<PAGE>
As filed with the Securities and Exchange Commission on February 3, 1995
Registration No. 33-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
UAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 4512 36-2675207
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
(708) 952-4000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Francesca M. Maher
Vice President - Law and
Corporate Secretary
UAL Corporation
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
(708) 952-4000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
____________________________
Copies to:
<TABLE>
<S> <C>
Robert E. Curley Joel S. Klaperman
Mayer, Brown & Platt Shearman & Sterling
190 South LaSalle Street 599 Lexington Avenue
Chicago, Illinois 60603 New York, New York 10022
(312) 782-0600 (212) 848-4000
</TABLE>
____________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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: /_/
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Subordinated
Debentures..................... $600,000,000 100% $600,000,000 $206,897
- ---------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value,
together with Preferred Stock
Purchase Rights................ (2) -- -- --
=========================================================================================================
</TABLE>
(1) Estimated solely for determining the amount of the registration fee.
(2) This Registration Statement also relates to such additional indeterminate
number of shares of Common Stock as may be issued upon conversion of the
Convertible Subordinated Debentures in accordance with the terms thereof
to prevent dilution. Pursuant to Rule 457(i), no filing fee is required.
____________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
==============================================================================
<PAGE>
UAL CORPORATION
CROSS REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTIONS HEADING OR LOCATION IN PROSPECTUS
- -------------------------------------- --------------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus.................. Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus........... Inside Front Cover Page
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information......................... Inside Front Cover Page; Prospectus
Summary; Selected Consolidated
Financial and Operating Information;
Special Considerations Relating to
the Debentures
4. Terms of Transaction................ Prospectus Summary; Price Range of
Common Stock and Dividends; The
Exchange Offer; Description of
Debentures; [Description of Capital
Stock;] Certain Federal Income Tax
Considerations; Certain Tax
Considerations for Non-United States
Persons
5. Pro Forma Financial Information..... *
6. Material Contacts with the
Company Being Acquired.............. *
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters... *
8. Interests of Named Experts and
Counsel............................. Legal Opinions
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities..................... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants......................... Recent Developments; Incorporation of
Certain Documents by Reference
11. Incorporation of Certain
Information by Reference............ Incorporation of Certain Documents by
Reference
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12. Information with Respect to S-2
or S-3 Registrants................. *
13. Incorporation of Certain
Information by Reference........... *
14. Information with Respect to
Registrants Other than S-3 or S-2
Registrants........................ *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies.......................... *
16. Information with Respect to S-2
or S-3 Companies................... *
17. Information with Respect to
Companies other than S-3 or S-2
Companies.......................... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents
or Authorizations are to
be Solicited....................... *
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange Offer.. Incorporation of Certain Documents by
Reference; The Exchange Offer
_______________
* Not applicable.
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 3, 1995
UAL CORPORATION
Offer to Exchange
% Convertible Subordinated Debentures due 2025
for
Series A Convertible Preferred Stock
--------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _____________ ____, 1995, UNLESS EXTENDED.
-------------------------
UAL Corporation, a Delaware corporation (the "Company"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal" which, together with the Prospectus, constitute the "Exchange
Offer"), to exchange up to $600,000,000 aggregate principal amount of debentures
designated as its % Convertible Subordinated Debentures due 2025 (the
"Debentures") for up to all shares of the outstanding Series A Convertible
Preferred Stock of the Company (the "Series A Preferred Stock"). The Debentures
are offered in minimum denominations of $1,000 and integral multiples thereof,
and the Series A Preferred Stock has a liquidation preference of $100 per share.
Consequently, the Exchange Offer will be effected on a basis of $1,000 principal
amount of Debentures for every ten shares of Series A Preferred Stock validly
tendered and accepted for exchange. The Company will pay amounts of less than
$1,000 due to exchanging stockholders in cash, in lieu of issuing Debentures
with a principal amount of less than $1,000. [The dividend on the Series A
Preferred Stock payable on ___________ will be payable to stockholders of record
on ___________ regardless of when shares of the Series A Preferred Stock are
tendered pursuant to the Exchange Offer.] Dividends accumulated after
_____________ will not be paid on Series A Preferred Stock accepted for exchange
in the Exchange Offer. In lieu thereof, holders of Debentures will be entitled
to interest from _____________, as described below.
The Company will accept for exchange Series A Preferred Stock validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on _______
__, 1995, or if extended by the Company, in its sole discretion, the latest date
and time to which extended (the "Expiration Date"). The Exchange Offer will
expire on the Expiration Date. Tenders of Series A Preferred Stock may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after forty business days
after the date of this Prospectus. The Company expressly reserves the right to
(i) extend, amend or modify the terms of the Exchange Offer in any manner and
(ii) withdraw or terminate the Exchange Offer and not accept for exchange any
Series A Preferred Stock, at any time for any reason, including (without
limitation) if fewer than _____ shares of Series A Preferred Stock are tendered
(which condition may be waived by the Company). See "The Exchange Offer--
Expiration Date; Extensions; Amendments; Termination."
(Continued on next page)
SEE "SPECIAL CONSIDERATIONS RELATING TO THE DEBENTURES" FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER
AND AN INVESTMENT IN THE DEBENTURES, INCLUDING IN THE CASE OF THE DEBENTURES THE
PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF INTEREST MAY BE
DEFERRED AND CERTAIN RELATED FEDERAL INCOME TAX CONSEQUENCES.
-------------------------
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.
-------------------------
The Dealer Managers for the Exchange Offer are:
Goldman, Sachs & Co. Lehman Brothers
The date of this Prospectus is ___________ ___, 1995
<PAGE>
The Debentures will mature on _______, 2025 and will bear interest at an
annual rate of % from the first day following the Expiration Date (the "Issue
Date"). In addition, holders of record of the Debentures will be entitled to
interest at a rate of 6 1/4% per annum from ____________ through the Expiration
Date in lieu of dividends accumulating after __________, 1995 on their Series A
Preferred Stock accepted for exchange, payable at the time of the first interest
payment on the Debentures. Interest will be payable quarterly in arrears on
February 1, May 1, August 1, and November 1 of each year, commencing
____________, 1995, provided that, so long as the Company shall not be in
default in the payment of interest on the Debentures, the Company shall have the
right, upon prior notice by public announcement given in accordance with New
York Stock Exchange, Inc. (the "NYSE") rules at any time during the term of the
Debentures, to extend the interest payment period from time to time for a period
not exceeding 20 consecutive calendar quarters (each, an "Extension Period"). No
interest shall be due and payable during an Extension Period, but at the end of
each Extension Period the Company shall pay all interest then accrued and unpaid
on the Debentures, together with interest thereon, compounded quarterly. Upon
the termination of any Extension Period and the payment of all interest then
due, the Company may commence a new Extension Period. After prior notice by
public announcement given in accordance with NYSE rules, the Company also may
prepay at any time all or any portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Debentures. The Company has no
current intention of exercising its right to extend an interest payment period.
However, should the Company determine to exercise such right in the future, the
market price of the Debentures is likely to be affected. See "Special
Considerations Relating to the Debentures" and "Description of Debentures--
Interest" and "--Option to Extend Interest Payment Period."
Each Debenture is convertible at the option of the holder at any time after
the date of original issuance thereof, unless previously redeemed, into a
combination of cash in the amount of $541.90 and common stock of the Company,
par value $.01 per share (the "Common Stock"), at a conversion price of $143.50
(equivalent to approximately 3.192 shares of the Common Stock per $1000
principal amount of the Debentures). Such conversion price is subject to
adjustment in certain events. See "Description of Debentures--Conversion." On
February 2, 1995, the last reported sale price of the Common Stock on the NYSE
was $91.625 per share.
The Debentures are redeemable at any time after May 1, 1996 at the option of
the Company, in whole or in part, initially at a redemption price of 104.375% of
the principal amount of the Debentures redeemed, and thereafter at prices
declining ratably to 100% of the principal amount of the Debentures redeemed
from and after May 1, 2003, plus interest accrued and unpaid to the redemption
date. The Company may exercise this redemption option only if for 20 trading
days within any period of 30 consecutive trading days, including the last
trading day, the last sale price of the Company's Common Stock as reported by
the NYSE Composite Transaction Tape exceeds 120% of the conversion price,
subject to adjustment as described herein. No sinking fund will be established
for the payment of the Debentures. See "Description of Debentures--Redemption."
The Debentures are unsecured obligations of the Company and will be subordinate
to all Senior Indebtedness (as defined herein) of the Company. Because the
Company is a holding company that conducts business through its subsidiaries,
the Debentures are also effectively subordinated to all existing and future
obligations of the Company's subsidiaries. On September 30, 1994, approximately
$586 million of such Senior Indebtedness and approximately $13.3 billion of
additional indebtedness, leases and other obligations of the Company's
subsidiaries (net of those obligations of the Company to its subsidiaries that
are included in the definition of Senior Indebtedness (as defined)) not included
in Senior Indebtedness were outstanding. See "Description of Debentures--
Subordination."
For federal income tax purposes, the exchange of Series A Preferred Stock
for Debentures will, depending upon each particular exchanging holder's facts
and circumstances, be treated as either an exchange in which gain or loss is
recognized or as a dividend, and the Debentures will be treated as having been
issued with original issue discount. For a discussion of these and other United
States federal income tax considerations relevant to the Exchange Offer, see
"Certain Federal Income Tax Considerations" and "Certain Federal Tax
Considerations for Non-United States Persons."
The Debentures constitute a new issue of securities with no established
trading market. While the Company intends to apply to list the Debentures on the
NYSE, there can be no assurance that an active market for the Debentures will
develop. The Series A Preferred Stock and the Common Stock issuable upon
conversion of such Series A Preferred Stock have not been and will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and are subject to certain restrictions on transfer provided for therein and
pursuant to their terms at original issuance. Such restrictions will continue to
apply to the Series A Preferred Stock and the Common Stock issuable upon
conversion of such Series A Preferred Stock that is not exchanged for
Debentures. Moreover, to the extent that Series A Preferred Stock is tendered
and accepted in the Exchange Offer, a holder's ability to sell untendered Series
A Preferred Stock could be adversely affected.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE 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 THE COMPANY. 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 THE COMPANY SINCE THE RESPECTIVE DATES OF WHICH INFORMATION IS GIVEN
HEREIN. THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF) HOLDERS (AS DEFINED BELOW) OF SERIES A PREFERRED STOCK IN
ANY JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE OFFER OR THE ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER,
THE COMPANY MAY, AT ITS DISCRETION, TAKE SUCH ACTION AS IT MAY DEEM NECESSARY TO
MAKE THE EXCHANGE OFFER IN ANY SUCH JURISDICTION AND EXTEND THE EXCHANGE OFFER
TO HOLDERS OF SERIES A PREFERRED STOCK IN SUCH JURISDICTION. IN ANY
JURISDICTION THE SECURITIES LAWS OR BLUE SKY LAWS OF WHICH REQUIRE THE EXCHANGE
OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE EXCHANGE OFFER IS BEING
MADE ON BEHALF OF THE COMPANY BY THE DEALER MANAGERS OR ONE OR MORE REGISTERED
BROKERS OR DEALERS WHICH ARE LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024;
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511; 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. 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 the Company with the Commission under the Securities Act. This Prospectus
does not contain all of the information included in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Statements contained herein concerning the provisions of any
document do not purport to be complete and, in each instance, are qualified in
all respects by reference to 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 the Company and the securities
offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference (Commission File No. 1-6033):
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1993, as amended.
2. The Company's Quarterly Reports on Form 10-Q for the periods ended March
31, 1994, as amended, June 30, 1994 and September 30, 1994.
3. The Company's Current Reports on Form 8-K dated February 4, 1994 (3
reports), March 25, 1994 (2 reports), April 27, 1994, April 28, 1994, May
3, 1994, June 2, 1994, June 10, 1994, June 15, 1994, June 29, 1994, July
8, 1994, July 11, 1994 and July 12, 1994 (2 reports).
-2-
<PAGE>
4. A description of the Company's Common Stock and Rights that are attached
to the Common Stock, as contained in the Company's Proxy Statement/Joint
Prospectus dated June 10, 1994 filed pursuant to Rule 424(b) under the
Securities Act under the caption "Description of Securities--the Common
Stock, the Series A Preferred Stock and the Junior Participating Preferred
Stock."
All documents filed by the Company 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 termination of the offering of the securities offered hereby 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 is so modified or superseded shall
not be deemed, except as so modified and superseded, to constitute a part of
this Prospectus .
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER OF THE SERIES A PREFERRED STOCK, TO WHOM
THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE,
OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST FROM UAL CORPORATION, P.O. BOX 66919, CHICAGO, ILLINOIS 60666
(TELEPHONE NUMBER (708) 952-4000), ATTENTION: FRANCESCA M. MAHER, SECRETARY. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NOT
LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
-3-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information............................................. 2
Incorporation of Certain Documents by Reference................... 2
Prospectus Summary................................................ 5
Special Considerations Relating to the Debentures................. 11
The Company....................................................... 14
Recent Developments............................................... 14
Price Range of Common Stock and Dividends......................... 16
Capitalization.................................................... 17
Selected Consolidated Financial and Operating Information......... 18
The Exchange Offer................................................ 19
Description of Debentures......................................... 26
Description of Capital Stock...................................... 42
Certain Federal Income Tax Considerations......................... 60
Certain Federal Tax Considerations for Non-United States Persons.. 64
Legal Opinions.................................................... 67
Experts........................................................... 67
</TABLE>
-4-
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by the detailed information contained elsewhere in this Prospectus or
by documents incorporated by reference into this Prospectus.
THE COMPANY
UAL Corporation, a Delaware corporation (the "Company"), is a holding company
and its primary subsidiary is United Air Lines, Inc., a Delaware corporation
("United"), which is wholly-owned. At the end of 1994, United served 152
airports in the United States and 31 foreign countries. During 1994, United
averaged 2,004 departures daily, flew a total of 108 billion revenue passenger
miles and carried an average of 203,400 passengers per day. At the end of 1994,
United's fleet of aircraft totaled 543. United's major hub operations are
located at Chicago, Denver, San Francisco, Washington, D.C., London and Tokyo.
THE EXCHANGE OFFER
PURPOSE OF EXCHANGE OFFER
The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing the Series A Preferred Stock (as defined below)
with the Debentures (as defined below). The potential cash flow benefit to the
Company arises because interest payable on the Debentures should be deductible
by the Company for federal income tax purposes, while dividends payable on the
Series A Preferred Stock are not deductible. See "The Exchange Offer--Purpose
of the Exchange Offer."
THE EXCHANGE OFFER; SECURITIES OFFERED
Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, the Company hereby offers to exchange up to $600,000,000
aggregate principal amount of debentures designated as its % Convertible
Subordinated Debentures due 2025 (the "Debentures") for up to all of the
outstanding shares of Series A Convertible Preferred Stock (the "Series A
Preferred Stock"). Exchanges will be made on a basis of $1,000 principal amount
of Debentures (the minimum permitted denomination) for every ten shares of
Series A Preferred Stock validly tendered and accepted for exchange in the
Exchange Offer. The Company will pay amounts of less than $1,000 due to any
exchanging stockholder in cash, in lieu of issuing Debentures with a principal
amount of less than $1,000. See "The Exchange Offer -- Terms of the Exchange
Offer."
The Debentures will mature on ________, 2025 and will bear interest at an
annual rate of % from the first day following the Expiration Date (the "Issue
Date") or from the most recent interest payment date to which interest has been
paid or duly provided for. Interest will be payable quarterly in arrears on
February 1, May 1, August 1 and November 1 of each year, commencing __________
__, 1995, provided that, so long as the Company shall not be in default in the
payment of interest on the Debentures, the Company shall have the right, upon
prior notice by public announcement given in accordance with NYSE rules at any
time during the term of the Debentures, to extend any interest payment period
from time to time for a period not exceeding 20 consecutive calendar quarters.
The Company has no current intention of exercising its right to extend any
interest payment period. However, should the Company determine to exercise such
right in the future, the market price of the Debentures is likely to be
affected. See "Special Considerations Relating to the Debentures" and
"Description of Debentures -- Option to Extend Interest Payment Period."
[The dividend on the Series A Preferred Stock payable on ______________ will
be payable to stockholders of record on ______________, regardless of when
shares of the Series A Preferred Stock are tendered pursuant to
-5-
<PAGE>
the Exchange Offer.] Dividends accumulated after ________________ will not be
paid on Series A Preferred Stock accepted for exchange in the Exchange Offer.
In lieu thereof, holders of record of the Debentures will be entitled to
interest at a rate of 6 1/4% per annum from _______________ through the
Expiration Date, payable at the time of the first interest payment on the
Debentures. The Debentures will be issued pursuant to an indenture, to be dated
as of __________ __, 1995, between the Company and __________________________,
as trustee. See "Description of Debentures."
EXPIRATION DATE; WITHDRAWALS
The Company will accept for exchange Series A Preferred Stock, validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on
___________ ___, 1995, or if extended by the Company, in its sole discretion,
the latest date and time to which extended (the "Expiration Date"). The
Exchange Offer will expire on the Expiration Date. Tenders of Series A
Preferred Stock pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date and, unless accepted for exchange by the Company,
may be withdrawn at any time after forty business days after the date of this
Prospectus. See "The Exchange Offer -- Withdrawal of Tenders" and " --
Expiration Date; Extensions; Amendments; Termination."
EXTENSIONS, AMENDMENTS AND TERMINATION
The Company expressly reserves the right to (i) extend, amend or modify the
terms of the Exchange Offer in any manner and (ii) withdraw or terminate the
Exchange Offer and not accept for exchange any Series A Preferred Stock, at any
time for any reason, including (without limitation) if fewer than ____________
shares of Series A Preferred Stock are tendered (which condition may be waived
by the Company). See "The Exchange Offer--Expiration Date; Extensions;
Amendments; Termination."
PROCEDURES FOR TENDERING
Each Holder of the Series A Preferred Stock wishing to accept the Exchange
Offer must (i) properly complete and sign the Letter of Transmittal 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 therein, together with any required
signature guarantees, and deliver the same to ______________, as Exchange Agent,
at either of its addresses set forth in "The Exchange Offer--Exchange Agent" and
either (a) certificates for the Series A Preferred Stock must be received by the
Exchange Agent at such address or (b) such Series A Preferred Stock 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 Exchange Offer--
General" and "--Procedures for Tendering."
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS
Any beneficial owner whose Series A Preferred Stock is 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 a Letter of Transmittal and delivering its Series A
Preferred Stock, either make appropriate arrangements to register ownership of
the Series A Preferred Stock 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 Exchange Offer--Procedures for Tendering--Signature
Guarantee."
-6-
<PAGE>
GUARANTEED DELIVERY PROCEDURES
If a Holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Series A Preferred Stock 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 Exchange Offer--Procedures for
Tendering--Guaranteed Delivery."
ACCEPTANCE OF SHARES AND DELIVERY OF DEBENTURES
Upon the terms and subject to the conditions of the Exchange Offer,
including the reservation by the Company of the right to withdraw or terminate
the Exchange Offer and certain other rights, the Company will accept for
exchange shares of Series A Preferred Stock that are properly tendered in the
Exchange Offer and not withdrawn prior to the Expiration Date. Subject to such
terms and conditions, the Debentures issued pursuant to the Exchange Offer will
be issued as of the Issue Date and will be delivered as promptly as practicable
following the Expiration Date. See "The Exchange Offer--Terms of the Exchange
Offer" and "--Expiration Date; Extensions; Amendments; Termination."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Series A Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event. Depending on each exchanging
stockholder's particular facts and circumstances, the exchange may be treated as
(i) a transaction in which gain or loss will be recognized in an amount equal to
the difference between the fair market value of the Debentures received in the
exchange and the exchanging stockholder's tax basis in the share of Series A
Preferred Stock surrendered or (ii) a distribution taxable as a dividend in an
amount equal to the fair market value of the Debentures received by such
exchanging stockholder. See "Certain Federal Income Tax Considerations" and
"Certain Federal Tax Considerations for Non-United States Persons."
In the event an Extension Period occurs, holders of the Debentures would
continue under the original issue discount rules to accrue income corresponding
to stated interest on the Debentures for United States federal income tax
purposes. As a result, a holder ordinarily would include such amounts in gross
income in advance of the receipt of cash. A holder that disposes of its
Debentures prior to the record date for payment of interest at the end of an
Extension Period will not receive cash from the Company related to such interest
because such interest will be paid to the holder of record on such record date,
regardless of who the holders of record may have been on other dates during the
Extension Period. The extent to which such a holder would receive a return on
the Debentures for the period it held such Debentures will depend on the market
for the Debentures at the time of disposition. In addition, under the original
issue discount rules, a holder will, in effect, be required to accrue the
difference between the fair market value of the Debentures at the time of the
exchange and the stated principal amount as interest income over the term of the
Debentures. See "Certain Federal Income Tax Considerations--Interest and
Original Issue Discount on Debentures."
UNTENDERED SHARES
Holders of Series A Preferred Stock who do not tender their Series A
Preferred Stock in the Exchange Offer or whose Series A Preferred Stock is not
accepted for exchange will continue to hold such Series A Preferred Stock and
will be entitled to all the rights and preferences, and will be subject to all
of the limitations, applicable thereto, including without limitation the
existing restrictions on transfer under the Securities Act. See "The Exchange
Offer--Listing and Trading of Debentures and Series A Preferred Stock; Transfer
Restrictions."
-7-
<PAGE>
EXCHANGE AGENT
________ has been appointed as Exchange Agent in connection with the Exchange
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 the Exchange Agent. The address and
telephone number of the Exchange Agent is set forth in "The Exchange Offer--
Exchange Agent."
DEALER MANAGERS
Goldman, Sachs & Co. and Lehman Brothers Inc. have been retained as Dealer
Managers to solicit exchanges of Series A Preferred Stock for Debentures.
Questions with respect to the Exchange Offer, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery may be directed to Goldman Sachs & Co. at (800) 323-5678 and
to Lehman Brothers Inc., Equity Syndicate Desk at (800) 524-4462.
COMPARISON OF DEBENTURES AND SERIES A PREFERRED STOCK
The following is a brief summary comparison of certain of the principal terms
of the Debentures and the Series A Preferred Stock.
<TABLE>
<CAPTION>
DEBENTURES SERIES A PREFERRED STOCK
----------------------------------------------- -------------------------------------------------
<S> <C> <C>
Interest/Dividend Rate % annual interest from the Issue Date 6 1/4% annual dividend, payable quarterly in
(6 1/4% per annum for the period from and arrears out of funds legally available therefor
including ____________ through the on February 1, May 1, August 1 and
Expiration Date) payable quarterly in arrears November 1 of each year, when, as and if
on February 1, May 1, August 1 and declared by the Company's Board of Directors
November 1 of each year, commencing (the "Board"). All dividends on the Series A
_________ 1, 1995, subject to the Preferred Stock have been paid to date [and
Company's right to extend the interest the Company has declared the dividend
payment period from time to time to a payable on _____________ to holders of
period of up to 20 consecutive calendar record on _____________.] In the event
quarters, as described herein. At the end of dividends are not paid on a dividend payment
each Extension Period the Company shall date in the future, holders would not be
pay to the holders all interest then accrued entitled to receive interest on any dividend
and unpaid, together with interest thereon, arrearages.
compounded quarterly, at the rate of interest
on the Debentures.
Conversion Convertible into a combination of cash in the Convertible into a combination of cash in the
amount of $541.90 and approximately 3.192 amount of $54.19 and approximately 0.3195
shares of Common Stock (equivalent to a shares of Common Stock per each Series A
Conversion Price of $143.50 per share of Preferred Stock share (equivalent to a
Common Stock) per $1,000 principal Conversion Price of $143.38 per share of
amount of Debentures converted, subject to Common Stock), giving effect to the
adjustment as described herein. adjustment to the consideration deliverable
upon conversion of the Series A Preferred
Stock resulting from the recapitalization of the
Company (the "Recapitalization") on July 12,
1994 and subject to further adjustment as
described herein.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Optional Redemption Redeemable at the option of the Company at Redeemable at the option of the Company at
any time on or after May 1, 1996, in whole any time on or after May 1, 1996, in whole
or in part, initially at a redemption price of or in part, initially at a redemption price of
104.375% of the principal amount of the 104.375% of the liquidation preference of the
Debentures redeemed, declining ratably to Series A Preferred Stock redeemed, declining
100% of the principal amount of the ratably to 100% of the liquidation preference
Debentures redeemed from and after May 1, of the Series A Preferred Stock redeemed
2003, in each case plus accrued and unpaid from and after May 1, 2003, in each case plus
interest to the date fixed for redemption. accumulated and unpaid dividends to the date
The Company may exercise this redemption fixed for redemption.
option ONLY IF for 20 trading days within any
period of 30 consecutive trading days,
including the last trading day, the last sale
price of the Company Common Stock as
reported by the NYSE Corporate
Transaction Tape exceeds 120% of the
Conversion Price, subject to adjustment as
described herein.
Subordination Subordinated to all existing and future Subordinate to claims of creditors, including
Senior Indebtedness of the Company, and holders of the Company's outstanding debt
effectively subordinated to all obligations of securities and the Debentures, and effectively
the Company's subsidiaries, but senior to all subordinated to all obligations of the
Preferred Stock of the Company, including Company's subsidiaries, but on parity with the
the Series A Preferred Stock and Series B Series B Preferred Stock and senior to the
Preferred Stock, and to the Common Stock Common Stock and any shares of Series C
and any shares of Series C Junior Preferred Stock.
Participating Preferred Stock ("Series C
Preferred Stock"). On September 30, 1994,
approximately $586 million of such Senior
Indebtedness and approximately $13.3
billion of additional indebtedness, leases and
other obligations of the Company's
subsidiaries (net of those obligations of the
Company to its subsidiaries that are included
in the definition of Senior Indebtedness) not
included in Senior Indebtedness were
outstanding.
Voting Rights None. None, except in certain circumstances.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Transfer Restrictions; The Debentures and the Common Stock The Series A Preferred Stock and the
New York Stock issuable upon conversion thereof will be Common Stock issuable upon conversion of
Exchange Listing registered under the Securities Act and will such Series A Preferred Stock have not been
be transferable to the extent permitted and will not be registered under the Securities
thereunder. The Company intends to apply Act. The Series A Preferred Stock has not
to list the Debentures and the Common been and will not be listed on the NYSE. The
Stock issuable upon conversion thereof on Series A Preferred Stock and the Common
the NYSE. Stock issuable upon conversion thereof are
subject to certain significant restrictions on
their transfer under the Securities Act and
pursuant to their terms at original issuance
and unexchanged Series A Preferred Stock
and the Common Stock issued upon
conversion thereof will remain subject to such
transfer restrictions. Beginning February 5,
1996, the Series A Preferred Stock and the
Common Stock issuable upon conversion
thereof may be resold pursuant to Rule 144
under the Securities Act, subject, in certain
cases, to the volume and other limitations of
Rule 144.
Dividends Received Interest will not be eligible for the Dividends are eligible for the dividends
Deduction dividends received deduction for corporate received deduction for corporate stockholders.
stockholders.
</TABLE>
-10-
<PAGE>
SPECIAL CONSIDERATIONS RELATING TO THE DEBENTURES
Prospective exchanging stockholders should carefully consider, in addition to
the other information set forth elsewhere in this Prospectus, the following:
RIGHT OF COMPANY TO DEFER PAYMENT OF INTEREST
So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time during the term of
the Debentures, to extend any interest payment period from time to time for a
period not exceeding 20 consecutive calendar quarters (each, an "Extension
Period"). No interest shall be due and payable during an Extension Period, but
on the interest payment date occurring at the end of each Extension Period the
Company shall pay to the holders 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
Debentures, together with interest thereon, compounded quarterly.
Upon the termination of any Extension Period and the payment of all interest
then due, the Company may commence a new Extension Period. After prior notice
given by public announcement in accordance with NYSE rules, the Company may also
prepay at any time all or a portion of the interest accrued during an Extension
Period. Consequently, there could be multiple Extension Periods of varying
lengths throughout the term of the Debentures. See "Description of Debentures--
Option to Extend Interest Payment Period."
The Company has no current intention of exercising its right to defer any
interest payment period.
NO CASH PAYMENTS DURING EXTENSION PERIOD TO PAY ACCRUED TAX LIABILITY
In the event an Extension Period occurs, holders of the Debentures would
continue under the original issue discount rules to accrue income corresponding
to stated interest on the Debentures for U.S. federal income tax purposes. As a
result, a holder ordinarily would include such amounts in gross income in
advance of the receipt of cash. A holder that disposes of its Debentures prior
to the record date for payment of interest at the end of an Extension Period
will not receive cash from the Company related to such interest because such
interest will be paid to the holder of record on such record date, regardless of
who the holders of record may have been on other dates during the Extension
Period. The extent to which such a holder would receive a return on the
Debentures for the period it held such Debentures will depend on the market for
the Debentures at the time of disposition. See "Certain Federal Income Tax
Considerations--Interest and Original Issue Discount on Debentures."
SUBORDINATION OF DEBENTURES
The Debentures are unsecured obligations of the Company and will be
subordinate to all Senior Indebtedness (as defined below) of the Company.
Because the Company is a holding company that conducts business through its
subsidiaries, the Debentures will also be effectively subordinated to all
existing and future obligations of the Company's subsidiaries. On September 30,
1994, approximately $586 million of such Senior Indebtedness and approximately
$13.3 billion of additional indebtedness, leases and other obligations of the
Company's subsidiaries (net of those obligations of the Company to its
subsidiaries that are included in the definition of Senior Indebtedness) not
included in Senior Indebtedness were outstanding. See "Description of
Debentures--Subordination."
-11-
<PAGE>
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, the Company has the right to extend an interest payment
period from time to time for a period not exceeding 20 consecutive calendar
quarters. In the event the Company determines to extend an interest payment
period, or in the event the Company thereafter extends an Extension Period or
prepays interest accrued during an Extension Period as described above, the
market price of the Debentures is likely to be affected. In addition, as a
result of such rights, the market price of the Debentures may be more volatile
than other debt instruments with original issue discount that do not have such
rights. A holder that disposes of its Debentures during an Extension Period,
therefore, may not receive the same return on its investment as a holder that
continues to hold its Debentures. See "Description of Debentures--Option to
Extend Interest Payment Period."
CASH CONVERSION CONSIDERATION NOT ESCROWED
Upon conversion of the Series A Preferred Stock or the Debentures, the holder
of the Series A Preferred Stock or the Debentures, as the case may be, is
entitled to receive $54.19 for each share of Series A Preferred Stock or $541.90
for each Debenture such holder converts in addition to the Common Stock
receivable upon such conversion. The Company is not obligated to and has not
set aside or escrowed any cash to be issued in connection with such conversions
and there can be no assurance that a sufficient amount of cash will be available
at the time that a holder elects to convert its shares of Series A Preferred
Stock or Debentures. If all of the outstanding untendered Series A Preferred
Stock and all of the Debentures offered hereby are converted into Common Stock,
the Company would be required to pay approximately $325 million to the holders
of the Debentures upon conversion. The Company's consolidated cash, cash
equivalents and short-term investments at December 31, 1994 aggregated
approximately $1.5 billion.
EXCHANGE OFFER AS TAXABLE EVENT
The exchange of Series A Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event. Depending on each exchanging
stockholder's particular facts and circumstances, the exchange may be treated as
(i) a transaction in which gain or loss will be recognized in an amount equal to
the difference between the fair market value of the Debentures received in the
exchange and the exchanging stockholder's tax basis in the shares of Series A
Preferred Stock surrendered or (ii) a distribution taxable as a dividend in an
amount equal to the fair market value of the Debentures received by such
exchanging stockholder. See "Certain Federal Income Tax Considerations" and
"Certain Federal Tax Considerations for Non-United States Persons." All holders
of Series A Preferred Stock are advised to consult their own tax advisors
regarding the federal, state, local and foreign tax consequences of the exchange
of Series A Preferred Stock.
ORIGINAL ISSUE DISCOUNT
Under the original issue discount rules, a holder will, in effect, be
required to accrue the difference between the fair market value of the
Debentures at the time of the exchange and the stated principal amount as
interest income over the term of the Debentures. See "Certain Federal Income
Tax Considerations--Interest and Original Issue Discount on Debentures."
CORPORATE GOVERNANCE
The Company's restated certificate of incorporation (the "Restated
Certificate") provides, among other things, that until the Sunset (as defined
under "Description of Capital Stock--Corporate Governance--Sunset"), the
Company's board of directors (the "Board") and committees thereof are required
to consist of directors elected by certain stockholders and Board actions be
approved by specified numbers of directors, including, in some cases, directors
elected by certain classes of the Company's stockholders. In addition, until
the Sunset the Company's
-12-
<PAGE>
ability to take certain specified actions without the consent of or the vote of
certain of the Company's stockholders is limited. See "Description of Capital
Stock--Corporate Governance."
REDUCTION IN SHAREHOLDERS' EQUITY
To the extent that shares of Series A Preferred Stock are exchanged for
Debentures, the Company's shareholders' equity will be reduced. If all of the
outstanding shares of Series A Preferred Stock were exchanged for Debentures, on
a pro forma basis at September 30, 1994, shareholders' equity would have been
reduced by approximately $525 million, from a deficit of $328 million to a
deficit of $853 million. A reduction in the level of shareholders' equity could
be viewed negatively by financial institutions which may limit the Company's
ability to effect future financings. A reduction in shareholders' equity could
also affect the Company's ability to pay dividends on the Company's outstanding
capital stock, including the Series A Preferred Stock. The Delaware General
Corporation Law (the "DGCL") requires that dividends may only be made from
surplus or the net profits of the Company for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. For purposes of the
DGCL, surplus equals the excess, if any, at any given time, of the net assets of
the corporation over stated capital. Since the Exchange Offer would increase
the Company's indebtedness and reduce shareholders' equity the Company's ability
to pay dividends could be reduced. In addition, dividends may not be paid if
after giving effect to such dividends, the Company would not be able to pay its
debts as they become due in the usual course of business.
-13-
<PAGE>
THE COMPANY
UAL Corporation, a Delaware corporation (the "Company"), is a holding company
and its primary subsidiary is United Air Lines, Inc., a Delaware corporation
("United"), which is wholly-owned. At the end of 1994, United served 152
airports in the United States and 31 foreign countries. During 1994, United
averaged 2,004 departures daily, flew a total of 108 billion revenue passenger
miles and carried an average of 203,400 passengers per day. At the end of 1994,
United's fleet of aircraft totaled 543. United's major hub operations are
located at Chicago, Denver, San Francisco, Washington, D.C., London and Tokyo.
RECENT DEVELOPMENTS
RECAPITALIZATION
On July 12, 1994, the stockholders of the Company approved a plan of
recapitalization that provides an approximately 55% equity and voting interest
in the Company to certain employees of United in exchange for wage concessions
and work-rule changes. The employees' equity interest will be allocated to
individual employee accounts through the year 2000 under Employee Stock
Ownership Plans ("ESOPs") which were created as a part of the Recapitalization.
Since the ESOP shares will be allocated over time, the current ownership
interest held by employees is substantially less than 55%. The entire 55% ESOP
voting interest is currently exercisable, which generally will be voted by the
ESOP trustee at the direction of, and on behalf of, the employees participating
in the ESOPs. The employee interest may increase to up to 63%, depending on the
average market value of a share of Common Stock between July 13, 1994 and July
12, 1995. Based on the average market value of a share of Common Stock through
January 30, 1995 the market value of Common Stock for the remainder of the
measuring period would have to average at least $187 7/8 for any adjustment to
be made in the ESOP percentage interest. In connection with the
Recapitalization, holders of the Company's old common stock received
approximately $2.1 billion in cash and the remaining 45% (subject to reduction,
as described above, to not less than 37%) of the equity in the form of Common
Stock. Each share of old common stock was converted into 0.5 shares of Common
Stock and cash in lieu of fractional shares plus a cash payment of $84.81. The
conversion of certain convertible securities and the exercise of certain stock
options could result in additional distributions of up to $428 million, based on
the amount of convertible securities and stock options outstanding on December
31, 1994. Distributions on account of stock option exercises would be reduced by
cash proceeds on the exercise of the options. In connection with the
Recapitalization, United issued $370 million of 10.67% debentures due in 2004
(the "10.67% Debentures") and $371 million of 11.21% Debentures due 2014 (the
"11.21% Debentures") and the Company issued Series B 12 1/4% preferred stock
(the "Series B Preferred Stock") with an aggregate liquidation preference of
$410 million. Approximately $169 million of one-time costs, before any related
taxes, were incurred in connection with the Recapitalization, including
transaction costs and severance payments to certain former United employees.
The Delaware Court of Chancery, after a fairness hearing on January 24,1995,
approved the proposed settlement of two stockholder class actions challenging
the Recapitalization and awarded the plaintiffs $5.1 million in costs and
attorneys' fees.
FINANCIAL RESULTS
On January 24, 1995, the Company reported consolidated fourth quarter net
earnings of $11 million versus a net loss in the same period in 1993 of $64
million. The 1993 loss included a $25 million after-tax charge related to the
merger of United's computer reservation system affiliates. Operating earnings
for the quarter were $78 million versus $19 million in 1993. After preferred
dividend requirements, the fourth quarter results represented a loss of $0.98
per share of Common Stock versus a 1993 loss of $3.02 per share of Common Stock.
-14-
<PAGE>
For the full year 1994, the Company reported preliminary consolidated
unaudited operating earnings of $521 million on operating revenues of $13,950
million. Unaudited net earnings for the year were $51 million. After preferred
dividend requirements, the reported full year financial results represent a loss
of $0.61 per share.
-15-
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded principally on the NYSE, and are also listed on
the Chicago Stock Exchange and the Pacific Stock Exchange. The following sets
forth for the periods indicated the high and low closing sales prices per share
of the Company's old common stock outstanding immediately prior to the
Recapitalization and of the Common Stock on the NYSE Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
OLD COMMON STOCK:
1993
First Quarter....................... 132 1/4 110 3/4
Second Quarter...................... 149 3/4 118
Third Quarter....................... 150 1/2 121 5/8
Fourth Quarter...................... 155 1/2 135 7/8
1994
First Quarter....................... 150 123 3/4
Second Quarter...................... 130 1/2 115 1/8
Third Quarter (through July 12)..... 130 1/2 125 1/2
COMMON STOCK:
1994
Third Quarter (from July 13)........ 105 86 3/4
Fourth Quarter...................... 96 7/8 83 1/8
1995
First Quarter (through February 2).. 99 5/8 89 1/2
</TABLE>
For a recent last reported sales price of the Common Stock on the NYSE, see
the cover page of this Prospectus.
The Recapitalization was consummated on July 12, 1994. In connection with
the Recapitalization, holders of the Company's old common stock received one-
half of a share of Common Stock and $84.81 for each share of old common stock.
As a result of the foregoing, the price per share of old common stock is not
comparable to the price per share of the Common Stock.
The Company has not paid cash dividends on its common stock since 1987. The
payment of any future dividends on the Common Stock and the amount thereof will
be determined by the Board in light of earnings, the financial condition of the
Company and other relevant factors.
-16-
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at September 30, 1994 and as adjusted to give effect to the Exchange
Offer (assuming that 50% and 100% of the outstanding shares of the Series A
Preferred Stock are exchanged).
<TABLE>
<CAPTION>
September 30, 1994
---------------------------------------
As Adjusted
-----------------------------
Assuming Assuming
Actual 50% Exchange 100% Exchange
-------- ------------- --------------
<S> <C> <C> <C>
(Dollars in Millions)
Short-term borrowings, long-term debt maturing
within one year and current obligations
under capital leases.......................... $ 489 $ 489 $ 489
-------- ------------- --------------
Long-term debt, excluding portion due within
one year......................................
Secured notes................................. 1,364 1,364 1,364
Deferred purchase certificates................ 182 182 182
Debentures.................................... 1,741 1,741 1,741
Convertible debentures (b).................... 31 331 631
Promissory notes.............................. 31 31 31
Unamortized discount on debt (b).............. (21) (58) (96)
-------- ------------- --------------
3,328 3,591 3,853
Long-term obligations under capital leases........ 742 742 742
-------- ------------- --------------
Total long-term debt and capital lease
obligations............................... 4,070 4,333 4,595
-------- ------------- --------------
Class 2 ESOP Preferred Stock, $.01 par
value(a)...................................... -- -- --
-------- ------------- --------------
Shareholders' equity:
Series A Preferred Stock, $.01 stated value... -- -- --
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.................. -- -- --
Additional capital invested (b)............... 1,274 1,011 749
Retained earnings (deficit)................... (1,327) (1,327) (1,327)
Other equity adjustments...................... (29) (29) (29)
Unearned ESOP Preferred Stock................. (160) (160) (160)
Common stock held in treasury................. (86) (86) (86)
-------- ------------- --------------
Total shareholders' equity................ (328) (591) (853)
-------- ------------- --------------
Total capitalization.................. $ 4,231 $ 4,231 $ 4,231
======== ============= ==============
</TABLE>
- ---------------
(a) The Class 2 ESOP Preferred Stock committed to be contributed to the
Supplemental ESOP (as defined under "Description of Capital Stock--The
ESOP Preferred Stock") 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.
-17-
<PAGE>
(b) Assuming a 50% exchange, the Debentures that will be issued are expected to
have an aggregate principal amount of $300 million and an aggregate fair
market value of $263 million as of the date of exchange. Assuming a 100%
exchange, the Debentures that will be issued are expected to have an
aggregate principal amount of $600 million and an aggregate fair market
value of $525 million as of the date of exchange.
The difference between the aggregate principal amount and the aggregate
fair market value of the Debentures is classified as a debt discount. The
difference between the fair market value of the Debentures and the carrying
value of the Preferred Stock is credited to additional capital invested. To
the extent the actual aggregate fair market value of the Debentures at the
date of exchange differs from the expected amounts, the balances of the
unamortized debt discount and additional capital invested will change
accordingly.
-18-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following should be read in conjunction with the Company'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, 1993 and as of
December 31, 1993 and 1992 has been derived from the consolidated financial
statements of the Company incorporated herein by reference which have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports incorporated by reference herein. Reference is made to said
reports for the years 1993 and 1992 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. The summary for each of the
years in the two year period ended December 31, 1990 and as of December 31,
1991, 1990 and 1989 has been derived from separate audited consolidated
financial statements of the Company.
The financial information for each of the nine-month periods ended
September 30, 1994 and 1993 has been derived from the Company'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."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Operating revenues(a)................... $ 10,511 $ 9,978 $ 13,325 $ 11,853 $ 10,706 $ 10,296 $ 9,288
Earnings (loss) from operations......... 443 244 263 (538) (494) (36) 465
Earnings (loss) before extraordinary
item and cumulative effect of
accounting changes.................... 66 34 (31) (417) (332) 94 324
Net earnings (loss)..................... 40 15 (50) (957) (332) 94 324
Earnings (loss) per common share
before extraordinary item and
cumulative effect of accounting
changes............................... 1.25 0.39 (2.64) (17.34) (14.31) 4.33 14.96
Net earnings (loss)
per common share(b)................... 0.03 (0.38) (3.40) (39.75) (14.31) 4.33 14.96
STATEMENT OF FINANCIAL POSITION DATA (at
end of period):
Total assets............................ 12,312 12,953 12,840 12,257 9,876 7,983 7,194
Total long-term debt and capital
lease obligations, including current
portion............................... 4,290 3,700 3,735 3,783 2,531 1,327 1,405
Shareholders' equity.................... (328) 1,302 1,203 706 1,597 1,671 1,564
Book value per common share(c).......... (107.80) 28.72 24.55 29.11 67.21 76.34 71.64
OTHER DATA:
Ratio of earnings to fixed charges...... 1.14 1.01 (d) (d) (d) 1.16 1.95
Ratio of earnings to fixed charges
and preferred stock dividends......... 1.13 1.01 (d) (d) (d) 1.16 1.95
UNITED OPERATING DATA:
Revenue passengers (millions)........... 55 53 70 67 62 58 55
Average length of a passenger trip in
miles................................. 1,473 1,453 1,450 1,390 1,327 1,322 1,269
Revenue passenger miles (millions)...... 81,292 76,576 101,258 92,690 82.290 76,137 69,639
Available seat miles (millions)......... 113,790 113,557 150,728 137,491 124,100 114,995 104,547
Passenger load factor................... 71.4% 67.4% 67.2% 67.4% 66.3% 66.2% 66.6%
Break even passenger load factor........ 68.1% 65.3% 65.5% 70.6% 69.7% 66.5% 62.8%
Revenue per passenger mile.............. 11.4c 11.6c 11.6c 11.3c 11.5c 11.8c 11.6c
Cost per available seat mile............ 8.8c 8.4c 8.5c 8.9c 9.0c 9.0c 8.4c
</TABLE>
-19-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Average price per gallon of jet fuel.... 58.2c 63.9c 63.6c 66.4c 71.6c 80.4c 63.6c
- ---------------
</TABLE>
(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. See the Company's Current Report
on Form 8-K dated May 3, 1994 which is incorporated by reference in this
Prospectus.
(b) In connection with the July 1994 recapitalization, each old common share
was exchanged for one half new common share. As required under generally
accepted accounting principles for transactions of this type, the
historical weighted average shares outstanding have not been restated.
Thus, direct comparisons between 1994 and prior years' per share amounts
are not meaningful. For the nine months ended September 30, 1994, certain
common stock equivalents were dilutive; however, primary and fully diluted
earnings per share were the same. For all other periods, common stock
equivalents were not dilutive.
(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, by $748 million in
1992 and by $599 million in 1991.
-20-
<PAGE>
THE EXCHANGE OFFER
GENERAL
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Neither the Board nor the Company makes
any recommendation to Holders as to whether to tender or refrain from tendering
in the Exchange Offer. Holders of the Series A Preferred Stock are urged to
consult their financial and tax advisors in making their own decisions on what
action to take in light of their own particular circumstances.
Unless the context requires otherwise, the term "Holder" with respect to
the Exchange Offer means (i) any person in whose name any shares of Series A
Preferred Stock are registered on the books of the Company or (ii) any other
person who has obtained a properly completed stock power from the registered
holder, or (iii) any person whose shares of Series A Preferred Stock are held of
record by The Depository Trust Company ("DTC") who desires to deliver such
Series A Preferred Stock by book-entry transfer at DTC.
PURPOSE OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing the Series A Preferred Stock with the
Debentures. The potential cash flow benefit to the Company arises because
interest payable on the Debentures (whether paid currently or deferred under the
terms of the Debentures) should be deductible by the Company as it accrues for
federal income tax purposes, while dividends payable on the Series A Preferred
Stock are not deductible. The extent of this cash flow benefit, however, cannot
be predicted because it depends upon the number of shares of Series A Preferred
Stock exchanged pursuant to the Exchange Offer, upon the Company's federal
income tax position in any year and the period of time the Debentures remain
outstanding. Neither the Company's ability to defer interest payments on the
Debentures nor the lack of voting rights on the part of holders of the
Debentures is a purpose of the Company in making the Exchange Offer.
Except as described herein, the Company has no present plans or intention
to make acquisitions of or offers for the Series A Preferred Stock. However, if
any shares of Series A Preferred Stock remain outstanding after the expiration
of the Exchange Offer, the Company will continue to monitor the market for the
Series A Preferred Stock and reserves the right, in its sole discretion, to
acquire and to make offers for Series A Preferred Stock subsequent to the
Expiration Date for cash or in exchange for other securities, by optional
redemption or otherwise. The terms of any such acquisitions or offers may
differ from the terms of the Exchange Offer. Such acquisitions or offers, if
any, may depend upon, among other things, the price and availability of such
shares and the Company's tax position.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, the Company will exchange up to $600,000,000 aggregate
principal amount of Debentures for up to all of the outstanding shares of Series
A Preferred Stock. The Debentures are offered in minimum denominations of
$1,000 and integral multiples thereof, and the Series A Preferred Stock has a
liquidation preference of $100 per share. Consequently, the Exchange Offer will
be effected on a basis of $1,000 principal amount of Debentures for every ten
shares of Series A Preferred Stock validly tendered and accepted for exchange.
The Company will pay cash to tendering Holders of Series A Preferred Stock in
lieu of issuing Debentures with a principal amount of less than $1,000. Upon
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal, the Company will accept Series A Preferred Stock validly tendered
and not withdrawn as promptly as practicable after the Expiration Date unless
the Exchange Offer has been withdrawn or terminated. The Company will not
accept Series A Preferred Stock for exchange prior to the Expiration Date. The
Company expressly reserves the right, in its sole discretion, to delay
acceptance for exchange of Series A Preferred Stock tendered under the Exchange
Offer or the exchange of the Debentures for the Series A Preferred Stock
accepted for exchange (subject to Rules 13e-4 and 14e-
-21-
<PAGE>
1 under the Exchange Act, which require that the Company consummate the Exchange
Offer or return the Series A Preferred Stock deposited by or on behalf of the
Holders thereof promptly after the termination or withdrawal of the Exchange
Offer), or to withdraw or terminate the Exchange Offer and not accept any Series
A Preferred Stock at any time for any reason. In all cases, except to the
extent waived by the Company, delivery of Debentures in exchange for the Series
A Preferred Stock accepted for exchange pursuant to the Exchange Offer will be
made only after timely receipt by the Exchange Agent of Series A Preferred Stock
(or confirmation of book-entry transfer thereof), a properly completed and duly
executed Letter of Transmittal and any other documents required thereby.
As of February 2, 1995, there were 5,999,900 shares of Series A Preferred
Stock outstanding. This Prospectus, together with the Letter of Transmittal, is
being sent to all registered Holders as of ___________ __, 1995.
The Company shall be deemed to have accepted validly tendered Series A
Preferred Stock (or defectively tendered Series A Preferred Stock with respect
to which the Company has waived such defect) when, as and if the Company 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 the
Debentures from the Company and remitting such Debentures to tendering Holders.
Upon the terms and subject to the conditions of the Exchange Offer, delivery of
Debentures in exchange for Series A Preferred Stock will be made as promptly as
practicable after the Expiration Date.
If any tendered Series A Preferred Stock is 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 Series A Preferred
Stock will be returned, without expense, to the tendering Holder thereof (or in
the case of Series A Preferred Stock tendered by book-entry transfer into the
Exchange Agent's account at DTC, such Series A Preferred Stock will be credited
to an account maintained at DTC designated by the participant therein who so
delivered such Series A Preferred Stock), as promptly as practicable after the
Expiration Date or the withdrawal or termination of the Exchange Offer.
Holders of Series A Preferred Stock will not have any appraisal or
dissenters' rights under the DGCL in connection with the Exchange Offer. The
Company intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.
Holders who tender Series A Preferred Stock in the Exchange 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
Series A Preferred Stock pursuant to the Exchange Offer. See "--Fees and
Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Exchange Offer will expire on the Expiration Date. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on ______________
___, 1995, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
The Company reserves the right to extend the Exchange Offer in its sole
discretion at any time and from time to time by giving oral or written notice to
the Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News Service. During any extension of the Exchange Offer, all Series
A Preferred Stock previously tendered pursuant to the Exchange Offer and not
withdrawn will remain subject to the Exchange Offer.
The Company expressly reserves the right to (i) amend or modify the terms
of the Exchange Offer in any manner and (ii) withdraw or terminate the Exchange
Offer and not accept for exchange any Series A Preferred
-22-
<PAGE>
Stock, at any time for any reason, including (without limitation) if fewer than
_________ shares of Series A Preferred Stock are tendered (which condition may
be waived by the Company). If the Company makes a material change in the terms
of the Exchange Offer or if it waives a material condition of the Exchange
Offer, the Company will extend the Exchange Offer. The minimum period for which
the Exchange Offer will be extended following a material change or waiver, other
than a change in the amount of Series A Preferred Stock sought for exchange,
will depend upon the facts and circumstances, including the relative materiality
of the change or waiver. With respect to a change in the amount of Series A
Preferred Stock sought, the offer will be extended for a minimum of ten business
days following public announcement of such change. Any withdrawal or
termination of the Exchange Offer will be followed as promptly as practicable by
public announcement thereof. In the event the Company withdraws or terminates
the Exchange Offer, it will give immediate notice to the Exchange Agent, and all
Series A Preferred Stock theretofore tendered pursuant to the Exchange Offer
will be returned promptly to the tendering Holders thereof. See "--Withdrawal
of Tenders."
ACCUMULATED DIVIDENDS AND INTEREST ON DEBENTURES
The Debentures will bear interest at an annual rate of % from the first
day following the Expiration Date (the "Issue Date") or from the most recent
interest payment date to which interest has been paid or duly provided for. The
dividend on the Series A Preferred Stock payable on ____________ will be payable
to stockholders of record on _____________, regardless of when shares of the
Series A Preferred Stock are tendered pursuant to the Exchange Offer. Dividends
accumulated after _____________ will not be paid on Series A Preferred Stock
accepted for exchange in the Exchange Offer. In lieu thereof, holders of
Debentures will be entitled to interest at a rate of 6 1/4% per annum (equal to
the stated dividend rate on the Series A Preferred Stock) from _____________
through the Expiration Date, payable at the time of the first interest payment
on the Debentures. See "Description of Debentures--Interest."
PROCEDURES FOR TENDERING
The tender of Series A Preferred Stock by a Holder thereof pursuant to one
of the procedures set forth below will constitute an agreement between such
Holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Each Holder of the Series A Preferred Stock wishing to accept the Exchange
Offer must (i) properly complete and sign the Letter of Transmittal 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 therein, together with any required
signature guarantees, and deliver the same to the Exchange Agent, at either of
its addresses set forth in "--Exchange Agent" and either (a) certificates for
the Series A Preferred Stock must be received by the Exchange Agent at such
address or (b) such Series A Preferred Stock 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, SERIES A PREFERRED STOCK AND ANY OTHER REQUIRED
DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY OR THE
DEALER MANAGERS.
Signature Guarantees. If tendered Series A Preferred Stock is registered
in the name of the signer of the Letter of Transmittal and the Debentures to be
issued in exchange therefor are to be issued (and any untendered Series A
Preferred Stock is to be reissued) in the name of the registered Holder (which
term, for the purposes described herein, shall include any participant in DTC
whose name appears on a security listing as the owner of Series A Preferred
Stock), the signature of such signer need not be guaranteed. If the tendered
Series A Preferred Stock is registered in the name of someone other than the
signer of the Letter of Transmittal, such tendered Series A Preferred Stock must
be endorsed or accompanied by written instruments of transfer in form
satisfactory to the
-23-
<PAGE>
Company 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 New York Stock Exchange Medallion Signature Guarantee Program or the
Stock Exchange Medallion Program (any of the foregoing hereinafter referred to
as an "Eligible Institution"). If the Debentures and/or Series A Preferred
Stock not exchanged are to be delivered to an address other than that of the
registered Holder appearing on the register for the Series A Preferred Stock,
the signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution. Any beneficial owner whose Series A Preferred Stock is 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 a Letter of Transmittal and delivering its Series A
Preferred Stock, either make appropriate arrangements to register ownership of
the Series A Preferred Stock 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 SERIES A PREFERRED STOCK AND ALL OTHER DOCUMENTS
IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED
THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PRIOR INSURANCE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Book-Entry Transfer. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish accounts
with respect to the Series A Preferred Stock at DTC for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in DTC's system may make book-entry
delivery of Series A Preferred Stock by causing DTC to transfer such Series A
Preferred Stock into the Exchange Agent's account with respect to the Series A
Preferred Stock in accordance with DTC's Automated Tender Offer Program ("ATOP")
procedures for such book-entry transfers. However, the exchange for the Series
A Preferred Stock so tendered will only be made after timely confirmation (a
"Book-Entry Confirmation") of such Book-Entry Transfer of Series A Preferred
Stock 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 sentence) and
any other documents required by the Letter of Transmittal. The term "Agent's
Message" means a message, transmitted by the Book-Entry Transfer Facility and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgement from a participant tendering Series A Preferred Stock 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
Company may enforce such agreement against such participant.
Guaranteed Delivery. If a Holder desires to accept the Exchange Offer and
time will not permit a Letter of Transmittal or Series A Preferred Stock 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 its office prior to the Expiration Date, a
letter, a telegram or facsimile transmission from an Eligible Institution
setting forth the name and address of the tendering Holder, the name(s) in which
the Series A Preferred Stock is registered and, if the Series A Preferred Stock
is held in certificated form, the certificate number of the Series A Preferred
Stock to be tendered, and stating that the tender is being made thereby and
guaranteeing that within five NYSE trading days after the date of execution of
such letter, telegram or facsimile transmission by the Eligible Institution, the
Series A Preferred Stock in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (and any other required
documents), or a confirmation of book-entry transfer of such Series A Preferred
Stock into the Exchange Agent's account at DTC, will be delivered by such
Eligible Institution. Unless the Series A Preferred Stock being tendered by the
above-described method is 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 a confirmation of book-entry
transfer of such Series A
-24-
<PAGE>
Preferred Stock into the Exchange Agent's account at DTC in accordance with
DTC's ATOP procedures is received, the Company may, at its option, reject the
tender. 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.
Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of Series
A Preferred Stock will be determined by the Company, whose determination will be
final and binding. The Company 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 Company's counsel, be unlawful. The Company also reserves the
absolute right to waive any defect or irregularity in the tender of any Series A
Preferred Stock, and the Company's interpretation of the terms and conditions of
the Exchange Offer (including the Instructions in the Letter of Transmittal)
will be final and binding. None of the Company, the Exchange Agent or the
Dealer Managers 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 Series A Preferred Stock involving any irregularities will not
be deemed to have been made until such irregularities have been cured or waived.
Series A Preferred Stock received by the Exchange Agent that is 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
Series A Preferred Stock tendered by book-entry transfer into the Exchange
Agent's account at DTC, such Series A Preferred Stock will be credited to an
account maintained at DTC designated by the participant therein who so delivered
such Series A Preferred Stock), 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 Exchange Offer.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Series A Preferred Stock for exchange (the
"Transferor") exchanges, assigns and transfers the Series A Preferred Stock to
the Company and irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Series A Preferred Stock 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 Series A Preferred Stock and to acquire Debentures issuable upon the
exchange of such tendered Series A Preferred Stock, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Series A Preferred Stock, 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 Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Series A Preferred
Stock or transfer ownership of such Series A Preferred Stock on the account
books maintained by DTC. 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 Series A Preferred Stock pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, 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 the address set forth in the Letter of Transmittal. The method of
notification is at the risk and election of the Holder. Any such notice of
withdrawal must specify (i) the Holder
-25-
<PAGE>
named in the Letter of Transmittal as having tendered Series A Preferred Stock
to be withdrawn, (ii) if the Series A Preferred Stock is held in certificated
form, the certificate numbers of the Series A Preferred Stock to be withdrawn,
(iii) that such Holder is withdrawing his election to have such Series A
Preferred Stock exchanged, and (iv) the name of the registered Holder of such
Series A Preferred Stock, 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 Company
that the person withdrawing the tender has succeeded to the beneficial ownership
of the Series A Preferred Stock being withdrawn. The Exchange Agent will return
the properly withdrawn Series A Preferred Stock promptly following receipt of
notice of withdrawal. If Series A Preferred Stock has been tendered pursuant to
the procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn Series A
Preferred Stock and otherwise comply with DTC's procedures. All questions as to
the validity of notice of withdrawal, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties. Withdrawals of tenders of Series A Preferred Stock may not be
rescinded and any Series A Preferred Stock withdrawn will thereafter be deemed
not validly tendered for purposes of the Exchange Offer. Properly withdrawn
Series A Preferred Stock, however, may be retendered by following the procedures
therefor described elsewhere herein at any time prior to the Expiration Date.
See "--Procedures for Tendering."
EXCHANGE AGENT
_________________________ has been appointed as Exchange Agent for the
Exchange Offer.
The Exchange Agent:
By Hand or Overnight Courier: By Mail:
By Facsimile:
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
Questions and requests for assistance regarding the Exchange Offer,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notice of Guaranteed Delivery may be directed to
the Exchange Agent at _________________, telephone _____________.
The Company will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse them for all their reasonable out-of-pocket
expenses in connection therewith.
DEALER MANAGERS
Goldman, Sachs & Co. and Lehman Brothers Inc., as Dealer Managers, have
agreed to solicit exchanges of Series A Preferred Stock for Debentures. The
Company will pay each Dealer Manager a fee that is dependent on the number of
shares of Series A Preferred Stock accepted pursuant to the Exchange Offer. The
maximum fee payable is approximately $____________. Additional solicitation may
be made by telecopier, telephone or in person by officers and regular employees
of the Company and its affiliates. No additional compensation will be paid to
any such officers and employees who engage in soliciting tenders.
-26-
<PAGE>
LISTING AND TRADING OF DEBENTURES AND SERIES A PREFERRED STOCK; TRANSFER
RESTRICTIONS
There has not previously been any public market for the Debentures. While
the Company intends to apply to list the Debentures and the Common Stock
issuable upon conversion thereof on the NYSE, there can be no assurance that an
active market for the Debentures will develop or be sustained in the future on
such exchange. Although the Dealer Managers have indicated to the Company that
they intend to make a market in the Debentures as permitted by applicable laws
and regulations, 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 Debentures.
The Series A Preferred Stock and the Common Stock issuable upon conversion
of such Series A Preferred Stock have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. Such Series A Preferred Stock and such
Common Stock are subject to restrictions on their transfer designed to ensure
compliance with the requirements of the Securities Act and, upon consummation of
the Exchange Offer, will continue to be subject to such existing restrictions
upon transfer, including the terms of the original issuance of such Series A
Preferred Stock and such Common Stock. Holders of Series A Preferred Stock who
do not tender their Series A Preferred Stock in the Exchange Offer or whose
Series A Preferred Stock is not accepted for exchange will continue to hold such
Series A Preferred Stock and will be entitled to all the rights and preferences,
and will be subject to all of the limitations applicable thereto. Moreover, to
the extent that Series A Preferred Stock is tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Series A Preferred Stock
could be adversely affected. Beginning February 5, 1996, the Series A Preferred
Stock and the Common Stock issuable upon conversion thereof may be resold
pursuant to Rule 144 under the Securities Act, subject, in certain cases, to the
volume and other limitations of Rule 144.
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SERIES A PREFERRED STOCK
Except as described herein, there are no contracts, arrangements,
understandings or relationships in connection with the Exchange Offer between
the Company or any of its directors or executive officers and any person with
respect to any securities of the Company, including the Debentures, the Series A
Preferred Stock and the Common Stock issuable upon conversion thereof.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of the Series A Preferred Stock will be
borne by the Company. For compensation to be paid to the Dealer Managers see "-
- -Dealer Managers." The total cash expenditures to be incurred by the Company in
connection with the Exchange Offer, other than fees payable to the Dealer
Managers, but including the expenses of the Dealer Managers, printing,
accounting and legal fees, and the fees and expenses of the Exchange Agent and
the Trustee under the Indenture, are estimated to be approximately
$________________.
Holders of the Series A Preferred Stock accepted in the Exchange Offer are
responsible for paying any transfer taxes in connection with such exchange. 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.
-27-
<PAGE>
DESCRIPTION OF DEBENTURES
GENERAL
The Debentures constitutes a series of debt securities ("Debt Securities")
to be issued under an Indenture (the "Indenture"), to be dated as of
______________ __, 1995, between the Company and __________________, as trustee
(the "Trustee"). The following statements with respect to the Debentures are
summaries and are subject to the detailed provisions of the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), and the Indenture, a copy of
the form of which has been filed as an exhibit to the Registration Statement.
The following summaries of certain provisions of the Indenture do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Debentures and the Indenture, including the
definitions therein of certain terms capitalized and not otherwise defined in
this Prospectus. Wherever references are made to particular provisions of the
Indenture or terms defined therein, such provisions or definitions are
incorporated by reference as part of the statements made and such statements are
qualified in their entirety by such references.
The Debentures will be unsecured, subordinated obligations of the Company,
will be limited in aggregate principal amount to the aggregate principal amount
of Debentures issued in the Exchange Offer and will mature on ____________,
2025. The Debentures will be issued only in fully registered form, without
coupons, in minimum denominations of $1,000 and any integral multiples of $1,000
in excess thereof.
The Indenture provides that the Debt Securities may be issued without
limitation as to aggregate principal amount, in one or more series, in each case
as established from time to time in or pursuant to authorization granted by
resolution of the Board and an officer's certificate or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
The Indenture does not contain any provisions that would limit the ability
of the Company to incur indebtedness or that would afford holders of the
Debentures protection in the event of a highly leveraged or similar transaction
involving the Company or in the event of a change of control.
Debentures will be transferable or exchangeable at the agency of the
Company maintained for such purpose in The City of New York (which, unless
changed, shall be a corporate trust office or agency of the Trustee). Debentures
may be transferred or exchanged without service charge, other than any tax or
governmental charge imposed in connection therewith. (Section 3.5 of the
Indenture.)
INTEREST
The Debentures will mature on _________________, 2025 and will bear
interest at an annual rate of % from the Issue Date or from the most recent
interest payment date to which interest has been paid or duly provided for. In
addition, holders of record of the Debentures will be entitled to interest at a
rate of 6 1/4% per annum from _______________ through the Expiration Date, in
lieu of dividends accumulating after _______________ on their Series A Preferred
Stock accepted for exchange, payable at the time of the first interest payment
on the Debentures. Interest will be payable quarterly in arrears on February 1,
May 1, August 1 and November 1 of each year commencing ________________, 1995,
provided that so long as the Company shall not be in default in the payment of
interest on the Debentures, the Company shall have the right, upon prior notice
by public announcement given in accordance with NYSE rules at any time during
the term of the Debentures, to extend the interest payment period from time to
time for a period not exceeding 20 consecutive calendar quarters (each, an
"Extension Period"). Interest will continue to accrue on the Debentures during
an Extension Period and will compound quarterly, at the rate specified for the
Debentures, to the extent permitted by applicable law. See "--Option to Extend
Interest Payment Period." Interest payable on any Debenture that is punctually
paid or duly provided for on any Interest
-28-
<PAGE>
Payment Date shall be paid to the person in whose name such Debenture is
registered at the close of business on the January 15, April 15, July 15 or
October 15, respectively, preceding such Interest Payment Date (each, a "Record
Date"). Interest will be computed on the basis of twelve 30-day months and a
360-day year and, for any period shorter than a full calendar month, on the
basis of the actual number of days elapsed in such period. (Section 3.10 of the
Indenture). If any date on which interest is payable on the Debentures is not a
Business Day, the payment of interest due on such date may be made on the next
succeeding Business Day (and without any interest or other payment in respect of
such delay). A "Business Day" shall mean any day other than a day on which
banking institutions in The City of New York or in Chicago, Illinois are
authorized or required by law to close.
Payments in respect of the Debentures will be made at the office or agency
of the Company maintained for that purpose in The City of New York (which,
unless changed, shall be a corporate trust office or agency of the Trustee).
However, at the option of the Company, payments on the Debentures may be made
(i) by checks mailed by the Trustee to the Holders entitled thereto at their
registered addresses or (ii) by wire transfers to accounts maintained by the
Holders entitled thereto as specified in the Register, provided that, in either
case, the payment of principal with respect to any Debenture will be made only
upon surrender of such Debenture to the Trustee. Interest payable on any
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
Debenture is registered on the relevant Record Date, and such defaulted interest
will instead be payable to the person in whose name such 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 the Company on any Interest Payment Date falling within an Extension Period
unless the Company has elected to make a full or partial payment of interest
accrued on the Debentures on such Interest Payment Date. (Section 3.7 of the
Indenture.)
In the event the Company fails at any time to make any payment of interest,
principal or premium on the Debentures when due (after giving effect to any
grace period for payment thereof as described in "--Events of Default, Notice
and Certain Rights on Default") or the Company exercises its option to extend
the interest payment period for an Extension Period as described in "--Option to
Extend Interest Payment Period," the Company will not, until all defaulted
interest on the Debentures and all interest accrued on the Debentures during an
Extension Period and all principal and premium, if any, then due and payable on
the Debentures shall have been paid in full, (i) declare, set aside or pay any
dividend or distribution on any capital stock of the Company, including the
Series A Preferred Stock and the Common Stock, except for dividends or
distributions in shares of its capital stock or in rights to acquire shares of
its capital stock, or (ii) repurchase, redeem or otherwise acquire, or make any
sinking fund payment for the purchase or redemption of, any shares of its
capital stock (except by conversion into or exchange for shares of its capital
stock and except for a redemption, purchase or other acquisition of shares of
its capital stock made for the purpose of an employee incentive plan or benefit
plan of the Company or any of its subsidiaries); provided, however, that any
moneys deposited in any sinking fund with respect to any preferred stock of the
Company in compliance with the provisions of such sinking fund and not in
violation of this provision may thereafter be applied to the purchase or
redemption of such preferred stock in accordance with the terms of such sinking
fund without regard to the restrictions contained in this provision. (Section
9.7 of the Indenture.)
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest
on the Debentures, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time during the term of
the Debentures, prior to an Interest Payment Date as provided below, to extend
the interest payment period from time to time to another Interest Payment Date
by one or more quarterly periods, not to exceed 20 consecutive calendar quarters
from the last Interest Payment Date to which interest was paid in full (each, an
"Extension Period"). No interest shall be due and payable during an Extension
Period, but on the Interest Payment Date occurring at the end of each Extension
Period the Company shall pay to the holders 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 Debentures, together with interest thereon. Interest
-29-
<PAGE>
will continue to accrue on the Debentures during an Extension Period and will
compound quarterly, at the rate specified for the Debentures, to the extent
permitted by applicable law. Prior to the termination of any Extension Period,
the Company may pay all or any portion of the interest accrued on the Debentures
on any Interest Payment Date to holders of record on the Record Date for such
Interest Payment Date or from time to time further extend the interest payment
period, provided that any such Extension Period together with all such previous
and further extensions thereof may not exceed 20 calendar quarters. If the
Company shall elect to pay all of the interest accrued on the Debentures on an
Interest Payment Date during an Extension Period, such Extension Period shall
automatically terminate on such Interest Payment Date. Upon the termination of
any Extension Period and the payment of all amounts of interest then due, the
Company may commence a new Extension Period, subject to the above requirements.
Consequently, there could be multiple Extension Periods of varying lengths
throughout the term of the Debentures. The Company has no current intention of
exercising its right to defer any interest payment period. However, in the event
the Company determines to extend an interest payment period, or in the event the
Company thereafter extends an Extension Period or prepays interest accrued
during an Extension Period as described above, the market price of the
Debentures is likely to be affected. In addition, as a result of such rights,
the market price of the Debentures may be more volatile than other debt
instruments with original issue discount that do not have such rights. A holder
that disposes of its Debentures during an Extension Period, therefore, may not
receive the same return on its investment as a holder that continues to hold its
Debentures.
The Company shall cause the Trustee to give holders of the Debentures prior
notice, by public announcement given in accordance with NYSE rules and by mail
to all such holders, of (i) the Company's election to initiate an Extension
Period and the duration thereof, (ii) the Company's election to extend any
Extension Period beyond the Interest Payment Date on which such Extension Period
is then scheduled to terminate and the duration of such extension and (iii) the
Company's election to make a full or partial payment of interest accrued on the
Debentures on any Interest Payment Date during any Extension Period and the
amount of such payment. In no event shall such notice be given less than five
Business Days prior to the January 15, April 15, July 15 or October 15 next
preceding the applicable Interest Payment Date. (Section 3.1 of the Indenture.)
SUBORDINATION
The payment of the principal of, and premium, if any, and interest on the
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). No payments or distributions, whether in cash, securities or other
property (other than securities of the Company 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 Debentures, to the payment of
all Senior Indebtedness at the time outstanding and to any securities issued in
respect thereof under any such plan of reorganization or readjustment) on
account of principal of, and premium, if any, or interest on the Debentures may
be made by the Company unless full payment of all amounts then due on Senior
Indebtedness has been made or provided for in money or money's worth. Upon any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than securities of the Company 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
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 the Company, 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 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 Debentures (for principal or
interest) or of the Indenture. (Article 12 of the Indenture.)
The term "Senior Indebtedness" of the Company means all Indebtedness of the
Company (other than the Debentures), unless such Indebtedness by its terms or
the terms of the instrument creating or evidencing the same
-30-
<PAGE>
expressly provides that it is subordinate in right of payment to or pari passu
with the Debentures. (Section 1.1 of the Indenture.) "Indebtedness," when used
with respect to the Company, 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 of the
Company for money borrowed, (ii) Indebtedness Guarantees (as defined in the
Indenture) by the Company of indebtedness for money borrowed by any other
person, (iii) indebtedness evidenced by notes, debentures, bonds or other
instruments of indebtedness for payment of which the Company 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
the Company under Capital Leases (as defined in the Indenture) and Flight
Equipment (as defined in the Indenture) leases (the amount of the Company'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.
By reason of the subordination described herein, in the event of the
distribution of assets upon insolvency, creditors of the Company who are not
holders of Senior Indebtedness or of the Debentures may recover less, ratably,
than holders of Senior Indebtedness, and may recover more, ratably, than holders
of the Debentures. Moreover, upon any distribution of the assets of the Company,
the holders of the Debentures are required to pay over their share of such
distribution to the holders of Senior Indebtedness to the extent necessary to
pay all holders of Senior Indebtedness in full.
On September 30, 1994 approximately $586 million of Senior Indebtedness was
outstanding. The calculation of the amount of Senior Indebtedness assumes that
the Company is primarily obligated for the present value of future minimum lease
payments under operating leases guaranteed by the Company but does not include
other contingent obligations such as stipulated values or liquidated damages.
There is no restriction under the Indenture on the creation of additional
indebtedness, including Senior Indebtedness, by the Company, including
indebtedness owed by the Company to United and its other subsidiaries.
Because the Company is a holding company that conducts business through its
subsidiaries, the Debentures are effectively subordinated to all existing and
future obligations of the Company's subsidiaries, including United. Any right of
the Company to participate in any distribution of the assets of any of the
Company's subsidiaries, including United, upon the liquidation, reorganization
or insolvency of such subsidiary (and the consequent right of the holders of the
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 the Company itself as a creditor
of such subsidiary may be recognized, in which case the claims of the Company
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 the
Company. On September 30, 1994, approximately $13.3 billion of indebtedness,
leases and other obligations (including trade payables) of the Company's
subsidiaries (net of those obligations of the Company to its subsidiaries that
are included in the definition of Senior Indebtedness) not included in the
definition of Senior Indebtedness was outstanding.
Because the Company is a holding company, the Company's cash flow and
consequent ability to meet its debt obligations are primarily dependent upon the
earnings of its subsidiaries, particularly United, and on dividends and other
payments therefrom. The Company's subsidiaries are not obligated or required to
pay any amounts due pursuant to the Debentures or to make funds available
therefor in the form of dividends or advances to the Company.
-31-
<PAGE>
CONVERSION
Each Debenture will be convertible at the option of the holder thereof at
any time after the date of original issuance thereof, unless previously
redeemed, into $541.90 and the number of fully paid and nonassessable shares of
Common Stock obtained by dividing the aggregate Principal Amount of such
Debenture minus $541.90 by the Conversion Price and surrendering such Debentures
to be converted as provided below; provided, however, that the right to convert
Debentures called for redemption shall terminate at the close of business on the
day preceding the Redemption Date, unless the Company shall default in making
payment of the cash payable upon such redemption. Certificates will be issued
for the remaining Debentures in any case in which fewer than all of the
Debentures represented by a certificate are converted.
Holders of Debentures at the close of business on an interest payment
record date shall be entitled to receive the interest payable on such Debentures
on the corresponding Interest Payment Date notwithstanding the conversion
thereof following such interest payment record date and prior to such Interest
Payment Date. However, Debentures surrendered for conversion during the period
between the close of business on any interest payment record date and the
opening of business on the corresponding Interest Payment Date (except
Debentures converted after the issuance of a notice of redemption with respect
to a Redemption Date during such period, which shall be entitled to such
interest on the Interest Payment Date) must be accompanied by payment of an
amount equal to the interest payable on such Debentures on such Interest Payment
Date. A holder of Debentures on an interest payment record date who (or whose
transferee) tenders any such Debentures for conversion into shares of Common
Stock on such Interest Payment Date will receive the interest payable by the
Company on such Debentures on such date, and the converting holder need not
include payment of the amount of such interest upon surrender of Debentures for
conversion. Except as provided above, the Company shall make no payment or
allowance for unpaid interest, whether or not in arrears, on converted
Debentures or for dividends on the shares of Common Stock issued upon such
conversion.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the Debentures shall have been
surrendered and such notice (and if applicable, payment of an amount equal to
the interest payable on such Debentures) received by the Company as aforesaid,
and the person or persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares represented
thereby at such time on such date and such conversion shall be at the Conversion
Price in effect at such time on such date, unless the stock transfer books of
the Company shall be closed on that date, in which event such person or persons
shall be deemed to have become such holder or holders of record at the close of
business on the next succeeding day on which such stock transfer books are open,
but such conversion shall be at the Conversion Price in effect on the date upon
which such shares shall have been surrendered and such notice received by the
Company.
No fractional shares or scrip representing fractions of shares of Common
Stock will be issued upon conversion of the Debentures. Instead of any
fractional interest in a share of Common Stock that would otherwise be
deliverable upon the conversion of a Debenture, the Company shall pay to the
holder of such share an amount in cash based upon the Current Market Price of
Common Stock on the Trading Day immediately preceding the date of conversion. If
more than one Debenture shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Debentures so surrendered.
The Conversion Price shall be adjusted from time to time as follows:
(a) If the Company shall after the Issue Date (A) pay a dividend or make a
distribution on its capital stock in shares of its Common Stock, (B) subdivide
its outstanding Common Stock into a greater number of shares, (C) combine its
outstanding Common Stock into a smaller number of shares or (D) issue any shares
of capital stock by reclassification of its Common Stock, the Conversion Price
in effect at the opening of business on the day next
-32-
<PAGE>
following the date fixed for the determination of stockholders entitled to
receive such dividend or distribution or at the opening of business on the day
next following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be adjusted so
that the holder of any Debentures thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock that such holder would
have owned or have been entitled to receive after the happening of any of the
events described above had such Debenture been converted immediately prior to
the record date in the case of a dividend or distribution or the effective date
in the case of a subdivision, combination or reclassification. An adjustment
made pursuant to this paragraph (a) shall become effective immediately after the
opening of business on the day next following the record date (except as
provided below) in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the day next following
the effective date in the case of a subdivision, combination or
reclassification.
(b) If the Company shall issue after the Issue Date rights or warrants (in
each case, other than the Rights) to all holders of Common Stock entitling them
(for a period expiring within 45 days after the record date mentioned below) to
subscribe for or purchase Common Stock at a price per share less than the Fair
Market Value per share of Common Stock on the record date for the determination
of stockholders entitled to receive such rights or warrants, then the Conversion
Price in effect at the opening of business on the day next following such record
date shall be adjusted to equal the price determined by multiplying (1) the
Conversion Price in effect immediately prior to the opening of business on the
day next following the date fixed for such determination by (2) a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding on the close of business on the date fixed for such determination
and (B) the number of shares that the aggregate proceeds to the Company from the
exercise of such rights or warrants for Common Stock would purchase at such Fair
Market Value, and the denominator of which shall be the sum of (A) the number of
shares of Common Stock outstanding on the close of business on the date fixed
for such determination and (B) the number of additional shares of Common Stock
offered for subscription or purchase pursuant to such rights or warrants. Such
adjustment shall become effective immediately after the opening of business on
the day next following such record date (except as provided below). In
determining whether any rights or warrants entitle the holders of Common Stock
to subscribe for or purchase shares of Common Stock at less than such Fair
Market Value, there shall be taken into account any consideration received by
the Company upon issuance and upon exercise of such rights or warrants, the
value of such consideration, if other than cash, to be determined by the Board.
(c) If the Company shall distribute to all holders of its Common Stock any
shares of capital stock of the Company (other than Common Stock) or evidence of
its indebtedness or assets (excluding cash dividends or distributions paid from
profits or surplus of the Company) or rights or warrants (in each case, other
than the Rights) to subscribe for or purchase any of its securities (excluding
those rights and warrants issued to all holders of Common Stock entitling them
for a period expiring within 45 days after the record date referred to in
paragraph (b) above to subscribe for or purchase Common Stock, which rights and
warrants are referred to in and treated under paragraph (b) above (any of the
foregoing being hereinafter in this paragraph (c) called the "Securities"), then
in each such case the Conversion Price shall be adjusted so that it shall equal
the price determined by multiplying (1) the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by (2) a
fraction, the numerator of which shall be the Fair Market Value per share of the
Common Stock on the record date mentioned below less the then fair market value
(as determined by the Board, whose determination shall be conclusive) of the
portion of the capital stock or assets or evidences of indebtedness so
distributed or of such rights or warrants applicable to one share of Common
Stock, and the denominator of which shall be the Fair Market Value per share of
the Common Stock on the record date mentioned below. Such adjustment shall
become effective immediately at the opening of business on the Business Day next
following (except as provided below) the record date for the determination of
stockholders entitled to receive such distribution. For the purposes of this
paragraph (c), the distribution of a Security, which is distributed not only to
the holders of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such distribution of such security, but also is
distributed with each share of Common Stock delivered to a person converting a
Debenture after such determination date, shall not require an adjustment of the
Conversion Price
-33-
<PAGE>
pursuant to this paragraph (c); provided that on the date, if any, on which a
Person converting a Debenture would no longer be entitled to receive such
Security with a share of Common Stock (other than as a result of the termination
of all such Securities), a distribution of such Securities shall be deemed to
have occurred and the Conversion Price shall be adjusted as provided in this
paragraph (c) (and such day shall be deemed to be "the date fixed for the
determination of the stockholders entitled to receive such distribution" and
"the record date" within the meaning of the two preceding sentences).
(d) No adjustment in the Conversion Price shall be required unless such
adjustment would require a cumulative increase or decrease of at least 1% in
such price; provided, however, that any adjustments that by reason of this
paragraph (d) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment until made; and provided, further,
that any adjustment shall be required and made in accordance with these
conversion provisions (other than this paragraph (d)) not later than such time
as may be required in order to preserve the tax-free nature of a distribution to
the holders of shares of Common Stock. Notwithstanding any other provisions, the
Company shall not be required to make any adjustment of the Conversion Price for
the issuance of any shares of Common Stock pursuant to any plan providing for
the reinvestment of dividends on securities of the Company. All calculations
shall be made to the nearest cent (with $.005 being rounded upward) or to the
nearest 1/10 of a share (with .05 of a share being rounded upward), as the case
may be. Anything to the contrary notwithstanding, the Company shall be entitled,
to the extent permitted by law, to make such reductions in the Conversion Price,
in addition to those required by this conversion provision, as it in its
discretion shall determine to be advisable in order that any stock dividends,
subdivision of shares, reclassification or combination of shares, distribution
of rights or warrants to purchase stock or securities, or a distribution of
other assets (other than cash dividends) hereafter made by the Company to its
stockholders shall not be taxable.
If the Corporation shall be a party to any transaction (including without
limitation a merger, consolidation, sale of all or substantially all of the
Company's assets or recapitalization of the Common Stock and excluding any
transaction as to which paragraph (a) above applies) (each of the foregoing
being referred to herein as a "Transaction"), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
Debenture which is not converted into the right to receive stock, securities or
other property in connection with such Transaction shall thereafter be
convertible into the kind and amount of shares of stock, securities and other
property (including cash or any combination thereof) receivable upon the
consummation of such Transaction by a holder of that number of shares or
fraction thereof of Common Stock into which $1,000 principal amount of Debenture
was convertible immediately prior to such Transaction, assuming such holder of
Common Stock (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be ("Constituent Person"), or an affiliate
of a Constituent Person and (ii) failed to exercise his rights of election, if
any, as to the kind or amount of stock, securities and other property (including
cash) receivable upon such Transaction (provided that if the kind or amount of
stock, securities and other property (including cash) receivable upon such
Transaction is not the same for each share of Common Stock of the Company held
immediately prior to such Transaction by other than a Constituent Person or an
affiliate thereof and in respect of which such rights of election shall not have
been exercised ("non-electing share"), then for the purpose of this paragraph
the kind and amount of stock, securities and other property (including cash)
receivable upon such Transaction by each non-electing share shall be deemed to
be the kind and amount so receivable per share by the plurality of the non-
electing shares). The Company shall not be a party to any Transaction unless the
terms of such Transaction are consistent with the provisions herein and it shall
not consent or agree to the occurrence of any Transaction until the Company has
entered into an agreement with the successor or purchasing entity, as the case
may be, for the benefit of the holders of the Debentures that will contain
provisions enabling the holders of the Debentures that remain outstanding after
such Transaction to convert into the consideration received by holders of Common
Stock at the Conversion Price in effect immediately prior to such Transaction.
The provisions of this paragraph shall similarly apply to successive
Transactions.
If:
-34-
<PAGE>
(i) the Company shall declare a dividend (or any other distribution)
on the Common Stock (other than in cash out of profits or surplus and
other than the Rights); or
(ii) the Company shall authorize the granting to the holders of the
Common Stock of rights or warrants (other than the Rights) to subscribe
for or purchase any shares of any class or any other rights or warrants
(other than the rights); or
(iii) there shall be any reclassification of the Common Stock (other
than an event to which paragraph (a) above with respect to Conversion
Price adjustment applies) or any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the
Company is required, or the sale or transfer of all or substantially all
of the assets of the Company as an entirety; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Company,
then the Company shall cause to be filed with the Trustee and shall cause to be
mailed to the holders of the Debentures at their addresses as shown on the
register of the Company, as promptly as possible, but a least 15 days prior to
the applicable date hereinafter specified, a notice stating (A) the date on
which a record is to be taken for the purpose of such dividend, distribution or
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to receive such dividend,
distribution or rights or warrants are to be determined or (B) the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up. Failure to give or receive such notice
or any defect therein shall not affect the legality or validity of the
proceedings herein.
Whenever the Conversion Price is adjusted as herein provided, the Company
shall promptly file with the Transfer Agent an officer's certificate setting
forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment which certificate shall be
prima facie evidence of the correctness of such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price
and the effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holders of the Debentures at such
holders' last address as shown on the register of the Company.
In any case in which an adjustment shall become effective on the day next
following a record date for an event, the Company may defer until the occurrence
of such event (A) issuing to the holder of any Debenture converted after such
record date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder any amount
in cash in lieu of any fraction.
For purposes of these conversion provisions, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Company. The Company shall not pay a
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
There shall be no adjustment of the Conversion Price in case of the
issuance of any stock of the Company in a reorganization, acquisition or other
similar transaction except as specifically set forth herein. If any action or
transaction would require adjustment of the Conversion Price pursuant to more
than one paragraph hereof, only one adjustment shall be made and such adjustment
shall be the amount of adjustment that has the highest absolute value.
-35-
<PAGE>
If the Company shall take any action affecting the Common Stock, other than
action described herein, that in the opinion of the Board would materially
adversely affect the conversion rights of the holders of the Debentures, the
Conversion Price for the Debentures may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board may determine to be
equitable in the circumstances.
