementioned persons upon oral request made from time to time prior to the
Expiration Date of such other information as they may reasonably request. Such
cooperation shall include, without limitation, the granting by you to the Trust
and such other person or persons as the Trust may request, of access to those
persons on your staff who are responsible for receiving tenders, in order to
ensure that immediately prior to the Initial Expiration Date and each other
Expiration Date, if any, the Trust shall have received information in
sufficient detail to enable it to decide whether to extend the Exchange Offer.
You shall prepare a final list of all persons whose tenders were accepted the
number of shares tendered, the amount accepted and deliver said list to the
Trust and such other person or persons as the Trust may request.
18. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Trust.
19. You hereby expressly waive any lien, encumbrance or right of set-off
whatsoever that you may have with respect to funds deposited with you, if any,
borrowed by the Trust, UAL, or any of their respective subsidiaries or
affiliates pursuant to any loan or credit agreement with you or for
compensation owed to you hereunder.
20. For services rendered as Depositary hereunder, you shall be entitled to
the compensation set forth on Attachment C to this Agreement.
21. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement,
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on the one hand, and the Prospectus and the Letter of Transmittal (as they may
be amended from time to time), on the other hand, shall be resolved in favor of
the latter two documents, except with respect of the duties, liabilities and
indemnification of you as Depositary, which shall be controlled by this
Agreement.
22. The Trust covenants and agrees to indemnify and hold you harmless in
your capacity as Depositary hereunder against any loss, liability, cost or
expense, including attorneys' fees (in each case incurred without negligence,
misconduct or bad faith on your part) arising out of or in connection with any
act, omission, delay or refusal made by you in reasonable reliance upon any
signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document believed by you to be valid,
genuine and sufficient in accepting any tender or effecting any transfer of
Depositary Shares believed by you in good faith to be authorized, and in
delaying or refusing in good faith to accept any tenders or effect any transfer
of Depositary Shares. In no case shall the Trust be liable under this
indemnity with respect to any claim against you unless the Trust shall be
notified by you, by letter or cable or by telex confirmed by letter, of the
written assertion of a claim against you or of any other action commenced
against you, promptly after you shall have received any such written assertion
or notice of commencement of action in connection therewith. The Trust shall
be entitled to participate at its own expense in the defense of any such claim
or other action and, if the Trust so elects, the Trust shall assume the defense
of any suit brought to enforce any such claim. In the event that the Trust
shall assume the defense of any such suit, the Trust shall not be liable for
the fees and expenses of any additional counsel thereafter retained by you, so
long as the Trust shall retain counsel reasonably satisfactory to you to defend
such suit.
23. You shall arrange to comply with all requirements under the tax laws of
the United States, including those relating to missing Tax Identification
Numbers, and shall file any appropriate reports with the Internal Revenue
Service (e.g., 1099, 1099B, etc.). The Trust understands that you are required
to deduct 31% on payments to holders who have not supplied their correct
Taxpayer Identification Number or required certification. Such funds will be
turned over to the Internal Revenue Service in accordance with applicable
regulations.
24. You shall deliver or cause to be delivered in a timely manner to each
governmental authority to which any stock transfer taxes are payable in respect
of the transfer of Depositary Shares accepted in the Exchange Offer to the
Trust your check in the amount of all stock transfer taxes so payable, and the
Trust shall reimburse you for the amount of any and all stock transfer taxes
payable in respect of the transfer of Depositary Shares accepted in the
Exchange Offer to the Trust; provided, however, that you shall
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8
reimburse the Trust for amounts refunded to you in respect of your payment of
any such stock transfer taxes, at such time as such refund is received by you.
25. This Agreement and your appointment as depository hereunder shall be
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such state,
and shall inure to the benefit of, and the obligations created hereby shall be
binding upon, the successors and assigns of each of the parties hereto. This
Agreement may not be modified orally.