The Company will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued shares of
Common Stock or its issued shares of Common Stock held in its treasury, or both,
for the purpose of effecting conversion of the Debentures, the full number of
shares of Common Stock deliverable upon the conversion of all outstanding
Debentures not theretofore converted. For purposes of this paragraph, the
number of shares of Common Stock that shall be deliverable upon the conversion
of all outstanding Debentures shall be computed as if at the time of computation
all such outstanding Debentures were held by a single holder.
The Company agrees that any shares of Common Stock issued upon conversion
of the Debentures shall be validly issued, fully paid and non-assessable.
Before taking any action that would cause an adjustment reducing the Conversion
Price below the then-par value of the shares of Common Stock deliverable upon
conversion of the Debentures, the Company will take any corporate action that,
in the opinion of its counsel, may be necessary in order that the Company may
validly and legally issue fully-paid and nonassessable shares of Common Stock at
such adjusted Conversion Price.
The Company shall endeavor to list the shares of Common Stock required to
be delivered upon conversion of the Debentures, prior to such delivery, upon
each national securities exchange, if any, upon which the outstanding Common
Stock is listed at the time of such delivery.
Prior to the delivery of any securities that the Company shall be obligated
to deliver upon conversion of the Debentures, the Company shall endeavor to
comply with all federal and state laws and regulations thereunder requiring the
registration of such securities with, or any approval of or consent to the
delivery thereof by, any governmental authority.
The Company will pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock or other securities or property on conversion of the Debentures pursuant
to these conversion provisions; provided, however, that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock or other securities or
property in a name other than that of the holder of the Debentures to be
converted and no such issue or delivery shall be made unless and until the
person requesting any issue or delivery has paid to the Company the amount of
any such tax or established, to the reasonable satisfaction of the Company, that
such tax has been paid.
The term "Conversion Price" means the conversion price per share of Common
Stock for which the Debentures are convertible, as such Conversion Price may be
adjusted. The initial Conversion Price will be $143.50.
The term "Current Market Price" of publicly traded shares of Common Stock
or any other class of capital stock or other security of the Company or any
other issuer for any day shall mean the last reported sales price, regular way
on such day, or, if no sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in either case as
reported on the NYSE Composite Tape, or, if such security is not listed or
admitted for trading on the NYSE, on the principal national securities exchange
on which such security is listed or admitted for trading or, if not listed or
admitted for trading on any national securities exchange, on the Nasdaq National
Market ("NNM") of the National Association of Securities Dealers, Inc. Automated
Quotations System ("Nasdaq") or, if such security is not quoted on such NNM, the
average of the closing bid and asked prices on such day in the over-the-counter
market as reported by Nasdaq or, if bid and asked prices for such security on
such day shall not have been reported through Nasdaq, the average of the bid and
asked prices on such day as
-36-
<PAGE>
furnished by any NYSE member firm regularly making a market in such security
selected for such purpose by the Board.
The term "Fair Market Value" means the average of the daily Current Market
Prices of a share of Common Stock during the five (5) consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution requiring such
computation. The term "ex date," when used with respect to any issuance or
distribution, means the first day on which the Common Stock trades regular way,
without the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current Market
Price.
The term "Principal Amount" shall mean the principal amount of the
Debenture.
The term "Rights" is defined under "Description of Capital Stock--Preferred
Share Purchase Rights."
The term "Trading Day" means any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the NNM, or if such securities are not
quoted on such NNM, in the applicable securities market in which the securities
are traded.
REDEMPTION
The Debentures will not be subject to any mandatory redemption, sinking
fund or other obligation of the Company to amortize, redeem or retire the
Debentures, and will not be redeemable prior to May 1, 1996. On and after such
date, the Company has the option to redeem the Debentures in whole or in part,
at the following percentages of the principal amount thereof redeemed, plus
accrued and unpaid interest, if any, up to but excluding the redemption date, if
redeemed during the twelve-month period commencing May 1 of the years indicated:
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
---- ----------- ----- -----------
<S> <C> <C> <C>
1996............... 104.375% 2000................... 101.875%
1997............... 103.750% 2001................... 101.250%
1998............... 103.125% 2002................... 100.625%
1999............... 102.500% 2003 and thereafter.... 100.000%
</TABLE>
If fewer than all the outstanding Debentures are to be redeemed, the Trustee,
not more than 45 days prior to the Redemption Date, will select those Debentures
to be redeemed in such manner as the Trustee shall deem fair and appropriate.
The Company may exercise this redemption option only if for 20 trading
days within any period of 30 consecutive trading days, including the last
trading day, the last sale price of the Common Stock as reported by the NYSE
Composite Transaction Tape exceeds 120% of the Conversion Price, subject to
adjustment as described herein. To exercise the option, the Company must,
within 10 trading days after the 30 day period in which the condition in the
preceding sentence has been met, mail a notice of redemption at least 30 days
but not more than 60 days before the redemption date to each holder of record of
Debentures to be redeemed at the address shown on the register of the Company.
(Section 10.4 of the Indenture). After the redemption date, interest will cease
to accrue on the Debentures called for redemption and all rights of the holders
of such Debentures will terminate, except the right to receive the redemption
price without interest.
-37-
<PAGE>
VOTING RIGHTS
The holders of the Debentures will have no voting rights.
CONSOLIDATION, MERGER OR SALE BY THE COMPANY
The Indenture provides that the Company 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
(i) (a) in the case of a merger or consolidation, the Company is the surviving
corporation or (b) in the case of a merger or consolidation where the Company 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 the Company under the 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 the
Company, such successor corporation shall succeed to and be substituted for the
Company under the Indenture and under the Debentures and all obligations of the
Company thereunder shall terminate. (Article 7 of the Indenture).
EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
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 Debentures then outstanding may, by written
notice to the Company (and to the Trustee, if notice is given by such holders of
Debentures), declare the principal of all the Debentures to be due and payable.
However, at any time after a declaration of acceleration with respect to the
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 Debentures then outstanding may, under certain circumstances,
rescind and annul such acceleration. (Section 5.2 of the Indenture.)
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 or premium, if any, at maturity or on redemption or
otherwise, on the Debentures when due; default for sixty days after notice to
the Company by the Trustee, or to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the Debentures then outstanding,
in the performance of any other covenant in the Indenture; default during an
Extension Period resulting in acceleration of other indebtedness of the Company
for borrowed money where the aggregate principal amount so accelerated exceeds
$150 million and such acceleration is not rescinded or annulled within ten days
after the written notice thereof to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in aggregate principal amount of
the Debentures then outstanding, provided, however, that such Event of Default
will be cured or waived if the default that resulted in the acceleration of such
other indebtedness is cured or waived; and certain events of bankruptcy,
insolvency or reorganization of the Company. (Section 5.1 of the Indenture.)
The Indenture provides that the Trustee shall, within ninety days
after the occurrence of a Default with respect to the Debentures, give to the
holders of the Debentures notice of all uncured Defaults known to it; provided
that, except in the case of default in payment on the 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. (Section 6.6 of the Indenture.) "Default" means any
event which is, or after notice or passage of time or both, would be, an Event
of Default. (Section 1.1 of the Indenture.)
The Indenture provides that the holders of a majority in aggregate
principal amount of the Debentures then outstanding may direct the time, method
and place of conducting any proceeding for any remedy available to the
-38-
<PAGE>
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. (Section 5.8 of the Indenture.) The right
of any holder of Debentures to institute action for any remedy under the
Indenture (except the right to enforce payment of the principal of, interest on,
and premium, if any, on its 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 Debentures then outstanding to
take action, and an offer to the Trustee of satisfactory indemnification against
liabilities incurred by it in so doing (Section 5.9 of the Indenture.)
The Indenture includes a covenant that the Company will file annually
with the Trustee a certificate as to the Company's compliance with all
conditions and covenants of the Indenture. (Section 9.7 of the Indenture.)
The holders of a majority in aggregate principal amount of the
Debentures then outstanding by notice to the Trustee may waive, on behalf of the
holders of all the 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, premium, if any, or interest on any of the Debentures and certain
other defaults. (Section 5.7 of the Indenture.)
If a bankruptcy proceeding is commenced in respect of the Company
under the Federal Bankruptcy Code or if the principal amount of the Debentures
is accelerated upon the occurrence of an event of default, the holders of the
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.
AGREED TAX TREATMENT
The Indenture provides that each holder of a Debenture, each person
that acquires a beneficial ownership interest in a Debenture and the Company
agree that for United States federal, state and local tax purposes it is
intended that such Debenture constitute indebtedness. (Section 3.1 of the
Indenture.)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Trustee to enter into one or more supplemental indentures without the consent of
the holders of any of the Debentures in order (i) to evidence the succession of
another corporation to the Company and the assumption of the covenants and
obligations of the Company by such successor to the Company; (ii) to add to the
covenants of the Company or surrender any right or power of the Company; (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 Debentures in bearer form or in global form; (v) to add to, change
or eliminate any provisions affecting Debt Securities not yet issued; (vi) to
secure the Debentures; (vii) to establish the form or terms of Debt Securities
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 Debt Securities in bearer form in the United States; (x) to
correct or supplement any inconsistent provisions 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 Debentures; (xi) to comply with any requirement of the Commission
in connection with the qualification of the Indenture under the Trust Indenture
Act; or (xii) to cure any ambiguity or correct any mistake. (Section 8.1 of the
Indenture.)
The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the Debentures then 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, (i) change the time for payment of principal, premium, if any, or
interest on any Debenture; (ii) reduce the principal of, or any installment of
principal of, or interest on any Debenture; (iii) reduce the amount of premium,
if any, payable upon the redemption of any Debenture; (iv) reduce the amount of
-39-
<PAGE>
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 Debenture 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 Debenture; (vii) reduce the percentage in principal amount of the
outstanding Debentures 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 default; (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; or (x) adversely
affect the right to convert Debentures. (Section 8.2 of the Indenture.)
THE TRUSTEE
_______________ is the Trustee under the Indenture. _____________, an
affiliate of the Trustee, will act as Exchange Agent for the Exchange Offer, and
currently serves as Transfer Agent and Registrar for the Series A Preferred
Stock and the Common Stock[, and as Rights Agent under the Rights Agreement (as
defined below)].
FORM OF DEBENTURES
The Debentures will be issued in fully registered form, without
coupons. Investors may elect to hold their Debentures directly or, subject to
the rules and procedures of DTC described below, hold interests in one or more
global Debentures (the "Global Debentures") registered in the name of DTC or its
nominee.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of section 17A of the Exchange Act. DTC holds securities that
its participants (the "Participants") deposit with DTC and facilities the
clearance and settlement of securities transactions among its Participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own DTC. Access to DTC's book-entry system
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. The rules applicable to DTC and its Participants
are on file with the Commission.
Upon the issuance of a Global Debenture, DTC will credit on its book-
entry registration and transfer system, the principal amount of the Debentures
represented by such Global Debenture to the accounts of institutions that have
accounts with DTC. The accounts to be credited shall be designated by the
holders that sold such Debentures to such Participants. Ownership of beneficial
interests in a Global Debenture will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
Global Debenture will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC for such Global Debenture and
on the records of Participants (with respect to the interests of persons holding
through Participants). So long as DTC, or its nominee, is the owner of a Global
Debenture, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Debentures represented by such Global Debenture for all
purposes under the Indenture.
Each person owning a beneficial interest in a Global Debenture must
rely on the procedures of DTC and, if such person is not a Participant, on the
procedures of the Participant through which such person owns its interest, to
exercise any rights of a holder under the Indenture. The Company understands
that under existing industry practices, if it requests any action of holders or
if an owner of a beneficial interest in a Global Debenture desires to give or
take any action which a holder is entitled to give or take under the Indenture,
DTC would authorize the Participants holding the relevant beneficial interests
to give or take such action, and such Participants would
-40-
<PAGE>
authorize beneficial owners owning through such Participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Principal and interest payments on the Debentures will be made to DTC.
The Company understands that it is DTC's practice to credit any Participant's
accounts with payments in amounts proportionate to their respective beneficial
interests in the Debentures represented by the Global Debenture as shown on the
records of DTC on the date payment is scheduled to be made, unless DTC has
reason to believe that it will not receive payment on such date. The Company
expects that payments by Participants to owners of beneficial interests in such
Global Debenture held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participants. Accordingly, although owners
who hold Debentures through Participants will not possess Debentures in
definitive form, the Participants will provide a mechanism by which holders of
Debentures will receive payments and will be able to transfer their interests.
Principal and interest payments on Debentures represented by Global
Debentures registered in the name of DTC or its nominee will be made to DTC or
its nominee, as the case may be, as the registered owner of such Global
Debentures. None of the Company, the Trustee or any other agent of the Company
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interest in such Global
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
If DTC or a successor depositor at any time notifies the Company that
it is unwilling or unable to continue as depository of the Global Debentures or
if at any time DTC is no longer eligible under the Indenture, and a successor
depository is not appointed by the Company within ninety days, the Company will
issue Debentures in definitive certificated form in exchange for the Global
Debentures. In addition, the Company may at any time and in its sole discretion
determine not to have Debentures represented by Global Debentures and, in such
event, will issue Debentures in definitive certificated form in exchange for the
Global Debentures. In either case, an owner of a beneficial interest in Global
Debentures will be entitled to have certificated Debentures equal in principal
amount of such beneficial interest registered in its name and will be entitled
to physical delivery of such certificated Debentures. (Section 3.5 of the
Indenture.)
SAME-DAY SETTLEMENT IN RESPECT OF GLOBAL DEBENTURES
So long as any Debentures are represented by Global Debentures
registered in the name of DTC or its nominee, such Debentures will trade in
DTC's Same-Day Funds Settlement System, and secondary market trading activity in
such Debentures will therefore be required by DTC to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Debentures.
-41-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's restated certificate of incorporation (the "Restated
Certificate") provides that the authorized capital stock of the Company consists
of (i) 100,000,000 shares of Common Stock, (ii) 16,000,000 shares of serial
preferred stock, without par value (the "Serial Preferred Stock"), of which (a)
6,000,000 shares are designated as Series A Preferred Stock, (b) 50,000 shares
are designated Series B Preferred Stock (the "Series B Preferred Stock") and (c)
1,250,000 shares are designated Series C Junior Participating Preferred Stock
(the "Series C Preferred Stock"), (iii) 25,000,000 shares of Class 1 ESOP
Convertible Preferred Stock, par value $0.01 per share (the "Class 1 ESOP
Preferred Stock"), (iv) 25,000,000 shares of Class 2 ESOP Convertible Preferred
Stock, par value $0.01 per share (the "Class 2 ESOP Preferred Stock" and
together with the Class 1 ESOP Preferred Stock, the "ESOP Preferred Stock"), (v)
11,600,000 shares of Class P ESOP Voting Junior Preferred Stock, par value $0.01
per share (the "Class P ESOP Voting Preferred Stock"), (vi) 9,300,000 shares of
Class M ESOP Voting Junior Preferred Stock, par value $0.01 par share (the
"Class M ESOP Voting Preferred Stock"), (vii) 4,200,000 shares of Class S ESOP
Voting Junior Preferred Stock, par value $0.01 per share (the "Class S ESOP
Voting Preferred Stock" and together with the Class P ESOP Voting Preferred
Stock and the Class M ESOP Voting Preferred Stock, the "Voting Preferred
Stock"), (viii) ten shares of Class I Junior Preferred Stock, par value $0.01
per share (the "Class I Preferred Stock"), (ix) one share of Class Pilot MEC
Junior Preferred Stock, par value $0.01 per share (the "Class Pilot MEC
Preferred Stock"), (x) one share of Class IAM Junior Preferred Stock, par value
$0.01 per share (the "Class IAM Preferred Stock"), and (xi) ten shares of Class
SAM Junior Preferred Stock, par value $0.01 per share (the "Class SAM Preferred
Stock" and together with the Class Pilot MEC Preferred Stock and the Class IAM
Preferred Stock, the "Employee Director Preferred Stock;" the Employee Director
Preferred Stock together with the Class I Preferred Stock, the "Director
Preferred Stock"). Together the shares of Serial Preferred Stock, ESOP
Preferred Stock, Voting Preferred Stock and Director Preferred Stock are
referred to as the "Preferred Stock." Shares of Serial Preferred Stock not
otherwise designated may be issued from time to time in one or more series,
without stockholder approval (unless the Serial Preferred Stock would rank prior
to the ESOP Preferred Stock in which case such issuance shall be subject to the
approval of each class of ESOP Preferred Stock, voting separately as a class),
with such powers, preferences and relative, participating, optional or other
special rights, and qualifications, limitations, or restrictions thereof as may
be adopted by the Board or a duly authorized committee thereof.
As of January 31, 1995, the outstanding capital stock of the Company
consisted of (i) 12,434,294 shares of Common Stock, (ii) 5,999,900 shares of
Series A Preferred Stock, (iii) 13,079.6 shares of Series B Preferred Stock,
issued in the form of depositary preferred shares each representing one one-
thousandth of a share of Series B Preferred Stock, (iv) 1,789,585 Shares of
Class 1 ESOP Preferred Stock, (v) __________ of Class 2 ESOP Preferred Stock,
(vi) one share of Class P ESOP Voting Preferred Stock, one share of Class M ESOP
Voting Preferred Stock and one share of Class S ESOP Voting Preferred Stock,
each owned of record by the trustee of the ESOP trusts, (vii) one share of Class
Pilot MEC Preferred Stock held by the United Airlines Pilots Master Executive
Counsel ("ALPA-MEC") of the Air Line Pilots Association, International ("ALPA"),
(viii) one share of Class IAM Preferred Stock held by the International
Association of Machinists and Aerospace Workers (the "IAM"), (ix) three shares
of Class SAM Preferred Stock, two held by the salaried and management director
of the Company (the "Salaried and Management Director"), and one share owned by
the senior executive of United with primary responsibility for human resources
(the "SAM Designated Stockholder") and (x) four shares of Class I Preferred
Stock, each held by one of the independent directors of the Company (the
"Independent Directors"). Additional shares of ESOP Preferred Stock will not be
outstanding but will be recorded on the books of the Company as book-entry
shares ("Book-Entry Shares"). All of the outstanding shares of Common Stock and
Preferred Stock, and the shares of Common Stock issuable upon conversion of the
Debentures will be, validly issued, fully paid and nonassessable.
-42-
<PAGE>
CORPORATE GOVERNANCE
Composition of the Board
Subject to the rights of holders of Series A Preferred Stock and the
holders of the Series B Preferred Stock to elect a total of two additional
directors in the event of certain dividend arrearages (the "Preferred Stock
Dividend Default Rights"), and prior to the Sunset, the Board will consist of 12
directors, who include (i) five Public Directors (as defined below), (ii) four
Independent Directors (as defined below), (iii) two Union Directors (as defined
below) and (iv) one Salaried and Management Director (as defined below) (the
Union Directors and the Salaried and Management Director, collectively, are
referred to as the "Employee Directors"). Following the Sunset, subject to the
Preferred Stock Dividend Default Rights and the occurrence of either or both of
the ALPA Termination Date and the IAM Termination Date (both as defined below,
see "--Sunset"), the Board will consist of 12 directors of whom nine will be
elected by the holders of the Common Stock and three will be Employee Directors,
elected as described below.
Public Directors
Five directors (the "Public Directors") are elected by holders of the
Common Stock and consist of (a) three individuals who are not and have never
been an officer or employee of, or a provider of professional services to, the
Company or any of its subsidiaries (the "Outside Public Directors") and (b) two
substantially full-time employees of the Company or any of its subsidiaries, one
of whom, in addition, to the fullest extent such additional qualification is
permitted by law, will be, at the time of election, the CEO, and the other of
whom, in addition, to the fullest extent such additional qualification is
permitted by law, will be a senior executive officer of the Company satisfactory
to the CEO (the "Management Public Directors"). At the expiration of the term
of each Outside Public Director and to fill vacancies, Outside Public Directors
will be nominated or appointed, as appropriate, by an "Outside Public Director
Nomination Committee" comprised of the Outside Public Directors. Any amendment
or modification of the rights, powers, privileges or qualifications of the
Outside Public Directors or the Outside Public Director Nomination Committee
will, in addition to the approval required by law or as described below under
the Restated Certificate, require the concurrence of all of the Outside Public
Directors or the affirmative vote of at least a majority in voting power of the
outstanding capital stock of the Company entitled to vote thereon excluding
shares held by the ESOP Trustee. In addition, Management Public Directors are
nominated or appointed, as appropriate, by a majority vote of the entire Board.
Independent Directors
The four Independent Directors have been elected by the holders of
Class I Preferred Stock. Each Independent Director, upon becoming an
Independent Director, acquired a share of Class I Preferred Stock and became a
party to the Class I Preferred Stockholders' Agreement pursuant to which the
stockholders have agreed to vote their shares to elect the Independent Directors
nominated in accordance with the procedures set forth below and to refrain from
transferring their shares of Class I Preferred Stock other than to a person who
has been elected to serve as an Independent Director and who agrees to be
subject to the provisions of the Class I Preferred Stockholders' Agreement.
None of the Independent Directors may have, without the consent of
both Union Directors and all of the Public Directors, a current or prior
material affiliation or business relationship with the Company (other than an
affiliation that results from being a member of the Board) or be an officer,
director, trustee or official of any labor organization that serves as a
collective bargaining "representative" under the Railway Labor Act or the
National Labor Relations Act. In addition, generally, at least two of the four
Independent Directors at the time of their initial nomination or appointment to
the Board must (i) be a senior executive officer of a private or public company
with revenues in excess of $1 billion during such company's prior fiscal year
and/or (ii) be a member of the board of
-43-
<PAGE>
directors of at least one other public company with a market capitalization in
excess of $1 billion as of the date of such company's most recent annual
financial statements.
The Independent Directors are nominated or appointed, as appropriate,
by an "Independent Director Nomination Committee" consisting of the Independent
Directors and the Employee Directors. Approval of such nomination or
appointment requires a majority of the Independent Directors and the concurrence
of at least one Union Director.
Employee Directors
The three Employee Directors are elected as follows: (i) one director
(the "ALPA Director") is elected by the holder of the Class Pilot MEC Preferred
Stock, (ii) one director (the "IAM Director" and, together with the ALPA
Director, the "Union Directors") is elected by the holder of the Class IAM
Preferred Stock, and (iii) the Salaried and Management Director is elected by
the holders of the Class SAM Preferred Stock, each selected as described below.
The replacement Salaried and Management Director will be nominated by
the System Roundtable. The System Roundtable will establish a selection
committee of four employees to select the nominee for Salaried and Management
Employee Director from time to time. The Salaried and Management Director and
the SAM Designated Stockholder are parties to the Class SAM Preferred
Stockholders' Agreement pursuant to which the stockholders have agreed to vote
their shares to elect the Salaried and Management Director nominated by the
System Roundtable and to refrain from transferring the shares of Class SAM
Preferred Stock other than to a person who has been elected to serve as the
Salaried and Management Director or to the senior executive of United who has
primary responsibility for human resources and, in each case, who agrees to be
subject to the provisions of the Class SAM Preferred Stockholders' Agreement.
The "System Roundtable" is a body of salaried and management employees of United
empaneled to review and discuss issues relating to the Company and their effect
on salaried and management employees.
Vacancies of Employee Directors may be filled only by the holder or
holders of the class of stock that elected such director.
Quorum
The Restated Certificate provides that until the Sunset, a quorum at a
Board meeting will exist only if (a) directors with at least a majority of the
votes entitled to be cast by the entire Board are present and (b) unless
consented to by the two Union Directors, if less than all votes are present, the
number of votes constituting a majority of the votes present is no greater than
the sum of (i) two plus (ii) the number of Independent Director votes present at
the meeting.
Required Board Action
Except as required by law or as set forth in the Restated Certificate,
approval of all Board action requires a majority vote of the total number of
director votes present at a meeting at which a quorum is present. Until the
Sunset, in the event of a vacancy on the Board of an Independent Directorship,
the remaining Independent Directors will as a group continue to have four votes
(divided equally among the remaining Independent Directors. Until the Sunset,
in the event of a vacancy on the Board of an Employee Directorship or a Public
Directorship, or in the event of a vacancy of an Independent Directorship that
immediately prior to the occurrence of such vacancy was held by a member of a
Board committee of which only one Independent Director was a member, then,
subject to the fiduciary duties of the remaining Directors or members of such
Board committee, as the case may be, then in office, neither the Board nor such
Board committee may take any action (other than to fill such vacancy) until
after
-44-
<PAGE>
the earlier of (i) 20 days following the occurrence of such vacancy and (ii) the
time that such vacancy is filled in accordance with the Restated Certificate.
Term of Office; Resignation; Removal
Each Director holds office until the next annual meeting of stockholders
and until his or her successor is elected and qualified; subject to such
Director's earlier death, resignation or removal. In addition, the term of an
Outside Public Director or an Independent Director automatically terminates if
such Director ceases to meet the qualifications of an Outside Public Director or
Independent Director, as the case may be. Any Director may resign at any time
upon written notice to the Company. Directors may not be removed from office
except (i) without cause, by the class of stockholders that elected them, or
(ii) "for cause" as determined under the DGCL.
Officers
All decisions to hire or fire members of senior management (other than the
CEO) are taken by the board or pursuant to the authority typically delegated by
it to the CEO. Until the Sunset, hiring a new CEO requires the approval of a
majority of the Board following a recommendation by the Executive Committee,
which will act as a search committee. If at the first meeting of stockholders
following the hiring of a new CEO (other than the initial CEO following the
Recapitalization), such CEO is not elected to the Board as a Public Director by
the stockholders entitled to vote on such election, such CEO will be removed
from office and a successor CEO will be selected. Any successor CEO will be
appointed to fill the Public Directorship vacated by the predecessor CEO).
Stockholder Approval Matters
Stockholder approval is not a condition to any action of the Company except
(i) as required by DGCL, or (ii) as described below under "--Extraordinary
Matters", "--Special Voting Provisions with Respect to Purchase and Sale of
Common Stock" or "--The ESOP Preferred Stock--Voting Rights." Until the Sunset,
except as otherwise required by law or by the Restated Certificate, the presence
in person or by proxy of the holders of outstanding shares representing at least
a majority of the total voting power of all outstanding shares entitled to vote
at a meeting of stockholders will constitute a quorum at a meeting of
stockholders.
ESOP Voting
Allocated shares of Voting Preferred Stock (and, under any limited
circumstances required by law or the Restated Certificate in which matters are
submitted to it for a vote, the ESOP Preferred Stock) held by the tax-qualified
employee stock ownership plan (as defined under "--The ESOP Preferred Stock")
will be voted by participants, as named fiduciaries under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), on a confidential
pass-through basis. The ESOP Trustee (as defined below) is obligated to vote as
instructed by the participants to whom the Voting Preferred Stock has been
allocated, and the shares which are allocated command the entire voting power of
each class of Voting Preferred Sock. ALPA has made an agreed-upon election
pursuant to which the shares of Class P Voting Preferred Stock allocated to
former employees who were ALPA members will be voted by the ESOP Trustee.
Unallocated shares and allocated shares which were not voted by the participants
in the Qualified ESOP will be voted as described below by those ESOP
participants who are employees who choose so to direct the ESOP Trustee. The
ESOP Trustee will (except as may be required by law) vote the unallocated and
otherwise unvoted shares in the proportions directed by participants who give
instructions to the ESOP Trustee with respect to such shares; each participant
who is an employee has the right to give such directions to the ESOP Trustee in
proportion that the participant's allocated shares bears to the allocated shares
of all participants giving such directions. Shares held by the Supplemental ESOP
will be voted as instructed by the administrative committee appointed under the
Supplemental ESOP. The Supplemental ESOP provides that the administrative
committee shall consider the sentiments of participants concerning the vote, but
is not required to take any particular action in response thereto. The
Supplemental ESOP provides that it shall be amended at the
-45-
<PAGE>
request of ALPA to provide for pass-through voting by participants. The
foregoing provisions also govern instructions to be given to the ESOP Trustee in
the event of a tender offer.
Extraordinary Matters
Certain matters, defined as "Extraordinary Matters" generally require, in
addition to any voting requirements under the DGCL, approval of at least either
three-quarters of the Board (including the concurrence of one Union Director) or
three-quarters of the shares present and voting at a stockholder meeting at
which a quorum is present. In addition, the vote of at least 66 2/3% of the
outstanding voting stock that is not owned by an "interested stockholder" is
required to approve a "business combination" under Section 203 of the DGCL,
where applicable. Extraordinary Matters include:
(a) Amendments to the Restated Certificate (other than certain technical
amendments), substantive amendments to the Bylaws and mergers or consolidations
of the Company or any of its subsidiaries or a sale, lease or exchange of all or
substantially all of the assets of the Company or United involving a person that
has been formed by or is an affiliate of one or more labor groups representing
employees of the Company or any of its subsidiaries or a person determined by
the Board to be a person in which a substantial group of employees of the
Company or any of its subsidiaries, acting as an organized group, owns a
majority ownership interest (a "Labor Affiliate") (the Extraordinary Matters
described in this paragraph (a) require, in addition to the approvals described
above, either (i) six affirmative votes cast by Directors who are not Employee
Directors or (ii) the affirmative vote of a majority of the shares of capital
stock not held by ESOPs);
(b) Mergers or consolidations of the Company or any of its subsidiaries or
a sale, lease or exchange of all or substantially all of the assets of the
Company or United involving a person who is not a Labor Affiliate;
(c) Dissolutions;
(d) Entry into any new line of business outside the "airline business"
(defined generally as the business of operating a domestic air carrier, together
with any business or activities reasonably related to or in support of all such
operations engaged in by the Company or any subsidiary at or immediately prior
to the Effective Time), or the making of any investment (in excess of five
percent of the total assets of the Company and its subsidiaries on a
consolidated basis) outside the airline business;
(e) The making of any domestic airline acquisition or any material
investment in another airline including ordinary course investments in excess of
one half of one percent of the total assets of the Company and its subsidiaries
on a consolidated basis;
(f) The adoption of any material amendment to the Rights Agreement (as
defined below, see "--Preferred Share Purchase Rights") or taking of any
material actions, including the redemption of rights, under the Rights
Agreement;
(g) The sale, lease, exchange, surrender to or at the direction of a
lessor, or other disposition (a "Disposition") by the Company or any of its
Subsidiaries of assets for "Gross Proceeds" (defined to exclude taxes and sales
costs) that, when added to the Gross Proceeds from (i) the Disposition of other
such assets during the preceding 365 day period resulting in Gross Proceeds in
excess of $5 million and (ii) the Disposition of other such assets during a
recently completed preceding twelve calendar month period resulting in Gross
Proceeds of $5 million or less, collectively exceeds $200 million; provided that
(A) Gross Proceeds included in clauses (i) and (ii) will not include Gross
Proceeds from any transactions consummated prior to the Effective Time and (B)
the $5 million set forth in clauses (i) and (ii) may be increased by action of
the Board on an annual basis based on the affirmative vote of at least 75% of
the votes entitled to be cast by the entire Board, which must include the
concurrence of at least one Union Director; provided, further, that such
approval will not be required for certain specified transactions (or
-46-
<PAGE>
count against the $200 million Gross Proceeds calculation above) including: (1)
secured aircraft financings, (2) sale-leaseback and leveraged lease
transactions, or sales or similar transfers of receivables, for financing
purposes, (3) Dispositions of assets if replacement assets (consisting of assets
of the same class as the assets being disposed of) generally have been ordered
or acquired within the six calendar month period prior to such Dispositions of
assets or so ordered or acquired within 365 days following the Disposition of
assets for which no replacement assets had been previously acquired, (4)
Dispositions provided Gross Proceeds in an amount up to 10% of the book value
(net of depreciation) of the Company's fixed assets at the time of the most
recent quarterly financial statements of the Company if (A) Directors entitled
cast at least 75% of the votes entitled to be cast by the entire Board,
including all of the Independent Directors, determine by resolution of the Board
that such asset Disposition is necessary to (I) cure a default under material
financing agreements binding upon the Company or any of its subsidiaries or any
of their respective properties, or avoid a default thereunder that, absent such
Disposition, would be reasonably likely to occur within 90 days or (II) remedy a
material adverse development in the Company's business or condition, and (B) the
Gross Proceeds of such asset Disposition are used to remedy the condition
referred to in clause (A) (provided, that the exception afforded by this clause
(4) will be available not more than once in any consecutive five-year period),
(5) certain ordinary course Dispositions designed to allow the Company and its
subsidiaries to continue many of their existing practices without significant
restrictions that may involve Dispositions of assets, (6) Dispositions of assets
(other than air frames, engines and related spare parts) if (A) made pursuant to
a discrete asset management program that provides for the Disposition of not
more than an aggregate of $25 million of assets and (B) such discrete asset
management program is approved annually by either the Board or the stockholders
as an Extraordinary Matter in accordance with the voting thresholds outlined
above and (7) Dispositions of assets that individually, or when aggregated with
other assets in the same or related Dispositions, are not in excess of a de
minimis amount, either with respect to periods prior to December 31, 1994 or
pursuant to a distinct asset management program approved in accordance with the
procedures set forth in clause (6) above; and
The issuance of equity or equity equivalent securities (including
convertible debt, but excluding non-voting, non-convertible preferred stock) (a
"Non-Dilutive Issuance"); provided that such issuance shall not constitute an
Extraordinary Matter if any of the following occur: (A) (I) three-quarters of
the votes entitled to be cast by the entire Board, including all the Independent
Directors, determine that such issuance is in the best interests of the Company,
(II) such issuance is subject to the First Refusal Agreement (as defined below,
see "--Common Stock--Right of First Refusal") and (III) if such issuance occurs
on or prior to July 12, 1995, the Board by the affirmative vote of a majority of
the votes entitled to be cast by the Directors present a meeting of the Board at
which a quorum is present, which vote must include the affirmative votes of both
Union Directors, approves an equitable adjustment to the number of Additional
Shares (as defined, see "--Establishment of ESOPs--Additional Shares") to be
issued pursuant to the Plan of Recapitalization, (B) three-quarters of votes
entitled to be cast by the entire Board, including all the Independent
Directors, determine (I) that the Company is insolvent (or, absent a material
positive change in the Company's results of operations over the immediately
succeeding 90 days from the results contained in the Company's regularly
prepared projections, that the Company will become insolvent within 90 days),
which determination is confirmed by written opinions of two nationally
recognized investment banking firms that further opine (giving effect to the
facts and circumstances applicable to the Company, including discussions with
prospective equity investors) that the sale of equity securities is necessary to
avoid or remedy such insolvency (the "Bankruptcy Opinions") and (II) that, after
giving effect to the proposed issuance of additional equity securities (the
"Permitted Bankruptcy Equity"), the Company would no longer be or not become
"insolvent" in the time frame referred to in the Bankruptcy Opinions (the
"Solvency Determination") and such issuance of Permitted Bankruptcy Equity
satisfies the following three conditions: (X) such issuance does not exceed the
amount determined by the Board to be reasonably necessary to allow the Board to
make the Solvency Determination, (Y) a binding commitment for the sale of such
Permitted Bankruptcy Equity is entered into within 90 days of the delivery of
the Bankruptcy Opinions and (Z) the terms of the First Refusal Agreement have
been complied with in all material respects by the Company, or (C) such issuance
is pursuant to (I) the exercise, conversion or exchange of equity securities
outstanding immediately prior to July 12, 1994, (II) the Company's 1981
Incentive Stock Plan, 1988 Restricted Stock Plan or Incentive Plan, each as
amended in accordance with the Plan of Recapitalization, (III) the UAL
Corporation 1992 Stock Plan for Outside Directors or (IV) any other equity
incentive compensation plan
-47-
<PAGE>
approved by the affirmative vote of three-quarters of the votes entitled to be
cast by the entire Board, including all the Independent Directors.
Special Voting Provisions with Respect to Purchase and Sale of Common Stock
Until the Sunset, any purchases of Common Stock by the Company (other than
to fulfill its obligations to issue or retain shares of Common Stock in
connection with the exercise of employee options issued pursuant to employee
benefit plans or to retain shares of Common Stock in connection with tax
withholding obligations in connection with the exercise of employee options or
restricted stock), or any sale by the Company of any shares of Common Stock to a
Company-sponsored pension, retirement or other employee benefit plans for the
account of employees (other than pursuant to the First Refusal Agreement or in
connection with the creation and operation of the ESOPs to which the ESOP
Preferred Stock is issued), whether for cash or non-cash consideration,
including without limitation, employee concessions, must be approved by a
majority of the Board, including at least 80% of the votes of the Public
Directors.
Nondilution
The holders of Voting Preferred Stock vote as a single class with the
holders of the Common Stock and the Employee Director Preferred Stock and
represent approximately 55% of the votes to be cast on matters submitted to the
vote of the Common Stock, Employee Director Preferred Stock and the Voting
Preferred Stock (other than the election of Directors and such matters for which
a vote by separate class is required under the DGCL). The number of votes
represented by such Voting Preferred Stock is subject to increase on July 12,
1995 as described in "--The Voting Preferred Stock--Voting Rights." The Voting
Preferred Stock will generally continue to represent approximately 55% of the
aggregate voting power of the Common Stock, the Employee Director Preferred
Stock and the Voting Preferred Stock, as adjusted under certain circumstances,
until the Sunset.
Sunset
The "Sunset" will occur when (i) the Common Stock issuable upon conversion
of the outstanding ESOP Preferred Stock, plus (ii) any Common Equity and
Available Unissued ESOP Shares held in the ESOPs, in any other employee benefit
plans sponsored by the Company or any of its subsidiaries for the benefit of its
employees, represent, in the aggregate, less than 20% of the Common Equity and
Available Unissued ESOP Shares of the Company. "Common Equity" is defined as, in
the aggregate and without double-counting, (i) the Common Stock outstanding at
the time in question, (ii) the Common Stock issuable upon conversion of the ESOP
Preferred Stock and Voting Preferred Stock outstanding at the time in question,
(iii) the Common Stock which is both (x) issuable upon exercise, conversion or
exchange of Equity Securities and (y) included in the definition of "Fully
Diluted Shares" (as defined in the Recapitalization Agreement), and (iv) the
Common Stock represented by the Permitted Bankruptcy Equity outstanding at the
time in question, if any; but excluding any Equity Securities (other than
Permitted Bankruptcy Equity, Equity Securities issued in connection with the
Recapitalization, any Class 2 ESOP Preferred Stock that may be issued and Equity
Securities included in the definition of Fully Diluted Shares, as well as any
other Equity Securities issued upon exercise or conversion of any such Permitted
Bankruptcy Equity or any other such Equity Securities) issued in connection with
a Non-Dilutive Issuance, including, without limitation, any Equity Securities
(a) outstanding immediately prior to the Recapitalization that were not included
in the definition of Fully Diluted Shares or (b) issued under the circumstances
described in paragraph (h)(A) under "--Extraordinary Matters" or paragraph
(h)(C)(II), (III) or (IV) under "--Extraordinary Matters" (including, in each
case the shares of Equity Securities underlying such Equity Securities or
issuable upon the exercise, conversion or exchange thereof). "Available Unissued
ESOP Shares" is generally defined as the number of shares of Common Stock to be
issued in connection with the ESOPs which have not yet been issued.
If the Sunset occurs, the Company will file a restated certificate of
incorporation providing for more customary corporate governance provisions, the
number of Directors will remain at 12 (of which three will be
-48-
<PAGE>
Employee Directors), the Outside Public Director Nomination Committee will
nominate the Board's nominees for election of directors (other than the Employee
Directors) to be elected by the stockholders at a meeting which will be held
promptly thereafter and upon the effectiveness of such election the term of the
then incumbent Directors will terminate, and there will be no special director
or voting rights, except that (a) the ALPA Director will be elected by the
holder of the Class Pilot MEC Preferred Stock until the ALPA Termination Date,
the IAM Director will be elected by the holder of the Class IAM Preferred Stock
until the IAM Termination Date and the Salaried and Management Director will be
elected by the holders of the Class SAM Preferred Stock until the earlier of the
ALPA Termination Date and the IAM Termination Date, each voting separately in a
class, and (b) the Union Directors would continue to serve on Committees as
provided below.
Under current actuarial assumptions, the Company estimates that the Sunset
will occur in the year 2016 if no additional purchases were made by eligible
employee trusts and retirement plans. However, employees have the right to, and
may be expected to, make additional purchases through such trusts and plans that
will have the effect of delaying the Sunset. In certain circumstances described
under "--The Director Preferred Stock--Uninstructed Trustee Action," the Sunset
may not occur until 2010 even though the conditions for the Sunset have
occurred. The Common Stock issuable or issued upon conversion of the Series A
Preferred Stock is considered Common Equity for purposes of Sunset and the
actuarial assumptions used in estimating the Sunset date assume that all Series
A Preferred Stock is converted into Common Stock and none is redeemed or
repurchased by the Company. However, neither the Debentures nor any Common Stock
issued upon conversion thereof are considered Common Equity under the Restated
Certificate. Accordingly, the Company estimates that the exchange of the Series
A Preferred Stock in the Exchange Offer can be expected, based on such actuarial
assumptions and all other things being equal, to delay the occurrence of the
Sunset by approximately one year, assuming all of the outstanding Series A
Preferred Stock is exchanged for Debentures in the Exchange Offer.
Committees
The Restated Certificate provides that until the Sunset the following
committees will constitute the Board committees: the Audit Committee, the
Competitive Action Plan ("CAP") Committee, the Compensation Committee, the
Compensation Administration Committee, the Executive Committee, the Independent
Director Nomination Committee, the Labor Committee, the Outside Public Director
Nomination Committee and the Transaction Committee (collectively, the
"Committees"). In addition, the Board may, by resolution passed by the
affirmative vote of 80% of the votes of the entire Board, including the
affirmative vote of at least one Union Director, designate one or more other
committees of the Board, and it has exercised such power to create a Pension and
Welfare Plan Oversight Committee ("PAWPOC"). Except as provided below, any act
of a Committee will require the affirmative vote of a majority of the votes
entitled to be cast by the Directors present at a meeting of such Committee and
entitled to vote on the matter in question. The Restated Certificate contains
certain provisions relating to the required quorum for committee action.
The Audit Committee consists of the four Independent Directors and the
three Outside Public Directors or such fewer number of such Directors (in as
nearly as practicable that same proportion of Independent Directors and Outside
Public Directors) as shall qualify for audit committee membership under
applicable rules of the securities exchanges or other similar trading market on
which the Common Stock is traded. The Audit Committee is primarily concerned
with (i) reviewing the professional services and independence of the Company's
independent auditors and the scope of the annual external audit as recommended
by the independent auditors, (ii) ensuring that the scope of the annual external
audit is sufficiently comprehensive, (iii) reviewing, in consultation with the
independent auditors and the internal auditors, the plan and results of the
annual external audit, the adequacy of the Company's internal control systems
and the results of the Company's internal audits, and (iv) reviewing, with
management and the independent auditors, the Company's annual financial
statements, financial reporting practices and the results of each external
audit. The Audit Committee also has the authority to consider the qualifications
of the Company's independent auditors, to make recommendations to the Board as
to their selection and to review and resolve disputes between such independent
auditors and management relating to the preparation of the annual financial
statements.
-49-
<PAGE>
The CAP Committee consists of eight Directors, including four Public
Directors, two Independent Directors and the two Union Directors. Of the four
Public Directors, three must be Outside Public Directors and one must be the CEO
(if the CEO is a Public Director). The two Independent Director members are
appointed by the Independent Director Nomination Committee which appointment
requires the affirmative vote of all of the votes entitled to be cast by the
Independent Directors. The function of the CAP Committee is to oversee
implementation of the Company's Competitive Action Plan. The CAP Committee has
the exclusive authority, acting for and on behalf of the Board and consistent
with the protection of the interests of the holders of Common Stock to approve
on behalf of the Company any and all modifications of or amendments to the
Competitive Action Plan. However, to the extent such modifications or
amendments relate to changes to any provision of the revised Collective
Bargaining Agreements with the IAM and ALPA, the two Union Directors on the CAP
Committee are neither entitled to vote nor counted in determining the presence
of a quorum of such committee in connection therewith. Notwithstanding the
foregoing, only the Labor Committee may approve on behalf of the Company any
such changes to such Collective Bargaining Agreements. In addition, the CAP
Committee has the exclusive authority, acting for and on behalf of the Board, to
approve on behalf of the Company any and all modifications of or amendments to
the salaried and management employee investment described in "--Investment for
Salaried and Management Employees." Such modifications or amendments must be
approved by the affirmative vote of at least a majority of the votes of the
entire CAP Committee, including at both Union Directors and all of the Outside
Public Directors.
The Compensation Committee consists of seven Directors, including two
Independent Directors, two Public Directors and three Employee Directors. Of
the two Public Directors, one must be an Outside Public Director appointed by
the Outside Public Director Nomination Committee, and one must be the CEO (if
the CEO is a Public Director). The two Independent Directors members are
appointed by the unanimous approval of the Independent Director Nomination
Committee. The principal functions of the Compensation Committee are to review
and recommend to the Board the compensation and benefit arrangements to be
established for the officers of the Company and to review general policy matters
relating to compensation and benefit arrangements of non-union employees of the
Company. The Compensation Committee also administers the stock option plans and
executive compensation programs of the Company, including bonus and incentive
plans applicable to officers and key employees of the Company. Subject to the
final approval of the Compensation Committee (except as described in the
following paragraph), the Compensation Committee may delegate to the
Compensation Administration Committee specific responsibilities with respect to
the compensation of the CEO.
The Compensation Administration Committee consists of two Independent
Directors and one Outside Public Director, each of whom is (a) a "disinterested
person" or "disinterested administrator" or any related successor concept under
Rule 16b-3 (or any successor provision) promulgated pursuant to Section 16 of
the Exchange Act and (b) an "outside director" or any related successor concept
under Section 162(m) (or any successor provision) of the Code. The Outside
Public Director is appointed by the Outside Public Director Nomination
Committee. The two Independent Directors are appointed by the Independent
Director Nomination Committee, which appointment shall require the affirmative
vote of all the Independent Directors. The principal function of the
Compensation Administration Committee is to administer the stock option plans
and executive compensation programs of the Company to the extent such functions
cannot or are not appropriate to be performed by the Compensation Committee in
light of any provision of the Internal Revenue Code, the securities laws, any
other applicable law or any regulations promulgated under any of the foregoing.
Any action of the Compensation Administration Committee must also be approved by
the Compensation Committee, unless such approval could reasonably be expected to
prevent a stock option plan or executive compensation program, or a component
thereof, that is intended to qualify under Rule 16b-3 (or any successor
provision) or to qualify for an exception under such Section 162(m) (or any
successor provision) from receiving the benefits of Rule 16b-3 or qualifying for
such exception, respectively.
The Executive Committee is comprised of two Independent Directors, two
Public Directors (the CEO, if the CEO is a Public Director, and one Outside
Public Director) and two Union Directors. Subject to the DGCL, the Executive
Committee has all the powers of the Board to manage the affairs of the Company
except that it does not have the authority to act with respect to any of the
"Extraordinary Matters" discussed above, to take any action
-50-
<PAGE>
as to matters specifically vested in other Committees or take any action that
may be taken by the Board only with a vote greater than or additional to a
majority of the Board. In the event a new CEO is to be selected prior to the
Sunset, the Executive Committee will function as a search committee to identify
a successor CEO.
The Labor Committee consists of three or more Directors, including one
Outside Public Director, at least one Independent Director and at least one
other Director, as designated by the Board, but may not include any Employee
Directors. The Labor Committee has the exclusive authority on behalf of the
Board to approve on behalf of the Company the entering of, or any modification
or amendment to, a collective bargaining agreement for U.S. employees to which
the Company or any of its subsidiaries is a party.
The Transaction Committee consists of seven Directors, consisting of
the four Independent Directors and the three Outside Public Directors. The
function of the Transaction Committee is to evaluate and advise the Board with
respect to any proposed merger or consolidation of the Company or any of its
Subsidiaries with or into, the sale, lease or exchange of all or substantially
all of the Company's or any of its Subsidiaries' property or assets to, or a
significant business transaction with, any Labor Affiliate.
PAWPOC consists of six Directors, consisting of two Independent
Directors, one Outside Public Director and three Employee Directors. The
function of PAWPOC is to exercise oversight with respect to compliance by the
Company and its subsidiaries with laws governing employee benefit plans
maintained by the Company and its subsidiaries and subject to the provisions of
ERISA.
Amended and Restated Bylaws
The Company's restated bylaws (the "Restated Bylaws") provide that
until the Sunset, many matters will be governed by the Restated Certificate
including, among others: (i) quorum requirements at any meeting of the
stockholders, the Board or any Board Committee; (ii) the number, composition and
term of office of directors; (iii) removal of Directors; (iv) filling of
vacancies on the Board and on Board Committees; (v) designation of Board
Committees; (vi) the composition, function and powers of the Executive
Committee; (vii) the appointment, term of office, filling of vacancies and
removal of officers of the Company; and (viii) any substantive amendment to the
Restated Bylaws. Further the Restated Bylaws provide that, subject to certain
exceptions, following the Sunset many provisions of the Company's Bylaws prior
to their restatement in connection with the Recapitalization will be reinstated.
The Restated Bylaws also: (i) govern the ability, until the Sunset, of
any two directors, the CEO or the secretary of the Company to call a special
meeting of the Board; (ii) require, until the Sunset, subject to the fiduciary
obligations of the directors, that the CEO will be elected as one of the
Management Public Directors; (iii) provide that the term of office of the CEO
(other than Mr. Greenwald as the initial CEO) will automatically terminate if he
is not elected as Management Public Director by the stockholders at the first
meeting of stockholders for the election of directors at which he is eligible
for nomination as a Management Public Director; and (iv) require, until the
Sunset, that non-substantive amendments to the Restated Bylaws may be adopted
either by a majority vote of the entire Board or by 75% of the voting power of
the stock entitled to vote at a stockholder meeting in which a quorum is
present. In addition, the Restated Bylaws contain other procedural sections,
some of which operate only until the Sunset and some of which become operative
only after the Sunset.
COMMON STOCK
Dividend Rights. Holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board out of funds legally available
therefor, provided that, so long as any shares of Preferred Stock are
outstanding, no dividends (other than dividends payable in common stock) or
other distributions may be made with respect to the Common Stock unless full
cumulative dividends on the shares of Preferred Stock have been paid. The
Company has not paid cash dividends on the Common Stock since the third quarter
of 1987.
-51-
<PAGE>
As a holding company, the Company relies on distributions from United
to pay dividends on its capital stock. There are currently no contractual
restrictions on United's ability to pay dividends to the Company.
Voting Rights. The holders of the Common Stock are entitled to cast
one vote per share. Prior to the Sunset, the holders of the Common Stock, the
holders of the Employee Director Preferred Stock and the holders of the Voting
Preferred Stock vote together as a single class with respect to all matters
submitted to the vote of the holders of Common Stock pursuant to law or as
provided in the Restated Certificate except with respect to (a) such matters
upon which the DGCL requires a separate class vote and (b) the election of the
Public Directors, whom the holders of the Common Stock elect separately as a
class. Until the Sunset, the holders of the Common Stock do not vote to elect
any directors other than the Public Directors. After the Sunset, the holders of
the Common Stock, the holders of the Employee Director Preferred Stock and the
holders of the Voting Preferred Stock will continue to vote together as a single
class with respect to all matters submitted to the vote of the holders of Common
Stock pursuant to law or as provided in the Restated Certificate except with
respect to such matters upon which the DGCL requires a separate class vote. See
"--The Voting Preferred Stock--Voting Rights."
Right of First Refusal. The Company has entered into a First Refusal
Agreement (the "First Refusal Agreement") with ALPA, the IAM and the Salaried
and Management Director (solely as the representative of the Salaried and
Management Employees) pursuant to which the Company has agreed that, subject to
certain exceptions, if it proposes to issue any shares of Common Stock or other
securities that are exchangeable for or convertible into shares of Common Stock
(collectively, the "Equity Securities"), it must first offer such Equity
Securities to ALPA and the IAM on behalf of the employees represented thereby
and to the Salaried and Management Employees on the same terms and conditions
upon which the Company proposes to sell such Equity Securities to a third party.
Under the First Refusal Agreement, the members of ALPA are entitled to purchase
46.23% of the Equity Securities offered, the members of the IAM will be entitled
to purchase 37.13% of the Equity Securities offered and the Salaried and
Management Employees will be entitled to purchase 16.64% of the Equity
Securities offered. The First Refusal Agreement terminates on the Sunset. The
First Refusal Agreement was amended on February ___, 1995 to clarify that the
issuance of the Debentures and the underlying Common Stock are excluded from
such right of first refusal.
SERIES A PREFERRED STOCK
Dividends. Holders of shares of Series A Preferred Stock are entitled
to receive, when, as and if declared by the Board of the Company out of assets
of the Company legally available therefor, cumulative cash dividends at the rate
per annum of $6.25 per share of Series A Preferred Stock. Dividends on the
Series A Preferred Stock are payable quarterly in arrears. Dividends on the
Series A Preferred Stock are cumulative. Accumulations of dividends on shares
of Series A Preferred Stock do not bear interest.
Except as provided in the next sentence, no dividend may be declared
or paid on any Parity Stock (as defined below) unless full cumulative dividends
have been paid on the Series A Preferred Stock for all prior dividend periods.
If accrued dividends on the Series A Preferred Stock for all prior dividend
periods have not been paid in full then any dividend declared on the Series A
Preferred Stock for any dividend period and any dividend on any Parity Stock
will be declared ratably in proportion to accrued and unpaid dividends on the
Series A Preferred Stock and such Parity Stock.
The Company will not (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 shares of Common
Stock of the Company made for purposes of an employee incentive or benefit plan
of the Company or any subsidiary), unless all accrued and unpaid dividends with
respect to the Series A Preferred Stock and any Parity
-52-
<PAGE>
Stock at the time such dividends are payable have been paid or funds have been
set apart for payment of such dividends.
For purposes of the description of the Series A Preferred Stock, (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 A Preferred Stock as to payment of dividends and amounts payable
upon liquidation, dissolution or winding up, including the Series B Preferred
Stock, and (iii) the term "Junior Stock" means the Common Stock, the ESOP
Preferred Stock, the Voting Preferred Stock, the Director Preferred Stock, any
shares of Series C Preferred Stock issued pursuant to the Rights, and any other
class or series of capital stock of the Company now or hereafter issued and
outstanding that ranks junior as to the payment of dividends or amounts payable
upon liquidation, dissolution or winding up to the Series A Preferred Stock.
Redemption. The Series A Preferred Stock is not redeemable prior to
May 1, 1996. On and after such date, the Series A Preferred Stock is redeemable
at the option of the Company, in whole or in part, initially at $104.375 per
share and thereafter at prices declining ratably on each May 1 to $100.00 per
share on and after May 1, 2003, plus, in each case, all accrued and unpaid
dividends. Unless converted by the holders or redeemed by the Company, the
Series A Preferred Stock will have perpetual maturity.
Liquidation Preference. The holders of shares of Series A Preferred
Stock are entitled to receive, in the event of any liquidation, dissolution or
winding up of the Company, $100 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 such holders (for purposes of the description of the
Series A Preferred Stock, the "Liquidation Preference"), and no more.
Until the holders of the Series A Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of Junior
Stock upon the liquidation, dissolution or winding up of the Company. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series A Preferred Stock 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 A Preferred Stock and any such Parity
Stock ratably in accordance with the respective amounts which would be payable
on such shares of Series A Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full. Neither a consolidation or merger of
the Company with another corporation nor a sale or transfer of all or
substantially all of the Company's assets will be considered a liquidation,
dissolution or winding up, voluntary or involuntary, of the Company.
Voting Rights. Except as indicated below, or except as otherwise from
time to time required by applicable law, the holders of shares of Series A
Preferred Stock do not have any voting rights, and their consent is not required
for taking any corporate action. When and if the holders of the Series A
Preferred Stock are entitled to vote, each share will be entitled to one vote.
If the equivalent of six quarterly dividends payable on the Series A
Preferred Stock or any other series of Serial Preferred Stock of the Company
have not been declared and paid or set apart for payment, whether or not
consecutive, the number of directors of the Company will be increased by two and
the holders of all such series 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 have been paid in full.
The affirmative vote or consent of the holders of 66 /2//3% of the
outstanding shares of the Series A Preferred Stock, voting separately as a class
with all other affected series of Serial Preferred Stock that is also a
-53-
<PAGE>
Parity Stock, is required for any amendment of the Restated Certificate which
alters or changes the powers, preferences, privileges or rights of the Series A
Preferred Stock 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 A Preferred Stock and any other series of
Parity Stock, voting as a single class without regard to series, is required to
authorize the creation or issue of, or reclassify any authorized stock of the
Company 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 all such series of Parity Stock.
Except as required by law, the holders of Series A Preferred Stock are
not entitled to vote on any merger or consolidation involving the Company or a
sale of all or substantially all of the assets of the Company.
Conversion Rights. Shares of Series A Preferred Stock are convertible
in whole or in part, at any time at the option of the holders thereof, into a
combination of cash in the amount of $54.19 and 0.3195 shares of Common Stock
(equivalent to a conversion price of $143.38 per share of Common Stock) for each
share of Series A Preferred Stock converted, subject to adjustment as set forth
in the Restated Certificate. The right to convert shares of Series A Preferred
Stock called for redemption will terminate at the close of business on the day
preceding a redemption date.
SERIES B PREFERRED STOCK
General. The outstanding shares of Series B Preferred Stock have been
deposited under a Deposit Agreement (the "Deposit Agreement") between the
Company and First Chicago Trust Company of New York, as the Depositary (the
"Depositary"). The Company has issued receipts for fractional interests
("Depositary Shares") in the shares of Series B Preferred Stock with each
Depositary Share representing one one-thousandth of a share of Series B
Preferred Stock. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share is entitled, in proportion to the applicable interest in a
share of the Series B Preferred Stock represented by such Depositary Share, to
all of the rights and preferences of the interest in shares of Series B
Preferred Stock represented thereby (including dividend, voting, redemption and
liquidation rights).
Ranking. The Series B Preferred Stock ranks on a parity with the
Series A Preferred Stock and ranks senior to the Common Stock, the ESOP
Preferred Stock, the Voting Preferred Stock, the Director Preferred Stock and
any shares of Series C Preferred Stock issued pursuant to the Rights with
respect to payment of dividends and amounts payable upon liquidation,
dissolution or winding up.
While any shares of Series B Preferred Stock are outstanding, the
Company may not authorize the creation or issue of any class or series of stock
that ranks senior to the Series B Preferred Stock 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 Stock. The Company 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 Stock without the
consent of any holder of Series B Preferred Stock. See "--Voting Rights" below.
Dividends. Holders of shares of Series B Preferred Stock are entitled
to receive, when, as and if declared by the Board out of assets of the Company
legally available therefor, cumulative cash dividends at a rate of 12 1/4% of
the $25,000 liquidation preference thereof (or $3,062.50 per share) per year.
Dividends on the Series B Preferred Stock 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). Each such dividend will
be payable to holders of record as they appear on the stock records of the
Company at the close of business on such record dates, which will not be more
than 60 days or less than 10 days preceding the payment dates corresponding
thereto, as may be fixed
-54-
<PAGE>
by the Board or a duly authorized committee thereof. Dividends will accrue from
the date of the original issuance of the Series B Preferred Stock (the "Series B
Preferred Stock Issue Date"). Dividends will be cumulative from such date,
whether or not in any dividend period or periods there are assets of the Company
legally available for the payment of such dividends.
Each share of Series B Preferred Stock issued after the Series B
Preferred Stock Issue Date (whether issued upon transfer of or in exchange for
an outstanding share of Series B Preferred Stock or issued for any other reason)
will be entitled to receive, when, as and if declared by the Board, dividends
with respect to each dividend period, starting with the Series B Preferred Stock
Issue Date, for which full dividends have not been paid prior to the date upon
which such share of Series B Preferred Stock was issued. Any share of Series B
Preferred Stock that is issued after the record date with respect to any
dividend payment and before such dividend is paid will not be entitled to
receive the dividend paid to holders of Series B Preferred Stock as of such
record date. Accumulations of dividends on shares of Series B Preferred Stock
do not bear interest.
Except as provided in the next sentence, no dividend may be declared
or paid on any Parity Stock (as defined below) unless full cumulative dividends
have been paid on the Series B Preferred Stock for all prior dividend periods.
If accrued dividends on the Series B Preferred Stock for all prior dividend
periods have not been paid in full, then any dividend declared on the Series B
Preferred Stock for any dividend period and on any Parity Stock will be declared
ratably in proportion to accrued and unpaid dividends on the Series B Preferred
Stock and such Parity Stock.
The Company will not (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 shares of Common
Stock made for purposes of an employee incentive or benefit plan of the Company
or any subsidiary), unless all accrued and unpaid dividends with respect to the
Series B Preferred Stock and any Parity Stock at the time such dividends or
other distributions are 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 Stock, (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 other class or series of preferred stock ranking on a
parity with the Series B Preferred Stock as to the payment of dividends and
amounts payable upon liquidation, dissolution or winding up, including the
Series A Preferred Stock, and (iii) the term "Junior Stock" means the Common
Stock, the ESOP Preferred Stock, the Voting Preferred Stock, the Director
Preferred Stock, any shares of Series C Preferred Stock issued pursuant to the
Rights and any other class or series of capital stock of the Company now or
hereafter issued and outstanding that ranks junior as to the payment of
dividends or amounts payable upon liquidation, dissolution or winding up to the
Series B Preferred Stock.
Redemption. The Series B Preferred Stock is not redeemable prior to
July 12, 2004. On and after such date, the Series B Preferred Stock is
redeemable at the option of the Company, 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 Stock up to the date fixed for redemption.
Liquidation Preference. The holders of shares of Series B Preferred
Stock are entitled to receive, in the event of any liquidation, dissolution or
winding up of the Company, $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 Stock, the "Liquidation Preference"), and no more.
-55-
<PAGE>
Until the holders of the Series B Preferred Stock 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 the Company. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series B Preferred Stock 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 Stock and any such Parity
Stock ratably in accordance with the respective amounts that would be payable on
such shares of Series B Preferred Stock and any such Parity Stock if all amounts
payable thereon were paid in full. Neither a consolidation or merger of the
Company with another corporation nor a sale, lease or transfer of all or
substantially all of the Company's assets will be considered a liquidation,
dissolution or winding up, voluntary or involuntary, of the Company.
Voting Rights. Except as indicated below, or except as otherwise from
time to time required by applicable law, the holders of shares of Series B
Preferred Stock do not have any voting rights, and their consent is not required
for taking any corporate action. When and if the holders of the Series B
Preferred Stock 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 Stock have not been declared and paid or set apart for payment,
whether or not consecutive, the number of directors of the Company will be
increased by two and the holders of all Series B Preferred Stock and any other
series of Serial 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 have been paid in full or set apart for payment.
The affirmative vote or consent of the holders of 66/2//3% of the
outstanding shares of the Series B Preferred Stock is required for any amendment
of the Restated Certificate that alters or changes the powers, preferences,
privileges or rights of the Series B Preferred Stock 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 Stock is required to authorize the creation or issue of, or
reclassify any authorized stock of the Company 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
Stock.
THE ESOP PREFERRED STOCK
In connection with the Recapitalization and employee investment
transaction, the Company established three ESOPs (i) the "Leveraged ESOP," which
is a component of a tax-qualified employee stock ownership plan, (ii) the "Non-
Leveraged Qualified ESOP," which is also a component of a tax-qualified employee
stock ownership plan, and (iii) the "Supplemental ESOP," which is not a tax-
qualified plan. The Leveraged ESOP and the Non-Leveraged Qualified ESOP are
referred to as the "Qualified ESOP." To the extent reasonably possible, but
without violating certain limitations imposed by the Internal Revenue Code,
shares will be delivered to employees through the Leveraged ESOP. To the extent
that shares cannot be delivered through the Leveraged ESOP, they will be
delivered through the Non-Leveraged Qualified ESOP, and to the extent they
cannot be delivered through the Non-Leveraged Qualified ESOP, they will be
delivered through the Supplemental ESOP.
Approximately 14,000,000 shares (subject to adjustment as described
below) of Class 1 ESOP Preferred Stock will be issued in seven separate sales
(the "ESOP Tranches") to the ESOP Trustee under the Leveraged ESOP. The first
ESOP Tranche was sold to the trustee (the "ESOP Trustee") of the trust (the
"Qualified Trust") established to hold shares sold to the Leveraged ESOP and the
Non-Leveraged Qualified ESOP on July 13, 1994. The next five tranches will be
sold to the ESOP Trustee in approximately August 1995, and on the four following
anniversaries of such date. The final ESOP Tranche will be sold on the first
business day of the year 2000. The shares to be purchased in each of the first
six ESOP Tranches will generally equal the sum of (i) the shares of Class
-56-
<PAGE>
1 ESOP Preferred Stock scheduled to be allocated to the accounts of participants
in the Leveraged ESOP for the year in which such ESOP Tranche is sold, minus the
dividends allocable to participants' accounts in such year from the shares
purchased in earlier Tranches, plus (ii) the number of shares of Class 1 ESOP
Preferred Stock equal in value to the aggregate dividends payable on the shares
purchased with the ESOP Tranche after the end of the year in which the ESOP
Tranche is purchased. The final ESOP Tranche will not include the shares
described in (ii), above, however.
Because of certain limitations imposed by the Internal Revenue Code,
the Qualified Trust will not purchase the shares representing the entire equity
interest (initially 55%) represented by the ESOP Preferred Stock. Accordingly,
based on certain elections made by ALPA, the Company will allocate "phantom"
shares of Class 2 ESOP Preferred Stock (the "Book Entry Shares") under the
Supplemental ESOP. The Class 2 ESOP Preferred Stock will be issued to the
Qualified ESOP and to the Supplemental ESOP. Except as provided below, these
Book-Entry Shares allocated to a participant will not in fact be issued by the
Company. Instead, the participant will have the same rights as a general
creditor of the Company with respect to amounts allocated to such participant
under the Supplemental ESOP. The number of shares of Class 2 ESOP Preferred
Stock will be equal to 17,675,345, less the number of shares of Class 1 ESOP
Preferred Stock sold to the Qualified ESOP. ALPA has the right to elect at any
time that the Supplemental ESOP be maintained by the actual issuance of Class 2
ESOP Preferred Stock to a non-qualified trust (the "Non-Qualified Trust")
established under the Supplemental ESOP. Each year as a portion of the shares
of Class 1 ESOP Preferred Stock are allocated to employees' accounts under the
Leveraged ESOP, the same proportion of the Book-Entry Shares of Class 2 ESOP
Preferred Stock will be allocated as described below. To the extent permissible
under the Internal Revenue Code, the shares of Class 2 ESOP Preferred Stock will
be issued by the Company and transferred to the Qualified Trust for allocation
to employees' accounts under the Non-Leveraged Qualified ESOP. The shares that
cannot be transferred to the Qualified Trust will be credited as Book-Entry
Shares to the accounts of employees in the Supplemental ESOP (and if ALPA elects
that the Non-Qualified Trust will hold Class 2 ESOP Preferred Stock, will be
deposited therein). The Company will be liable for the benefits of employees
under the Supplemental ESOP.
General. The ESOP Preferred Stock consists of two similar classes of
Preferred Stock: the Class 1 ESOP Preferred Stock and the Class 2 ESOP
Preferred Stock. Where the summaries do not make a distinction between the
Class 1 ESOP Preferred Stock and the Class 2 ESOP Preferred Stock, such
summaries refer to either class.
The shares of the ESOP Preferred Stock are convertible into shares of
Common Stock as described below. If all the shares of ESOP Preferred Stock were
to be converted into shares of Common Stock, such shares of Common Stock would
constitute approximately 55% of the shares of Common Stock (including shares of
Common Stock issuable upon exercise of the ESOP Preferred Stock) that would be
outstanding at that time, on a fully diluted basis based on the treasury stock
method. If the average market value of the Common Stock exceeds $136 per share
during the period of July 13, 1994 to July 12, 1995, a number of additional
shares of ESOP Preferred Stock will be issued or reserved for issuance as Book-
Entry Shares. With the issuance or reservation for issuance of such additional
shares, the ownership interest of the ESOPs could be increased from
approximately 55% to up to approximately 63% of the Company. Based on the
average market value of Common Stock through January 30, 1995, the market value
of the Common Stock would have to average at least $187 per share for the
remainder of the measuring period in order to any adjustment to be made in the
number of shares of ESOP Preferred Stock outstanding or reserved for issuance as
Book-Entry Shares.
Ranking. The ESOP Preferred Stock ranks junior to the Series A
Preferred Stock and the Series B Preferred and ranks senior to the Common Stock,
the Voting Preferred Stock, the Director Preferred Stock and any shares of
Series C Preferred Stock issued pursuant to the Rights with respect to payment
of dividends and amounts payable upon liquidation, dissolution or winding up.
The Class 1 ESOP Preferred Stock ranks senior to the Class 2 ESOP Preferred
Stock with respect to the payment of Fixed Dividends (as defined below) and the
Class 1 ESOP Preferred Stock ranks on a parity with the Class 2 ESOP Preferred
Stock as to the payment of Participating Dividends (as defined below) and as to
amounts payable upon liquidation, dissolution or winding up.
-57-
<PAGE>
Dividends. Holders of Class 1 ESOP Preferred Stock are entitled to
receive, when, as and if declared by the Board out of assets of the Company
legally available therefor, cumulative cash dividends at a rate per annum of a
dollar amount per share of Class 1 ESOP Preferred Stock not to exceed, without
the consent of the Unions, $8.8872 (the "Fixed Dividend"). The Fixed Dividends
on the Class 1 ESOP Preferred Stock will cease to accrue on March 31, 2000.
Under certain circumstances, any Fixed Dividends that remain accrued and unpaid
on April 1, 2000 will not prevent the payment of dividends on any capital stock
of the Company that ranks junior to the Class 1 ESOP Preferred Stock with
respect to the payment of dividends, although such accrued and unpaid Fixed
Dividends will remain a part of the Liquidation Preference (as defined below)
payable in respect of the Class 1 ESOP Preferred Stock upon any liquidation,
dissolution or winding up of the Company. In addition, if during any 12-month
period ending on the annual dividend payment date, holders of the shares of
Common Stock receive any cash dividends or cash distributions thereon, and the
aggregate amount of such dividends and distributions that would have been
received, during such period, by the holder of a share of Class 1 ESOP Preferred
Stock had such share of Class 1 ESOP Preferred Stock been converted into shares
of Common Stock, exceeds the amount of the Fixed Dividend paid on such share of
Class 1 ESOP Preferred Stock, then the holders of the Class 1 ESOP Preferred
Stock will be entitled to receive an additional cash dividend in an amount equal
to such excess (the "Participating Dividend"), although the aggregate amount of
the Fixed Dividend and the Participating Dividend paid on any share of Class 1
ESOP Preferred Stock with respect to any annual dividend period may not exceed
12 1/2% of the fair market value of the shares of Common Stock into which such
share of Class 1 ESOP Preferred Stock is convertible.
Holders of Class 2 ESOP Preferred Stock are not entitled to receive
any Fixed Dividend. If during any 12-month period ending on the annual dividend
payment date, holders of the Common Stock receive any cash dividends or cash
distributions thereon, then the holders of the Class 2 ESOP Preferred Stock will
be entitled to receive a cash dividend in an amount equal to the dividend they
would have received had their shares of Class 2 ESOP Preferred Stock been
converted into and were outstanding as Common Stock at all relevant times,
although the aggregate amount of the dividend paid on any share of Class 2 ESOP
Preferred Stock with respect to any annual dividend period may not exceed
12 1/2% of the fair market value of the shares of Common Stock into which it is
convertible.
If the holders of the Common Stock receive cash dividends and cash
distributions that exceed 12 1/2% of the fair market value of such shares, such
excess will be applied to adjust the Conversion Rate (as defined below) on the
ESOP Preferred Stock.
Except as described above, the Company will not (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 (as defined
below) 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 shares of Common Stock made for purposes of an employee
incentive or benefit plan of the Company or any subsidiary), unless all accrued
and unpaid dividends with respect to the ESOP Preferred Stock and any Parity
Stock at the time such dividends are payable have been paid or funds have been
set apart for payment of such dividends.
For purposes of the description of the ESOP Preferred Stock, (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
ESOP Preferred Stock as to payment of dividends (with respect to such dividends)
or amounts payable upon liquidation, dissolution or winding up (with respect to
such amounts) and (iii) the term "Junior Stock" means the Common Stock, the
Voting Preferred Stock, the Director Preferred Stock, any shares of Series C
Preferred Stock issued pursuant to the Rights and any other class or series of
capital stock of the Company now or hereafter issued and outstanding that ranks
junior as to the payment of dividends (with respect to such dividends) or
amounts payable upon liquidation, dissolution or winding up (with respect to
such amounts) to the ESOP Preferred Stock.
-58-
<PAGE>
Conversion. The ESOP Preferred Stock are convertible, in whole or in
part, at any time and from time to time, into shares of Common Stock initially
at the rate (for purposes of the description of ESOP Preferred Stock, the
"Conversion Rate") of one share of Common Stock for each share of ESOP Preferred
Stock converted. In addition, the Conversion Rate on the ESOP Preferred Stock
will be adjusted upon the occurrence of a variety of events, including, without
limitation, a distribution of capital stock to holders of shares of Common
Stock, a subdivision, recombination or reclassification of the Common Stock, the
issuance to holders of Common Stock of rights to subscribe for equity securities
at a price per share of Common Stock that is less than the fair market value of
a share of Common Stock, the issuance of Common Stock or securities representing
a right to acquire shares of Common Stock at a price per share that is less than
the fair market value of a share of Common Stock, the payment of cash dividends
and cash distributions to holders of Common Stock that exceed in the aggregate
12 1/2% of the fair market value of the Common Stock, the payment of any non-
cash dividend or distribution to holders of Common Stock and certain Pro Rata
Repurchases of Common Stock.
Redemption. The ESOP Preferred Stock is not redeemable.
Liquidation Preference. The holders of shares of ESOP Preferred Stock
are entitled to receive, in the event of any liquidation, dissolution or winding
up of the Company, $126.96 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, including, without limitation, Fixed
Dividends in respect of the Class 1 ESOP Preferred Stock that are accrued and
unpaid as of April 1, 2000 (but that will not prevent the payment of dividends
on any capital stock of the Company that ranks junior to the Class 1 ESOP
Preferred Stock with respect to the payment of dividends) (for purposes of the
description of the ESOP Preferred Stock, the "Liquidation Preference"), and no
more.
Until the holders of the ESOP Preferred Stock 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 the Company. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
ESOP Preferred Stock 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 ESOP Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts that would be payable on such shares of
ESOP Preferred Stock and any such Parity Stock if all amounts payable thereon
were paid in full. Neither a consolidation or merger of the Company with
another corporation nor a sale, lease or transfer of all or substantially all of
the Company's assets will be considered a liquidation, dissolution or winding
up, voluntary or involuntary, of the Company.
Voting Rights. Except as indicated below, and except as otherwise
from time to time required by applicable law, the holders of shares of ESOP
Preferred Stock do not have any voting rights, and their consent is not required
for taking any corporate action. When and if the holders of ESOP Preferred
Stock are entitled to vote, each share will be entitled to one vote.
The affirmative vote or consent of at least a majority of the holders
of the outstanding shares of the Class 1 ESOP Preferred Stock or the Class 2
ESOP Preferred Stock, as the case may be, voting separately as a class, is
required for any amendment of the Restated Certificate which alters or changes
the powers, preferences, privileges or rights of the Class 1 ESOP Preferred
Stock or the Class 2 ESOP Voting Preferred Stock, as the case may be, so as to
materially adversely affect the holders thereof. The affirmative vote or
consent of the holders of at least a majority of the outstanding shares of the
Class 1 ESOP Preferred Stock or the Class 2 ESOP Voting Preferred Stock, as the
case may be, voting separately as a class, is required to authorize the creation
or issue of, or reclassify any authorized stock of the Company 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 such stock.
-59-
<PAGE>
Consolidation, Merger, etc. Upon the occurrence of certain mergers
and other similar transactions, the holders of the ESOP Preferred Stock are
entitled to receive, depending on the circumstances, either (i) a preferred
stock having the same powers, preference and relative, participating, optional
or other special rights as the class of ESOP Preferred Stock they held prior to
such merger or other transaction or (ii) the consideration receivable by the
holders of the number of shares of Common Stock into which such shares of ESOP
Preferred Stock could have been converted immediately prior to such merger or
other transaction.
THE VOTING PREFERRED STOCK
General. The Voting Preferred Stock consists of three similar classes
of Preferred Stock of the Company: the Class P ESOP Voting Preferred Stock, will
be allocated to ESOP accounts of employees represented by ALPA, the Class M ESOP
Voting Preferred Stock, will be allocated to ESOP accounts of employees
represented by the IAM and the Class S ESOP Voting Junior Preferred Stock, will
be allocated to Salaried and Management Employees' accounts. Where the
following summaries do not make a distinction among the Class M ESOP Voting
Preferred Stock, the Class P ESOP Voting Preferred Stock and the Class S ESOP
Voting Preferred Stock, such summaries refer to any such class.
One share of Class P ESOP Voting Preferred Stock, one share of Class M
ESOP Voting Preferred Stock and one share of Class S ESOP Voting Preferred Stock
have been issued to the ESOP Trustee.
Voting Rights. The Voting Preferred Stock votes with the holders of
the Common Stock and the Director Preferred Stock as a single class on all
matters (except as to such matters as to which a separate class vote may be
required by the DGCL), except that until the Sunset, holders of the Voting
Preferred Stock are not entitled to vote to elect members of the Board. Until
the Sunset, the Voting Preferred Stock represents the right to cast in the
aggregate approximately 55% of the votes of all classes of capital stock that
vote together with the Common Stock as a single class (other than for the
election of members to the Board), subject to reduction for the number of shares
of Common Stock that have been issued upon conversion of shares of the ESOP
Preferred Stock that continue to be held by the ESOP. If the average market
value of the Common Stock exceeds $136 per share during the period of July 13,
1994 to July 12, 1995, the number of votes represented by the Voting Preferred
Stock will be increased above approximately 55% of the votes represented by the
shares of Common Stock (including shares of Common Stock issuable upon exercise
of the ESOP Preferred Stock that would be outstanding reserved for issuance as
Book-Entry Shares or remaining to be transferred to the ESOPs) to up to a
maximum of approximately 63%. Based on the average market value of Common Stock
through January 30, 1995, the market value of the Common Stock would have to
average at least $187 per share for the remainder of the measuring period in
order to any adjustment to be made in the ESOP voting percentage.
The voting power of the Voting Preferred Stock is held such that the
voting power of the Company on a fully diluted basis based on the treasury stock
method the Class P ESOP Voting Preferred Stock is entitled to cast approximately
46.23% of the votes represented by the Voting Preferred Stock, the Class M ESOP
Voting Preferred Stock is entitled to cast approximately 37.13% of the votes
represented by the Voting Preferred Stock and the Class S ESOP Voting Preferred
Stock is entitled to cast approximately 16.64% of the votes represented by the
Voting Preferred Stock. Such percentages are referred to as the "Agreed
Percentages."
After the Sunset, each class of Voting Preferred Stock will represent
the right to cast in the aggregate the number of votes that is equal to the
relevant Agreed Percentage of the number of shares of Common Stock into which
the ESOP Preferred Stock can be converted plus the number of Book-Entry Shares
remaining to be issued plus the number of shares of ESOP Preferred Stock, if
any, remaining to be transferred to the ESOP.
Other. The Voting Preferred Stock is not entitled to receive any
dividends. The Voting Preferred Stock is convertible into shares of Common
Stock at the rate of one ten-thousandth of a share of Common Stock for each
share of Voting Preferred Stock converted. All the Voting Preferred Stock will
be converted into shares of
-60-
<PAGE>
Common Stock automatically upon the occurrence of an Uninstructed Trustee Action
(as defined below) or at such time when none of the ESOP Preferred Stock remains
outstanding. The Voting Preferred Stock has a liquidation preference of $0.01
per share.
Upon the occurrence of certain mergers and other similar transactions,
the holders of the Voting Preferred Stock is entitled to receive a preferred
stock having the same powers, preference and relative, participating, optional
or other special rights as the class of Voting Preferred Stock they held prior
to such merger or other transaction except that such preferred stock will not
control 55% of the vote.
THE DIRECTOR PREFERRED STOCK
General
The Director Preferred Stock consists of four classes of Preferred
Stock: the Class I Preferred Stock, the Class Pilot MEC Preferred Stock, the
Class IAM Preferred Stock and the Class SAM Preferred Stock. Where the
summaries do not make a distinction among the several classes of Director
Preferred Stock, such summaries refer to any of them.
Each of the classes of Director Preferred Stock has the power to elect
one or more members of the Board. Except for the election of the Public
Directors on which the holders of the Director Preferred Stock cannot vote, and
except as otherwise from time to time required by applicable law, the holders of
the shares of Director Preferred Stock vote together as a class with the holders
of the Common Stock. None of the classes of Director Preferred Stock bear
dividends. Each class of Director Preferred Stock has a liquidation preference
of $0.01 per share.
Each of the Class Pilot MEC Preferred Stock, the Class IAM Preferred
Stock and the Class SAM Preferred Stock provides that upon the consolidation,
merger or similar transaction involving the Company or United, pursuant to which
the outstanding shares of Common Stock are to be exchanged for or converted into
securities of a successor or resulting company or cash or other property, the
Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and the Class SAM
Preferred Stock, respectively, will be converted into, or exchanged for,
preferred stock of such successor or resulting company having, in respect of
such company, the same powers, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereof, that the original Class Pilot MEC Preferred Stock, Class IAM Preferred
Stock and Class SAM Preferred Stock had, respectively.
Class I Preferred Stock
The Class I Preferred Stock has been issued to the Independent
Directors. The Restated Certificate authorizes the issuance of ten shares of
Class I Preferred Stock, although the Company expects that no more than four
shares will be outstanding at any time.
The initial holders of the Class I Preferred Stock have entered into a
Stockholders' Agreement among themselves, ALPA, the IAM and the Company (the
"Class I Preferred Stockholders' Agreement"), pursuant to which the holders
agree to vote their shares to elect the Independent Directors nominated pursuant
to the provisions described above and to refrain from transferring the shares of
Class I Preferred Stock other than to a person who has been elected to serve as
one of the Independent Directors and who agrees to be subject to the provisions
of the Class I Preferred Stockholders' Agreement. The Restated Certificate and
the Class I Preferred Stockholders' Agreement provide that the Company, subject
to legally available funds, will redeem or purchase the shares of Class I
Preferred Stock held by any holder thereof who votes contrary to the Class I
Preferred Stockholder's Agreement or who purports to transfer the share of Class
I Preferred Stock to any person other than an Independent Director. Any share
of Class I Preferred Stock redeemed or purchased as provided in the immediately
prior sentence may
-61-
<PAGE>
be reissued as provided in the Restated Certificate or the Class I Preferred
Stockholders' Agreement. All shares of the Class I Preferred Stock will be
redeemed automatically upon the occurrence of the Sunset, and following such
redemption, none of the shares of Class I Preferred Stock may be reissued
thereafter.
Class Pilot MEC Preferred Stock and Class IAM Preferred Stock
The Restated Certificate authorizes the issuance of one share of each
of the Class Pilot MEC Preferred Stock and the Class IAM Preferred Stock. The
share of the Class Pilot MEC Preferred Stock has been issued to the ALPA MEC and
the share of Class IAM Preferred Stock has been issued to the IAM. Each of the
Class Pilot MEC Preferred Stock and the Class IAM Preferred Stock has the right
to elect one Employee Director, and the shares of such stock will be redeemed
automatically upon the purported transfer thereof to any person other than the
holder thereof authorized under the Restated Certificate. The Class Pilot MEC
Preferred Stock will be redeemed automatically upon the later of the Sunset or
the occurrence of the ALPA Termination Date. The Class IAM Preferred Stock will
be redeemed automatically upon the later of the Sunset or the occurrence of the
IAM Termination Date.
Class SAM Preferred Stock
The Restated Certificate authorizes the issuance of ten shares of
Class SAM Preferred Stock, although the Company expects that no more than three
shares will be outstanding at any time. Two shares of Class SAM Preferred Stock
are held by the Salaried and Management Director and one share is held by the
SAM Designated Shareholder.
The initial holders of the Class SAM Preferred Stock have entered into
a Stockholders' Agreement among themselves and the Company (the "Class SAM
Preferred Stockholders' Agreement"), pursuant to which the holders agree to vote
their shares to elect the Salaried and Management Director nominated by the
System Roundtable, and to refrain from transferring the shares of Class SAM
Preferred Stock other than to a person who has been elected to serve as the
Salaried and Management Director or another person designated by the System
Roundtable to be the Designated Holder, each of whom must agree to be subject to
the provisions of the Class SAM Preferred Stockholders' Agreement. The Class
SAM Preferred Stockholders' Agreement provides that in most instances the
Designated Holder will be the senior executive of United who has primary
responsibility for human resources. The Restated Certificate and the Class SAM
Preferred Stockholders' Agreement provide that the Company, subject to legally
available funds, will redeem or purchase the shares of Class SAM Preferred Stock
of any holder who votes contrary to the instructions given by the System
Roundtable or who purports to transfer the share or shares of Class SAM
Preferred Stock to any person other than the Salaried and Management Director or
another person designated by the System Roundtable. The Restated Certificate
provides that no holder of shares of Class SAM Preferred Stock will have the
right to vote unless at such time such person is the Salaried and Management
Director or the Designated Holder. Any share of Class SAM Preferred Stock that
is redeemed or purchased as provided in the immediately prior sentence may be
reissued as provided in the Restated Certificate and the Class SAM Preferred
Stockholders' Agreement. All shares of the Class SAM Preferred Stock will be
redeemed automatically on or after the Sunset upon the earlier to occur of the
ALPA Termination Date and the IAM Termination Date, and following such
redemption, none of the shares of Class SAM Preferred Stock may be reissued.
Uninstructed Trustee Actions
Under certain circumstances prior to the Sunset, described below, (i)
the Voting Preferred Stock will cease to vote and (ii) the right to cast the
votes that the holder of the Voting Preferred Stock would otherwise have been
entitled to cast will be transferred generally in the following percentages:
46.23% to the holder of the Class Pilot MEC Preferred Stock, 37.13% to the
holder of the Class IAM Preferred Stock and 16.64% to the holders of the Class
SAM Preferred Stock.
-62-
<PAGE>
In connection with (i) a stockholder vote on a transaction involving a
merger of the Company or United or a change of control of the Company or United,
or (ii) if the trustee under either ESOP enters into a binding commitment with
respect to any such transaction or (iii) if the trustee disposes of 10% or more
of the common equity initially represented by the ESOP Preferred Stock, (x) if
the trustee either (1) fails to solicit timely instructions from the Plan
participants or the Committees or (2) fails to act in accordance with the
instructions received, (y) if the merger or change of control transaction would
have been approved or if the trustee disposes of 10% or more of the common
equity initially represented by the ESOP Preferred Stock and (z)(I) the trustee
solicited instructions, failed to follow them and such transaction would not
have been approved if the trustee had followed the instructions, (II) the
trustee failed to follow instructions and the transaction would not have been
approved had the trustee cast all the votes represented by securities in the
Plan against the transaction or (III) the trustee failed to follow instructions
or to solicit instructions with respect to a matter upon which no vote is
required (the occurrence of the conditions set forth in clauses (x), (y) and (z)
being referred to as an "Uninstructed Trustee Action"), the voting rights of the
Voting Preferred Stock will be transferred from the Voting Preferred Stock to
the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and the Class
SAM Preferred Stock in the proportions referred to above. In addition, if the
trustee fails to solicit instructions or disregards instructions received in
respect of a vote on a transaction which, if consummated, would constitute an
Uninstructed Trustee Action, then the voting power of the Voting Preferred Stock
will shift to the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock
and the Class SAM Preferred Stock and the transaction must be approved by the
vote of the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and
the Class SAM Preferred Stock voting together as a class with the Common Stock,
in addition to any other vote required by the Restated Certificate, stock
exchange requirements or applicable law.
In addition, if the Sunset occurs directly or indirectly as a result
of an Uninstructed Trustee Action (or for any reason within one year after an
Uninstructed Trustee Action), the voting power to which the Class Pilot MEC
Preferred Stock, the Class IAM Preferred Stock and the Class SAM Preferred Stock
succeed as a result of an Uninstructed Trustee Action will survive until July
12, 2010.
SERIES C PREFERRED STOCK
General. The Company has designated 1,250,000 shares of a series of
Serial Preferred Stock as Series C Preferred Stock and such shares are reserved
for issuance upon exercise of the Rights associated with each share of Common
Stock. See "--Preferred Share Purchase Rights" below. As of the date of this
Prospectus, there are no shares of Series C Preferred Stock outstanding.
Ranking. The Series C Preferred Stock ranks junior to all other
series of preferred stock as to dividends and amounts payable upon any voluntary
or involuntary liquidation, dissolution or winding up of the Company unless the
terms of any such other series shall provide otherwise.
Dividends. Holders of shares of Series C Preferred Stock will be
entitled to receive, when, as and if declared by the Board out of funds legally
available therefor, cumulative cash dividends payable quarterly on the fifteenth
day of January, April, July and October in each year (each such date being a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series C Preferred Stock, in an amount per share equal to the greater of (a)
$10.00 or (b) subject to certain provisions for adjustment set forth in the
Restated Certificate, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of common stock or a subdivision of the outstanding shares of common
stock since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series C Preferred Stock.
-63-
<PAGE>
The Company must declare a dividend or distribution on the Series C
Preferred Stock immediately after it declares a dividend or distribution on
common stock (other than a dividend payable in shares of common stock), provided
that in the event no dividend or distribution has been declared on common stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the Series C Preferred Stock will nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
The Restated Certificate sets forth certain restrictions imposed upon
the Company whenever quarterly dividends or other distributions payable on
Series C Preferred Stock are in arrears, including, but not limited to,
restrictions on the Company's ability to declare or pay dividends on, make any
other distributions on, redeem or purchase or otherwise acquire for
consideration shares ranking junior to or on a parity with the Series C
Preferred Stock either as to dividends or amounts payable upon liquidation,
dissolution or winding up of the Company.
Redemption. When issued and outstanding, the shares of Series C
Preferred Stock will not be redeemable .
Liquidation Preference. Subject to (a) the rights of holders of
preferred stock of the Company ranking senior to Series C Preferred Stock as to
dividends and amounts payable upon any voluntary or involuntary liquidation,
dissolution or winding up and (b) any other provision of the Restated
Certificate, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, no distribution shall be made (1) to the holders of
shares of stock ranking junior (either as to dividends or amounts payable upon
any voluntary or involuntary liquidation, dissolution or winding up) to the
Series C Preferred Stock unless, prior thereto, the holders of shares of Series
C Preferred Stock will have received $100.00 per share, plus accrued and unpaid
dividends to the date of such payment, provided that the holders of shares of
Series C Preferred Stock will be entitled to receive an aggregate amount per
share, subject to certain provisions for adjustment set forth in the Restated
Certificate, equal to 100 times the aggregate amount to be distributed per share
to holders of common stock, or (2) to the holders of stock ranking on a parity
(either as to dividends or amounts payable upon any voluntary or involuntary
liquidation, dissolution or winding up) with the Series C Preferred Stock,
except distributions made ratably on Series C Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such voluntary or involuntary liquidation, dissolution
or winding up.
Voting Rights. Except as indicated below or as expressly required by
applicable law, the holders of Series C Preferred Stock will not have voting
rights.
Subject to certain provisions for adjustment set forth in the Restated
Certificate, each share of Series C Preferred Stock will entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Company. Except as indicated below or expressly required by applicable law,
the holders of Series C Preferred Stock and the holders of shares of common
stock will vote together as one class on all matters submitted to a vote of
stockholders of the Company.
If the equivalent of six quarterly dividends payable on the Series C
Preferred Stock or any other series of Serial Preferred Stock of the Company
have not been declared and paid or set aside for payment, whether or not
consecutive, the number of directors of the Company will be increased by two and
the holders of all such series 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 have been paid in full or until noncumulative dividends
have been paid regularly for at least a year.
Consolidation, Merger, Etc. In the event of any consolidation,
merger, combination or other transaction in which shares of common stock are
exchanged for or changed into other stock, securities, cash or other property,
each share of Series C Preferred Stock shall be similarly exchanged or changed
in an amount per share equal to 100 times the aggregate amount of stock,
securities, cash or other property, as the case may be, for or into which each
share of common stock is exchanged or changed.
-64-
<PAGE>
PREFERRED SHARE PURCHASE RIGHTS
A right (a "Right") is associated with, and trades with, each share of
Common Stock outstanding. As long as the Rights are associated with the shares
of Common Stock, each newly issued share of Common Stock issued by the Company,
including shares of Common Stock into which the ESOP Preferred Stock and the
Series A Preferred Stock are convertible, will include one Right. The Rights
Agreement provides that a Right will be associated with each share of ESOP
Preferred Stock outstanding and each Authorized Unissued ESOP Share. Each Right
will entitle its holder to purchase one one-hundredth of a share of Series C
Preferred Stock for $185 (subject to adjustment). Subject to amendment, the
Rights are not exercisable until 10 business days after any person or group
announces its beneficial ownership of 15% or more of the Common Stock. The
Rights Agreement provides that the transactions associated with the
Recapitalization will not cause the Rights to become exercisable as a result
thereof.
If any person or group acquires 15% or more of the Common Stock
outstanding (other than the ESOP Trustee, ALPA, the IAM and the beneficial
owners of Common Stock eligible to report and reporting on Schedule 13G under
the Exchange Act), each Right holder (except the acquiring party) has the right
to receive, upon exercise, shares of Common Stock (or, under certain
circumstances, cash, property or other Company securities) having a market value
of three times the exercise price of the Right. If, after the Rights become
exercisable, the Company is involved in a merger where it does not survive or
survives with a change or exchange of its Common Stock or the Company sells or
transfers more than 50% of its assets or earning power, each Right will be
exercisable for common stock of the other party to such transaction having a
market value of three times the exercise price of the Right. The Company has
the right to redeem the Rights for $.05 per Right prior to the time that they
become exercisable. The Rights will expire on December 31, 1996.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board, except pursuant to an offer conditioned on a
substantial number of Rights being acquired. The Rights should not interfere
with any merger or other business combination approved by the Board since the
Rights may be redeemed or their terms amended by the Company as described above.
-65-
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material United States
federal income tax considerations relevant to an exchange of Series A Preferred
Stock for Debentures and the ownership, disposition and conversion of Debentures
by persons acquiring Debentures pursuant to the Exchange Offer. To the extent
it relates to matters of law or legal conclusion, this summary constitutes the
opinion of Mayer, Brown & Platt, special counsel to the Company. This summary
is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations (including Proposed Regulations and Temporary Regulations)
promulgated thereunder, Internal Revenue Service ("IRS") rulings, official
pronouncements and judicial decisions, all as in effect on the date hereof and
all of which are subject to change, possibly with retroactive effect, or
different interpretations. This summary is applicable only to holders who are
United States persons for federal income tax purposes and who hold Preferred
Stock as a capital asset and who will hold Debentures and any Common Stock
received on conversion of Debentures as capital assets. For a discussion of
certain material United States federal income and estate tax considerations that
may be relevant to non-United States persons, see "Certain Federal Tax
Considerations for Non-United States Persons."
This summary does not discuss all the tax consequences that may be
relevant to a particular holder in light of the holder's particular
circumstances and it is not intended to be applicable in all respects to all
categories of investors, some of whom--such as insurance companies, tax-exempt
persons, financial institutions, regulated investment companies, dealers in
securities or currencies, persons that hold Series A Preferred Stock or the
Debentures 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 holder's decision to exchange Series A Preferred Stock
for Debentures pursuant to the Exchange Offer.
References in this discussion and below under the caption "Certain
Federal Tax Considerations For Non-United States Persons" to a holder of Series
A Preferred Stock includes a holder of Depositary Shares.
ALL SERIES A PREFERRED STOCK HOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE EXCHANGE OF SERIES A PREFERRED STOCK FOR DEBENTURES AND OF THE OWNERSHIP,
CONVERSION AND DISPOSITION OF DEBENTURES RECEIVED IN THE EXCHANGE IN LIGHT OF
THEIR OWN PARTICULAR CIRCUMSTANCES.
EXCHANGE OF SERIES A PREFERRED STOCK FOR DEBENTURES
The exchange of Series A Preferred Stock for Debentures pursuant to
the Exchange Offer will be a taxable event. If, with respect to a particular
holder, such exchange satisfies one of the tests of section 302 of the Code
described below, it will be treated as a transaction in which capital gain or
loss is recognized, rather than as a dividend. The tests under section 302 of
the Code are applied on a stockholder-by-stockholder basis; therefore, whether
an exchange will be treated as a transaction in which capital gain or loss is
recognized or as a dividend with respect to a particular holder will depend on
that holder's particular facts and circumstances. If the exchange of Series A
Preferred Stock for Debentures is treated as a transaction in which capital gain
or loss is recognized with respect to a particular holder, the capital gain or
loss will be based on the difference between the fair market value of the
Debentures received in the exchange and such holder's adjusted tax basis in the
Series A Preferred Stock surrendered therefor. Such capital gain or loss will
be long-term capital gain or loss if the Series A Preferred Stock surrendered in
the exchange was held by such holder for more than one year. The exchanging
holder's tax basis in the Debentures received in the exchange will equal the
fair market value of such Debentures at the time of the exchange and the holding
period for such Debentures will begin on the day after the day on which the
Debentures are acquired by such holder.
-66-
<PAGE>
Pursuant to section 302 of the Code, an exchange will be treated as a
transaction in which gain or loss is recognized if, after giving effect to the
constructive ownership rules of section 318 of the Code, the exchange (i)
represents a "complete termination" of the exchanging holder's stock interest in
the Company, (ii) is "substantially disproportionate" with respect to the
exchanging holder or (iii) is "not essentially equivalent to a dividend" with
respect to the exchanging holder, all within the meaning of section 302(b) of
the Code. Under the constructive ownership rules of section 318 of the Code, a
holder of a Debenture will be treated as owning the Common Stock into which such
Debenture is convertible. Accordingly, an exchange pursuant to the Exchange
Offer could not, standing alone, satisfy the "complete termination" or the
"substantially disproportionate" tests. An exchange will be "not essentially
equivalent to a dividend" as to a particular holder if it results in a
"meaningful reduction" in such holder's interest in the Company (after
application of the constructive ownership rules of section 318 of the Code). In
general, there are no fixed rules for determining whether a "meaningful
reduction" has occurred. However, based upon published rulings of the Internal
Revenue Service, the exchange will be treated as a transaction in which gain or
loss is recognized if the holder's stock ownership (treating the Debentures as
converted) is minimal, the holder exercises no control over the affairs of the
Company, and the holder's percentage equity interest in the Company is reduced
in the redemption to any extent. Because the conversion price of a Debenture is
higher than that of the equivalent amount of Series A Preferred Stock to be
surrendered therefor, an exchange of Series A Preferred Stock for Debentures
would, standing alone, result in some reduction in an exchanging holder's
constructive stock interest in the Company. No assurance can be given that
these tests will be satisfied. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR
AS TO ITS ABILITY TO SATISFY ANY OF THE FOREGOING TESTS, POSSIBLY BY DISPOSING
OF A PORTION OF ITS STOCK INTEREST IN THE COMPANY CONTEMPORANEOUSLY, AND AS PART
OF AN INTEGRATED PLAN, WITH THE EXCHANGE OF SERIES A PREFERRED STOCK FOR
DEBENTURES, IN LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES.
If an exchange is treated as a dividend with respect to a particular
exchanging holder under section 302 of the Code, such holder (i) will not
recognize any loss on the exchange and (ii) will recognize dividend income
(rather than capital gain) in an amount equal to the fair market value of the
Debentures (and any cash in lieu of fractional Debentures) received (without
regard to such holder's basis in the Series A Preferred Stock surrendered in the
exchange), to the extent of its proportionate share of the Company's current or
accumulated earnings and profits. If the fair market value of the Debentures
(and any cash in lieu of fractional Debentures) received exceeds the holder's
proportionate share of the Company's current and accumulated earnings and
profits, the excess will be treated as a nontaxable recovery of the holder's
basis in any remaining Series A Preferred Stock held by such holder or, if such
holder does not retain any Series A Preferred Stock, to any Common Stock held by
such holder, with any remaining excess treated as gain from the sale or exchange
of such stock. Such holder's tax basis in the Debentures generally will equal
the fair market value of such Debentures at the time of the exchange (without
regard to such holder's basis in the Series A Preferred Stock surrendered in the
exchange). The holder's adjusted tax basis in its Series A Preferred Stock
surrendered in the exchange will be transferred to any remaining Series A
Preferred Stock held by such holder or, if such holder does not retain any
Series A Preferred Stock, to any Common Stock held by such holder. If the
holder does not retain any stock ownership in the Company, it is unclear whether
the holder will be permitted to add such basis to any Debentures received in the
exchange or will lose such basis entirely. To the extent the distribution is
taxable as a dividend to a corporate stockholder, (i) it will be eligible for a
dividend received deduction (subject to the minimum holding period requirements
under section 246(c) of the Code and other applicable limitations) and (ii) it
may be subject to the "extraordinary dividend" provisions of the Code which, if
applicable, would require a corporate shareholder to reduce its tax basis (and
possibly recognize gain) in any stock of the Company held by it by the nontaxed
portion of any such dividend. The holding period for the Debentures will begin
on the day after the day on which the Debentures are acquired by the exchanging
holder.
INTEREST AND ORIGINAL ISSUE DISCOUNT ON DEBENTURES
In accordance with sections 1271 through 1275 of the Code and the
final Treasury Regulations promulgated thereunder (the "OID Regulations"), a
debt instrument bears original issue discount ("OID") if its "stated
-67-
<PAGE>
redemption price at maturity" exceeds its "issue price" by more than a de
minimis amount. The issue price of the Debentures will be their fair market
value at the time of the exchange. The stated redemption price at maturity of a
debt instrument generally includes all amounts payable other than "qualified
stated interest" (i.e., payments that are unconditionally required to be paid at
least annually at a single fixed rate over the term of the instrument). Because
the Company has the right to elect to extend the interest payment period to a
period of up to 20 consecutive quarterly periods, none of the payments of stated
interest on the Debentures will be qualified stated interest. Thus, the
Debentures will have OID in an amount equal to the excess of all payments
required to be made under the Debentures over their issue price. A holder will
be required to include OID in income, based on a constant yield method, before
the receipt of cash attributable to such income, regardless of such holder's
regular method of accounting. As a result, during any period in which the
Company has elected to extend the interest payment period a holder generally
would be required to include OID in income but would not receive cash from the
Company sufficient to pay tax thereon. A holder will not recognize any income
upon the receipt of a payment of stated interest on a Debenture; instead, a
holder's basis in the Debentures will be increased by the amount of OID
includible in income and reduced by all payments made on the Debentures.
The amount of OID includible in income is the sum of the daily
portions of OID with respect to such Debenture for each day during the taxable
year on which such holder held such Debenture. The daily portion of OID on a
Debenture is determined by allocating to each day in any "accrual period" a
ratable portion of the OID allocable to such accrual period. The term "accrual
period" means a period of any length selected by the holder, provided that each
accrual period must be no longer than one year and each scheduled payment date
of principal or interest on a Debenture must occur either on the final day of an
accrual period or the first day of an accrual period. The amount of OID
allocable to an accrual period is the product of the "adjusted issue price" at
the beginning of the accrual period and the "yield to maturity" of the
Debenture. For the first accrual period, the adjusted issue price of the
Debentures will be their issue price. Thereafter, the adjusted issue price of a
Debenture generally will be its issue price increased by any OID previously
includible in the gross income of the holder and decreased by any payment
previously made on the Debenture.
Under the OID Regulations, in computing the yield to maturity of an
instrument the issuer is deemed to elect to exercise any option available to it
under the instrument if doing so will minimize the yield on the instrument. If
the issuer does not exercise such option, then, solely for purposes of the
accrual of OID, the yield and maturity of the instrument are redetermined by
treating the instrument as reissued for an amount equal to its adjusted issue
price. Thus, for example, in the case of the first accrual period with respect
to the Debentures, the OID Regulations require that the yield to maturity of the
Debentures be computed assuming that the Company would elect to extend the
interest payment period to the maximum 20 consecutive quarters (because doing so
would minimize the yield on the Debentures). Assuming quarterly accrual periods,
the aggregate amount of OID for the first quarterly accrual period would equal
the product of the issue price and the yield to maturity (as so determined).
If, contrary to this assumption under the OID Regulations, the Company does not
elect to extend the interest payment period and pays the stated interest at the
end of the first quarterly interest payment period, the instrument will be
treated, solely for OID purposes, as having been reissued on such payment date.
The yield to maturity would then be recomputed, again assuming that the Company
would elect to extend the interest payment period to the maximum 20 consecutive
quarters (again, because doing so would minimize the yield on the Debentures).
The amount of OID for this second accrual period would equal the product of such
recomputed yield to maturity and the adjusted issue price on the date of such
deemed reissuance (i.e., the issue price plus the amount of previously accrued
OID minus the interest previously paid on the Debentures). In the case of the
final accrual period, the allocable OID is the difference between the amount
payable at maturity and the adjusted issue price at the beginning of the accrual
period.
If an exchange of Series A Preferred Stock for Debentures is treated
as a dividend to the exchanging holder (see "--Exchange of Series A Preferred
Stock for Debentures," above), and the exchanging holder's basis in the Series A
Preferred Stock surrendered in the exchange is transferred to the Debentures,
such holder may have
-68-
<PAGE>
acquisition premium with respect to the Debentures, which would reduce the
amount includible in such holder's income as OID in each taxable year.
SALE OR REDEMPTION OF DEBENTURES
Generally, a sale or redemption of Debentures will result in taxable
gain or loss equal to the difference between the amount realized and the
holder's tax basis in the Debentures. Such gain or loss would be long-term
capital gain or loss if the Debentures were held for more than one year.
CONVERSION OF DEBENTURES
The conversion of Debentures into Common Stock and cash will likely be
treated as a recapitalization within the meaning of Section 368(a)(1)(E) of the
Code. If the conversion so qualifies, a holder of Debentures will recognize
gain on the conversion of Debentures into Common Stock and cash equal to the
lesser of (1) the excess of (a) the sum of (i) the fair market value of the
Common Stock received at the time of conversion and (ii) the cash received over
(b) the holder's tax basis in the Debentures and (2) the cash received. Such
recognized gain will likely be treated as capital gain. The tax basis for the
Common Stock received upon such conversion will be equal to the tax basis of the
Debentures converted (reduced by the portion of such basis allocable to any
fractional Common Stock interest paid in cash) decreased by the cash received in
the conversion and increased by the amount of gain recognized on the exchange by
the holder. A holder generally will recognize gain (or loss) upon a conversion
to the extent that any cash paid in lieu of a fractional share of Common Stock
exceeds (or is less than) its tax basis in such fractional share.
If the conversion is not treated as a recapitalization, the holder of
Debentures may be able to contend that the conversion should be treated as a
redemption of a portion of Debentures for cash and an exchange of the remaining
Debentures for Common Stock. The holder would generally recognize gain or loss
on the redemption of the Debentures equal to the difference between the cash
received and such holder's tax basis in the Debentures that are treated as
redeemed in the exchange for cash. The holder would not recognize any gain or
loss on the exchange of the remaining Debentures for Common Stock and would have
a tax basis in the Common Stock received equal to the tax basis of the
Debentures treated as exchanged for Common Stock.
The holding period for the Common Stock generally will include the
holding period of the Debentures converted. However, the holding period for the
Common Stock allocable to original issue discount accrued during the holder's
holding period for the Debentures converted may be treated as commencing on the
day after the date of the conversion.
SALE OR DISPOSITION OF COMMON STOCK
A holder will recognize gain or loss on the sale or exchange of Common
Stock received upon conversion of a Debenture equal to the difference between
the amount realized on such sale or exchange and the holder's adjusted tax basis
in the Common Stock sold or exchanged. Such gain or loss would be long-term
capital gain or loss if the holder's holding period for the Common Stock were
more than one year. See "--Conversion of Debentures."
ADJUSTMENT OF CONVERSION PRICE
Pursuant to Treasury Regulations promulgated under section 305 of the
Code, a holder of a Debenture will be treated as having received a constructive
distribution from the Company upon an adjustment in the conversion price of the
Debentures if (i) as a result of such adjustment, the proportionate interest of
such holder in the assets or earnings and profits of the Company were increased
and (ii) the adjustment was not made pursuant to a bona fide, reasonable anti-
dilution formula. An adjustment in the conversion price would not be considered
made pursuant
-69-
<PAGE>
to such a formula if the adjustment was made to compensate for certain taxable
distributions with respect to the stock into which the Debentures are
convertible. Thus, under certain circumstances, a decrease in the conversion
price for the Debentures may be taxable to a holder as a dividend to the extent
of the current or accumulated earnings and profits of the Company. In addition,
the failure to adjust fully the conversion price of the Debentures to reflect
distributions of stock dividends with respect to the Common Stock (or rights to
acquire Common Stock) may result in a taxable dividend to the holders of the
Common Stock and holders of rights to acquire Common Stock.
BACKUP WITHHOLDING
A holder of Series A Preferred Stock, a Debenture or Common Stock
issued upon conversion of a Debenture may be subject to backup withholding at a
rate of 31% with respect to dividends or interest (including OID) on, or the
proceeds of a sale, exchange, or redemption of, such Series A Preferred Stock,
Debenture or Common Stock, as the case may be, unless (i) such holder 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.
CERTAIN FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES PERSONS
The following is a general summary of the material United States
federal income and estate tax considerations relevant to the exchange of Series
A Preferred Stock for Debentures by non-United States persons and the ownership,
disposition and conversion of Debentures by non-United States persons acquiring
Debentures pursuant to the Exchange Offer. To the extent it relates to matters
of law or legal conclusion, this summary constitutes the opinion of Mayer, Brown
& Platt, special counsel to the Company. This summary is based on the Code,
Treasury Regulations (including Proposed Regulations and Temporary Regulations)
promulgated thereunder, IRS rulings, official pronouncements and judicial
decisions, all as in effect on the date hereof and all of which are subject to
change, possibly with retroactive effect, or different interpretations. This
summary does not discuss all the tax consequences that may be relevant to a
particular holder that is a non-United States person in light of the holder's
particular circumstances and it is not intended to be applicable in all respects
to all categories of non-United States persons, some of whom--such as foreign
governments and certain international organizations--may be subject to special
rules not discussed below. In addition, this summary does not address any
state, local or foreign tax considerations that may be relevant to a holder's
decision to exchange Series A Preferred Stock for Debentures pursuant to the
Exchange Offer. For a discussion of certain United States federal income tax
considerations, some of which may also be relevant to non-United States persons,
see "Certain Federal Income Tax Considerations."
As used herein, "non-United States person" means any person who, for
United States federal income tax purposes, is neither (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any State or of any of
its territories or possessions or (iii) a domestic trust or estate.
ALL SERIES A PREFERRED STOCK HOLDERS THAT ARE NON-UNITED STATES
PERSONS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE OF SERIES A PREFERRED
STOCK FOR DEBENTURES AND THE OWNERSHIP, CONVERSION AND DISPOSITION OF DEBENTURES
RECEIVED IN THE EXCHANGE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
-70-
<PAGE>
EXCHANGE OF SERIES A PREFERRED STOCK FOR DEBENTURES
Subject to the discussion of backup withholding below, if a holder
that is a non-United States person proves, in a manner and under arrangements
satisfactory to the Company or other withholding agent that the exchange of
Series A Preferred Stock for Debentures by such holder qualifies as a
transaction in which gain or loss is recognized, rather than as a dividend (see
"Certain Federal Income Tax Considerations--Exchange of Series A Preferred Stock
for Debentures," above), the Company or such withholding agent will not withhold
federal income tax on the issuance of Debentures to such holder and such holder
generally will not be subject to United States federal income tax in respect of
gain recognized on such exchange unless (i) such gain is effectively connected
with a trade or business conducted by such non-United States person within the
United States (in which case the branch profits tax may also apply if the holder
is a foreign corporation), (ii) in the case of a non-United States person that
is an individual, such holder is present if the United States for a period or
periods aggregating 183 days or more in the taxable year of the exchange and
certain other conditions are satisfied or (iii) the Company is or has been a
"United States real property holding corporation" for federal income tax
purposes within the five-year period ending on the date of the exchange (which
the Company does not believe it has been or is currently) and certain other
conditions are satisfied, and no treaty exception is applicable.
If a holder that is a non-United States person who exchanges Series A
Preferred Stock for Debentures does not prove, in a manner satisfactory to the
Company or other withholding agent, that such exchange qualifies as a
transaction in which gain or loss is recognized, United States federal
withholding tax will be withheld from the gross proceeds to such holder in an
amount equal to 30% of such proceeds (including Debentures that such holder
would otherwise have received) unless such holder is eligible for a reduced tax
treaty rate with respect to dividend income, in which case the tax will be
withheld at the reduced rate, or establishes that it is exempt from such tax
(e.g., by providing the appropriate form certifying its status as a foreign
government). Except as may be otherwise provided in an applicable income tax
treaty, a holder that is a non-United States person will be taxed at ordinary
federal income tax rates on a net income basis if such dividend is effectively
connected with the conduct of a trade or business of such holder within the
United States (in which case the branch profits tax may also apply if the holder
is a foreign corporation) and will not be subject to the withholding tax
described in the preceding sentence. A holder that is a non-United States
person may be eligible to obtain from the IRS a refund of tax withheld if such
holder meets one of the three tests of section 302 described above under
"Certain Federal Income Tax Considerations--Exchange of Series A Preferred Stock
for Debentures" or is otherwise able to establish that no tax (or a reduced
amount of tax) was due.
PAYMENTS ON DEBENTURES
Subject to the discussion of backup withholding below, payments of
principal, premium (if any) and interest (including original issue discount) on
a Debenture by the Company or its agent (in its capacity as such) to a
beneficial owner that is a non-United States person will not be subject to
United States federal withholding tax; provided that (a) such person does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote, (b) such person is not a
controlled foreign corporation that is related to the Company actually or
constructively through stock ownership, (c) such person is not a bank that
acquired its Debenture in consideration of an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of business and (d)
either (i) the beneficial owner certifies to the Company or its agent, under
penalties of perjury, in a suitable form that it is a not a United States person
and provides its name and address or (ii) a qualifying securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business and that holds the
Debenture certifies to the Company or its agent under penalties of perjury that
such statement has been received from the beneficial owner in a suitable form by
it or by a qualifying intermediary and furnishes the payor with a copy thereof.
If a beneficial owner of a Debenture who is a non-United States person
is engaged in a trade or business within the United States and interest
(including original issue discount) and premium, if any, on the Debenture is
-71-
<PAGE>
effectively connected with the conduct of such trade or business, such
beneficial owner 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 holder is a foreign corporation).
CONVERSION OF DEBENTURE
If a holder that is a non-United States person converts a Debenture
into Common Stock and cash and does not prove, in a manner satisfactory to the
Company or other withholding agent, that the cash received is not treated as a
dividend for U.S. federal income tax purposes, United States federal withholding
tax will be withheld from the proceeds at a rate of 30% of such proceeds unless
such holder is eligible for a reduced tax treaty rate with respect to dividend
income, in which case the tax will be withheld at the reduced rate, or
establishes that it is exempt from such tax (e.g., by providing the appropriate
form certifying its status as a foreign government). Except as may be otherwise
provided in an applicable income tax treaty, a holder that is a non-United
States person will be taxed at ordinary federal income tax rates on a net income
basis if such dividend is effectively connected with the conduct of a trade or
business of such holder within the United States (in which case the branch
profits tax may also apply if the holder is a foreign corporation) and will not
be subject to the withholding tax described in the preceding sentence. A holder
that is a non-United States person may be eligible to obtain from the IRS a
refund of tax withheld if such holder is able to establish that no tax (or a
reduced amount of tax) is due. To the extent such a holder receives cash in
lieu of fractional shares of Common Stock, such payment will be subject to the
rules described below under "--Sale or Exchange of Debentures or Common Stock."
SALE OR EXCHANGE OF DEBENTURES OR COMMON STOCK
Subject to the discussion of backup withholding below, any capital
gain realized upon a sale or exchange of a Debenture (including upon retirement
of a Debenture) or Common Stock issued upon conversion of a Debenture by a
beneficial owner who is a non-United States person ordinarily will not be
subject to United States federal income tax unless (i) such gain is effectively
connected with a trade or business conducted by such non-United States person
within the United States (in which case the branch profits tax may also apply if
the holder is a foreign corporation), (ii) in the case of a non-United States
person that is an individual, such 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) the Company is or has
been a "United States real property holding corporation" for federal income tax
purposes (which the Company does not believe it has been or is currently) and
such non-United States person has held, directly or constructively, more than 5%
of the outstanding Common Stock within the five-year period ending on the date
of the sale or exchange, and no treaty exception is applicable.
DIVIDENDS ON COMMON STOCK
Generally, any dividends paid on Common Stock received upon the
conversion of a Debenture will be subject to United States federal withholding
tax at a rate of 30% of the amount of the dividend, or at a lower applicable
treaty rate. However, if the dividend is effectively connected with a United
States trade or business of a holder that is a non-United States person, it will
be subject to United States federal income tax at ordinary federal income tax
rates on a net basis (in which case the branch profits tax may also apply if
such holder is a foreign corporation), rather than the 30% withholding tax.
Under current Treasury Regulations, a holder's status as a non-United
States person and eligibility for a tax treaty reduced rate of withholding will
be determined by reference to the holder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of
withholding, unless facts and circumstances indicate that reliance is not
warranted. However, the IRS has issued Proposed Regulations that, if adopted in
final form, would require a non-United States person to provide certifications
under penalties of perjury in order to obtain treaty benefits.
-72-
<PAGE>
FEDERAL ESTATE TAXES
Debentures beneficially owned by an individual who at the time of
death is neither a citizen nor a resident of the United States will not be
subject to United States federal estate tax as a result of such individual's
death, provided that at the time of death the income from the Debentures was not
or would not have been effectively connected with the conduct by such individual
of a trade or business within the United States and that such individual
qualified for the exemption from United States federal withholding tax (without
regard to the certification requirements) on premium and interest that is
described above under "--Payments on Debentures."
Common Stock that is beneficially owned by an individual who is
neither a citizen nor a resident of the United States at the time of death will
be included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting on IRS Form 1099 and backup withholding at a
rate of 31% will not apply to payments of principal, premium (if any) and
interest (including original issue discount) made by the Company or a paying
agent to a non-United States holder on a Debenture if the certification
described in clause (d) under "--Payments on Debentures" above is received,
provided that the payor does not have actual knowledge that the holder is a
United States person. However, interest (including original issue discount) on
a Debenture owned by a holder that is a non-United States person may be required
to be reported annually on IRS Form 1042S.
Generally, dividends on Common Stock paid to holders that are non-
United States persons that are subject to the 30% or a reduced treaty rate of
United States federal withholding tax will be exempt from backup withholding
tax. Otherwise, backup withholding of United States federal income tax at a
rate of 31% may apply to dividends paid with respect to Common Stock to holders
that are not "exempt recipients" and that fail to provide certain information
(including the holder's taxpayer identification number) in the manner required
by United States law and applicable regulations.
Payments of the proceeds from the sale by a holder that is a non-
United States person of a Debenture or Common Stock issued upon conversion of a
Debenture made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Debenture or Common Stock to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the holder certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
LEGAL OPINIONS
The validity of the Debentures will be passed upon for the Company by
Francesca M. Maher, Vice President - Law and Corporate Secretary of the Company.
Ms. Maher owns shares of Common Stock and has options to purchase additional
shares of Common Stock. Certain other legal matters will be passed upon for the
Company by Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters will
be passed upon for the Dealer Managers by Shearman & Sterling, New York, New
York.
-73-
<PAGE>
EXPERTS
The consolidated financial statements and related schedules of the Company as
of December 31, 1993 and 1992 and for each of the three years in the period
ended December 31, 1993, incorporated by reference in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report. Reference is made to said report which includes
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.
-74-
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. Letters
of Transmittal, certificates representing shares of Series A Preferred Stock
and any other required documents should be sent by each holder of Series A
Preferred Stock or 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:
By Mail: By Hand or Overnight Courier:
By Facsimile Transmission
(For Eligible Institutions Only):
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
Any questions or requests for assistance or additional copies of this
Prospectus and the Letter of Transmittal may be directed to the Exchange 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 Exchange Offer.
The Dealer Managers for the Exchange Offer are:
<TABLE>
<CAPTION>
<S> <C>
Goldman, Sachs & Co. Lehman Brothers
85 Broad Street 3 World Financial Center
New York, New York 10004 New York, New York 10285
New York State: (212) 902-1000 (Call Collect) (800) 524-4462 (Toll-Free)
Other Areas: (800) 323-5678 (Toll-Free)
</TABLE>
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
LIMITATION OF LIABILITY OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that no director of
the Company will be personally liable to the Company 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 the Company 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
The Company's Restated Certificate of Incorporation provides that directors and
officers of the Company 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 actin 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
<PAGE>
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 of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
The Company has purchased directors' and officers' liability insurance covering
certain liabilities incurred by its directors and officers in connection with
the performance of their duties.
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:
[TO COME]
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
The undersigned Registrant hereby undertakes:
(1) 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 (the "Securities Act");
(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 in the 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.
(2) That, for the purpose of determining any liability under the Securities
Act, 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.
(3) 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.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described under Item 14 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid
<PAGE>
by a director, officer or controlling person of the Registrant 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
Registrant will, unless in the opinion of its 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 Securities Act and will be governed by the final adjudication
of such issue.
(4) 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 throughout the date responding to the request.
(5) 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Elk Grove Township, Illinois on
February 3, 1995.
UAL CORPORATION
By /s/ Douglas A. Hacker
----------------------
Douglas A. Hacker
Senior Vice President - Finance
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Gerald Greenwald and Douglas A. Hacker, and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Gerald Greenwald Chairman and Chief February 3, 1995
- ------------------------- Executive
Gerald Greenwald Officer
/s/ Douglas A. Hacker Senior Vice President-Finance February 3, 1995
- -------------------------- (Principal Financial and
Douglas A. Hacker Accounting Officer)
/s/ John A. Edwardson Director February 3, 1995
- --------------------------
John A. Edwardson
/s/ Duane D. Fitzgerald Director February 3, 1995
- --------------------------
Duane D. Fitzgerald
/s/ Richard D. McCormick Director February 3, 1995
- --------------------------
Richard D. McCormick
II-4
<PAGE>
SIGNATURE TITLE DATE
/s/ John F. McGillicuddy Director February 3, 1995
- --------------------------
John F. McGillicuddy
/s/ James J. O'Connor Director February 3, 1995
- --------------------------
James J. O'Connor
/s/ Harlow Osteboe Director February 3, 1995
- --------------------------
Harlow Osteboe
/s/ John F. Peterpaul Director February 3, 1995
- --------------------------
John F. Peterpaul
/s/ Paul E. Tierney, Jr. Director February 3, 1995
- --------------------------
Paul E. Tierney, Jr.
/s/ John K. Van de Kamp Director February 3, 1995
- --------------------------
John K. Van de Kamp
/s/ Joseph V. Vittoria Director February 3, 1995
- --------------------------
Joseph V. Vittoria
/s/ Paul A. Volcker Director February 3, 1995
- --------------------------
Paul A. Volcker
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description Number
- -------- ----------- ----------
<C> <S> <C>
1.1* Form of Dealer Manager Agreement...................................................
3.1 Restated Certificate of Incorporation as corrected on February 2, 1995.............
4.1 Form of Indenture between the Registrant and ____________________, as
Trustee............................................................................
4.2* Form of Officer's Certificate relating to the Convertible Subordinated
Debentures.........................................................................
4.3* Form of Debenture..................................................................
5.1* Opinion of Francesca M. Maher......................................................
8.1 Opinion of Mayer, Brown & Platt (contained in "Certain Federal Income Tax
Considerations" and "Certain Federal Income Tax Considerations for Non-
United States Persons" and incorporated herein by reference).
23.1* Consent of Francesca M. Maher. (Contained in the opinion filed as Exhibit
5.1.)
23.2* Consent of Mayer, Brown & Platt....................................................
23.3 Consent of Arthur Andersen LLP.....................................................
24.1 Power of Attorney. (Contained on the signature page to the original registration
statement.)
25.1* Statement of Eligibility and Qualification on Form T-1.............................
99.1 Form of Letter of Transmittal......................................................
</TABLE>
* To be filed by amendment
<PAGE>
As Corrected
February 2, 1995
RESTATED CERTIFICATE OF INCORPORATION
OF
UAL CORPORATION
The present name of the corporation is UAL Corporation (the ''Corporation'').
The Corporation was incorporated under the name of UAL, Inc., the original
Certificate of Incorporation having been filed with the Secretary of State of
the State of Delaware on December 30, 1968. This Restated Certificate of
Incorporation of the Corporation, which both restates and further amends the
provisions of the Corporation's Certificate of Incorporation as heretofore
amended, restated or supplemented, was duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
FIRST. The name of the Corporation is UAL CORPORATION
SECOND. The registered office of the Corporation in the State of Delaware is
located at 32 Loockerman Square, Suite L-100, in the City of Dover, County of
Kent. The name and address of its registered agent is The Prentice-Hall
Corporation System, Inc., 32 Loockerman Square, Suite L-100, City of Dover,
County of Kent, Delaware 19901.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of capital stock of all classes of which
the Corporation shall have authority to issue is 191,100,022, divided into
eleven (11) classes, as follows: 16,000,000 shares of Preferred Stock, without
par value (hereinafter referred to as ''Serial Preferred Stock''), 25,000,000
shares of Class 1 ESOP Convertible Preferred Stock, of the par value of $0.01
per share (hereinafter referred to as ''Class 1 ESOP Convertible Preferred
Stock''), 25,000,000 shares of Class 2 ESOP Convertible Preferred Stock, of the
par value of $0.01 per share (hereinafter referred to as ''Class 2 ESOP
Convertible Preferred Stock''), 11,600,000 shares of Class P ESOP Voting Junior
Preferred Stock, of the par value of $0.01 per share (hereinafter referred to as
''Class P Voting Preferred Stock''), 9,300,000 shares of Class M ESOP Voting
Junior Preferred Stock, of the par value of $0.01 per share (hereinafter
referred to as ''Class M Voting Preferred Stock''), 4,200,000 shares of Class S
ESOP Voting Junior Preferred Stock, of the par value of $0.01 per share
(hereinafter referred to as ''Class S Voting Preferred Stock''), one (1) share
of Class Pilot MEC Junior Preferred Stock, of the par value of $0.01 per share
(hereinafter referred to as ''Class Pilot MEC Preferred Stock''), one (1) share
of Class IAM Junior Preferred Stock, of the par value of $0.01 per share
(hereinafter referred to as ''Class IAM Preferred Stock''), ten (10) shares of
Class SAM Junior Preferred Stock, of the par value of $0.01 per share
(hereinafter referred to as ''Class SAM Preferred Stock''), ten (10) shares of
Class I Junior Preferred Stock, of the par value of $0.01 per share (hereinafter
referred to as ''Class I Preferred Stock'' and, together with the Serial
Preferred Stock, the Class 1 ESOP Convertible Preferred Stock, the Class 2 ESOP
Convertible Preferred Stock, the Class P Voting Preferred Stock, the Class M
Voting Preferred Stock, the Class S Voting Preferred Stock, the Class Pilot MEC
Preferred Stock, the Class IAM Preferred Stock, and the Class SAM Preferred
Stock, collectively, as ''Preferred Stock'') and 100,000,000 shares of Common
Stock, of the par value of $0.01 per share (hereinafter referred to as ''Common
Stock'').
1
<PAGE>
PART I
Serial Preferred Stock
The Board of Directors is expressly authorized to adopt, from time to time, a
resolution or resolutions providing for the issue of Serial Preferred Stock in
one or more series, to fix the number of shares in each such series and to fix
the designations and the powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof, of each such series. The authority of the Board of
Directors with respect to each such series shall include a determination of the
following (which may vary as between the different series of Serial Preferred
Stock):
(a) The number of shares constituting the series and the distinctive
designation of the series;
(b) The dividend rate on the shares of the series, the conditions and dates
upon which dividends thereon shall be payable, the extent, if any, to which
dividends thereon shall be cumulative, and the relative rights of preference,
if any, of payment of dividends thereon;
(c) Whether or not the shares of the series are redeemable and, if
redeemable, the time or times during which they shall be redeemable and the
amount per share payable on redemption thereof, which amount may, but need
not, vary according to the time and circumstances of such redemption;
(d) The amount payable in respect of the shares of the series, in the event
of any liquidation, dissolution or winding up of the Corporation, which amount
may, but need not, vary according to the time or circumstances of such action,
and the relative rights of preference, if any, of payment of such amount;
(e) Any requirement as to a sinking fund for the shares of the series, or
any requirement as to the redemption, purchase or other retirement by the
Corporation of the shares of the series;
(f) The right, if any, to exchange or convert shares of the series into
other securities or property, and the rate or basis, time, manner and
condition of exchange or conversion;
(g) The voting rights, if any, to which the holders of shares of the series
shall be entitled in addition to the voting rights provided by law; and
(h) Any other term, condition or provision with respect to the series not
inconsistent with the provisions of this Article Fourth or any resolution
adopted by the Board of Directors pursuant thereto.
A. DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK
Unless otherwise indicated, any reference in this Article FOURTH, Part I.A to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part I.A.
Section 1. Number of Shares and Designations. Six million (6,000,000)
shares of the Serial Preferred Stock, without par value, of the Corporation are
constituted as a series thereof designated as Series A Convertible Preferred
Stock (the ''Series A Preferred Stock'').
Section 2. Definitions. For purposes of the Series A Preferred Stock, the
following terms shall have the meanings indicated:
2.1 ''Accrued Dividends'' shall have the meaning set forth in Section 4.1
hereof.
2
<PAGE>
2.2 ''Aggregate Involuntary Liquidation Amount'' shall mean the limitation
on the aggregate amount payable upon an involuntary liquidation, dissolution or
winding up in respect of all shares of Serial Preferred Stock outstanding at any
one time contained in Article FOURTH, Part I, paragraph (h) of the Corporation's
Restated Certificate of Incorporation, as the same may be increased or
eliminated from time to time.*
* Article FOURTH, Part I, paragraph (h) was amended, and the limitation on
amounts payable upon an involuntary liquidation was repealed, pursuant to a
Certificate of Amendment dated May 6, 1993.
2.3 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee authorized by such board of directors to perform
any of its responsibilities with respect to the Series A Preferred Stock.
2.4 ''Business Day'' shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
2.5 ''Common Stock'' shall mean the common stock of the Corporation, par
value $5.00 per share.*
2.6 ''Constituent Person'' shall have the meaning set forth in Section 7.5
hereof.
2.7 ''Conversion Price'' shall mean the conversion price per share of Common
Stock for which the Series A Preferred Stock is convertible, as such Conversion
Price may be adjusted pursuant to Section 7. The initial conversion price will
be $156.50.
2.8 ''Current Market Price'' of publicly traded shares of Common Stock or
any other class of capital stock or other security of the Corporation or any
other issuer for any day shall mean the last reported sales price, regular way
on such day, or, if no sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in either case as
reported on the New York Stock Exchange Composite Tape or, if such security is
not listed or admitted for trading on the New York Stock Exchange (''NYSE''), on
the principal national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any national
securities exchange, on the National Market System of the National Association
of Securities Dealers, Inc. Automated Quotations System (''NASDAQ'') or, if such
security is not quoted on such National Market System, the average of the
closing bid and asked prices on such day in the over-the-counter market as
reported by NASDAQ or, if bid and asked prices for such security on such day
shall not have been reported through NASDAQ, the average of the bid and asked
prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Board of Directors.
2.9 ''Dividend Payment Date'' shall mean May 1, August 1, November 1 and
February 1 in each year, commencing on May 1, 1993; provided, however, that if
any Dividend Payment Date falls on any day other than a Business Day, the
dividend payment due on such Dividend Payment Date shall be paid on the Business
Day immediately following such Dividend Payment Date.
2.10 ''Dividend Periods'' shall mean quarterly dividend periods commencing
on May 1, August 1, November 1 and February 1 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend Period
(other than the initial Dividend Period, which shall commence on the Issue Date
and end on and include April 30, 1993).
2.11 ''Fair Market Value'' shall mean the average of the daily Current
Market Prices of a share of Common Stock during the five (5) consecutive Trading
Days selected by the Corporation commencing not more than 20 Trading Days
before, and ending not later than, the earlier of the day in question and the
day before the ''ex'' date with respect to the issuance or distribution
requiring such computation. The term '' 'ex' date,'' when used with respect to
any issuance or distribution, means the first day on which the Common Stock
trades regular way, without the right to receive such issuance or distribution,
on the exchange or in the market, as the case may be, used to determine that
day's Current Market Price.
3
<PAGE>
* The Common Stock, par value $5.00 per share, was reclassified pursuant to the
Agreement and Plan of Recapitalization dated as of March 25, 1994, among the
Corporation, the Air Line Pilots Association, International and the
International Association of Machinists and Aerospace Workers, as amended from
time to time, a copy of which is on file in the office of the Secretary of the
Corporation, and this Restated Certificate.
2.12 ''Involuntary Liquidation Preference'' shall have the meaning set forth
in Section 4.1 hereof.
2.13 ''Issue Date'' shall mean the first date on which shares of Series A
Preferred Stock are issued and sold.
2.14 ''Junior Stock'' shall mean the Common Stock, the Series C Preferred
Stock and any other class or series of shares of the Corporation over which the
Series A Preferred Stock has preference or priority in the payment of dividends
or in the distribution of assets on any liquidation, dissolution or winding up
of the
Corporation. The Common Stock shall be deemed Junior Stock notwithstanding that
it may participate in distributions upon an involuntary liquidation, dissolution
or winding up without the Series A Preferred Stock receiving the Voluntary
Liquidation Preference.
2.15 ''non-electing share'' shall have the meaning set forth in Section 7.5
hereof.
2.16 ''Person'' shall mean any individual, firm, partnership, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
2.17 ''Redemption Date'' shall have the meaning set forth in Section 5.3
hereof.
2.18 ''Restated Certificate'' or ''Certificate of Incorporation'' shall mean
the Restated Certificate of Incorporation of the Corporation, as amended from
time to time.
2.19 ''Rights'' shall mean the rights of the Corporation which are issuable
under the Corporation's Rights Agreement dated as of December 11, 1986, and as
amended from time to time, or rights to purchase any capital stock of the
Corporation under any successor shareholder rights plan or plans adopted in
replacement of the Corporation's Rights Agreement.
2.20 ''Securities'' shall have the meaning set forth in Section 7.4(c)
hereof.
2.21 ''Series A Preferred Stock'' shall have the meaning set forth in
Section 1 hereof.
2.22 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.B of this Certificate.
2.23 ''set apart for payment'' shall be deemed to include, without any
action other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of dividends or other distribution by the Board of
Directors, the allocation of funds to be so paid on any series or class of
capital stock of the Corporation; provided, however, that if any funds for any
class or series of Junior Stock or any class or series of stock ranking on a
parity with the Series A Preferred Stock as to the payment of dividends are
placed in a separate account of the Corporation or delivered to a disbursing,
paying or other similar agent, then ''set apart for payment'' with respect to
the Series A Preferred Stock shall mean placing such funds in a separate account
or delivering such funds to a disbursing, paying or other similar agent.
2.24 ''Stated Value'' shall have the meaning set forth in Section 4.1
hereof.
2.25 ''Trading Day'' shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the National Market System of the NASDAQ,
or if such securities are not quoted on such National Market System, in the
applicable securities market in which the securities are traded.
4
<PAGE>
2.26 ''Transaction'' shall have the meaning set forth in Section 7.5 hereof.
2.27 ''Transfer Agent'' means First Chicago Trust Company of New York or
such other agent or agents of the Corporation as may be designated by the Board
of Directors as the transfer agent for the Series A Preferred Stock.
2.28 ''Voluntary Liquidation Preference'' shall have the meaning set forth
in Section 4.1 hereof.
Section 3. Dividends.
3.1 The holders of shares of the Series A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors out of assets
legally available for that purpose, dividends payable in cash at the rate per
annum of $6.25 per share of Series A Preferred Stock. Such dividends shall be
cumulative from the Issue Date, whether or not in any Dividend Period or Periods
there shall be assets of the Corporation legally available for the payment of
such dividends, and shall be payable quarterly, when, as and if declared by the
Board of Directors, in arrears on Dividend Payment Dates, commencing on May 1,
1993. Each such dividend shall be payable in arrears to the holders of record of
shares of the Series A Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on such record dates, which shall not
be more than 60 days nor less than 10 days preceding the payment dates thereof,
as shall be fixed by the Board of Directors or a duly authorized committee
thereof. Accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time, without reference to any Dividend Payment Date,
to holders of record on such date, not exceeding 45 days preceding the payment
date thereof, as may be fixed by the Board of Directors.
3.2 The amount of dividends payable for each full Dividend Period for the
Series A Preferred Stock shall be computed by dividing the annual dividend rate
by four. The amount of dividends payable for the initial Dividend Period, or any
other period shorter or longer than a full Dividend Period, on the Series A
Preferred Stock shall be computed on the basis of twelve 30-day months and a
360-day year. Holders of shares of Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of cumulative dividends, as herein provided, on the Series A Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series A Preferred Stock that may be in
arrears.
3.3 So long as any shares of the Series A Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on any class or series of stock of the
Corporation ranking, as to dividends and amounts distributable upon liquidation,
dissolution or winding up, on a parity with the Series A Preferred Stock, for
any period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series A Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of the dividend on such class or
series of parity stock. When dividends are not paid in full or a sum sufficient
for such payment is not set apart, as aforesaid, all dividends declared upon
shares of the Series A Preferred Stock and all dividends declared upon any other
class or series of stock ranking on a parity as to dividends and amounts
distributable upon liquidation, dissolution or winding up shall be declared
ratably in proportion to the respective amounts of dividends accumulated and
unpaid on the Series A Preferred Stock and accumulated and unpaid on such parity
stock.
3.4 So long as any shares of the Series A Preferred Stock are outstanding,
no dividends (other than (i) the Rights and (ii) dividends or distributions paid
in shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Stock) shall be declared or paid or set apart for payment or other
distribution declared or made upon Junior Stock, nor shall any Junior Stock or
any series of stock of the Corporation ranking, as to dividends and amounts
distributable upon liquidation, dissolution or winding up, on a parity with
Series A Preferred Stock be redeemed, purchased or otherwise acquired (other
than a redemption, purchase or other acquisition of shares of Common Stock made
for purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly (except by conversion into or exchange for
Junior Stock), unless in each case the full cumulative dividends on all
outstanding shares of the Series A Preferred
5
<PAGE>
Stock and any other stock of the Corporation ranking on a parity with the Series
A Preferred Stock, as to dividends and amounts distributable upon liquidation,
dissolution or winding up shall have been paid or set apart for payment for all
past Dividend Periods with respect to the Series A Preferred Stock and all past
dividend periods with respect to such parity stock.
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary liquidation, dissolution or winding up of
the Corporation before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for the
holders of Junior Stock, the holders of the shares of Series A Preferred Stock
shall be entitled to receive One Hundred Dollars ($100) per share of Series A
Preferred Stock (the ''Stated Value'') plus an amount equal to all dividends
(whether or not earned or declared) accrued and unpaid thereon to the date of
final distribution to such holders (the ''Voluntary Liquidation Preference'');
but such holders shall not be entitled to any further payment. In the event of
any involuntary liquidation, dissolution or winding up of the Corporation,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Stock, the holders of the shares of Series A Preferred Stock shall be entitled
to receive an amount per share of Series A Preferred Stock (the ''Involuntary
Liquidation Preference'') equal to the Voluntary Liquidation Preference or, in
the event the Corporation's Restated Certificate of Incorporation contains an
Aggregate Involuntary Liquidation Amount, the lesser of (i) the Voluntary
Liquidation Preference or (ii) an amount equal to the product of (a) the
Voluntary Liquidation Preference and (b) a fraction, the numerator of which is
the Aggregate Involuntary Liquidation Amount less the aggregate maximum amounts
distributable upon liquidation of all classes or series of stock of the
Corporation ranking, as to dividends and amounts distributable upon liquidation,
dissolution or winding up, prior to the Series A Preferred Stock and the
denominator of which is the aggregate amount of the voluntary liquidation
preference (including accrued dividends) of all shares of the Series A Preferred
Stock and any other stock of the Corporation ranking, as to dividends and
amounts distributable upon liquidation, dissolution or winding up, on a parity
with the Series A Preferred Stock; but such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of the shares of Series A Preferred Stock shall be
insufficient to pay in full the Voluntary Liquidation Preference or the
Involuntary Liquidation Preference, as the case may be, and the liquidation
preference on all other shares of any class or series of stock ranking, as to
dividends and amounts distributable upon liquidation, dissolution or winding up,
on a parity with the Series A Preferred Stock, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of Series A Preferred
Stock and any such other parity stock ratably in accordance with the respective
amounts that would be payable on such shares of Series A Preferred Stock and any
such other stock if all amounts payable thereon were paid in full. For the
purposes of this Section 4, (i) a consolidation or merger of the Corporation
with one or more corporations, or (ii) a sale or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class or
classes of stock ranking on a parity with or prior to the Series A Preferred
Stock as to dividends and amounts distributable upon liquidation, dissolution or
winding up of the Corporation, after payment shall have been made to the holders
of the Series A Preferred Stock, as and to the fullest extent provided in this
Section 4, any other series or class or classes of Junior Stock shall, subject
to the respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series A Preferred Stock shall not be entitled to share therein.
Section 5. Redemption at the Option of the Corporation.
5.1 The shares of Series A Preferred Stock will be redeemable at the option
of the Corporation by resolution of its Board of Directors, in whole, or, from
time to time, in part, at any time on or after May 1, 1996, at the following
redemption prices per share, if redeemed during the twelve-month period
beginning May 1 of the year indicated below, plus, in each case, all dividends
accrued and unpaid on the shares of Series A Preferred Stock up to the date
fixed for the redemption, upon giving notice as provided hereinbelow:
6
<PAGE>
PRICE
--------
1996................. $104.375
1997................. 103.750
1998................. 103.125
1999................. 102.500
2000................. 101.875
2001................. 101.250
2002................. 100.625
2003 and thereafter.. 100.000
5.2 If fewer than all of the outstanding shares of Series A Preferred Stock
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined pro
rata or by lot or in such other manner and subject to such regulations as the
Board of Directors in its sole discretion shall prescribe.
5.3 At least 30 days, but not more than 60 days, prior to the date fixed for
the redemption of shares of Series A Preferred Stock, a written notice shall be
mailed in a postage prepaid envelope to each holder of record of the shares of
Series A Preferred Stock to be redeemed, addressed to such holder at his post
office address as shown on the records of the Corporation, notifying such holder
of the election of the Corporation to redeem such shares, stating the date fixed
for redemption thereof (the ''Redemption Date''), and calling upon such holder
to surrender to the Corporation, on the Redemption Date at the place designated
in such notice, his certificate or certificates representing the number of
shares specified in such notice of redemption.
On or after the Redemption Date, each holder of shares of Series A Preferred
Stock to be redeemed shall present and surrender his certificate or certificates
for such shares to the Corporation at the place designated in such notice and
thereupon the redemption price of such shares shall 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 shall be cancelled. In case less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
From and after the Redemption Date (unless default shall be made by the
Corporation in payment of the redemption price), all dividends on the shares of
Series A Preferred Stock designated for redemption in such notice shall cease to
accrue, and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price of such shares
(including all accrued and unpaid dividends up to the Redemption Date) upon the
surrender of certificates representing the same, shall cease and terminate and
such shares shall not thereafter be transferred (except with the consent of the
Corporation) on the books of the Corporation, and such shares shall not be
deemed to be outstanding for any purpose whatsoever. At its election, the
Corporation, prior to the Redemption Date, may deposit the redemption price
(including all accrued and unpaid dividends up to the Redemption Date) of shares
of Series A Preferred Stock so called for redemption in trust for the holders
thereof with a bank or trust company (having a capital surplus and undivided
profits aggregating not less than $50,000,000) in the Borough of Manhattan, City
and State of New York, or in any other city in which the Corporation at the time
shall maintain a transfer agency with respect to such shares, in which case the
aforesaid notice to holders of shares of Series A Preferred Stock to be redeemed
shall state the date of such deposit, shall specify the office of such bank or
trust company as the place of payment of the redemption price, and shall 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 shall 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
interest accrued on such funds shall be paid to the Corporation from time to
time. Any moneys so deposited which shall remain unclaimed by the holders of
such shares of Series A Preferred Stock at the end of two years after the
Redemption Date shall be returned by such bank or trust company to the
Corporation.
7
<PAGE>
If a notice of redemption has been given pursuant to this Section 5 and any
holder of shares of Series A Preferred Stock shall, prior to the close of
business on the day preceding the Redemption Date, give written notice to the
Corporation pursuant to Section 7 below of the conversion of any or all of the
shares to be redeemed held by such holder (accompanied by a certificate or
certificates for such shares, duly endorsed or assigned to the Corporation, and
any necessary transfer tax payment, as required by Section 7 below), then such
redemption shall not become effective as to such shares to be converted, such
conversion shall become effective as provided in Section 7 below, and any moneys
set aside by the Corporation for the redemption of such shares of converted
Series A Preferred Stock shall revert to the general funds of the Corporation.
Section 6. Shares to be Retired. All shares of Series A Preferred Stock
which shall have been issued and reacquired in any manner by the Corporation
(excluding, until the Corporation elects to retire them, shares which are held
as treasury shares) shall be restored to the status of authorized but unissued
shares of Serial Preferred Stock, without designation as to series.
Section 7. Conversion. Holders of shares of Series A Preferred Stock shall
have the right to convert all or a portion of such shares into shares of Common
Stock, as follows:
7.1 Subject to and upon compliance with the provisions of this Section 7, a
holder of shares of Series A Preferred Stock shall have the right, at his or her
option, at any time after 40 days after the Issue Date, to convert such shares
into the number of fully paid and nonassessable shares of Common Stock obtained
by dividing the aggregate Stated Value of such shares by the Conversion Price
(as in effect on the date provided for in the last paragraph of Section 7.2) by
surrendering such shares to be converted, such surrender to be made in the
manner provided in Section 7.2; provided, however, that the right to convert
shares called for redemption pursuant to Section 5 shall terminate at the close
of business on the day preceding the Redemption Date, unless the Corporation
shall default in making payment of the cash payable upon such redemption under
Section 5 hereof. Certificates will be issued for the remaining shares of Series
A Preferred Stock in any case in which fewer than all of the shares of Series A
Preferred Stock represented by a certificate are converted.
7.2 In order to exercise the conversion right, the holder of shares of
Series A Preferred Stock to be converted shall surrender the certificate or
certificates representing such shares, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent in the Borough of
Manhattan, City of New York, accompanied by written notice to the Corporation
that the holder thereof elects to convert Series A Preferred Stock. Unless the
shares issuable on conversion are to be issued in the same name as the name in
which such share of Series A Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
Holders of shares of Series A Preferred Stock at the close of business on a
dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date and prior to such
Dividend Payment Date. However, shares of Series A Preferred Stock surrendered
for conversion during the period between the close of business on any dividend
payment record date and the opening of business on the corresponding Dividend
Payment Date (except shares converted after the issuance of a notice of
redemption with respect to a Redemption Date during such period, which shall be
entitled to such dividend on the Dividend Payment Date) must be accompanied by
payment of an amount equal to the dividend payable on such shares on such
Dividend Payment Date. A holder of shares of Series A Preferred Stock on a
dividend payment record date who (or whose transferee) tenders any such shares
for conversion into shares of Common Stock on such Dividend Payment Date will
receive the dividend payable by the Corporation on such shares of Series A
Preferred Stock on such date, and the converting holder need not include payment
of the amount of such dividend upon surrender of shares of Series A Preferred
Stock for conversion. Except as provided above, the Corporation shall make no
payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares or for dividends on the shares of Common Stock issued upon such
conversion.
8
<PAGE>
As promptly as practicable after the surrender of certificates for shares of
Series A Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on his or her written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with provisions of
this Section 7, and any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided in Section 7.3.
Each conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the certificates for shares of Series A
Preferred Stock shall have been surrendered and such notice (and if applicable,
payment of an amount equal to the dividend payable on such shares) received by
the Corporation as aforesaid, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby at such time on such date and such
conversion shall be at the Conversion Price in effect at such time on such date,
unless the stock transfer books of the Corporation shall be closed on that date,
in which event such person or persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such shares shall have been
surrendered and such notice received by the Corporation.
7.3 No fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Series A Preferred Stock. Instead
of any fractional interest in a share of Common Stock that would otherwise be
deliverable upon the conversion of a share of Series A Preferred Stock, the
Corporation shall pay to the holder of such share an amount in cash based upon
the Current Market Price of Common Stock on the Trading Day immediately
preceding the date of conversion. If more than one share shall be surrendered
for conversion at one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series A Preferred Stock so surrendered.
7.4 The Conversion Price shall be adjusted from time to time as follows:
(a) If the Corporation shall after the Issue Date (A) pay a dividend or
make a distribution on its capital stock in shares of its Common Stock, (B)
subdivide its outstanding Common Stock into a greater number of shares, (C)
combine its outstanding Common Stock into a smaller number of shares or (D)
issue any shares of capital stock by reclassification of its Common Stock, the
Conversion Price in effect at the opening of business on the day next
following the date fixed for the determination of stockholders entitled to
receive such dividend or distribution or at the opening of business on the day
next following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be adjusted so
that the holder of any share of Series A Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares
of Common Stock that such holder would have owned or have been entitled to
receive after the happening of any of the events described above had such
share been converted immediately prior to the record date in the case of a
dividend or distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subparagraph (a) shall become effective immediately after the opening of
business on the day next following the record date (except as provided in
Section 7.8 below) in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the day next following
the effective date in the case of a subdivision, combination or
reclassification.
(b) If the Corporation shall issue after the Issue Date rights or warrants
(in each case, other than the Rights) to all holders of Common Stock entitling
them (for a period expiring within 45 days after the record date mentioned
below) to subscribe for or purchase Common Stock at a price per share less
than the Fair Market Value per share of Common Stock on the record date for
the determination of stockholders entitled to receive such rights or warrants,
then the Conversion Price in effect at the opening of business on the day next
following such record date shall be adjusted to equal the price determined by
multiplying (I) the Conversion Price in effect immediately prior to the
opening of business on the day next following the date fixed for such
determination by (II) a fraction, the numerator of which shall be the sum of
(A) the number of shares of
9
<PAGE>
Common Stock outstanding on the close of business on the date fixed for such
determination and (B) the number of shares that the aggregate proceeds to the
Corporation from the exercise of such rights or warrants for Common Stock
would purchase at such Fair Market Value, and the denominator of which shall
be the sum of (A) the number of shares of Common Stock outstanding on the
close of business on the date fixed for such determination and (B) the number
of additional shares of Common Stock offered for subscription or purchase
pursuant to such rights or warrants. Such adjustment shall become effective
immediately after the opening of business on the day next following such
record date (except as provided in Section 7.8 below). In determining whether
any rights or warrants entitle the holders of Common Stock to subscribe for or
purchase shares of Common Stock at less than such Fair Market Value, there
shall be taken into account any consideration received by the Corporation upon
issuance and upon exercise of such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
(c) If the Corporation shall distribute to all holders of its Common Stock
any shares of capital stock of the Corporation (other than Common Stock) or
evidence of its indebtedness or assets (excluding cash dividends or
distributions paid from profits or surplus of the Corporation) or rights or
warrants (in each case, other than the Rights) to subscribe for or purchase
any of its securities (excluding those rights and warrants issued to all
holders of Common Stock entitling them for a period expiring within 45 days
after the record date referred to in subparagraph (b) above to subscribe for
or purchase Common Stock, which rights and warrants are referred to in and
treated under subparagraph (b) above (any of the foregoing being hereinafter
in this subparagraph (c) called the ''Securities''), then in each such case
the Conversion Price shall be adjusted so that it shall equal the price
determined by multiplying (I) the Conversion Price in effect immediately prior
to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by (II) a fraction, the
numerator of which shall be the Fair Market Value per share of the Common
Stock on the record date mentioned below less the then fair market value (as
determined by the Board of Directors, whose determination shall be conclusive)
of the portion of the capital stock or assets or evidences of indebtedness so
distributed or of such rights or warrants applicable to one share of Common
Stock, and the denominator of which shall be the Fair Market Value per share
of the Common Stock on the record date mentioned below. Such adjustment shall
become effective immediately at the opening of business on the Business Day
next following (except as provided in Section 7.8 below) the record date for
the determination of shareholders entitled to receive such distribution. For
the purposes of this clause (c), the distribution of a Security, which is
distributed not only to the holders of the Common Stock on the date fixed for
the determination of stockholders entitled to such distribution of such
security, but also is distributed with each share of Common Stock delivered to
a person converting a share of Series A Preferred Stock after such
determination date, shall not require an adjustment of the Conversion Price
pursuant to this clause (c); provided that on the date, if any, on which a
Person converting a share of Series A Preferred Stock would no longer be
entitled to receive such Security with a share of Common Stock (other than as
a result of the termination of all such Securities), a distribution of such
Securities shall be deemed to have occurred and the Conversion Price shall be
adjusted as provided in this clause (c) (and such day shall be deemed to be
''the date fixed for the determination of the stockholders entitled to receive
such distribution'' and ''the record date'' within the meaning of the two
preceding sentences).
(d) No adjustment in the Conversion Price shall be required unless such
adjustment would require a cumulative increase or decrease of at least 1% in
such price; provided, however, that any adjustments that by reason of this
subparagraph (d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made in accordance with the
provisions of this Section 7 (other than this subparagraph (d)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock. Notwithstanding any
other provisions of this Section 7, the Corporation shall not be required to
make any adjustment of the Conversion Price for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends
on securities of the Corporation. All calculations under this Section 7 shall
be made to the nearest cent (with $.005 being rounded upward) or to the
nearest 1/10 of a share (with .05 of a share being rounded upward), as the
case may be. Anything in this Section 7.4 to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to make such
reductions in the Conversion Price, in addition to those required by this
Section 7.4, as it in its discretion shall determine to
10
<PAGE>
be advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights or warrants
to purchase stock or securities, or a distribution of other assets (other than
cash dividends) hereafter made by the Corporation to its stockholders shall
not be taxable.
7.5 If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, sale of all or substantially all of
the Corporation's assets or recapitalization of the Common Stock and excluding
any transaction as to which Section 7.4(a) applies) (each of the foregoing being
referred to herein as a ''Transaction''), in each case as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Series A Preferred Stock which is not converted into the right to
receive stock, securities or other property in connection with such Transaction
shall thereafter be convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination thereof)
receivable upon the consummation of such Transaction by a holder of that number
of shares or fraction thereof of Common Stock into which one share of Series A
Preferred Stock was convertible immediately prior to such Transaction, assuming
such holder of Common Stock (i) is not a Person with which the Corporation
consolidated or into which the Corporation merged or which merged into the
Corporation or to which such sale or transfer was made, as the case may be
(''Constituent Person''), or an affiliate of a Constituent Person and (ii)
failed to exercise his rights of election, if any, as to the kind or amount of
stock, securities and other property (including cash) receivable upon such
Transaction (provided that if the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction is not the same for
each share of Common Stock of the Corporation held immediately prior to such
Transaction by other than a Constituent Person or an affiliate thereof and in
respect of which such rights of election shall not have been exercised (''non-
electing share''), then for the purpose of this Section 7.5 the kind and amount
of stock, securities and other property (including cash) receivable upon such
Transaction by each non-electing share shall be deemed to be the kind and amount
so receivable per share by the plurality of the non-electing shares). The
Corporation shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this Section 7.5 and it shall
not consent or agree to the occurrence of any Transaction until the Corporation
has entered into an agreement with the successor or purchasing entity, as the
case may be, for the benefit of the holders of the Series A Preferred Stock that
will contain provisions enabling the holders of the Series A Preferred Stock
that remains outstanding after such Transaction to convert into the
consideration received by holders of Common Stock at the Conversion Price in
effect immediately prior to such Transaction. The provisions of this Section 7.5
shall similarly apply to successive Transactions.
7.6 If:
(a) the Corporation shall declare a dividend (or any other distribution) on
the Common Stock (other than in cash out of profits or surplus and other than
the Rights); or
(b) the Corporation shall authorize the granting to the holders of the
Common Stock of rights or warrants (other than the Rights) to subscribe for or
purchase any shares of any class or any other rights or warrants (other than
the Rights); or
(c) there shall be any reclassification of the Common Stock (other than an
event to which Section 7.4(a) applies) or any consolidation or merger to which
the Corporation is a party and for which approval of any stockholders of the
Corporation is required, or the sale or transfer of all or substantially all
of the assets of the Corporation as an entirety; or
(d) there shall occur the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of shares of the Series A Preferred Stock at
their addresses as shown on the stock records of the Corporation, as promptly as
possible, but at least 15 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights or warrants are
to be determined or (B) the date on which such reclassification,
11
<PAGE>
consolidation, merger, sale, transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up. Failure to give or receive such notice or any defect
therein shall not affect the legality or validity of the proceedings described
in this Section 7.
7.7 Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be prima facie evidence of the correctness of such adjustment. Promptly after
delivery of such certificate, the Corporation shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price
and the effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holder of each share of Series A
Preferred Stock at such holder's last address as shown on the stock records of
the Corporation.
7.8 In any case in which Section 7.4 provides that an adjustment shall
become effective on the day next following a record date for an event, the
Corporation may defer until the occurrence of such event (A) issuing to the
holder of any share of Series A Preferred Stock converted after such record date
and before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (B) paying to such holder any amount in cash in
lieu of any fraction pursuant to Section 7.3.
7.9 For purposes of this Section 7, the number of shares of Common Stock at
any time outstanding shall not include any shares of Common Stock then owned or
held by or for the account of the Corporation. The Corporation shall not pay a
dividend or make any distribution on shares of Common Stock held in the treasury
of the Corporation.
7.10 There shall be no adjustment of the Conversion Price in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in this Section 7. If
any action or transaction would require adjustment of the Conversion Price
pursuant to more than one paragraph of this Section 7, only one adjustment shall
be made and such adjustment shall be the amount of adjustment that has the
highest absolute value.
7.11 If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section 7, that in the opinion of the Board
of Directors would materially adversely affect the conversion rights of the
holders of the shares of Series A Preferred Stock, the Conversion Price for the
Series A Preferred Stock may be adjusted, to the extent permitted by law, in
such manner, if any, and at such time, as the Board of Directors may determine
to be equitable in the circumstances.
7.12 The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purpose of effecting conversion of the Series A
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series A Preferred Stock not theretofore
converted. For purposes of this Section 7.12, the number of shares of Common
Stock that shall be deliverable upon the conversion of all outstanding shares of
Series A Preferred Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the Series A Preferred Stock shall be validly issued, fully paid
and non-assessable. Before taking any action that would cause an adjustment
reducing the Conversion Price below the then-par value of the shares of Common
Stock deliverable upon conversion of the Series A Preferred Stock, the
Corporation will take any corporate action that, in the opinion of its counsel,
may be necessary in order that the Corporation may validly and legally issue
fully-paid and nonassessable shares of Common Stock at such adjusted Conversion
Price.
12
<PAGE>
The Corporation shall endeavor to list the shares of Common Stock required to
be delivered upon conversion of the Series A Preferred Stock, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of such delivery.
Prior to the delivery of any securities that the Corporation shall be
obligated to deliver upon conversion of the Series A Preferred Stock, the
Corporation shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
7.13 The Corporation will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion of the Series A
Preferred Stock pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock or other securities
or property in a name other than that of the holder of the Series A Preferred
Stock to be converted and no such issue or delivery shall be made unless and
until the person requesting any issue or delivery has paid to the Corporation
the amount of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
Section 8. Ranking. Any class or series of stock of the Corporation shall
be deemed to rank:
(A) prior to the Series A Preferred Stock, as to the payment of dividends
and as to distributions of assets upon liquidation, dissolution or winding up,
if the holders of such class or series shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or
winding up in preference or priority to the holders of Series A Preferred
Stock;
(B) on a parity with the Series A Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Series A Preferred Stock if the holders of such class of stock or series
and the Series A Preferred Stock shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per
share or liquidation preferences, without preference or priority one over the
other; and
(C) junior to the Series A Preferred Stock, as to the payment of dividends
or as to the distribution of assets upon liquidation, dissolution or winding
up, if such stock or series shall be Common Stock or Series C Preferred Stock
or if the holders of Series A Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of shares of such stock or series.
Common Stock shall be deemed junior to the Series A Preferred Stock
notwithstanding that it may participate in distributions upon an involuntary
liquidation, dissolution or winding up without the Series A Preferred Stock
receiving the Voluntary Liquidation Preference.
Section 9. Voting.
9.1 Unless the affirmative vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders of at
least 66-2/3% of all of the outstanding shares of Series A Preferred Stock and
all other affected series of Serial Preferred Stock ranking on a parity with the
Series A Preferred Stock as to dividends and amounts distributable upon
liquidation, dissolution and winding up, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose, at which the holders
of shares of Series A Preferred Stock and such other series of Serial Preferred
Stock shall vote together as a single class without regard to series, shall be
necessary for authorizing, effecting or validating the amendment, alteration or
repeal of any of the provisions of this Restated Certificate or of any
certificate amendatory thereof or supplemental thereto (including any
Certificate of Designations, Preferences and Rights or any similar document
relating to any series of Serial Preferred Stock) which would materially
adversely affect the preferences, rights, powers or privileges of the Series
13
<PAGE>
A Preferred Stock; provided, however, that the amendment of the provisions of
this Restated Certificate so as to authorize or create, or to increase the
authorized amount of, any Junior Stock or any shares of any class ranking on a
parity with the Series A Preferred Stock shall not be deemed to materially
adversely affect the preferences, rights, powers or privileges of Series A
Preferred Stock; and provided, further, that the amendment of the provisions of
the Restated Certificate of Incorporation so as to increase or eliminate the
Aggregate Involuntary Liquidation Amount shall not be deemed to materially
adversely affect the preferences, rights, powers or privileges of Series A
Preferred Stock.
9.2 Unless the affirmative vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders of at
least 66-2/3% of all of the outstanding shares of Series A Preferred Stock and
all other series of Serial Preferred Stock ranking on a parity with the Series A
Preferred Stock as to dividends and amounts distributable upon liquidation,
dissolution or winding up, given in person or by proxy, either in writing or by
a vote at a meeting called for the purpose at which the holders of shares of
Series A Preferred Stock and such other series of Serial Preferred Stock shall
vote together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the Series A
Preferred Stock as to dividends or upon liquidation, dissolution or winding up,
or the reclassification of any authorized stock of the Corporation into any such
prior shares, or the creation, authorization or issuance of any obligation or
security convertible into or evidencing the right to purchase any such prior
shares.
9.3 If at the time of any annual meeting of stockholders for the election of
directors a default in preference dividends (as defined below) on the Series A
Preferred Stock and any other series of Serial Preferred Stock with respect to
which such a default exists shall exist, the number of directors constituting
the Board of Directors of the Corporation shall be increased by two, and the
holders of the Series A Preferred Stock and such other series shall have the
right at such meeting, voting together as a single class without regard to
series, to the exclusion of the holders of common stock, to elect two directors
of the Corporation to fill such newly created directorships. Such right shall
continue until there are no dividends in arrears upon the Serial Preferred
Stock. Any Preferred Director may be removed by, and shall not be removed except
by, the vote of the holders of record of the outstanding shares of Serial
Preferred Stock, voting together as a single class without regard to series, at
a meeting of the stockholders, or of the holders of shares of Serial Preferred
Stock as to which a default exists, called for the purpose. So long as a default
in any preference dividends on the Serial Preferred Stock shall exist, (a) any
vacancy in the office of a Preferred Director may be filled (except as provided
in the following clause (b)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (b) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of Serial Preferred Stock as to which a
default exists, voting together as a single class without regard to series, at
the same meeting at which such removal shall be voted. Each director appointed
as aforesaid by the remaining Preferred Director shall be deemed, for all
purposes hereof, to be a Preferred Director. Whenever a default in preference
dividends shall no longer exist, the term of office of each Preferred Director
shall terminate and the number of directors constituting the Board of Directors
of the Corporation shall be reduced by two. For the purposes hereof, a ''default
in preference dividends'' on any series of Serial Preferred Stock shall be
deemed to exist whenever the equivalent of six quarterly dividends have not been
declared and paid or set apart for payment, whether or not consecutive, and,
having so occurred, such default shall be deemed to exist thereafter until, but
only until, all accrued dividends on all shares of Serial Preferred Stock of
each and every series then outstanding shall have been declared and paid or set
apart for payment to the end of the last preceding dividend period.
For purposes of the foregoing provisions of this Section 9, each share of
Series A Preferred Stock shall have one (1) vote per share. Except as otherwise
required by applicable law or as set forth herein, the shares of Series A
Preferred Stock shall not have any relative, participating, optional or other
special voting rights and powers and the consent of the holders thereof shall
not be required for the taking of any corporate action.
Section 10. Record Holders. The Corporation and the Transfer Agent may
deem and treat the record holder of any shares of Series A Preferred Stock as
the true and lawful owner thereof for all purposes, and neither the Corporation
nor the Transfer Agent shall be affected by any notice to the contrary.
14
<PAGE>
B. DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B PREFERRED STOCK
Unless otherwise indicated, any reference in this Article FOURTH, Part I.B to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part I.B.
Section 1. Number of Shares and Designations. Fifty thousand (50,000)
shares of the Serial Preferred Stock, without par value, of the Corporation are
hereby constituted as a series designated as Series B Preferred Stock (the
''Series B Preferred Stock'').
Section 2. Definitions. For purposes of the Series B Preferred Stock, the
following terms shall have the meanings indicated:
2.1 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee of such board of directors authorized to perform
any of its responsibilities with respect to the Series B Preferred Stock.
2.2 ''Business Day'' shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
2.3 ''Common Stock'' shall mean the common stock of the Corporation, par
value $0.01 per share.
2.4 ''default in preference dividends'' shall have the meaning set forth in
Section 8.3 hereof.
2.5 ''Dividend Payment Date'' shall mean February 1, May 1, August 1 and
November 1 in each year, commencing on August 1, 1994; provided that if any
Dividend Payment Date falls on any day other than a Business Day, the dividend
payment due on such Dividend Payment Date shall be paid on the Business Day
immediately following such Dividend Payment Date.
2.6 ''Dividend Periods'' shall mean quarterly dividend periods commencing on
February 1, May 1, August 1 and November 1 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend Period
(other than the initial Dividend Period, which shall commence on the Issue Date
and end on and include July 31, 1994.)
2.7 ''Issue Date'' shall mean the first date on which shares of Series B
Preferred Stock are issued.
2.8 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.9 ''Preferred Director'' shall mean any director of the Corporation
elected or appointed pursuant to Section 8.3 hereof.
2.10 ''Redemption Date'' shall have the meaning set forth in Section 5.3
hereof.
2.11 ''Restated Certificate'' shall mean this Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.12 ''Rights'' shall mean the rights of the Corporation that are issuable
under the Corporation's Rights Agreement dated as of December 11, 1986, and as
amended from time to time, or rights to purchase any capital stock of the
Corporation under any successor shareholder rights plan or plans adopted in
replacement of the Corporation's Rights Agreement.
15
<PAGE>
2.13 ''set apart for payment'' shall be deemed to include, without any
action other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry that indicates,
pursuant to a declaration of dividends or other distribution by the Board of
Directors, the allocation of funds to be so paid on any series or class of
capital stock of the Corporation; provided that if any funds for any class or
series of stock ranking on a parity with or junior to the Series B Preferred
Stock as to the payment of dividends are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar agent, then
''set apart for payment'' with respect to the Series B Preferred Stock shall
mean placing such funds in a separate account or delivering such funds to a
disbursing, paying or other similar agent.
2.14 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated by the Board of Directors as the transfer agent
for the Series B Preferred Stock.
Section 3. Dividends.
3.1 The holders of shares of the Series B Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors out of assets
legally available for that purpose, dividends payable in cash at the rate per
annum of $3,062.50 per share of Series B Preferred Stock. Such dividends shall
be cumulative from the Issue Date, whether or not in any Dividend Period or
Periods there shall be assets of the Corporation legally available for the
payment of such dividends, and shall be payable quarterly, when, as and if
declared by the Board of Directors, in arrears on Dividend Payment Dates,
commencing on August 1, 1994. Each such dividend shall be payable in arrears to
the holders of record of shares of the Series B Preferred Stock, as they appear
on the stock records of the Corporation at the close of business on such record
dates, which shall not be more than 60 days nor less than 10 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors or a duly
authorized committee thereof. Accrued and unpaid dividends for any past Dividend
Periods may be declared and paid at any time, without reference to any Dividend
Payment Date, to holders of record on such date, not exceeding 45 days preceding
the payment date thereof, as may be fixed by the Board of Directors.
3.2 The amount of dividends payable for each full Dividend Period for the
Series B Preferred Stock shall be computed by dividing the annual dividend rate
by four. The amount of dividends payable for the initial Dividend Period, or any
other period shorter or longer than a full Dividend Period, on the Series B
Preferred Stock shall be computed on the basis of twelve-30-day months and a
360-day year. Holders of shares of Series B Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of cumulative dividends, as herein provided, on the Series B Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series B Preferred Stock that may be in
arrears.
3.3 So long as any shares of the Series B Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on any class or series of stock of the
Corporation ranking, as to dividends and amounts distributable upon liquidation,
dissolution or winding up, on a parity with the Series B Preferred Stock, for
any period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series B Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of the dividend on such class or
series of parity stock. When dividends are not paid in full or a sum sufficient
for such payment is not set apart, as aforesaid, all dividends declared upon
shares of the Series B Preferred Stock and all dividends declared upon any other
class or series of stock ranking on a parity as to dividends and amounts
distributable upon liquidation, dissolution or winding up shall be declared
ratably in proportion to the respective amounts of dividends accumulated and
unpaid on the Series B Preferred Stock and accumulated and unpaid on such parity
stock.
3.4 So long as any shares of the Series B Preferred Stock are outstanding,
no dividends (other than (i) the Rights and (ii) dividends or distributions paid
in shares of, or options, warrants or rights to subscribe for or purchase shares
of, any class or series of stock of the Corporation that is junior to the Series
B Preferred Stock as to the payment of dividends and as to distributions upon
liquidation, dissolution or winding up of the Corporation) shall be declared or
paid or set apart for payment or other distribution declared or made upon any
class or series of stock of the Corporation that is junior to the Series B
Preferred Stock as to the payment of dividends, nor shall any
16
<PAGE>
class or series of stock of the Corporation ranking, as to dividends and amounts
distributable upon liquidation, dissolution or winding up, on a parity with or
junior to the Series B Preferred Stock be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan of the
Corporation or any subsidiary) for any consideration (or any moneys be paid to
or made available for a sinking fund for the redemption of any shares of any
such stock) by the Corporation, directly or indirectly (except by conversion
into or exchange for any class or series of stock of the Corporation that is
junior to the Series B Preferred Stock as to payment of dividends and as to
distributions upon liquidation, dissolution or winding-up of the Corporation),
unless in each case the full cumulative dividends on all outstanding shares of
the Series B Preferred Stock and any other stock of the Corporation ranking on a
parity with the Series B Preferred Stock, as to dividends and amounts
distributable upon liquidation, dissolution or winding up shall have been paid
or set apart for payment for all past Dividend Periods with respect to the
Series B Preferred Stock and all past dividend periods with respect to such
parity stock.
Section 4. Payments upon Liquidation.
4.1 In the event of any liquidation, dissolution or winding up of the
Corporation before any payment or distribution of the assets of the Corporation
(whether capital or surplus) shall be made to or set apart for the holders of
any class or series of stock of the Corporation that ranks junior to the Series
B Preferred Stock as to the receipt of amounts distributable upon liquidation,
dissolution or winding up of the Corporation, the holders of the shares of
Series B Preferred Stock shall be entitled to receive Twenty-Five Thousand
Dollars ($25,000) per share of Series B Preferred Stock plus an amount equal to
all dividends (whether or not earned or declared) accrued and unpaid thereon to
the date of final distribution to such holders (the ''Liquidation Preference'');
but such holders shall not be entitled to any further payment. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of the shares
of Series B Preferred Stock shall be insufficient to pay in full the Liquidation
Preference and the liquidation preference on all other shares of any class or
series of stock ranking, as to dividends and amounts distributable upon
liquidation, dissolution or winding up, on a parity with the Series B Preferred
Stock, then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Series B Preferred Stock and any such other parity stock
ratably in accordance with the respective amounts that would be payable on such
shares of Series B Preferred Stock and any such other parity stock if all
amounts payable thereon were paid in full. For the purposes of this Section 4,
neither (i) a consolidation or merger of the Corporation with or into one or
more corporations nor (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class or
classes of stock ranking on a parity with or prior to the Series B Preferred
Stock as to dividends and amounts distributable upon liquidation, dissolution or
winding up of the Corporation, after payment shall have been made to the holders
of the Series B Preferred Stock, as and to the fullest extent provided in this
Section 4, any other class or series of stock of the Corporation that ranks
junior to the Series B Preferred Stock as to amounts distributable upon
dissolution, liquidation or winding up of the Corporation shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series B Preferred Stock shall not be entitled to share therein.
Section 5. Redemption at the Option of the Corporation.
5.1 The shares of Series B Preferred Stock shall be redeemable at the option
of the Corporation by resolution of its Board of Directors, in whole, or, from
time to time, in part, at any time on or after July 12, 2004, at the redemption
price of $25,000.00 per share plus all dividends accrued and unpaid on the
shares of Series B Preferred Stock up to the date fixed for the redemption, upon
giving notice as provided herein below.
5.2 If fewer than all of the outstanding shares of Series B Preferred Stock
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined pro
rata or by lot or in such other manner and subject to such regulations as the
Board of Directors in its sole discretion shall prescribe.