26. This Agreement shall not be deemed or construed to be modified, amended,
rescinded, cancelled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
27. Unless otherwise provided herein, all notices requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
If to the Trust:
UAL Corporation Capital Trust I
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Facsimile: (847) 700-7117
Attention: Secretary
If to the Depositary:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Administration
28. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration date. Notwithstanding the
foregoing, Paragraphs 20, 22 and 25 shall survive the termination of this
Agreement. Upon any termination of this agreement, you shall promptly deliver
to the Trust any certificates for Depositary Shares, funds or property then
held by you as Depositary under this Agreement.
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29. This Agreement shall be binding and effective as of the date hereof.
30. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but which together shall constitute one
and the same agreement.
Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
UAL CORPORATION CAPITAL TRUST I
By: UAL Corporation
By:_____________________________
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Depositary
By:
______________________
Name:
Title:
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ATTACHMENT C
DEPOSITARY AGENT FEE SCHEDULE
UAL CORPORATION
NOVEMBER 21, 1996
1. Acceptance Fee-- $1,500.00
-- Review Exchange Documents
-- Assist Trust and counsel with preliminary
set-up of transaction
-- Conversion of shareholder file from prior
Trustee to The Bank of New York's database
2. Processing Letters of Transmittal -- Each $6.50
-- Review and examination of Letters of Transmittal and
accompanying securities
-- Data Entry/Data Processing
-- Generation of Daily Reports
-- Proof and control of presentations
-- Initiation of debit down to shareholder file
-- Calculation of Entitlements
-- Generation of check
- Telephone inquiries
3. Special Handling Items -- Each $5.00
-- Deficient Presentations
-- Legal Presentations
-- Transfer Items
-- Window Presentations
-- Guarantee Items
-- Lost stock items
4. Tax Reporting
-- Prepare and file Form 1099B with
surrendering shareholders - Each $0.50
-- Creation of tax tape for appropriate
government agencies $500.00
5. Minimum Fee $5,000.00
6. Certificate Issuance (for certificated holders) $1.00
7. Check issuance (for certificated holders) $1.00
8. Out-of-Pocket Expenses Billed on a
cost-to-us
basis
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All fees are subject to review based upon the duties and responsibilities of
the appointment.
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EXHIBIT 99.6
November 21, 1996
UAL Corporation
1200 East Algonquin Road
Elk Grove Township, IL 60007
Ladies and Gentlemen:
This Letter Agreement sets forth the terms and conditions pursuant to
which UAL Corporation Capital Trust I (the "Trust") has retained Georgeson &
Company, Inc. ("Georgeson") in connection with a proposed exchange offer.
The Trust is offering to the holders of its outstanding Series B
Depositary Shares, each representing 1/1,000 of a share of 12 1/4% Series B
Preferred Stock of UAL Corporation ("UAL"), the opportunity to exchange any and
all Depositary Shares not owned by UAL, upon the terms and subject to the
conditions contained in a Prospectus dated November 20, 1996 and the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer") for its 13 1/4% Trust Originated Preferred Securities ("TOPrS").
1. The Trust hereby retains Georgeson as Information Agent for advisory
and consulting services in connection with the Exchange Offer and requests and
authorizes Georgeson to contact, and to provide information with respect to the
Exchange Offer to, holders of the Depositary Shares. For this purpose,
Georgeson is authorized to use, and will be supplied by the Trust with as many
copies as Georgeson may reasonably request of, the following materials filed
with the Securities and Exchange Commission (the "Commission") or publicly
released (or to be filed or publicly released) by the Trust in connection with
the Exchange Offer (collectively, the "Exchange" Offer Materials"): (i) a
Prospectus; (ii) Letter of Transmittal; (iii) press releases and newspaper
advertisements; (iv) letter to Registered Holders and Depositary Trust Company
Participants to their customers; (v) question and answer pamphlet; (vi) letter
from chairman of UAL and (vii) any and all amendments or supplements to any of
the foregoing. In no event will Georgeson make any recommendation to anyone
regarding whether to tender or refrain from tendering Depositary Shares. If
such advice is requested, Georgeson will respond that it is not authorized to
give such advice and shall recommend to the person requesting such advice that
such person consult with his or her financial advisor or broker.