17
<PAGE>
5.3 At least 30 days, but not more than 60 days, prior to the date fixed for
the redemption of shares of Series B Preferred Stock, a written notice shall be
mailed in a postage prepaid envelope to each holder of record of the shares of
Series B Preferred Stock to be redeemed, addressed to such holder at his post
office address as shown on the records of the Corporation, notifying such holder
of the election of the Corporation to redeem such shares, stating the date fixed
for redemption thereof (the ''Redemption Date'') and calling upon such holder to
surrender to the Corporation, on the Redemption Date at the place designated in
such notice, the certificate or certificates representing the number of shares
specified in such notice of redemption. On or after the Redemption Date, each
holder of shares of Series B Preferred Stock to be redeemed shall present and
surrender such certificate or certificates for such shares to the Corporation at
the place designated in such notice and thereupon the redemption price of such
shares shall 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 shall be cancelled. In case less than all the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the shares not redeemed.
From and after the Redemption Date (unless default shall be made by the
Corporation in payment of the redemption price), all dividends on the shares of
Series B Preferred Stock designated for redemption in such notice shall cease to
accrue, and all rights of the holders thereof as stockholders of the
Corporation, except the right to receive the redemption price of such shares
(including all accrued and unpaid dividends up to the Redemption Date) upon the
surrender of certificates representing the same, shall cease and terminate and
such shares shall not thereafter be transferred (except with the consent of the
Corporation) on the books of the Corporation, and such shares shall not be
deemed to be outstanding for any purpose whatsoever. At its election, the
Corporation, prior to the Redemption Date, may deposit the redemption price
(including all accrued and unpaid dividends up to the Redemption Date) of shares
of Series B Preferred Stock called for redemption in trust for the holders
thereof with a bank or trust company (having a capital surplus and undivided
profits aggregating not less than $50,000,000) in the Borough of Manhattan, City
and State of New York, or in any other city in which the Corporation at the time
shall maintain a transfer agency with respect to such shares, in which case the
aforesaid notice to holders of shares of Series B Preferred Stock to be redeemed
shall state the date of such deposit, shall specify the office of such bank or
trust company as the place of payment of the redemption price, and shall 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 shall not be
later than the Redemption Date). Any interest accrued on such funds shall be
paid to the Corporation from time to time. Any moneys so deposited that shall
remain unclaimed by the holders of such shares of Series B Preferred Stock at
the end of two years after the Redemption Date shall be returned by such bank or
trust company to the Corporation.
Section 6. Shares to be Retired.
All shares of Series B Preferred Stock that have been issued and reacquired in
any manner by the Corporation (excluding, until the Corporation elects to retire
them, shares that are held as treasury shares) shall be restored to the status
of authorized but unissued shares of Serial Preferred Stock, without designation
as to series.
Section 7. Ranking.
7.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Series B Preferred Stock, as to the payment of dividends
and as to distributions of assets upon liquidation, dissolution or winding up,
if the holders of such class or series shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or
winding up in preference or priority to the holders of Series B Preferred
Stock;
(b) on a parity with the Series B Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Series B Preferred Stock, if the holders of such class of stock or series
and the Series B Preferred Stock shall be entitled to the receipt of
18
<PAGE>
dividends and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or priority
one over the other; and
(c) junior to the Series B Preferred Stock, as to the payment of dividends
or as to the distribution of assets upon liquidation, dissolution or winding
up, if the holders of Series B Preferred Stock shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up in preference or priority to the holders of shares of such class
or series.
7.2 The Series A Convertible Preferred Stock and the Series D Redeemable
Preferred Stock shall each be deemed to rank on a parity with the Series B
Preferred Stock. The Class 1 ESOP Convertible Preferred Stock, the Class 2 ESOP
Convertible Preferred Stock, the Class M ESOP Voting Junior Preferred Stock, the
Class P ESOP Voting Junior Preferred Stock, the Class S ESOP Voting Junior
Preferred Stock, the Class I Junior Preferred Stock, the Class IAM Junior
Preferred Stock, the Class Pilot MEC Junior Preferred Stock, the Class SAM
Junior Preferred Stock, the Series C Junior Participating Preferred Stock and
the Common Stock shall each be deemed to rank junior to the Series B Preferred
Stock as to receipt of dividends and as to amounts distributable upon
liquidation, dissolution or winding up.
Section 8. Voting.
8.1 Unless the affirmative vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders of at
least 66-2/3% of all of the outstanding shares of Series B Preferred Stock,
given in person or by proxy, either in writing or by a vote at a meeting called
for the purpose shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of this Restated
Certificate or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designations, Preferences and Rights or any
similar document relating to any series of Serial Preferred Stock) that would
materially adversely affect the preferences, rights, powers or privileges of the
Series B Preferred Stock; provided that the amendment of the provisions of this
Restated Certificate so as to authorize or create, or to increase the authorized
amount of, any shares of any class or series ranking on a parity with or junior
to the Series B Preferred Stock shall not be deemed to materially adversely
affect the preferences, rights, powers or privileges of Series B Preferred
Stock.
8.2 Unless the affirmative vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders of at
least 66-2/3% of all of the outstanding shares of Series B Preferred Stock,
given in person or by proxy, either in writing or by a vote at a meeting called
for the purpose shall be necessary for authorizing, effecting or validating the
creation, authorization or issue of any shares of any class or series of stock
of the Corporation ranking prior to the Series B Preferred Stock as to dividends
or upon liquidation, dissolution or winding up, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issuance of any obligation or security convertible into or
evidencing the right to purchase any such prior shares.
8.3 If at the time of any annual meeting of stockholders for the election of
directors a default in preference dividends (as defined below) on the Series B
Preferred Stock and any other series of Serial Preferred Stock with respect to
which such a default exists shall exist, then (without duplication of the
provisions of Article FOURTH, Part 1.A, Section 9.3 of this Restated
Certificate) the number of directors constituting the Board of Directors of the
Corporation shall be increased by two, and the holders of the Series B Preferred
Stock and such other series shall have the right at such meeting, voting
together as a single class without regard to series, to the exclusion of the
holders of common stock, to elect two directors of the Corporation to fill such
newly created directorships. Such right shall continue until there are no
dividends in arrears upon the Serial Preferred Stock. Any Preferred Director may
be removed by, and shall not be removed except by, the vote of the holders of
record of the outstanding shares of Serial Preferred Stock, voting together as a
single class without regard to series, at a meeting of the stockholders, or of
the holders of shares of Serial Preferred Stock as to which a default exists,
called for the purpose. So long as a default in any preference dividends on the
Serial Preferred Stock shall exist, (a) any vacancy in the office of a
19
<PAGE>
Preferred Director may be filled (except as provided in the following clause
(b)) by an instrument in writing signed by the remaining Preferred Director and
filed with the Corporation and (b) in the case of the removal of any Preferred
Director, the vacancy may be filled by the vote of the holders of the
outstanding shares of Serial Preferred Stock as to which a default exist, voting
together as a single class without regard to series, at the same meeting at
which such removal shall be voted. Each director appointed as aforesaid by the
remaining Preferred Director shall be deemed, for all purposes hereof, to be a
Preferred Director. Whenever a default in preference dividends shall no longer
exist, the term of office of each Preferred Director shall terminate and the
number of directors constituting the Board of Directors of the Corporation shall
be reduced by two. For the purposes hereof, a ''default in preference
dividends'' on any series of Serial Preferred Stock shall be deemed to exist
whenever the equivalent of six quarterly dividends have not been declared and
paid or set apart for payment, whether or not consecutive, and, having so
occurred, such default shall be deemed to exist thereafter until, but only
until, all accrued dividends on all shares of Serial Preferred Stock of each and
every series then outstanding shall have been declared and paid or set apart for
payment to the end of the last preceding dividend period.
8.4 For purposes of the foregoing provisions of this Section 8, each share
of Series B Preferred Stock shall have one thousand (1,000) votes per share.
Except as otherwise required by applicable law or as set forth herein, the
shares of Series B Preferred Stock shall not have any relative, participating,
optional or other special voting rights and powers and the consent of the
holders thereof shall not be required for the taking of any corporate action.
Section 9. Record Holders. The Corporation and the Transfer Agent may deem
and treat the record holder of any shares of Series B Preferred Stock as the
true and lawful owner thereof for all purposes, and neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
C. DESIGNATION, PREFERENCES AND RIGHTS OF SERIES C JUNIOR PARTICIPATING
PREFERRED STOCK
Unless otherwise indicated, any reference in this Article FOURTH, Part I.C to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part I.C.
Section 1. Designation and Amount. The shares of such series shall be
designated as ''Series C Junior Participating Preferred Stock'' (the ''Series C
Preferred Stock'') and the number of shares constituting such series shall be
1,250,000.
Section 2. Dividends and Distributions. The holders of shares of Series C
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the fifteenth day of January, April, July and
October in each year (each such date being referred to herein as a ''Quarterly
Dividend Payment Date''), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a share of Series C
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $10 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the ''Common Stock'') since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series C Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series C Preferred Stock then outstanding were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares
20
<PAGE>
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
The Corporation shall declare a dividend or distribution on the Series C
Preferred Stock as provided in this Section 2 immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $10.00 per share on the Series C Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
Dividends shall begin to accrue and be cumulative on outstanding shares of
Series C Preferred Stock from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares of Series C Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series C Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series C Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series C Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series C Preferred Stock
shall have the following voting rights:
3.1 Subject to the provision for adjustment hereinafter set forth, each
share of Series C Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series C
Preferred Stock then outstanding were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
3.2 Except as otherwise provided herein or by law, the holders of shares of
Series C Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
3.3 If the equivalent of six quarterly dividends payable on the Series C
Preferred Stock or any other series of Serial Preferred Stock of the Corporation
are in default, the number of directors of the Corporation shall be increased by
two and the holders of all such series 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 have been paid in full or until noncumulative
dividends have been paid regularly for at least one year.
3.4 Except as set forth herein, holders of Series C Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
21
<PAGE>
Section 4. Certain Restrictions.
4.1 Whenever quarterly dividends or other dividends or distributions payable
on the Series C Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series C Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
(a) declare or pay dividends on, make any other distributions on, or redeem
or purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series C Preferred Stock;
(b) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series C Preferred Stock,
except dividends paid ratably on the Series C Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;
(c) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire shares
of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior as to dividends and as to distributions upon
dissolution, liquidation or winding up to the Series C Preferred Stock; or
(d) purchase or otherwise acquire for consideration any shares of Series C
Preferred Stock, or any shares of stock ranking on a parity with the Series C
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or classes.
4.2 The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Section 4.1, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series C Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Serial Preferred Stock and may be reissued as part of a new series of the Serial
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. Subject to (a) the
rights of the holders of preferred stock of the Corporation ranking senior to
the Series C Preferred Stock as to dividends and amounts payable upon any
voluntary or involuntary liquidation, dissolution or winding up and (b) any
other provision of the Restated Certificate of Incorporation of the Corporation
(as amended from time to time, the ''Restated Certificate''), upon any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon any voluntary or involuntary liquidation,
dissolution or winding up) to the Series C Preferred Stock unless, prior
thereto, the holders of shares of the Series C Preferred Stock shall have
received $100.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series C Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (2) to the holders of stock
ranking on a parity (either as to dividends or upon any voluntary or involuntary
liquidation,
22
<PAGE>
dissolution or winding up) with the Series C Preferred Stock, except
distributions made ratably on the Series C Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such voluntary or involuntary liquidation, dissolution
or winding up. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series C
Preferred Stock then outstanding were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series C Preferred Stock then outstanding shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series C Preferred Stock shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series C Preferred Stock shall not
be redeemable.
Section 9. Ranking. The Series C Preferred Stock shall rank junior to all
other series of the Corporation's preferred stock, whether now or hereafter
outstanding, as to dividends and amounts payable upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, unless
the terms of any such series shall provide otherwise.
Section 10. Amendment. The Restated Certificate shall not be amended in
any manner which would materially alter or change the powers, preferences or
special rights of the Series C Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series C Preferred Stock, voting together as a single
class.
D. DESIGNATION, PREFERENCES AND RIGHTS OF SERIES D REDEEMABLE PREFERRED STOCK
Unless otherwise indicated, any reference in this Article FOURTH, Part I.D to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part I.D.
Section 1. Number of Shares and Designations.
Fifty thousand (50,000) shares of the Serial Preferred Stock, without par
value, of the Corporation are hereby constituted as a series designated as
Series D Redeemable Preferred Stock (the ''Series D Preferred Stock'').
Section 2. Definitions. For purposes of the Series D Preferred Stock, the
following terms shall have the meanings indicated:
23
<PAGE>
2.1 ''Common Stock'' shall mean the common stock of the Corporation, par
value $0.01 per share.
2.2 ''Redemption Consideration'' shall mean (subject to Section 6 hereof)
$84.81 in cash, such Redemption Consideration to be distributed by the
Corporation in respect of each 1/1,000th of a share of Series D Preferred Stock
to the holder thereof upon the redemption of such fraction of a share as
provided in Section 6 hereof and as adjusted as provided in Section 6 hereof.
2.3 ''Series D Preferred Stock'' shall have the meaning set forth in Section
1 hereof.
2.4 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated by the Board of Directors of the Corporation
(or any committee of such board of directors authorized to perform any of its
responsibilities with respect to the Series D Preferred Stock) as the transfer
agent for the Series D Preferred Stock.
Section 3. Dividends. The holders of shares of the Series D Preferred
Stock or fractions thereof shall not be entitled to receive any dividends.
Section 4. Payments upon Liquidation.
4.1 In the event of any liquidation, dissolution or winding up of the
Corporation before any payment or distribution of the assets of the Corporation
(whether capital or surplus) shall be made to or set apart for the holders of
any class or series of stock of the Corporation that ranks junior to the Series
D Preferred Stock as to amounts distributable upon liquidation, dissolution or
winding up of the Corporation, the holders of the shares of Series D Preferred
Stock or fractions thereof shall be entitled to receive the Redemption
Consideration per 1/1,000th of a share of Series D Preferred Stock (the
''Liquidation Preference''); but such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of the shares of Series D Preferred Stock and fractions
thereof shall be insufficient to pay in full the Liquidation Preference, and the
liquidation preference on all other shares of any class or series of stock
ranking, as to dividends and amounts distributable upon liquidation, dissolution
or winding up, on a parity with the Series D Preferred Stock, then such assets,
or the proceeds thereof, shall be distributed among the holders of shares of
Series D Preferred Stock or fractions thereof and any such other parity stock
ratably in accordance with the respective amounts that would be payable on such
shares of Series D Preferred Stock or fractions thereof and any such other
parity stock if all amounts payable thereon were paid in full. For the purposes
of this Section 4, neither (i) a consolidation or merger of the Corporation with
or into one or more corporations nor (ii) a sale, lease, exchange or transfer of
all or substantially all of the Corporation's assets shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class or
classes of stock ranking on a parity with or prior to the Series D Preferred
Stock as to amounts distributable upon liquidation, dissolution or winding up of
the Corporation, after payment shall have been made to the holders of the Series
D Preferred Stock, as and to the fullest extent provided in this Section 4, any
other series or class or classes of stock of the Corporation that ranks junior
to the Series D Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up of the Corporation, shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Series D
Preferred Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. All shares of Series D Preferred Stock
and fractions thereof that shall have been issued and reacquired in any manner
by the Corporation (excluding, until the Corporation elects to retire them,
shares that are held as treasury shares) shall be restored to the status of
authorized but unissued shares of Serial Preferred Stock, without designation as
to series.
Section 6. Redemption. Each 1/1,000th of a share of Series D Preferred
Stock is redeemable, and immediately following the issuance thereof, the
Corporation, to the extent that it may legally do so and subject to the other
provisions of this Restated Certificate, shall redeem each 1/1,000th of a share
of Series D Preferred Stock,
24
<PAGE>
for the Redemption Consideration. If for any reason the Corporation is not able
to redeem any portion of the Series D Preferred Stock so issued, such shares and
fractions thereof that remain outstanding shall continue to exist and remain
outstanding and shall thereafter represent the right to receive the Redemption
Consideration as soon as the Corporation is legally and hereunder permitted to
redeem such shares and fractions thereof.
At the time of the redemption pursuant to this Section 6, the rights of
holders of Series D Preferred Stock so redeemed shall cease with respect to such
shares or fractions thereof (except the right to receive cash as provided
above), and the person entitled to receive the cash upon redemption shall be
treated for all purposes as the owner of such cash as of the date of such
redemption.
With respect to any shares of the Series D Preferred Stock or fractions
thereof that are redeemed by the Corporation immediately following the issuance
thereof, the Corporation need not distribute a certificate to the person
otherwise entitled to receive such shares or fractions thereof but may instead
distribute the Redemption Consideration to such person or persons directly. If
certificates representing shares of the Series
D Preferred Stock or fractions thereof are issued, the Corporation may require
the surrender of such certificates as a condition precedent to the issuance of
the Redemption Consideration.
Section 7. Ranking.
7.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Series D Preferred Stock, as to distributions of assets
upon liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of Series D Preferred Stock;
(b) on a parity with the Series D Preferred Stock, as to distribution of
assets upon liquidation, dissolution or winding up, whether or not the
redemption or liquidation prices per share thereof be different from those of
the Series D Preferred Stock, if the holders of such class of stock or series
and the Series D Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in proportion to
their respective liquidation preferences, without preference or priority one
over the other; and
(c) junior to the Series D Preferred Stock, as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of Series D
Preferred Stock shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of shares of such class or series.
7.2 The Series A Convertible Preferred Stock and the Series B Preferred
Stock shall each be deemed to rank on a parity with the Series D Preferred Stock
as to amounts distributable upon liquidation, dissolution or winding up. The
Class 1 ESOP Convertible Preferred Stock, the Class 2 ESOP Convertible Preferred
Stock, the Class M ESOP Voting Junior Preferred Stock, the Class P ESOP Voting
Junior Preferred Stock, the Class S ESOP Voting Junior Preferred Stock, the
Class I Junior Preferred Stock, the Class IAM Junior Preferred Stock, the Class
Pilot MEC Junior Preferred Stock, the Class SAM Junior Preferred Stock, the
Series C Junior Participating Preferred Stock and the Common Stock shall each be
deemed to rank junior to the Series D Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up.
Section 8. Voting. Except as otherwise required by applicable law, the
shares of Series D Preferred Stock shall not have any voting rights and the
consent of the holders thereof shall not be required for the taking of any
corporate action. For each matter as to which shares of the Series D Preferred
Stock shall have voting rights, each share of Series D Preferred Stock shall
have one (1) vote per share.
Section 9. Record Holders. The Corporation and the Transfer Agent may deem
and treat the record holder of any shares of Series D Preferred Stock as the
true and lawful owner thereof for all purposes, and except as otherwise provided
by law, neither the Corporation nor the Transfer Agent shall be affected by any
notice to the contrary.
25
<PAGE>
PART II
Class 1 ESOP Convertible Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part II to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part II.
Section 1. Number of Shares; Designation; Issuance and Automatic Conversion.
1.1 The Class 1 ESOP Convertible Preferred Stock of the Corporation (the
''Class 1 ESOP Preferred Stock'') shall consist of 25,000,000 shares, par value
$0.01 per share.
1.2 Shares of Class 1 ESOP Preferred Stock shall be issued only to a trustee
or trustees acting on behalf of the UAL Corporation Employee Stock Ownership
Plan (the ''ESOP''). In the event of any sale, transfer or other disposition
(including, without limitation, upon a foreclosure or other realization upon
shares of Class 1 ESOP Preferred Stock pledged as security for any loan or loans
made to the ESOP or to the trustee or the trustees acting on behalf of the ESOP)
(hereinafter a ''transfer'') of shares of Class 1 ESOP Preferred Stock to any
person (including, without limitation, any participant in the ESOP) other than
(x) any trustee or trustees of the ESOP or (y) any pledgee of such shares
acquiring such shares as security for any loan or loans made to the ESOP or to
any trustee or trustees acting on behalf of the ESOP, the shares of Class 1 ESOP
Preferred Stock so transferred, upon such transfer and without any further
action by the Corporation or the transferee, shall be automatically converted
into shares of Common Stock at the applicable Conversion Rate in accordance with
Section 6 hereof and thereafter such transferee shall not have any of the voting
powers, preferences or relative, participating, optional or special rights
ascribed to shares of Class 1 ESOP Preferred Stock hereunder, but, rather, shall
have only the powers and rights pertaining to the Common Stock into which such
shares of Class 1 ESOP Preferred Stock shall have been so converted. In the
event of any such automatic conversion provided for in this Section 1.2, such
transferee shall be treated for all purposes as the record holder of the shares
of Common Stock into which the Class 1 ESOP Preferred Stock shall have been
converted as of the date of such conversion. Certificates representing shares of
Class 1 ESOP Preferred Stock shall be legended to reflect such consequences of a
transfer. Notwithstanding the foregoing provisions of this Section 1, shares of
Class 1 ESOP Preferred Stock may be converted into shares of Common Stock as
provided by Section 6 hereof and the shares of Common Stock issued upon any
conversion in accordance with Section 6 hereof or this Section 1.2 may be
transferred by the holder thereof as permitted by law.
Section 2. Definitions. For purposes of the Class 1 ESOP Preferred Stock,
the following terms shall have the meanings indicated:
2.1 ''Affiliate'' shall have the meaning defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended, or any successor thereto.
2.2 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee autho-rized by such board of directors to perform
any of its responsibilities with respect to the Class 1 ESOP Preferred Stock.
2.3 ''Business Day'' shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York, New
York are not required to be open.
2.4 ''Class 1 ESOP Preferred Stock'' shall have the meaning set forth in
Section 1 hereof.
2.5 ''Class 2 ESOP Preferred Stock'' shall mean the Class 2 ESOP Convertible
Preferred Stock, par value $0.01 per share, of the Corporation.
26
<PAGE>
2.6 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.7 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.9 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.10 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.11 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.12 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.13 ''Code'' shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.14 ''Common Stock'' shall mean the common stock of the Corporation, par
value $0.01 per share.
2.15 ''Conversion Rate'' shall have the meaning set forth in Section 6.1
hereof.
2.16 ''Current Market Price'' of publicly traded shares of Common Stock or
any other class or series of capital stock or other security of the Corporation
or any other issuer for any day shall mean the last reported sales price,
regular way, on such day, or, if no sale takes place on such day, the average of
the reported closing bid and asked prices on such day, regular way, in either
case as reported on the New York Stock Exchange Composite Tape or, if such
security is not listed or admitted for trading on the New York Stock Exchange,
Inc. (''NYSE''), on the principal national securities exchange on which such
security is listed or admitted for trading or quoted or, if not listed or
admitted for trading or quoted on any national securities exchange, on the
Nasdaq National Market, or, if such security is not quoted on such National
Market, the average of the closing bid and asked prices on such day in the over-
the-counter market as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System (''NASDAQ'') or, if bid and asked
prices for such security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices on such day as furnished by any
NYSE member firm regularly making a market in such security selected for such
purpose by the Board of Directors.
2.17 ''Director Preferred Stocks'' shall mean collectively, the Class I
Preferred Stock, the Class IAM Preferred Stock, the Class Pilot MEC Preferred
Stock and the Class SAM Preferred Stock.
2.18 ''Dividend Payment Date'' shall mean the penultimate Business Day in
each year, commencing on such penultimate Business Day in 1994; provided that,
with respect to the Dividend Period beginning on January 1, 2000 and ending on
March 31, 2000, the Dividend Payment Date shall be the penultimate Business Day
in the calendar quarter ending March 31, 2000.
2.19 ''Dividend Periods'' shall mean annual dividend periods commencing on
the last Business Day of each year and ending on and including the penultimate
Business Day of the next succeeding year (other than the initial Dividend
Period, which shall commence on the Issue Date and end on and include the
penultimate Business Day in 1994, the Dividend Period commencing on the last
Business Day of 1999, which shall commence on such date and end on the
penultimate Business Day in the calendar quarter ending March 31, 2000 and the
Dividend Period
27
<PAGE>
commencing on the last Business Day of the calendar quarter ending on March 31,
2000, which shall commence on such date and end on the penultimate Business Day
in the year 2000).
2.20 ''Equity Securities'' shall mean the Common Stock or any debt, equity
or other security or contractual right convertible into or exercisable or
exchangeable for, or based on the value of, the Common Stock or any warrants,
options or other rights to purchase the Common Stock or other Equity Securities
(other than the Rights).
2.21 ''ESOP Preferred Stocks'' shall mean, collectively, the Class 1 ESOP
Preferred Stock and the Class 2 ESOP Preferred Stock.
2.22 ''Extraordinary Distribution'' shall mean any single dividend or other
distribution (including by reclassification of shares or recapitalization of the
Corporation, as well as any such dividend or distribution made in connection
with a merger or consolidation in which the Corporation is the continuing
corporation and the Common Stock is not changed or exchanged) to holders of
Common Stock (effected while any of the shares of Class 1 ESOP Preferred Stock
are outstanding) (i) of cash, where the aggregate amount of such single cash
dividend or distribution together with the amount of all cash dividends and
distributions made to holders of Common Stock during the period from the latest
to occur of the Issue Date or the most recent Dividend Payment Date until the
payment date for such cash dividend or distribution to holders of Common Stock,
when combined with the aggregate amount of all previous Pro Rata Repurchases
during such period (for this purpose, including only that portion of the
aggregate purchase price of each such Pro Rata Repurchase which is in excess of
the Fair Market Value of the Common Stock repurchased as determined on the
Business Day prior to the public announcement of such Pro Rata Repurchase made
during such period), exceeds twelve and one-half percent (12-1/2%) of the
aggregate Fair Market Value of all shares of Common Stock outstanding on the
record date for determining the shareholders entitled to receive such
Extraordinary Distribution and (ii) of any shares of capital stock of the
Corporation (other than shares of Common Stock), other securities of the
Corporation (other than securities of the type referred to in Sections 6.4(b)
and 6.4(c) hereof), evidences of indebtedness of the Corporation or any other
person or any other property (including, without limitation, shares of capital
stock of any subsidiary of the Corporation), or any combination thereof. The
Fair Market Value of any such single dividend or other distribution that,
pursuant to clause (i), constitutes an Extraordinary Distribution shall for
purposes of the first paragraph of Section 6.4(d) hereof be the sum of the Fair
Market Value of such Extraordinary Distribution plus the amount of any other
cash dividends and distributions made within the relevant period referred to
above to holders of Common Stock to the extent such other dividends and
distributions were not previously included in the calculation of an adjustment
pursuant to the first paragraph of Section 6.4(d) hereof within such period.
2.23 ''Fair Market Value'' shall mean the average of the daily Current
Market Prices of the security in question during the five (5) consecutive
Trading Days before the earlier of the day in question and the ''ex'' date with
respect to the issuance or distribution requiring such computation. The term
'''ex' date,'' when used with respect to any issuance or distribution, means the
first day on which the Common Stock trades regular way, without the right to
receive such issuance or distribution, on the exchange or in the market, as the
case may be, used to determine that day's Current Market Price. With respect to
any asset or security for which there is no Current Market Price, the Fair
Market Value of such asset or security shall be determined in good faith by the
Board of Directors.
2.24 ''Issue Date'' shall mean the first date on which shares of Class 1
ESOP Preferred Stock are issued.
2.25 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.26 ''Measuring Date'' shall mean that date which is the 365th day
following the Issue Date.
2.27 ''Non-Dilutive Amount'' in respect of an issuance, sale or exchange by
the Corporation of any Equity Securities (other than Common Stock) shall mean
the excess of (i) the product of the Fair Market Value of a share of Common
Stock on the day preceding the first public announcement of such issuance, sale
or exchange multiplied by the maximum number of shares of Common Stock which
could be acquired on such date upon the exercise,
28
<PAGE>
conversion or exchange in full of such Equity Securities (and any Equity
Securities receivable upon exercise, conversion or exchange thereof), whether or
not then exercisable, convertible or exchangeable at such date, over (ii) the
aggregate amount payable pursuant to the exercise, conversion or exchange of
such Equity Securities, whether or not then exercisable, convertible or
exchangeable, to purchase or acquire such maximum number of shares of Common
Stock (and any Equity Securities receivable upon exercise, conversion or
exchange thereof); provided, however, that in no event shall the Non-Dilutive
Amount be less than zero. For purposes of the foregoing sentence, the amount
payable pursuant to the exercise, conversion or exchange of such Equity
Securities to purchase or acquire shares of Common Stock shall be deemed to be
the Fair Market Value of the consideration payable pursuant to the exercise,
conversion or exchange of such Equity Securities on the date of the issuance,
sale or exchange of such Equity Securities by the Corporation (excluding for
that purpose the Fair Market Value of the Equity Security to be so exercised,
converted or exchanged).
2.28 ''Pro Rata Repurchase'' shall mean any purchase of shares of Common
Stock by the Corporation or any Affiliate thereof, whether for cash, shares of
capital stock of the Corporation, other securities of the Corporation, evidences
of indebtedness of the Corporation or any other person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Corporation), or any
combination thereof, effected while any of the shares of Class 1 ESOP Preferred
Stock are outstanding, pursuant to any tender offer or exchange offer subject to
Section 13(e) of the Securities Exchange Act of 1934, as amended (the ''Exchange
Act''), or any successor provision of law, or pursuant to any other offer
available to substantially all holders of Common Stock; provided, however, that
''Pro Rata Repurchase'' shall not include any purchase of shares by the
Corporation or any subsidiary thereof made in open market transactions
substantially in accordance with the requirements of Rule 10b-18 as in effect
under the Exchange Act or on such other terms and conditions as the Board of
Directors shall have determined are reasonably designed to prevent such
purchases from having a material effect on the trading market for the Common
Stock. The ''Effective Date'' of a Pro Rata Repurchase shall mean the date of
acceptance of shares for purchase or exchange under any tender or exchange offer
which is a Pro Rata Repurchase or the date of purchase with respect to any Pro
Rata Repurchase that is not a tender or exchange offer.
2.29 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.30 ''Rights'' shall mean the rights of the Corporation issued or issuable
under the Corporation's Rights Agreement dated as of December 11, 1986, and as
amended from time to time (the ''Rights Agreement''), or rights to purchase any
capital stock of the Corporation issued or issuable under any successor
shareholder rights plan or plans adopted in replacement of the Rights Agreement.
2.31 ''Series A Debentures'' shall mean the Series A Debentures due 2004 of
United Air Lines, Inc.
2.32 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.33 ''Series B Debentures'' shall mean the Series B Debentures due 2014 of
United Air Lines, Inc.
2.34 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.35 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.36 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
29
<PAGE>
2.37 [Reserved]
2.38 ''set apart for payment'' shall be deemed to include, without any
action other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of dividends or other distribution by the Board of
Directors, the allocation of funds to be so paid on any series or class of
capital stock of the Corporation; provided, however, that if any funds for any
class or series of stock of the Corporation ranking on a parity with or junior
to the Class 1 ESOP Preferred Stock as to the payment of dividends or
distributions are placed in a separate account of the Corporation or delivered
to a disbursing, paying or other similar agent, then ''set apart for payment''
with respect to the Class 1 ESOP Preferred Stock shall mean, with respect to
such dividends or distributions, placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
2.39 ''Trading Day'' shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading or quoted on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market, or if such securities are not quoted on such National Market, in the
applicable securities market in which the securities are traded.
2.40 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class 1 ESOP Preferred Stock.
2.41 ''Voting Preferred Stocks'' shall mean collectively, the Class M Voting
Preferred Stock, the Class P Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends.
3.1 The holders of shares of the Class 1 ESOP Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
assets legally available for that purpose, dividends payable in cash at the rate
per annum of (i) an amount per share of Class 1 ESOP Preferred Stock with
respect to any Dividend Period ending on or before March 31, 2000 equal to seven
percent of the result of dividing (x) the Purchase Price (as defined in and
determined pursuant to Section 1 of the Preferred Stock Purchase Agreement,
dated as of March 25, 1994, as amended, between the Corporation and State Street
Bank and Trust Company as trustee for the UAL Corporation Employee Stock
Ownership Plan Trust (the ''Agreement''), a copy of which is on file in the
office of the Secretary of the Corporation) of the shares of Class 1 ESOP
Preferred Stock purchased pursuant to Section 1 of the Agreement by (y) the
number of shares of Class 1 ESOP Preferred Stock purchased pursuant to Section 1
of the Agreement and (ii) zero thereafter (the ''Fixed Dividend''). Such Fixed
Dividends shall be cumulative from the Issue Date until the penultimate Business
Day in the calendar quarter ending March 31, 2000, whether or not in any
Dividend Period or Periods there shall be assets of the Corporation legally
available for the payment of such Fixed Dividends and whether or not the Board
of Directors shall have declared such Fixed Dividends, and shall be payable
annually (except as otherwise provided herein) when, as and if declared by the
Board of Directors, in arrears on Dividend Payment Dates, commencing on the
penultimate Business Day of 1994. Each such Fixed Dividend shall be payable in
arrears to the holders of record of shares of the Class 1 ESOP Preferred Stock,
as they appear on the stock records of the Corporation at the close of business
on such record dates, which shall not be more than 60 days nor less than 10 days
preceding the Dividend Payment Dates thereof, as shall be fixed by the Board of
Directors. Accrued and unpaid Fixed Dividends for any past Dividend Periods
ending on or prior to the penultimate Business Day in the calendar quarter
ending March 31, 2000 may be declared and paid at any time, without reference to
any Dividend Payment Date, to holders of record on such date, not exceeding 45
days preceding the payment date thereof, as may be fixed by the Board of
Directors. Holders of the Class 1 ESOP Preferred Stock shall be entitled to the
cumulative Fixed Dividend provided in this Section 3.1 and the additional
cumulative dividends provided in Section 3.5 and shall not be entitled to any
other dividends in excess thereof.
3.2 The amount of Fixed Dividends payable for the initial Dividend Period,
or any other period shorter or longer than a full Dividend Period, on the Class
1 ESOP Preferred Stock shall be computed on the basis of twelve 30-day months
and a 360-day year. Except as provided in Section 3.5, holders of shares of
Class 1 ESOP Preferred
30
<PAGE>
Stock shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of cumulative Fixed Dividends, as herein provided, on the
Class 1 ESOP Preferred Stock. No interest, or sum of money in lieu of interest,
shall be payable in respect of any Fixed Dividend payment or payments on the
Class 1 ESOP Preferred Stock that may be in arrears.
3.3 So long as any shares of the Class 1 ESOP Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any other class or series
of stock of the Corporation ranking on a parity with the Class 1 ESOP Preferred
Stock as to the payment of dividends for any period unless full cumulative Fixed
Dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the Class 1
ESOP Preferred Stock for all Dividend Periods terminating on or prior to the
date of payment of the dividends on such class or series of parity stock. When
Fixed Dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, all dividends declared upon the Class 1 ESOP Preferred
Stock and such parity stock shall be declared ratably in proportion to the
respective amounts of Fixed Dividends accumulated and unpaid on the Class 1 ESOP
Preferred Stock and dividends accumulated and unpaid on such parity stock.
Notwithstanding the foregoing to the contrary, cumulated Fixed Dividends that
remain unpaid on April 1, 2000 shall not prevent the payment of a dividend on
any other security on or after April 1, 2000 to the extent that, on the Dividend
Payment Date occurring on or prior to April 1, 2000 with respect to the Class 1
ESOP Preferred Stock that immediately followed the last payment of a dividend on
the Series A Preferred Stock or the Series B Preferred Stock, (a) the unpaid
current and cumulated dividends on the Class 1 ESOP Preferred Stock as of such
Dividend Payment Date exceeds (b) the surplus of the Corporation available on
such Dividend Payment Date to pay Fixed Dividends on the Class 1 ESOP Preferred
Stock after (I) the payment in full of all unpaid current and cumulated
dividends in respect of all other classes or series of stock of the Corporation
ranking senior to the Class 1 ESOP Preferred Stock as to the payment of
dividends and (II) the payment on a pro rata basis of all unpaid current and
cumulated dividends in respect of all other classes or series of stock of the
Corporation ranking on a parity with the Class 1 ESOP Preferred Stock as to the
payment of dividends, provided that an amount equal to the lesser of the amounts
described in clause (a) and clause (b) must be paid as a dividend in respect of
the Class 1 ESOP Preferred Stock before any amount may be paid as a dividend in
respect of any class or series of stock of the Corporation that ranks junior to
the Class 1 ESOP Preferred Stock as to the payment of dividends (the amount of
such excess, the ''Designated Amount''), provided further that the Designated
Amount plus all unpaid Fixed Dividends on the Class 1 ESOP Preferred Stock that
accrue in respect of Dividend Payment Dates that occurred after such Dividend
Payment Date shall remain part of the accrued and unpaid dividends on the Class
1 ESOP Preferred Stock for the purpose of Section 4.
3.4 So long as any shares of the Class 1 ESOP Preferred Stock are
outstanding, no dividends (other than (i) the Rights and (ii) dividends or
distributions paid in shares of, or options, warrants, or rights to subscribe
for or purchase shares of, any class or series of stock of the Corporation that
is junior to the Class 1 ESOP Preferred Stock as to the payment of dividends)
shall be declared or paid or set apart for payment or other distribution
declared or made upon any class or series of stock of the Corporation that is
junior to the Class 1 ESOP Preferred Stock as to the payment of dividends, nor
shall any other class or series of stock of the Corporation ranking on a parity
with or junior to the Class 1 ESOP Preferred Stock as to the payment of
dividends or as to distributions upon liquidation, dissolution or winding up of
the Corporation, be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly (except by conversion into or exchange for
any class or series of stock of the Corporation that is junior to the Class 1
ESOP Preferred Stock as to the payment of dividends and as to distributions upon
liquidation, dissolution or winding up of the Corporation), unless in each case
the full cumulative Fixed Dividends on all outstanding shares of the Class 1
ESOP Preferred Stock shall have been paid or set apart for payment for all past
Dividend Periods with respect to the Class 1 ESOP Preferred Stock and such
parity stock. Notwithstanding the foregoing to the contrary, cumulated Fixed
Dividends that remain unpaid on April 1, 2000 shall not prevent the payment of a
dividend on any other security on or after April 1, 2000 to the extent that, on
the Dividend Payment Date occurring on or prior to April 1, 2000 with respect to
the Class 1 ESOP Preferred Stock that immediately followed the last payment of a
dividend on the Series A Preferred Stock or the Series B Preferred Stock, (a)
the unpaid current and cumulated dividends on the Class 1
31
<PAGE>
ESOP Preferred Stock as of such Dividend Payment Date exceeds (b) the surplus of
the Corporation available on such Dividend Payment Date to pay Fixed Dividends
on the Class 1 ESOP Preferred Stock after (I) the payment in full of all unpaid
current and cumulated dividends in respect of all other classes or series of
stock of the Corporation ranking senior to the Class 1 ESOP Preferred Stock as
to the payment of dividends and (II) the payment on a pro rata basis of all
unpaid current and cumulated dividends in respect of all other classes or series
of stock of the Corporation ranking on a parity with the Class 1 ESOP Preferred
Stock as to the payment of dividends, provided that an amount equal to the
lesser of the amounts described in clause (a) and clause (b) must be paid as a
dividend in respect of the Class 1 ESOP Preferred Stock before any amount may be
paid as a dividend in respect of any class or series of stock of the Corporation
that ranks junior to the Class 1 ESOP Preferred Stock as to the payment of
dividends, provided further that the Designated Amount plus all unpaid Fixed
Dividends on the Class 1 ESOP Preferred Stock that accrue in respect of Dividend
Payment Dates that occurred after such Dividend Payment Date shall remain part
of the accrued and unpaid dividends on the Class 1 ESOP Preferred Stock for the
purpose of Section 4.
3.5 If, during the period ending upon the most recent Dividend Payment Date
and beginning on the immediately prior Dividend Payment Date or, if none, the
Issue Date, cash dividends have been paid to the holders of Common Stock which,
if paid at the same rate (per outstanding share of Common Stock) with respect to
the shares of Common Stock into which the Class 1 ESOP Preferred Stock is
convertible, would be in excess of the sum of the amounts of the Fixed Dividends
which have been or will have been paid during such period ending on such
Dividend Payment Date, the holders of shares of Class 1 ESOP Preferred Stock
shall be entitled to receive on such Dividend Payment Date, in addition to the
Fixed Dividends payable on such Dividend Payment Date, an additional dividend
equal to the excess of (a) the dividends which would have been received during
such period with respect to the shares of Common Stock which would have been
issued upon conversion of the Class 1 ESOP Preferred Stock had the Class 1 ESOP
Preferred Stock been outstanding as Common Stock at each relevant time in order
to receive such dividends (but only to the extent such dividends do not
constitute an Extraordinary Distribution under clause (i) of the definition
thereof), over (b) the sum of the amount of (i) the Fixed Dividends which have
been or will have been paid during such period and (ii) the amount previously
paid pursuant to this Section 3.5 during such period, which additional dividends
(hereinafter referred to as ''Participating Dividends'') shall be paid in cash,
pro-rata to each holder of Class 1 ESOP Preferred Stock. In the event that an
adjustment is made pursuant to the second paragraph of Section 6.4(d) with
respect to shares of Class 1 ESOP Preferred Stock converted during the period
referred to above, the amount of Participating Dividend to be paid in accordance
with the preceding sentence shall be reduced by an amount equal to the product
of (x) the number of shares of Common Stock into which such converted shares of
Class 1 ESOP Preferred Stock would have been converted in the absence of such
adjustment and (y) the amount of the cash dividend or distributions per share of
Common Stock in respect of which such adjustment was made.
3.6 In respect of any Dividend Payment Date on which both Fixed Dividends
and Participating Dividends are due, or at any time that both Fixed Dividends
and Participating Dividends are unpaid, dividend payments made on the Class 1
ESOP Preferred Stock shall be applied first to unpaid Participating Dividends
and, after all Participating Dividends are paid in full, then to unpaid Fixed
Dividends.
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class 1 ESOP Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up of the Corporation,
the holders of the shares of Class 1 ESOP Preferred Stock shall be entitled to
receive an amount per share of Class 1 ESOP Preferred Stock equal to the sum of
(a) the result of dividing (i) the Purchase Price (as defined in and determined
pursuant to Section 1 of the Preferred Stock Purchase Agreement, dated as of
March 25, 1994, as amended, between the Corporation and State Street Bank and
Trust Company as trustee for the UAL Corporation Employee Stock Ownership Plan
Trust (the ''Agreement''), a copy of which is on file in the office of the
Secretary of the Corporation) of the shares of Class 1 ESOP Preferred Stock
purchased pursuant to Section 1 of the Agreement by (ii) the number of shares of
Class 1 ESOP Preferred Stock purchased pursuant to Section 1 of the Agreement
and
32
<PAGE>
(b) an amount equal to all dividends (whether or not earned or declared) accrued
and unpaid thereon to the date of final distribution to such holders
(collectively, the ''Liquidation Preference''), but such holders shall not be
entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of the shares of Class 1 ESOP Preferred
Stock shall be insufficient to pay in full the Liquidation Preference and the
liquidation preference on all other shares of any class or series of stock of
the Corporation that ranks on a parity with the Class 1 ESOP Preferred Stock as
to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, then such assets, or the proceeds thereof, shall be distributed
among the holders of shares of Class 1 ESOP Preferred Stock and any such other
parity stock ratably in accordance with the respective amounts that would be
payable on such shares of Class 1 ESOP Preferred Stock and any such other parity
stock if all amounts payable thereon were paid in full. For the purposes of this
Section 4, (i) a consolidation or merger of the Corporation with or into one or
more corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any class or series of
stock ranking prior to or on a parity with the Class 1 ESOP Preferred Stock as
to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of the Class 1
ESOP Preferred Stock, as and to the fullest extent provided in this Section 4,
any other class or series of stock of the Corporation that ranks junior to the
Class 1 ESOP Preferred Stock as to amounts distributable upon dissolution,
liquidation or winding up of the Corporation shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Class 1
ESOP Preferred Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. All shares of Class 1 ESOP Preferred
Stock which shall have been issued and reacquired in any manner by the
Corporation shall be retired and shall not be reissued.
Section 6. Conversion. Holders of shares of Class 1 ESOP Preferred Stock
shall have the right to convert all or a portion of such shares into shares of
Common Stock as follows:
6.1 Subject to and upon compliance with the provisions of this Section 6, a
holder of shares of Class 1 ESOP Preferred Stock shall have the right, at such
holder's option, at any time and from time to time, to convert all or any of
such shares into fully paid and nonassessable shares of Common Stock at a rate
of one share of Common Stock for one share of Class 1 ESOP Preferred Stock
subject to adjustment as provided in this Section 6 (as so adjusted, the
''Conversion Rate'') by surrendering such shares to be converted, such surrender
to be made in the manner provided in Section 6.2. Certificates shall be issued
for the remaining shares of Class 1 ESOP Preferred Stock if fewer than all of
the shares of Class 1 ESOP Preferred Stock represented by a certificate are
converted.
6.2 In order to exercise the conversion right, the holder of shares of
Class 1 ESOP Preferred Stock to be converted shall surrender the certificate or
certificates representing such shares, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent in the Borough of
Manhattan, City of New York, accompanied by written notice to the Corporation
that the holder thereof elects to convert Class 1 ESOP Preferred Stock. Unless
the shares issuable on conversion are to be issued in the same name as the name
in which such share of Class 1 ESOP Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid or that no such taxes are payable).
Holders of shares of Class 1 ESOP Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date. The Corporation
shall make no payment or allowance for unpaid dividends on the shares of Common
Stock issued upon such conversion.
33
<PAGE>
As promptly as practicable after the surrender of certificates for shares of
Class 1 ESOP Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on such holder's written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with provisions of
this Section 6, and any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided in Section 6.3.
Each conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the certificates for shares of Class 1
ESOP Preferred Stock shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the dividend payable on such shares)
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date
and such conversion shall be at the Conversion Rate in effect at such time on
such date, unless the stock transfer books of the Corporation shall be closed on
that date, in which event such person or persons shall be deemed to have become
such holder or holders of record at the close of business on the next succeeding
day on which such stock transfer books are open, but such conversion shall be at
the Conversion Rate in effect on the date upon which such shares shall have been
surrendered and such notice received by the Corporation.
6.3 No fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Class 1 ESOP Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Class 1 ESOP
Preferred Stock, the Corporation shall pay to the holder of such share an amount
in cash based upon the Current Market Price of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one certificate shall
be surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Class 1 ESOP Preferred Stock so
surrendered.
6.4 The Conversion Rate shall be adjusted from time to time as follows:
(a) In case the Corporation shall, at any time or from time to time while
any of the shares of Class 1 ESOP Preferred Stock are outstanding, (i) pay a
dividend or make a distribution on its capital stock in shares of its Common
Stock, (ii) subdivide its outstanding Common Stock into a greater number of
shares, (iii) combine its outstanding Common Stock into a smaller number of
shares or (iv) issue any shares of capital stock by reclassification of its
Common Stock, the Conversion Rate in effect at the opening of business on the
day next following the date fixed for the determination of stockholders
entitled to receive such dividend or distribution or at the opening of
business on the day next following the day on which such subdivision,
combination or reclassification becomes effective, as the case may be, shall
be adjusted so that the holder of any share of Class 1 ESOP Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number
of shares of Common Stock or other capital stock that such holder would have
owned or have been entitled to receive after the happening of any of the
events described above had such share been converted immediately prior to the
record date in the case of a dividend or distribution or the effective date in
the case of a subdivision, combination or reclassification. An adjustment made
pursuant to this subparagraph (a) shall become effective immediately after the
opening of business on the day next following the record date (except as
provided in Section 6.7 below) in the case of a dividend or distribution and
shall become effective immediately after the opening of business on the day
next following the effective date in the case of a subdivision, combination or
reclassification.
(b) In case the Corporation shall, at any time or from time to time while
any of the shares of Class 1 ESOP Preferred Stock are outstanding, issue
Equity Securities (other than Common Stock and the Rights) (the ''Issued
Equity Securities'') to all holders of shares of its Common Stock entitling
them (for a period expiring within 45 days after the record date for such
issuance) to subscribe for or purchase (whether by exercise, conversion,
exchange or otherwise) shares of Common Stock (or other Equity Securities) at
a price per share less than the Fair Market Value of the Common Stock (or the
other Equity Security to be acquired) at such record date (treating the price
per share of the Equity Securities to be acquired as equal to (x) the sum of
(i) the Fair Market
34
<PAGE>
Value of the consideration payable for a unit of the Equity Security plus (ii)
the Fair Market Value of any additional consideration initially payable upon
the exercise, conversion or exchange of such security into Common Stock
divided by (y) the number of shares of Common Stock initially underlying or
that may be acquired upon the exercise, conversion or exchange of such Equity
Security), the Conversion Rate shall be adjusted so that it shall equal the
rate determined by multiplying the Conversion Rate in effect immediately prior
to the date of issuance of such Issued Equity Securities by a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common
Stock outstanding on the date of issuance of such Issued Equity Securities
plus (B) the number of additional shares of Common Stock offered for
subscription or purchase (including, without limitation, the security
underlying or that may be acquired upon the exercise, conversion or exchange
of the Equity Securities so offered) and the denominator of which shall be the
sum of (A) the number of shares of Common Stock outstanding on the date of
issuance of such Issued Equity Securities plus (B) the number of shares of
Common Stock that the aggregate offering price of the total number of shares
so offered for subscription or purchase (including, without limitation, the
Fair Market Value of the consideration payable for a unit of the Equity
Securities so offered plus the Fair Market Value of any additional
consideration payable upon exercise, conversion or exchange of such Equity
Securities) would purchase at such Fair Market Value of the Common Stock as of
the record date for such issuance. Such adjustment shall become effective as
of the record date for the determination of stockholders entitled to receive
such Issued Equity Securities (except as provided in Section 6.6 below).
(c) In case the Corporation shall, at any time or from time to time while
any of the shares of Class 1 ESOP Preferred Stock are outstanding, issue, sell
or exchange shares of Common Stock (other than pursuant to any Rights, Equity
Securities issued in connection with any employee or director incentive or
benefit plan or arrangement of the Corporation or any subsidiary or any Equity
Security theretofore outstanding entitling the holder to purchase or acquire
shares of Common Stock) for a consideration having a Fair Market Value on the
date of such issuance, sale or exchange less than the Fair Market Value of
such shares of Common Stock on the date of such issuance, sale or exchange,
then the Conversion Rate in effect immediately prior to such issuance, sale or
exchange shall be adjusted by multiplying such Conversion Rate by a fraction,
the numerator of which shall be the product of (i) the Fair Market Value of a
share of Common Stock on the Trading Day immediately preceding the first
public announcement of such issuance, sale or exchange multiplied by (ii) the
sum of the number of shares of Common Stock outstanding on such day plus the
number of shares of Common Stock so issued, sold or exchanged by the
Corporation, and the denominator of which shall be the sum of (i) the Fair
Market Value of all the shares of Common Stock outstanding on the Trading Day
immediately preceding the first public announcement of such issuance, sale or
exchange plus (ii) the Fair Market Value of the consideration received by the
Corporation in respect of such issuance, sale or exchange of shares of Common
Stock. In case the Corporation shall, at any time or from time to time while
any of the shares of Class 1 ESOP Preferred Stock are outstanding, issue, sell
or exchange any Equity Security (other than any Rights, Equity Securities
issued in connection with any employee or director incentive or benefit plan
or arrangement of the Corporation or any subsidiary or Common Stock) other
than any such issuance to all holders of shares of Common Stock as a dividend
or distribution (including by way of a reclassification of shares or a
recapitalization of the Corporation) for a consideration having a Fair Market
Value on the date of such issuance, sale or exchange less than the Non-
Dilutive Amount, then the Conversion Rate shall be adjusted by multiplying
such Conversion Rate by a fraction, the numerator of which shall be the
product of (i) the Fair Market Value of a share of Common Stock on the Trading
Day immediately preceding the first public announcement of such issuance, sale
or exchange multiplied by (ii) the sum of the number of shares of Common Stock
outstanding on such day plus the maximum number of shares of Common Stock
underlying or which could be acquired pursuant to such Equity Security at the
time of the issuance, sale or exchange of such Equity Security (assuming
shares of Common Stock could be acquired pursuant to such Equity Security at
such time), and the denominator of which shall be the sum of (i) the Fair
Market Value of all the shares of Common Stock outstanding on the Trading Day
immediately preceding the first public announcement of such issuance, sale or
exchange plus (ii) the Fair Market Value of the consideration received by the
Corporation in respect of such issuance, sale or exchange of such Equity
Security plus (iii) the Fair Market Value as of the time of such issuance of
the consideration which the Corporation would receive upon exercise,
conversion or exchange in full of all such Equity Securities.
35
<PAGE>
(d) In case the Corporation shall, at any time or from time to time while
any of the shares of Class 1 ESOP Preferred Stock are outstanding, make an
Extraordinary Distribution in respect of the Common Stock or effect a Pro Rata
Repurchase of Common Stock, the Conversion Rate in effect immediately prior to
such Extraordinary Distribution or Pro Rata Repurchase shall be adjusted by
multiplying such Conversion Rate by a fraction, the numerator of which shall
be the product of (i) the number of shares of Common Stock outstanding
immediately before such Extraordinary Dividend or Pro Rata Repurchase (minus,
in the case of a Pro Rata Repurchase, the number of shares of Common Stock
repurchased by the Corporation) multiplied by (ii) the Fair Market Value of a
share of Common Stock on the record date with respect to such Extraordinary
Distribution or on the Trading Day immediately preceding the first public
announcement by the Corporation or any of its Affiliates of the intent to
effect a Pro Rata Repurchase, as the case may be, and the denominator of which
shall be (i) the product of (x) the number of shares of Common Stock
outstanding immediately before such Extraordinary Distribution or Pro Rata
Repurchase multiplied by (y) the Fair Market Value of a share of Common Stock
on the record date with respect to such Extraordinary Distribution, or on the
Trading Day immediately preceding the first public announcement by the
Corporation or any of its Affiliates of the intent to effect a Pro Rata
Repurchase, as the case may be, minus (ii) the Fair Market Value of the
Extraordinary Distribution or the aggregate purchase price of the Pro Rata
Repurchase, as the case may be (provided that such denominator shall never be
less than 1.0); provided, however, that no Pro Rata Repurchase shall cause an
adjustment to the Conversion Rate unless the amount of all cash dividends and
distributions made to holders of Common Stock during the period from the
latest to occur of the Issue Date or the most recent Dividend Payment Date
preceding the Effective Date of such Pro Rata Repurchase, when combined with
the aggregate amount of all Pro Rata Repurchases, including such Pro Rata
Repurchase (for all purposes of this Section 7.4(d), including only that
portion of the Fair Market Value of the aggregate purchase price of each Pro
Rata Repurchase which is in excess of the Fair Market Value of the Common
Stock repurchased as determined on the Trading Day immediately preceding the
first public announcement by the Corporation or any of its Affiliates of the
intent to effect each such Pro Rata Repurchase), the Effective Dates of which
fall within such period, exceeds twelve and one-half percent (12-1/2%) of the
aggregate Fair Market Value of all shares of Common Stock outstanding on the
Trading Day immediately preceding the first public announcement by the
Corporation or any of its Affiliates of the intent to effect such Pro Rata
Repurchase. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
Extraordinary Distribution or immediately after the Effective Date of such Pro
Rata Repurchase.
Solely as an adjustment applicable to shares of Class 1 ESOP Preferred
Stock that are being converted into Common Stock as of a given date, and not
as a permanent adjustment to the Conversion Rate, the Conversion Rate in
effect immediately prior to such conversion shall be adjusted by multiplying
such Conversion Rate by a fraction, the numerator of which shall be the
product of (i) the number of shares of Common Stock outstanding immediately
before such conversion multiplied by (ii) the Fair Market Value of a share of
Common Stock on the date of such conversion, and the denominator of which
shall be (i) the product of (x) the number of shares of Common Stock
outstanding immediately before such conversion multiplied by (y) the Fair
Market Value of a share of Common Stock on the date of such conversion minus
(ii) the Fair Market Value of the cash dividends and distributions made on or
before the date of such conversion with a record date after the later of the
Issue Date or the most recent Dividend Payment Date upon which Participating
Dividends were paid in full, but only to the extent that such cash dividends
and distributions (a) would entitle the holders of the shares of Class 1 ESOP
Preferred Stock outstanding on such conversion date to a dividend under
Section 3.5 that has not been paid and (b) would not constitute an
Extraordinary Distribution (provided that such denominator shall never be less
than 1.0).
(e) No adjustment in the Conversion Rate shall be required unless such
adjustment would require a cumulative increase or decrease of at least 0.01%
in such rate; provided that any adjustments that by reason of this
subparagraph (e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made; and provided
further that any adjustment shall be required and made in accordance with the
provisions of this Section 6.4 (other than this subparagraph (e)) not later
than such time as may be required in order to preserve the taxfree nature of a
distribution to the holders of shares of Common Stock. Notwithstanding any
other provisions of this Section 6, the Corporation shall not be required to
make
36
<PAGE>
any adjustments of the Conversion Rate for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends
on securities of the Corporation so long as the holders of the Class 1 ESOP
Preferred Stock shall be entitled to participate therein on substantially the
same terms as holders of Common Stock. All calculations under this Section 6
shall be made to the nearest cent (with $.005 being rounded upward), one-tenth
of a share (with .05 of a share being rounded upward) or, in the case of the
Conversion Rate, one hundred millionth of a share (with .000000005 being
rounded upward), as the case may be. Anything in this Section 6.4 to the
contrary notwithstanding, the Corporation shall be entitled, to the extent
permitted by law, to make such reductions in the Conversion Rate, in addition
to those required by this Section 6.4, as it in its discretion shall determine
to be advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights or warrants
to purchase stock or securities, or a distribution of other assets (other than
cash dividends) hereafter made by the Corporation to its stockholders shall
not be taxable.
6.5 If:
(a) the Corporation shall declare a dividend or any other distribution on
the Common Stock (other than the Rights); or
(b) the Corporation shall authorize the granting to the holders of the
Common Stock of Equity Securities (other than Common Stock) to subscribe for
or purchase any Equity Security; or
(c) there shall be any reclassification of the Common Stock (other than an
event to which Section 6.4(a) applies) or any consolidation or merger to which
the Corporation is a party and for which approval of any stockholders of the
Corporation is required, or the sale or transfer of all or substantially all
of the assets of the Corporation as an entirety; or
(d) there shall occur the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation; or
(e) there shall occur any Pro Rata Repurchase,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of shares of the Class 1 ESOP Preferred Stock
at their addresses as shown on the stock records of the Corporation, as promptly
as possible, but at least 10 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of Equity Securities, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or granting of Equity
Securities are to be determined, (B) the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up or (C) the number of shares subject to such offer for
a Pro Rata Repurchase and the purchase price payable by the Corporation pursuant
to such offer. Failure to give or receive such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section 6.
6.6 Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Rate after such adjustment and setting forth a
brief statement of the facts requiring and the manner of effecting such
adjustment which certificate shall be prima facie evidence of the correctness of
such adjustment. Promptly after delivery of such certificate, the Corporation
shall prepare a notice of such adjustment of the Conversion Rate setting forth
the adjusted Conversion Rate and the effective date of such adjustment or
adjustments and shall mail such notice of such adjustment or adjustments to the
holder of each share of Class 1 ESOP Preferred Stock at such holder's last
address as shown on the stock records of the Corporation.
37
<PAGE>
6.7 In any case in which Section 6.4 provides that an adjustment shall become
effective on the day next following a record date for an event, the Corporation
may defer until the occurrence of such event (A) issuing to the holder of any
share of Class 1 ESOP Preferred Stock converted after such record date and
before the occurrence of such event the additional shares of Common Stock or
other securities issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock or other securities
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of any fraction pursuant to
Section 6.3.
6.8 For purposes of this Section 6, the number of shares of Common Stock at
any time outstanding shall not include any shares of Common Stock then owned or
held by or for the account of the Corporation or any subsidiary. The Corporation
shall not pay a dividend or make any distribution on shares of Common Stock held
in the treasury of the Corporation.
6.9 There shall be no adjustment of the Conversion Rate in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in Section 6 or
Section 7. If any action or transaction would require adjustment of the
Conversion Rate pursuant to more than one paragraph of this Section 6, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value.
6.10 If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section 6, that in the opinion of the Board
of Directors would materially adversely affect the conversion rights of the
holders of the shares of Class 1 ESOP Preferred Stock, the Conversion Rate for
the Class 1 ESOP Preferred Stock may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board of Directors may
determine to be equitable in the circumstances.
6.11 The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purpose of effecting conversion of the Class 1
ESOP Preferred Stock, the full number of shares of Common Stock deliverable upon
the conversion of all outstanding shares of Class 1 ESOP Preferred Stock not
theretofore converted. For purposes of this Section 6.11, the number of shares
of Common Stock that shall be deliverable upon the conversion of all outstanding
shares of Class 1 ESOP Preferred Stock shall be computed as if at the time of
computation all such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the Class 1 ESOP Preferred Stock shall be validly issued, fully
paid and non-assessable.
The Corporation shall endeavor to list the shares of Common Stock (or other
securities) required to be delivered upon conversion of the Class 1 ESOP
Preferred Stock, prior to such delivery, upon each national securities exchange,
if any, upon which the outstanding Common Stock (or other securities) is listed
at the time of such delivery.
Prior to the delivery of any securities that the Corporation shall be
obligated to deliver upon conversion of the Class 1 ESOP Preferred Stock, the
Corporation shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
6.12 The Corporation shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion of the Class 1 ESOP
Preferred Stock pursuant hereto; provided that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock or other securities or
property in a name other than that of the holder of the Class 1 ESOP Preferred
Stock to be converted and no such issue or delivery shall be made unless and
until the person requesting any such issue or delivery has paid to the
Corporation the amount of any such tax or established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
38
<PAGE>
6.13 If, prior to the Distribution Date (as defined for purposes of the
Rights), the Corporation shall issue shares of Common Stock upon conversion of
shares of Class 1 ESOP Preferred Stock as contemplated by this Section 6, the
Corporation shall issue together with each such share of Common Stock that
number of Rights as are then issuable, pursuant to the Rights Agreement (or any
successor rights plan or plans adopted in replacement of the Rights Agreement),
per share of such Common Stock so issued, but only if at such time such Rights
or rights are, pursuant to the relevant rights agreement, to be represented by
certificates representing shares of Common Stock and have not expired.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation shall enter into any consolidation, merger, share
exchange or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are to be exchanged solely for or changed,
reclassified or converted solely into stock of any successor or resulting or
other company (including the Corporation) that constitutes ''qualifying employer
securities'' with respect to holders of Class 1 ESOP Preferred Stock within the
meaning of Section 409(l) of the Code and Section 407(d)(5) of the Employee
Retirement Income Security Act of 1974, as amended, or any successor provisions
of law, and, if applicable, for a cash payment in lieu of fractional shares, if
any, proper provisions shall be made so that upon consummation of such
transaction, the shares of Class 1 ESOP Preferred Stock shall be converted into
or exchanged for preferred stock of such successor or resulting or other
company, having in respect of such company, the same powers, preferences and
relative, participating, optional or other special rights (including the rights
provided by this Section 7), and the qualifications, limitations or restrictions
thereof, that the Class 1 ESOP Preferred Stock had, in respect of the
Corporation, immediately prior to such transaction, except that after such
transaction each share of preferred stock of the surviving or resulting or other
company so received in such transaction upon conversion or exchange of the Class
1 ESOP Preferred Stock shall be convertible, otherwise on the terms and
conditions provided by Section 6 hereof, into the number and kind of
''qualifying employer securities'' receivable in such transaction by a holder of
the number of shares of Common Stock into which a share of Class 1 ESOP
Preferred Stock could have been converted immediately prior to such transaction;
provided, however, that if by virtue of the structure of such transaction, a
holder of Common Stock is required to make an election with respect to the
nature and kind of consideration to be received in such transaction, which
election cannot practicably be made by the holders of the Class 1 ESOP Preferred
Stock, then the shares of preferred stock of the surviving or resulting or other
company received in such transaction upon conversion or exchange of Class 1 ESOP
Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be convertible into or exchangeable solely
for ''qualifying employer securities'' (together, if applicable, with a cash
payment in lieu of fractional shares) with the effect provided above on the
basis of the number and kind of qualifying employer securities receivable in
such transaction by a holder of the number of shares of Common Stock into which
such shares of Class 1 ESOP Preferred Stock could have been converted
immediately prior to such transaction (provided that if the kind or amount of
qualifying employer securities receivable in such transaction is not the same
for each such share of Common Stock, then the kind and amount so receivable in
such transaction for each share of Common Stock for this purpose shall be deemed
to be the kind and amount so receivable per share by the plurality of such
shares of Common Stock). The rights of the preferred stock of such successor or
resulting or other company so received in such transaction upon conversion or
exchange of the Class 1 ESOP Preferred Stock shall successively be subject to
adjustments pursuant to Section 6 hereof following such transaction as nearly
equivalent to the adjustments provided for by such Sections prior to such
transaction.
7.2 In case the Corporation shall enter into any consolidation, merger, share
exchange or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are to be exchanged for or changed,
reclassified or converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of ''qualifying employer securities'' (as referred to in
Section 7.1) and cash payments, if applicable, in lieu of fractional shares,
proper provisions shall be made so that upon consummation of such transaction
the outstanding shares of Class 1 ESOP Preferred Stock shall, by virtue of such
transaction and on the same terms as are applicable to the holders of Common
Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind) receivable by holders
of the number of shares of Common Stock into which such shares of Class 1 ESOP
Preferred Stock could
39
<PAGE>
have been converted immediately prior to such transaction; provided, however,
that if by virtue of the structure of such transaction, a holder of Common Stock
is required to make an election with respect to the nature and kind of
consideration to be received in such transaction, which election cannot
practicably be made by holders of the Class 1 ESOP Preferred Stock, then the
shares of Class 1 ESOP Preferred Stock shall, by virtue of such transaction and
on the same terms as apply to the holders of Common Stock, be converted into or
exchanged for the aggregate amount of stock, securities, cash or other property
(payable in kind) receivable by a holder of the number of shares of Common Stock
into which such shares of Class 1 ESOP Preferred Stock could have been converted
immediately prior to such transaction if such holder of Common Stock failed to
exercise any rights of election to receive any kind or amount of stock,
securities, cash or other property receivable in such transaction (provided that
if the kind or amount of stock, securities, cash or other property receivable in
such transaction are not the same for each non-electing share, then the kind and
amount of stock, securities, cash or other property so receivable upon such
transaction for each non-electing share shall be the kind and amount so
receivable per share by the plurality of the non-electing shares).
7.3 In case the Corporation shall enter into any agreement providing for any
consolidation, merger, share exchange or similar transaction described in this
Section 7, then the Corporation shall as soon as practicable thereafter (and in
any event at least fifteen (15) Business Days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Class 1 ESOP Preferred Stock. The Corporation shall not
consummate any consolidation, merger, share exchange or similar transaction
unless all of the terms of this Section 7 have been complied with.
Section 8. Ranking.
8.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Class 1 ESOP Preferred Stock, as to the payment of
dividends or as to distributions of assets upon liquidation, dissolution or
winding up, as the case may be, if the holders of such class or series shall
be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class 1 ESOP Preferred Stock;
(b) on a parity with the Class 1 ESOP Preferred Stock as to the payment of
dividends, whether or not the dividend rates or dividend payment dates thereof
be different from those of the Class 1 ESOP Preferred Stock, if the holders of
such class or series of stock and the Class 1 ESOP Preferred Stock shall be
entitled to the receipt of dividends in proportion to their respective amounts
of accrued and unpaid dividends per share, without preference or priority one
over the other, and on a parity with the Class 1 ESOP Preferred Stock as to
the distribution of assets upon liquidation, dissolution or winding up,
whether or not the liquidation prices per share thereof be different from
those of the Class 1 ESOP Preferred Stock, if the holder of such class or
series of stock and the Class 1 ESOP Preferred Stock shall be entitled to the
receipt of amounts distributable upon liquidation, dissolution or winding up
in proportion to their respective liquidation preferences, without preference
or priority one over the other; and
(c) junior to the Class 1 ESOP Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, as the case may be, if the holders of Class 1 ESOP Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of such class or series.
8.2 The Series A Preferred Stock and the Series B Preferred Stock shall each
be deemed to rank prior to the Class 1 ESOP Preferred Stock both as to the
payment of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up. The Series D Preferred Stock shall be deemed to rank
prior to the Class 1 ESOP Preferred Stock as to the distribution of assets upon
liquidation, dissolution or winding up. The Class 2 ESOP Preferred Stock shall
be deemed to rank on a parity with the Class 1 ESOP Preferred Stock as to the
payment of Participating Dividends and as to amounts distributable upon
liquidation, dissolution or winding up and the Class 2 ESOP Preferred Stock
shall be deemed to rank junior to the Class 1 ESOP Preferred Stock as to the
payment of Fixed Dividends on the Class 1 Preferred Stock. The Common Stock, the
Director Preferred Stocks, the Voting
40
<PAGE>
Preferred Stocks and the Series C Preferred Stock shall each be deemed to rank
junior to the Class 1 ESOP Preferred Stock both as to the payment of dividends
and as to the distribution of assets upon liquidation, dissolution or winding
up.
Section 9. Voting. The holders of shares of Class 1 ESOP Preferred Stock
shall have the following voting rights:
9.1 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class 1 ESOP Preferred Stock shall then be required by law or this
Restated Certificate, and in addition to any other vote required by law or this
Restated Certificate, the affirmative vote or written consent of the holders of
at least a majority of all of the outstanding shares of Class 1 ESOP Preferred
Stock, voting separately as a class, shall be necessary for authorizing,
effecting or validating the amendment, alteration or repeal (including any
amendment, alteration or repeal by operation of merger or consolidation) of any
of the provisions of this Restated Certificate or of any certificate amendatory
thereof or supplemental thereto (including any Certificate of Designation,
Preferences and Rights or any similar document relating to any series of Serial
Preferred Stock) that would adversely affect the preferences, rights, powers or
privileges of the Class 1 ESOP Preferred Stock; provided, however, that the
amendment of the provisions of this Restated Certificate so as to authorize or
create, or to increase the authorized amount of, any class or series of stock of
the Corporation ranking on a parity with or junior to the Class 1 ESOP Preferred
Stock both as to the payment of dividends and as to the distribution of assets
upon liquidation, dissolution or winding up of the Corporation shall not be
deemed to adversely affect the preferences, rights, powers or privileges of
Class 1 ESOP Preferred Stock.
9.2 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class 1 ESOP Voting Preferred Stock shall then be required by law
or this Restated Certificate, and in addition to any other vote required by law
or this Restated Certificate, the affirmative vote or written consent of the
holders of at least a majority of all of the outstanding shares of Class 1 ESOP
Preferred Stock, voting separately as a class, shall be necessary for
authorizing, effecting or validating the creation, authorization or issuance of
any shares of any class or series of stock of the Corporation ranking prior to
the Class 1 ESOP Preferred Stock either as to payment of dividends or as to
distributions upon liquidation, dissolution or winding up, or the
reclassification of any authorized stock of the Corporation into any such prior
shares, or the creation, authorization or issuance of any obligation or security
convertible into or evidencing the right to purchase any such prior shares.
9.3 For purposes of the foregoing provisions of Sections 9.1 and 9.2, each
share of Class 1 ESOP Preferred Stock shall have one (1) vote per share. Except
as otherwise required by applicable law or as set forth herein, the shares of
Class 1 ESOP Preferred Stock shall not have any relative, participating,
optional or other special voting rights and powers and the consent of the
holders thereof shall not be required for the taking of any corporate action.
Section 10. No Redemption. The Class 1 ESOP Preferred Stock shall not be
redeemable in whole or in part.
Section 11. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of any shares
of Class 1 ESOP Preferred Stock as the true and lawful owner thereof for all
purposes, and, except as otherwise provided by law, neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
PART III
Class 2 ESOP Convertible Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part III to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part III.
Section 1. Number of Shares; Designation; Issuance and Automatic Conversion.
41
<PAGE>
1.1 The Class 2 ESOP Convertible Preferred Stock of the Corporation (the
''Class 2 ESOP Preferred Stock'') shall consist of 25,000,000 shares, par value
$0.01 per share.
1.2 Shares of Class 2 ESOP Preferred Stock shall be issued only to a trustee
or trustees acting on behalf of (i) the UAL Corporation Employee Stock Ownership
Plan, or (ii) the UAL Corporation Supplemental ESOP (either of (i) or (ii), a
''Plan''). In the event of any sale, transfer or other disposition (including,
without limitation, upon a foreclosure or other realization upon shares of Class
2 ESOP Preferred Stock pledged as security for any loan or loans made to a Plan
or to the trustee or the trustees acting on behalf of a Plan) (hereinafter a
''transfer'') of shares of Class 2 ESOP Preferred Stock to any person
(including, without limitation, any participant in a Plan) other than (x) any
trustee or trustees of a Plan or (y) any pledgee of such shares acquiring such
shares as security for any loan or loans made to a Plan or to any trustee or
trustees acting on behalf of a Plan, the shares of Class 2 ESOP Preferred Stock
so transferred, upon such transfer and without any further action by the
Corporation or the transferee, shall be automatically converted into shares of
Common Stock at the applicable Conversion Rate in accordance with Section 6
hereof and thereafter such transferee shall not have any of the voting powers,
preferences or relative, participating, optional or special rights ascribed to
shares of Class 2 ESOP Preferred Stock hereunder, but, rather, shall have only
the powers and rights pertaining to the Common Stock into which such shares of
Class 2 ESOP Preferred Stock shall have been so converted. In the event of any
such automatic conversion provided for in this Section 1.2, such transferee
shall be treated for all purposes as the record holder of the shares of Common
Stock into which the Class 2 ESOP Preferred Stock shall have been converted as
of the date of such conversion. Certificates representing shares of Class 2 ESOP
Preferred Stock shall be legended to reflect such consequences of a transfer.
Notwithstanding the foregoing provisions of this Section 1, shares of Class 2
ESOP Preferred Stock may be converted into shares of Common Stock as provided by
Section 6 hereof and the shares of Common Stock issued upon any conversion in
accordance with Section 6 hereof or this Section 1.2 may be transferred by the
holder thereof as permitted by law.
Section 2. Definitions. For purposes of the Class 2 ESOP Preferred Stock,
the following terms shall have the meanings indicated:
2.1 ''Affiliate'' shall have the meaning defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended, or any successor thereto.
2.2 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee authorized by such board of directors to perform
any of its responsibilities with respect to the Class 2 ESOP Preferred Stock.
2.3 ''Business Day'' shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
2.4 ''Class 1 ESOP Preferred Stock'' shall mean the Class 1 ESOP Convertible
Preferred Stock, par value $0.01 per share, of the Corporation.
2.5 ''Class 2 ESOP Preferred Stock'' shall have the meaning set forth in
Section 1 hereof.
2.6 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
2.7 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.9 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
42
<PAGE>
2.10 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
2.11 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.12 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.13 ''Code'' shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.14 ''Common Stock'' shall mean the common stock of the Corporation, par
value $0.01 per share.
2.15 ''Conversion Rate'' shall have the meaning set forth in Section 6.1
hereof.
2.16 ''Current Market Price'' of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the Corporation or
any other issuer for any day shall mean the last reported sales price, regular
way, on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either case
as reported on the New York Stock Exchange Composite Tape or, if such security
is not listed or admitted for trading on the New York Stock Exchange, Inc.
(''NYSE''), on the principal national securities exchange on which such security
is listed or admitted for trading or quoted or, if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market, or, if such security is not quoted on such National Market, the average
of the closing bid and asked prices on such day in the over-the-counter market
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System (''NASDAQ'') or, if bid and asked prices for such security on
such day shall not have been reported through NASDAQ, the average of the bid and
asked prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Board of Directors.
2.17 ''Director Preferred Stocks'' shall mean collectively, the Class I
Preferred Stock, the Class IAM Preferred Stock, the Class Pilot MEC Preferred
Stock and the Class SAM Preferred Stock.
2.18 ''Dividend Payment Date'' shall mean the penultimate Business Day in each
year, commencing on such penultimate Business Day in 1994; provided that, with
respect to the Dividend Period beginning on January 1, 2000 and ending on March
31, 2000, the Dividend Payment Date shall be the penultimate Business Day in the
calendar quarter ending March 31, 2000.
2.19 ''Dividend Periods'' shall mean annual dividend periods commencing on the
last Business Day of each year and ending on and including the penultimate
Business Day of the next succeeding year (other than the initial Dividend
Period, which shall commence on the Issue Date and end on and include the
penultimate Business Day in 1994).
2.20 ''Equity Securities'' shall mean the Common Stock or any debt, equity or
other security or contractual right convertible into or exercisable or
exchangeable for, or based on the value of, the Common Stock or any warrants,
options or other rights to purchase the Common Stock or other Equity Securities
(other than the Rights).
2.21 ''ESOP Preferred Stocks'' shall mean, collectively, the Class 2 ESOP
Preferred Stock and the Class 1 ESOP Preferred Stock.
2.22 ''Extraordinary Distribution'' shall mean any single dividend or other
distribution (including by reclassification of shares or recapitalization of the
Corporation, as well as any such dividend or distribution made in connection
with a merger or consolidation in which the Corporation is the continuing
corporation and the Common Stock is not changed or exchanged) to holders of
Common Stock (effected while any of the shares of Class 2 ESOP Preferred Stock
are outstanding) (i) of cash, where the aggregate amount of such single cash
dividend or distribution
43
<PAGE>
together with the amount of all cash dividends and distributions made to holders
of Common Stock during the period from the latest to occur of the Issue Date or
the most recent Dividend Payment Date until the payment date for such cash
dividend or distribution to holders of Common Stock, when combined with the
aggregate amount of all previous Pro Rata Repurchases during such period (for
this purpose, including only that portion of the aggregate purchase price of
each such Pro Rata Repurchase which is in excess of the Fair Market Value of the
Common Stock repurchased as determined on the Business Day prior to the public
announcement of such Pro Rata Repurchase made during such period), exceeds
twelve and one-half percent (12-1/2%) of the aggregate Fair Market Value of all
shares of Common Stock outstanding on the record date for determining the
shareholders entitled to receive such Extraordinary Distribution and (ii) of any
shares of capital stock of the Corporation (other than shares of Common Stock),
other securities of the Corporation (other than securities of the type referred
to in Sections 6.4(b) and 6.4(c) hereof), evidences of indebtedness of the
Corporation or any other person or any other property (including, without
limitation, shares of capital stock of any subsidiary of the Corporation), or
any combination thereof. The Fair Market Value of any such single dividend or
other distribution that, pursuant to clause (i), constitutes an Extraordinary
Distribution shall for purposes of the first paragraph of Section 6.4(d) hereof
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
amount of any other cash dividends and distributions made within the relevant
period referred to above to holders of Common Stock to the extent such other
dividends and distributions were not previously included in the calculation of
an adjustment pursuant to the first paragraph of Section 6.4(d) hereof within
such period.
2.23 ''Fair Market Value'' shall mean the average of the daily Current Market
Prices of the security in question during the five (5) consecutive Trading Days
before the earlier of the day in question and the ''ex'' date with respect to
the issuance or distribution requiring such computation. The term '' 'ex'
date,'' when used with respect to any issuance or distribution, means the first
day on which the Common Stock trades regular way, without the right to receive
such issuance or distribution, on the exchange or in the market, as the case may
be, used to determine that day's Current Market Price. With respect to any asset
or security for which there is no Current Market Price, the Fair Market Value of
such asset or security shall be determined in good faith by the Board of
Directors.
2.24 ''Issue Date'' shall mean the first date on which shares of Class 2 ESOP
Preferred Stock are issued.
2.25 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.26 ''Measuring Date'' shall mean that date which is the 365th day following
the Issue Date.
2.27 ''Non-Dilutive Amount'' in respect of an issuance, sale or exchange by
the Corporation of any Equity Securities (other than Common Stock) shall mean
the excess of (i) the product of the Fair Market Value of a share of Common
Stock on the day preceding the first public announcement of such issuance, sale
or exchange multiplied by the maximum number of shares of Common Stock which
could be acquired on such date upon the exercise, conversion or exchange in full
of such Equity Securities (and any Equity Securities receivable upon exercise,
conversion or exchange thereof), whether or not then exercisable, convertible or
exchangeable at such date, over (ii) the aggregate amount payable pursuant to
the exercise, conversion or exchange of such Equity Securities, whether or not
then exercisable, convertible or exchangeable, to purchase or acquire such
maximum number of shares of Common Stock (and any Equity Securities receivable
upon exercise, conversion or exchange thereof); provided, however, that in no
event shall the Non-Dilutive Amount be less than zero. For purposes of the
foregoing sentence, the amount payable pursuant to the exercise, conversion or
exchange of such Equity Securities to purchase or acquire shares of Common Stock
shall be deemed to be the Fair Market Value of the consideration payable
pursuant to the exercise, conversion or exchange of such Equity Securities on
the date of the issuance, sale or exchange of such Equity Securities by the
Corporation (excluding for that purpose the Fair Market Value of the Equity
Security to be so exercised, converted or exchanged).
2.28 ''Pro Rata Repurchase'' shall mean any purchase of shares of Common Stock
by the Corporation or any Affiliate thereof, whether for cash, shares of capital
stock of the Corporation, other securities of the Corporation, evidences of
indebtedness of the Corporation or any other person or any other property
(including, without limitation, shares of capital stock, other securities or
evidences of indebtedness of a subsidiary of the Corporation),
44
<PAGE>
or any combination thereof, effected while any of the shares of Class 2 ESOP
Preferred Stock are outstanding, pursuant to any tender offer or exchange offer
subject to Section 13(e) of the Securities Exchange Act of 1934, as amended (the
''Exchange Act''), or any successor provision of law, or pursuant to any other
offer available to substantially all holders of Common Stock; provided, however,
that ''Pro Rata Repurchase'' shall not include any purchase of shares by the
Corporation or any subsidiary thereof made in open market transactions
substantially in accordance with the requirements of Rule 10b-18 as in effect
under the Exchange Act or on such other terms and conditions as the Board of
Directors shall have determined are reasonably designed to prevent such
purchases from having a material effect on the trading market for the Common
Stock. The ''Effective Date'' of a Pro Rata Repurchase shall mean the date of
acceptance of shares for purchase or exchange under any tender or exchange offer
which is a Pro Rata Repurchase or the date of purchase with respect to any Pro
Rata Repurchase that is not a tender or exchange offer.
2.29 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.30 ''Rights'' shall mean the rights of the Corporation issued or issuable
under the Corporation's Rights Agreement dated as of December 11, 1986, and as
amended from time to time (the ''Rights Agreement''), or rights to purchase any
capital stock of the Corporation issued or issuable under any successor
shareholder rights plan or plans adopted in replacement of the Rights Agreement.
2.31 ''Series A Debentures'' shall mean the Series A Debentures due 2004 of
United Air Lines, Inc.
2.32 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.33 ''Series B Debentures'' shall mean the Series B Debentures due 2014 of
United Air Lines, Inc.
2.34 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.35 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.36 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.37 [Reserved]
2.38 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class 2 ESOP
Preferred Stock as to the payment of dividends or distributions are placed in a
separate account of the Corporation or delivered to a disbursing, paying or
other similar agent, then ''set apart for payment'' with respect to the Class 2
ESOP Preferred Stock shall mean, with respect to such dividends or
distributions, placing such funds in a separate account or delivering such funds
to a disbursing, paying or other similar agent.
2.39 ''Trading Day'' shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading or quoted on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market, or if such securities are not quoted on such National Market, in the
applicable securities market in which the securities are traded.
45
<PAGE>
2.40 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class 2 ESOP Preferred Stock.
2.41 ''Voting Preferred Stocks'' shall mean collectively, the Class M Voting
Preferred Stock, the Class P Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends.
3.1 The holders of shares of the Class 2 ESOP Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
assets legally available for that purpose, dividends payable in cash at the rate
(per outstanding share of Common Stock) equal to the dividends which would have
been received during the applicable Dividend Period with respect to the shares
of Common Stock which would have been issued upon conversion of the Class 2 ESOP
Preferred Stock had the Class 2 ESOP Preferred Stock been outstanding as Common
Stock at each relevant time in order to receive such dividends (but only to the
extent such dividends do not constitute an Extraordinary Distribution under
clause (i) of the definition thereof), which dividends (hereinafter referred to
as ''Participating Dividends'') shall be paid in cash, pro-rata to each holder
of Class 2 ESOP Preferred Stock. Such Participating Dividends shall be
cumulative from the Issue Date, whether or not in any Dividend Period or Periods
there shall be assets of the Corporation legally available for the payment of
such Participating Dividends and whether or not the Board of Directors shall
have declared such Participating Dividends, and shall be payable annually
(except as otherwise provided herein) when, as and if declared by the Board of
Directors, in arrears on Dividend Payment Dates, commencing on the penultimate
Business Day of 1994. Each such Participating Dividend shall be payable in
arrears to the holders of record of shares of the Class 2 ESOP Preferred Stock,
as they appear on the stock records of the Corporation at the close of business
on such record dates, which shall not be more than 60 days nor less than 10 days
preceding the Dividend Payment Dates thereof, as shall be fixed by the Board of
Directors. Accrued and unpaid Participating Dividends for any past Dividend
Periods may be declared and paid at any time, without reference to any Dividend
Payment Date, to holders of record on such date, not exceeding 45 days preceding
the payment date thereof, as may be fixed by the Board of Directors. Holders of
the Class 2 ESOP Preferred Stock shall be entitled to the cumulative
Participating Dividend provided in this Section 3.1 and shall not be entitled to
any other dividends in excess thereof. In the event that an adjustment is made
pursuant to the second paragraph of Section 6.4(d) with respect to shares of
Class 2 ESOP Preferred Stock converted during the applicable Dividend Period,
the amount of Participating Dividend to be paid in accordance with the preceding
sentence shall be reduced by an amount equal to the product of (x) the number of
shares of Common Stock into which such converted shares of Class 2 ESOP
Preferred Stock would have been converted in the absence of such adjustment and
(y) the amount of the cash dividend or distributions per share of Common Stock
in respect of which such adjustment was made.
3.2 Except as provided in Section 3.1, holders of shares of Class 2 ESOP
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of cumulative Participating Dividends, as herein
provided, on the Class 2 ESOP Preferred Stock. No interest, or sum of money in
lieu of interest, shall be payable in respect of any Participating Dividend
payment or payments on the Class 2 ESOP Preferred Stock that may be in arrears.
3.3 So long as any shares of the Class 2 ESOP Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on any other class or series of stock
of the Corporation ranking on a parity with the Class 2 ESOP Preferred Stock as
to the payment of dividends for any period unless full cumulative Participating
Dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the Class 2
ESOP Preferred Stock for all Dividend Periods terminating on or prior to the
date of payment of the dividends on such class or series of parity stock. When
Participating Dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon the Class 2
ESOP Preferred Stock and such parity stock shall be declared ratably in
proportion to the respective amounts of Participating Dividends accumulated and
unpaid on the Class 2 ESOP Preferred Stock and dividends accumulated and unpaid
on such parity stock.
46
<PAGE>
3.4 So long as any shares of the Class 2 ESOP Preferred Stock are outstanding,
no dividends (other than (i) the Rights and (ii) dividends or distributions paid
in shares of, or options, warrants, or rights to subscribe for or purchase
shares of, any class or series of stock of the Corporation that is junior to the
Class 2 ESOP Preferred Stock as to the payment of dividends) shall be declared
or paid or set apart for payment or other distribution declared or made upon any
class or series of stock of the Corporation that is junior to the Class 2 ESOP
Preferred Stock as to the payment of dividends, nor shall any other class or
series of stock of the Corporation ranking on a parity with or junior to the
Class 2 ESOP Preferred Stock as to the payment of dividends or as to
distributions upon liquidation, dissolution or winding up of the Corporation, be
redeemed, purchased or otherwise acquired (other than a redemption, purchase or
other acquisition of shares of Common Stock made for purposes of an employee
incentive or benefit plan of the Corporation or any subsidiary) for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for any class or series of
stock of the Corporation that is junior to the Class 2 ESOP Preferred Stock as
to the payment of dividends and as to distributions upon liquidation,
dissolution or winding up of the Corporation), unless in each case the full
cumulative Participating Dividends on all outstanding shares of the Class 2 ESOP
Preferred Stock shall have been paid or set apart for payment for all past
Dividend Periods with respect to the Class 2 ESOP Preferred Stock and such
parity stock.
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class 2 ESOP Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up of the Corporation,
the holders of the shares of Class 2 ESOP Preferred Stock shall be entitled to
receive an amount per share of Class 2 ESOP Preferred Stock equal to the sum of
(a) the result of dividing (i) the Purchase Price (as defined in and determined
pursuant to Section 1 of the Preferred Stock Purchase Agreement, dated as of
March 25, 1994, as amended, between the Corporation and State Street Bank and
Trust Company as trustee for the UAL Corporation Employee Stock Ownership Plan
Trust (the ''Agreement''), a copy of which is on file in the office of the
Secretary of the Corporation) of the shares of Class 1 ESOP Preferred Stock
purchased pursuant to Section 1 of the Agreement by (ii) the number of shares of
Class 1 ESOP Preferred Stock purchased pursuant to Section 1 of the Agreement
and (b) an amount equal to all dividends (whether or not earned or declared)
accrued and unpaid thereon to the date of final distribution to such holders
(collectively, the ''Liquidation Preference''), but such holders shall not be
entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of the shares of Class 2 ESOP Preferred
Stock shall be insufficient to pay in full the Liquidation Preference and the
liquidation preference on all other shares of any class or series of stock of
the Corporation that ranks on a parity with the Class 2 ESOP Preferred Stock as
to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, then such assets, or the proceeds thereof, shall be distributed
among the holders of shares of Class 2 ESOP Preferred Stock and any such other
parity stock ratably in accordance with the respective amounts that would be
payable on such shares of Class 2 ESOP Preferred Stock and any such other parity
stock if all amounts payable thereon were paid in full. For the purposes of this
Section 4, (i) a consolidation or merger of the Corporation with or into one or
more corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any class or series of
stock ranking prior to or on a parity with the Class 2 ESOP Preferred Stock as
to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of the Class 2
ESOP Preferred Stock, as and to the fullest extent provided in this Section 4,
any other class or series of stock of the Corporation that ranks junior to the
Class 2 ESOP Preferred Stock as to amounts distributable upon dissolution,
liquidation or winding up of the Corporation shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Class 2
ESOP Preferred Stock shall not be entitled to share therein.
47
<PAGE>
Section 5. Shares to be Retired. All shares of Class 2 ESOP Preferred
Stock which shall have been issued and reacquired in any manner by the
Corporation shall be retired and shall not be reissued.
Section 6. Conversion. Holders of shares of Class 2 ESOP Preferred Stock
shall have the right to convert all or a portion of such shares into shares of
Common Stock as follows:
6.1 Subject to and upon compliance with the provisions of this Section 6, a
holder of shares of Class 2 ESOP Preferred Stock shall have the right, at such
holder's option, at any time and from time to time, to convert all or any of
such shares into fully paid and nonassessable shares of Common Stock at a rate
of one share of Common Stock for one share of Class 2 ESOP Preferred Stock,
subject to adjustment as provided in this Section 6 (as so adjusted, the
''Conversion Rate'') by surrendering such shares to be converted, such surrender
to be made in the manner provided in Section 6.2. Certificates shall be issued
for the remaining shares of Class 2 ESOP Preferred Stock if fewer than all of
the shares of Class 2 ESOP Preferred Stock represented by a certificate are
converted.
6.2 In order to exercise the conversion right, the holder of shares of Class 2
ESOP Preferred Stock to be converted shall surrender the certificate or
certificates representing such shares, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent in the Borough of
Manhattan, City of New York, accompanied by written notice to the Corporation
that the holder thereof elects to convert Class 2 ESOP Preferred Stock. Unless
the shares issuable on conversion are to be issued in the same name as the name
in which such share of Class 2 ESOP Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid or that no such taxes are payable).
Holders of shares of Class 2 ESOP Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date. The Corporation
shall make no payment or allowance for unpaid dividends on the shares of Common
Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for shares of
Class 2 ESOP Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on such holder's written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with provisions of
this Section 6, and any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided in Section 6.3.
Each conversion shall be deemed to have been effected immediately prior to the
close of business on the date on which the certificates for shares of Class 2
ESOP Preferred Stock shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the dividend payable on such shares)
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date
and such conversion shall be at the Conversion Rate in effect at such time on
such date, unless the stock transfer books of the Corporation shall be closed on
that date, in which event such person or persons shall be deemed to have become
such holder or holders of record at the close of business on the next succeeding
day on which such stock transfer books are open, but such conversion shall be at
the Conversion Rate in effect on the date upon which such shares shall have been
surrendered and such notice received by the Corporation.
6.3 No fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Class 2 ESOP Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Class 2 ESOP
Preferred Stock, the Corporation shall pay to the holder of such share an amount
in cash based upon the Current Market Price of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one certificate shall
be surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion
48
<PAGE>
thereof shall be computed on the basis of the aggregate number of shares of
Class 2 ESOP Preferred Stock so surrendered.
6.4 The Conversion Rate shall be adjusted from time to time as follows:
(a) In case the Corporation shall, at any time or from time to time while any
of the shares of Class 2 ESOP Preferred Stock are outstanding, (i) pay a
dividend or make a distribution on its capital stock in shares of its Common
Stock, (ii) subdivide its outstanding Common Stock into a greater number of
shares, (iii) combine its outstanding Common Stock into a smaller number of
shares or (iv) issue any shares of capital stock by reclassification of its
Common Stock, the Conversion Rate in effect at the opening of business on the
day next following the date fixed for the determination of stockholders entitled
to receive such dividend or distribution or at the opening of business on the
day next following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be adjusted so
that the holder of any share of Class 2 ESOP Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock or other capital stock that such holder would have owned or have
been entitled to receive after the happening of any of the events described
above had such share been converted immediately prior to the record date in the
case of a dividend or distribution or the effective date in the case of a
subdivision, combination or reclassification. An adjustment made pursuant to
this subparagraph (a) shall become effective immediately after the opening of
business on the day next following the record date (except as provided in
Section 6.7 below) in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the day next following
the effective date in the case of a subdivision, combination or
reclassification.
(b) In case the Corporation shall, at any time or from time to time while any
of the shares of Class 2 ESOP Preferred Stock are outstanding, issue Equity
Securities (other than Common Stock and the Rights) (the ''Issued Equity
Securities'') to all holders of shares of its Common Stock entitling them (for a
period expiring within 45 days after the record date for such issuance) to
subscribe for or purchase (whether by exercise, conversion, exchange or
otherwise) shares of Common Stock (or other Equity Securities) at a price per
share less than the Fair Market Value of the Common Stock (or the other Equity
Security to be acquired) at such record date (treating the price per share of
the Equity Securities to be acquired as equal to (x) the sum of (i) the Fair
Market Value of the consideration payable for a unit of the Equity Security plus
(ii) the Fair Market Value of any additional consideration initially payable
upon the exercise, conversion or exchange of such security into Common Stock
divided by (y) the number of shares of Common Stock initially underlying or that
may be acquired upon the exercise, conversion or exchange of such Equity
Security), the Conversion Rate shall be adjusted so that it shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
date of issuance of such Issued Equity Securities by a fraction, the numerator
of which shall be the sum of (A) the number of shares of Common Stock
outstanding on the date of issuance of such Issued Equity Securities plus (B)
the number of additional shares of Common Stock offered for subscription or
purchase (including, without limitation, the security underlying or that may be
acquired upon the exercise, conversion or exchange of the Equity Securities so
offered) and the denominator of which shall be the sum of (A) the number of
shares of Common Stock outstanding on the date of issuance of such Issued Equity
Securities plus (B) the number of shares of Common Stock that the aggregate
offering price of the total number of shares so offered for subscription or
purchase (including, without limitation, the Fair Market Value of the
consideration payable for a unit of the Equity Securities so offered plus the
Fair Market Value of any additional consideration payable upon exercise,
conversion or exchange of such Equity Securities) would purchase at such Fair
Market Value of the Common Stock as of the record date for such issuance. Such
adjustment shall become effective as of the record date for the determination of
stockholders entitled to receive such Issued Equity Securities (except as
provided in Section 6.6 below).
(c) In case the Corporation shall, at any time or from time to time while any
of the shares of Class 2 ESOP Preferred Stock are outstanding, issue, sell or
exchange shares of Common Stock (other than pursuant to any Rights, Equity
Securities issued in connection with any employee or director incentive or
benefit plan or arrangement of the Corporation or any subsidiary or any Equity
Security theretofore outstanding entitling the holder to purchase or acquire
shares of Common Stock) for a consideration having a Fair Market Value on the
date of such issuance, sale or exchange less than the Fair Market Value of such
shares of Common Stock on the date of such issuance, sale or exchange, then the
Conversion Rate in effect immediately prior to such issuance, sale or exchange
shall be adjusted
49
<PAGE>
by multiplying such Conversion Rate by a fraction, the numerator of which shall
be the product of (i) the Fair Market Value of a share of Common Stock on the
Trading Day immediately preceding the first public announcement of such
issuance, sale or exchange multiplied by (ii) the sum of the number of shares of
Common Stock outstanding on such day plus the number of shares of Common Stock
so issued, sold or exchanged by the Corporation, and the denominator of which
shall be the sum of (i) the Fair Market Value of all the shares of Common Stock
outstanding on the Trading Day immediately preceding the first public
announcement of such issuance, sale or exchange plus (ii) the Fair Market Value
of the consideration received by the Corporation in respect of such issuance,
sale or exchange of shares of Common Stock. In case the Corporation shall, at
any time or from time to time while any of the shares of Class 2 ESOP Preferred
Stock are outstanding, issue, sell or exchange any Equity Security (other than
any Rights, Equity Securities issued in connection with any employee or director
incentive or benefit plan or arrangement of the Corporation or any subsidiary or
Common Stock) other than any such issuance to all holders of shares of Common
Stock as a dividend or distribution (including by way of a reclassification of
shares or a recapitalization of the Corporation) for a consideration having a
Fair Market Value on the date of such issuance, sale or exchange less than the
Non-Dilutive Amount, then the Conversion Rate shall be adjusted by multiplying
such Conversion Rate by a fraction, the numerator of which shall be the product
of (i) the Fair Market Value of a share of Common Stock on the Trading Day
immediately preceding the first public announcement of such issuance, sale or
exchange multiplied by (ii) the sum of the number of shares of Common Stock
outstanding on such day plus the maximum number of shares of Common Stock
underlying or which could be acquired pursuant to such Equity Security at the
time of the issuance, sale or exchange of such Equity Security (assuming shares
of Common Stock could be acquired pursuant to such Equity Security at such
time), and the denominator of which shall be the sum of (i) the Fair Market
Value of all the shares of Common Stock outstanding on the Trading Day
immediately preceding the first public announcement of such issuance, sale or
exchange plus (ii) the Fair Market Value of the consideration received by the
Corporation in respect of such issuance, sale or exchange of such Equity
Security plus (iii) the Fair Market Value as of the time of such issuance of the
consideration which the Corporation would receive upon exercise, conversion or
exchange in full of all such Equity Securities.
(d) In case the Corporation shall, at any time or from time to time while any
of the shares of Class 2 ESOP Preferred Stock are outstanding, make an
Extraordinary Distribution in respect of the Common Stock or effect a Pro Rata
Repurchase of Common Stock, the Conversion Rate in effect immediately prior to
such Extraordinary Distribution or Pro Rata Repurchase shall be adjusted by
multiplying such Conversion Rate by a fraction, the numerator of which shall be
the product of (i) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase (minus, in the case of
a Pro Rata Repurchase, the number of shares of Common Stock repurchased by the
Corporation) multiplied by (ii) the Fair Market Value of a share of Common Stock
on the record date with respect to such Extraordinary Distribution or on the
Trading Day immediately preceding the first public announcement by the
Corporation or any of its Affiliates of the intent to effect a Pro Rata
Repurchase, as the case may be, and the denominator of which shall be (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such Extraordinary Distribution or Pro Rata Repurchase multiplied by (y)
the Fair Market Value of a share of Common Stock on the record date with respect
to such Extraordinary Distribution, or on the Trading Day immediately preceding
the first public announcement by the Corporation or any of its Affiliates of the
intent to effect a Pro Rata Repurchase, as the case may be, minus (ii) the Fair
Market Value of the Extraordinary Distribution or the aggregate purchase price
of the Pro Rata Repurchase, as the case may be (provided that such denominator
shall never be less than 1.0); provided, however, that no Pro Rata Repurchase
shall cause an adjustment to the Conversion Rate unless the amount of all cash
dividends and distributions made to holders of Common Stock during the period
from the latest to occur of the Issue Date or the most recent Dividend Payment
Date preceding the Effective Date of such Pro Rata Repurchase, when combined
with the aggregate amount of all Pro Rata Repurchases, including such Pro Rata
Repurchase (for all purposes of this Section 7.4(d), including only that portion
of the Fair Market Value of the aggregate purchase price of each Pro Rata
Repurchase which is in excess of the Fair Market Value of the Common Stock
repurchased as determined on the Trading Day immediately preceding the first
public announcement by the Corporation or any of its Affiliates of the intent to
effect each such Pro Rata Repurchase), the Effective Dates of which fall within
such period, exceeds twelve and one-half percent (12-1/2%) of the aggregate Fair
Market Value of all shares of Common Stock outstanding on the Trading Day
immediately preceding the first public announcement by the Corporation or any of
50
<PAGE>
its Affiliates of the intent to effect such Pro Rata Repurchase. Such adjustment
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such Extraordinary Distribution or
immediately after the Effective Date of such Pro Rata Repurchase.
Solely as an adjustment applicable to shares of Class 2 ESOP Preferred Stock
that are being converted into Common Stock as of a given date, and not as a
permanent adjustment to the Conversion Rate, the Conversion Rate in effect
immediately prior to such conversion shall be adjusted by multiplying such
Conversion Rate by a fraction, the numerator of which shall be the product of
(i) the number of shares of Common Stock outstanding immediately before such
conversion multiplied by (ii) the Fair Market Value of a share of Common Stock
on the date of such conversion, and the denominator of which shall be (i) the
product of (x) the number of shares of Common Stock outstanding immediately
before such conversion multiplied by (y) the Fair Market Value of a share of
Common Stock on the date of such conversion minus (ii) the Fair Market Value of
the cash dividends and distributions made on or before the date of such
conversion with a record date after the later of the Issue Date or the most
recent Dividend Payment Date upon which Participating Dividends were paid in
full, but only to the extent that such cash dividends and distributions (a)
would entitle the holders of the shares of Class 2 ESOP Preferred Stock
outstanding on such conversion date to a dividend under Section 3.1 that has not
been paid and (b) would not constitute an Extraordinary Distribution (provided
that such denominator shall never be less than 1.0).
(e) No adjustment in the Conversion Rate shall be required unless such
adjustment would require a cumulative increase or decrease of at least 0.01% in
such rate; provided that any adjustments that by reason of this subparagraph (e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment until made; and provided further that any adjustment
shall be required and made in accordance with the provisions of this Section 6.4
(other than this subparagraph (e)) not later than such time as may be required
in order to preserve the taxfree nature of a distribution to the holders of
shares of Common Stock. Notwithstanding any other provisions of this Section 6,
the Corporation shall not be required to make any adjustments of the Conversion
Rate for the issuance of any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends on securities of the Corporation so
long as the holders of the Class 2 ESOP Preferred Stock shall be entitled to
participate therein on substantially the same terms as holders of Common Stock.
All calculations under this Section 6 shall be made to the nearest cent (with
$.005 being rounded upward), one-tenth of a share (with .05 of a share being
rounded upward) or, in the case of the Conversion Rate, one hundred millionth of
a share (with .000000005 being rounded upward), as the case may be. Anything in
this Section 6.4 to the contrary notwithstanding, the Corporation shall be
entitled, to the extent permitted by law, to make such reductions in the
Conversion Rate, in addition to those required by this Section 6.4, as it in its
discretion shall determine to be advisable in order that any stock dividends,
subdivision of shares, reclassification or combination of shares, distribu tion
of rights or warrants to purchase stock or securities, or a distribution of
other assets (other than cash dividends) hereafter made by the Corporation to
its stockholders shall not be taxable.
6.5 If:
(a) the Corporation shall declare a dividend or any other distribution on the
Common Stock (other than the Rights); or
(b) the Corporation shall authorize the granting to the holders of the Common
Stock of Equity Securities (other than Common Stock) to subscribe for or
purchase any Equity Security; or
(c) there shall be any reclassification of the Common Stock (other than an
event to which Section 6.4(a) applies) or any consolidation or merger to which
the Corporation is a party and for which approval of any stockholders of the
Corporation is required, or the sale or transfer of all or substantially all of
the assets of the Corporation as an entirety; or
(d) there shall occur the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
(e) there shall occur any Pro Rata Repurchase,
51
<PAGE>
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of shares of the Class 2 ESOP Preferred Stock
at their addresses as shown on the stock records of the Corporation, as promptly
as possible, but at least 10 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of Equity Securities, or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or granting of Equity
Securities are to be determined, (B) the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up or (C) the number of shares subject to such offer for
a Pro Rata Repurchase and the purchase price payable by the Corporation pursuant
to such offer. Failure to give or receive such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section 6.
6.6 Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Rate after such adjustment and setting forth a
brief statement of the facts requiring and the manner of effecting such
adjustment which certificate shall be prima facie evidence of the correctness of
such adjustment. Promptly after delivery of such certificate, the Corporation
shall prepare a notice of such adjustment of the Conversion Rate setting forth
the adjusted Conversion Rate and the effective date of such adjustment or
adjustments and shall mail such notice of such adjustment or adjustments to the
holder of each share of Class 2 ESOP Preferred Stock at such holder's last
address as shown on the stock records of the Corporation.
6.7 In any case in which Section 6.4 provides that an adjustment shall become
effective on the day next following a record date for an event, the Corporation
may defer until the occurrence of such event (A) issuing to the holder of any
share of Class 2 ESOP Preferred Stock converted after such record date and
before the occurrence of such event the additional shares of Common Stock or
other securities issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock or other securities
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of any fraction pursuant to
Section 6.3.
6.8 For purposes of this Section 6, the number of shares of Common Stock at
any time outstanding shall not include any shares of Common Stock then owned or
held by or for the account of the Corporation or any subsidiary. The Corporation
shall not pay a dividend or make any distribution on shares of Common Stock held
in the treasury of the Corporation.
6.9 There shall be no adjustment of the Conversion Rate in case of the
issuance of any stock of the Corporation in a reorganization, acquisition or
other similar transaction except as specifically set forth in Section 6 or
Section 7. If any action or transaction would require adjustment of the
Conversion Rate pursuant to more than one paragraph of this Section 6, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value.
6.10 If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section 6, that in the opinion of the Board
of Directors would materially adversely affect the conversion rights of the
holders of the shares of Class 2 ESOP Preferred Stock, the Conversion Rate for
the Class 2 ESOP Preferred Stock may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board of Directors may
determine to be equitable in the circumstances.
6.11 The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held in
its treasury, or both, for the purpose of effecting conversion of the Class 2
ESOP Preferred Stock, the full number of shares of Common Stock deliverable upon
the conversion of all outstanding shares of Class 2 ESOP Preferred Stock not
theretofore converted. For purposes of this Section 6.11, the number of shares
of Common
52
<PAGE>
Stock that shall be deliverable upon the conversion of all outstanding shares of
Class 2 ESOP Preferred Stock shall be computed as if at the time of computation
all such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the Class 2 ESOP Preferred Stock shall be validly issued, fully
paid and non-assessable.
The Corporation shall endeavor to list the shares of Common Stock (or other
securities) required to be delivered upon conversion of the Class 2 ESOP
Preferred Stock, prior to such delivery, upon each national securities exchange,
if any, upon which the outstanding Common Stock (or other securities) is listed
at the time of such delivery.
Prior to the delivery of any securities that the Corporation shall be
obligated to deliver upon conversion of the Class 2 ESOP Preferred Stock, the
Corporation shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
6.12 The Corporation shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion of the Class 2 ESOP
Preferred Stock pursuant hereto; provided that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock or other securities or
property in a name other than that of the holder of the Class 2 ESOP Preferred
Stock to be converted and no such issue or delivery shall be made unless and
until the person requesting any such issue or delivery has paid to the
Corporation the amount of any such tax or established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
6.13 If, prior to the Distribution Date (as defined for purposes of the
Rights), the Corporation shall issue shares of Common Stock upon conversion of
shares of Class 2 ESOP Preferred Stock as contemplated by this Section 6, the
Corporation shall issue together with each such share of Common Stock that
number of Rights as are then issuable, pursuant to the Rights Agreement (or any
successor rights plan or plans adopted in replacement of the Rights Agreement),
per share of such Common Stock so issued, but only if at such time such Rights
or rights are, pursuant to the relevant rights agreement, to be represented by
certificates representing shares of Common Stock and have not expired.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation shall enter into any consolidation, merger, share
exchange or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are to be exchanged solely for or changed,
reclassified or converted solely into stock of any successor or resulting or
other company (including the Corporation) that constitutes ''qualifying employer
securities'' with respect to holders of Class 2 ESOP Preferred Stock within the
meaning of Section 409(l) of the Code and Section 407(d)(5) of the Employee
Retirement Income Security Act of 1974, as amended, or any successor provisions
of law, and, if applicable, for a cash payment in lieu of fractional shares, if
any, proper provisions shall be made so that upon consummation of such
transaction, the shares of Class 2 ESOP Preferred Stock shall be converted into
or exchanged for preferred stock of such successor or resulting or other
company, having in respect of such company, the same powers, preferences and
relative, participating, optional or other special rights (including the rights
provided by this Section 7), and the qualifications, limitations or restrictions
thereof, that the Class 2 ESOP Preferred Stock had, in respect of the
Corporation, immediately prior to such transaction, except that after such
transaction each share of preferred stock of the surviving or resulting or other
company so received in such transaction upon conversion or exchange of the Class
2 ESOP Preferred Stock shall be convertible, otherwise on the terms and
conditions provided by Section 6 hereof, into the number and kind of
''qualifying employer securities'' receivable in such transaction by a holder of
the number of shares of Common Stock into which a share of Class 2 ESOP
Preferred Stock could have been converted immediately prior to such transaction;
provided, however, that if by virtue of the structure of such transaction, a
holder of Common Stock is required to make an election with respect to the
nature and kind of consideration to be received in such transaction, which
election cannot practicably be made by the holders of the Class 2 ESOP
53
<PAGE>
Preferred Stock, then the shares of preferred stock of the surviving or
resulting or other company received in such transaction upon conversion or
exchange of Class 2 ESOP Preferred Stock shall, by virtue of such transaction
and on the same terms as apply to the holders of Common Stock, be convertible
into or exchangeable solely for ''qualifying employer securities'' (together, if
applicable, with a cash payment in lieu of fractional shares) with the effect
provided above on the basis of the number and kind of qualifying employer
securities receivable in such transaction by a holder of the number of shares of
Common Stock into which such shares of Class 2 ESOP Preferred Stock could have
been converted immediately prior to such transaction (provided that if the kind
or amount of qualifying employer securities receivable in such transaction is
not the same for each such share of Common Stock, then the kind and amount so
receivable in such transaction for each share of Common Stock for this purpose
shall be deemed to be the kind and amount so receivable per share by the
plurality of such shares of Common Stock). The rights of the preferred stock of
such successor or resulting or other company so received in such transaction
upon conversion or exchange of the Class 2 ESOP Preferred Stock shall
successively be subject to adjustments pursuant to Section 6 hereof following
such transaction as nearly equivalent to the adjustments provided for by such
Sections prior to such transaction.
7.2 In case the Corporation shall enter into any consolidation, merger, share
exchange or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are to be exchanged for or changed,
reclassified or converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of ''qualifying employer securities'' (as referred to in
Section 7.1) and cash payments, if applicable, in lieu of fractional shares,
proper provisions shall be made so that upon consummation of such transaction
the outstanding shares of Class 2 ESOP Preferred Stock shall, by virtue of such
transaction and on the same terms as are applicable to the holders of Common
Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in like kind) receivable by holders
of the number of shares of Common Stock into which such shares of Class 2 ESOP
Preferred Stock could have been converted immediately prior to such transaction;
provided, however, that if by virtue of the structure of such transaction, a
holder of Common Stock is required to make an election with respect to the
nature and kind of consideration to be received in such transaction, which
election cannot practicably be made by holders of the Class 2 ESOP Preferred
Stock, then the shares of Class 2 ESOP Preferred Stock shall, by virtue of such
transaction and on the same terms as apply to the holders of Common Stock, be
converted into or exchanged for the aggregate amount of stock, securities, cash
or other property (payable in kind) receivable by a holder of the number of
shares of Common Stock into which such shares of Class 2 ESOP Preferred Stock
could have been converted immediately prior to such transaction if such holder
of Common Stock failed to exercise any rights of election to receive any kind or
amount of stock, securities, cash or other property receivable in such
transaction (provided that if the kind or amount of stock, securities, cash or
other property receivable in such transaction are not the same for each non-
electing share, then the kind and amount of stock, securities, cash or other
property so receivable upon such transaction for each non-electing share shall
be the kind and amount so receivable per share by the plurality of the non-
electing shares).
7.3 In case the Corporation shall enter into any agreement providing for any
consolidation, merger, share exchange or similar transaction described in this
Section 7, then the Corporation shall as soon as practicable thereafter (and in
any event at least fifteen (15) Business Days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Class 2 ESOP Preferred Stock. The Corporation shall not
consummate any consolidation, merger, share exchange or similar transaction
unless all of the terms of this Section 7 have been complied with.
Section 8. Ranking.
8.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Class 2 ESOP Preferred Stock, as to the payment of
dividends or as to distributions of assets upon liquidation, dissolution or
winding up, as the case may be, if the holders of such class or series shall
be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Class 2 ESOP Preferred Stock;
54
<PAGE>
(b) on a parity with the Class 2 ESOP Preferred Stock as to the payment of
dividends, whether or not the dividend rates or dividend payment dates thereof
be different from those of the Class 2 ESOP Preferred Stock, if the holders of
such class or series of stock and the Class 2 ESOP Preferred Stock shall be
entitled to the receipt of dividends in proportion to their respective amounts
of accrued and unpaid dividends per share, without preference or priority one
over the other, and on a parity with the Class 2 ESOP Preferred Stock as to
the distribution of assets upon liquidation, dissolution or winding up,
whether or not the liquidation prices per share thereof be different from
those of the Class 2 ESOP Preferred Stock, if the holder of such class or
series of stock and the Class 2 ESOP Preferred Stock shall be entitled to the
receipt of amounts distributable upon liquidation, dissolution or winding up
in proportion to their respective liquidation preferences, without preference
or priority one over the other; and
(c) junior to the Class 2 ESOP Preferred Stock, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, as the case may be, if the holders of Class 2 ESOP Preferred Stock
shall be entitled to receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of such class or series.
8.2 The Series A Preferred Stock and the Series B Preferred Stock, shall each
be deemed to rank prior to the Class 2 ESOP Preferred Stock both as to the
payment of dividends and as to the distribution of assets upon liquidation,
dissolution or winding up. The Series D Preferred Stock shall be deemed to rank
prior to the Class 2 ESOP Preferred Stock as to the distribution of assets upon
liquidation, dissolution or winding up. The Class 1 ESOP Preferred Stock shall
be deemed to rank on a parity with the Class 2 ESOP Preferred Stock as to the
payment of Participating Dividends and as to amounts distributable upon
liquidation, dissolution or winding up and the Class 1 ESOP Preferred Stock
shall be deemed to rank prior to the Class 2 ESOP Preferred Stock with respect
to the payment of Fixed Dividends (as such term is defined in Article FOURTH,
Part II of this Restated Certificate) on the Class 1 ESOP Preferred Stock. The
Common Stock, the Director Preferred Stocks, the Voting Preferred Stocks and the
Series C Preferred Stock shall each be deemed to rank junior to the Class 2 ESOP
Preferred Stock both as to the payment of dividends and as to the distribution
of assets upon liquidation, dissolution or winding up.
Section 9. Voting. The holders of shares of Class 2 ESOP Preferred Stock
shall have the following voting rights:
9.1 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class 2 ESOP Preferred Stock shall then be required by law or this
Restated Certificate, and in addition to any other vote required by law or this
Restated Certificate, the affirmative vote or written consent of the holders of
at least a majority of all of the outstanding shares of Class 2 ESOP Preferred
Stock, voting separately as a class, shall be necessary for authorizing,
effecting or validating the amendment, alteration or repeal (including any
amendment, alteration or repeal by operation of merger or consolidation) of any
of the provisions of this Restated Certificate or of any certificate amendatory
thereof or supplemental thereto (including any Certificate of Designation,
Preferences and Rights or any similar document relating to any series of Serial
Preferred Stock) that would adversely affect the preferences, rights, powers or
privileges of the Class 2 ESOP Preferred Stock; provided, however, that the
amendment of the provisions of this Restated Certificate so as to authorize or
create, or to increase the authorized amount of, any class or series of stock of
the Corporation ranking on a parity with or junior to the Class 2 ESOP Preferred
Stock both as to the payment of dividends and as to the distribution of assets
upon liquidation, dissolution or winding up of the Corporation shall not be
deemed to adversely affect the preferences, rights, powers or privileges of
Class 2 ESOP Preferred Stock.
9.2 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class 2 ESOP Voting Preferred Stock shall then be required by law
or this Restated Certificate, and in addition to any other vote required by law
or this Restated Certificate, the affirmative vote or written consent of the
holders of at least a majority of all of the outstanding shares of Class 2 ESOP
Preferred Stock, voting separately as a class, shall be necessary for
authorizing, effecting or validating the creation, authorization or issuance of
any shares of any class or series of stock of the Corporation ranking prior to
the Class 2 ESOP Preferred Stock either as to payment of dividends or as to
distributions upon liquidation, dissolution or winding up, or the
reclassification of any authorized stock of the
55
<PAGE>
Corporation into any such prior shares, or the creation, authorization or
issuance of any obligation or security convertible into or evidencing the right
to purchase any such prior shares.
9.3 For purposes of the foregoing provisions of Sections 9.1 and 9.2, each
share of Class 2 ESOP Preferred Stock shall have one (1) vote per share. Except
as otherwise required by applicable law or as set forth herein, the shares of
Class 2 ESOP Preferred Stock shall not have any relative, participating,
optional or other special voting rights and powers and the consent of the
holders thereof shall not be required for the taking of any corporate action.
Section 10. No Redemption. The Class 2 ESOP Preferred Stock shall not be
redeemable in whole or in part.
Section 11. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of any shares
of Class 2 ESOP Preferred Stock as the true and lawful owner thereof for all
purposes, and, except as otherwise provided by law, neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
PART IV
Class P ESOP Voting Junior Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part IV to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part IV.
Section 1. Number of Shares; Designation; Issuances; Automatic Conversion.
1.1 The Class P ESOP Voting Junior Preferred Stock of the Corporation (the
''Class P Voting Preferred Stock'') shall consist of 11,600,000 shares, par
value $0.01 per share.
1.2 Shares of Class P Voting Preferred Stock shall be issued only to a trustee
or trustees acting on behalf of (i) the UAL Corporation Employee Stock Ownership
Plan (the ''ESOP''), (ii) the UAL Corporation Supplemental ESOP (the
''Supplemental ESOP'') or (iii) any other employee stock ownership trust or plan
or other employee benefit plan of the Corporation or any of its subsidiaries
(each, a ''Plan''). In the event of any sale, transfer or other disposition
(including, without limitation, upon a foreclosure or other realization upon
shares of Class P Voting Preferred Stock pledged as security for any loan or
loans made to a Plan or to the trustee or the trustees acting on behalf of a
Plan) (hereinafter a ''transfer'') of shares of Class P Voting Preferred Stock
to any person (including, without limitation, any participant in a Plan) other
than (x) any Plan or trustee or trustees of a Plan or (y) any pledgee of such
shares acquiring such shares as security for any loan or loans made to the Plan
or to any trustee or trustees acting on behalf of the Plan, the shares of Class
P Voting Preferred Stock so transferred, upon such transfer and without any
further action by the Corporation or the holder, shall be automatically
converted into shares of Common Stock at the applicable Conversion Rate in
accordance with Section 9 hereof and thereafter such transferee shall not have
any of the voting powers, preferences or relative, participating, optional or
special rights ascribed to shares of Class P Voting Preferred Stock hereunder,
but, rather, shall have only the powers and rights pertaining to the Common
Stock into which such shares of Class P Voting Preferred Stock shall be so
converted. In the event of any such automatic conversion provided for in this
Section 1.2, such transferee shall be treated for all purposes as the record
holder of the shares of Common Stock into which the Class P Voting Preferred
Stock shall have been converted as of the date of such conversion. Certificates
representing shares of Class P Voting Preferred Stock shall be legended to
reflect such consequences of a transfer. The shares of Common Stock issued upon
any conversion in accordance with Section 9 hereof or this Section 1.2 may be
transferred by the holder thereof as permitted by law.
Section 2. Definitions. For purposes of the Class P Voting Preferred
Stock, the following terms shall have the meanings indicated:
56
<PAGE>
2.1 ''Available Unissued ESOP Shares'' shall have the meaning set forth in
Article FIFTH, Section 1.5 of this Restated Certificate.
2.2 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee of such board of directors authorized by such board
of directors to perform any of its responsibilities with respect to the Class P
Voting Preferred Stock.
2.3 ''Business Day'' shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
2.4 ''Class 1 ESOP Convertible Preferred Stock'' shall mean the Class 1 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
2.5 ''Class 2 ESOP Convertible Preferred Stock'' shall mean the Class 2 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
2.6 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
2.7 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.9 ''Class P Voting Preferred Stock'' shall have the meaning set forth in
Section 1 hereof.
2.10 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
2.11 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.12 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.13 ''Common Stock'' shall mean the common stock, par value $0.01 per share,
of the Corporation.
2.14 ''Conversion Rate'' shall have the meaning set forth in Section 9.1
hereof.
2.15 ''Current Market Price'' of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the Corporation or
any other issuer for any day shall mean the last reported sales price, regular
way, on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either case
as reported on the New York Stock Exchange Composite Tape or, if such security
is not listed or admitted for trading on the New York Stock Exchange, Inc.
(''NYSE''), on the principal national securities exchange on which such security
is listed or admitted for trading or quoted or, if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market or, if such security is not quoted on such National Market, the average
of the closing bid and asked prices on such day in the over-the-counter market
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System (''NASDAQ'') or, if bid and asked prices for such security on
such day shall not have been reported through NASDAQ, the average of the bid and
asked prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Board of Directors.
57
<PAGE>
2.16 ''Director Preferred Stocks'' shall mean, collectively, the Class I
Preferred Stock, the Class Pilot MEC Preferred Stock, the Class IAM Preferred
Stock and the Class SAM Preferred Stock.
2.17 ''ESOP Convertible Preferred Stocks'' shall mean, collectively, the Class
1 ESOP Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred
Stock.
2.18 ''Issue Date'' shall mean the first date on which shares of Class P
Voting Preferred Stock are issued.
2.19 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.20 ''Measuring Date'' shall mean that date which is the 365th day following
the Issue Date.
2.21 ''Pilot Fraction'' shall mean 0.4623.
2.22 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.23 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.24 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.25 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.26 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.27 [Reserved]
2.28 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class P
Voting Preferred Stock as to distributions upon liquidation, dissolution or
winding up of the Corporation are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar agent, then
''set apart for payment'' with respect to the Class P Voting Preferred Stock
shall mean, with respect to such distributions, placing such funds in a separate
account or delivering such funds to a disbursing, paying or other similar agent.
2.29 ''Termination Date'' shall have the meaning set forth in Article FIFTH,
Section 1.72 of this Restated Certificate.
2.30 ''Trading Day'' shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading or quoted on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market, or if such securities are not quoted on such National Market, in the
applicable securities market in which the securities are traded.
2.31 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class P Voting Preferred Stock.
58
<PAGE>
2.32 ''Voting Fraction'' shall mean 0.55 with respect to votes and consents
that have a record date on or prior to the Measuring Date and a fraction that is
equivalent to the Adjusted Percentage (as defined in Section 1.10 of the
Agreement and Plan of Recapitalization, dated as of March 25, 1994, among the
Corporation, the Air Line Pilots Association, International and International
Association of Machinists and Aerospace Workers, as amended from time to time)
as in effect at the close of business on the Measuring Date with respect to
votes and consents that have a record date after the Measuring Date.
2.33 ''Voting Preferred Stocks'' shall mean, collectively, the Class P Voting
Preferred Stock, the Class M Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends. The holders of shares of the Class P Voting
Preferred Stock as such shall not be entitled to receive any dividends or other
distributions (except as provided in Section 4 below).
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class P Voting Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up of the Corporation,
the holders of the shares of Class P Voting Preferred Stock shall be entitled to
receive $0.01 per share of Class P Voting Preferred Stock (the ''Liquidation
Preference''), but such holders shall not be entitled to any further payment.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable among the holders
of the shares of Class P Voting Preferred Stock shall be insufficient to pay in
full the Liquidation Preference and the liquidation preference on all other
shares of any class or series of stock of the Corporation that ranks on a parity
with the Class P Voting Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up of the Corporation, then such assets, or
the proceeds thereof, shall be distributed among the holders of shares of Class
P Voting Preferred Stock and any such other parity stock ratably in accordance
with the respective amounts that would be payable on such shares of Class P
Voting Preferred Stock and any such other parity stock if all amounts payable
thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with or into one or more
corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class of
stock ranking prior to or on a parity with the Class P Voting Preferred Stock as
to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of the Class P
Voting Preferred Stock, as and to the fullest extent provided in this Section 4,
any other series or class of stock of the Corporation that ranks junior to the
Class P Voting Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up of the Corporation, shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Class P
Voting Preferred Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. All shares of Class P Voting Preferred
Stock which shall have been issued and reacquired in any manner by the
Corporation shall be retired and shall not be reissued.
Section 6. Ranking.
6.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Class P Voting Preferred Stock as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of such
class or series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of Class P Voting Preferred Stock;
59
<PAGE>
(b) on a parity with the Class P Voting Preferred Stock as to the
distribution of assets upon liquidation, dissolution or winding up, whether or
not the liquidation prices per share thereof be different from those of the
Class P Voting Preferred Stock, if the holders of such class or series and the
Class P Voting Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in proportion to
their respective liquidation preferences, without preference or priority one
over the other; and
(c) junior to the Class P Voting Preferred Stock, as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of Class P
Voting Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of shares of such class or series.
6.2 The Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock and the ESOP Convertible Preferred Stocks shall be deemed to
rank prior to the Class P Voting Preferred Stock as to amounts distributable
upon liquidation, dissolution or winding up. The other Voting Preferred Stocks
and the Director Preferred Stocks shall each be deemed to rank on a parity with
the Class P Voting Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock and the Series C Preferred Stock
shall each be deemed to rank junior to the Class P Voting Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation shall enter into any consolidation, merger, share
exchange or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are to be exchanged solely for or changed,
reclassified or converted solely into stock of any successor, resulting or other
company (including the Corporation) (each of the foregoing is referred to herein
as ''Merger Transaction'') that constitutes ''qualifying employer securities''
with respect to holders of Class P Voting Preferred Stock within the meaning of
Section 409(l) of the Code and Section 407(d)(5) of the Employee Retirement
Income Security Act of 1974, as amended, or any successor provisions of law,
and, if applicable, for a cash payment in lieu of fractional shares, if any,
proper provisions shall be made so that upon consummation of such transaction,
the shares of Class P Voting Preferred Stock shall be converted into or
exchanged for preferred stock of such successor, resulting or other company (the
''New Pilot Voting Preferred Stock''), having in respect of such company, except
as provided below, the same powers, preferences and relative, participating,
optional or other special rights (including the rights provided by this Section
7), and the qualifications, limitations or restrictions thereof, that the Class
P Voting Preferred Stock had, in respect of the Corporation, immediately prior
to such transaction, except that after such transaction each share of such New
Pilot Voting Preferred Stock so received in such transaction upon conversion or
exchange of the Class P Voting Preferred Stock shall be convertible, otherwise
on the terms and conditions provided by Section 9 hereof, into the number and
kind of ''qualifying employer securities'' receivable in such transaction by a
holder of the number of shares of Common Stock into which a share of Class P
Voting Preferred Stock could have been converted immediately prior to such
transaction; provided, however, that the holder of each share of New Pilot
Voting Preferred Stock shall be entitled to a number of votes per share equal to
a fraction, the numerator of which is the product of (x) the Pilot Fraction and
(y) the aggregate number of votes that would be entitled to be cast by the
holders of the securities of the surviving, resulting or other corporation into
which the ESOP Convertible Preferred Stocks are changed, reclassified or
converted (collectively, the ''New ESOP Convertible Preferred Stocks'') upon
consummation of such transaction (assuming for such purpose the conversion of
the New ESOP Convertible Preferred Stocks), and the denominator of which is the
aggregate number of shares of New Pilot Voting Preferred Stock then outstanding;
provided, further that if by virtue of the structure of such transaction, a
holder of Common Stock is required to make an election with respect to the
nature and kind of consideration to be received in such transaction, which
election cannot practicably be made by the holders of the Class P Voting
Preferred Stock, then the shares of New Pilot Voting Preferred Stock received in
such transaction upon conversion or exchange of Class P Voting Preferred Stock
shall, by virtue of such transaction and on the same terms as apply to the
holders of Common Stock, be convertible into or exchangeable solely for
''qualifying employer securities'' (together, if applicable, with a cash payment
in lieu of fractional shares) with the effect provided above on the basis of the
number and kind of qualifying employer securities receivable in such transaction
by a holder of the number of shares of Common Stock into which such shares of
Class P Voting Preferred Stock could have been converted
60
<PAGE>
immediately prior to such transaction (provided that if the kind or amount of
qualifying employer securities receivable in such transaction is not the same
for each such share of Common Stock, then the kind and amount so receivable in
such transaction for each share of Common Stock for this purpose shall be deemed
to be the kind and amount so receivable per share by the plurality of such
shares of Common Stock). The rights of the New Pilot Voting Preferred Stock so
received in such transaction upon conversion or exchange of the Class P Voting
Preferred Stock shall successively be subject to adjustment pursuant to Section
9 hereof following such transaction as nearly equivalent to the adjustments
provided for by such Section prior to such transaction.
7.2 In case the Corporation shall enter into any Merger Transaction, however
named, pursuant to which the outstanding shares of Common Stock are exchanged
for or changed, reclassified or converted into other stock or securities or cash
or any other property, or any combination thereof, other than any such
consideration which is constituted solely of ''qualifying employer securities''
(as referred to in Section 7.1) and cash payments, if applicable, in lieu of
fractional shares, proper provisions shall be made so that each outstanding
share of Class P Voting Preferred Stock shall, by virtue of and upon
consummation of such transaction, on the same terms as are applicable to the
holders of Common Stock, be converted into or exchanged for the aggregate amount
of stock, securities, cash or other property (payable in like kind) receivable
by holders of the number of shares of Common Stock into which such shares of
Class P Voting Preferred Stock could have been converted immediately prior to
such transaction; provided, however, that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by holders of the Class P
Voting Preferred Stock, then the shares of Class P Voting Preferred Stock shall,
by virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in kind) receivable by a holder of
the number of shares of Common Stock into which such shares of Class P Voting
Preferred Stock could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of election to
receive any kind or amount of stock, securities, cash or other property
receivable in such transaction (provided that if the kind or amount of stock,
securities, cash or other property receivable in such transaction are not the
same for each non-electing share, then the kind and amount of stock, securities,
cash or other property so receivable upon such transaction for each non-electing
share shall be the kind and amount so receivable per share by the plurality of
the non-electing shares).
7.3 In case the Corporation shall enter into any agreement providing for any
Merger Transaction described in Section 7.1 or 7.2, then the Corporation shall
as soon as practicable thereafter (and in any event at least fifteen (15)
Business Days before consummation of such transaction) give notice of such
agreement and the material terms thereof to each holder of Class P Voting
Preferred Stock. The Corporation shall not consummate any such Merger
Transaction unless all of the terms of this Section 7 have been complied with.
Section 8. Voting. The holders of shares of Class P Voting Preferred Stock
shall have the following voting rights:
8.1 Except as otherwise required by law or provided in this Restated
Certificate, the holders of Class P Voting Preferred Stock shall be entitled to
vote on all matters submitted to a vote of the holders of Common Stock of the
Corporation, voting together as a single class with the holders of Common Stock
and the holders of such other classes and series of stock that vote together
with the Common Stock as a single class; provided, however, that prior to the
Termination Date, the holders of Class P Voting Preferred Stock shall not be
entitled to vote with respect to the election of the members of the Board of
Directors. For purposes of this Section 8.1, with respect to any vote or consent
with a record date occurring prior to the Termination Date, (a) the holders of
the shares of Class P Voting Preferred Stock from time to time outstanding
shall, collectively, be entitled to a number of votes (rounded to the nearest
whole vote) equal to the excess of (i) the product of (I) the Pilot Fraction,
(II) the Voting Fraction and (III) a fraction, the numerator of which shall be
the number of votes entitled to be cast on the matter by the holders of all
outstanding securities of the Corporation (excluding the Voting Preferred Stocks
and the shares of Common Stock issued upon conversion of the ESOP Convertible
Preferred Stocks and held on the applicable record date in the ESOP or the
Supplemental ESOP), and the denominator of which shall be the excess of one
(1.0) over the Voting Fraction, over (ii) the sum of (A) the aggregate number of
shares of Common Stock held under the ESOP or the Supplemental ESOP which have
been issued upon conversion of the ESOP Convertible Preferred Stocks and have
61
<PAGE>
been, on the applicable record date, allocated under the ESOP or the
Supplemental ESOP to the accounts of individuals who are members of the ALPA
Employee Group (as defined in the ESOP), (B) the product of (x) the number of
shares of Common Stock held under the ESOP which have been issued upon
conversion of the Class 1 ESOP Convertible Preferred Stock and are held on the
applicable record date in the Loan Suspense Account (as defined in the ESOP)
under the ESOP multiplied by (y) the Pilot Fraction, and (C) the product of (aa)
the number of shares of Common Stock held by the Supplemental ESOP which have
been issued upon conversion of the Class 2 ESOP Convertible Preferred Stock and
are held on the applicable record date in the Phantom Suspense Account (as
defined in the Supplemental ESOP) under the Supplemental ESOP multiplied by (bb)
the Pilot Fraction (the excess of clause (i) over clause (ii) being referred to
herein as the ''Attributed Votes''); and (b) the holder of each share of the
Class P Voting Preferred Stock shall be entitled to a number of votes per share
(rounded to the nearest one hundred millionth of a vote) equal to the result of
dividing (x) the number of Attributed Votes by (y) the number of shares of Class
P Voting Preferred Stock outstanding on the applicable record date. With respect
to each vote or consent with a record date occurring on or after the Termination
Date, each share of Class P Voting Preferred Stock then outstanding shall be
entitled to the number of votes per share (rounded to the nearest one hundred
millionth of a vote) equal to a fraction, the numerator of which is the product
of (i) the sum of (x) the number of shares of Common Stock into which the ESOP
Convertible Preferred Stocks then outstanding can be converted as of the record
date with respect to such vote or consent and (y) the number of Available
Unissued ESOP Shares as of such record date and (ii) the Pilot Fraction, and the
denominator of which is the number of shares of Class P Voting Preferred Stock
outstanding as of such record date. For purposes of this Section 8.1, the
Corporation shall certify to the holders of Class P Voting Preferred Stock and
to the judges or similar officials appointed for the purpose of tabulating votes
at any meeting of stockholders as soon as practicable following the record date
for the determination of stockholders entitled to notice of or to vote at any
meeting of stockholders, but in no event less than five Trading Days before such
meeting, with respect to record dates prior to the Termination Date, the number
of shares of Common Stock then outstanding and the number of votes entitled to
be cast on the matter or matters in question by the holders of all outstanding
securities of the Corporation (excluding the Voting Preferred Stocks and the
shares of Common Stock issued upon conversion of the ESOP Convertible Preferred
Stocks and held on the applicable record date in the ESOP or the Supplemental
ESOP) and, with respect to record dates from and after the Termination Date, the
number of shares of Common Stock into which a share of ESOP Convertible
Preferred Stock was convertible as of the record date for such vote or votes.
The Corporation shall be deemed to satisfy the requirements of the preceding
sentence if such matters are specified in any proxy statement mailed to all
stockholders entitled to vote on such matter or matters.
Prior to the Termination Date, the outstanding shares of the Voting Preferred
Stocks, the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and
the Class SAM Preferred Stock, together with the shares of Common Stock held by
the ESOP and the Supplemental ESOP that were received upon conversion of the
ESOP Preferred Stocks, will represent the Voting Fraction (expressed as a
percentage) of the votes to be cast in connection with matters (other than the
election of directors) submitted to the vote of the holders of the Common Stock
and the holders of all other outstanding securities that vote as a single class
together with the Common Stock. Subject to any amendment of this Restated
Certificate after the date hereof, it is the intent of this Restated Certificate
that this Section 8.1 (with respect to the Class P Voting Preferred Stock),
Article FOURTH, Part V, Section 8.1 of the Restated Certificate (with respect to
the Class M Voting Preferred Stock) and Article FOURTH, Part VI, Section 8.1 of
the Restated Certificate (with respect to the Class S Voting Preferred Stock) be
interpreted together to achieve the foregoing result.
8.2 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class P Voting Preferred Stock shall then be required by law or
this Restated Certificate, and in addition to any other vote required by law or
this Restated Certificate, the affirmative vote or written consent of the
holders of at least a majority of all of the outstanding shares of Class P
Voting Preferred Stock, voting separately as a class, shall be necessary for
authorizing, effecting or validating the amendment, alteration or repeal
(including any amendment, alteration or repeal by operation of merger or
consolidation) of any of the provisions of this Restated Certificate or of any
certificate amendatory thereof or supplemental thereto (including any
Certificate of Designation, Preferences and Rights or any similar document
relating to any series of Serial Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of the Class P Voting Preferred
Stock or of either of the ESOP Convertible Preferred Stocks.
62
<PAGE>
8.3 For purposes of the foregoing provisions of Section 8.2, each share of
Class P Voting Preferred Stock shall have one (1) vote per share.
8.4 Notwithstanding anything to the contrary in Section 7 or 8.1, if at any
time prior to the Termination Date, (x) the trustee under either (i) the ESOP or
(ii) the Supplemental ESOP (together with the ESOP, the ''Employee Plan'')
either (a) fails to solicit, in accordance with the Employee Plan, timely
instructions from Employee Plan participants, the Committee of the ESOP (as
defined in the ESOP and hereinafter referred to as the ''ESOP Committee'') or
the Committee of the Supplemental ESOP (as defined in the Supplemental ESOP and,
together with the ESOP Committee, the ''Committees''), as applicable
(''Instructions''), with respect to any matter referred to in clause (y) below,
or (b) fails to act in accordance with such Instructions with respect to any
matter referred to in clause (y) below (but only if such failure to follow such
Instructions is attributable to (i) the trustee having concluded that, based
upon the terms of such transaction, the trustee's fiduciary duties require the
trustee to fail to follow such instructions or (ii) the unenforceability of the
provisions of the ESOP and/or the Supplemental ESOP relating to the solicitation
and/or following of such Instructions); (y) either (i) but for the provisions of
Article FOURTH, Part VII, Subsection 8.3(a), Article FOURTH, Part VIII,
Subsection 8.3(a) and Article FOURTH, Part IX, Subsection 8.3(a) of this
Restated Certificate, the vote of the stockholders of the Corporation would have
been sufficient, under applicable law, stock exchange listing requirements and
this Restated Certificate, as applicable, to approve the Merger Transaction or
other Control Transaction (as defined in the ESOP) in question (or, if no
stockholder approval would be required by this Restated Certificate, applicable
stock exchange listing requirements or applicable law, the trustee enters into a
binding commitment in connection with a Control Transaction or a Control
Transaction is consummated) or (ii) following the Issue Date, the trustee
disposes of an aggregate of 10% or more of the Common Equity (as defined in
Article FIFTH, Section 1.26 of this Restated Certificate) initially represented
by the ESOP Convertible Preferred Stocks other than in connection with Employee
Plan distributions or diversification requirements; and (z) any of the following
occur: (a) Instructions with respect to a matter are given, the trustee fails to
follow such Instructions and such transaction would not have been approved by
stockholders of the Corporation in accordance with the applicable provisions of
this Restated Certificate (excluding Article FOURTH, Part VII, Subsection
8.3(a), Article FOURTH, Part VIII, Subsection 8.3(a) and Article FOURTH, Part
IX, Subsection 8.3(a) of this Restated Certificate), applicable stock exchange
listing requirements or applicable law if the trustee had acted in accordance
with such Instructions (or, if no vote of stockholders would be required by this
Restated Certificate, applicable stock exchange listing requirements or
applicable law, such action by the trustee in respect of such transaction as to
which Instructions were so given would not have been authorized had the trustee
acted in accordance with such Instructions), (b) the trustee fails to solicit
timely Instructions with respect to such matters, such transaction requires the
approval of stockholders of the Corporation under applicable provisions of this
Restated Certificate, applicable stock exchange listing requirements or
applicable law and such approval would not have been obtained (without regard to
the provisions of Article FOURTH, Part VII, Subsection 8.3(a), Article FOURTH,
Part VIII, Subsection 8.3(a) and Article FOURTH, Part IX, Subsection 8.3(a) of
this Restated Certificate) if the trustee had voted against such transaction all
of the votes entitled to be cast by such trustee as the holder of securities of
the Corporation held under the Employee Plan, or (c) the trustee fails to follow
Instructions or to solicit timely Instructions with respect to such matter and
no vote of stockholders of the Corporation is required by the Restated
Certificate, applicable stock exchange listing requirements or applicable law to
approve such transaction (an action or inaction by the trustee under clauses (x)
and (z) in connection with a transaction referred to in clause (y) being
referred to herein as an ''Uninstructed Trustee Action''); then each outstanding
share of Class P Voting Preferred Stock shall, immediately and automatically,
without any further action on the part of holders thereof or of the Corporation,
be converted into shares of Common Stock at the applicable Conversion Rate in
accordance with Section 9 hereof.
Section 9. Automatic Conversion.
9.1 Shares of Class P Voting Preferred Stock shall, as provided in Sections
1.2 and 8.4, be automatically converted, from time to time, in part or in whole,
respectively, upon (i) any transfer thereof other than a transfer described in
clauses (x) and (y) of Section 1.2 or (ii) an Uninstructed Trustee Action as
described in Section 8.4, at a rate of one ten thousandth of a share of Common
Stock per share of Class P Voting Preferred Stock to be converted (the
''Conversion Rate'').
63
<PAGE>
9.2 At the time that all of the shares of the ESOP Convertible Preferred
Stocks cease to be outstanding for any reason whatsoever, including, without
limitation, their conversion in full into Common Stock (the ''Final Conversion
Date''), all outstanding shares of Class P Voting Preferred Stock shall be
automatically converted, in full, into shares of Common Stock at the Conversion
Rate then in effect.
9.3 Following any conversion in accordance with Sections 9.1 and 9.2, (i) no
holder of Class P Voting Preferred Stock shall have any of the voting powers,
preferences, relative, participating, optional or special rights ascribed to
shares of Class P Voting Preferred Stock hereunder, but, rather, shall have only
the powers and rights pertaining to the Common Stock into which such shares of
Class P Voting Preferred Stock have been so converted, and (ii) any holder of
Class P Voting Preferred Stock shall be treated for all purposes as the record
holder of the shares of Common Stock into which the Class P Voting Preferred
Stock shall have been converted as of the date of the conversion of the shares
of Class P Voting Preferred Stock.
9.4 On or after the date of (i) a transfer of shares of Class P Voting
Preferred Stock (other than as described in clauses (x) and (y) of Section 1.2),
(ii) the Final Conversion Date or (iii) an Uninstructed Trustee Action, each
holder of a certificate or certificates formerly representing shares of Class P
Voting Preferred Stock converted in accordance with Sections 9.1 and 9.2 shall
surrender such certificate or certificates, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent (if other than the
Corporation) in the Borough of Manhattan, City of New York. Unless the shares
issuable on conversion are to be issued in the same name as the name in which
such certificate is registered, each such certificate shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid or that no such taxes
are payable).
9.5 No fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Class P Voting Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Class P Voting
Preferred Stock, the Corporation shall pay to the holder of such share an amount
in cash based upon the Current Market Price of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one certificate shall
be surrendered in respect of such conversion at one time by the same holder, the
number of full shares of Common Stock issuable upon conversion shall be computed
on the basis of the aggregate number of shares of Class P Voting Preferred Stock
formerly represented by the certificates so surrendered.
9.6 In the event of an adjustment to the ''Conversion Rate'' in effect with
respect to the ESOP Convertible Preferred Stocks, a corresponding adjustment
shall be made to the Conversion Rate with respect to the Class P Voting
Preferred Stock.
Section 10. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of any shares
of Class P Voting Preferred Stock as the true and lawful owner thereof for all
purposes, and, except as otherwise provided by law, neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
PART V
Class M ESOP Voting Junior Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part V to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part V.
Section 1. Number of Shares; Designation; Issuances; Automatic Conversion.
64
<PAGE>
1.1 The Class M ESOP Voting Junior Preferred Stock of the Corporation (the
''Class M Voting Preferred Stock'') shall consist of 9,300,000 shares, par value
$0.01 per share.
1.2 Shares of Class M Voting Preferred Stock shall be issued only to a trustee
or trustees acting on behalf of (i) the UAL Corporation Employee Stock Ownership
Plan (the ''ESOP''), (ii) the UAL Corporation Supplemental ESOP (the
''Supplemental ESOP'') or (iii) any other employee stock ownership trust or plan
or other employee benefit plan of the Corporation or any of its subsidiaries
(each, a ''Plan''). In the event of any sale, transfer or other disposition
(including, without limitation, upon a foreclosure or other realization upon
shares of Class M Voting Preferred Stock pledged as security for any loan or
loans made to a Plan or to the trustee or the trustees acting on behalf of a
Plan) (hereinafter a ''transfer'') of shares of Class M Voting Preferred Stock
to any person (including, without limitation, any participant in a Plan) other
than (x) any Plan or trustee or trustees of a Plan or (y) any pledgee of such
shares acquiring such shares as security for any loan or loans made to the Plan
or to any trustee or trustees acting on behalf of the Plan, the shares of Class
M Voting Preferred Stock so transferred, upon such transfer and without any
further action by the Corporation or the holder, shall be automatically
converted into shares of Common Stock at the applicable Conversion Rate in
accordance with Section 9 hereof and thereafter such transferee shall not have
any of the voting powers, preferences or relative, participating, optional or
special rights ascribed to shares of Class M Voting Preferred Stock hereunder,
but, rather, shall have only the powers and rights pertaining to the Common
Stock into which such shares of Class M Voting Preferred Stock shall be so
converted. In the event of any such automatic conversion provided for in this
Section 1.2, such transferee shall be treated for all purposes as the record
holder of the shares of Common Stock into which the Class M Voting Preferred
Stock shall have been converted as of the date of such conversion. Certificates
representing shares of Class M Voting Preferred Stock shall be legended to
reflect such consequences of a transfer. The shares of Common Stock issued upon
any conversion in accordance with Section 9 hereof or this Section 1.2 may be
transferred by the holder thereof as permitted by law.
Section 2. Definitions. For purposes of the Class M Voting Preferred
Stock, the following terms shall have the meanings indicated:
2.1 ''Available Unissued ESOP Shares'' shall have the meaning set forth in
Article FIFTH, Section 1.5 of this Restated Certificate.
2.2 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee of such board of directors authorized by such board
of directors to perform any of its responsibilities with respect to the Class M
Voting Preferred Stock.
2.3 ''Business Day'' shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
2.4 ''Class 1 ESOP Convertible Preferred Stock'' shall mean the Class 1 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
2.5 ''Class 2 ESOP Convertible Preferred Stock'' shall mean the Class 2 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
2.6 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
2.7 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class M Voting Preferred Stock'' shall have the meaning set forth in
Section 1 hereof.
2.9 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
65
<PAGE>
2.10 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
2.11 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.12 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.13 ''Common Stock'' shall mean the common stock, par value $0.01 per share,
of the Corporation.
2.14 ''Conversion Rate'' shall have the meaning set forth in Section 9.1
hereof.
2.15 ''Current Market Price'' of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the Corporation or
any other issuer for any day shall mean the last reported sales price, regular
way on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either case
as reported on the New York Stock Exchange Composite Tape or, if such security
is not listed or admitted for trading on the New York Stock Exchange, Inc.
(''NYSE''), on the principal national securities exchange on which such security
is listed or admitted for trading or quoted or, if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market or, if such security is not quoted on such National Market, the average
of the closing bid and asked prices on such day in the over-the-counter market
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System (''NASDAQ'') or, if bid and asked prices for such security on
such day shall not have been reported through NASDAQ, the average of the bid and
asked prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Board of Directors.
2.16 ''Director Preferred Stocks'' shall mean, collectively, the Class I
Preferred Stock, the Class Pilot MEC Preferred Stock, the Class IAM Preferred
Stock and the Class SAM Preferred Stock.
2.17 ''ESOP Convertible Preferred Stocks'' shall mean, collectively, the Class
1 ESOP Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred
Stock.
2.18 ''Issue Date'' shall mean the first date on which shares of Class M
Voting Preferred Stock are issued.
2.19 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.20 ''Machinist Fraction '' shall mean 0.3713.
2.21 ''Measuring Date'' shall mean that date which is the 365th day following
the Issue Date.
2.22 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.23 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.24 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.25 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
66
<PAGE>
2.26 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.27 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class M
Voting Preferred Stock as to distributions upon liquidation, dissolution or
winding up of the Corporation are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar agent, then
''set apart for payment'' with respect to the Class M Voting Preferred Stock
shall mean, with respect to such distributions, placing such funds in a separate
account or delivering such funds to a disbursing, paying or other similar agent.
2.28 ''Termination Date'' shall have the meaning set forth in Article FIFTH,
Section 1.72 of this Restated Certificate.
2.29 ''Trading Day'' shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading or quoted on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market, or if such securities are not quoted on such National Market, in the
applicable securities market in which the securities are traded.
2.30 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class M Voting Preferred Stock.
2.31 ''Voting Fraction'' shall mean 0.55 with respect to votes and consents
that have a record date on or prior to the Measuring Date and a fraction that is
equivalent to the Adjusted Percentage (as defined in the Agreement and Plan of
Recapitalization, dated as of March 25, 1994, among the Corporation, the Air
Line Pilots Association, International and International Association of
Machinists and Aerospace Workers, as amended from time to time) as in effect at
the close of business on the Measuring Date with respect to votes and consents
that have a record date after the Measuring Date.
2.32 ''Voting Preferred Stocks'' shall mean, collectively, the Class P Voting
Preferred Stock, the Class M Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends. The holders of shares of the Class M Voting
Preferred Stock as such shall not be entitled to receive any dividends or other
distributions (except as provided in Section 4 below).
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class M Voting Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up of the Corporation,
the holders of the shares of Class M Voting Preferred Stock shall be entitled to
receive $0.01 per share of Class M Voting Preferred Stock (the ''Liquidation
Preference''), but such holders shall not be entitled to any further payment.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable among the holders
of the shares of Class M Voting Preferred Stock shall be insufficient to pay in
full the Liquidation Preference and the liquidation preference on all other
shares of any class or series of stock of the Corporation that ranks on a parity
with the Class M Voting Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up of the Corporation, then such assets, or
the proceeds thereof, shall be distributed among the holders of shares of Class
M Voting Preferred Stock and any such other parity stock ratably in accordance
with the respective amounts that would be payable on such shares of Class M
Voting Preferred Stock and any such other parity stock if all amounts payable
thereon were paid in full. For the purposes of this Section 4,
67
<PAGE>
(i) a consolidation or merger of the Corporation with or into one or more
corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class of
stock ranking prior to or on a parity with the Class M Voting Preferred Stock as
to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of the Class M
Voting Preferred Stock, as and to the fullest extent provided in this Section 4,
any other series or class of stock of the Corporation that ranks junior to the
Class M Voting Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up of the Corporation, shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Class M
Voting Preferred Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. All shares of Class M Voting Preferred
Stock which shall have been issued and reacquired in any manner by the
Corporation shall be retired and shall not be reissued.
Section 6. Ranking.
6.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Class M Voting Preferred Stock as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of such
class or series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of Class M Voting Preferred Stock;
(b) on a parity with the Class M Voting Preferred Stock as to the
distribution of assets upon liquidation, dissolution or winding up, whether or
not the liquidation prices per share thereof be different from those of the
Class M Voting Preferred Stock, if the holders of such class or series and the
Class M Voting Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in proportion to
their respective liquidation preferences, without preference or priority one
over the other; and
(c) junior to the Class M Voting Preferred Stock, as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of Class M
Voting Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of shares of such class or series.
6.2 The Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock and the ESOP Convertible Preferred Stocks shall be deemed to
rank prior to the Class M Voting Preferred Stock as to amounts distributable
upon liquidation, dissolution or winding up. The other Voting Preferred Stocks
and the Director Preferred Stocks shall each be deemed to rank on a parity with
the Class M Voting Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock and the Series C Preferred Stock
shall each be deemed to rank junior to the Class M Voting Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation shall enter into any consolidation, merger, share
exchange or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are to be exchanged solely for or changed,
reclassified or converted solely into stock of any successor, resulting or other
company (including the Corporation) (each of the foregoing is referred to herein
as ''Merger Transaction'') that constitutes ''qualifying employer securities''
with respect to holders of Class M Voting Preferred Stock within the meaning of
Section 409(l) of the Code and Section 407(d)(5) of the Employee Retirement
Income Security Act of 1974, as amended, or any successor provisions of law,
and, if applicable, for a cash payment in lieu of fractional shares, if any,
proper provisions shall be made so that upon consummation of such transaction,
the shares of Class M Voting Preferred
68
<PAGE>
Stock shall be converted into or exchanged for preferred stock of such
successor, resulting or other company (the ''New Machinist Voting Preferred
Stock''), having in respect of such company, except as provided below, the same
powers, preferences and relative, participating, optional or other special
rights (including the rights provided by this Section 7), and the
qualifications, limitations or restrictions thereof, that the Class M Voting
Preferred Stock had, in respect of the Corporation, immediately prior to such
transaction, except that after such transaction each share of such New Machinist
Voting Preferred Stock so received in such transaction upon conversion or
exchange of the Class M Voting Preferred Stock shall be convertible, otherwise
on the terms and conditions provided by Section 9 hereof, into the number and
kind of ''qualifying employer securities'' receivable in such transaction by a
holder of the number of shares of Common Stock into which a share of Class M
Voting Preferred Stock could have been converted immediately prior to such
transaction; provided, however, that the holder of each share of New Machinist
Voting Preferred Stock shall be entitled to a number of votes per share equal to
a fraction, the numerator of which is the product of (x) the Machinist Fraction
and (y) the aggregate number of votes that would be entitled to be cast by the
holders of the securities of the surviving, resulting or other corporation into
which the ESOP Convertible Preferred Stocks are changed, reclassified or
converted (collectively, the ''New ESOP Convertible Preferred Stocks'') upon
consummation of such transaction (assuming for such purpose the conversion of
the New ESOP Convertible Preferred Stocks), and the denominator of which is the
aggregate number of shares of New Machinist Voting Preferred Stock then
outstanding; provided, further that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by the holders of the
Class M Voting Preferred Stock, then the shares of New Machinist Voting
Preferred Stock received in such transaction upon conversion or exchange of
Class M Voting Preferred Stock shall, by virtue of such transaction and on the
same terms as apply to the holders of Common Stock, be convertible into or
exchangeable solely for ''qualifying employer securities'' (together, if
applicable, with a cash payment in lieu of fractional shares) with the effect
provided above on the basis of the number and kind of qualifying employer
securities receivable in such transaction by a holder of the number of shares of
Common Stock into which such shares of Class M Voting Preferred Stock could have
been converted immediately prior to such transaction (provided that if the kind
or amount of qualifying employer securities receivable in such transaction is
not the same for each such share of Common Stock, then the kind and amount so
receivable in such transaction for each share of Common Stock for this purpose
shall be deemed to be the kind and amount so receivable per share by the
plurality of such shares of Common Stock). The rights of the New Machinist
Voting Preferred Stock so received in such transaction upon conversion or
exchange of the Class M Voting Preferred Stock shall successively be subject to
adjustment pursuant to Section 9 hereof following such transaction as nearly
equivalent to the adjustments provided for by such Section prior to such
transaction.
7.2 In case the Corporation shall enter into any Merger Transaction, however
named, pursuant to which the outstanding shares of Common Stock are exchanged
for or changed, reclassified or converted into other stock or securities or cash
or any other property, or any combination thereof, other than any such
consideration which is constituted solely of ''qualifying employer securities''
(as referred to in Section 7.1) and cash payments, if applicable, in lieu of
fractional shares, proper provisions shall be made so that each outstanding
share of Class M Voting Preferred Stock shall, by virtue of and upon
consummation of such transaction, on the same terms as are applicable to the
holders of Common Stock, be converted into or exchanged for the aggregate amount
of stock, securities, cash or other property (payable in like kind) receivable
by holders of the number of shares of Common Stock into which such shares of
Class M Voting Preferred Stock could have been converted immediately prior to
such transaction; provided, however, that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by holders of the Class M
Voting Preferred Stock, then the shares of Class M Voting Preferred Stock shall,
by virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in kind) receivable by a holder of
the number of shares of Common Stock into which such shares of Class M Voting
Preferred Stock could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of election to
receive any kind or amount of stock, securities, cash or other property
receivable in such transaction (provided that if the kind or amount of stock,
securities, cash or other property receivable in such transaction are not the
same for each non-electing share, then the kind and amount of stock, securities,
cash or other property so receivable upon such transaction for each non-electing
share shall be the kind and amount so receivable per share by the plurality of
the non-electing shares).
69
<PAGE>
7.3 In case the Corporation shall enter into any agreement providing for any
Merger Transaction described in Section 7.1 or 7.2, then the Corporation shall
as soon as practicable thereafter (and in any event at least fifteen (15)
Business Days before consummation of such transaction) give notice of such
agreement and the material terms thereof to each holder of Class M Voting
Preferred Stock. The Corporation shall not consummate any such Merger
Transaction unless all of the terms of this Section 7 have been complied with.
Section 8. Voting. The holders of shares of Class M Voting Preferred Stock
shall have the following voting rights:
8.1 Except as otherwise required by law or provided in this Restated
Certificate, the holders of Class M Voting Preferred Stock shall be entitled to
vote on all matters submitted to a vote of the holders of Common Stock of the
Corporation, voting together as a single class with the holders of Common Stock
and the holders of such other classes and series of stock that vote together
with the Common Stock as a single class; provided, however, that prior to the
Termination Date, the holders of Class M Voting Preferred Stock shall not be
entitled to vote with respect to the election of the members of the Board of
Directors. For purposes of this Section 8.1, with respect to any vote or consent
with a record date occurring prior to the Termination Date, (a) the holders of
the shares of Class M Voting Preferred Stock from time to time outstanding
shall, collectively, be entitled to a number of votes (rounded to the nearest
whole vote) equal to the excess of (i) the product of (I) the Machinist
Fraction, (II) the Voting Fraction and (III) a fraction, the numerator of which
shall be the number of votes entitled to be cast on the matter by the holders of
all outstanding securities of the Corporation (excluding the Voting Preferred
Stocks and the shares of Common Stock issued upon conversion of the ESOP
Convertible Preferred Stocks and held on the applicable record date in the ESOP
or the Supplemental ESOP), and the denominator of which shall be the excess of
one (1.0) over the Voting Fraction, over (ii) the sum of (A) the aggregate
number of shares of Common Stock held under the ESOP or the Supplemental ESOP
which have been issued upon conversion of the ESOP Convertible Preferred Stocks
and have been, on the applicable record date, allocated under the ESOP or the
Supplemental ESOP to the accounts of individuals who are members of the IAM
Employee Group (as defined in the ESOP), (B) the product of (x) the number of
shares of Common Stock held under the ESOP which have been issued upon
conversion of the Class 1 ESOP Convertible Preferred Stock and are held on the
applicable record date in the Loan Suspense Account (as defined in the ESOP)
under the ESOP multiplied by (y) the Machinist Fraction, and (C) the product of
(aa) the number of shares of Common Stock held by the Supplemental ESOP which
have been issued upon conversion of the Class 2 ESOP Convertible Preferred Stock
and are held on the applicable record date in the Phantom Suspense Account (as
defined in the Supplemental ESOP) under the Supplemental ESOP multiplied by (bb)
the Machinist Fraction (the excess of clause (i) over clause (ii) being referred
to herein as the ''Attributed Votes''); and (b) the holder of each share of the
Class M Voting Preferred Stock shall be entitled to a number of votes per share
(rounded to the nearest one hundred millionth of a vote) equal to the result of
dividing (x) the number of Attributed Votes by (y) the number of shares of Class
M Voting Preferred Stock outstanding on the applicable record date. With respect
to each vote or consent with a record date occurring on or after the Termination
Date, each share of Class M Voting Preferred Stock then outstanding shall be
entitled to the number of votes per share (rounded to the nearest one hundred
millionth of a vote) equal to a fraction, the numerator of which is the product
of (i) the sum of (x) the number of shares of Common Stock into which the ESOP
Convertible Preferred Stocks then outstanding can be converted as of the record
date with respect to such vote or consent and (y) the number of Available
Unissued ESOP Shares as of such record date and (ii) the Machinist Fraction, and
the denominator of which is the number of shares of Class M Voting Preferred
Stock outstanding as of such record date. For purposes of this Section 8.1, the
Corporation shall certify to the holders of Class M Voting Preferred Stock and
to the judges or similar officials appointed for the purpose of tabulating votes
at any meeting of stockholders as soon as practicable following the record date
for the determination of stockholders entitled to notice of or to vote at any
meeting of stockholders, but in no event less than five Trading Days before such
meeting, with respect to record dates prior to the Termination Date, the number
of shares of Common Stock then outstanding and the number of votes entitled to
be cast on the matter or matters in question by the holders of all outstanding
securities of the Corporation (excluding the Voting Preferred Stocks and the
shares of Common Stock issued upon conversion of the ESOP Convertible Preferred
Stocks and held on the applicable record date in the ESOP or the Supplemental
ESOP) and, with respect to record dates from and after the Termination Date, the
number of shares of Common Stock into which a share of ESOP Convertible
Preferred Stock was convertible as of the record date for such vote or votes.
The Corporation shall be
70
<PAGE>
deemed to satisfy the requirements of the preceding sentence if such matters are
specified in any proxy statement mailed to all stockholders entitled to vote on
such matter or matters.
Prior to the Termination Date, the outstanding shares of the Voting Preferred
Stocks, the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and
the Class SAM Preferred Stock, together with the shares of Common Stock held by
the ESOP and the Supplemental ESOP that were received upon conversion of the
ESOP Preferred Stocks, will represent the Voting Fraction (expressed as a
percentage) of the votes to be cast in connection with matters (other than the
election of directors) submitted to the vote of the holders of the Common Stock
and the holders of all other outstanding securities that vote as a single class
together with the Common Stock. Subject to any amendment of this Restated
Certificate after the date hereof, it is the intent of this Restated Certificate
that this Section 8.1 (with respect to the Class M Voting Preferred Stock),
Article FOURTH, Part IV, Section 8.1 of the Restated Certificate (with respect
to the Class P Voting Preferred Stock) and Article FOURTH, Part VI, Section 8.1
of the Restated Certificate (with respect to the Class S Voting Preferred Stock)
be interpreted together to achieve the foregoing result.
8.2 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class M Voting Preferred Stock shall then be required by law or
this Restated Certificate, and in addition to any other vote required by law or
this Restated Certificate, the affirmative vote or written consent of the
holders of at least a majority of all of the outstanding shares of Class M
Voting Preferred Stock, voting separately as a class, shall be necessary for
authorizing, effecting or validating the amendment, alteration or repeal
(including any amendment, alteration or repeal by operation of merger or
consolidation) of any of the provisions of this Restated Certificate or of any
certificate amendatory thereof or supplemental thereto (including any
Certificate of Designation, Preferences and Rights or any similar document
relating to any series of Serial Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of the Class M Voting Preferred
Stock or of either of the ESOP Convertible Preferred Stocks.
8.3 For purposes of the foregoing provisions of Section 8.2, each share of
Class M Voting Preferred Stock shall have one (1) vote per share.
8.4 Notwithstanding anything to the contrary in Section 7 or 8.1, if at any
time prior to the Termination Date, (x) the trustee under either (i) the ESOP or
(ii) the Supplemental ESOP (together with the ESOP, the ''Employee Plan'')
either (a) fails to solicit, in accordance with the Employee Plan, timely
instructions from Employee Plan participants, the Committee of the ESOP (as
defined in the ESOP and hereinafter referred to as the ''ESOP Committee'') or
the Committee of the Supplemental ESOP (as defined in the Supplemental ESOP and,
together with the ESOP Committee, the ''Committees''), as applicable
(''Instructions''), with respect to any matter referred to in clause (y) below,
or (b) fails to act in accordance with such Instructions with respect to any
matter referred to in clause (y) below (but only if such failure to follow such
Instructions is attributable to (i) the trustee having concluded that, based
upon the terms of such transaction, the trustee's fiduciary duties require the
trustee to fail to follow such instructions or (ii) the unenforceability of the
provisions of the ESOP and/or the Supplemental ESOP relating to the solicitation
and/or following of such Instructions); (y) either (i) but for the provisions of
Article FOURTH, Part VII, Subsection 8.3(a), Article FOURTH, Part VIII,
Subsection 8.3(a) and Article FOURTH, Part IX, Subsection 8.3(a) of this
Restated Certificate, the vote of the stockholders of the Corporation would have
been sufficient, under applicable law, stock exchange listing requirements and
this Restated Certificate, as applicable, to approve the Merger Transaction or
other Control Transaction (as defined in the ESOP) in question (or, if no
stockholder approval would be required by this Restated Certificate, applicable
stock exchange listing requirements or applicable law, the trustee enters into a
binding commitment in connection with a Control Transaction or a Control
Transaction is consummated) or (ii) following the Issue Date, the trustee
disposes of an aggregate of 10% or more of the Common Equity (as defined in
Article FIFTH, Section 1.26 of this Restated Certificate) initially represented
by the ESOP Convertible Preferred Stocks other than in connection with Employee
Plan distributions or diversification requirements; and (z) any of the following
occur: (a) Instructions with respect to a matter are given, the trustee fails to
follow such Instructions and such transaction would not have been approved by
stockholders of the Corporation in accordance with the applicable provisions of
this Restated Certificate (excluding Article FOURTH, Part VII, Subsection
8.3(a), Article FOURTH, Part VIII, Subsection 8.3(a) and Article FOURTH, Part
IX, Subsection 8.3(a) of this Restated Certificate), applicable stock exchange
listing requirements or applicable law
71
<PAGE>
if the trustee had acted in accordance with such Instructions (or, if no vote of
stockholders would be required by this Restated Certificate, applicable stock
exchange listing requirements or applicable law, such action by the trustee in
respect of such transaction as to which Instructions were so given would not
have been authorized had the trustee acted in accordance with such
Instructions), (b) the trustee fails to solicit timely Instructions with respect
to such matters, such transaction requires the approval of stockholders of the
Corporation under applicable provisions of this Restated Certificate, applicable
stock exchange listing requirements or applicable law and such approval would
not have been obtained (without regard to the provisions of Article FOURTH, Part
VII, Subsection 8.3(a), Article FOURTH, Part VIII, Subsection 8.3(a) and Article
FOURTH, Part IX, Subsection 8.3(a) of this Restated Certificate) if the trustee
had voted against such transaction all of the votes entitled to be cast by such
trustee as the holder of securities of the Corporation held under the Employee
Plan, or (c) the trustee fails to follow Instructions or to solicit timely
Instructions with respect to such matter and no vote of stockholders of the
Corporation is required by the Restated Certificate, applicable stock exchange
listing requirements or applicable law to approve such transaction (an action or
inaction by the trustee under clauses (x) and (z) in connection with a
transaction referred to in clause (y) being referred to herein as an
''Uninstructed Trustee Action''); then each outstanding share of Class M Voting
Preferred Stock shall, immediately and automatically, without any further action
on the part of holders thereof or of the Corporation, be converted into shares
of Common Stock at the applicable Conversion Rate in accordance with Section 9
hereof.
Section 9. Automatic Conversion.
9.1 Shares of Class M Voting Preferred Stock shall, as provided in Sections
1.2 and 8.4, be automatically converted, from time to time, in part or in whole,
respectively, upon (i) any transfer thereof other than a transfer described in
clauses (x) and (y) of Section 1.2 or (ii) an Uninstructed Trustee Action as
described in Section 8.4, at a rate of one ten thousandth of a share of Common
Stock per share of Class M Voting Preferred Stock to be converted (the
''Conversion Rate'').
9.2 At the time that all of the shares of the ESOP Convertible Preferred
Stocks cease to be outstanding for any reason whatsoever, including, without
limitation, their conversion in full into Common Stock (the ''Final Conversion
Date''), all outstanding shares of Class M Voting Preferred Stock shall be
automatically converted, in full, into shares of Common Stock at the Conversion
Rate then in effect.
9.3 Following any conversion in accordance with Sections 9.1 and 9.2, (i) no
holder of Class M Voting Preferred Stock shall have any of the voting powers,
preferences, relative, participating, optional or special rights ascribed to
shares of Class M Voting Preferred Stock hereunder, but, rather, shall have only
the powers and rights pertaining to the Common Stock into which such shares of
Class M Voting Preferred Stock have been so converted, and (ii) any holder of
Class M Voting Preferred Stock shall be treated for all purposes as the record
holder of the shares of Common Stock into which the Class M Voting Preferred
Stock shall have been converted as of the date of the conversion of the shares
of Class M Voting Preferred Stock.
9.4 On or after the date of (i) a transfer of shares of Class M Voting
Preferred Stock (other than as described in clauses (x) and (y) of Section 1.2),
(ii) the Final Conversion Date or (iii) an Uninstructed Trustee Action, each
holder of a certificate or certificates formerly representing shares of Class M
Voting Preferred Stock converted in accordance with Sections 9.1 and 9.2 shall
surrender such certificate or certificates, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent (if other than the
Corporation) in the Borough of Manhattan, City of New York. Unless the shares
issuable on conversion are to be issued in the same name as the name in which
such certificate is registered, each such certificate shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid or that no such taxes
are payable).
9.5 No fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Class M Voting Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Class M Voting
Preferred Stock, the Corporation shall pay to the holder of such share an amount
in cash based upon the Current Market Price of
72
<PAGE>
Common Stock on the Trading Day immediately preceding the date of conversion. If
more than one certificate shall be surrendered in respect of such conversion at
one time by the same holder, the number of full shares of Common Stock issuable
upon conversion shall be computed on the basis of the aggregate number of shares
of Class M Voting Preferred Stock formerly represented by the certificates so
surrendered.
9.6 In the event of an adjustment to the ''Conversion Rate'' in effect with
respect to the ESOP Convertible Preferred Stocks, a corresponding adjustment
shall be made to the Conversion Rate with respect to the Class M Voting
Preferred Stock.
Section 10. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of any shares
of Class M Voting Preferred Stock as the true and lawful owner thereof for all
purposes, and, except as otherwise provided by law, neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
PART VI
Class S ESOP Voting Junior Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part VI to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part VI.
Section 1. Number of Shares; Designation; Issuances; Automatic Conversion.
1.1 The Class S ESOP Voting Junior Preferred Stock of the Corporation (the
''Class S Voting Preferred Stock'') shall consist of 4,200,000 shares, par value
$0.01 per share.
1.2 Shares of Class S Voting Preferred Stock shall be issued only to a trustee
or trustees acting on behalf of (i) the UAL Corporation Employee Stock Ownership
Plan (the ''ESOP''), (ii) the UAL Corporation Supplemental ESOP (the
''Supplemental ESOP'') or (iii) any other employee stock ownership trust or plan
or other employee benefit plan of the Corporation or any of its subsidiaries
(each, a ''Plan''). In the event of any sale, transfer or other disposition
(including, without limitation, upon a foreclosure or other realization upon
shares of Class S Voting Preferred Stock pledged as security for any loan or
loans made to a Plan or to the trustee or the trustees acting on behalf of a
Plan) (hereinafter a ''transfer'') of shares of Class S Voting Preferred Stock
to any person (including, without limitation, any participant in a Plan) other
than (x) any Plan or trustee or trustees of a Plan or (y) any pledgee of such
shares acquiring such shares as security for any loan or loans made to the Plan
or to any trustee or trustees acting on behalf of the Plan, the shares of Class
S Voting Preferred Stock so transferred, upon such transfer and without any
further action by the Corporation or the holder, shall be automatically
converted into shares of Common Stock at the applicable Conversion Rate in
accordance with Section 9 hereof and thereafter such transferee shall not have
any of the voting powers, preferences or relative, participating, optional or
special rights ascribed to shares of Class S Voting Preferred Stock hereunder,
but, rather, shall have only the powers and rights pertaining to the Common
Stock into which such shares of Class S Voting Preferred Stock shall be so
converted. In the event of any such automatic conversion provided for in this
Section 1.2, such transferee shall be treated for all purposes as the record
holder of the shares of Common Stock into which the Class S Voting Preferred
Stock shall have been converted as of the date of such conversion. Certificates
representing shares of Class S Voting Preferred Stock shall be legended to
reflect such consequences of a transfer. The shares of Common Stock issued upon
any conversion in accordance with Section 9 hereof or this Section 1.2 may be
transferred by the holder thereof as permitted by law.
Section 2. Definitions. For purposes of the Class S Voting Preferred
Stock, the following terms shall have the meanings indicated:
2.1 ''Available Unissued ESOP Shares'' shall have the meaning set forth in
Article FIFTH, Section 1.5 of this Restated Certificate.