2. The Trust agrees to pay Georgeson as compensation for its services a
fee which is described in Schedule A, which is due upon the completion,
expiration or termination, as the case may be, of
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UAL Corporation Capital Trust I
November __, 1996
Page 2
the Exchange Offer. In the event the Trust requests Georgeson to provide
additional services, the Trust agrees to pay Georgeson reasonable and customary
compensation, in an amount, if any, to be mutually agreed upon. The Trust
further agrees to reimburse Georgeson for, or pay directly where requested by
Georgeson, all reasonable and documented out-of-pocket expenses (including
counsel's fees and disbursements) incurred by Georgeson in retention hereunder,
provided that the travel expenses will not be reimbursed when travelling on an
air carrier other than United Airlines. The Trust agrees and acknowledges that
it obligation described in the preceding sentence is not in any way conditional
upon the successful consummation of the Exchange Offer or dependent upon the
amount of Depositary Shares acquired by the Trust pursuant to the Exchange
Offer.
3. The Trust agrees that Georgeson shall have the right to pass upon and
approve any and all references to Georgeson in the Exchange Offer Materials.
The Trust shall not file with the Commission, any other governmental or
regulatory authority or body or any court, or otherwise make public, any
document containing any reference to Georgeson unless and until Georgeson shall
have approved such reference. All references to Georgeson in the Exchange
Offer Materials dated November 20, 1996 are hereby deemed approved.
4. The Trust represents and warrants to Georgeson that:
(i) this letter agreement is a valid and binding agreement on
the Trust's part;
(ii) all necessary corporate action will be duly taken by the
Trust prior to the commencement of the Exchange Offer to authorize the Exchange
Offer, and the exchange of TOPrS for Depositary Shares in connection with the
Exchange Offer;
(iii) all Exchange Offer Materials will comply, in all material
respects, with the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder, and none of the Exchange Offer
Materials, and no other report, filing, document, release or communication
published or filed in connection with the Exchange Offer, will contain any
untrue or misleading statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading;
(iv) The Exchange Offer, and the exchange of TOPrS for
Depositary Shares in connection with the Exchange Offer, will
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UAL Corporation Capital Trust I
November __, 1996
Page 3
comply, in all material respects, with all applicable requirements of law
including the applicable rules or regulations of any governmental or regulatory
authority or body, and no material consent or approval of, or filing with, any
government or regulatory authority or body is required in connection with the
making or consummation of the Exchange Offer (or, if any such material
consent, approval or filing is required it will be duly obtained or made prior
to the commencement of the Exchange Offer); and
(v) The Exchange Offer, and the exchange of TOPrS for
Depositary Shares in connection with the Exchange Offer, and or execution,
delivery and performance of this letter agreement, will not conflict with or
result in a breach of or constitute a default under the Trust's Declaration of
Trust or any material agreement, indenture, mortgage, note or other instrument
by which the Trust is bound.
5. The Trust will advise Georgeson promptly of the occurrence of any
event which would cause it not to proceed with, or to withdraw or abandon the
Exchange Offer. The Trust will also advise Georgeson promptly of any proposal
or requirement to amend or supplement any of the Exchange Offer Materials.
6. The Trust hereby agrees to indemnify and hold harmless Georgeson,
Georgeson's controlling persons, officers, directors, employees, agents and
representatives (collectively, the "Indemnified Persons") from and against any
and all losses, claims, damages, liabilities and expenses whatsoever (including
but not limited to, all counsel fees, disbursements and other out-of-pocket
expenses) incurred by such Indemnified Persons in investigating, preparing to
defend or defending (or appearing or preparing for appearance as a witness in
connection with) any claim, litigation, proceeding, investigation, or
governmental or stock exchange inquiry, commenced or threatened or any claim
whatsoever; (i) arising out of or based upon any facts or circumstances
constituting a violation of, or in conflict with, any of the representations
and warranties set forth in Paragraph 4 above; or (ii) arising out of, relating
to or in connection with the Exchange Offer except for the Indemnified Person's
misconduct or negligence. The Trust shall reimburse such Indemnified Persons
for such counsel fees and disbursements and other out-of-pocket expenses at
such time as they are paid or incurred by such Indemnified Persons. The
foregoing indemnity shall be in addition to any liability which the Trust might
otherwise have to the Indemnified Persons.