73
<PAGE>
2.2 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee of such board of directors authorized by such board
of directors to perform any of its responsibilities with respect to the Class S
Voting Preferred Stock.
2.3 ''Business Day'' shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
2.4 ''Class 1 ESOP Convertible Preferred Stock'' shall mean the Class 1 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
2.5 ''Class 2 ESOP Convertible Preferred Stock'' shall mean the Class 2 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
2.6 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
2.7 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.9 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.10 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
2.11 ''Class S Voting Preferred Stock'' shall have the meaning set forth in
Section 1 hereof.
2.12 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.13 ''Common Stock'' shall mean the common stock, par value $0.01 per share,
of the Corporation.
2.14 ''Conversion Rate'' shall have the meaning set forth in Section 9.1
hereof.
2.15 ''Current Market Price'' of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the Corporation or
any other issuer for any day shall mean the last reported sales price, regular
way on such day, or, if no sale takes place on such day, the average of the
reported closing bid and asked prices on such day, regular way, in either case
as reported on the New York Stock Exchange Composite Tape or, if such security
is not listed or admitted for trading on the New York Stock Exchange, Inc.
(''NYSE''), on the principal national securities exchange on which such security
is listed or admitted for trading or quoted or, if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market or, if such security is not quoted on such National Market, the average
of the closing bid and asked prices on such day in the over-the-counter market
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System (''NASDAQ'') or, if bid and asked prices for such security on
such day shall not have been reported through NASDAQ, the average of the bid and
asked prices on such day as furnished by any NYSE member firm regularly making a
market in such security selected for such purpose by the Board of Directors.
2.16 ''Director Preferred Stocks'' shall mean, collectively, the Class I
Preferred Stock, the Class Pilot MEC Preferred Stock, the Class IAM Preferred
Stock and the Class SAM Preferred Stock.
74
<PAGE>
2.17 ''ESOP Convertible Preferred Stocks'' shall mean, collectively, the Class
1 ESOP Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred
Stock.
2.18 ''Issue Date'' shall mean the first date on which shares of Class S
Voting Preferred Stock are issued.
2.19 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.20 ''Measuring Date'' shall mean that date which is the 365th day following
the Issue Date.
2.21 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.22 ''Salaried/Management Fraction'' shall mean 0.1664.
2.23 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.24 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.25 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.26 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.27 [Reserved]
2.28 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class S
Voting Preferred Stock as to distributions upon liquidation, dissolution or
winding up of the Corporation are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar agent, then
''set apart for payment'' with respect to the Class S Voting Preferred Stock
shall mean, with respect to such distributions, placing such funds in a separate
account or delivering such funds to a disbursing, paying or other similar agent.
2.29 ''Termination Date'' shall have the meaning set forth in Article FIFTH,
Section 1.72 of this Restated Certificate.
2.30 ''Trading Day'' shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted for
trading or quoted on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted for
trading or quoted on any national securities exchange, on the Nasdaq National
Market, or if such securities are not quoted on such National Market, in the
applicable securities market in which the securities are traded.
2.31 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class S Voting Preferred Stock.
2.32 ''Voting Fraction'' shall mean 0.55 with respect to votes and consents
that have a record date on or prior to the Measuring Date and a fraction that is
equivalent to the Adjusted Percentage (as defined in Section 1.10 of the
Agreement and Plan of Recapitalization, dated as of March 25, 1994, among the
Corporation, the Air Line Pilots
75
<PAGE>
Association, International and International Association of Machinists and
Aerospace Workers, as amended from time to time) as in effect at the close of
business on the Measuring Date with respect to votes and consents that have a
record date after the Measuring Date.
2.33 ''Voting Preferred Stocks'' shall mean, collectively, the Class P Voting
Preferred Stock, the Class M Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends. The holders of shares of the Class S Voting
Preferred Stock as such shall not be entitled to receive any dividends or other
distributions (except as provided in Section 4 below).
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class S Voting Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up of the Corporation,
the holders of the shares of Class S Voting Preferred Stock shall be entitled to
receive $0.01 per share of Class S Voting Preferred Stock (the ''Liquidation
Preference''), but such holders shall not be entitled to any further payment.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable among the holders
of the shares of Class S Voting Preferred Stock shall be insufficient to pay in
full the Liquidation Preference and the liquidation preference on all other
shares of any class or series of stock of the Corporation that ranks on a parity
with the Class S Voting Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up of the Corporation, then such assets, or
the proceeds thereof, shall be distributed among the holders of shares of Class
S Voting Preferred Stock and any such other parity stock ratably in accordance
with the respective amounts that would be payable on such shares of Class S
Voting Preferred Stock and any such other parity stock if all amounts payable
thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with or into one or more
corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class of
stock ranking prior to or on a parity with the Class S Voting Preferred Stock as
to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of the Class S
Voting Preferred Stock, as and to the fullest extent provided in this Section 4,
any other series or class of stock of the Corporation that ranks junior to the
Class S Voting Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up of the Corporation, shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the holders of the Class S
Voting Preferred Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. All shares of Class S Voting Preferred
Stock which shall have been issued and reacquired in any manner by the
Corporation shall be retired and shall not be reissued.
Section 6. Ranking.
6.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Class S Voting Preferred Stock as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of such
class or series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of Class S Voting Preferred Stock;
(b) on a parity with the Class S Voting Preferred Stock as to the
distribution of assets upon liquidation, dissolution or winding up, whether or
not the liquidation prices per share thereof be different from those of the
Class S Voting Preferred Stock, if the holders of such class or series and the
Class S Voting Preferred Stock
76
<PAGE>
shall be entitled to the receipt of amounts distributable upon liquidation,
dissolution or winding up in proportion to their respective liquidation
preferences, without preference or priority one over the other; and
(c) junior to the Class S Voting Preferred Stock, as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of Class S
Voting Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of shares of such class or series.
6.2 The Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock and the ESOP Convertible Preferred Stocks shall be deemed to
rank prior to the Class S Voting Preferred Stock as to amounts distributable
upon liquidation, dissolution or winding up. The other Voting Preferred Stocks
and the Director Preferred Stocks shall each be deemed to rank on a parity with
the Class S Voting Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock and the Series C Preferred Stock
shall each be deemed to rank junior to the Class S Voting Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation shall enter into any consolidation, merger, share
exchange or similar transaction, however named, pursuant to which the
outstanding shares of Common Stock are to be exchanged solely for or changed,
reclassified or converted solely into stock of any successor, resulting or other
company (including the Corporation) (each of the foregoing is referred to herein
as ''Merger Transaction'') that constitutes ''qualifying employer securities''
with respect to holders of Class S Voting Preferred Stock within the meaning of
Section 409(l) of the Code and Section 407(d)(5) of the Employee Retirement
Income Security Act of 1974, as amended, or any successor provisions of law,
and, if applicable, for a cash payment in lieu of fractional shares, if any,
proper provisions shall be made so that upon consummation of such transaction,
the shares of Class S Voting Preferred Stock shall be converted into or
exchanged for preferred stock of such successor, resulting or other company (the
''New Salaried/Management Voting Preferred Stock''), having in respect of such
company, except as provided below, the same powers, preferences and relative,
participating, optional or other special rights (including the rights provided
by this Section 7), and the qualifications, limitations or restrictions thereof,
that the Class S Voting Preferred Stock had, in respect of the Corporation,
immediately prior to such transaction, except that after such transaction each
share of such New Salaried/Management Voting Preferred Stock so received in such
transaction upon conversion or exchange of the Class S Voting Preferred Stock
shall be convertible, otherwise on the terms and conditions provided by Section
9 hereof, into the number and kind of ''qualifying employer securities''
receivable in such transaction by a holder of the number of shares of Common
Stock into which a share of Class S Voting Preferred Stock could have been
converted immediately prior to such transaction; provided, however, that the
holder of each share of New Salaried/Management Voting Preferred Stock shall be
entitled to a number of votes per share equal to a fraction, the numerator of
which is the product of (x) the Salaried/Management Fraction and (y) the
aggregate number of votes that would be entitled to be cast by the holders of
the securities of the surviving, resulting or other corporation into which the
ESOP Convertible Preferred Stocks are changed, reclassified or converted
(collectively, the ''New ESOP Convertible Preferred Stocks'') upon consummation
of such transaction (assuming for such purpose the conversion of the New ESOP
Convertible Preferred Stocks), and the denominator of which is the aggregate
number of shares of New Salaried/Management Voting Preferred Stock then
outstanding; provided, further that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by the holders of the
Class S Voting Preferred Stock, then the shares of New Salaried/Management
Voting Preferred Stock received in such transaction upon conversion or exchange
of Class S Voting Preferred Stock shall, by virtue of such transaction and on
the same terms as apply to the holders of Common Stock, be convertible into or
exchangeable solely for ''qualifying employer securities'' (together, if
applicable, with a cash payment in lieu of fractional shares) with the effect
provided above on the basis of the number and kind of qualifying employer
securities receivable in such transaction by a holder of the number of shares of
Common Stock into which such shares of Class S Voting Preferred Stock could have
been converted immediately prior to such transaction (provided that if the kind
or amount of qualifying employer securities receivable in such transaction is
not the same for each such share of Common Stock, then the kind and amount so
77
<PAGE>
receivable in such transaction for each share of Common Stock for this purpose
shall be deemed to be the kind and amount so receivable per share by the
plurality of such shares of Common Stock). The rights of the New
Salaried/Management Voting Preferred Stock so received in such transaction upon
conversion or exchange of the Class S Voting Preferred Stock shall successively
be subject to adjustment pursuant to Section 9 hereof following such transaction
as nearly equivalent to the adjustments provided for by such Section prior to
such transaction.
7.2 In case the Corporation shall enter into any Merger Transaction, however
named, pursuant to which the outstanding shares of Common Stock are exchanged
for or changed, reclassified or converted into other stock or securities or cash
or any other property, or any combination thereof, other than any such
consideration which is constituted solely of ''qualifying employer securities''
(as referred to in Section 7.1) and cash payments, if applicable, in lieu of
fractional shares, proper provisions shall be made so that each outstanding
share of Class S Voting Preferred Stock shall, by virtue of and upon
consummation of such transaction, on the same terms as are applicable to the
holders of Common Stock, be converted into or exchanged for the aggregate amount
of stock, securities, cash or other property (payable in like kind) receivable
by holders of the number of shares of Common Stock into which such shares of
Class S Voting Preferred Stock could have been converted immediately prior to
such transaction; provided, however, that if by virtue of the structure of such
transaction, a holder of Common Stock is required to make an election with
respect to the nature and kind of consideration to be received in such
transaction, which election cannot practicably be made by holders of the Class S
Voting Preferred Stock, then the shares of Class S Voting Preferred Stock shall,
by virtue of such transaction and on the same terms as apply to the holders of
Common Stock, be converted into or exchanged for the aggregate amount of stock,
securities, cash or other property (payable in kind) receivable by a holder of
the number of shares of Common Stock into which such shares of Class S Voting
Preferred Stock could have been converted immediately prior to such transaction
if such holder of Common Stock failed to exercise any rights of election to
receive any kind or amount of stock, securities, cash or other property
receivable in such transaction (provided that if the kind or amount of stock,
securities, cash or other property receivable in such transaction are not the
same for each non-electing share, then the kind and amount of stock, securities,
cash or other property so receivable upon such transaction for each non-electing
share shall be the kind and amount so receivable per share by the plurality of
the non-electing shares).
7.3 In case the Corporation shall enter into any agreement providing for any
Merger Transaction described in Section 7.1 or 7.2, then the Corporation shall
as soon as practicable thereafter (and in any event at least fifteen (15)
Business Days before consummation of such transaction) give notice of such
agreement and the material terms thereof to each holder of Class S Voting
Preferred Stock. The Corporation shall not consummate any such Merger
Transaction unless all of the terms of this Section 7 have been complied with.
Section 8. Voting. The holders of shares of Class S Voting Preferred Stock
shall have the following voting rights:
8.1 Except as otherwise required by law or provided in this Restated
Certificate, the holders of Class S Voting Preferred Stock shall be entitled to
vote on all matters submitted to a vote of the holders of Common Stock of the
Corporation, voting together as a single class with the holders of Common Stock
and the holders of such other classes and series of stock that vote together
with the Common Stock as a single class; provided, however, that prior to the
Termination Date, the holders of Class S Voting Preferred Stock shall not be
entitled to vote with respect to the election of the members of the Board of
Directors. For purposes of this Section 8.1, with respect to any vote or consent
with a record date occurring prior to the Termination Date, (a) the holders of
the shares of Class S Voting Preferred Stock from time to time outstanding
shall, collectively, be entitled to a number of votes (rounded to the nearest
whole vote) equal to the excess of (i) the product of (I) the
Salaried/Management Fraction, (II) the Voting Fraction and (III) a fraction, the
numerator of which shall be the number of votes entitled to be cast on the
matter by the holders of all outstanding securities of the Corporation
(excluding the Voting Preferred Stocks and the shares of Common Stock issued
upon conversion of the ESOP Convertible Preferred Stocks and held on the
applicable record date in the ESOP or the Supplemental ESOP), and the
denominator of which shall be the excess of one (1.0) over the Voting Fraction,
over (ii) the sum of (A) the aggregate number of shares of Common Stock held
under the ESOP or the Supplemental ESOP which have been issued upon conversion
of the ESOP Convertible Preferred Stocks and have been, on the applicable record
date, allocated under the ESOP or the Supplemental ESOP to the accounts of
individuals who are members of the Salaried/Management Employee Group (as
defined in the ESOP),
78
<PAGE>
(B) the product of (x) the number of shares of Common Stock held under the ESOP
which have been issued upon conversion of the Class 1 ESOP Convertible Preferred
Stock and are held on the applicable record date in the Loan Suspense Account
(as defined in the ESOP) under the ESOP multiplied by (y) the Salaried/
Management Fraction, and (C) the product of (aa) the number of shares of Common
Stock held by the Supplemental ESOP which have been issued upon conversion of
the Class 2 ESOP Convertible Preferred Stock and are held on the applicable
record date in the Phantom Suspense Account (as defined in the Supplemental
ESOP) under the Supplemental ESOP multiplied by (bb) the Salaried/Management
Fraction (the excess of clause (i) over clause (ii) being referred to herein as
the ''Attributed Votes''); and (b) the holder of each share of the Class S
Voting Preferred Stock shall be entitled to a number of votes per share (rounded
to the nearest one hundred millionth of a vote) equal to the result of dividing
(x) the number of Attributed Votes by (y) the number of shares of Class S Voting
Preferred Stock outstanding on the applicable record date. With respect to each
vote or consent with a record date occurring on or after the Termination Date,
each share of Class S Voting Preferred Stock then outstanding shall be entitled
to the number of votes per share (rounded to the nearest one hundred millionth
of a vote) equal to a fraction, the numerator of which is the product of (i) the
sum of (x) the number of shares of Common Stock into which the ESOP Convertible
Preferred Stocks then outstanding can be converted as of the record date with
respect to such vote or consent and (y) the number of Available Unissued ESOP
Shares as of such record date and (ii) the Salaried/Management Fraction, and the
denominator of which is the number of shares of Class S Voting Preferred Stock
outstanding as of such record date. For purposes of this Section 8.1, the
Corporation shall certify to the holders of Class S Voting Preferred Stock and
to the judges or similar officials appointed for the purpose of tabulating votes
at any meeting of stockholders as soon as practicable following the record date
for the determination of stockholders entitled to notice of or to vote at any
meeting of stockholders, but in no event less than five Trading Days before such
meeting, with respect to record dates prior to the Termination Date, the number
of shares of Common Stock then outstanding and the number of votes entitled to
be cast on the matter or matters in question by the holders of all outstanding
securities of the Corporation (excluding the Voting Preferred Stocks and the
shares of Common Stock issued upon conversion of the ESOP Convertible Preferred
Stocks and held on the applicable record date in the ESOP or the Supplemental
ESOP) and, with respect to record dates from and after the Termination Date, the
number of shares of Common Stock into which a share of ESOP Convertible
Preferred Stock was convertible as of the record date for such vote or votes.
The Corporation shall be deemed to satisfy the requirements of the preceding
sentence if such matters are specified in any proxy statement mailed to all
stockholders entitled to vote on such matter or matters.
Prior to the Termination Date, the outstanding shares of the Voting Preferred
Stocks, the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock and
the Class SAM Preferred Stock, together with the shares of Common Stock held by
the ESOP and the Supplemental ESOP that were received upon conversion of the
ESOP Preferred Stocks, will represent the Voting Fraction (expressed as a
percentage) of the votes to be cast in connection with matters (other than the
election of directors) submitted to the vote of the holders of the Common Stock
and the holders of all other outstanding securities that vote as a single class
together with the Common Stock. Subject to any amendment of this Restated
Certificate after the date hereof, it is the intent of this Restated Certificate
that this Section 8.1 (with respect to the Class S Voting Preferred Stock),
Article FOURTH, Part V, Section 8.1 of the Restated Certificate (with respect to
the Class M Voting Preferred Stock) and Article FOURTH, Part IV, Section 8.1 of
the Restated Certificate (with respect to the Class P Voting Preferred Stock) be
interpreted together to achieve the foregoing result.
8.2 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class S Voting Preferred Stock shall then be required by law or
this Restated Certificate, and in addition to any other vote required by law or
this Restated Certificate, the affirmative vote or written consent of the
holders of at least a majority of all of the outstanding shares of Class S
Voting Preferred Stock, voting separately as a class, shall be necessary for
authorizing, effecting or validating the amendment, alteration or repeal
(including any amendment, alteration or repeal by operation of merger or
consolidation) of any of the provisions of this Restated Certificate or of any
certificate amendatory thereof or supplemental thereto (including any
Certificate of Designation, Preferences and Rights or any similar document
relating to any series of Serial Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of the Class S Voting Preferred
Stock or of either of the ESOP Convertible Preferred Stocks.
79
<PAGE>
8.3 For purposes of the foregoing provisions of Section 8.2, each share of
Class S Voting Preferred Stock shall have one (1) vote per share.
8.4 Notwithstanding anything to the contrary in Section 7 or 8.1, if at any
time prior to the Termination Date, (x) the trustee under either (i) the ESOP or
(ii) the Supplemental ESOP (together with the ESOP, the ''Employee Plan'')
either (a) fails to solicit, in accordance with the Employee Plan, timely
instructions from Employee Plan participants, the Committee of the ESOP (as
defined in the ESOP and hereinafter referred to as the ''ESOP Committee'') or
the Committee of the Supplemental ESOP (as defined in the Supplemental ESOP and,
together with the ESOP Committee, the ''Committees''), as applicable
(''Instructions''), with respect to any matter referred to in clause (y) below,
or (b) fails to act in accordance with such Instructions with respect to any
matter referred to in clause (y) below (but only if such failure to follow such
Instructions is attributable to (i) the trustee having concluded that, based
upon the terms of such transaction, the trustee's fiduciary duties require the
trustee to fail to follow such instructions or (ii) the unenforceability of the
provisions of the ESOP and/or the Supplemental ESOP relating to the solicitation
and/or following of such Instructions); (y) either (i) but for the provisions of
Article FOURTH, Part VII, Subsection 8.3(a), Article FOURTH, Part VIII,
Subsection 8.3(a) and Article FOURTH, Part IX, Subsection 8.3(a) of this
Restated Certificate, the vote of the stockholders of the Corporation would have
been sufficient, under applicable law, stock exchange listing requirements and
this Restated Certificate, as applicable, to approve the Merger Transaction or
other Control Transaction (as defined in the ESOP) in question (or, if no
stockholder approval would be required by this Restated Certificate, applicable
stock exchange listing requirements or applicable law, the trustee enters into a
binding commitment in connection with a Control Transaction or a Control
Transaction is consummated) or (ii) following the Issue Date, the trustee
disposes of an aggregate of 10% or more of the Common Equity (as defined in
Article FIFTH, Section 1.26 of this Restated Certificate) initially represented
by the ESOP Convertible Preferred Stocks other than in connection with Employee
Plan distributions or diversification requirements; and (z) any of the following
occur: (a) Instructions with respect to a matter are given, the trustee fails to
follow such Instructions and such transaction would not have been approved by
stockholders of the Corporation in accordance with the applicable provisions of
this Restated Certificate (excluding Article FOURTH, Part VII, Subsection
8.3(a), Article FOURTH, Part VIII, Subsection 8.3(a) and Article FOURTH, Part
IX, Subsection 8.3(a) of this Restated Certificate), applicable stock exchange
listing requirements or applicable law if the trustee had acted in accordance
with such Instructions (or, if no vote of stockholders would be required by this
Restated Certificate, applicable stock exchange listing requirements or
applicable law, such action by the trustee in respect of such transaction as to
which Instructions were so given would not have been authorized had the trustee
acted in accordance with such Instructions, (b) the trustee fails to solicit
timely Instructions with respect to such matters, such transaction requires the
approval of stockholders of the Corporation under applicable provisions of this
Restated Certificate, applicable stock exchange listing requirements or
applicable law and such approval would not have been obtained (without regard to
the provisions of Article FOURTH, Part VII, Subsection 8.3(a), Article FOURTH,
Part VIII, Subsection 8.3(a) and Article FOURTH, Part IX, Subsection 8.3(a) of
this Restated Certificate) if the trustee had voted against such transaction all
of the votes entitled to be cast by such trustee as the holder of securities of
the Corporation held under the Employee Plan, or (c) the trustee fails to follow
Instructions or to solicit timely Instructions with respect to such matter and
no vote of stockholders of the Corporation is required by the Restated
Certificate, applicable stock exchange listing requirements or applicable law to
approve such transaction (an action or inaction by the trustee under clauses (x)
and (z) in connection with a transaction referred to in clause (y) being
referred to herein as an ''Uninstructed Trustee Action''); then each outstanding
share of Class S Voting Preferred Stock shall, immediately and automatically,
without any further action on the part of holders thereof or of the Corporation,
be converted into shares of Common Stock at the applicable Conversion Rate in
accordance with Section 9 hereof.
Section 9. Automatic Conversion.
9.1 Shares of Class S Voting Preferred Stock shall, as provided in Sections
1.2 and 8.4, be automatically converted, from time to time, in part or in whole,
respectively, upon (i) any transfer thereof other than a transfer described in
clauses (x) and (y) of Section 1.2 or (ii) an Uninstructed Trustee Action as
described in Section 8.4, at a rate of one ten thousandth of a share of Common
Stock per share of Class S Voting Preferred Stock to be converted (the
''Conversion Rate'').
80
<PAGE>
9.2 At the time that all of the shares of the ESOP Convertible Preferred
Stocks cease to be outstanding for any reason whatsoever, including, without
limitation, their conversion in full into Common Stock (the ''Final Conversion
Date''), all outstanding shares of Class S Voting Preferred Stock shall be
automatically converted, in full, into shares of Common Stock at the Conversion
Rate then in effect.
9.3 Following any conversion in accordance with Sections 9.1 and 9.2, (i) no
holder of Class S Voting Preferred Stock shall have any of the voting powers,
preferences, relative, participating, optional or special rights ascribed to
shares of Class S Voting Preferred Stock hereunder, but, rather, shall have only
the powers and rights pertaining to the Common Stock into which such shares of
Class S Voting Preferred Stock have been so converted, and (ii) any holder of
Class S Voting Preferred Stock shall be treated for all purposes as the record
holder of the shares of Common Stock into which the Class S Voting Preferred
Stock shall have been converted as of the date of the conversion of the shares
of Class S Voting Preferred Stock.
9.4 On or after the date of (i) a transfer of shares of Class S Voting
Preferred Stock (other than as described in clauses (x) and (y) of Section 1.2),
(ii) the Final Conversion Date or (iii) an Uninstructed Trustee Action, each
holder of a certificate or certificates formerly representing shares of Class S
Voting Preferred Stock converted in accordance with Sections 9.1 and 9.2 shall
surrender such certificate or certificates, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent (if other than the
Corporation) in the Borough of Manhattan, City of New York. Unless the shares
issuable on conversion are to be issued in the same name as the name in which
such certificate is registered, each such certificate shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid or that no such taxes
are payable).
9.5 No fractional shares or scrip representing fractions of shares of Common
Stock shall be issued upon conversion of the Class S Voting Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Class S Voting
Preferred Stock, the Corporation shall pay to the holder of such share an amount
in cash based upon the Current Market Price of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one certificate shall
be surrendered in respect of such conversion at one time by the same holder, the
number of full shares of Common Stock issuable upon conversion shall be computed
on the basis of the aggregate number of shares of Class S Voting Preferred Stock
formerly represented by the certificates so surrendered.
9.6 In the event of an adjustment to the ''Conversion Rate'' in effect with
respect to the ESOP Convertible Preferred Stocks, a corresponding adjustment
shall be made to the Conversion Rate with respect to the Class S Voting
Preferred Stock.
Section 10. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of any shares
of Class S Voting Preferred Stock as the true and lawful owner thereof for all
purposes, and, except as otherwise provided by law, neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
PART VII
Class Pilot MEC Junior Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part VII to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part VII.
Section 1. Number of Shares; Designation; Issuance; Restrictions on
Transfer.
81
<PAGE>
1.1 The Class Pilot MEC Junior Preferred Stock of the Corporation (the ''Class
Pilot MEC Preferred Stock'') shall consist of one (1) share, par value $0.01.
1.2 The share of Class Pilot MEC Preferred Stock shall be issued only to (i)
the United Airlines Pilots Master Executive Council of the Air Line Pilots
Association, International (''ALPA'') pursuant to ALPA's authority as the
collective bargaining representative for the crafts or class of pilots employed
by United Air Lines, Inc. (the ''MEC'') or (ii) a duly authorized agent acting
for the benefit of the MEC. Any purported sale, transfer, pledge or other
disposition (hereinafter a ''transfer'') of the share of Class Pilot MEC
Preferred Stock to any person, other than a successor to the MEC or a duly
authorized agent acting for the benefit of such successor, shall be null and
void and of no force and effect. Upon any purported transfer of the share of
Class Pilot MEC Preferred Stock by the holder thereof other than as expressly
permitted above, and without any further action by the Corporation or such
holder, such share shall, to the extent of funds legally available therefor and
subject to the other provisions of this Restated Certificate, be automatically
redeemed by the Corporation in accordance with Section 9 hereof, and thereupon
such share shall no longer be deemed outstanding, and neither such holder nor
any purported transferee thereof shall have in respect thereof any of the voting
powers, preferences or relative, participating, optional or special rights
ascribed to the share of Class Pilot MEC Preferred Stock hereunder, but rather
such holder thereafter shall only be entitled to receive the amount payable upon
redemption in accordance with Section 9. The certificate representing the share
of Class Pilot MEC Preferred Stock shall be legended to reflect the restrictions
on transfer and automatic redemption provided for herein.
Section 2. Definitions. For purposes of the Class Pilot MEC Preferred
Stock, the following terms shall have the meanings indicated:
2.1 ''Affiliate'' shall have the meaning defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended, or any successor thereto.
2.2 ''ALPA Termination Date'' shall have the meaning set forth in Section 8
hereof.
2.3 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee thereof authorized by such board of directors to
perform any of its responsibilities with respect to the Class Pilot MEC
Preferred Stock.
2.4 ''Business Day'' shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
2.5 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
2.6 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.7 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.9 ''Class Pilot MEC Preferred Stock'' shall have the meaning set forth in
Section 1 hereof.
2.10 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.11 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
82
<PAGE>
2.12 ''Common Stock'' shall mean the common stock, par value $0.01 per share,
of the Corporation.
2.13 ''Director Preferred Stocks'' shall mean, collectively, the Class I
Preferred Stock, the Class IAM Preferred Stock, the Class Pilot MEC Preferred
Stock and the Class SAM Preferred Stock.
2.14 ''ESOP Convertible Preferred Stocks'' shall mean, collectively, the Class
1 ESOP Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred
Stock, each of the par value of $0.01 per share, of the Corporation.
2.15 ''Issue Date'' shall mean the first date on which shares of Class Pilot
MEC Preferred Stock are issued.
2.16 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.17 ''Measuring Date'' shall mean that date which is the 365th day following
the Issue Date.
2.18 ''Pilot Fraction'' shall mean 0.4623.
2.19 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.20 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.21 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.22 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.23 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.24 [Reserved]
2.25 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class Pilot
MEC Preferred Stock as to distributions upon liquidation, dissolution or winding
up of the Corporation are placed in a separate account of the Corporation or
delivered to a disbursing, paying or other similar agent, then ''set apart for
payment'' with respect to the Class Pilot MEC Preferred Stock shall mean, with
respect to such distributions, placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
2.26 ''Termination Date'' shall have the meaning set forth in Article FIFTH,
Section 1.72 of this Restated Certificate.
2.27 ''Trading Day'' shall mean any day on which the securities in question
are traded on the New York Stock Exchange, Inc. (the ''NYSE''), or if such
securities are not listed or admitted for trading or quoted on the NYSE, on the
principal national securities exchange on which such securities are listed or
admitted, or if not listed or admitted for trading or quoted on any national
securities exchange, on the Nasdaq National Market, or if such securities are
not quoted on such National Market, in the applicable securities market in which
the securities are traded.
83
<PAGE>
2.28 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class Pilot MEC Preferred Stock.
2.29 ''Voting Fraction'' shall mean 0.55 with respect to votes or consents
that have a record date on or prior to the Measuring Date, and a fraction that
is equivalent to the Adjusted Percentage (as defined in Section 1.10 of the
Agreement and Plan of Recapitalization, dated as of March 25, 1994, among the
Corporation, the Air Line Pilots Association, International and International
Association of Machinists and Aerospace Workers, as amended from time to time)
as in effect at the close of business on the Measuring Date with respect to
votes and consents that have a record date after the Measuring Date.
2.30 ''Voting Preferred Stocks'' shall mean, collectively, the Class P Voting
Preferred Stock, the Class M Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends. The holder of the share of Class Pilot MEC Preferred
Stock as such shall not be entitled to receive any dividends or other
distributions (except as provided in Section 4).
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class Pilot MEC Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up of the Corporation,
the holder of the share of Class Pilot MEC Preferred Stock shall be entitled to
receive $0.01 per share of Class Pilot MEC Preferred Stock (the ''Liquidation
Preference''), but such holder shall not be entitled to any further payment. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation, or proceeds thereof, distributable to the holder of the
share of Class Pilot MEC Preferred Stock shall be insufficient to pay in full
the Liquidation Preference and the liquidation preference on all other shares of
any class or series of stock of the Corporation that ranks on a parity with the
Class Pilot MEC Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up of the Corporation, then such assets, or the proceeds
thereof, shall be distributed among the holders of the share of Class Pilot MEC
Preferred Stock and any such other parity stock ratably in accordance with the
respective amounts that would be payable on such share of Class Pilot MEC
Preferred Stock and any such other parity stock if all amounts payable thereon
were paid in full. For the purposes of this Section 4, (i) a consolidation or
merger of the Corporation with or into one or more corporations, or (ii) a sale,
lease, exchange or transfer of all or substantially all of the Corporation's
assets, shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation.
4.2 Subject to the rights of the holders of shares of any series or class of
stock ranking prior to or on a parity with the Class Pilot MEC Preferred Stock
as to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holder of the share of
Class Pilot MEC Preferred Stock, as and to the fullest extent provided in this
Section 4, any series or class of stock of the Corporation that ranks junior to
the Class Pilot MEC Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up of the Corporation, shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holder
of the share of Class Pilot MEC Preferred Stock shall not be entitled to share
therein.
Section 5. Shares to be Retired. The share of Class Pilot MEC Preferred
Stock which shall have been issued and reacquired in any manner (other than
redemption pursuant to Section 9.1) by the Corporation shall be retired and
restored to the status of an authorized but unissued share of Class Pilot MEC
Preferred Stock and, in the event of the redemption of such share pursuant to
Section 9.1 hereof, shall not be reissued.
Section 6. Ranking.
6.1 Any class or series of stock of the Corporation shall be deemed to rank:
84
<PAGE>
(a) prior to the Class Pilot MEC Preferred Stock as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of such
class or series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the holder
of Class Pilot MEC Preferred Stock;
(b) on a parity with the Class Pilot MEC Preferred Stock as to the
distribution of assets upon liquidation, dissolution or winding up, whether or
not the liquidation prices per share thereof be different from those of the
Class Pilot MEC Preferred Stock, if the holders of such class or series and
the Class Pilot MEC Preferred Stock shall be entitled to the receipt of
amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective liquidation preferences, without preference or
priority one over the other; and
(c) junior to the Class Pilot MEC Preferred Stock, as to the distribution
of assets upon liquidation, dissolution or winding up, if the holder of Class
Pilot MEC Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of shares of such class or series.
6.2 The Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock and the ESOP Convertible Preferred Stocks shall be deemed to
rank prior to the Class Pilot MEC Preferred Stock as to amounts distributable
upon liquidation, dissolution or winding up. The other Director Preferred Stocks
and the Voting Preferred Stocks shall each be deemed to rank on a parity with
the Class Pilot MEC Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up. The Common Stock and the Series C
Preferred Stock shall each be deemed to rank junior to the Class Pilot MEC
Preferred Stock as to amounts distributable upon liquidation, dissolution or
winding up.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation enters into any consolidation, merger, share
exchange or similar transaction, however named, involving the Corporation or its
subsidiary, United Air Lines, Inc. (''United'') (or any successor to all or
substantially all the assets or business of United), pursuant to which the
outstanding shares of Common Stock are to be exchanged for or changed,
reclassified or converted into securities of any successor or resulting or other
company (including the Corporation), or cash or other property (each of the
foregoing transactions is referred to herein as a ''Merger Transaction''),
proper provision shall be made so that, upon consummation of such transaction,
the share of Class Pilot MEC Preferred Stock shall be converted, reclassified or
changed into or exchanged for preferred stock of such successor or resulting or
other company having, in respect of such company, the same powers, preferences
and relative, participating, optional or other special rights (including the
rights provided by this Section 7), and the qualifications, limitations or
restrictions thereof, that the Class Pilot MEC Preferred Stock had, in respect
of the Corporation, immediately prior to such transaction; specifically
including, without limitation, the right, until the ALPA Termination Date, to
elect one member of the board of directors (or similar governing body) of such
company.
7.2 In case the Corporation shall enter into any agreement providing for any
Merger Transaction, then the Corporation shall as soon as practicable thereafter
(and in any event at least fifteen (15) Business Days before consummation of
such transaction) give notice of such agreement and the material terms thereof
to the holder of the share of Class Pilot MEC Preferred Stock. The Corporation
shall not consummate any such Merger Transaction unless all of the terms of this
Section 7 and Section 8 have been complied with.
Section 8. Voting. The holder of the share of Class Pilot MEC Preferred
Stock shall have the following voting rights:
8.1 Until the later of (i) the Termination Date and (ii) such time as there
are no longer any persons represented by the Air Line Pilots Association,
International (or any successor organization) employed by the Corporation or any
of its Affiliates (the ''ALPA Termination Date''), the holder of the share of
Class Pilot MEC Preferred Stock shall have the right (a) voting as a separate
class, to elect one Class Pilot MEC Director (as defined in Article FIFTH,
Section 2.2 of this Restated Certificate) to the Board of Directors and (b)
voting together as a single class
85
<PAGE>
with the holders of Common Stock and the holders of such other classes or series
of stock that vote together with the Common Stock as a single class, to vote on
all matters submitted to a vote of the holders of Common Stock of the
Corporation (other than the election of Public Directors, as defined in Article
FIFTH, Section 2.3), except as otherwise required by law.
8.2 Notwithstanding anything to the contrary in Section 7.1, 7.2 or 8.1, if at
any time prior to the Termination Date, (x) the trustee under either (i) the UAL
Corporation Employee Stock Ownership Plan (the ''ESOP'') or (ii) the UAL
Corporation Supplemental ESOP (together with the ESOP, the ''Plan'') either (a)
fails to solicit, in accordance with the Plan, timely instructions from Plan
participants, the Committee of the ESOP (as defined in the ESOP and hereinafter
referred to as the ''ESOP Committee'') or the Committee of the Supplemental ESOP
(as defined in the Supplemental ESOP and, together with the ESOP Committee, the
''Committees''), as applicable (''Instructions''), with respect to any matter
referred to in clause (y) below, or (b) fails to act in accordance with such
Instructions with respect to any matter referred to in clause (y) below (but
only if such failure to follow such Instructions is attributable to (i) the
trustee having concluded that, based upon the terms of such transaction, the
trustee's fiduciary duties require the trustee to fail to follow such
Instructions or (ii) the unenforceability of the provisions of the ESOP and/or
the Supplemental ESOP relating to the solicitation and/or following of such
Instructions); (y) either (i) but for the provisions of Subsection 8.3(a) and
Article FOURTH, Part VIII, Subsection 8.3(a) and Article FOURTH, Part IX,
Subsection 8.3(a) of this Restated Certificate, the vote of the stockholders of
the Corporation would have been sufficient, under applicable law, stock exchange
listing requirements and this Restated Certificate, as applicable, to approve
the Merger Transaction or other Control Transaction (as defined in the ESOP) in
question (or, if no stockholder approval would be required by this Restated
Certificate, applicable stock exchange listing requirements or applicable law,
the trustee enters into a binding commitment in connection with a Control
Transaction or a Control Transaction is consummated) or (ii) following the Issue
Date, the trustee disposes of an aggregate of 10% or more of the Common Equity
(as defined in Article FIFTH, Section 1.26 of this Restated Certificate)
initially represented by the ESOP Convertible Preferred Stocks other than in
connection with Plan distributions; and (z) any of the following occur: (a)
Instructions with respect to a matter are given, the trustee fails to follow
such Instructions and such transaction would not have been approved by
stockholders of the Corporation in accordance with the applicable provisions of
this Restated Certificate (excluding Subsection 8.3(a) and Article FOURTH, Part
VIII, Subsection 8.3(a) and Article FOURTH, Part IX, Subsection 8.3(a) of this
Restated Certificate), applicable stock exchange listing requirements or
applicable law if the trustee had acted in accordance with such Instructions
(or, if no vote of stockholders would be required by this Restated Certificate,
applicable stock exchange listing requirements or applicable law, such action by
the trustee in respect of such transaction as to which Instructions were so
given would not have been authorized had the trustee acted in accordance with
such Instructions), (b) the trustee fails to solicit timely Instructions with
respect to such matters, such transaction requires the approval of stockholders
of the Corporation under applicable provisions of this Restated Certificate,
applicable stock exchange listing requirements or applicable law and such
approval would not have been obtained (without regard to Subsection 8.3(a) and
Article FOURTH, Part VIII, Subsection 8.3(a) and Article FOURTH, Part IX,
Subsection 8.3(a) of this Restated Certificate) if the trustee had voted against
such transaction all of the votes entitled to be cast by such trustee as the
holder of securities of the Corporation held under the Plan, or (c) the trustee
fails to follow Instructions or to solicit timely Instructions with respect to
such matter and no vote of stockholders of the Corporation is required by the
Restated Certificate, applicable stock exchange listing requirements or
applicable law to approve such transaction (an action or inaction by the trustee
under clauses (x) and (z) in connection with a transaction referred to in clause
(y) being referred to herein as an ''Uninstructed Trustee Action''); then, (I)
the Merger Transaction or other Control Transaction referred to in clause (y)(i)
of Section 8.2 involving an Uninstructed Trustee Action, if it requires
stockholder approval under applicable law, stock exchange listing requirements
or this Restated Certificate, must also be approved by the vote of stockholders
described in Subsection 8.3(a), and (II) from and after such Uninstructed
Trustee Action, in addition to the voting rights provided for under Section 8.1,
the share of Class Pilot MEC Preferred Stock shall have the voting rights set
forth in Subsection 8.3(b).
8.3 (a) In addition to any other vote or consent of stockholders required by
this Restated Certificate, applicable stock exchange listing requirements or
applicable law, any Merger Transaction or other Control Transaction referred to
in clause (y)(i) of Section 8.2 involving an Uninstructed Trustee Action that
requires stockholder approval under applicable law, stock exchange listing
requirements or this Restated Certificate must also be approved by at least a
majority of the votes entitled to be cast in respect of all outstanding shares
of the Class Pilot
86
<PAGE>
MEC Preferred Stock, the Class IAM Preferred Stock, the Class SAM Preferred
Stock, the Common Stock and such other classes and series of stock that vote
together with the Common Stock as a single class (other than the Voting
Preferred Stocks), with all such shares voting, for purposes of this paragraph,
as a single class, and for purposes of such vote the Class Pilot MEC Preferred
Stock shall be entitled to cast a number of votes calculated in accordance with
Subsection 8.3(c).
(b) Except as otherwise required by law or provided in this Restated
Certificate, from and after an Uninstructed Trustee Action, the holder of the
share of Class Pilot MEC Preferred Stock shall be entitled to vote on all
matters submitted to a vote of the holders of Common Stock, voting together as a
single class with the holders of Class IAM Preferred Stock, the holders of Class
SAM Preferred Stock, the holders of Common Stock and the holders of such other
classes and series of stock that vote together with the Common Stock as a single
class (other than the Voting Preferred Stocks) and for purposes of such vote the
Class Pilot MEC Preferred Stock shall be entitled to cast a number of votes
calculated in accordance with Subsection 8.3(c); provided, however, that, except
as provided in Section 8.1, prior to the Termination Date, the holder of the
share of Class Pilot MEC Preferred Stock shall not be entitled to vote with the
holders of Common Stock with respect to the election of the members of the Board
of Directors.
(c) With respect to any vote or consent (i) with respect to which the Class
Pilot MEC Preferred Stock is entitled to vote pursuant to Subsection 8.3(a) or
(ii) with respect to which the Class Pilot MEC Preferred Stock is entitled to
vote pursuant to Subsection 8.3(b) and the record date for which occurs after an
Uninstructed Trustee Action and prior to the Termination Date, the holder of the
share of Class Pilot MEC Preferred Stock shall be entitled to a number of votes
(rounded to the nearest whole vote) equal to the product of (I) the Pilot
Fraction, (II) the Voting Fraction and (III) a fraction, the numerator of which
shall be the number of votes entitled to be cast on the matter by the holders of
all outstanding securities of the Corporation (excluding the Class IAM Preferred
Stock and the Class SAM Preferred Stock), and the denominator of which shall be
the excess of one (1.0) over the Voting Fraction (the ''Attributed Vote''). If,
with respect to any matter as to which the immediately preceding sentence shall
apply, (i) shares of Common Stock are held under the ESOP or the Supplemental
ESOP which have been issued upon conversion of the ESOP Convertible Preferred
Stocks (''Subject Shares''), (ii) with respect to any action as to which the
trustee is required, in accordance with the terms of the ESOP or the
Supplemental ESOP, to solicit Instructions, the trustee has solicited such
Instructions and (iii) the trustee has voted some or all of the Subject Shares
in accordance with such Instructions (the shares which the trustee has voted in
accordance with such Instructions, ''Instructed Trustee Common Shares''), then
the Attributed Votes shall be reduced by the Pro Rata Reduction. The ''Pro Rata
Reduction'' shall equal, with respect to any such matter, the sum of (I) the
product of (x) a fraction, the numerator of which is the number of votes
represented by Subject Shares as to which members of the ALPA Employee Group (or
the Committees) gave Instructions to the trustee to vote in favor of the matter,
and the denominator of which is the number of votes represented by Subject
Shares as to which members of all Employee Groups (as defined in the ESOP) (or
the Committees) gave Instructions to the trustee to vote in favor of the matter
(such denominator being referred to as the ''Instructed Pro Vote'') and (y) the
number of votes represented by Subject Shares that the trustee actually voted in
favor of the matter (but in no event more than the Instructed Pro Vote); and
(II) the product of (x) a fraction, the numerator of which is the number of
votes represented by Subject Shares as to which members of the ALPA Employee
Group (or the Committees) gave instructions to the trustee to vote against the
matter, and the denominator of which is the number of votes represented by
Subject Shares as to which members of all Employee Groups (or the Committees)
gave Instructions to the trustee to vote against the matter (such denominator
being referred to as the ''Instructed Con Vote'') and (y) the number of votes
represented by Subject Shares that the trustee actually voted against the matter
(but in no event more than the Instructed Con Vote).
For purposes of this Section 8.3, the Corporation shall certify to the holders
of Class Pilot MEC Preferred Stock and to the judges or similar officials
appointed for the purpose of tabulating votes at any meeting of stockholders as
soon as practicable following the record date for the determination of
stockholders entitled to notice of or to vote at any meeting of stockholders,
but in no event less than five Trading Days before such meeting, the number of
shares of Common Stock then outstanding and the number of votes entitled to be
cast on the matter or matters in question by the holders of all outstanding
securities of the Corporation (excluding the Class IAM Preferred Stock and the
Class SAM Preferred Stock). The Corporation shall be deemed to satisfy the
requirements of the preceding sentence if such matters are specified in any
proxy statement mailed to all stockholders entitled to
87
<PAGE>
vote on such matter or matters. With respect to any vote or consent as to which
the first sentence of this Subsection 8.3(c) applies, the outstanding share of
Class Pilot MEC Preferred Stock, together with the outstanding shares of the
Class IAM Preferred Stock and the outstanding shares of Class SAM Preferred
Stock, will represent the Voting Fraction (expressed as a percentage) of the
votes to be cast in connection with matters (other than the election of
directors) submitted to the vote of the holders of the Common Stock and the
holders of all other outstanding securities that vote as a single class together
with the Common Stock. Subject to any amendment of this Restated Certificate
after the date hereof, it is the intent of this Restated Certificate that this
Section 8.3 (with respect to the Class Pilot MEC Preferred Stock), Article
FOURTH, Part VIII, Section 8.3 of the Restated Certificate (with respect to the
Class IAM Preferred Stock), and Article FOURTH, Part IX, Section 8.3 of the
Restated Certificate (with respect to the Class SAM Preferred Stock), be
interpreted together to achieve the foregoing result. With respect to any vote
or consent as to which the first sentence of this Section 8.3(c) does not apply,
the Class Pilot MEC Preferred Stock shall not have any voting rights except as
provided by Sections 8.1, 8.2 and 8.4 and applicable law; provided, however,
that if the Termination Date occurs directly or indirectly as a result of an
Uninstructed Trustee Action then, notwithstanding anything to the contrary
contained herein, the voting rights of the Class Pilot MEC Preferred Stock set
forth in this Section 8.3 shall continue until the anniversary of the Issue Date
occurring in the year 2010. For purposes of the proviso in the immediately
preceding sentence, the Termination Date shall be deemed to have occurred as a
result of an Uninstructed Trustee Action if the Termination Date occurs within
one year of such Uninstructed Trustee Action.
8.4 The affirmative vote or written consent of the holder of the share of
Class Pilot MEC Preferred Stock, voting separately as a class, shall be
necessary for authorizing, effecting or validating the amendment, alteration or
repeal (including any amendment, alteration or repeal by operation of merger or
consolidation) of any of the provisions of this Restated Certificate or of any
certificate amendatory thereof or supplemental thereto (including any
Certificate of Designation, Preferences and Rights or any similar document
relating to any series of Serial Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of the Class Pilot MEC Preferred
Stock.
8.5 For purposes of the foregoing provisions of Sections 8.1 and 8.4, each
share of Class Pilot MEC Preferred Stock shall have one (1) vote per share.
Section 9. Redemption.
9.1 The share of Class Pilot MEC Preferred Stock shall, to the extent of funds
legally available therefor and subject to the other provisions of this Restated
Certificate, be automatically redeemed on the ALPA Termination Date, at a price
of $0.01 per share of Class Pilot MEC Preferred Stock, as provided hereinbelow.
As promptly as reasonably possible following the occurrence of the ALPA
Termination Date, the Corporation shall give notice thereof and of the
redemption under this Section 9 to the record holder of the Class Pilot MEC
Preferred Stock. From and after the redemption provided for in this Section 9.1,
all rights of the holder of the Class Pilot MEC Preferred Stock as such, except
the right to receive the redemption price of such shares upon the surrender of
the certificate formerly representing the same, shall cease and terminate and
such share shall not thereafter be deemed to be outstanding for any purpose
whatsoever.
9.2 The share of Class Pilot MEC Preferred Stock shall, to the extent of funds
legally available therefor and subject to the other provisions of this Restated
Certificate, be automatically redeemed upon any purported transfer thereof other
than as expressly permitted under Section 1.2. The redemption price to be paid
in connection with any redemption shall be $0.01 per share of Class Pilot MEC
Preferred Stock. Upon any such redemption, all rights of the holder of Class
Pilot MEC Preferred Stock as such, except the right to receive the redemption
price of such share upon the surrender of the certificate formerly representing
the same, shall cease and terminate and such share shall not thereafter be
deemed to be outstanding for any purpose whatsoever.
9.3 The holder of the share of Class Pilot MEC Preferred Stock so redeemed
pursuant to Section 9.1 or 9.2 shall present and surrender his certificate
formerly representing such share to the Corporation and thereupon the redemption
price of such share shall be paid to or on the order of the person whose name
appears on such certificate as the owner thereof and the surrendered certificate
shall be cancelled.
88
<PAGE>
Section 10. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of the share of
Class Pilot MEC Preferred Stock as the true and lawful owner thereof for all
purposes, and, except as otherwise provided by law, neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
PART VIII
Class IAM Junior Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part VIII to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part VIII.
Section 1. Number of Shares; Designation; Issuance; Restrictions on
Transfer.
1.1 The Class IAM Junior Preferred Stock of the Corporation (the ''Class IAM
Preferred Stock'') shall consist of one (1) share, par value $0.01.
1.2 The share of Class IAM Preferred Stock shall be issued only to (i) the
International Association of Machinists and Aerospace Workers (the ''IAM'')
pursuant to the IAM's authority as the collective bargaining representative for
the crafts or classes of mechanics and related employees, ramp and stores
employees, food service employees, dispatchers and security officers employed by
United Air Lines, Inc. or (ii) a duly authorized agent acting for the benefit of
the IAM. Any purported sale, transfer, pledge or other disposition (hereinafter
a ''transfer'') of the share of Class IAM Preferred Stock to any person, other
than a successor to the IAM or a duly authorized agent acting for the benefit of
such successor, shall be null and void and of no force and effect. Upon any
purported transfer of the share of Class IAM Preferred Stock by the holder
thereof other than as expressly permitted above, and without any further action
by the Corporation or such holder, such share shall, to the extent of funds
legally available therefor and subject to the other provisions of this Restated
Certificate, be automatically redeemed by the Corporation in accordance with
Section 9 hereof, and thereupon such share shall no longer be deemed
outstanding, and neither such holder nor any purported transferee thereof shall
have in respect thereof any of the voting powers, preferences or relative,
participating, optional or special rights ascribed to the share of Class IAM
Preferred Stock hereunder, but rather such holder thereafter shall only be
entitled to receive the amount payable upon redemption in accordance with
Section 9. The certificate representing the share of Class IAM Preferred Stock
shall be legended to reflect the restrictions on transfer and automatic
redemption provided for herein.
Section 2. Definitions. For purposes of the Class IAM Preferred Stock, the
following terms shall have the meanings indicated:
2.1 ''Affiliate'' shall have the meaning defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended, or any successor thereto.
2.2 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee thereof authorized by such board of directors to
perform any of its responsibilities with respect to the Class IAM Preferred
Stock.
2.3 ''Business Day'' shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
2.4 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
2.5 ''Class IAM Preferred Stock'' shall have the meaning set forth in Section
1 hereof.
89
<PAGE>
2.6 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.7 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
2.9 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.10 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.11 ''Common Stock'' shall mean the common stock, par value $0.01 per share,
of the Corporation.
2.12 ''Director Preferred Stocks'' shall mean, collectively, the Class I
Preferred Stock, the Class IAM Preferred Stock, the Class Pilot MEC Preferred
Stock and the Class SAM Preferred Stock.
2.13 ''ESOP Convertible Preferred Stocks'' shall mean, collectively, the Class
1 ESOP Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred
Stock, each of the par value of $0.01 per share, of the Corporation.
2.14 ''IAM Fraction'' shall mean 0.3713.
2.15 ''IAM Termination Date'' shall have the meaning set forth in Section 8
hereof.
2.16 ''Issue Date'' shall mean the first date on which shares of Class IAM
Preferred Stock are issued.
2.17 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.18 ''Measuring Date'' shall mean that date which is the 365th day following
the Issue Date.
2.19 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.20 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.21 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.22 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.23 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.24 [Reserved]
90
<PAGE>
2.25 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class IAM
Preferred Stock as to distributions upon liquidation, dissolution or winding up
of the Corporation are placed in a separate account of the Corporation or
delivered to a disbursing, paying or other similar agent, then ''set apart for
payment'' with respect to the Class IAM Preferred Stock shall mean, with respect
to such distributions, placing such funds in a separate account or delivering
such funds to a disbursing, paying or other similar agent.
2.26 ''Termination Date'' shall have the meaning set forth in Article FIFTH,
Section 1.72 of this Restated Certificate.
2.27 ''Trading Day'' shall mean any day on which the securities in question
are traded on the New York Stock Exchange, Inc. (the ''NYSE''), or if such
securities are not listed or admitted for trading or quoted on the NYSE, on the
principal national securities exchange on which such securities are listed or
admitted, or if not listed or admitted for trading or quoted on any national
securities exchange, on the Nasdaq National Market, or if such securities are
not quoted on such National Market, in the applicable securities market in which
the securities are traded.
2.28 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class IAM Preferred Stock.
2.29 ''Voting Fraction'' shall mean 0.55 with respect to votes or consents
that have a record date on or prior to the Measuring Date, and a fraction that
is equivalent to the Adjusted Percentage (as defined in Section 1.10 of the
Agreement and Plan of Recapitalization, dated as of March 25, 1994, among the
Corporation, the Air Line Pilots Association, International and International
Association of Machinists and Aerospace Workers, as amended from time to time)
as in effect at the close of business on the Measuring Date with respect to
votes and consents that have a record date after the Measuring Date.
2.30 ''Voting Preferred Stocks'' shall mean, collectively, the Class P Voting
Preferred Stock, the Class M Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends. The holder of the share of Class IAM Preferred Stock
as such shall not be entitled to receive any dividends or other distributions
(except as provided in Section 4).
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class IAM Preferred Stock as to amounts distributable
upon liquidation, dissolution or winding up of the Corporation, the holder of
the share of Class IAM Preferred Stock shall be entitled to receive $0.01 per
share of Class IAM Preferred Stock (the ''Liquidation Preference''), but such
holder shall not be entitled to any further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable to the holder of the share of Class IAM
Preferred Stock shall be insufficient to pay in full the Liquidation Preference
and the liquidation preference on all other shares of any class or series of
stock of the Corporation that ranks on a parity with the Class IAM Preferred
Stock as to amounts distributable upon liquidation, dissolution or winding up of
the Corporation, then such assets, or the proceeds thereof, shall be distributed
among the holders of the share of Class IAM Preferred Stock and any such other
parity stock ratably in accordance with the respective amounts that would be
payable on such share of Class IAM Preferred Stock and any such other parity
stock if all amounts payable thereon were paid in full. For the purposes of this
Section 4, (i) a consolidation or merger of the Corporation with or into one or
more corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
91
<PAGE>
4.2 Subject to the rights of the holders of shares of any series or class of
stock ranking prior to or on a parity with the Class IAM Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holder of the share of
Class IAM Preferred Stock, as and to the fullest extent provided in this Section
4, any series or class of stock of the Corporation that ranks junior to the
Class IAM Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up of the Corporation, shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the holder of the share of
Class IAM Preferred Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. The share of Class IAM Preferred Stock
which shall have been issued and reacquired in any manner (other than redemption
pursuant to Section 9.1) by the Corporation shall be retired and restored to the
status of an authorized but unissued share of Class IAM Preferred Stock and, in
the event of the redemption of such share pursuant to Section 9.1 hereof, shall
not be reissued.
Section 6. Ranking.
6.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Class IAM Preferred Stock as to the distribution of assets
upon liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the holder
of Class IAM Preferred Stock;
(b) on a parity with the Class IAM Preferred Stock as to the distribution
of assets upon liquidation, dissolution or winding up, whether or not the
liquidation prices per share thereof be different from those of the Class IAM
Preferred Stock, if the holders of such class or series and the Class IAM
Preferred Stock shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in proportion to their respective
liquidation preferences, without preference or priority one over the other;
and
(c) junior to the Class IAM Preferred Stock, as to the distribution of
assets upon liquidation, dissolution or winding up, if the holder of Class IAM
Preferred Stock shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of shares of such class or series.
6.2 The Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock and the ESOP Convertible Preferred Stocks shall be deemed to
rank prior to the Class IAM Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up. The other Director Preferred Stocks and
the Voting Preferred Stocks shall each be deemed to rank on a parity with the
Class IAM Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock and the Series C Preferred Stock
shall each be deemed to rank junior to the Class IAM Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation enters into any consolidation, merger, share
exchange or similar transaction, however named, involving the Corporation or its
subsidiary, United Air Lines, Inc. (''United'') (or any successor to all or
substantially all the assets or business of United), pursuant to which the
outstanding shares of Common Stock are to be exchanged for or changed,
reclassified or converted into securities of any successor or resulting or other
company (including the Corporation), or cash or other property (each of the
foregoing transactions is referred to herein as a ''Merger Transaction''),
proper provision shall be made so that, upon consummation of such transaction,
the share of Class IAM Preferred Stock shall be converted, reclassified or
changed into or exchanged for preferred stock of such successor or resulting or
other company having, in respect of such company, the same powers, preferences
and relative, participating, optional or other special rights (including the
rights provided by this Section 7), and the qualifications, limitations or
restrictions thereof, that the Class IAM Preferred Stock had, in respect of
92
<PAGE>
the Corporation, immediately prior to such transaction; specifically including,
without limitation, the right, until the IAM Termination Date, to elect one
member of the board of directors (or similar governing body) of such company.
7.2 In case the Corporation shall enter into any agreement providing for any
Merger Transaction, then the Corporation shall as soon as practicable thereafter
(and in any event at least fifteen (15) Business Days before consummation of
such transaction) give notice of such agreement and the material terms thereof
to the holder of the share of Class IAM Preferred Stock. The Corporation shall
not consummate any such Merger Transaction unless all of the terms of this
Section 7 and Section 8 have been complied with.
Section 8. Voting. The holder of the share of Class IAM Preferred Stock
shall have the following voting rights:
8.1 Until the later of (i) the Termination Date and (ii) such time as there
are no longer any persons represented by the IAM (or any successor organization)
employed by the Corporation or any of its Affiliates (the ''IAM Termination
Date''), the holder of the share of Class IAM Preferred Stock shall have the
right (a) voting as a separate class, to elect one Class IAM Director (as
defined in Article FIFTH, Section 2.2 of this Restated Certificate) to the Board
of Directors and (b) voting together as a single class with the holders of
Common Stock and the holders of such other classes or series of stock that vote
together with the Common Stock as a single class, to vote on all matters
submitted to a vote of the holders of Common Stock of the Corporation (other
than the election of Public Directors, as defined in Article FIFTH, Section
2.3), except as otherwise required by law.
8.2 Notwithstanding anything to the contrary in Section 7.1, 7.2 or 8.1, if at
any time prior to the Termination Date, (x) the trustee under either (i) the UAL
Corporation Employee Stock Ownership Plan (the ''ESOP'') or (ii) the UAL
Corporation Supplemental ESOP (together with the ESOP, the ''Plan'') either (a)
fails to solicit, in accordance with the Plan, timely instructions from Plan
participants, the Committee of the ESOP (as defined in the ESOP and hereinafter
referred to as the ''ESOP Committee'') or the Committee of the Supplemental ESOP
(as defined in the Supplemental ESOP and, together with the ESOP Committee, the
''Committees''), as applicable (''Instructions''), with respect to any matter
referred to in clause (y) below, or (b) fails to act in accordance with such
Instructions with respect to any matter referred to in clause (y) below (but
only if such failure to follow such Instructions is attributable to (i) the
trustee having concluded that, based upon the terms of such transaction, the
trustee's fiduciary duties require the trustee to fail to follow such
Instructions or (ii) the unenforceability of the provisions of the ESOP and/or
the Supplemental ESOP relating to the solicitation and/or following of such
Instructions); (y) either (i) but for the provisions of Subsection 8.3(a) and
Article FOURTH, Part VII, Subsection 8.3(a) and Article FOURTH, Part IX,
Subsection 8.3(a) of this Restated Certificate, the vote of the stockholders of
the Corporation would have been sufficient, under applicable law, stock exchange
listing requirements and this Restated Certificate, as applicable, to approve
the Merger Transaction or other Control Transaction (as defined in the ESOP) in
question (or, if no stockholder approval would be required by this Restated
Certificate, applicable stock exchange listing requirements or applicable law,
the trustee enters into a binding commitment in connection with a Control
Transaction or a Control Transaction is consummated) or (ii) following the Issue
Date, the trustee disposes of an aggregate of 10% or more of the Common Equity
(as defined in Article FIFTH, Section 1.26 of this Restated Certificate)
initially represented by the ESOP Convertible Preferred Stocks other than in
connection with Plan distributions; and (z) any of the following occur: (a)
Instructions with respect to a matter are given, the trustee fails to follow
such Instructions and such transaction would not have been approved by
stockholders of the Corporation in accordance with the applicable provisions of
this Restated Certificate (excluding Subsection 8.3(a) and Article FOURTH, Part
VII, Subsection 8.3(a) and Article FOURTH, Part IX, Subsection 8.3(a) of this
Restated Certificate), applicable stock exchange listing requirements or
applicable law if the trustee had acted in accordance with such Instructions
(or, if no vote of stockholders would be required by this Restated Certificate,
applicable stock exchange listing requirements or applicable law, such action by
the trustee in respect of such transaction as to which Instructions were so
given would not have been authorized had the trustee acted in accordance with
such Instructions), (b) the trustee fails to solicit timely Instructions with
respect to such matters, such transaction requires the approval of stockholders
of the Corporation under applicable provisions of this Restated Certificate,
applicable stock exchange listing requirements or applicable law and such
approval would not have been obtained (without regard to Subsection 8.3(a) and
Article FOURTH, Part VII, Subsection 8.3(a) and Article FOURTH, Part IX,
Subsection 8.3(a) of this Restated Certificate) if the trustee had voted against
such transaction all of the votes entitled to be cast
93
<PAGE>
by such trustee as the holder of securities of the Corporation held under the
Plan, or (c) the trustee fails to follow Instructions or to solicit timely
Instructions with respect to such matter and no vote of stockholders of the
Corporation is required by the Restated Certificate, applicable stock exchange
listing requirements or applicable law to approve such transaction (an action or
inaction by the trustee under clauses (x) and (z) in connection with a
transaction referred to in clause (y) being referred to herein as an
''Uninstructed Trustee Action''); then, (I) the Merger Transaction or other
Control Transaction referred to in clause (y)(i) of Section 8.2 involving an
Uninstructed Trustee Action, if it requires stockholder approval under
applicable law, stock exchange listing requirements or this Restated
Certificate, must also be approved by the vote of stockholders described in
Subsection 8.3(a), and (II) from and after such Uninstructed Trustee Action, in
addition to the voting rights provided for under Section 8.1, the share of Class
IAM Preferred Stock shall have the voting rights set forth in Subsection 8.3(b).
8.3 (a) In addition to any other vote or consent of stockholders required by
this Restated Certificate, applicable stock exchange listing requirements or
applicable law, any Merger Transaction or other Control Transaction referred to
in clause (y)(i) of Section 8.2 involving an Uninstructed Trustee Action that
requires stockholder approval under applicable law, stock exchange listing
requirements or this Restated Certificate must also be approved by at least a
majority of the votes entitled to be cast in respect of all outstanding shares
of the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock, the Class
SAM Preferred Stock, the Common Stock and such other classes and series of stock
that vote together with the Common Stock as a single class (other than the
Voting Preferred Stocks), with all such shares voting, for purposes of this
paragraph, as a single class, and for purposes of such vote the Class IAM
Preferred Stock shall be entitled to cast a number of votes calculated in
accordance with Subsection 8.3(c).
(b) Except as otherwise required by law or provided in this Restated
Certificate, from and after an Uninstructed Trustee Action, the holder of the
share of Class IAM Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the holders of Common Stock, voting together as a single
class with the holders of Class Pilot MEC Preferred Stock, the holders of Class
SAM Preferred Stock, the holders of Common Stock and the holders of such other
classes and series of stock that vote together with the Common Stock as a single
class (other than the Voting Preferred Stocks) and for purposes of such vote the
Class IAM Preferred Stock shall be entitled to cast a number of votes calculated
in accordance with Subsection 8.3(c); provided, however, that, except as
provided in Section 8.1, prior to the Termination Date, the holder of the share
of Class IAM Preferred Stock shall not be entitled to vote with the holders of
Common Stock with respect to the election of the members of the Board of
Directors.
(c) With respect to any vote or consent (i) with respect to which the Class
IAM Preferred Stock is entitled to vote pursuant to Subsection 8.3(a) or (ii)
with respect to which the Class IAM Preferred Stock is entitled to vote pursuant
to Subsection 8.3(b) and the record date for which occurs after an Uninstructed
Trustee Action and prior to the Termination Date, the holder of the share of
Class IAM Preferred Stock shall be entitled to a number of votes (rounded to the
nearest whole vote) equal to the product of (I) the IAM Fraction, (II) the
Voting Fraction and (III) a fraction, the numerator of which shall be the number
of votes entitled to be cast on the matter by the holders of all outstanding
securities of the Corporation (excluding the Class Pilot MEC Preferred Stock and
the Class SAM Preferred Stock), and the denominator of which shall be the excess
of one (1.0) over the Voting Fraction (the ''Attributed Vote''). If, with
respect to any matter as to which the immediately preceding sentence shall
apply, (i) shares of Common Stock are held under the ESOP or the Supplemental
ESOP which have been issued upon conversion of the ESOP Convertible Preferred
Stocks (''Subject Shares''), (ii) with respect to any action as to which the
trustee is required, in accordance with the terms of the ESOP or the
Supplemental ESOP, to solicit Instructions, the trustee has solicited such
Instructions and (iii) the trustee has voted some or all of the Subject Shares
in accordance with such Instructions (the shares which the trustee has voted in
accordance with such Instructions, ''Instructed Trustee Common Shares''), then
the Attributed Votes shall be reduced by the Pro Rata Reduction. The ''Pro Rata
Reduction'' shall equal, with respect to any such matter, the sum of (I) the
product of (x) a fraction, the numerator of which is the number of votes
represented by Subject Shares as to which members of the IAM Employee Group (or
the Committees) gave Instructions to the trustee to vote in favor of the matter,
and the denominator of which is the number of votes represented by Subject
Shares as to which members of all Employee Groups (as defined in the ESOP) (or
the Committees) gave Instructions to the trustee to vote in favor of the matter
(such denominator being referred to as the ''Instructed Pro Vote'') and (y) the
number of votes represented by Subject Shares that the trustee actually voted in
favor of the matter (but in no event more than the Instructed Pro
94
<PAGE>
Vote); and (II) the product of (x) a fraction, the numerator of which is the
number of votes represented by Subject Shares as to which members of the IAM
Employee Group (or the Committees) gave instructions to the trustee to vote
against the matter, and the denominator of which is the number of votes
represented by Subject Shares as to which members of all Employee Groups (or the
Committees) gave Instructions to the trustee to vote against the matter (such
denominator being referred to as the ''Instructed Con Vote'') and (y) the number
of votes represented by Subject Shares that the trustee actually voted against
the matter (but in no event more than the Instructed Con Vote).
For purposes of this Section 8.3, the Corporation shall certify to the holders
of Class IAM Preferred Stock and to the judges or similar officials appointed
for the purpose of tabulating votes at any meeting of stockholders as soon as
practicable following the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of stockholders, but in no event
less than five Trading Days before such meeting, the number of shares of Common
Stock then outstanding and the number of votes entitled to be cast on the matter
or matters in question by the holders of all outstanding securities of the
Corporation (excluding the Class Pilot MEC Preferred Stock and the Class SAM
Preferred Stock). The Corporation shall be deemed to satisfy the requirements of
the preceding sentence if such matters are specified in any proxy statement
mailed to all stockholders entitled to vote on such matter or matters. With
respect to any vote or consent as to which the first sentence of this Subsection
8.3(c) applies, the outstanding share of Class IAM Preferred Stock, together
with the outstanding shares of the Class Pilot MEC Preferred Stock and the
outstanding shares of Class SAM Preferred Stock, will represent the Voting
Fraction (expressed as a percentage) of the votes to be cast in connection with
matters (other than the election of directors) submitted to the vote of the
holders of the Common Stock and the holders of all other outstanding securities
that vote as a single class together with the Common Stock. Subject to any
amendment of this Restated Certificate after the date hereof, it is the intent
of this Restated Certificate that this Section 8.3 (with respect to the Class
IAM Preferred Stock), Article FOURTH, Part VII, Section 8.3 of the Restated
Certificate (with respect to the Class Pilot MEC Preferred Stock), and Article
FOURTH, Part IX, Section 8.3 of the Restated Certificate (with respect to the
Class SAM Preferred Stock), be interpreted together to achieve the foregoing
result. With respect to any vote or consent as to which the first sentence of
this Section 8.3(c) does not apply, the Class IAM Preferred Stock shall not have
any voting rights except as provided by Sections 8.1, 8.2 and 8.4 and applicable
law provided, however, that if the Termination Date occurs directly or
indirectly as a result of an Uninstructed Trustee Action then, notwithstanding
anything to the contrary contained herein, the voting rights of the Class IAM
Preferred Stock set forth in this Section 8.3 shall continue until the
anniversary of the Issue Date occurring in the year 2010. For purposes of the
proviso in the immediately preceding sentence, the Termination Date shall be
deemed to have occurred as a result of an Uninstructed Trustee Action if the
Termination Date occurs within one year of such Uninstructed Trustee Action.
8.4 The affirmative vote or written consent of the holder of the share of
Class IAM Preferred Stock, voting separately as a class, shall be necessary for
authorizing, effecting or validating the amendment, alteration or repeal
(including any amendment, alteration or repeal by operation of merger or
consolidation) of any of the provisions of this Restated Certificate or of any
certificate amendatory thereof or supplemental thereto (including any
Certificate of Designation, Preferences and Rights or any similar document
relating to any series of Serial Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of the Class IAM Preferred Stock.
8.5 For purposes of the foregoing provisions of Sections 8.1 and 8.4, each
share of Class IAM Preferred Stock shall have one (1) vote per share.
Section 9. Redemption.
9.1 The share of Class IAM Preferred Stock shall, to the extent of funds
legally available therefor and subject to the other provisions of this Restated
Certificate, be automatically redeemed on the IAM Termination Date, at a price
of $0.01 per share of Class IAM Preferred Stock, as provided hereinbelow. As
promptly as reasonably possible following the occurrence of the IAM Termination
Date, the Corporation shall give notice thereof and of the redemption under this
Section 9 to the record holder of the Class IAM Preferred Stock. From and after
the redemption provided for in this Section 9.1, all rights of the holder of the
Class IAM Preferred Stock as such, except the right to receive the redemption
price of such shares upon the surrender of the certificate formerly representing
95
<PAGE>
the same, shall cease and terminate and such share shall not thereafter be
deemed to be outstanding for any purpose whatsoever.
9.2 The share of Class IAM Preferred Stock shall, to the extent of funds
legally available therefor and subject to the other provisions of this Restated
Certificate, be automatically redeemed upon any purported transfer thereof other
than as expressly permitted under Section 1.2. The redemption price to be paid
in connection with any redemption shall be $0.01 per share of Class IAM
Preferred Stock. Upon any such redemption, all rights of the holder of Class IAM
Preferred Stock as such, except the right to receive the redemption price of
such share upon the surrender of the certificate formerly representing the same,
shall cease and terminate and such share shall not thereafter be deemed to be
outstanding for any purpose whatsoever.
9.3 The holder of the share of Class IAM Preferred Stock so redeemed pursuant
to Section 9.1 or 9.2 shall present and surrender his certificate formerly
representing such share to the Corporation and thereupon the redemption price of
such share shall be paid to or on the order of the person whose name appears on
such certificate as the owner thereof and the surrendered certificate shall be
cancelled.
Section 10. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of the share of
Class IAM Preferred Stock as the true and lawful owner thereof for all purposes,
and, except as otherwise provided by law, neither the Corporation nor the
Transfer Agent shall be affected by any notice to the contrary.
PART IX
Class SAM Junior Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part IX, to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part IX.
Section 1. Number of Shares; Designation; Issuance; Restrictions on
Transfer.
1.1 The Class SAM Junior Preferred Stock of the Corporation (the ''Class SAM
Preferred Stock'') shall consist of ten shares, par value $0.01 per share.
1.2 Shares of Class SAM Preferred Stock shall be issued only to the persons
who are designated, pursuant to Section 8 of the Class SAM Preferred Stock
Stockholders' Agreement, to be the nominee for election pursuant to Article
FIFTH, Section 2.2 of this Restated Certificate as the Salaried/Management
Employee Director (the ''Salaried/Management Director'') or as a Designated
Stockholder (as defined in the Class SAM Stockholders' Agreement, the
''Designated Stockholder''). Any purported sale, transfer, pledge (other than a
pledge made in accordance with the Class SAM Stockholders' Agreement) or other
disposition (hereinafter a ''transfer'') of shares of Class SAM Preferred Stock
by a holder thereof other than to (x) any person to whom shares of Class SAM
Preferred Stock may be issued in accordance with the immediately prior sentence,
(y) another person designated pursuant to Section 8 of the Class SAM
Stockholders' Agreement or (z) in the case where no successor Salaried/
Management Director (the ''Successor Salaried/Management Director'') has been
elected concurrently with the Salaried/Management Director's removal,
resignation, failure to remain qualified, failure to be re-elected or otherwise
ceasing to serve as Salaried/Management Director, to the Corporation (to be held
in escrow pending transfer to the Successor Salaried/Management Director when
such successor is duly elected) shall be null and void and of no force and
effect. Upon any purported transfer other than as expressly permitted above, and
without any further action by the Corporation or such holder, such share of
Class SAM Preferred Stock so purported to be transferred shall, to the extent of
funds legally available therefor and subject to the other provisions of this
Restated Certificate, be automatically redeemed by the Corporation in accordance
with Section 9 hereof, and thereupon such share shall no longer be deemed
outstanding and neither such holder nor any purported transferee thereof shall
have in respect thereof any of the voting powers, preferences or relative,
participating, optional or special rights ascribed
96
<PAGE>
to the shares of Class SAM Preferred Stock hereunder, but rather such holder
thereafter shall only be entitled to receive the amount payable upon redemption
in accordance with Section 9. Certificates representing the shares of Class SAM
Preferred Stock shall be legended to reflect the restrictions on transfer and
automatic redemption provided for herein.
Section 2. Definitions. For purposes of the Class SAM Preferred Stock, the
following terms shall have the meanings indicated:
2.1 ''ALPA Termination Date'' shall have the meaning set forth in Article
FOURTH, Part VII, Section 8.1 of this Restated Certificate.
2.2 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee thereof authorized by such board of directors to
perform any of its responsibilities with respect to the Class SAM Preferred
Stock.
2.3 ''Business Day'' shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
2.4 ''Class I Preferred Stock'' shall mean the Class I Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
2.5 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.6 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.7 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
2.9 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.10 ''Class SAM Preferred Stock'' shall have the meaning set forth in Section
1 hereof.
2.11 ''Class SAM Stockholders' Agreement'' shall mean the Class SAM Preferred
Stockholders' Agreement dated as of July 12, 1994 among the Corporation and the
individuals named therein, a copy of which is on file at the office of the
Secretary of the Corporation.
2.12 ''Common Stock'' shall mean the common stock of the Corporation, par
value $0.01 per share.
2.13 ''Director Preferred Stocks'' shall mean collectively, the Class I
Preferred Stock, the Class IAM Preferred Stock, the Class Pilot MEC Preferred
Stock and the Class SAM Preferred Stock.
2.14 ''ESOP Convertible Preferred Stocks'' shall mean, collectively, the Class
1 ESOP Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred
Stock, each of the par value of $0.01 per share, of the Corporation.
2.15 ''IAM Termination Date'' shall have the meaning set forth in Article
FOURTH, Part VIII, Section 8.1 of this Restated Certificate.
97
<PAGE>
2.16 ''Issue Date'' shall mean the first date on which shares of Class SAM
Preferred Stock are issued.
2.17 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.18 ''Measuring Date'' shall mean that date which is the 365th day following
the Issue Date.
2.19 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.20 ''Salaried/Management Employee Director'' shall have the meaning set
forth in Section 1.2 hereof.
2.21 ''SAM Fraction'' shall mean 0.1664.
2.22 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.23 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.24 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.25 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.26 [Reserved]
2.27 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class SAM
Preferred Stock as to distributions upon liquidation, dissolution or winding up
of the Corporation are placed in a separate account of the Corporation or
delivered to a disbursing, paying or other similar agent, then ''set apart for
payment'' with respect to the Class SAM Preferred Stock shall mean, with respect
to such distributions, placing such funds in a separate account or delivering
such funds to a disbursing, paying or other similar agent.
2.28 ''Termination Date'' shall have the meaning set forth in Article FIFTH,
Section 1.72 of this Restated Certificate.
2.29 ''Trading Day'' shall mean any day on which the securities in question
are traded on the New York Stock Exchange, Inc. (the ''NYSE''), or if such
securities are not listed or admitted for trading or quoted on the NYSE, on the
principal national securities exchange on which such securities are listed or
admitted, or if not listed or admitted for trading or quoted on any national
securities exchange, on the Nasdaq National Market, or if such securities are
not quoted on such National Market, in the applicable securities market in which
the securities are traded.
2.30 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class SAM Preferred Stock.
2.31 ''Voting Fraction'' shall mean 0.55 with respect to votes or consents
that have a record date on or prior to the Measuring Date, and a fraction that
is equivalent to the Adjusted Percentage (as defined in Section 1.10 of the
Agreement and Plan of Recapitalization, dated as of March 25, 1994, among the
Corporation, the Air Line Pilots Association, International and International
Association of Machinists and Aerospace Workers, as amended from
98
<PAGE>
time to time) as in effect at the close of business on the Measuring Date with
respect to votes and consents that have a record date after the Measuring Date.
2.32 ''Voting Preferred Stocks'' shall mean, collectively, the Class P Voting
Preferred Stock, the Class M Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends. The holders of shares of the Class SAM Preferred
Stock as such shall not be entitled to receive any dividends or other
distributions (except as provided in Section 4).
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class SAM Preferred Stock as to amounts distributable
upon liquidation, dissolution or winding up of the Corporation, the holders of
the shares of Class SAM Preferred Stock shall be entitled to receive $0.01 per
share of Class SAM Preferred Stock (the ''Liquidation Preference''), but such
holders shall not be entitled to any further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable to the holders of the shares of Class SAM
Preferred Stock shall be insufficient to pay in full the Liquidation Preference
and the liquidation preference on all other shares of any class or series of
stock of the Corporation that ranks on a parity with the Class SAM Preferred
Stock as to amounts distributable upon liquidation, dissolution or winding up of
the Corporation, then such assets, or the proceeds thereof, shall be distributed
among the holders of shares of Class SAM Preferred Stock and any such other
parity stock ratably in accordance with the respective amounts that would be
payable on such shares of Class SAM Preferred Stock and any such other parity
stock if all amounts payable thereon were paid in full. For the purposes of this
Section 4, (i) a consolidation or merger of the Corporation with or into one or
more corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class of
stock ranking prior to or on a parity with the Class SAM Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of the Class SAM
Preferred Stock, as and to the fullest extent provided in this Section 4, any
series or other class of stock of the Corporation that ranks junior to the Class
SAM Preferred Stock as to amounts distributable upon liquidation, dissolution or
winding up of the Corpora tion, shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of the Class SAM Preferred
Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. All shares of Class SAM Preferred Stock
which shall have been issued and reacquired in any manner (other than redemption
pursuant to Section 9.1) by the Corporation, other than in its capacity as
escrow agent in accordance with Section 1.2 hereof, shall be retired and
restored to the status of authorized but unissued shares of Class SAM Preferred
Stock and, in the event of redemption of such shares pursuant to Section 9.1
hereof, shall not be reissued.
Section 6. Ranking.
6.1 Any class or series of stock of the Corporation shall be deemed to rank:
(a) prior to the Class SAM Preferred Stock as to the distribution of assets
upon liquidation, dissolution or winding up, if the holders of such class or
series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of Class SAM Preferred Stock;
(b) on a parity with the Class SAM Preferred Stock as to the distribution
of assets upon liquidation, dissolution or winding up, whether or not the
liquidation prices per share thereof be different from those of the
99
<PAGE>
Class SAM Preferred Stock, if the holders of such class or series and the
Class SAM Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in proportion to
their respective liquidation preferences, without preference or priority one
over the other; and
(c) junior to the Class SAM Preferred Stock, as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of Class
SAM Preferred Stock shall be entitled to the receipt of amounts distributable
upon liquidation, dissolution or winding up in preference or priority to the
holders of shares of such class or series.
6.2 The Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock and the ESOP Convertible Preferred Stocks shall each be deemed
to rank prior to the Class SAM Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up. The other Director Preferred Stocks and
the Voting Preferred Stocks shall each be deemed to rank on a parity with the
Class SAM Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock and the Series C Preferred Stock
shall each be deemed to rank junior to the Class SAM Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc.
7.1 In case the Corporation enters into any consolidation, merger, share
exchange or similar transaction, however named, involving the Corporation or its
subsidiary, United Air Lines, Inc. (''United'') (or any successor to all or
substantially all the assets or business of United), pursuant to which the
outstanding shares of Common Stock are to be exchanged for or changed,
reclassified or converted into securities of any successor or resulting or other
company (including the Corporation), or cash or other property (each of the
foregoing transactions is referred to herein as a ''Merger Transaction''),
proper provision shall be made so that, upon consummation of such transaction,
the shares of Class SAM Preferred Stock shall be converted, reclassified or
changed into or exchanged for preferred stock of such successor or resulting or
other company having, in respect of such company, the same powers, preferences
and relative, participating, optional or other special rights (including the
rights provided by this Section 7), and the qualifications, limitations or
restrictions thereof, that the Class SAM Preferred Stock had, in respect of the
Corporation, immediately prior to such transaction; specifically including,
without limitation, the right, until the Class SAM Preferred Stock Termination
Date (as defined in Section 9.1), to elect one member of the board of directors
(or similar governing body) of such company.
7.2 In case the Corporation shall enter into any agreement providing for any
Merger Transaction, then the Corporation shall as soon as practicable thereafter
(and in any event at least fifteen (15) Business Days before consummation of
such transaction) give notice of such agreement and the material terms thereof
to the holders of the shares of Class SAM Preferred Stock. The Corporation shall
not consummate any such Merger Transaction unless all of the terms of this
Section 7 and Section 8 have been complied with.
Section 8. Voting. The holders of shares of Class SAM Preferred Stock
shall have the following voting rights; provided, however, that no holder of
shares of Class SAM Preferred Stock shall have any right to vote unless at such
time such person is the Salaried/Management Director or the Designated
Stockholder under the Class SAM Stockholders' Agreement:
8.1 Until the Class SAM Preferred Stock Termination Date, the holders of the
Class SAM Preferred Stock shall have the right (i) voting separately as a class,
to elect one Salaried/Management Employee Director to the Board of Directors and
(ii) voting together as a single class with the holders of Common Stock and the
holders of such other classes or series of stock that vote together with the
Common Stock as a single class, to vote on all matters submitted to a vote of
the holders of Common Stock of the Corporation (other than the election of
Public Directors, as defined in Article FIFTH, Section 2.3), except as otherwise
required by law.
8.2 Notwithstanding anything to the contrary in Section 7.1, 7.2 or 8.1, if at
any time prior to the Termination Date, (x) the trustee under either (i) the UAL
Corporation Employee Stock Ownership Plan (the ''ESOP'') or (ii) the UAL
Corporation Supplemental ESOP (together with the ESOP, the ''Plan'') either (a)
fails to solicit, in accordance
100
<PAGE>
with the Plan, timely instructions from Plan participants, the Committee of the
ESOP (as defined in the ESOP and hereinafter referred to as the ''ESOP
Committee'') or the Committee of the Supplemental ESOP (as defined in the
Supplemental ESOP and, together with the ESOP Committee, the ''Committees''), as
applicable (''Instructions''), with respect to any matter referred to in clause
(y) below, or (b) fails to act in accordance with such Instructions with respect
to any matter referred to in clause (y) below (but only if such failure to
follow such Instructions is attributable to (i) the trustee having concluded
that, based upon the terms of such transaction, the trustee's fiduciary duties
require the trustee to fail to follow such Instructions or (ii) the
unenforceability of the provisions of the ESOP and/or the Supplemental ESOP
relating to the solicitation and/or following of such Instructions); (y) either
(i) but for the provisions of Subsection 8.3(a) and Article FOURTH, Part VII,
Subsection 8.3(a) and Article FOURTH, Part VIII, Subsection 8.3(a) of this
Restated Certificate, the vote of the stockholders of the Corporation would have
been sufficient, under applicable law, stock exchange listing requirements and
this Restated Certificate, as applicable, to approve the Merger Transaction or
other Control Transaction (as defined in the ESOP) in question (or, if no
stockholder approval would be required by this Restated Certificate, applicable
stock exchange listing requirements or applicable law, the trustee enters into a
binding commitment in connection with a Control Transaction or a Control
Transaction is consummated) or (ii) following the Issue Date, the trustee
disposes of an aggregate of 10% or more of the Common Equity (as defined in
Article FIFTH, Section 1.26 of this Related Certificate) initially represented
by the ESOP Convertible Preferred Stocks other than in connection with Plan
distributions; and (z) any of the following occur: (a) Instructions with respect
to a matter are given, the trustee fails to follow such Instructions and such
transaction would not have been approved by stockholders of the Corporation in
accordance with the applicable provisions of this Restated Certificate
(excluding Subsection 8.3(a) and Article FOURTH, Part VII, Subsection 8.3(a) and
Article FOURTH, Part VIII, subsection 8.3(a) of this Restated Certificate),
applicable stock exchange listing requirements or applicable law if the trustee
had acted in accordance with such Instructions (or, if no vote of stockholders
would be required by this Restated Certificate, applicable stock exchange
listing requirements or applicable law, such action by the trustee in respect of
such transaction as to which Instructions were so given would not have been
authorized had the trustee acted in accordance with such Instructions), (b) the
trustee fails to solicit timely Instructions with respect to such matters, such
transaction requires the approval of stockholders of the Corporation under
applicable provisions of this Restated Certificate, applicable stock exchange
listing requirements or applicable law and such approval would not have been
obtained (without regard to Subsection 8.3(a) and Article FOURTH, Part VII,
Subsection 8.3(a) and Article FOURTH, Part VIII, Subsection 8.3(a) of this
Restated Certificate) if the trustee had voted against such transaction all of
the votes entitled to be cast by such trustee as the holder of securities of the
Corporation held under the Plan, or (c) the trustee fails to follow Instructions
or to solicit timely Instructions with respect to such matter and no vote of
stockholders of the Corporation is required by the Restated Certificate,
applicable stock exchange listing requirements or applicable law to approve such
transaction (an action or inaction by the trustee under clauses (x) and (z) in
connection with a transaction referred to in clause (y) being referred to herein
as an ''Uninstructed Trustee Action''); then, (I) the Merger Transaction or
other Control Transaction referred to in clause (y)(i) of Section 8.2 involving
an Uninstructed Trustee Action, if it requires stockholder approval under
applicable law, stock exchange listing requirements or this Restated
Certificate, must also be approved by the vote of stockholders described in
Subsection 8.3(a), and (II) from and after such Uninstructed Trustee Action, in
addition to the voting rights provided for under Section 8.1, the share of Class
SAM Preferred Stock shall have the voting rights set forth in Subsection 8.3(b).
8.3 (a) In addition to any other vote or consent of stockholders required by
this Restated Certificate, applicable stock exchange listing requirements or
applicable law, any Merger Transaction or other Control Transaction referred to
in clause (y)(i) of Section 8.2 involving an Uninstructed Trustee Action that
requires stockholder approval under applicable law, stock exchange listing
requirements or this Restated Certificate must also be approved by at least a
majority of the votes entitled to be cast in respect of all outstanding shares
of the Class Pilot MEC Preferred Stock, the Class IAM Preferred Stock, the Class
SAM Preferred Stock, the Common Stock and such other classes and series of stock
that vote together with the Common Stock as a single class (other than the
Voting Preferred Stocks), with all such shares voting, for purposes of this
paragraph, as a single class, and for purposes of such vote the Class SAM
Preferred Stock shall be entitled to cast a number of votes calculated in
accordance with Subsection 8.3(c).
(b) Except as otherwise required by law or provided in this Restated
Certificate, from and after an Uninstructed Trustee Action, holders of shares of
Class SAM Preferred Stock shall be entitled to vote on all matters submitted to
101
<PAGE>
a vote of the holders of Common Stock, voting together as a single class with
the holders of Class IAM Preferred Stock, the holders of Class Pilot MEC
Preferred Stock, the holders of Common Stock and the holders of such other
classes and series of stock that vote together with the Common Stock as a single
class (other than the Voting Preferred Stocks) and for purposes of such vote the
Class SAM Preferred Stock shall be entitled to cast a number of votes calculated
in accordance with Subsection 8.3(c); provided, however, that, except as
provided in Section 8.1, prior to the Termination Date, holders of shares of
Class SAM Preferred Stock shall not be entitled to vote with the holders of
Common Stock with respect to the election of the members of the Board of
Directors.
(c) With respect to any vote or consent (i) with respect to which the Class
SAM Preferred Stock is entitled to vote pursuant to Subsection 8.3(a) or (ii)
with respect to which the Class SAM Preferred Stock is entitled to vote pursuant
to Subsection 8.3(b) and the record date for which occurs after an Uninstructed
Trustee Action and prior to the Termination Date, (x) holders of shares of Class
SAM Preferred Stock shall, collectively, be entitled to a number of votes
(rounded to the nearest whole vote) equal to the product of (I) the SAM
Fraction, (II) the Voting Fraction and (III) a fraction, the numerator of which
shall be the number of votes entitled to be cast on the matter by the holders of
all outstanding securities of the Corporation (excluding the Class IAM Preferred
Stock and the Class Pilot MEC Preferred Stock), and the denominator of which
shall be the excess of one (1.0) over the Voting Fraction (the ''Aggregate SAM
Vote''), and (y) the holder of each share of the Class SAM Preferred Stock shall
be entitled to a number of votes per share equal to the result of dividing (aa)
the number of Aggregate SAM Votes by (bb) the number of shares of Class SAM
Preferred Stock outstanding on the applicable record date. If, with respect to
any matter as to which the immediately preceding sentence shall apply, (i)
shares of Common Stock are held under the ESOP or the Supplemental ESOP which
have been issued upon conversion of the ESOP Convertible Preferred Stocks
(''Subject Shares''), (ii) with respect to any action as to which the trustee is
required, in accordance with the terms of the ESOP or the Supplemental ESOP, to
solicit Instructions, the trustee has solicited such Instructions and (iii) the
trustee has voted some or all of the Subject Shares in accordance with such
Instructions (the shares which the trustee has voted in accordance with such
Instructions, ''Instructed Trustee Common Shares''), then the Attributed Votes
shall be reduced by the Pro Rata Reduction. The ''Pro Rata Reduction'' shall
equal, with respect to any such matter, the sum of (I) the product of (x) a
fraction, the numerator of which is the number of votes represented by Subject
Shares as to which members of the Management and Salaried Employee Group (or the
Committees) gave Instructions to the trustee to vote in favor of the matter, and
the denominator of which is the number of votes represented by Subject Shares as
to which members of all Employee Groups (as defined in the ESOP) (or the
Committees) gave Instructions to the trustee to vote in favor of the matter
(such denominator being referred to as the ''Instructed Pro Vote'') and (y) the
number of votes represented by Subject Shares that the trustee actually voted in
favor of the matter (but in no event more than the Instructed Pro Vote); and
(II) the product of (x) a fraction, the numerator of which is the number of
votes represented by Subject Shares as to which members of the Management and
Salaried Employee Group (or the Committees) gave instructions to the trustee to
vote against the matter, and the denominator of which is the number of votes
represented by Subject Shares as to which members of all Employee Groups (or the
Committees) gave Instructions to the trustee to vote against the matter (such
denominator being referred to as the ''Instructed Con Vote'') and (y) the number
of votes represented by Subject Shares that the trustee actually voted against
the matter (but in no event more than the Instructed Con Vote).
For purposes of this Section 8.3, the Corporation shall certify to the holders
of Class SAM Preferred Stock and to the judges or similar officials appointed
for the purpose of tabulating votes at any meeting of stockholders as soon as
practicable following the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of stockholders, but in no event
less than five Trading Days before such meeting, the number of shares of Common
Stock then outstanding and the number of votes entitled to be cast on the matter
or matters in question by the holders of all outstanding securities of the
Corporation (excluding the Class IAM Preferred Stock and the Class Pilot MEC
Preferred Stock). The Corporation shall be deemed to satisfy the requirements of
the preceding sentence if such matters are specified in any proxy statement
mailed to all stockholders entitled to vote on such matter or matters. With
respect to any vote or consent as to which the first sentence of this Subsection
8.3(c) applies, the outstanding share of Class SAM Preferred Stock, together
with the outstanding shares of the Class IAM Preferred Stock and the outstanding
shares of Class Pilot MEC Preferred Stock, will represent the Voting Fraction
(expressed as a percentage) of the votes to be cast in connection with matters
(other than the election of directors) submitted to the vote of the holders of
the Common Stock and the holders of all other outstanding securities that vote
as a single class together with the Common Stock. Subject to any amendment of
this Restated Certificate after
102
<PAGE>
the date hereof, it is the intent of this Restated Certificate that this Section
8.3 (with respect to the Class SAM Preferred Stock), Article FOURTH, Part VIII,
Section 8.3 of the Restated Certificate (with respect to the Class IAM Preferred
Stock), and Article FOURTH, Part VII, Section 8.3 of the Restated Certificate
(with respect to the Class Pilot MEC Preferred Stock), be interpreted together
to achieve the foregoing result. With respect to any vote or consent as to which
the first sentence of this Section 8.3(c) does not apply, the Class SAM
Preferred Stock shall not have any voting rights except as provided by Sections
8.1, 8.2 and 8.4 and applicable law; provided, however, that if the Termination
Date occurs directly or indirectly as a result of an Uninstructed Trustee Action
then, notwithstanding anything to the contrary contained herein, the voting
rights of the Class SAM Preferred Stock set forth in this Section 8.3 shall
continue until the anniversary of the Issue Date occurring in the year 2010. For
purposes of the proviso in the immediately preceding sentence, the Termination
Date shall be deemed to have occurred as a result of an Uninstructed Trustee
Action if the Termination Date occurs within one year of such Uninstructed
Trustee Action.
8.4 The affirmative vote or written consent of the holders of a majority of
the outstanding shares of Class SAM Preferred Stock, voting separately as a
class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal (including any amendment, alteration or repeal
by operation of merger or consolidation) of any of the provisions of this
Restated Certificate or of any certificate amendatory thereof or supplemental
thereto (including any Certificate of Designation, Preferences and Rights or any
similar document relating to any series of Serial Preferred Stock) which would
adversely affect the preferences, rights, powers or privileges of the Class SAM
Preferred Stock.
8.5 For purposes of the foregoing provisions of Sections 8.1 and 8.4, each
share of Class SAM Preferred Stock shall have one (1) vote per share.
Section 9. Redemption.
9.1 All outstanding shares of Class SAM Preferred Stock shall, to the extent
of funds legally available therefor and subject to the other provisions of this
Restated Certificate, be automatically redeemed on the earlier of the ALPA
Termination Date and the IAM Termination Date (the ''Class SAM Preferred Stock
Termination Date''), at a price of $0.01 per share of Class SAM Preferred Stock,
as provided below. As promptly as reasonably possible following the occurrence
of the Class SAM Preferred Stock Termination Date, the Corporation shall give
notice thereof and of the redemption under this Section 9 to all record holders
of the Class SAM Preferred Stock. From and after the redemption provided for in
this Section 9.1, all rights of the holder of Class SAM Preferred Stock as such,
except the right to receive the redemption price of such shares upon the
surrender of certificates formerly representing the same, shall cease and
terminate and such shares shall not thereafter be deemed to be outstanding for
any purpose whatsoever.
9.2 The shares of Class SAM Preferred Stock shall, to the extent of funds
legally available therefor and subject to the other provisions of this Restated
Certificate, be automatically redeemed from time to time, in part, concurrently
with any purported transfer of shares of Class SAM Preferred Stock other than as
expressly permitted under Section 1.2, and the number of shares so redeemed
shall be equal to the number of shares purported to be transferred. The
redemption price to be paid in connection with any redemption shall be $0.01 per
share of Class SAM Preferred Stock. From and after the redemption provided for
in this Section 9.2, all rights of the holders of the shares of Class SAM
Preferred Stock so redeemed, except the right to receive the redemption price of
such shares upon the surrender of certificates formerly representing the same,
shall cease and terminate and such shares shall not thereafter be deemed to be
outstanding for any purpose whatsoever.
9.3 Upon any such redemption provided for in Section 9.1 or 9.2 above, each
holder of a certificate formerly representing the shares of Class SAM Preferred
Stock so redeemed shall present and surrender such certificate to the
Corporation and thereupon the redemption price of such shares shall 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 shall be
cancelled.
103
<PAGE>
Section 10. Record Holders. The Corporation and the Transfer Agent (if
other than the Corporation) may deem and treat the record holder of any shares
of Class SAM Preferred Stock as the true and lawful owner thereof for all
purposes, and, except as otherwise provided by law, neither the Corporation nor
the Transfer Agent shall be affected by any notice to the contrary.
PART X
Class I Junior Preferred Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part X, to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part X.
Section 1. Number of Shares; Designations; Issuance; Restrictions on
Transfer.
1.1 The Class I Junior Preferred Stock of the Corporation (the ''Class I
Preferred Stock'') shall consist of ten shares, par value $0.01 per share.
1.2 Each share of Class I Preferred Stock shall be issued only to a person who
serves as an Independent Director of the Corporation meeting the requirements
set forth in Article FIFTH, Section 2.4 of this Restated Certificate or to the
initial ''Individual Parties'' under the Class I Stockholders' Agreement (as
such term is defined in Article FIFTH, Section 1.15 of this Restated
Certificate) (the ''Class I Stockholders' Agreement'') (each such person, an
''Independent Director'') and may be held by such person only so long as such
person shall continue to serve as an Independent Director. Any purported sale,
transfer, pledge (other than a pledge made in accordance with the Class I
Stockholders' Agreement), or other disposition (hereinafter a ''transfer'') of
shares of Class I Preferred Stock by a holder thereof to any person other than
to (x) such holder's successor as an Independent Director (any such individual,
a ''Successor Independent Director'') or (y) in the case where no such Successor
Independent Director has been elected concurrently with such holder's removal,
resignation, failure to remain qualified, failure to be re-elected or otherwise
ceasing to serve as an Independent Director, to any Independent Director then in
office, or if there are no Independent Directors then in office, to the
Corporation (to be held in escrow by such Independent Director or the
Corporation, as the case may be, pending transfer to such holder's Successor
Independent Director when such successor is duly elected) shall be null and void
and of no force and effect. Upon any purported transfer of a share of Class I
Preferred Stock by the holder thereof other than as expressly permitted above,
without any further action by the Corporation or such holder, such share of
Class I Preferred Stock so purported to be transferred shall, to the extent of
funds legally available therefor and subject to the other provisions of this
Restated Certificate, be automatically redeemed by the Corporation in accordance
with Section 8 hereof, and thereupon such share shall no longer be deemed
outstanding, and neither such holder nor any purported transferee thereof shall
have in respect thereof any of the voting powers, preferences or relative,
participating, optional or special rights ascribed to the shares of Class I
Preferred Stock hereunder, but rather such holder thereafter shall only be
entitled to receive the amount payable upon redemption in accordance with
Section 8. Certificates representing shares of Class I Preferred Stock shall be
legended to reflect the restrictions on transfer and automatic redemption
provided for herein.
Section 2. Definitions. For purposes of the Class I Preferred Stock, the
following terms shall have the meanings indicated:
2.1 ''Board of Directors'' shall mean the board of directors of the
Corporation or any committee thereof authorized by such board of directors to
perform any of its responsibilities with respect to the Class I Preferred Stock.
2.2 ''Class I Preferred Stock'' shall have the meaning set forth in Section 1
hereof.
2.3 ''Class IAM Preferred Stock'' shall mean the Class IAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
104
<PAGE>
2.4 ''Class M Voting Preferred Stock'' shall mean the Class M ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.5 ''Class P Voting Preferred Stock'' shall mean the Class P ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.6 ''Class Pilot MEC Preferred Stock'' shall mean the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
2.7 ''Class S Voting Preferred Stock'' shall mean the Class S ESOP Voting
Junior Preferred Stock, par value $0.01 per share, of the Corporation.
2.8 ''Class SAM Preferred Stock'' shall mean the Class SAM Junior Preferred
Stock, par value $0.01 per share, of the Corporation.
2.9 ''Common Stock'' shall mean the common stock of the Corporation, par value
$0.01 per share.
2.10 ''Director Preferred Stocks'' shall mean collectively, the Class I
Preferred Stock, the Class IAM Preferred Stock, the Class Pilot MEC Preferred
Stock and the Class SAM Preferred Stock.
2.11 ''ESOP Convertible Preferred Stocks'' shall mean, collectively, the Class
1 ESOP Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred
Stock, each of the par value of $0.01 per share, of the Corporation.
2.12 ''Issue Date'' shall mean the first date on which shares of Class I
Preferred Stock are issued.
2.13 ''Liquidation Preference'' shall have the meaning set forth in Section
4.1 hereof.
2.14 ''Restated Certificate'' shall mean the Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
2.15 ''Series A Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series A Convertible
Preferred Stock in Article FOURTH, Part I.A of this Restated Certificate.
2.16 ''Series B Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series B Preferred Stock
in Article FOURTH, Part I.B of this Restated Certificate.
2.17 ''Series C Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series C Junior
Participating Preferred Stock in Article FOURTH, Part I.C of this Restated
Certificate.
2.18 ''Series D Preferred Stock'' shall mean the series of Serial Preferred
Stock of the Corporation, without par value, designated Series D Redeemable
Preferred Stock in Article FOURTH, Part I.D of this Restated Certificate.
2.19 [Reserved]
2.20 ''set apart for payment'' shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of capital stock of the
Corporation; provided, however, that if any funds for any class or series of
stock of the Corporation ranking on a parity with or junior to the Class I
Preferred Stock as to distributions upon liquidation, dissolution or winding up
of the Corporation are placed in a separate account of the Corporation or
delivered to a disbursing, paying or other similar agent, then ''set apart for
payment'' with respect to the Class I
105
<PAGE>
Preferred Stock shall mean, with respect to such distributions, placing such
funds in a separate account or delivering such funds to a disbursing, paying or
other similar agent.
2.20 ''Termination Date'' shall have the meaning set forth in Article FIFTH,
Section 1.72 of this Restated Certificate.
2.21 ''Transfer Agent'' means the Corporation or such agent or agents of the
Corporation as may be designated from time to time by the Board of Directors as
the transfer agent for the Class I Preferred Stock.
2.22 ''Voting Preferred Stocks'' shall mean, collectively, the Class M Voting
Preferred Stock, the Class P Voting Preferred Stock and the Class S Voting
Preferred Stock.
Section 3. Dividends. The holders of shares of the Class I Preferred Stock
as such shall not be entitled to receive any dividends or other distributions
(except as provided in Section 4).
Section 4. Payments upon Liquidation.
4.1 In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set apart
for payment to the holders of any class or series of stock of the Corporation
that ranks junior to the Class I Preferred Stock as to amounts distributable
upon liquidation, dissolution or winding up of the Corporation, the holders of
the shares of Class I Preferred Stock shall be entitled to receive $0.01 per
share of Class I Preferred Stock (the ''Liquidation Preference''), but such
holders shall not be entitled to any further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of the shares of Class I
Preferred Stock shall be insufficient to pay in full the Liquidation Preference
and the liquidation preference on all other shares of any class or series of
stock of the Corporation that ranks on a parity with the Class I Preferred Stock
as to amounts distributable upon liquidation, dissolution or winding up of the
Corporation, then such assets, or the proceeds thereof, shall be distributed to
the holders of shares of Class I Preferred Stock and any such other parity stock
ratably in accordance with the respective amounts that would be payable on such
shares of Class I Preferred Stock and any such other parity stock if all amounts
payable thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with or into one or more
corporations, or (ii) a sale, lease, exchange or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
4.2 Subject to the rights of the holders of shares of any series or class of
stock ranking prior to or on a parity with the Class I Preferred Stock as to
amounts distributable upon liquidation, dissolution or winding up of the
Corporation, after payment shall have been made to the holders of the Class I
Preferred Stock, as and to the fullest extent provided in this Section 4, any
series or other class of stock of the Corporation that ranks junior to the Class
I Preferred Stock as to amounts distributable upon liquidation, dissolution or
winding up of the Corporation, shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of the Class I Preferred
Stock shall not be entitled to share therein.
Section 5. Shares to be Retired. All shares of Class I Preferred Stock
which shall have been issued and reacquired in any manner (other than pursuant
to Section 8.1) by the Corporation, other than in its capacity as escrow agent
in accordance with Section 1.2 hereof, shall be retired and restored to the
status of authorized but unissued shares of Class I Preferred Stock and, in the
case of shares redeemed pursuant to Section 8.1 hereof, shall not be reissued.
Section 6. Ranking.
6.1 Any class or series of stock of the Corporation shall be deemed to rank:
106
<PAGE>
(a) prior to the Class I Preferred Stock as to the distribution of assets
upon liquidation, dissolution or winding up if the holders of such class or
series shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up, in preference or priority to the
holders of Class I Preferred Stock;
(b) on a parity with the Class I Preferred Stock as to the distribution of
assets upon liquidation, dissolution or winding up, whether or not the
liquidation prices per share thereof be different from those of the Class I
Preferred Stock, if the holders of such class or series and the Class I
Preferred Stock shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in proportion to their respective
liquidation preferences, without preference or priority one over the other;
and
(c) junior to the Class I Preferred Stock, as to the distribution of assets
upon liquidation, dissolution or winding up, if the holders of Class I
Preferred Stock shall be entitled to the receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the
holders of shares of such class or series.
6.2 The Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock and the ESOP Convertible Preferred Stocks shall each be deemed
to rank prior to the Class I Preferred Stock as to amounts distributable upon
liquidation, dissolution or winding up. The other Director Preferred Stocks and
the Voting Preferred Stocks shall each be deemed to rank on a parity with the
Class I Preferred Stock as to amounts distributable upon liquidation,
dissolution or winding up. The Common Stock and the Series C Preferred Stock
shall each be deemed to rank junior to the Class I Preferred Stock as to amounts
distributable upon liquidation, dissolution or winding up.
Section 7. Voting. The holders of shares of Class I Preferred Stock shall
have the following voting rights; provided, however, that no holder of shares of
Class I Preferred Stock shall have any right to vote unless at such time such
person is an Independent Director or an initial ''Individual Party'' under the
Class I Stockholders' Agreement:
7.1 Until the Termination Date, the holders of the Class I Preferred Stock
shall have the right, voting separately as a class, to elect four Independent
Directors to the Board of Directors.
7.2 Unless the affirmative vote or consent of the holders of a greater number
of shares of Class I Preferred Stock shall then be required by law or this
Restated Certificate, and in addition to any other vote required by law or this
Restated Certificate, the affirmative vote or written consent of the holders of
at least a majority of all of the outstanding shares of Class I Preferred Stock,
voting separately as a class, shall be necessary for authorizing, effecting or
validating the amendment, alteration or repeal (including any amendment,
alteration or repeal by operation of merger or consolidation) of any of the
provisions of this Restated Certificate or of any certificate amendatory thereof
or supplemental thereto (including any Certificate of Designation, Preferences
and Rights or any similar document relating to any series of Serial Preferred
Stock) which would adversely affect the preferences, rights, powers or
privileges of the Class I Preferred Stock.
7.3 For purposes of the foregoing provisions of Sections 7.1 and 7.2, each
share of Class I Preferred Stock shall have one (1) vote per share. Except as
otherwise required by applicable law or as set forth herein, the shares of Class
I Preferred Stock shall not have any relative participating, optional or other
special voting rights and powers and the consent of the holder thereof shall not
be required for the taking of any corporate action.
Section 8. Redemption.
8.1 All outstanding shares of Class I Preferred Stock shall, to the extent of
funds legally available therefor and subject to the other provisions of this
Restated Certificate, be automatically redeemed on the Termination Date, at a
price of $0.01 per share of Class I Preferred Stock, as provided below. As
promptly as reasonably possible following the occurrence of the Termination
Date, the Corporation shall give notice thereof and of the redemption under this
Section 8 to all record holders of the Class I Preferred Stock.
107
<PAGE>
From and after the redemption provided for in this Section 8.1, all rights of
the holders of Class I Preferred Stock as such, except the right to receive the
redemption price of such shares upon the surrender of certificates therefor,
shall cease and terminate and such shares shall not thereafter be deemed to be
outstanding for any purpose whatsoever.
8.2 The shares of Class I Preferred Stock shall, to the extent of funds
legally available therefor and subject to the other provisions of this Restated
Certificate, be automatically redeemed from time to time, in part, concurrently
with any purported transfer of shares of Class I Preferred Stock other than as
expressly permitted under Section 1.2 and the number of shares so redeemed shall
be equal to the number of shares so purported to be transferred. The redemption
price to be paid in connection with any redemption shall be $0.01 per share of
Class I Preferred Stock. From and after the redemption provided for in this
Section 8.2, all rights of such holder of Class I Preferred Stock as such,
except the right to receive the redemption price of such shares upon the
surrender of certificates representing the same, shall cease and terminate and
such share(s) shall not thereafter be deemed to be outstanding for any purpose
whatsoever.
8.3 Upon any such redemption provided for in Section 8.1 or 8.2 above, each
holder of a certificate formerly representing the share(s) of Class I Preferred
Stock so redeemed shall present and surrender such certificate to the
Corporation and thereupon the redemption price of such share(s) shall 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 shall be
cancelled.
Section 9. Record Holders.
The Corporation and the Transfer Agent (if other than the Corporation) may
deem and treat the record holder of any share(s) of Class I Preferred Stock as
the true and lawful owner thereof for all purposes, and, except as otherwise
provided by law, neither the Corporation nor the Transfer Agent shall be
affected by any notice to the contrary.
PART XI
Common Stock
Unless otherwise indicated, any reference in this Article FOURTH, Part XI to
''Section'', ''Subsection'', ''paragraph'', ''subparagraph'' or ''clause'' shall
refer to a Section, Subsection, paragraph, subparagraph or clause of this
Article FOURTH, Part XI. Capitalized terms used and not otherwise defined in
this Article FOURTH, Part XI, shall have the respective meanings given those
terms in the introductory sentence of Article FOURTH.
Section 1. Dividends. Subject to any rights to receive dividends to which
the holders of the shares of any other class or series of stock may be entitled,
the holders of shares of Common Stock shall be entitled to receive dividends, if
and when declared payable from time to time by the Board of Directors, from any
funds legally available therefor.
Section 2. Liquidation. In the event of any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, after there
shall have been paid to the holders of shares of any other class or series of
stock ranking prior to the Common Stock in respect thereof the full amounts to
which they shall be entitled, and subject to any rights of the holders of any
other class or series of stock to participate therein, the holders of the then
outstanding shares of Common Stock shall be entitled to receive, pro rata, any
remaining assets of the Corporation available for distribution to its
stockholders. Subject to the foregoing, the Board of Directors may distribute in
kind to the holders of the shares of Common Stock such remaining assets of the
Corporation, or may sell, transfer or otherwise dispose of all or any part of
such remaining assets to any other corporation, trust or other entity and
receive payment therefor in cash, stock or obligations of such, other
corporations, trust or entity or any combination thereof, and may sell all or
any part of the consideration so received, and may distribute the consideration
so received or any balance thereof in kind to holders of the shares of Common
Stock. The voluntary sale, conveyance,
108
<PAGE>
lease, exchange or transfer of all or substantially all the property or assets
of the Corporation (unless in connection therewith the dissolution, liquidation
or winding up of the Corporation is specifically approved), or the merger or
consolidation of the Corporation into or with any other corporation, or the
merger of any other corporation into it, or any purchase or redemption of shares
of stock of the Corporation of any class, shall not be deemed to be a
dissolution, liquidation or winding up of the corporation for the purpose of
this Section 2.
Section 3. Voting. Except as provided by law or this Restated Certificate
of Incorporation:
a. each outstanding share of Common Stock of the Corporation shall entitle
the holder thereof to one vote on each matter submitted to a vote at a meeting
of stockholders; and
b. until the Termination Date (as defined in Article FIFTH, Section 1.72),
the holders of Common Stock, voting as a separate class, shall be entitled to
elect five Public Directors (as defined in Article FIFTH, Section 2.3) of the
Corporation.
PART XII
General Provisions
No Preemptive Rights, Etc. Except as otherwise provided herein, no holder of
stock of the Corporation of any class shall have any preemptive, preferential or
other right to purchase or subscribe for any shares of stock, whether now or
hereafter authorized, of the Corporation of any class, or any obligations
convertible into, or any options or warrants to purchase, any shares of stock,
whether now or hereafter authorized, of the Corporation of any class, other than
such, if any, as the Board of Directors may from time to time determine, and at
such price as the Board of Directors may from time to time fix; and any shares
of stock or any obligations, options or warrants which the Board of Directors
may determine to offer for subscription to holders of any shares of stock of the
Corporation may, as the Board of Directors shall determine, be offered to
holders of shares of stock of the Corporation of any class or classes or series,
and if offered to holders of shares of stock of more than one class or series,
in such proportions as between such classes and series as the Board of Directors
may determine.
FIFTH. GOVERNANCE. Unless otherwise expressly indicated, references in
this Article FIFTH to any ''Section'', ''Subsection'', ''paragraph'',
''subparagraph'' or ''clause'' shall refer to such Section, Subsection,
paragraph, subparagraph or clause of this Article FIFTH.
Section 1. Definitions. As used in this Restated Certificate, unless the
context otherwise requires, the following terms shall have the following
meanings:
1.1 ''Affiliate'' has the meaning defined in Rule 12b-2 promulgated under the
Exchange Act.
1.2 ''Airline Business'' means the business of operating an Air Carrier,
together with any business or activity reasonably related to or in support of
any and all such operations engaged in by the Corporation or any of its
Subsidiaries at or during the one year period immediately prior to the Effective
Time.
1.3 ''Air Carrier'' means an ''air carrier'' as defined in Section 1301(3) of
the Federal Aviation Act of 1958, 49 U.S.C. (S)(S) 1301 et seq., as amended, or
any successor act thereto.
1.4 ''ALPA'' means the Air Line Pilots Association, International.
1.5 ''Available Unissued ESOP Shares'' shall mean as of the date of
determination and without duplication, (a) the number of shares of Common Stock
that would be issuable upon conversion of that portion of (w) 17,675,345 shares
of ESOP Convertible Preferred Stock plus (x) an aggregate of 17,675,345 shares
of Class P Voting Preferred Stock, Class M Voting Preferred Stock and Class S
Voting Preferred Stock plus (y) the number of Additional Shares (as defined in
Section 1.10 of the Recapitalization Agreement) plus (z) an aggregate number of
shares of Class P
109
<PAGE>
Voting Preferred Stock, Class M Voting Preferred Stock and Class S Voting
Preferred Stock that is equal to the number of Additional Shares that, in the
case of each of clause (w), (x), (y) and (z), as of the date of determination of
Available Unissued ESOP Shares, have not been issued pursuant to Section 1.6 or
1.10 of the Recapitalization Agreement as ESOP Convertible Preferred Stock,
Class P Voting Preferred Stock, Class M Voting Preferred Stock, Class S Voting
Preferred Stock or Common Stock, plus (b) the number of shares of Common Stock
that have been credited to the Supplemental ESOP (other than pursuant to Section
1.6 or 1.10 of the Recapitalization Agreement) and that have not been issued.
1.6 ''Bankrupt'' means ''insolvent'' as defined in Section 101(32) of the
Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq., as amended.
1.7 ''Bankruptcy Opinions'' has the meaning defined in Subsection
3.4(b)(vii)(B).
1.8 ''Board'' means the Board of Directors of the Corporation.
1.9 ''Board Committees'' has the meaning defined in Subsection 4.1.10.
1.10 ''Business Combination'' means a ''business combination'' as defined in
Section 203 of the GCL.
1.11 ''Chief Executive Officer'' means the Chief Executive Officer of the
Corporation.
1.12 ''Class 1 ESOP Convertible Preferred Stock'' means the Class 1 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
1.13 ''Class 2 ESOP Convertible Preferred Stock'' means the Class 2 ESOP
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
1.14 ''Class I Preferred Stock'' means the Class I Junior Preferred Stock, par
value $0.01 per share, of the Corporation.
1.15 ''Class I Stockholders' Agreement'' means the Class I Preferred
Stockholders' Agreement, dated as of the date of the Effective Time, among the
Corporation, ALPA, the IAM and the holders of the Class I Preferred Stock, as
amended from time to time.
1.16 ''Class IAM Director'' has the meaning defined in Subsection 2.2.
1.17 ''Class IAM Preferred Stock'' means the Class IAM Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
1.18 ''Class M Voting Preferred Stock'' means the Class M ESOP Voting Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
1.19 ''Class P Voting Preferred Stock'' means the Class P ESOP Voting Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
1.20 ''Class Pilot MEC Director'' has the meaning defined in Subsection 2.2.
1.21 ''Class Pilot MEC Preferred Stock'' means the Class Pilot MEC Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
1.22 ''Class SAM Preferred Stock'' means the Class SAM Junior Preferred Stock,
par value $0.01 per share, of the Corporation.
110
<PAGE>
1.23 ''Class SAM Stockholders' Agreement'' means the Class SAM Stockholders'
Agreement, dated as of the date of the Effective Time, between the Corporation
and the holders of Class SAM Preferred Stock, as amended from time to time.
1.24 ''Class S Voting Preferred Stock'' means the Class S ESOP Voting Junior
Preferred Stock, par value $0.01 per share, of the Corporation.
1.25 ''Collective Bargaining Agreement'' means any agreement between the
Corporation or any of its Subsidiaries and any labor union representing the
Corporation's or any of its Subsidiaries' employees based in the United States
that relates to rates of pay, rules, working conditions or any other incident or
aspect of employment with the Corporation or any of its Subsidiaries.
1.26 ''Common Equity'' means, in the aggregate and without double-counting,
(i) the Common Stock outstanding at the time in question, (ii) the Common Stock
issuable upon conversion of the ESOP Convertible Preferred Stock and Voting
Stock outstanding at the time in question, (iii) the Common Stock which is both
(x) issuable upon exercise, conversion or exchange of Equity Securities and (y)
included in the definition of "Fully Diluted Shares" pursuant to Subsection
1.10(d) of the Recapitalization Agreement, and (iv) the Common Stock represented
by the Permitted Bankruptcy Equity outstanding at the time in question, if any;
but excluding any Equity Securities (other than Permitted Bankruptcy Equity,
Equity Securities issued pursuant to Sections 1.6 and 1.10 of the
Recapitalization Agreement and Equity Securities included in the definition of
"Fully Diluted Shares" pursuant to Subsection 1.10(d) of the Recapitalization
Agreement, as well as any other Equity Securities issued upon exercise or
conversion of any such Permitted Bankruptcy Equity or any other such Equity
Securities) issued in connection with a Non-Dilutive Issuance, including,
without limitation, any Equity Securities (a) outstanding immediately prior to
the Effective Time that were not included in the definition of ''Fully Diluted
Shares'' pursuant to Subsection 1.10(d) of the Recapitalization Agreement or (b)
issued pursuant to Subsection 3.4(b)(vii)(A) or Subsection 3.4(b)(vii)(C) (II),
(III) or (IV) (including, in each case the shares of Equity Securities
underlying such Equity Securities or issuable upon the exercise, conversion or
exchange thereof) hereof.
1.27 ''Common Stock'' means the common stock, par value $0.01 per share, of
the Corporation.
1.28 ''Common Stock Transaction'' has the meaning defined in Subsection 3.5.
1.29 ''Competitive Action Plan'' means the Corporation's business plan to
develop a low cost operation, which is intended to compete against other low
cost Air Carriers.
1.30 ''Corporation'' means UAL Corporation.
1.31 ''Director'' means a director of the Corporation.
1.32 ''Director Incentive Plan'' means the UAL Corporation 1992 Stock Plan for
Outside Directors.
1.33 ''Distribution Companies'' means Galileo International Partnership,
Apollo Travel Services Partnership and Galileo Japan Partnership, each a
Delaware general partnership.
1.34 ''Effective Time'' has the meaning defined in the Recapitalization
Agreement.
1.35 ''Employee Directors'' has the meaning defined in Subsection 2.2.
1.36 ''entire Board'' means all Directors of the Corporation who would be in
office if there were no vacancies.
1.37 ''Equity Securities'' means common stock of the Corporation or any debt,
equity or other security or contractual right convertible into or exercisable or
exchangeable for common stock or any warrants, options or other rights to
purchase common stock or such other Equity Securities, but in no event shall the
term ''Equity Securities'' include non-voting, non-convertible preferred stock.
111
<PAGE>
1.38 ''ESOP Convertible Preferred Stock'' means collectively, the Class 1 ESOP
Convertible Preferred Stock and the Class 2 ESOP Convertible Preferred Stock and
any other securities into which such preferred stocks are changed or
reclassified, into which they are converted or for which they are exchanged.
1.39 ''ESOPs'' means collectively, the UAL Corporation Employee Stock
Ownership Plan and the UAL Corporation Supplemental ESOP and any similar or
successor plans thereto.
1.40 ''Exchange Act'' means the Securities Exchange Act of 1934, as amended,
or any successor act thereto.
1.41 ''Existing Plans'' means collectively, the United Air Lines, Inc. Flight
Attendant Employees' Savings Plan; the United Air Lines, Inc. Management and
Salaried Employees' Personal Investment Program; the United Air Lines, Inc.
Union Ground Employees' Long Term Investment Program; the United Air Lines, Inc.
Pilots' Directed Account Retirement Income Plan; and the Employees' Stock
Purchase Plan of UAL Corporation.
1.42 ''Extraordinary Matters'' means (a) any matter that pursuant to the GCL
requires stockholder approval, (b) any Substantive Amendment to the Restated
Bylaws and (c) any Other Extraordinary Matters.
1.43 ''First Refusal Agreement'' means the First Refusal Agreement, dated as
of the date of the Effective Time, among the Corporation, ALPA, the IAM and the
Salaried/Management Employee Director, as amended from time to time.
1.44 ''GCL'' means the General Corporation Law of the State of Delaware, as
amended from time to time.
1.45 ''Gross Proceeds'' means, with respect to any sale, lease, exchange,
surrender to or at the direction of a lessor, or other disposition of assets,
whether tangible or intangible, real or personal, or the issuance of ownership
interests, by any Person (each, a ''Gross Proceeds Event''), (a) (i) with
respect to owned assets or the issuance of ownership interests, the sum of (A)
the aggregate cash consideration received by such Person in connection with such
Gross Proceeds Event, (B) the fair market value of (1) all cash consideration to
be received in the future (including future payments evidenced by a note or
other instrument) by such Person in connection with such Gross Proceeds Event
and (2) all future payments that are obligations of such Person and are assumed
by another Person in connection with such Gross Proceeds Event and (C) the fair
market value of all other non-cash consideration, and (ii) with respect to
leased assets, the fair market value of such assets (in each case with respect
to clauses (i)(B) and (i)(C) and clause (ii), such fair market value as
determined in good faith by the Corporation as of the date of such Gross
Proceeds Event), minus (b) the sum, without duplication, of:
(i) any taxes (including, but not limited to, any alternative minimum taxes
and other similar taxes) that are paid, actually payable or would be payable
(absent the availability of any net operating loss carryover, tax credit or
other tax benefit that reduces the amount paid or payable) to any Federal,
state, local or foreign taxing authority and that are directly or indirectly
attributable to such Gross Proceeds Event; and
(ii) the amount of fees and commissions (including, without limitation,
reasonable investment banking fees), legal, title and recording tax expenses
and other similar costs and expenses directly incident to such Gross Proceeds
Event that are paid or payable by such Person, other than fees and commissions
(including, without limitation, management consulting and financial services
fees) paid or payable to Affiliates of such Person (or officers or employees
of such Person or any Affiliate of such Person).
1.46 ''IAM'' means the International Association of Machinists and Aerospace
Workers.
1.47 ''Investment'' means all (A) investments in any Person by stock purchase,
capital contribution, loan, advance, guarantee of obligations of (other than any
guarantee of an obligation of the Corporation or any of its Subsidiaries) or
creation or assumption by the Corporation or any of its Subsidiaries of any
other liability in respect of any indebtedness (other than indebtedness of the
Corporation or any of its Subsidiaries) of such Person and (B) investments in
any other property, other than:
112
<PAGE>
(i) an investment in the ordinary course of business in the Corporation,
any of its Subsidiaries or the Distribution Companies, so long as such
investment is in the Airline Business;
(ii) investments in the ordinary course of business in direct obligations
of the United States of America, or obligations of any instrumentality or
agency thereof, or obligations the payment of which is unconditionally
guaranteed by the United States of America or any instrumentality or agency
thereof;
(iii) investments in the ordinary course of business in obligations of any
state or municipal government or obligations of any instrumentality or agency
thereof;
(iv) investments in the ordinary course of business in readily marketable
commercial paper;
(v) investments in the ordinary course of business in short-term deposit
accounts in, or negotiable certificates of deposit or negotiable bankers
acceptances issued by, any bank or trust company organized under the laws of
the United States or a state thereof or Canada, Western Europe or Japan;
(vi) investments in negotiable instruments for collection in the ordinary
course of business;
(vii) investments in tangible assets to be used in the ordinary course of
business of the Corporation or any of its Subsidiaries;
(viii) investments in the ordinary course of business in stocks of
investment companies registered under the Investment Company Act of 1940, as
amended, which are no-load money market funds and which invest primarily in
obligations of the type described in clause (ii), (iii) or (iv) above and
which are classified as current assets in accordance with generally accepted
accounting principles;
(ix) investments in Persons resulting from non-payment by such Persons of
receivables of the Corporation or any of its Subsidiaries arising in the
ordinary course of business;
(x) investments in connection with the settlement of claims of the
Corporation or any of its Subsidiaries in financially-distressed companies or
in connection with bankruptcy proceedings;
(xi) investments in airline clearing houses, other similar industry
organizations or other Air Carriers arising out of receivables payable to the
Corporation or any of its Subsidiaries relating to airline tickets and similar
liabilities and arising in the ordinary course of business of the Corporation
or its Subsidiaries;
(xii) advances to employees of the Corporation or its Subsidiaries made in
the ordinary course of business;
(xiii) investments in Persons pursuant to obligations of the Corporation or
any of its Subsidiaries, including contingent obligations, in effect on the
Effective Time;
(xiv) other investments made in the ordinary course of the Corporation's
and its Subsidiaries' business in connection with the Corporation's and its
Subsidiaries' cash management program or fiscal management policies and
practices (including, without limitation, interest rate, currency and
commodity risk management and similar activities);
(xv) investments in the ordinary course of business of the Corporation or
its Subsidiaries in ARINC, SITA, Air Cargo, Inc., Scheduled Airline Traffic
Offices, Inc., organizations used to provide aircraft fuel services or other
similar industry organizations;
(xvi) the purchase or other acquisition by the Corporation or any of its
Subsidiaries from Persons other than the Corporation or any of its
Subsidiaries of evidences of indebtedness or other obligations or securities
issued by the Corporation or any of its Subsidiaries;
113
<PAGE>
(xvii) investments in Persons through customary indemnity obligations
contained in contracts of the Corporation or its Subsidiaries; and
(xviii) loans or advances to the Corporation by any of its Subsidiaries.
1.48 ''Labor Affiliate'' means (a) any Person that has been formed by or is an
Affiliate of one or more labor groups representing employees of the Corporation
or any of its Subsidiaries or (b) any Person determined by the Board to be a
Person in which a substantial group of employees of the Corporation or any of
its Subsidiaries, acting as an organized group, owns a majority ownership
interest.
1.49 ''Management Public Directors'' has the meaning defined in Subsection
2.3.
1.50 ''Market Capitalization'' means the aggregate market value of a Public
Company's voting stock held by Persons that are not Affiliates of such Public
Company as set forth in the most recent Form 10-K or any successor form of such
Public Company preceding the date of determination.
1.51 ''Measuring Period'' means the 365-day period commencing on the Effective
Time.
1.52 ''Non-Dilutive Issuance'' has the meaning defined in Subsection
3.4(b)(vii).
1.53 ''Other Board Committee'' has the meaning defined in Subsection 4.1.10.
1.54 ''Other Extraordinary Matters'' has the meaning defined in Subsection
3.4(b).
1.55 ''Outside Public Directors'' has the meaning defined in Subsection 2.3.
1.56 ''Permitted Bankruptcy Equity'' has the meaning defined in Subsection
3.4(b)(vii)(B).
1.57 ''Person'' means an individual, corporation, association, partnership,
joint venture, limited liability company, trust, estate, unincorporated
organization, governmental authority, judicial entity or other entity.
1.58 ''Post-Termination Meeting'' has the meaning defined in Subsection
2.13(b).
1.59 ''Public Company'' means a Person with a class of securities registered
pursuant to Section 12 of the Exchange Act.
1.60 ''Public Directors'' has the meaning defined in Subsection 2.3.
1.61 ''Recapitalization Agreement'' means the Recapitalization Agreement,
dated as of March 25, 1994, among the Corporation, ALPA and the IAM, as amended
from time to time.
1.62 ''Restated Bylaws'' means the Amended and Restated Bylaws of the
Corporation, as amended from time to time.
1.63 ''Restated Certificate'' means the Restated Certificate of Incorporation
of the Corporation, as amended from time to time.
1.64 ''Rights Agreement'' means the Rights Agreement, dated as of December 11,
1986, between the Corporation and First Chicago Trust Company of New York
(formerly Morgan Shareholder Services Trust Company), as amended from time to
time.
114
<PAGE>
1.65 ''Salaried and Management Employee Investment'' means the concessions
and other investments of employees who perform the functions currently performed
by the salaried and management employees of the Corporation or United Air Lines,
Inc. (including any functions which such group of employees begins performing in
the future) as set forth in Schedule 5.8(iii) to the Recapitalization Agreement,
which shall be provided for the term identified in such Schedule 5.8(iii).
1.66 ''Salaried/Management Employee Director'' has the meaning defined in
Subsection 2.2.
1.67 ''Significant Labor-Related Business Transaction'' means any purchase,
sale, transfer or other disposition of assets, or the issuance of capital stock,
by any Person, or any merger or consolidation with any Person, in a single
transaction or series of related transactions, in which the Gross Proceeds to be
received by any Person or Persons in connection with such purchase, sale,
transfer, disposition, issuance, merger or consolidation exceeds $1,000,000.
1.68 ''Solvency Determination'' has the meaning defined in Subsection
3.4(b)(vii)(B).
1.69 ''Stockholders'' means the stockholders of the Corporation.
1.70 ''Subsidiary'' means, with respect to any Person (herein referred to as
the ''parent''), any corporation, partnership, association or other business
entity which such parent, directly or indirectly, controls, including, without
limitation, any such Person of which securities or other ownership interests
representing 50% or more of the equity, or 50% or more of the ordinary voting
power or voting power representing the right to elect 50% or more of the Board
of Directors or similar governing body, or 50% or more of the general
partnership interests, are, at the time any determination is being made, owned,
controlled or held by such parent; provided, however, that the term
''Subsidiary'' shall not include a Distribution Company where the Corporation
does not, directly or indirectly, control the particular actions or activities
under consideration (including the power, under the relevant organizational
documents of such Distribution Company, to block such actions or activities)
with respect to such Distribution Company.
1.71 ''Substantive Amendment'' means the adoption of any material amendment
to, the deletion or repeal of, or the adoption of any provision materially
inconsistent with, any of the following sections of the Restated Bylaws: 2.2(a),
2.6(a), 2.6(c), 3.1, 3.2, 3.3, 3.6, 3.7, 3.8, 3.9(a), 3.10, 3.12(a), 3.14(a),
4.1(a), 4.2, 4.3, 4.5(a), 4.7(a), 4.8(a), 5.1, 5.2(a), 5.3(a), 5.4(a), 5.6(a)
and 8.1.
1.72 ''Termination Date'' means, except as otherwise provided in this Restated
Certificate, the date on which the Common Equity held in the ESOPs, the Existing
Plans or in any other employee trusts or pension, retirement or other employee
benefit plans sponsored by the Corporation or any of its Subsidiaries for the
benefit of its employees as of the close of business on such date, plus the
number of Available Unissued ESOP Shares represent, in the aggregate, less than
20% of (a) the Common Equity of the Corporation plus (b) the number of Available
Unissued ESOP Shares.
1.73 ''Union Directors'' has the meaning defined in Subsection 2.2.
1.74 ''United Air Lines, Inc.'' means United Air Lines, Inc., a Delaware
corporation, or any successor to all or substantially all of the assets thereof.
1.75 ''Voting Stock'' means collectively, the Common Stock, Class IAM
Preferred Stock, Class M Voting Preferred Stock, Class Pilot MEC Preferred
Stock, Class P Voting Preferred Stock, Class SAM Preferred Stock and Class S
Voting Preferred Stock.
Section 2. Directors.
2.1 General Powers. Except as otherwise provided in this Restated
Certificate, the business and affairs of the Corporation shall be managed by or
under the direction of the Board. The Board may adopt such rules and
115
<PAGE>
regulations, not inconsistent with this Restated Certificate, the Restated
Bylaws or applicable law, as it may deem proper for the conduct of its meetings
and the management of the Corporation. In addition to the powers conferred
expressly by this Restated Certificate and the Restated Bylaws, the Board may
exercise all powers and perform all acts that are not required, by this Restated
Certificate, the Restated Bylaws or applicable law, to be exercised or performed
by the Stockholders.
2.2 Number and Composition. Subject to Article FOURTH, Parts I.A and I.B of
this Restated Certificate and Subsection 2.13 of this Article FIFTH, the Board
shall consist of twelve members and shall be comprised as follows: five
Directors shall be designated Public Directors who shall be elected, subject to
Subsection 2.3, by the holders of the Common Stock in accordance with Article
FOURTH, Part XI of this Restated Certificate, voting separately as a class; four
Directors shall be designated Independent Directors who shall be elected,
subject to Subsection 2.4, by the holders of the Class I Preferred Stock in
accordance with Article FOURTH, Part X of this Restated Certificate, voting
separately as a class; and three Directors shall be designated Employee
Directors, of whom one shall be elected by the holders of the Class IAM
Preferred Stock, voting separately as a class, in accordance with Article
FOURTH, Part VIII of this Restated Certificate (the ''Class IAM Director''), one
shall be elected by the holders of the Class Pilot MEC Preferred Stock, voting
separately as a class, in accordance with Article FOURTH, Part VII of this
Restated Certificate (the ''Class Pilot MEC Director,''0 and together with the
Class IAM Director, the ''Union Directors'') and one shall be elected by the
holders of the Class SAM Preferred Stock, voting separately as a class, in
accordance with Article FOURTH, Part IX of this Restated Certificate (the
''Salaried/Management Employee Director''). The Union Directors and the
Salaried/Management Employee Director are referred to in this Restated
Certificate collectively as the ''Employee Directors.''
2.3 Qualifications of Public Directors. Until the Termination Date, of the
five Public Directors, (a) three shall be individuals who are not and have never
been an officer or employee of, or a provider of professional services to, the
Corporation or any of its Subsidiaries (collectively, the ''Outside Public
Directors'') and (b) two shall be, at the time of their election, substantially
full-time employees of the Corporation or one of its Subsidiaries, one of whom,
in addition, to the fullest extent such additional qualification is permitted by
law, shall be, at the time of such election, the Chief Executive Officer, and
the second of whom, in addition, to the fullest extent such additional
qualification is permitted by law, shall be a senior executive officer of the
Corporation satisfactory to the Chief Executive Officer (collectively, the
''Management Public Directors''). The Outside Public Directors and the
Management Public Directors are referred to in this Restated Certificate
collectively as the ''Public Directors.''
2.4 Qualifications of Independent Directors. Until the Termination Date, no
Independent Director shall either (a) without the consent of both Union
Directors and all of the Public Directors, have a current affiliation (other
than an affiliation that may result from being a member of the Board) or
business relationship with the Corporation or any of its Subsidiaries
(collectively, an ''affiliation'') which is required to be disclosed or have had
a prior such affiliation (other than an affiliation that may result from having
been an Independent Director) which, had such Independent Director been a
Director of the Corporation at the time of such prior affiliation, would have
been required to be disclosed, pursuant to Item 7 of Schedule 14A promulgated
under the Exchange Act (or any successor provision thereto) or (b) be an
officer, director, trustee or official of any labor organization that serves as
a collective bargaining ''representative'' under the Railway Labor Act, 45
U.S.C. (S)(S) 151 et seq., or the National Labor Relations Act, 29 U.S.C. (S)(S)
141 et seq. or any similar laws as may from time to time be in effect. In
addition to the foregoing, until the Termination Date, at the time of the
election or appointment of an Independent Director to the Board, at least two of
the Independent Directors (or at least one of the Independent Directors if only
one Independent Director vacancy is being filled and none of the incumbent
Independent Directors meet the criteria specified in clause (i) or (ii) below),
after giving effect to the election or appointment of the Independent Directors
being elected or appointed, shall be, or have been at the time of their initial
election or appointment as Independent Directors, either (i) a senior executive
officer of a company (other than the Corporation) with revenues during such
company's prior fiscal year in excess of $1 billion as set forth in such
company's most recent annual financial statements or (ii) a member of the board
of directors of at least one other Public Company with a Market Capitalization
in excess of $1 billion as of the date of such Public Company's most recent
annual financial statements.
116
<PAGE>
2.5 Nomination of Board's Nominees for Public Directors. Until the
Termination Date, the Board's nominees for the Outside Public Directors shall be
nominated by the Outside Public Director Nomination Committee in accordance with
Subsection 4.1.8. Until the Termination Date, the Board's nominees for the
Management Public Directors shall be nominated by action of the Board by the
affirmative vote of at least a majority of the votes entitled to be cast by the
entire Board. For purposes of this Subsection 2.5 and Subsection 4.1.8,
''nominate'' means to designate those persons who are recommended by the Board
for election as Public Directors in the proxy materials distributed by the
Corporation to the holders of its Voting Stock and to take such other action as
required to place their name in nomination for election at the meeting of
Stockholders called in accordance with such proxy material.
2.6 Term of Office. Subject to Subsection 2.13(b), and except as otherwise
provided in this Restated Certificate, each Director shall hold office until the
next annual meeting of Stockholders and until his or her successor is elected
and qualified, subject to such Director's earlier death, resignation or removal;
provided, however, that, until the Termination Date, the term of an Outside
Public Director or an Independent Director shall automatically terminate if
during such term the status of such Director shall change such that the
qualification requirements set forth in Subsection 2.3(a) or the first sentence
of Subsection 2.4, as applicable, are no longer satisfied.
2.7 Resignation of Directors. Any Director may resign at any time upon
written notice to the Corporation.
2.8 Removal of Directors. (a) Any Director may be removed without cause at
any time only by the affirmative vote of the holders of a majority in voting
power of the shares of the class or classes or series of stock that are entitled
to vote for the election of such Director, voting separately as a class or
series.
(b) Any Director or the entire Board may be removed for cause as provided
under the GCL.
2.9 Vacancies on the Board. Vacancies on the Board may only be filled as
follows:
2.9.1 Vacancies of Public Directors. Until the Termination Date, in the
event of a vacancy of an Outside Public Director, such vacancy may be filled
only by the Outside Public Director Nomination Committee in accordance with
Subsection 4.1.8. Until the Termination Date, in the event of a vacancy of a
Management Public Director, such vacancy may be filled only by action of the
Board by the affirmative vote of at least a majority of the votes entitled to be
cast by the entire Board with an individual who would be eligible to be
nominated for election to such position in accordance with Subsections 2.3 and
2.5.
2.9.2 Vacancies of Independent Directors. Until the Termination Date, in the
event of a vacancy of an Independent Director, such vacancy may be filled only
by the Independent Director Nomination Committee in accordance with Subsection
4.1.6.
2.9.3 Vacancies of Employee Directors. In the event of a vacancy of an
Employee Director, such vacancy may be filled only by a vote of the class or
series of stock that elected such Director.
2.9.4 Board Action During Vacancies. Until the Termination Date, in the
event of a vacancy on the Board of an Employee Director or Public Director, or
in the event of a vacancy of an Independent Director who immediately prior to
the occurrence of such vacancy was a member of a Board Committee of which only
one Independent Director was a member, then, subject to the fiduciary duties of
the remaining Directors or members of such Board Committee, as the case may be,
then in office, neither the Board nor such Board Committee may take any action
(other than to fill such vacancy of such Public Director), until after the
earlier of (a) 20 days following the occurrence of such vacancy and (b) the time
that such vacancy is filled in accordance with the provisions of this Restated
Certificate.
2.10 Quorum Requirements of Board Meetings. Until the Termination Date, at
all meetings of the Board, other than meetings of Board Committees, a quorum
shall exist only if (a) Directors having at least a majority of the votes
entitled to be cast by the entire Board are present at the meeting and (b)
unless otherwise consented to by each
117
<PAGE>
of the Union Directors, if less than all of the Public Directors, Independent
Directors and Employee Directors are present, or if Directors other than the
Public Directors, Independent Directors and Employee Directors are present, the
number of votes constituting a majority of the votes present is no greater than
the sum of (i) two plus (ii) the aggregate number of votes entitled to be cast
by the Independent Directors present at such meeting.
2.11 Voting by Directors. Subject to any greater or additional vote of the
Board or of any class of Directors required by law or by this Restated
Certificate, including, without limitation, Section 3, an act of the Board shall
require the affirmative vote of at least a majority of the votes entitled to be
cast by the Directors present at a meeting of the Board at which a quorum is
present. Each Director shall have one vote; provided, however, that, until the
Termination Date, at any time there is a vacancy of one or more Independent
Directors, then with respect to any action of the Board (but not including any
action of a Board Committee), each Independent Director shall have the number of
votes equal to a fraction, (a) the numerator of which equals four and (b) the
denominator of which equals four minus the number of vacancies then existing
among the Independent Directors.
2.12 Quorum Requirements of Stockholder Meetings. Until the Termination
Date, except as otherwise required by law or by this Restated Certificate, the
presence in person or by proxy of the holders of outstanding shares representing
at least a majority of the total voting power of all outstanding shares entitled
to vote at a meeting of Stockholders shall constitute a quorum at a meeting of
Stockholders; provided, however, that where a separate vote of a class or
classes or series of stock is required, the presence in person or by proxy of
the holders of outstanding shares representing at least a majority of the total
voting power of all outstanding shares of such class or classes or series shall
constitute a quorum thereof entitled to take action with respect to such
separate vote.
2.13 Events Upon the Occurrence of the Termination Date.
(a) Upon the occurrence of the Termination Date, the Board shall take all
necessary and appropriate actions to cause to be filed and become effective a
restated certificate of incorporation of the Corporation under Section 245 of
the GCL, or any successor provision then in effect, deleting all provisions in
this Restated Certificate that, by their terms, are no longer in effect and
operative as a result of the occurrence of the Termination Date and
integrating into a single document all other amendments to this Restated
Certificate that have been adopted between the date hereof and the Termination
Date.
(b) Upon the occurrence of the Termination Date, the Outside Public
Director Nomination Committee shall, on behalf of the Board, subject to
Subsection 2.13(c), nominate the individuals to be the Board's nominees for
election as Directors (other than the Employee Directors) to be recommended
for election by the Stockholders entitled to vote thereon at a meeting of
Stockholders to be held promptly following the Termination Date (the ''Post-
Termination Meeting''), and the officers of the Corporation shall take all
necessary and appropriate actions to promptly call and hold the Post-
Termination Meeting. Upon the effectiveness of the election of the Directors
elected at such Post-Termination Meeting, the term of office of each Director
in office immediately prior thereto (except any such Director re-elected in
such election or as to whom no successor is elected in such election) shall
terminate.
(c) Notwithstanding any other provision in this Restated Certificate, but
subject to Article FOURTH, Parts I.A and I.B, following the Termination Date
the Board shall consist of twelve members and shall be comprised as follows:
nine Directors shall be elected by the holders of the outstanding Common Stock
and of any other class or series of stock entitled to vote thereon together
with the Common Stock, voting together as a single class; one Director shall
be elected by the holders of the outstanding Class IAM Preferred Stock, voting
separately as a class; one Director shall be elected by the holders of the
outstanding Class Pilot MEC Preferred Stock, voting separately as a class; and
one Director shall be elected by the holders of the outstanding Class SAM
Preferred Stock, voting separately as a class. After the Termination Date, and
until the IAM Termination Date (as defined in Article FOURTH, Part VIII of
this Restated Certificate) in the case of the Director elected by the holders
of the outstanding Class IAM Preferred Stock or the ALPA Termination Date (as
defined in Article FOURTH, Part VII of this Restated Certificate) in the case
of the Director elected by the holders of the outstanding Class Pilot MEC
Preferred Stock, the Director elected by the holders of the outstanding Class
IAM Preferred Stock and the Director elected by the holders of the outstanding
Class Pilot MEC Preferred Stock
118
<PAGE>
shall each be deemed a ''Union Director,'' and collectively shall be deemed
''Union Directors,'' for purposes of this Restated Certificate. After the
Termination Date, and until the IAM Termination Date in the case of the
Director elected by the holders of the outstanding Class IAM Preferred Stock,
until the ALPA Termination Date in the case of the Director elected by the
holders of the outstanding Class Pilot MEC Preferred Stock, and until the
earlier of the IAM Termination Date and the ALPA Termination Date in the case
of the Director elected by the holders of the outstanding Class SAM Preferred
Stock, the Director elected by the holders of the outstanding Class IAM
Preferred Stock, the Director elected by the holders of the outstanding Class
Pilot MEC Preferred Stock and the Director elected by the holders of the
outstanding Class SAM Preferred Stock shall each be deemed an ''Employee
Director,'' and collectively shall be deemed ''Employee Directors,'' for
purposes of this Restated Certificate.
Section 3. Special Voting Provisions.
3.1 Matters Requiring Stockholder Vote under the GCL.
3.1.1 Amendment to the Restated Certificate. Until the Termination Date,
subject to Subsection 3.8, notwithstanding that a lesser or no vote may be
required by law of either the Board or the Stockholders, and in addition to any
other vote of the Board or the Stockholders required by law or this Restated
Certificate, any amendment to the Restated Certificate (excluding a restatement
of the Restated Certificate effected solely pursuant to Section 245 of the GCL
(which merely restates and integrates but does not further amend this Restated
Certificate) and any action taken by the Board in accordance with this Restated
Certificate pursuant to Section 151(g) of the GCL not inconsistent with this
Restated Certificate) must be approved by one of the following:
(a) (i) the affirmative vote of at least a majority of the votes entitled
to be cast by the Directors present at a meeting of the Board at which a
quorum is present, which vote must include the affirmative vote of at least
six of the votes entitled to be cast by the Directors present at the Board
meeting other than the Employee Directors, plus (ii) the affirmative vote of
at least 75% in voting power of the Voting Stock present in person or
represented by proxy at a meeting of Stockholders at which a quorum is
present;
(b) (i) the affirmative vote of at least 75% in voting power of the Voting
Stock present in person or represented by proxy at a meeting of Stockholders
at which a quorum is present, plus (ii) the affirmative vote of at least a
majority in voting power of the outstanding capital stock of the Corporation
entitled to vote thereon not held by the trustees, in their capacity as such,
under the ESOPs, voting separately as a class;
(c) the affirmative vote of at least 75% of the votes entitled to be cast
by the entire Board, which vote must include (i) the affirmative vote of at
least one Union Director and (ii) the affirmative vote of at least a majority
of the votes entitled to be cast by the Directors present at a meeting of the
Board at which a quorum is present, which vote must include the affirmative
vote of at least six of the votes entitled to be cast by the Directors present
at the Board meeting other than the Employee Directors; or
(d) (i) the affirmative vote of at least 75% of the votes entitled to be
cast by the entire Board, which vote must include the affirmative vote of at
least one Union Director, plus (ii) the affirmative vote of at least a
majority in voting power of the outstanding capital stock of the Corporation
entitled to vote thereon not held by the trustees, in their capacity as such,
under the ESOPs, voting separately as a class.
3.1.2 Merger or Consolidation. Until the Termination Date, subject to
Subsection 3.8, notwithstanding that a lesser or no vote may be required by law
of either the Board or the Stockholders, and in addition to any other vote of
the Board or the Stockholders required by law or this Restated Certificate, but
subject in each case to the provisions of Section 253 of the GCL, any merger or
consolidation of the Corporation or any of its Subsidiaries must be approved,
(a) if the merger or consolidation is with or into a Labor Affiliate, by
one of the following:
119
<PAGE>
(i) (A) the affirmative vote of at least a majority of the votes
entitled to be cast by the Directors present at a meeting of the Board at
which a quorum is present, which vote must include the affirmative vote of
at least six of the votes entitled to be cast by the Directors present at
the Board meeting other than the Employee Directors, plus (B) the
affirmative vote of at least 75% in voting power of the Voting Stock
present in person or represented by proxy at a meeting of Stockholders at
which a quorum is present;
(ii) (A) the affirmative vote of at least 75% in voting power of the
Voting Stock present in person or represented by proxy at a meeting of
Stockholders at which a quorum is present, plus (B) the affirmative vote of
at least a majority in voting power of the outstanding capital stock of the
Corporation entitled to vote thereon not held by the trustees, in their
capacity as such, under the ESOPs, voting separately as a class;
(iii) the affirmative vote of at least 75% of the votes entitled to be
cast by the entire Board, which vote must include (A) the affirmative vote
of at least one Union Director and (B) the affirmative vote of at least a
majority of the votes entitled to be cast by the Directors present at a
meeting of the Board at which a quorum is present, which vote must include
the affirmative vote of at least six of the votes entitled to be cast by
the Directors present at the Board meeting other than the Employee
Directors; or
(iv) (A) the affirmative vote of at least 75% of the votes entitled to
be cast by the entire Board, which vote must include the affirmative vote
of at least one Union Director, plus (B) the affirmative vote of at least a
majority in voting power of the outstanding capital stock of the
Corporation entitled to vote thereon not held by the trustees, in their
capacity as such, under the ESOPs, voting separately as a class; or
(b) if the merger or consolidation is not with or into a Labor Affiliate,
by either:
(i) the affirmative vote of at least 75% in voting power of the Voting
Stock present in person or represented by proxy at a meeting of
Stockholders at which a quorum is present; or
(ii) the affirmative vote of at least 75% of the votes entitled to be
cast by the entire Board, which vote must include the affirmative vote of
at least one Union Director.
3.1.3 Sale, Lease or Exchange of All or Substantially All Assets. Until the
Termination Date, subject to Subsection 3.8, notwithstanding that a lesser or no
vote may be required by law of either the Board or the Stockholders, and in
addition to any other vote of the Board or the Stockholders required by law or
this Restated Certificate, the sale, lease or exchange of all or substantially
all of the property and assets of the Corporation or of United Air Lines, Inc.,
including its goodwill and its corporate franchises (treating as a sale, lease
or exchange of assets for purposes of Subsection 3.1.3(a) below, the issuance of
ownership interests by any Subsidiary of the Corporation to a Person other than
the Corporation or a wholly-owned Subsidiary of the Corporation if such issuance
would diminish the percentage ownership held by the Corporation or any of its
Subsidiaries), must be approved,
(a) if such sale, lease or exchange is to or with a Labor Affiliate, by one
of the following:
(i) (A) the affirmative vote of at least a majority of the votes
entitled to be cast by the Directors present at a meeting of the Board at
which a quorum is present, which vote must include the affirmative vote of
at least six of the votes entitled to be cast by the Directors present at
the Board meeting other than the Employee Directors, plus (B) the
affirmative vote of at least 75% in voting power of the Voting Stock
present in person or represented by proxy at a meeting of Stockholders at
which a quorum is present;
(ii) (A) the affirmative vote of at least 75% in voting power of the
Voting Stock present in person or represented by proxy at a meeting of
Stockholders at which a quorum is present, plus (B) the affirmative vote of
at least a majority in voting power of the outstanding capital stock of the
Corporation entitled to vote thereon not held by the trustees, in their
capacity as such, under the ESOPs, voting separately as a class;
120
<PAGE>
(iii) the affirmative vote of at least 75% of the votes entitled to be
cast by the entire Board, which vote must include (A) the affirmative vote
of at least one Union Director and (B) the affirmative vote of at least a
majority of the votes entitled to be cast by the Directors present at a
meeting of the Board at which a quorum is present, which vote must include
the affirmative vote of at least six of the votes entitled to be cast by
the Directors present at the Board meeting other than the Employee
Directors; or
(iv) (A) the affirmative vote of at least 75% of the votes entitled to
be cast by the entire Board, which vote must include the affirmative vote
of at least one Union Director, plus (B) the affirmative vote of at least a
majority in voting power of the outstanding capital stock of the
Corporation entitled to vote thereon not held by the trustees, in their
capacity as such, under the ESOPs, voting separately as a class; or
(b) if such sale, lease or exchange is not to or with a Labor Affiliate, by
either:
(i) the affirmative vote of at least 75% in voting power of the Voting
Stock present in person or represented by proxy at a meeting of
Stockholders at which a quorum is present; or
(ii) the affirmative vote of at least 75% of the votes entitled to be
cast by the entire Board, which vote must include the affirmative vote of
at least one Union Director.
3.1.4 Dissolution. Until the Termination Date, subject to Subsection 3.8,
notwithstanding that a lesser or no vote may be required by law of either the
Board or the Stockholders, and in addition to any other vote of the Board or the
Stockholders required by law or this Restated Certificate, but subject to the
provisions of Section 275(c) of the GCL, the dissolution of the Corporation must
be approved by either:
(a) the affirmative vote of at least 75% in voting power of the Voting
Stock present in person or represented by proxy at a meeting of Stockholders
at which a quorum is present; or
(b) the affirmative vote of at least 75% of the votes entitled to be cast
by the entire Board, which vote must include the affirmative vote of at least
one Union Director.
3.2 Substantive Amendment to the Restated Bylaws. Subject to the provisions
of this Subsection 3.2 and the bylaws of the Corporation, the Board is expressly
authorized to make, alter or repeal the bylaws of the Corporation. Until the
Termination Date, subject to Subsection 3.8, notwithstanding that a lesser or no
vote may be required by law of either the Board or the Stockholders, and in
addition to any other vote of the Board or the Stockholders required by law or
this Restated Certificate, any Substantive Amendment to the Restated Bylaws must
be approved by one of the following:
(a) (i) the affirmative vote of at least a majority of the votes entitled
to be cast by the Directors present at a meeting of the Board at which a
quorum is present, which vote must include the affirmative vote of at least
six of the votes entitled to be cast by the Directors present at the Board
meeting other than the Employee Directors, plus (ii) the affirmative vote of
at least 75% in voting power of the Voting Stock present in person or
represented by proxy at a meeting of Stockholders at which a quorum is
present;
(b) (i) the affirmative vote of at least 75% in voting power of the Voting
Stock present in person or represented by proxy at a meeting of Stockholders
at which a quorum is present, plus (ii) the affirmative vote of at least a
majority in voting power of the outstanding capital stock of the Corporation
entitled to vote thereon not held by the trustees, in their capacity as such,
under the ESOPs, voting separately as a class;
(c) the affirmative vote of at least 75% of the votes entitled to be cast
by the entire Board, which vote must include (i) the affirmative vote of at
least one Union Director and (ii) the affirmative vote of at least a majority
of the votes entitled to be cast by the Directors present at a meeting of the
Board at which a quorum is present, which vote must include the affirmative
vote of at least six of the votes entitled to be cast by the Directors present
at the Board meeting other than the Employee Directors; or
121
<PAGE>
(d) (i) the affirmative vote of at least 75% of the votes entitled to be
cast by the entire Board, which vote must include the affirmative vote of at
least one Union Director, plus (ii) the affirmative vote of at least a
majority in voting power of the outstanding capital stock of the Corporation
entitled to vote thereon not held by the trustees, in their capacity as such,
under the ESOPs, voting separately as a class.
3.3 Significant Labor-Related Business Transaction with a Labor Affiliate.
Until the Termination Date, subject to Subsection 3.8, notwithstanding that a
lesser or no vote may be required by law of either the Board or the
Stockholders, and in addition to any other vote of the Board or the Stockholders
required by law or this Restated Certificate, any Significant Labor-Related
Business Transaction (other than entering into or modifying, amending or
supplementing a Collective Bargaining Agreement) between the Corporation or any
of its Subsidiaries and a Labor Affiliate must be approved on behalf of the
Corporation by either:
(a) the affirmative vote of at least a majority of the votes entitled to be
cast by the Directors present at a meeting of the Board at which a quorum is
present, which vote must include the affirmative vote of at least six of the
votes entitled to be cast by the Directors present at the Board meeting other
than the Employee Directors; or
(b) the affirmative vote of at least a majority in voting power of the
outstanding capital stock of the Corporation entitled to vote thereon not held
by the trustees, in their capacity as such, under the ESOPs, voting separately
as a class.
3.4 Other Extraordinary Matters Requiring Special Voting.
(a) Until the Termination Date, subject to Subsection 3.8, notwithstanding
that a lesser or no vote may be required by law of either the Board or the
Stockholders, and in addition to any other vote of the Board or the
Stockholders required by law or this Restated Certificate, any Other
Extraordinary Matters must be approved by either:
(i) the affirmative vote of at least 75% of the votes entitled to be
cast by the entire Board, which vote must include the affirmative vote of
at least one Union Director; or
(ii) the affirmative vote of at least 75% in voting power of the Voting
Stock present in person or represented by proxy at a meeting of
Stockholders at which a quorum is present.
(b) For purposes of this Restated Certificate, the term ''Other
Extraordinary Matters'' means any of the following:
(i) The entry by the Corporation or any of its Subsidiaries into any
line of business outside the Airline Business;
(ii) The making by the Corporation or any of its Subsidiaries of any
Investment outside the Airline Business if immediately after giving effect
to such proposed Investment the aggregate Investments made by the
Corporation and its Subsidiaries outside the Airline Business would exceed
five percent of the total assets of the Corporation and its Subsidiaries on
a consolidated basis as set forth in the most recent audited financial
statements of the Corporation; provided, that an Investment shall be
excluded from such calculation if the Board determines, pursuant to the
affirmative vote set forth in Subsection 3.4(a)(i), or if the Stockholders
determine, pursuant to the affirmative vote set forth in Subsection
3.4(a)(ii), not to include such Investment for purposes of the test set
forth in this Subsection 3.4(b)(ii);
(iii) The acquisition, directly or indirectly, by the Corporation or any
of its Subsidiaries of all or substantially all of the assets or a majority
of the voting stock or other ownership interests of any Person, whether or
not organized in the United States, engaged, either directly or indirectly,
in the business of
122
<PAGE>
transporting persons, property or mail, separately or in combination, for
hire as a common or private air carrier;
(iv) The making by the Corporation or any of its Subsidiaries of any
Investment in any Person, whether or not organized in the United States,
engaged, either directly or indirectly, in the business of transporting
persons, property or mail, separately or in combination, for hire as a
common or private air carrier, other than such Investments made by the
Corporation and its Subsidiaries in the ordinary course of business
(''Ordinary Course Air Carrier Investments''); provided, that the aggregate
of all Ordinary Course Air Carrier Investments outstanding at any time
shall not exceed one-half of one percent of the total assets of the
Corporation and its Subsidiaries on a consolidated basis as set forth in
the most recent audited financial statements of the Corporation; and
provided, further, that an Ordinary Course Air Carrier Investment shall be
excluded from such calculation if the Board determines, pursuant to the
affirmative vote set forth in Subsection 3.4(a)(i), or if the Stockholders
determine, pursuant to the affirmative vote set forth in Subsection
3.4(a)(ii), not to include such Ordinary Course Air Carrier Investment for
purposes of the test set forth in this Subsection 3.4(b)(iv);
(v) The adoption of any material amendment or supplement to the Rights
Agreement or the taking by the Corporation of any material actions pursuant
to the Rights Agreement, including, without limitation, the redemption of
rights under the Rights Agreement;
(vi) The sale, lease, exchange, surrender to or at the direction of a
lessor, or other disposition (any of such transactions being referred to
herein as a ''Disposition'') by the Corporation or any of its Subsidiaries
of assets, tangible or intangible, real or personal (including, without
limitation, goodwill, franchises and the sale of ownership interests in, or
the issuance of ownership interests by (other than director qualifying
shares or the issuance of any other minority ownership interests to the
extent required by law), any of the Corporation's Subsidiaries to a Person
other than the Corporation or a wholly-owned Subsidiary of the Corporation
if such issuance would diminish the percentage ownership held by the
Corporation or any of its Subsidiaries, but excluding from the term
''assets'' for purposes of this Subsection (vi) fixtures, office equipment
and office, cleaning, packaging, lubricating, deicing, sanitation and
similar supplies which for accounting purposes are expensed upon
acquisition and items which but for the application of clauses (ii) through
(vi), (viii) through (xi), (xiv) and (xvi) of Section 1.47 would constitute
Investments)), for Gross Proceeds which, when added to the Gross Proceeds
from
(aa) the Disposition of other such assets during the immediately
preceding 365 day period which ended one business day prior to the date of
such Disposition resulting in Gross Proceeds in excess of $5 million and
(bb) the Disposition of other such assets during the immediately
preceding twelve calendar month period which ended not less than 45 days
nor more than 2 full calendar months prior to the date of such Disposition
resulting in Gross Proceeds of $5 million or less, collectively exceeds
$200 million; provided, however, in all cases the Gross Proceeds identified
in clause (aa) and (bb) shall not include any transactions consummated
prior to the Effective Time and the $5 million set forth in clauses (aa)
and (bb) may be increased by action of the Board on an annual basis based
on the affirmative vote of at least 75% of the votes entitled to be cast by
the entire Board, which vote must include the affirmative vote of at least
one Union Director; provided, further, however, that none of the following
transactions shall constitute an Other Extraordinary Matter for purposes of
this Subsection (vi) (or count against the $200 million Gross Proceeds
calculation above):
(A) secured aircraft financings,
(B) sale-leaseback and leveraged lease transactions, or sales or similar
transfers of receivables, for financing purposes,
123
<PAGE>
(C) foreclosure sales of assets subject to bona fide security interests,
and deeds and other dispositions of assets subject to bona fide security
interests in lieu of foreclosure,
(D) Dispositions of assets if replacement assets (consisting of assets
of the same class (i.e., airframes of similar range and payload capability,
engines and facilities similar in character to the assets disposed of, and
ground equipment, spare parts and fixtures) as the assets being disposed of
(which for these purposes shall include the Disposition of assets from a
disassembled aircraft or engine which shall be replaced by a fully
assembled aircraft of similar range and payload capability or engine of
similar character, and similar transactions)) have been ordered (pursuant
to firm commitment, bona fide orders) or acquired within the six calendar
month period prior to such Dispositions of assets (provided, further, that
if replacement assets are so ordered or acquired within 365 days following
the Disposition of assets for which no replacement assets had been
previously acquired, Gross Proceeds from such Disposition shall not
thereafter be included in the $200 million Gross Proceeds calculation above
unless such replacement assets are not actually acquired),
(E) Disposition providing Gross Proceeds in an amount up to 10% of the
book value (net of depreciation) of the Corporation's fixed assets at the
time of the most recent quarterly financial statements of the Corporation
if (x) Directors entitled to cast at least 75% of the votes entitled to be
cast by the entire Board, including all of the Independent Directors,
determine by resolution of the Board that such asset Disposition is
necessary to (I) cure a default under material financing agreements binding
upon the Corporation or any of its Subsidiaries or any of their respective
properties, or avoid a default thereunder that, absent such Disposition,
would be reasonably likely to occur within 90 days, or (II) remedy a
material adverse development in the Corporation's business or condition,
and (y) the Gross Proceeds of such asset Disposition are used to remedy the
condition referred to in clause (x) (provided, that the exception afforded
by this clause (E) shall be available not more than once in any consecutive
five-year period),
(F) Dispositions of damaged tangible assets or tangible assets that are
obsolete in the Airline Business used in the ordinary course of business of
the Corporation or any of its Subsidiaries, excluding airframes, engines
and related spare parts (other than aircraft which may no longer be legally
operated in the United States by the Corporation or United Air Lines, Inc.
and airframes, engines and related spare parts which under applicable
insurance policies have been declared to be a total loss or a constructive
total loss),
(G) without limiting clause (D), (1) leases, subleases, slides, swaps,
trades, transfers, exchanges or similar transactions involving aircraft
take-off and landing authorizations, slots or similar rights, (2) leases,
subleases, exchanges or similar transactions involving vacant land,
building space, parking areas, airport gates or similar real property and
(3) Dispositions of consumables, spare parts, ground equipment or other
similar goods, in each case (x) entered into in the ordinary course of
business, consistent with past practice, and (y) to the extent, in
connection with such Disposition, the Corporation or its Subsidiaries
receives (contemporaneously or over a reasonable time frame) benefits of
substantially the same or similar value and either class or character,
(H) without limiting clause (D), leases, subleases, swaps, trades,
exchanges or similar transactions involving aircraft takeoff and landing
authorization, slots, or similar rights which are not being utilized by the
Corporation or a Subsidiary and where such lack of utilization may subject
such authorizations, slots or rights to loss or forfeiture,
(I) without limiting clause (D), subleases or licenses, in the ordinary
course of business and consistent with past practices, of gates or other
airport facilities not being utilized by the Corporation or a Subsidiary
pursuant to agreements which are cancelable or terminable by the
Corporation on 90 days' notice or less;
124
<PAGE>
(J) Dispositions of assets (other than airframes, engines and related
spare parts) if (x) made pursuant to a discrete asset management program
that provides for the Disposition of not more than an aggregate of $25
million of assets and (y) such discrete asset management program is
approved by either the Board pursuant to the affirmative vote set forth in
Subsection 3.4(a)(i), or the Stockholders (following the recommendation of
the Board), pursuant to the affirmative vote set forth in Subsection
3.4(a)(ii); provided, that only one asset management program referred to in
this clause (J) shall be in place in any fiscal year and such program is
subject to such approval on an annual basis;
(K) Dispositions, in the ordinary course of business, of supplies or
spare parts pursuant to ground support, spare part or similar mutual
accommodation arrangements with other United States or foreign air carriers
or pursuant to the provision of maintenance, ground support or similar
support services by the Corporation or any Subsidiary,
(L) Dispositions, in the ordinary course of business consistent with
past practices, of assets which are held for resale by the Corporation or
any Subsidiary (other than airframes and engines),
(M) Dispositions, in the ordinary course of business, of flight
equipment spare parts (other than as part of a transaction or series of
related transactions involving the Disposition of airframes or engines) (x)
which are obsolete, or in excess of reasonably projected needs, with
respect to United's fleet, or (y) for which the costs of repair, or of
redistribution within the Corporation or its Subsidiaries, would exceed the
value of such assets to the Corporation or its Subsidiaries,
(N) Dispositions, in the ordinary course of business, of ground
equipment, fixtures and related spare parts (x) which are obsolete, or in
excess of reasonably projected needs, with respect to the Corporation's or
its Subsidiaries' operations or (y) for which the costs of repair, or of
redistribution within the Corporation or its Subsidiaries, would exceed the
value of such assets to the Corporation or its Subsidiaries,
(O) Dispositions of fuel in the ordinary course of business,
(P) Dispositions of aircraft, engines, propellers, and spare parts owned
or leased by Air Wisconsin, Inc. on the date of execution of the
Recapitalization Agreement,
(Q) Dispositions of assets to lessors, in the ordinary course of
business, in connection with the provision by the Corporation or any
Subsidiary of any replacement engines or spare parts pursuant to
replacement, modification or maintenance obligations under aircraft leases
(financing or otherwise), and
(R) Dispositions of assets which individually, or when aggregated with
other assets in the same or related Dispositions, are not in excess of
$25,000, either with respect to periods prior to December 31, 1994 or
pursuant to a distinct asset management program approved in the same manner
as the procedures set forth in clause (J) above; and
(vii) The issuance by the Corporation of Equity Securities (a ''Non-
Dilutive Issuance'') other than pursuant to Sections 1.6 and 1.10 of the
Recapitalization Agreement to the ESOPs; provided, that such an issuance
shall not constitute an Other Extraordinary Matter if:
(A)(I) Directors entitled to cast at least 75% of the votes entitled
to be cast by the entire Board, including all of the Independent
Directors, determine by resolution of the Board that it is in the best
interests of the Corporation to issue shares of Equity Securities, (II)
such issuance is subject to the First Refusal Agreement and (III) if
such issuance occurs during the Measuring Period (as defined in the
Recapitalization Agreement), the Board by the affirmative vote of a
majority of the votes entitled to be cast by the Directors present at a
meeting of the Board at which a quorum is present, which vote must
include the affirmative votes of both Union Directors, approves an
equitable adjustment to the number of Additional Shares (as defined in
Subsection 1.10(b) of the Recapitalization Agreement) to
125
<PAGE>
be issued pursuant to Sections 1.6 and 1.10 of the Recapitalization
Agreement. Any shares of Equity Securities issued in accordance with the
provisions of this Subsection 3.4(b)(vii)(A) shall not be deemed to be
Common Equity for purposes of this Restated Certificate;
(B) Directors entitled to cast at least 75% of the votes entitled to
be cast by the entire Board, including all of the Independent Directors,
determine by a resolution of the Board (I) that the Corporation is
Bankrupt (or, absent a material positive change in the Corporation's
results of operations over the immediately succeeding 90 days from the
results contained in the Corporation's regularly prepared projections,
that in their opinion the Corporation will become Bankrupt within 90
days), which determination is confirmed by written opinions of two
nationally recognized investment banking firms that further opine
(giving effect to the facts and circumstances applicable to the
Corporation, including discussions with prospective equity investors)
that the sale of Equity Securities is necessary to avoid or remedy such
Bankruptcy (the ''Bankruptcy Opinions''), and (II) that the issuance of
additional Equity Securities (the ''Permitted Bankruptcy Equity'') would
cause the Corporation, after giving effect to the proposed issuance, no
longer to be or not to become Bankrupt in the time frame referred to in
the Bankruptcy Opinions (the ''Solvency Determination'').
Notwithstanding the foregoing, the issuance of Permitted Bankruptcy
Equity shall constitute an Other Extraordinary Matter unless (I) such
issuance is in an amount that does not exceed the amount determined by
the Board to be reasonably necessary to obtain sufficient equity
investor participation so as to allow the Board to make the Solvency
Determination, (II) a binding commitment for the sale of such Permitted
Bankruptcy Equity is entered into within 90 days of the delivery of the
Bankruptcy Opinions and (III) the terms of the First Refusal Agreement
have been complied with in all material respects by the Corporation. Any
Permitted Bankruptcy Equity issued in accordance with this Subsection
3.4(b)(vii)(B) shall be included as outstanding Common Equity for
purposes of the definition of the Termination Date; or
(C) Such issuance is pursuant to (I) the exercise, conversion or
exchange of Equity Securities outstanding immediately prior to the
Effective Time, (II) the Corporation's 1981 Incentive Stock Program,
1988 Restricted Stock Plan and Incentive Compensation Plan, each as
amended in accordance with the Recapitalization Agreement, (III) the
Director Incentive Plan or (IV) any other equity incentive compensation
plan approved by the affirmative vote of Directors entitled to cast at
least 75% of the votes entitled to be cast by the entire Board,
including all of the Independent Directors. The shares of Equity
Securities (x) outstanding immediately prior to the Effective Time that
were not included in the definition of ''Fully Diluted Shares'' pursuant
to Subsection 1.10(d) of the Recapitalization Agreement and (y) issued
in accordance with clauses (II), (III) and (IV) of this Subsection
3.4(b)(vii)(C) (in each case including the shares of Equity Securities
underlying such Equity Securities or issuable upon the exercise,
conversion or exchange thereof), shall not be deemed to be Common Equity
for purposes of this Restated Certificate and, along with the other
Equity Securities issued in accordance with clause (I) of this
Subsection 3.4(b)(vii)(C) (and the shares of Equity Securities
underlying such Equity Securities or issuable upon the exercise,
conversion or exchange thereof), shall not be subject to the First
Refusal Agreement.
3.5 Special Voting Provisions with Respect to the Purchase and Sale of Common
Stock. Until the Termination Date, notwithstanding that a lesser or no vote
may be required by law of either the Board or the Stockholders, and in addition
to any other vote of the Board or the Stockholders required by law or this
Restated Certificate, subject, in the case of clause (b) below, to Subsection
3.9, any Common Stock Transaction must be approved by the affirmative vote of at
least a majority of the votes entitled to be cast by the entire Board, which
vote must include the affirmative vote of at least 80% of the votes entitled to
be cast by the Public Directors. For purposes of this Restated Certificate, the
term ''Common Stock Transaction'' means (a) any purchase by the Corporation of
any shares of Common Stock (other than to fulfill its obligations to issue or
retain Common Stock in connection with the exercise of employee options issued
pursuant to employee benefit plans or to retain Common Stock in connection with
tax withholding obligations in connection with the exercise of employee options
or restricted stock) or (b) any sale by the Corporation of any shares of Common
Stock to a company sponsored pension, retirement or other employee benefit plan
for the account of employees (other than pursuant to the first refusal rights
provided in the
126
<PAGE>
First Refusal Agreement or in connection with the creation and operation of the
employee stock ownership plans and programs of the Corporation under which the
ESOP Convertible Preferred Stock is issued), whether for cash or non-cash
consideration, including, without limitation, changes in the rates of pay, rules
or working conditions for employees holding beneficial ownership interests in
the ESOP Convertible Preferred Stock.