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UAL Corporation Capital Trust I
November __, 1996
Page 4
7. Georgeson agrees to notify the Trust promptly of the assertion of any
claim against any of the Indemnified Persons in connection with the Exchange
Offer; and the Trust agrees to notify Georgeson promptly of the assertion of
any claim against the Trust or any of its officers, directors, employees or
agents in connection with the Exchange Offer. At the Trust's election, unless
there is a conflict of interest, the defense of the Indemnified Persons shall
be conducted by the Trust's counsel who shall be satisfactory to Georgeson and
the Indemnified Persons who are defendants in the action or proceeding.
Notwithstanding the Trust's election to assume the defense of such action or
proceeding, an Indemnified Person may employ separate counsel to represent it
or defend it in such action or proceeding and the Trust will pay the reasonable
fees and expenses of such counsel as set forth above if such Indemnified Person
reasonably determines that there are defenses available to such Indemnified
Person which are different from, or in addition to, those available to the
Trust, or if a conflict of interest exists which makes representation by
counsel chosen by the Trust not advisable; provided however, unless there are
actual or potential conflicts of interest among the Indemnified Persons, the
Trust will not be required to pay the fees and expenses of more than one
separate counsel for all Indemnified Persons in any jurisdiction in any single
action or proceeding. In any action or proceeding the defense of which the
Trust assumes, the Indemnified Persons shall nevertheless be entitled to
participate in such action or proceeding and retain its own counsel at such
Indemnified Person's own expense. The Trust shall not settle or compromise any
such consent, unless the terms of the settlement or compromise include an
unconditional release of any such Indemnified Person from all liability or loss
arising out os such action or proceeding.
8. The representations and warranties contained in paragraph 4 above and
the indemnity agreement contained in paragraphs 6 and 7 above shall remain
operative and in full force and effect regardless of: (i) the termination or
consummation of the Exchange Offer; and (ii) any investigation made by or on
behalf of any party.
9. This agreement shall be construed and enforced in accordance with the
laws of the State of New York. It is agreed that any action, suit or
proceeding arising out of or based upon this agreement shall be brought in the
United States District Court for the Southern District of New York or any court
of the State of New York of competent jurisdiction located in such District,
and the parties hereto hereby consent to the in personam jurisdiction
5
UAL Corporation Capital Trust I
November __, 1996
Page 5
and venue of any such court and to service of process by certified mail, return
receipt requested.
If any provision of this agreement shall be held illegal or invalid by any
court, this agreement shall be construed and enforced as if such provision had
not been contained herein and shall be deemed an agreement between the parties
hereto to the fullest extent permitted by law.
If the foregoing correctly sets forth the understanding between the Trust
and Georgeson, please indicate acceptance thereof in the space provided below
for the purpose, whereupon this letter and the Trust's acceptance shall
constitute a binding agreement between the parties hereto.
Georgeson & Company, Inc.
By: __________________________
Title: _______________________
Accepted as of the date first above written:
UAL Corporation Capital Trust I
By: UAL Corporation
By: _________________________
Title: _______________________
6
SCHEDULE A
Information Agent Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,500
Fee for outgoing calls by Georgeson to registered holders and non-objecting
beneficial owners (such flat fee includes all telephone charges) (no
additional charges shall be rendered for incoming calls to Georgeson from such
shareholders) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.00 per telephone call
If requested by the Trust, Georgeson will itemize and pay on the Trust's
behalf, from funds provided to Georgeson by the Trust, the charges of brokers
and banks for forwarding offering material to beneficial owners . . . . . . . $5.50 for each broker
and bank invoice paid by
Georgeson