3.6 Special Provisions with Respect to the Appointment and Removal of
Officers.
3.6.1 Appointment of Successor Chief Executive Officer. Until the
Termination Date, upon the death, resignation, removal or other termination of
employment of the Chief Executive Officer and following the making of a
recommendation by the Executive Committee as to a successor Chief Executive
Officer as provided in Subsection 4.1.5, the affirmative vote of at least a
majority of the votes entitled to be cast by the entire Board shall be required
to elect a successor Chief Executive Officer; provided, however, that the Board
may elect as a successor Chief Executive Officer only a person who is
recommended for such position by the Executive Committee.
3.6.2 Appointment of Other Officers. The officers of the Corporation (other
than the Chief Executive Officer) shall be elected or appointed, annually or at
such other time or times as the Board shall determine, by the Board or by the
Chief Executive Officer pursuant to authority delegated by the Board to the
Chief Executive Officer; provided, however, with respect to the initial
appointment of the Chief Operating Officer following the Effective Time, such
person shall be elected or appointed by the Board and shall not be found to be
unacceptable by two of the three Outside Public Directors.
3.6.3 Term of Office. Each officer of the Corporation shall hold office
until such officer's successor is chosen and qualifies or until such officer's
earlier death, resignation or removal. Any such officer may resign at any time
upon written notice to the Corporation. Such resignation shall take effect on
the date of receipt of such notice or at such later date as is therein
specified, and, unless otherwise specified, the acceptance of such resignation
shall not be necessary to make it effective. The resignation of such officer
shall be without prejudice to the contract rights of the Corporation, if any.
3.6.4 Removal. Until the Termination Date, any officer elected or appointed
by the Board (including, without limitation, the Chief Executive Officer) may be
removed at any time, with or without cause, only by (a) the affirmative vote of
at least a majority of the votes entitled to be cast by the entire Board or (b)
the Chief Executive Officer pursuant to authority delegated by the Board (by the
same vote specified in clause (a) of this Subsection 3.6.4) to the Chief
Executive Officer.
3.6.5 Vacancy. Until the Termination Date, any vacancy occurring in any
office of the Corporation (other than the Chief Executive Officer) shall be
filled either by the Board or the Chief Executive Officer pursuant to authority
delegated by the Board to the Chief Executive Officer.
3.7 Certain Provisions with Respect to (a) the Class I Preferred Stock and the
Independent Directors and (b) the Class SAM Preferred Stock and the
Salaried/Management Employee Director.
(a) Notwithstanding any other provision of this Restated Certificate, (i)
the Corporation may issue Class I Preferred Stock only to an Independent
Director or the initial ''Individual Parties'' under the Class I Stockholders'
Agreement, and (ii) a holder of Class I Preferred Stock may not sell,
transfer, pledge or assign any shares of Class I Preferred Stock or any
interest therein, including, without limitation, by operation of law or
otherwise, other than to the Corporation or to another Independent Director in
accordance with the Class I Stockholders' Agreement. Any sale, transfer,
pledge or assignment of any shares of Class I Preferred Stock, whether by
operation of law or otherwise, in violation of this Subsection 3.7(a) shall be
null and void and of no force and effect. The certificates evidencing shares
of Class I Preferred Stock shall bear a legend describing the transfer
restrictions set forth in this Subsection 3.7(a).
(b) Notwithstanding any other provision of this Restated Certificate, (i)
the Corporation may issue Class SAM Preferred Stock only to a
Salaried/Management Employee Director, a ''Designated Shareholder'' under the
Class SAM Stockholders' Agreement or the initial ''Designated Nominee'' under
the Class SAM
127
<PAGE>
Stockholders' Agreement, and (ii) a holder of Class SAM Preferred Stock may
not sell, transfer, pledge or assign any shares of Class SAM Preferred Stock
or any interest therein, including, without limitation, by operation of law or
otherwise, other than to the Corporation or to another Salaried/Management
Employee Director in accordance with the Class SAM Stockholders' Agreement.
Any sale, transfer, pledge or assignment of any shares of Class SAM Preferred
Stock, whether by operation of law or otherwise, in violation of this
Subsection 3.7(b) shall be null and void and of no force and effect. The
certificates evidencing shares of Class SAM Preferred Stock shall bear a
legend describing the transfer restrictions set forth in this Subsection
3.7(b).
3.8 Section 203 of the GCL. Notwithstanding any provision of this Restated
Certificate to the contrary, if any provision of this Restated Certificate by
its terms purports to require for any vote of Stockholders required by Section
203 of the GCL (or any successor section thereto) a greater vote of Stockholders
than that specified in Section 203 of the GCL, then, to the fullest extent
required by law, the provision of Section 203 of the GCL that requires such
specific vote of the Stockholders shall govern and the provision of this
Restated Certificate that would require a greater vote of the Stockholders shall
not apply.
3.9 Employees' Purchase of Equity Securities. Until the Termination Date,
any repeal or modification of, or any amendment or supplement to, the terms of
any resolution of the Board or any of the Corporation's or any of its
Subsidiaries' policies, practices, procedures or employee benefit plans, which
would increase the aggregate amount of Common Equity that may be acquired or
held by the employee trusts or pension, retirement or other employee benefit
plans (including the ESOPs and the Existing Plans) sponsored by the Corporation
or any of its Subsidiaries (''Plans''), may be approved by the affirmative vote
of at least a majority of the votes entitled to be cast by the Directors present
at a meeting of the Board at which a quorum is present, provided that such vote
includes the affirmative vote of both Union Directors, but only if such approval
does not increase the maximum aggregate amount of Common Equity that may be held
by the Plans by an amount in excess of (a) the Adjusted Percentage (as defined
in Section 1.10 of the Recapitalization Agreement), minus (b) the percentage of
the Common Equity then held by the ESOPs. Until the Termination Date, any other
repeal or modification of, or amendment or supplement to, the terms of any such
resolution of the Board or any of such policies, practices, procedures or
employee benefit plans that would in any manner materially affect (other than as
provided in the preceding sentence) the right or ability of the employees of the
Corporation or any of its Subsidiaries to purchase, directly or indirectly, any
Equity Securities, must be approved by the affirmative vote of at least a
majority of the votes entitled to be cast by the Directors present at a meeting
of the Board at which a quorum is present, which vote must include the
affirmative vote of both Union Directors and all of the Outside Public
Directors.
3.10 Construction of Special Voting Provisions. Except as otherwise
expressly provided in this Restated Certificate, where more than one Subsection
of this Section 3 is applicable to an event, transaction or other matter, the
provisions contained in each such Subsection shall apply independently to such
event, transaction or other matter.
3.11 Participation of Flight Attendants. Notwithstanding any other provision
of this Restated Certificate, until the Termination Date, the Corporation shall
not (a) amend in any way this Restated Certificate, (b) amend in any way the
Restated Bylaws, (c) issue any securities of the Corporation or any of its
Subsidiaries or (d) enter into or amend any contract, agreement, arrangement,
understanding or instrument to which the Corporation is a party, in connection
with the participation of the Association of Flight Attendants or any of its
members in any investment in the Corporation or any of its Subsidiaries, unless
the Labor Committee (as defined in Subsection 4.1.7), after complete
examination, with the assistance of outside financial and legal counsel, of such
proposed participation, shall determine (by the affirmative vote of at least a
majority of the votes entitled to be cast by the Directors present at a meeting
of such committee at which a quorum is present, which vote must include the
affirmative vote of at least one Outside Public Director) that the terms of such
participation are fair from a financial point of view to the holders of the
outstanding Common Stock of the Corporation.
Section 4. Board Committees.
4.1 Committees of the Board. Until the Termination Date (subject to
Subsection 2.13(b)), the following committees of the Board shall be constituted
and exist with the membership, functions, powers and authorizations
128
<PAGE>
set forth below: Audit Committee, CAP Committee, Compensation Committee,
Compensation Administration Committee, Executive Committee, Independent Director
Nomination Committee, Labor Committee, Outside Public Director Nomination
Committee and Transaction Committee.
4.1.1 Audit Committee. The Audit Committee shall consist of the four
Independent Directors and the three Outside Public Directors or such fewer
number of such Directors (in as nearly as practicable that same proportion of
Independent Directors and Outside Public Directors) as shall qualify for audit
committee membership under applicable rules of the securities exchanges or other
similar trading market on which the Common Stock is traded. The function of the
Audit Committee shall be (a) to review the professional services and
independence of the Corporation's independent auditors and the scope of the
annual external audit as recommended by the independent auditors, (b) to ensure
that the scope of the annual external audit is sufficiently comprehensive, (c)
to review, in consultation with the independent auditors and the internal
auditors, the plan and results of the annual external audit, the adequacy of the
Corporation's internal control systems and the results of the Corporation's
internal audits, (d) to review, with management and the independent auditors,
the Corporation's annual financial statements, financial reporting practices and
the results of each external audit and (e) to undertake reasonably related
activities to those set forth in clauses (a) through (d) of this Subsection
4.1.1. The Audit Committee shall also have the authority to consider the
qualification of the Corporation's independent auditors, to make recommendations
to the Board as to their selection and to review and resolve disputes between
such independent auditors and management relating to the preparation of the
annual financial statements.
4.1.2 CAP Committee. The CAP Committee shall consist of eight Directors,
including four Public Directors, two Independent Directors and the two Union
Directors. Of the four Public Directors, three shall be Outside Public Directors
and one shall be the Chief Executive Officer, if the Chief Executive Officer is
a Public Director. The two Independent Director members shall be appointed by
the Independent Director Nomination Committee, which appointment shall require
the affirmative vote of all of the votes entitled to be cast by the Independent
Directors. The function of the CAP Committee shall be to oversee implementation
of the Corporation's Competitive Action Plan. The CAP Committee shall have the
exclusive authority, acting for and on behalf of the Board and consistent with
the protection of the interests of the holders of the Common Stock, to approve
on behalf of the Corporation any and all modifications of or amendments to the
Competitive Action Plan; provided, however, that to the extent such
modifications or amendments relate to changes to any provision of the
Corporation's Collective Bargaining Agreements, the two Union Directors on the
CAP Committee shall not be considered members of the CAP Committee in connection
therewith and shall neither be entitled to vote nor be counted in determining
the presence of a quorum of such committee in connection therewith.
Notwithstanding the foregoing, the Labor Committee shall have the exclusive
authority on behalf of the Board to approve on behalf of the Corporation any
such modifications or amendments to such Collective Bargaining Agreements. The
CAP Committee shall have the exclusive authority, acting for and on behalf of
the Board, to approve on behalf of the Corporation any and all modifications of
or amendments to the Salaried and Management Employee Investment; provided,
however, that such modifications or amendments must be approved by the
affirmative vote of at least a majority of the votes entitled to be cast by all
the members of the CAP Committee, which vote must include the affirmative vote
of at least two Union Directors and all of the Outside Public Directors.
4.1.3 Compensation Committee. The Compensation Committee shall consist of
seven Directors, including two Independent Directors, two Public Directors and
the three Employee Directors. Of the two Public Directors, one shall be an
Outside Public Director appointed by the Outside Public Director Nomination
Committee, and one shall be the Chief Executive Officer, if the Chief Executive
Officer is a Public Director. The two Independent Director members shall be
appointed by the Independent Director Nomination Committee, which appointment
shall require the affirmative vote of all of the votes entitled to be cast by
the Independent Directors. At all meetings of the Compensation Committee, the
presence of Directors entitled to cast at least a majority of the aggregate
number of votes entitled to be cast by all Directors on such committee,
including the presence of at least one Independent Director, shall be required
to constitute a quorum for the transaction of business. The principal functions
of the Compensation Committee shall be to review and recommend to the Board the
compensation and benefit arrangements to be established for the officers of the
Corporation and to review general policy matters relating to compensation and
benefit arrangements of non-union employees of the Corporation. The Compensation
Committee shall also administer the stock option plans and executive
compensation programs of the Corporation, including
129
<PAGE>
bonus and incentive plans applicable to officers and key employees of the
Corporation. Subject to final approval by the Compensation Committee in
accordance with Section 4.1.4, the Compensation Committee may delegate to the
Compensation Administration Committee specific responsibilities with respect to
the Chief Executive Officer's compensation.
4.1.4 Compensation Administration Committee. The Compensation Administration
Committee shall consist of two Independent Directors and one Outside Public
Director, each of whom shall be (a) a ''disinterested person'' or
''disinterested administrator'' or any related successor concepts under Rule
16b-3 (or any successor provision) promulgated pursuant to Section 16 of the
Exchange Act and (b) an ''outside director'' or any related successor concepts
under Section 162(m) (or any successor provision) of the Internal Revenue Code
of 1986, as amended from time to time (the ''Code''). The Outside Public
Director shall be appointed by the Outside Public Director Nomination Committee.
The two Independent Directors shall be appointed by the Independent Director
Nomination Committee, which appointment shall require the affirmative vote of
all the votes entitled to be cast by the Independent Directors. The principal
functions of the Compensation Administration Committee shall be to administer
the stock option plans and executive compensation programs of the Corporation to
the extent such functions cannot or are not appropriate to be performed by the
Compensation Committee in light of any provision of the Code, the securities
laws, any other applicable law or any regulations promulgated under any of the
foregoing and to perform such responsibilities with respect to the Chief
Executive Officer's compensation as shall be delegated by the Compensation
Committee; provided, however, that in order for any action of the Compensation
Administration Committee to be effective, such action must also be approved by
the Compensation Committee (unless such approval could reasonably be expected to
prevent a stock option plan or executive compensation program (or a component
thereof) that is intended to qualify under Rule 16b-3 (or any successor
provision) or to qualify for an exception under such Section 162(m) (or any
successor provision) from receiving the benefits of Rule 16b-3 or qualifying for
such exception, respectively).
4.1.5 Executive Committee. The Executive Committee shall consist of six
Directors, including two Independent Directors, two Public Directors and the two
Union Directors. Of the two Public Directors, one shall be an Outside Public
Director appointed by the Outside Public Director Nomination Committee, and one
shall be the Chief Executive Officer, if the Chief Executive Officer is a Public
Director. The two Independent Director members shall be appointed by the
Independent Director Nomination Committee, which appointment shall require the
affirmative vote of all of the votes entitled to be cast by the Independent
Directors. At all meetings of the Executive Committee, the presence of Directors
entitled to cast at least a majority of the aggregate number of votes entitled
to be cast by all Directors on such committee, including the presence of at
least one Independent Director, shall be required to constitute a quorum for the
transaction of business. Subject to the provisions of the GCL, and except as
otherwise expressly provided in this Restated Certificate, the Executive
Committee shall have and may exercise all of the powers of the Board in the
management and affairs of the Corporation; provided, however, that the Executive
Committee shall not be authorized to (a) take any action with respect to any
Extraordinary Matters, (b) take any action with respect to matters specifically
vested by this Restated Certificate in either the Audit Committee, CAP
Committee, Compensation Committee, Compensation Administration Committee,
Independent Director Nomination Committee, Labor Committee, Outside Public
Director Nomination Committee or Transaction Committee or (c) take any action
which under this Restated Certificate may be taken by the Board only with a
greater or additional vote of the Board or any class of Directors than that
provided for in Subsection 2.11, including, without limitation, any action that
is subject to the requirements of Section 3. In addition to the foregoing, in
the event of the death, resignation, removal or other termination of employment
of the Chief Executive Officer, the Executive Committee shall act as a search
committee in connection with and shall recommend to the Board the appointment of
a successor Chief Executive Officer. The affirmative vote of at least four of
the votes entitled to be cast by the members of the Executive Committee
(excluding the departing Chief Executive Officer, if he or she is a member of
the Executive Committee) shall be required for the Executive Committee to
recommend to the Board a successor Chief Executive Officer; provided, however,
that if the departing Chief Executive Officer is not a member of the Executive
Committee, the affirmative vote of at least five of the votes entitled to be
cast by the members of the Executive Committee shall be required for the
Executive Committee to recommend to the Board a successor Chief Executive
Officer.
130
<PAGE>
4.1.6 Independent Director Nomination Committee. The Independent Director
Nomination Committee shall consist of seven Directors, consisting of the four
Independent Directors and the three Employee Directors. The function of the
Independent Director Nomination Committee shall be (a) to nominate, on behalf of
the Board, individuals satisfying the qualifications for Independent Directors
set forth in Subsection 2.4 to be the Board's nominees for election by the
holders of the Class I Preferred Stock to serve as Independent Directors upon
the expiration of the term of Independent Directors then in office, (b) to
appoint, on behalf of the Board, individuals satisfying such qualifications to
serve as Independent Directors upon the occurrence of a vacancy on the Board as
a result of the death, resignation, removal or disqualification of an
Independent Director during his or her term for the remainder of such term and
(c) to appoint Independent Directors to serve on certain Board Committees. The
vote of the Independent Director Nomination Committee required to approve any
such nomination or appointment shall be (i) the affirmative vote of at least a
majority of the votes entitled to be cast by the Independent Directors, plus
(ii) the affirmative vote of at least one Union Director.
4.1.7 Labor Committee. The Labor Committee shall consist of three or more
Directors, including one Outside Public Director, at least one Independent
Director and at least one other Director, as designated by the Board, but shall
not include any Employee Directors. The Labor Committee shall have the exclusive
authority on behalf of the Board to approve on behalf of the Corporation the
entering into of, or any modification or amendment to, a Collective Bargaining
Agreement to which the Corporation or any of its Subsidiaries is a party.
4.1.8 Outside Public Director Nomination Committee. The Outside Public
Director Nomination Committee shall consist of all three Outside Public
Directors. The function of the Outside Public Director Nomination Committee
shall be (a) to nominate on behalf of the Board individuals satisfying the
qualifications for Outside Public Directors set forth in Subsection 2.3 to be
the Board's nominees for election by the holders of the Common Stock to serve as
Outside Public Directors upon the expiration of the term of Outside Public
Directors, (b) to appoint on behalf of the Board individuals satisfying such
qualifications to serve as Outside Public Directors upon the occurrence of a
vacancy on the Board as a result of the death, resignation, removal or
disqualification of an Outside Public Director during his or her term for the
remainder of such term and (c) to appoint Outside Public Directors to serve on
certain Board Committees. In addition to any approval required by law or by
Subsection 3.1.1, any amendment or modification of the rights, powers,
privileges or qualifications of the Outside Public Directors or the Outside
Public Director Nomination Committee must be approved by either (a) all of the
Outside Public Directors or (b) the affirmative vote of at least a majority in
voting power of the outstanding capital stock of the Corporation entitled to
vote thereon not held by the trustees, in their capacity as such, under the
ESOPs, voting separately as a class.
4.1.9 Transaction Committee. The Transaction Committee shall consist of
seven Directors, consisting of the four Independent Directors and the three
Outside Public Directors. The function of the Transaction Committee shall be to
evaluate and advise the Board with respect to any proposed merger or
consolidation of the Corporation or any of its Subsidiaries with or into, the
sale, lease or exchange of all or substantially all of the Corporation's or any
of its Subsidiaries' property or assets to, or a Significant Labor-Related
Business Transaction (other than entering into or modifying, supplementing or
amending a Collective Bargaining Agreement, which shall be within the exclusive
authority of the Labor Committee) with, any Labor Affiliate.
4.1.10 Other Board Committees. Until the Termination Date, at any time, and
from time to time, the Board may, by resolution passed by the affirmative vote
of 80% of the votes entitled to be cast by the entire Board, which vote must
include the affirmative vote of at least one Union Director, designate one or
more other committees of the Board (an ''Other Board Committee'' and, together
with the Audit Committee, CAP Committee, Compensation Committee, Compensation
Administration Committee, Executive Committee, Independent Director Nomination
Committee, Labor Committee, Outside Public Director Nomination Committee and
Transaction Committee, collectively the ''Board Committees''). Except as
otherwise provided in this Restated Certificate, any Other Board Committee, to
the extent permitted under the GCL and provided in a resolution of the Board
passed as aforesaid, shall have and may exercise any of the powers and authority
of the Board in the management of the business and affairs of the Corporation;
provided, however, that, until the Termination Date, no Other Board Committee
shall have the power or authority of the Board with respect to (a) matters
specifically vested by this Restated Certificate in either the Audit Committee,
CAP Committee, Compensation Committee, Compensation Administration
131
<PAGE>
Committee, Executive Committee, Independent Director Nomination Committee, Labor
Committee, Outside Public Director Nomination Committee or Transaction
Committee, (b) Extraordinary Matters, (c) the appointment or removal of officers
of the Corporation or (d) any action which under this Restated Certificate may
be taken by the Board only with a greater or additional vote of the Board or any
class of Directors than that provided for in Subsection 2.11, including, without
limitation, any action that is subject to the requirements of Section 3. Other
Board Committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board. Except as otherwise provided in this
Restated Certificate, until the Termination Date each Other Board Committee
shall consist of at least three Directors, including at least one Independent
Director, at least one Union Director (unless both Union Directors consent that
a Union Director need not be a member of such Other Board Committee) and at
least one other Director as designated by the Board.
4.1.11 Union Director Membership on Board Committees. Unless otherwise
agreed upon by both Union Directors, the Union Director membership on each of
the Board Committees on which only one Union Director serves shall be rotated
biennially between the Class IAM Director and the Class Pilot MEC Director.
4.1.12 Quorum and Voting Requirements of Board Committees. Except as
otherwise provided in this Restated Certificate, at all meetings of a Board
Committee the presence of Directors entitled to cast at least a majority of the
aggregate number of votes entitled to be cast by all Directors on such committee
shall constitute a quorum for the transaction of business; provided, however,
that, until the Termination Date, at all meetings of an Other Board Committee,
if less than all of the members of such Other Board Committee are present, a
quorum shall exist only if the number of votes constituting a majority of the
votes present is no greater than the sum of (a) one, plus (b) the aggregate
number of votes entitled to be cast by the Independent Directors present at such
meeting. Each Director serving on a Board Committee shall have one vote;
provided, however, that, until the Termination Date, at any time there is a
vacancy among the Independent Directors designated as members of a Board
Committee of which two or more Independent Directors are members, then with
respect to any action of such Board Committee while such vacancy exists, each
Independent Director serving on such Board Committee shall have a number of
votes equal to a fraction, (a) the numerator of which equals the number of
Independent Directors who would be serving on such committee if there were no
vacancies and (b) the denominator of which equals (i) the number of Independent
Directors who would be serving on such committee if there were no vacancies
minus (ii) the number of vacancies in the Independent Directors designated as
members of such committee. Except as otherwise provided in this Restated
Certificate, any act of a Board Committee shall require the affirmative vote of
a majority of the votes entitled to be cast by the Directors present at a
meeting of such Board Committee (at which a quorum is present) and entitled to
vote on the matter in question.
4.1.13 Effect of Board Committee Action. Any action that is authorized
pursuant to this Restated Certificate or pursuant to a Board resolution adopted
in accordance with Subsection 4.1.10 to be taken by a Board Committee and that
is duly taken by such committee in accordance therewith shall have the same
effect as if such action were taken by the Board.
4.1.14 Retainer of Counsel and Advisors. The CAP Committee and the
Transaction Committee shall have the authority at any time, and from time to
time, to retain independent counsel and independent financial advisors, at the
reasonable expense of the Corporation, for the purpose of advising such
committees in connection with the performance of their functions as described in
this Restated Certificate.
4.2 Board Committees Following the Termination Date.
(a) Upon the occurrence of the Termination Date, the Board may by the
affirmative vote of a majority of the votes entitled to be cast by the entire
Board designate one or more committees of the Board and provide in a
resolution of the Board passed as aforesaid the powers and functions of such
committees to the extent permitted under the GCL; provided, however, that the
number of Union Directors that shall be members of each such committee shall
be the same as the number of Union Directors that served immediately prior to
the Termination Date on the Board Committee, if any, the function of which was
substantially the same as such newly designated committee.
132
<PAGE>
(b) Unless otherwise agreed upon by both Union Directors, the Union
Director membership on each committee of the Board following the Termination
Date on which only one Union Director serves shall be rotated annually between
the Class IAM Director and the Class Pilot MEC Director.
SIXTH. (a) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
(b) Each person who was or is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a ''proceeding''), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer, 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 of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators: provided, however, that, except as provided in paragraph (c)
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Article SIXTH
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition: provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expense incurred by a director or
officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Article SIXTH or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
(c) If a claim under paragraph (b) of this Article SIXTH is not paid in full
by the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
133
<PAGE>
(d) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article SIXTH shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this Restated
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(e) The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
SEVENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate, in the manner now
or hereafter prescribed by the laws of Delaware and this Restated Certificate,
and all rights and powers conferred herein upon stockholders and directors are
granted subject to this reservation.
Upon this Restated Certificate of Incorporation becoming effective (the
''Effective Time''), each share of common stock, par value $5.00 per share, of
the Corporation (''Common Stock'') outstanding immediately prior to the
Effective Time, and each share of Common Stock which immediately prior to the
Effective Time was held by the Corporation as treasury stock, shall be
reclassified as and converted into the following: (i) 0.5 shares of common
stock, par value $0.01 per share, of the Corporation (the ''New Shares'') and
(ii) one one-thousandth of a share of Series D Redeemable Preferred Stock, par
value $.01 per share, of the Corporation; provided, however, that no fractional
New Shares shall be issued, and in lieu thereof the Corporation shall make cash
payments as provided in Section 1.5(f) of the Agreement and Plan of
Recapitalization, dated as of March 25, 1994, as amended from time to time,
among the Corporation and the other parties thereto.
I, the undersigned officer of UAL Corporation, a corporation of the State of
Delaware, Hereby Certify that the foregoing is a true, correct and complete copy
of the Restated Certificate of Incorporation of said Corporation as at present
in force.
In Witness Whereof, I have hereunto subscribed by name and affixed the seal of
this Corporation this 12th day of July 1994.
UAL Corporation
/s/ James M. Guyette
Name: James M. Guyette
Title: Executive Vice President
Attest:
/s/ Francesca M. Maher
Name: Francesca M. Maher
Title: Vice President and Secretary
134
<PAGE>
Draft of 2/2/95
---------------
===========================================
UAL CORPORATION, Issuer
to
_______________, Trustee
------------
INDENTURE
Dated as of ____________, 1995
------------
Providing for Issuance of Convertible
Subordinated Debt Securities in Series
===========================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
Definitions and Other Provisions
of General Application
<S> <C>
1.1. Definitions................................................... 1
1.2. Compliance Certificates and Opinions.......................... 13
1.3. Form of Documents Delivered to Trustee........................ 14
1.4. Acts of Holders............................................... 15
1.5. Notices, etc., to Trustee and Company......................... 16
1.6. Notice to Holders; Waiver..................................... 17
1.7. Headings and Table of Contents................................ 18
1.8. Successors and Assigns........................................ 18
1.9. Separability.................................................. 18
1.10. Benefits of Indenture......................................... 18
1.11. Governing Law................................................. 18
1.12. Legal Holidays................................................ 18
1.13. Trustee to Establish Record Dates............................. 19
1.14. No Recourse Against Others.................................... 19
ARTICLE 2
Security Forms
2.1. Forms Generally............................................... 19
2.2. Form of Trustee's Certificate of Authentication............... 20
2.3. Securities in Global Form..................................... 20
2.4. Form of Legend for Securities in Global Form.................. 21
ARTICLE 3
The Securities
3.1. Amount Unlimited; Issuable in Series.......................... 22
3.2. Denominations................................................. 27
3.3. Execution, Authentication, Delivery and Dating................ 28
3.4. Temporary Securities.......................................... 31
3.5. Registration, Registration of Transfer and Exchange........... 32
3.6. Replacement Securities........................................ 36
3.7. Payment of Interest; Interest Rights Preserved................ 37
3.8. Persons Deemed Owners......................................... 40
3.9. Cancellation.................................................. 40
3.10. Computation of Interest....................................... 41
3.11. Currency and Manner of Payment in Respect of Securities....... 41
3.12. Appointment and Resignation of Exchange Rate Agent............ 46
3.13. CUSIP Numbers................................................. 47
</TABLE>
-i-
<PAGE>
<TABLE>
ARTICLE 4
Satisfaction, Discharge and Defeasance
<S> <C>
4.1. Termination of Company's Obligations Under the Indenture...... 47
4.2. Application of Trust Funds.................................... 48
4.3. Applicability of Defeasance Provisions; Company's
Option to Effect Defeasance or Covenant Defeasance........... 49
4.4. Defeasance and Discharge...................................... 49
4.5. Covenant Defeasance........................................... 50
4.6. Conditions to Defeasance or Covenant Defeasance............... 50
4.7. Deposited Money and Government Obligations to Be
Held in Trust................................................ 53
4.8. Transfers and Distribution at Company Request................. 53
ARTICLE 5
Defaults and Remedies
5.1. Events of Default............................................. 54
5.2. Acceleration; Rescission and Annulment........................ 56
5.3. Collection of Indebtedness and Suits for
Enforcement by Trustee....................................... 57
5.4. Trustee May File Proofs of Claim.............................. 57
5.5. Trustee May Enforce Claims Without Possession of
Securities................................................... 57
5.6. Delay or Omission Not Waiver.................................. 58
5.7. Waiver of Past Defaults....................................... 58
5.8. Control by Majority........................................... 58
5.9. Limitation on Suits by Holders................................ 58
5.10. Rights of Holders to Receive Payment.......................... 59
5.11. Application of Money Collected................................ 59
5.12. Restoration of Rights and Remedies............................ 60
5.13. Rights and Remedies Cumulative................................ 60
ARTICLE 6
The Trustee
6.1. Certain Duties and Responsibilities............................ 60
6.2. Rights of Trustee.............................................. 62
6.3. Trustee May Hold Securities.................................... 63
6.4. Money Held in Trust............................................ 63
6.5. Trustee's Disclaimer........................................... 63
6.6. Notice of Defaults............................................. 64
6.7. Reports by Trustee to Holders.................................. 64
6.8. Securityholder Lists........................................... 64
6.9. Compensation and Indemnity..................................... 64
6.10. Replacement of Trustee......................................... 65
6.11. Acceptance of Appointment by Successor......................... 67
6.12. Eligibility; Disqualification.................................. 68
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
6.13. Merger, Conversion, Consolidation or Succession
to Business.................................................. 69
6.14. Appointment of Authenticating Agent........................... 69
6.15. Trustee's Application for Instructions from the
Company...................................................... 71
ARTICLE 7
Consolidation, Merger or Sale by the Company.................. 71
ARTICLE 8
Supplemental Indentures
8.1. Supplemental Indentures Without Consent of
Holders...................................................... 72
8.2. Supplemental Indentures With Consent of Holders............... 73
8.3. Compliance with Trust Indenture Act........................... 75
8.4. Execution of Supplemental Indentures.......................... 75
8.5. Effect of Supplemental Indentures............................. 75
8.6. Reference in Securities to Supplemental
Indentures................................................... 75
ARTICLE 9
Covenants
9.1. Maintenance of Office or Agency............................... 76
9.2. Money for Securities to Be Held in Trust;
Unclaimed Money.............................................. 77
9.3. Corporate Existence........................................... 78
9.4. Insurance..................................................... 79
9.5. Reports by the Company........................................ 79
9.6. Annual Review Certificate..................................... 79
9.7. Limitation on Dividends and Capital Stock
Acquisitions................................................. 80
ARTICLE 10
Redemption
10.1. Applicability of Article...................................... 80
10.2. Election to Redeem; Notice to Trustee......................... 80
10.3. Selection of Securities to Be Redeemed........................ 81
10.4. Notice of Redemption.......................................... 81
10.5. Deposit of Redemption Price................................... 83
10.6. Securities Payable on Redemption Date......................... 83
10.7. Securities Redeemed in Part................................... 84
ARTICLE 11
Sinking Funds
11.1. Applicability of Article...................................... 84
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
11.2. Satisfaction of Sinking Fund Payments with
Securities................................................... 85
11.3. Redemption of Securities for Sinking Fund..................... 85
ARTICLE 12
Subordination of Securities
12.1. Securities Subordinated to Senior Indebtedness................ 86
12.2. Company Not to Make Payments with Respect to
Securities in Certain Circumstances;
Limitations on Acceleration of Securities.................... 86
12.3. Securities Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation
or Reorganization of the Company............................. 89
12.4. Holders to Be Subrogated to Rights of Holders of
Senior Indebtedness.......................................... 90
12.5. Obligation of the Company Unconditional....................... 91
12.6. Knowledge of Trustee.......................................... 92
12.7. Application by Trustee of Moneys Deposited with
It........................................................... 92
12.8. Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior
Indebtedness................................................. 93
12.9. Holders Authorize Trustee to Effectuate
Subordination of Securities.................................. 93
12.10. Right of Trustee to Hold Senior Indebtedness.................. 93
12.11. Article 12 Not to Prevent Events of Default................... 94
12.12. Paying Agents Other Than the Trustee.......................... 94
12.13. Trustee's Compensation Not Prejudiced......................... 94
12.14. Trust Moneys Not Subordinated................................. 94
</TABLE>
-iv-
<PAGE>
Reconciliation and tie between Indenture dated as of _____ 1993, and the Trust
Indenture Act of 1939, as amended.
<TABLE>
<CAPTION>
Trust Indenture Act Indenture
of l939 Section Section
- --------------- -------
<S> <C>
310(a)(1).............. 6.12
(a)(2).............. 6.12
(a)(3).............. TIA
(a)(4).............. Not applicable
(a)(5).............. TIA
(b)................. 6.10; 6.12;
TIA
311(a)................. TIA
(b)................. TIA
312(a)................. 6.8
(b)................. TIA
(c)................. TIA
313(a)................. 6.7; TIA
(b)................. TIA
(c)................. TIA
(d)................. TIA
314(a)................. 9.5; 9.6; TIA
(b)................. Not Applicable
(c)(1).............. 1.2
(c)(2).............. 1.2
(c)(3).............. Not Applicable
(d)................. Not Applicable
(e)................. TIA
(f)................. TIA
315(a)................. TIA
(b)................. 6.6
(c)................. TIA
(d)(1).............. TIA
(d)(2).............. TIA
(d)(3).............. TIA
(e)................. TIA
316(a)(last sentence).. 1.1
(a)(1)(A)........... 5.2; 5.8
(a)(1)(B)........... 5.7
(b)................. 5.9; 5.10
(c)................. TIA
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C>
317(a)(1).............. 5.3
(a)(2).............. 5.4
(b)................. 9.2
318(a)................. 1.11
(b)................. TIA
(c)................. 1.11; TIA
</TABLE>
- --------------------------
This reconciliation and tie section does not constitute part of the Indenture.
-vi-
<PAGE>
INDENTURE, dated as of ________, 1995, among UAL CORPORATION, a Delaware
corporation (the "Company"), as issuer, and __________________, a New York
banking corporation, as Trustee (the "Trustee").
Recitals
--------
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated convertible debentures, notes or other evidences of indebtedness
("Securities") to be issued in one or more series as herein provided.
All things necessary to make the Securities, when executed by the Company,
the valid obligations of the Company, and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms, have been
done.
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed as follows for the
equal and ratable benefit of the Holders of the Securities:
ARTICLE 1
Definitions and Other Provisions
--------------------------------
of General Application
----------------------
Section 1.1. Definitions. (a) For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Affiliate" of any specified Person means any Person directly or
indirectly controlling or controlled by, or under
<PAGE>
direct or indirect common control with, such specified Person. For purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Paying Agent or Registrar.
"Authenticating Agent" means any authenticating agent appointed by the
Trustee pursuant to Section 6.14.
"Authorized Newspaper" means a newspaper of general circulation, in
the official language of the country of publication or in the English language,
customarily published on each Business Day whether or not published on
Saturdays, Sundays or holidays, and of general circulation in the place in
connection with which the term is used or in the financial community of such
place. Whenever successive publications in an Authorized Newspaper are required
hereunder they may be made (unless otherwise expressly provided herein) on any
Business Day and in the same or different Authorized Newspapers.
"Bearer Security" means any Security in the form (to the extent
applicable thereto) established pursuant to Section 2.1 which is payable to
bearer.
"Board" or "Board of Directors" means the Board of Directors of the
Company, the Executive Committee or any other duly authorized committee thereof.
"Board Resolution" means a copy of a resolution of the Board of
Directors, certified by the Corporate Secretary or an Assistant Secretary of the
Company, to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day", when used with respect to any Place of Payment or any
other particular location referred to in this Indenture or in the Securities,
means, unless otherwise specified with respect to any Securities pursuant to
Section 3.1, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in that Place of Payment or particular
location are authorized or obligated by law or executive order to close.
"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
-2-
<PAGE>
accordance with generally accepted accounting principles consistently applied as
in effect on the date hereof.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Company" means the Person named as the Company in the first paragraph
of this Indenture until one or more successor corporations shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
means such successors.
"Company Order" and "Company Request" mean, respectively, a written
order or request signed in the name of the Company by the Chairman of the Board,
the President, any Executive Vice President or any Senior Vice President,
signing alone, by any Vice President signing together with the Treasurer, any
Assistant Treasurer, the Corporate Secretary or any Assistant Secretary of the
Company, or, with respect to Sections 3.3, 3.4, 3.5 and 6.1, any other employee
of the Company named in an Officers' Certificate delivered to the Trustee.
"Conversion Event" means the cessation of use of (i) a Foreign
Currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit other than the ECU for the purposes for which it was established.
"Corporate Trust Office" means the office of the Trustee in New York,
New York at which at any particular time its corporate trust business shall be
principally administered, which office at the date hereof is located at
________________________.
"corporation" includes corporations, associations, companies and
business trusts.
"coupon" means any interest coupon appertaining to a Bearer Security.
"Default" means any event which is, or after notice or passage of
time, or both, would be, an Event of Default.
-3-
<PAGE>
"Depositary", when used with respect to the Securities of or within
any series issuable or issued in whole or in part in global form, means the
Person designated as Depositary by the Company pursuant to Section 3.1 until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter shall mean or include each Person
which is then a Depositary hereunder, and if at any time there is more than one
such Person, shall be a collective reference to such Persons.
"Dollar" means the coin or currency of the United States as at the
time of payment is legal tender for the payment of public and private debts.
"ECU" means the European Currency Unit as defined and revised from
time to time by the Council of the European Communities.
"European Communities" means the European Economic Community, the
European Coal and Steel Community and the European Atomic Energy Community.
"European Monetary System" means the European Monetary System
established by the Resolution of December 5, 1978 of the Council of the European
Communities.
"Exchange Rate Agent", when used with respect to Securities of or
within any series, means, unless otherwise specified with respect to any
Securities pursuant to Section 3.1, a New York Clearing House bank designated
pursuant to Section 3.1 or Section 3.12.
"Exchange Rate Officer's Certificate" means a certificate setting
forth (i) the applicable Market Exchange Rate or the applicable bid quotation
and (ii) the Dollar or Foreign Currency amounts of principal (and premium, if
any) and interest, if any (on an aggregate basis and on the basis of a Security
having the lowest denomination principal amount in the relevant currency or
currency unit), payable with respect to a Security of any series on the basis of
such Market Exchange Rate or the applicable bid quotation, signed by the
Treasurer, any Vice President or any Assistant Treasurer of the Company.
"Extension Period" means the period from and including the Interest
Payment Date next following the date of any notice of extension of the interest
payment period on the Securities given pursuant to the last sentence of Section
3.1(e) (or, in the case of any further extension of the interest payment period
pursuant to the third sentence of Section 3.1(e) before the payment in full of
all accrued interest on the Securities, the Interest Payment Date next following
the date of the first such
-4-
<PAGE>
notice given after the last Interest Payment Date to which interest was paid in
full) to but excluding the Interest Payment Date to which payment of interest on
the Securities is so extended, after giving effect to any further extensions of
the interest payment period on the Securities pursuant to the third sentence of
Section 3.1(e); provided that no Extension Period shall exceed 20 consecutive
quarters from the last date to which interest on the Securities was paid in
full; and provided, further, that any Extension Period shall end on an Interest
Payment Date. Notwithstanding the foregoing, in no event shall any Extension
Period exceed the final Stated Maturity of the principal of the Securities.
"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) above.
"Foreign Currency" means any currency issued by the government of one
or more countries other than the United States or by any recognized
confederation or association of such governments.
"Government Obligations" means securities which are (i) direct
obligations of the United States or, if specified as contemplated by Section
3.1, the government which issued the currency in which the Securities of a
particular series are payable, for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised
-5-
<PAGE>
by and acting as an agency or instrumentality of the United States or, if
specified as contemplated by Section 3.1, such government which issued the
foreign currency in which the Securities of such series are payable, the payment
of which is unconditionally guaranteed as a full faith and credit obligation by
the United States or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depositary receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the Government Obligation evidenced by such depositary
receipt.
"Holder" means, with respect to a Bearer Security or coupon, a bearer
thereof and, with respect to a Registered Security, a person in whose name a
Security is registered on the Register.
"Indebtedness" of any Person 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 of such
Person for money borrowed, (ii) Indebtedness Guarantees by such Person of
indebtedness for money borrowed by any other Person, (iii) indebtedness
evidenced by notes, debentures, bonds or other instruments of indebtedness for
payment of which such Person 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 such Person under Capital Leases
and Flight Equipment leases (the amount of the Company'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.
"Indebtedness Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness or other obligation of
-6-
<PAGE>
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 terms Indebtedness Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Indebtedness Guarantee" used as a verb has a corresponding meaning.
"Indenture" means this Indenture as originally executed or as amended
or supplemented from time to time and shall include the forms and terms (but not
defined terms established in an Officers' Certificate or a Board Resolution) of
particular series of Securities established as contemplated by Section 2.1 and
Section 3.1.
"Indexed Security" means a Security the terms of which provide that
the principal amount thereof payable at Stated Maturity may be more or less than
the principal face amount thereof at original issuance.
"interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after maturity, means interest
payable after maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Market Exchange Rate" means, unless otherwise specified with respect
to any Securities pursuant to Section 3.1, (i) for any conversion involving a
currency unit on the one hand and Dollars or any Foreign Currency on the other,
the exchange rate between the relevant currency unit and Dollars or such Foreign
Currency calculated by the method specified pursuant to Section 3.1 for the
Securities of the relevant series, (ii) for any conversion of Dollars into any
Foreign Currency, the noon buying rate for such Foreign Currency for cable
transfers quoted in New York City as certified for customs purposes by the
Federal Reserve Bank of New York and (iii) for any conversion of one Foreign
Currency into Dollars or another Foreign Currency, the spot rate at noon local
time in the relevant market at which, in
-7-
<PAGE>
accordance with normal banking procedures, the Dollars or Foreign Currency into
which conversion is being made could be purchased with the Foreign Currency from
which conversion is being made from major banks located in New York City, London
or any other principal market for Dollars or such purchased Foreign Currency, in
each case determined by the Exchange Rate Agent. Unless otherwise specified
with respect to any Securities pursuant to Section 3.1, in the event of the
unavailability of any of the exchange rates provided for in the foregoing
clauses (i), (ii) and (iii), the Exchange Rate Agent shall use, in its sole
discretion and without liability on its part, such quotation of the Federal
Reserve Bank of New York as of the most recent available date, or quotations
from one or more major banks in New York City, London or other principal market
for such currency or currency unit in question (which may include any such bank
acting as Trustee under this Indenture), or such other quotations as the
Exchange Rate Agent shall deem appropriate. Unless otherwise specified by the
Exchange Rate Agent, if there is more than one market for dealing in any
currency or currency unit by reason of foreign exchange regulations or
otherwise, the market to be used in respect of such currency or currency unit
shall be that upon which a nonresident issuer of securities designated in such
currency or currency unit would purchase such currency or currency unit in order
to make payments in respect of such securities.
"Maturity", when used with respect to any Security means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officer" means the Chairman of the Board of Directors, the President,
any Executive Vice President, any Senior Vice President, any Vice President or
the Corporate Secretary of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President, any Executive Vice President or any Senior Vice
President of the Company, signing alone, or by any Vice President signing
together with the Corporate Secretary, any Assistant Secretary, the Treasurer,
or any Assistant Treasurer of the Company.
"Opinion of Counsel" means a written opinion of legal counsel, who may
be (a) the senior attorney employed by the Company, (b) Mayer, Brown & Platt or
(c) other counsel designated by the Company and who shall be acceptable to the
Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the stated principal
-8-
<PAGE>
amount thereof to be due and payable upon declaration of acceleration of the
Maturity thereof pursuant to Section 5.2.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities and any coupons
appertaining thereto provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or
provisions therefor satisfactory to the Trustee have been made;
(iii) Securities, except to the extent provided in Sections 4.4 and
4.5, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article 4; and
(iv) Securities which have been paid pursuant to Section 3.6 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, or whether
sufficient funds are available for redemption or for any other purpose, and for
the purpose of making the calculations required by section 313 of the Trust
Indenture Act, (w) the principal amount of any Original Issue Discount
Securities that may be counted in making such determination or calculation and
that shall be deemed to be Outstanding for such purpose shall be equal to the
amount of principal thereof that would be (or shall have been declared to be)
due and payable, at the time of such determination, upon a declaration of
acceleration of the maturity thereof pursuant to Section 5.2, (x) the principal
amount of any Security denominated in a Foreign Currency that may be counted in
making such
-9-
<PAGE>
determination or calculation and that shall be deemed Outstanding for such
purpose shall be equal to the Dollar equivalent, determined as of the date such
Security is originally issued by the Company as set forth in an Exchange Rate
Officer's Certificate delivered to the Trustee, of the principal amount (or, in
the case of an Original Issue Discount Security, the Dollar equivalent as of
such date of original issuance of the amount determined as provided in clause
(w) above) of such Security, (y) the principal amount of any Indexed Security
that may be counted in making such determination or calculation and that shall
be deemed outstanding for such purpose shall be equal to the principal face
amount of such Indexed Security at original issuance, unless otherwise provided
with respect to such Security pursuant to Section 3.1, and (z) Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of, premium, if any, or interest on any Securities on behalf of the
Company.
"Periodic Offering" means an offering of Securities of a series from
time to time the specific terms of which Securities, including, without
limitation, the rate or rates of interest or formula for determining the rate or
rates of interest thereon, if any, the Stated Maturity or Stated Maturities
thereof, the original issue date or dates thereof, the redemption provisions, if
any, with respect thereto, and any other terms specified as contemplated by
Section 3.1 with respect thereto, are to be determined by the Company upon the
issuance of such Securities.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of or
within any series, means the place or places where, subject to the provisions of
Section 9.1, the principal
-10-
<PAGE>
of, premium, if any, and interest on such Securities are payable as specified as
contemplated by Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redeemable Stock" means, with respect to any person, any equity
security of such person that by its terms or otherwise (i) is required to be
redeemed prior to the maturity of any of the Securities, or is redeemable at the
option of the holder thereof at any time prior to the maturity of any of the
Securities and (ii) creates a financial obligation on such person if any
required or optional redemption obligation is not timely satisfied.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, in whole or in part, means the price at which it is to be redeemed
pursuant to this Indenture.
"Registered Security" means any Security in the form (to the extent
applicable thereto) established pursuant to Section 2.1 which is registered as
to principal and interest in the Register.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Registered Securities of or within any series means the date
specified for that purpose as contemplated by Section 3.1.
"Responsible Officer", when used with respect to the Trustee, shall
mean the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any senior vice president, any
vice president, any assistant vice president, the secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any senior trust
officer, any trust officer, the controller, any assistant controller, or any
other officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
and also means, with respect to a particular
-11-
<PAGE>
corporate trust matter, any other officer to whom such corporate trust matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Security" or "Securities" has the meaning stated in the first recital
of this Indenture and more particularly means any Security or Securities of the
Company issued, authenticated and delivered under this Indenture.
"Senior Indebtedness of the Company" means all Indebtedness of the
Company (other than the Securities), 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 Securities.
"Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of any issue means a date fixed by the Trustee pursuant to
Section 3.7.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or in a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.
"Subsidiary" means any corporation of which the Company at the time
owns or controls, directly or indirectly, more than 50% of the shares of
outstanding stock having general voting power under ordinary circumstances to
elect a majority of the Board of Directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in effect on the date of this Indenture, except as provided in
Section 8.3.
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor Trustee replaces it pursuant to the applicable
provisions of this Indenture, and thereafter means such successor Trustee and
if, at any time, there is more than one Trustee, "Trustee" as used with respect
to the Securities of any series shall mean the Trustee with respect to the
Securities of that series.
"United States" means, unless otherwise specified with respect to the
Securities of any series as contemplated by Section 3.1, the United States of
America (including the States
-12-
<PAGE>
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. Person" means, unless otherwise specified with respect to the
Securities of any series as contemplated by Section 3.1, a citizen, national or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is subject to
United States federal income taxation regardless of its source.
"Yield to Maturity" means the yield to maturity, calculated by the
Company at the time of issuance of a series of Securities or, if applicable, at
the most recent determination of interest on such series, in accordance with
accepted financial practice.
(b) The following terms shall have the meanings specified in the
Sections referred to opposite such term below:
Term Section
---- -------
"Act" 1.4(a)
"Bankruptcy Law" 5.1
"Component Currency" 3.11(d)
"Conversion Date" 3.11(d)
"Custodian" 5.1
"Defaulted Interest" 3.7(b)
"Election Date" 3.11(h)
"Event of Default" 5.1
"Register" 3.5
"Registrar" 3.5
"Valuation Date" 3.7(c)
Section 1.2. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
-13-
<PAGE>
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Sections 2.3,
3.3 and 9.6) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such condition or covenant and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such condition or covenant
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.3. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations as to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates,
-14-
<PAGE>
statements, opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
Section 1.4. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by agent duly appointed in writing. Except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other reasonable manner which the Trustee deems sufficient.
(c) The ownership of Bearer Securities may be proved by the production
of such Bearer Securities or by a certificate executed by any trust company,
bank, banker or other depositary, wherever situated, if such certificate shall
be deemed by the Trustee to be satisfactory, showing that at the date therein
mentioned such Person had on deposit with such depositary, or exhibited to it,
the Bearer Securities therein described; or such facts may be proved by the
certificate or affidavit of the Person holding such Bearer Securities, if such
certificate or affidavit is deemed by the Trustee to be satisfactory. The
Trustee and the Company may assume that such ownership of any Bearer Security
continues until (i) another such certificate or affidavit bearing a later date
issued in respect of the same Bearer Security is produced, (ii) such Bearer
Security is produced to the Trustee by some other Person, (iii) such Bearer
Security is surrendered in exchange for a Registered Security or (iv) such
Bearer Security is no longer outstanding. The ownership of Bearer Securities
may
-15-
<PAGE>
also be proved in any other reasonable manner which the Trustee deems
sufficient.
(d) The ownership of Registered Securities shall be proved by the
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
(f) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to an Officers' Certificate delivered to the
Trustee, fix in advance a record date for the determination of Holders entitled
to give such request, demand, authorization, direction, notice, consent, waiver
or other Act, but the Company shall have no obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether Holders of the
requisite proportion of Outstanding Securities have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the Outstanding Securities shall be
computed as of such record date; provided that no such authorization, agreement
or consent by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of clause (a) of this
Section 1.4 not later than six months after the record date.
Section 1.5. Notices, etc., to Trustee and Company. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise
-16-
<PAGE>
herein expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at UAL Corporation, P.O. Box 66100,
Chicago, Illinois 60666, Attention: Treasurer or at any other address
previously furnished in writing to the Trustee by the Company.
Section 1.6. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, (i) if any of the Securities
affected by such event are Registered Securities, such notice to the Holders
thereof shall be sufficiently given (unless otherwise herein expressly provided
or otherwise agreed to by a Holder) if in writing and mailed, first-class
postage prepaid, to each such Holder affected by such event, at his address as
it appears in the Register, within the time prescribed for the giving of such
notice and (ii) if any of the Securities affected by such event are Bearer
Securities, notice to the Holders thereof shall be sufficiently given (unless
otherwise herein or in the terms of such Bearer Securities expressly provided)
if published once in an Authorized Newspaper in New York, New York, and in such
other city or cities, if any, as may be specified as contemplated by Section
3.1(5).
In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders of Registered Securities or the sufficiency of any notice to
Holders of Bearer Securities given as provided herein. In any case where notice
is given to Holders by publication, neither the failure to publish such notice,
nor any defect in any notice so published, shall affect the sufficiency of such
notice with respect to other Holders of Bearer Securities or the sufficiency of
any notice to Holders of Registered Securities given as provided herein. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice.
If by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice as provided above,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder. If it is
impossible or, in the opinion of the Trustee, impracticable to give any notice
by publication in the manner herein required, then such publication in lieu
thereof as shall be made with the approval of the Trustee shall constitute a
sufficient publication of such notice.
Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published
-17-
<PAGE>
notice may be in an official language of the country of publication.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
Section 1.7. Headings and Table of Contents. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
Section 1.8. Successors and Assigns. All covenants and agreements in
this Indenture by the Company shall bind their respective successors and
assigns, whether so expressed or not.
Any act or proceed that is required or permitted by any provision of
this Indenture and that is authorized or required to be done or performed by any
board, committee or officer of the Company shall and may be done and performed
with like force and effect by the like board, committee or officer of any
corporation that shall at the time be the successor or assign of the Company.
Section 1.9. Separability. In case any provision of this Indenture
or the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 1.10. Benefits of Indenture. Nothing in this Indenture or in
the Securities, expressed or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, the holders of Senior
Indebtedness of the Company, and the Holders, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 1.11. Governing Law. THIS INDENTURE, THE SECURITIES AND ANY
COUPONS APPERTAINING THERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. This Indenture is subject to the Trust
Indenture Act and if any provision hereof limits, qualifies or conflicts with
the Trust Indenture Act, the Trust Indenture Act shall control.
Section 1.12. Legal Holidays. In any case where any Interest Payment
Date, Redemption Date, sinking fund payment date, Stated Maturity or Maturity of
any Security shall not be a Business Day at any Place of Payment, then
(notwithstanding any
-18-
<PAGE>
other provision of this Indenture of any Security or coupon other than a
provision in the Securities of any series which specifically states that such
provision shall apply in lieu of this Section) payment of principal, premium, if
any, or interest need not be made at such Place of Payment on such date, but may
be made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on such date; provided that no interest shall
accrue on the amount so payable for the period from and after such Interest
Payment Date, Redemption Date, sinking fund payment date, Stated Maturity or
Maturity, as the case may be.
Section 1.13. Trustee to Establish Record Dates. The Trustee shall
fix a record date for the purpose of determining the Holders entitled to make,
give or take any request, demand, authorization, direction, notice, consent,
waiver or other action provided in this Indenture to be made, given or taken by
Holders. If such a record date is fixed, the Holders on such record date and
only such Holders, shall be entitled to make, give or take such request, demand,
authorization, direction, notice, consent, waiver or other action, whether or
not such Holders remain Holders after such record date. No such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be valid or effective if made, given or taken more than 90 days after such
record date.
Section 1.14. No Recourse Against Others. No recourse for the
payment of the principal of interest on the Securities, or for any claim based
on the Securities or this Indenture, and no recourse under or upon any
obligation, covenant or agreement of the Company in this Indenture or any
indenture supplemental thereto or in any Security or because of the creation of
any indebtedness represented thereby, 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 otherwise, all
such liability being, by the acceptance of a Security by each Holder and as part
of the consideration for the issue of such Security, expressly waived and
released.
ARTICLE 2
Security Forms
--------------
Section 2.1. Forms Generally. The Securities of each series and the
coupons, if any, to be attached thereto shall be in substantially such form
(including global form) as shall be established by delivery to the Trustee of an
Officers' Certificate or in one or more indentures supplemental hereto, in
-19-
<PAGE>
each case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities and coupons, if any, as evidenced by their
execution of the Securities and coupons, if any. If temporary Securities of any
series are issued as permitted by Section 3.4, the form thereof also shall be
established as provided in the preceding sentence. If the forms of Securities
and coupons, if any, of any series are established by an Officers' Certificate,
such Officers' Certificate shall be delivered to the Trustee at or prior to the
delivery of the Company Order contemplated by Section 3.3 for the authentication
and delivery of such Securities.
Unless otherwise specified as contemplated by Section 3.1, Bearer
Securities shall have interest coupons attached.
The permanent Securities and coupons, if any, shall be printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner, all as determined by the officers executing
such Securities and coupons, if any, as evidenced by their execution of such
Securities and coupons, if any.
Section 2.2. Form of Trustee's Certificate of Authentication. The
Trustee's certificate of authentication shall be in substantially the following
form:
This is one of the Securities of a series issued under the within-
mentioned Indenture.
Dated: ______________________,
as Trustee
By_________________________
Authorized Signatory
Section 2.3. Securities in Global Form. If securities of or within a
series are issuable in whole or in part in temporary or permanent global form,
as specified as contemplated by Section 3.1, then, notwithstanding clause (8) of
Section 3.1(b) and the provisions of Section 3.2, any such Security shall
represent such of the outstanding securities of
-20-
<PAGE>
such series as shall be specified therein and may provide that it shall
represent the aggregate amount of Outstanding Securities from time to time
endorsed thereon and that the aggregate amount of Outstanding Securities
represented thereby may from time to time be reduced to reflect exchanges. Any
endorsement of a Security in global form to reflect the amount, or any increase
or decrease in the amount, or changes in the rights of Holders, of Outstanding
Securities represented thereby, shall be made by the Trustee in such manner and
upon instructions given by such Person or Persons as shall be specified therein
or in the Company Order to be delivered to the Trustee pursuant to Section 3.3
or 3.4. Subject to the provisions of Section 3.3 and, if applicable, Section
3.4, the Trustee shall deliver and redeliver any Security in global form in the
manner and upon instructions given by the Person or Persons specified therein or
in the applicable Company Order. Any instructions by the Company with respect
to endorsement or delivery or redelivery of a Security in global form shall be
in writing but need not comply with Section 1.2 hereof and need not be
accompanied by an Opinion of Counsel.
The provisions of the last paragraph of Section 3.3 shall apply to any
Security in global form if such Security was never issued and sold by the
Company and the Company delivers to the Trustee the Security in global form
together with written instructions (which need not comply with Section 1.2 and
need not be accompanied by an Opinion of Counsel) with regard to the reduction
in the principal amount of Securities represented thereby, together with the
written statement contemplated by the last paragraph of Section 3.3.
Notwithstanding the provisions of Sections 2.1 and 3.7, unless otherwise
specified as contemplated by Section 3.1, payment of principal of, premium, if
any, and interest on any Security in permanent global form shall be made to the
Person or Persons specified therein.
Section 2.4. Form of Legend for Securities in Global Form. Any
Security in global form authenticated and delivered hereunder shall bear a
legend in substantially the following form, or such other form as deemed
necessary or desirable by the Company and specified in a Company Order delivered
to the Trustee:
This Security is in global form within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee of a Depositary. Unless and until it is exchanged in whole or in
part for Securities in certificated form, this Security may not be
transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the
-21-
<PAGE>
Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary.
ARTICLE 3
The Securities
--------------
Section 3.1. Amount Unlimited; Issuable in Series. (a) The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited. The Securities may be issued from
time to time in one or more series.
(b) The following matters shall be established and (subject to Section
3.3) set forth, or determined in the manner provided, in an Officers'
Certificate and a Board Resolution of the Company, or one or more indentures
supplemental hereto:
(1) the title of the Securities of the series (which title shall
distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(which limit shall not pertain to (i) Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 8.6,
or 10.7 and (ii) any Securities which, pursuant to the last paragraph of
Section 3.3, are deemed never to have been authenticated and delivered
hereunder)
(3) the date or dates on which the principal of the Securities of the
series is payable or the method of determination thereof;
(4) the rate or rates at which the Securities of the series shall bear
interest, if any, or the method of calculating such rate or rates of
interest, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the Interest
Payment Dates on which any such interest shall be payable and, with respect
to Registered Securities, the Regular Record Date, if any, for the interest
payable on any Registered Security on any Interest Payment Date;
(5) the place or places where, subject to the provisions of Section
9.1, the principal of, premium, if any, and interest, if any, on Securities
of the series shall be payable;
-22-
<PAGE>
(6) the period or periods within which, the price or prices at which,
the currency or currencies (including currency units) in which, and the
other terms and conditions upon which, Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other
than as provided in Section 10.3, the manner in which the particular
Securities of such series (if less than all Securities of such series are
to be redeemed) are to be selected for redemption;
(7) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or upon the happening of a specified event or at the option of a
Holder thereof and the period or periods within which, the price or prices
at which, and the other terms and conditions upon which, Securities of the
series shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, if Registered Securities, and if other than denominations of
$5,000 and $100,000, if Bearer Securities, the denominations in which
Securities of the series shall be issuable;
(9) if other than Dollars, the currency or currencies (including
currency units) in which the principal of, premium, if any, and interest,
if any, on the Securities of the series shall be payable, or in which the
Securities of the series shall be denominated, the particular provisions
applicable thereto in accordance with, in addition to, or in lieu of the
provisions of Section 3.11, and whether the Securities of the series may be
satisfied and discharged other than as provided in Article 4;
(10) if the payments of principal of, premium, if any, or interest, if
any, on the Securities of the series are to be made, at the election of the
Company or a Holder, in a currency or currencies (including currency units)
other than that in which such Securities are denominated or designated to
be payable, the currency or currencies (including currency units) in which
such payments are to be made, the terms and conditions of such payments and
the manner in which the exchange rate with respect to such payments shall
be determined, the particular provisions applicable thereto in accordance
with, in addition to, or in lieu of the provisions of Section 3.11, and
whether the Securities of the series may be satisfied and discharged other
than as provided in Article 4;
-23-
<PAGE>
(11) if the amount of payments of principal of, premium, if any, and
interest, if any, on the Securities of the series shall be determined with
reference to an index, formula or other method (which index, formula or
method may be based, without limitation, on a currency or currencies
(including currency units) other than that in which the Securities of the
series are denominated or designated to be payable), the index, formula or
other method by which such amounts shall be determined;
(12) if other than the principal amount thereof, the portion of the
principal amount of such Securities of the series which shall be payable
upon declaration of acceleration thereof pursuant to Section 5.2 or the
method by which such portion shall be determined;
(13) if other than as provided in Section 3.7, the Person to whom any
interest on any Registered Security of the series shall be payable, the
manner in which, or the Person to whom, any interest on any Bearer
Securities of the series shall be payable, and the extent to which, or the
manner in which (including any certification requirement and other terms
and conditions under which), any interest payable on a temporary or
permanent global Security on an Interest Payment Date will be paid if other
than in the manner provided in Section 2.3 and Section 3.4, as applicable;
(14) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the Events
of Default set forth in Section 5.1 or covenants of the Company set forth
in Article 9 pertaining to the Securities of the series;
(16) under what circumstances, if any, the Company will pay additional
amounts on the Securities of that series held by a Person who is not a U.S.
Person in respect of taxes or similar charges withheld or deducted and, if
so, whether the Company will have the option to redeem such Securities
rather than pay such additional amounts (and the terms of any such option);
(17) whether Securities of the series shall be issuable as Registered
Securities or Bearer Securities (with or without interest coupons), or
both, and any restrictions applicable to the offering, sale or delivery of
Bearer Securities and, if other than as provided in Section 3.5, the terms
upon which Bearer Securities of a series may be
-24-
<PAGE>
exchanged for Registered Securities of the same series and vice versa;
(18) the date as of which any Bearer Securities of the series and any
temporary global Security representing outstanding Securities of the series
shall be dated if other than the date of original issuance of the first
Security of the series to be issued;
(19) the applicability, if any, to the Securities of or within the
series of Sections 4.4 and 4.5, or such other means of defeasance or
covenant defeasance as may be specified for the Securities and coupons, if
any, of such series, and whether, for the purpose of such defeasance or
covenant defeasance, the term "Government Obligations" shall include
obligations referred to in the definition of such term which are not
obligations of the United States or an agency or instrumentality of the
United States;
(20) if other than the Trustee, the identity of the Registrar and any
Paying Agent;
(21) any terms which may be related to warrants issued by the Company
in connection with, or for the purchase of, Securities of such series,
including whether and under what circumstances the Securities of any series
may be used toward the exercise price of any such warrants;
(22) the designation of the initial Exchange Rate Agent, if any;
(23) whether Securities of the series shall be issued in whole or in
part in temporary or permanent global form and, if so, (i) the initial
Depositary for such global Securities and (ii) if other than as provided in
Section 3.4 or 3.5, as applicable, whether and the circumstance under which
beneficial owners of interests in any Securities of the series in temporary
or permanent global form may exchange such interests for Securities of such
series and of like tenor of any authorized form and denomination;
(24) the terms and conditions upon which Securities of the series will
be convertible into shares of common stock of the Company, including the
conversion price, the conversion period and other conversion provisions;
(25) if other than as provided in Article 12, the terms and conditions
under which the Securities will be subordinated to the Senior Indebtedness
of the Company; and
-25-
<PAGE>
(26) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture), including any terms
which may be required by or advisable under United States laws or
regulations or advisable in connection with the marketing of Securities of
the series.
(c) All Securities of any one series and coupons, if any, appertaining
to any Bearer Securities of such series shall be substantially identical except
as to denomination and the rate or rates of interest, if any, and Stated
Maturity, the date from which interest, if any, shall accrue and except as may
otherwise be provided in or pursuant to an Officers' Certificate pursuant to
this Section 3.1 or in an indenture supplemental hereto. All Securities of any
one series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the Holders, for issuances of
additional Securities of such series or for the establishment of additional
terms with respect to the Securities of such series.
(d) If any of the terms of the Securities of any series are
established by action taken pursuant to a Board Resolution, a copy of such Board
Resolution shall be certified by the Corporate Secretary or an Assistant
Secretary of the Company and delivered to the Trustee at or prior to the
delivery of the Officers' Certificate of the Company, setting forth, or
providing the manner for determining, the terms of the Securities of such
series, and an appropriate record of any action taken pursuant thereto in
connection with the issuance of any Securities of such series shall be delivered
to the Trustee prior to the authentication and delivery thereof. With respect
to Securities of a series subject to a Periodic Offering, such Board Resolutions
or Officers' Certificates may provide general terms for Securities of such
series and provide either that the specific terms of particular Securities of
such series shall be specified in a Company Order, or that such terms shall be
determined by the Company, or one or more of their respective agents designated
in their respective Officers' Certificates, in accordance with the Company
Order, as contemplated by the first proviso of the third paragraph of Section
3.3.
(e) Notwithstanding anything contained in this Indenture to the
contrary, the Company shall have the right at any time during the term of any
series of Securities, so long as the Company is not in default in the payment of
interest on such series of Securities, to extend the interest payment period for
an Extension Period. Except as provided in the next succeeding sentence, no
interest shall be due and payable during an Extension Period, but at the end of
each Extension Period the Company shall pay all interest then accrued and unpaid
on such series of Securities, together with interest thereon, compounded
quarterly at the rate specified for such series of Securities to
-26-
<PAGE>
the extent permitted by applicable law. Prior to the termination of any
Extension Period, the Company may (i) on any Interest Payment Date pay all or
any portion of the interest accrued on the Securities to holders of record on
the Record Date for such Interest Payment Date or (ii) from time to time further
extend the interest payment period as provided in the last sentence of this
paragraph, provided that any such Extension Period, together with all such
previous and further extensions thereof, may not exceed 20 consecutive calendar
quarters from the last date to which interest on the series of Securities was
paid in full. If the Company shall elect to pay all of the interest accrued on
the series of Securities on an Interest Payment Date during any Extension
Period, such Extension Period shall automatically terminate on such Interest
Payment Date. Upon the termination of any Extension Period and the payment of
all amounts of interest then due, the Company may select a new Extension Period,
subject to the above requirements. The Company shall cause the Trustee to give
notice to the Holders, in the manner provided in Section 1.6, not less than five
Business Days prior to the earlier of (x) the January 15, April 15, July 15 or
October 15 next preceding the applicable Interest Payment Date and (y) the date
on which the Company or the Trustee is required to give notice to the New York
Stock Exchange or other applicable self-regulatory organization of the Regular
Record Date and payment date for such related interest payment period, of
(1) the Company's election to initiate an Extension Period and the
duration thereof,
(2) the Company's election to extend any Extension Period beyond the
Interest Payment Date on which such Extension Period is then scheduled to
terminate, and the duration of such extension, and
(3) the Company's election to make a full or partial payment of
interest accrued on the series of Securities on any Interest Payment Date
during any Extension Period and the amount of such payment.
(f) Each Security issued hereunder shall provide that the Company and,
by its acceptance of a Security or a beneficial interest therein, the Holder of,
and any Person that acquires a beneficial interest in, such Security agree that
for United States federal, state and local tax purposes it is intended that such
Security constitute indebtedness.
Section 3.2. Denominations. Unless otherwise provided as
contemplated by Section 3.1, any Registered Securities of a series shall be
issuable in denominations of $1,000 and any integral multiple thereof and any
Bearer Securities of a series shall be issuable in denominations of $5,000 and
$100,000.
-27-
<PAGE>
Section 3.3. Execution, Authentication, Delivery and Dating.
Securities shall be executed on behalf of the Company by its Chairman or
President and Chief Executive Officer and attested to by the Secretary of the
Company. The Company's seal shall be affixed to the Securities or a facsimile
of such seal shall be engraved, printed, or otherwise reproduced on the
Securities. The signatures of such officers on the Securities may be manual or
facsimile. The coupons, if any, of Bearer Securities shall bear the facsimile
signature of the Chairman or President and Chief Executive Officer and shall be
attested by the Secretary of the Company.
Securities and coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time, the Company may deliver Securities
and any coupons appertaining thereto, of any series executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and make available for delivery such Securities, and the Trustee
in accordance with the Company Order shall authenticate and deliver such
Securities; provided, however, that in the case of Securities offered in a
Periodic Offering, the Trustee shall authenticate and deliver such Securities
from time to time in accordance with such other procedures (including, without
limitation, the receipt by the Trustee of oral or electronic instructions from
the Company or its duly authorized agents, promptly confirmed in writing)
acceptable to the Trustee as may be specified by or pursuant to a Company Order
delivered to the Trustee prior to the time of the first authentication of
Securities of such series.
If the form or terms of the Securities of a series have been
established by or pursuant to one or more Officers' Certificates as permitted by
Sections 2.1 and 3.1, in authenticating such Securities and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to section 315(a) through
(d) of the Trust Indenture Act) shall be fully protected in relying upon, an
Opinion of Counsel stating,
(1) that the forms and terms of such Securities and any coupons have
been established in conformity with the provisions of this Indenture; and
-28-
<PAGE>
(2) that such Securities together with any coupons appertaining
thereto, when authenticated and delivered by the Trustee and issued by the
Company in the manner and subject to any conditions specified in such
Opinion of Counsel, will constitute valid and legally binding obligations
of the Company, enforceable in accordance with its terms, subject to
customary exceptions;
provided, however, that, with respect to Securities of a series subject to
a Periodic Offering, the Trustee shall be entitled to receive such Opinion
of Counsel only once at or prior to the time of the first authentication of
Securities of such series and that the Opinion of Counsel above may state:
(x) that the forms of such Securities have been, and the terms of
such Securities (when established in accordance with such procedures
as may be specified from time to time in a Company Order, all as
contemplated by and in accordance with a Board Resolution or an
Officers' Certificate pursuant to Section 3.1, as the case may be)
will have been, established in conformity with the provisions of this
Indenture; and
(y) that such Securities together with the coupons, if any,
appertaining thereto, when (1) executed by the Company, (2) completed,
authenticated and delivered by the Trustee in accordance with this
Indenture, and (3) issued by the Company in the manner and subject to
any conditions specified in such Opinion of Counsel, will constitute
valid and legally binding obligations of the Company, enforceable in
accordance with its terms, subject to customary exceptions.
With respect to Securities of a series subject to a Periodic Offering,
the Trustee may conclusively rely, as to the authorization by the Company
of any of such Securities, the form and terms thereof and the legality,
validity, binding effect and enforceability thereof, upon the Opinion of
Counsel and other documents delivered pursuant to Sections 2.1 and 3.1 of
this Section, as applicable, at or prior to the time of the first
authentication of Securities of such series unless and until it has
received written notification that such opinion or other documents have
been superseded or revoked. In connection with the authentication and
delivery of Securities of a series subject to a Periodic Offering, the
Trustee shall be entitled to assume that the Company's instructions to
authenticate and deliver such Securities do not violate any
-29-
<PAGE>
rules, regulations or orders of any governmental agency or commission
having jurisdiction over the Company.
If the form or terms of the Securities of a series have been
established by or pursuant to one or more Officers' Certificates as permitted by
Sections 2.1 and 3.1, the Trustee shall have the right to decline to
authenticate such Securities if the issue of such Securities pursuant to this
Indenture will adversely affect the Trustee's own rights, duties or immunities
under this Indenture or otherwise in a manner which is not reasonably acceptable
to the Trustee. Notwithstanding the generality of the foregoing, the Trustee
will not be required to authenticate Securities denominated in a Foreign
Currency if the Trustee reasonably believes that it would be unable to perform
its duties with respect to such Securities.
Notwithstanding the provisions of Section 3.1 and of the two preceding
paragraphs, if all of the Securities of any series are not to be issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 at or prior to the time of the authentication
of each Security of such series if such Officers' Certificate is delivered at or
prior to the authentication upon original issuance of the first Security of such
series to be issued.
If the Company shall establish pursuant to Section 3.1 that the
Securities of a series are to be issued in whole or in part in global form, then
the Company shall execute and the Trustee shall, in accordance with this Section
and the Company Order with respect to such series, authenticate and deliver one
or more Securities in global form that (i) shall represent and shall be
denominated in an amount equal to the aggregate principal amount of the
Outstanding Securities of such series to be represented by such Security or
Securities in global form, (ii) shall be registered, if a Registered Security,
in the name of the Depositary for such Security or Securities in global form or
the nominee of such Depositary and (iii) shall be delivered by the Trustee to
such Depositary or pursuant to such Depositary's instruction.
Each Depositary designated pursuant to Section 3.1 for a Registered
Security in global form must, at the time of its designation and at all times
while it serves as Depositary, be a clearing agency registered under the
Securities Exchange Act of 1934 and any other applicable statute or regulation.
The Trustee shall have no responsibility to determine if the Depositary is so
registered. Each Depositary shall enter into an agreement with the Trustee
governing the respective duties and rights of such Depositary and the Trustee
with regard to Securities issued in global form.
-30-
<PAGE>
Each Registered Security shall be dated the date of its authentication
and each Bearer Security (including a Bearer Security represented by a temporary
global Security) shall be dated as of the date specified as contemplated by
Section 3.1.
No Security or coupon appertaining thereto shall be entitled to any
benefits under this Indenture or be valid or obligatory for any purpose until
such Security is authenticated by the manual signature of one of the authorized
signatories of the Trustee or an Authenticating Agent. Such signature upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered under this Indenture and is entitled
to the benefits of this Indenture. Except as permitted by Section 3.6 or 3.7,
the Trustee shall not authenticate and deliver any Bearer Security unless all
appurtenant coupons for interest then matured have been detached and cancelled.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9 together with a written statement (which need not comply
with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating
that such Security has never been issued and sold by the Company, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall not be entitled to the benefits
of this Indenture.
Section 3.4. Temporary Securities. Pending the preparation of
definitive Securities of any series, the Company may execute and, upon Company
Order, the Trustee shall authenticate and deliver temporary Securities of such
series which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor and form,
with or without coupons, of the definitive Securities in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities and coupons, if
any. In the case of Securities of any series, such temporary Securities may be
in global form.
Except in the case of temporary Securities in global form, each of
which shall be exchanged in accordance with the provisions thereof, if temporary
Securities of any series are issued, the Company will cause permanent Securities
of such series to be prepared without unreasonable delay. After preparation of
such permanent Securities, the temporary Securities shall be exchangeable for
such permanent Securities of
-31-
<PAGE>
like tenor upon surrender of the temporary Securities of such series at the
office or agency of the Company pursuant to Section 9.1 in a Place of Payment
for such series, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Securities of any series (accompanied by any
unmatured coupons appertaining thereto), the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of permanent Securities of the same series of authorized denominations
and of like tenor; provided, however, that no permanent Bearer Security shall be
delivered in exchange for a temporary Registered Security; and provided further
that no permanent Bearer Security shall be delivered in exchange for a temporary
Bearer Security unless the Trustee shall have received from the person entitled
to receive the definitive Bearer Security a certificate substantially in the
form approved in the Officers' Certificate relating thereto and such delivery
shall occur only outside the United States. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as permanent Securities of such series except as otherwise
specified as contemplated by Section 3.1.
Section 3.5. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
or in any office or agency to be maintained by the Company in accordance with
Section 9.1 in a Place of Payment a register (the "Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Registered Securities and the registration of transfers
of Registered Securities. The Register shall be in written form or any other
form capable of being converted into written form within a reasonable time. The
Trustee is hereby appointed "Registrar" for the purpose of registering
Registered Securities and transfers of Registered Securities as herein provided.
Upon surrender for registration of transfer of any Registered Security
of any series at the office or agency maintained pursuant to Section 9.1 in a
Place of Payment for that series, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor.
Bearer Securities or any coupons appertaining thereto shall be
transferable by delivery.
At the option of the Holder, Registered Securities of any series
(except a Registered Security in global form) may be exchanged for other
Registered Securities of the same series, of
-32-
<PAGE>
any authorized denominations and of a like aggregate principal amount containing
identical terms and provisions, upon surrender of the Registered Securities to
be exchanged at such office or agency. Whenever any Registered Securities are
so surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Registered Securities which the Holder making the
exchange is entitled to receive. Unless otherwise specified as contemplated by
Section 3.1, Bearer Securities may not be issued in exchange for Registered
Securities.
Unless otherwise specified as contemplated by Section 3.1, at the
option of the Holder, Bearer Securities of such series may be exchanged for
Registered Securities (if the Securities of such series are issuable in
registered form) or Bearer Securities (if Bearer Securities of such series are
issuable in more than one denomination and such exchanges are permitted by such
series) of the same series, of any authorized denominations and of like tenor
and aggregate principal amount, upon surrender of the Bearer Securities to be
exchanged at any such office or agency, with all unmatured coupons and all
matured coupons in default thereto appertaining. If the Holder of a Bearer
Security is unable to produce any such unmatured coupon or coupons or matured
coupon or coupons in default, such exchange may be effected if the Bearer
Securities are accompanied by payment in funds acceptable to the Company and the
Trustee in an amount equal to the face amount of such missing coupon or coupons,
or the surrender of such missing coupon or coupons may be waived by the Company
and the Trustee if there be furnished to them such security or indemnity as they
may require to save each of them and any Paying Agent harmless. If thereafter
the Holder of such Security shall surrender to any Paying Agent any such missing
coupon in respect of which such a payment shall have been made, such Holder
shall be entitled to receive the amount of such payment; provided, however,
that, except as otherwise provided in Section 9.1, interest represented by
coupons shall be payable only upon presentation and surrender of those coupons
at an office or agency located outside the United States. Notwithstanding the
foregoing, in case any Bearer Security of any series is surrendered at any such
office or agency in exchange for a Registered Security of the same series after
the close of business at such office or agency on (i) any Regular Record Date
and before the opening of business at such office or agency on the relevant
Interest Payment Date, or (ii) any Special Record Date and before the opening of
business at such office or agency on the related date for payment of Defaulted
Interest, such Bearer Security shall be surrendered without the coupon relating
to such Interest Payment Date or proposed date of payment, as the case may be
(or, if such coupon is so surrendered with such Bearer Security, such coupon
shall be returned to the person so surrendering the Bearer Security), and
interest or Defaulted
-33-
<PAGE>
Interest, as the case may be, will not be payable on such Interest Payment Date
or proposed date for payment, as the case may be, in respect of the Registered
Security issued in exchange for such Bearer Security, but will be payable only
to the Holder of such coupon, when due in accordance with the provisions of this
Indenture.
Notwithstanding any other provision (other than the provisions set
forth in the seventh and eighth paragraphs of this Section) of this Section,
unless and until it is exchanged in whole or in part for Securities in
certificated form, a Security in global form representing all or a portion of
the Securities of a series may not be transferred except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary for such series or
a nominee of such successor Depositary.
If at any time the Depositary for the Securities of a series notifies
the Company that it is unwilling or unable to continue as Depositary for the
Securities of such series or if at any time the Depositary for the Securities of
such series shall no longer be eligible under Section 3.3, the Company shall
appoint a successor Depositary with respect to the Securities of such series.
If a successor Depositary for the Securities of such series is not appointed by
the Company within 90 days after the issuer receives such notice or becomes
aware of such ineligibility, the Company's election pursuant to Section 3.1
shall no longer be effective with respect to the Securities of such series and
the Company shall execute, and the Trustee, upon receipt of a Company Order for
the authentication and delivery of certificated Securities of such series of
like tenor, shall authenticate and deliver Securities of such series of like
tenor in certificated form, in authorized denominations and in an aggregate
principal amount equal to the principal amount of the Security or Securities of
such series of like tenor in global form in exchange for such Security or
Securities in global form.
The Company may at any time in its sole discretion determine that
Securities of a series issued in global form shall no longer be represented by
such a Security or Securities in global form. In such event the Company shall
execute, and the Trustee, upon receipt of a Company Order for the authentication
and delivery of certificated Securities of such series of like tenor, shall
authenticate and deliver, Securities of such series of like tenor in
certificated form, in authorized denominations and in an aggregate principal
amount equal to the principal amount of the Security or Securities of such
series of like tenor in global form in exchange for such Security or Securities
in global form.
-34-
<PAGE>
If specified by the Company pursuant to Section 3.1 with respect to a
series of Securities, the Depositary for such series may surrender a Security in
global form of such series in exchange in whole or in part for Securities of
such series in certificated form on such terms as are acceptable to the Company
and such Depositary. Thereupon, the Company shall execute, and the Trustee
shall authenticate and deliver, without service charge,
(i) to each Person specified by such Depositary a new certificated
Security or Securities of the same series of like tenor, of any authorized
denomination as requested by such Person in aggregate principal amount
equal to and in exchange for such Person's beneficial interest in the
Security in global form; and
(ii) to such Depositary a new Security in global form of like tenor in
a denomination equal to the difference, if any, between the principal
amount of the surrendered Security in global form and the aggregate
principal amount of certificated Securities delivered to Holders thereof.
Upon the exchange of a Security in global form for Securities in
certificated form, such Security in global form shall be cancelled by the
Trustee. Unless expressly provided with respect to the Securities of any series
that such Security may be exchanged for Bearer Securities, Securities in
certificated form issued in exchange for a Security in global form pursuant to
this Section shall be registered in such names and in such authorized
denominations as the Depositary for such Security in global form, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Securities to the Persons
in whose names such Securities are so registered.
Whenever any Securities are surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or upon any
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the Registrar or
the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to those of the Company, the Registrar and the
-35-
<PAGE>
Trustee requiring such written instrument of transfer duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
for any exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration or transfer or exchange of Securities, other
than exchanges pursuant to Section 3.4 or 10.7 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of, or exchange any Securities for a period beginning at the opening of business
15 days before any selection for redemption of Securities of like tenor and of
the series of which such Security is a part and ending at the close of business
on the earliest date on which the relevant notice of redemption is deemed to
have been given to all Holders of Securities of like tenor and of such series to
be redeemed; (ii) to register the transfer of or exchange any Registered
Security so selected for redemption, in whole or in part, except the unredeemed
portion of any Security being redeemed in part; or (iii) to exchange any Bearer
Security so selected for redemption, except that such a Bearer Security may be
exchanged for a Registered Security of that series and like tenor; provided that
such Registered Security shall be simultaneously surrendered for redemption.
Section 3.6. Replacement Securities. If a mutilated Security or a
Security with a mutilated coupon appertaining to it is surrendered to the
Trustee, together with, in proper cases, such security or indemnity as may be
required by the Company or the Trustee to save each of them harmless, the
Company shall execute and the Trustee shall authenticate and deliver a
replacement Registered Security, if such surrendered Security was a Registered
Security, or a replacement Bearer Security with coupons corresponding to the
coupons appertaining to the surrendered Security, if such surrendered Security
was a Bearer Security, of the same series and date of maturity, if the Trustee's
requirements are met.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
or Security with a destroyed, lost or stolen coupon and (ii) such security or
indemnity as may be required by them to save each of them and any agent of
either of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security or coupon has been acquired by a bona fide purchaser,
the Company shall execute and the Trustee shall authenticate and deliver in lieu
of any such destroyed, lost or stolen Security or in exchange for the Security
to which
-36-
<PAGE>
a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not
destroyed, lost or stolen), a replacement Registered Security, if such Holder's
claim appertains to a Registered Security, or a replacement Bearer Security with
coupons corresponding to the coupons appertaining to the destroyed, lost or
stolen Bearer Security or the Bearer Security to which such lost, destroyed or
stolen coupon appertains, if such Holder's claim appertains to a Bearer
Security, of the same series and principal amount, containing identical terms
and provisions and bearing a number not contemporaneously outstanding with
coupons corresponding to the coupons, if any, appertaining to the destroyed,
lost or stolen Security.
In case any such mutilated, destroyed, lost or stolen Security or
coupon has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security or coupon, pay such Security
or coupon; provided, however, that payment of principal of and any premium or
interest on Bearer Securities shall, except as otherwise provided in Section
9.1, be payable only at an office or agency located outside the United States
and, unless otherwise specified as contemplated by Section 3.1, any interest on
Bearer Securities shall be payable only upon presentation and surrender of the
coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued
pursuant to this Section in lieu of any destroyed, lost or stolen Security, or
in exchange for a Security to which a destroyed, lost or stolen coupon
appertains, shall constitute an original additional contractual obligation of
the Company, whether or not the destroyed, lost or stolen Security and its
coupon, if any, or the destroyed, lost or stolen coupon, shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that
series and their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities or coupons.
Section 3.7. Payment of Interest; Interest Rights Preserved. (a)
Unless otherwise provided as contemplated by Section 3.1, interest, if any, on
any Registered Security which
-37-
<PAGE>
is payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest at the office or agency maintained for such
purpose pursuant to Section 9.1; provided, however, that, at the option of the
Company, interest on any series of Registered Securities that bear interest may
be paid (i) by check mailed to the address of the Person entitled thereto as it
shall appear on the Register of Holders of Securities of such series or (ii) to
the extent specified as contemplated by Section 3.1, by wire transfer to an
account maintained by the Person entitled thereto as specified in the Register
of Holders of Securities of such series.
Unless otherwise provided as contemplated by Section 3.1, (i)
interest, if any, on Bearer Securities shall be paid only against presentation
and surrender of the coupons for such interest installments as are evidenced
thereby as they mature and (ii) original issue discount, if any, on Bearer
Securities shall be paid only against presentation and surrender of such
Securities; in either case at the office of a Paying Agent located outside the
United States, unless the Company shall have otherwise instructed the Trustee in
writing provided that any such instruction for payment in the United States does
not cause any Bearer Security to be treated as a "registration-required
obligation" under the United States law and regulations. The interest, if any,
on any temporary Bearer Security shall be paid, as to any installment of
interest evidenced by a coupon attached thereto only upon presentation and
surrender of such coupon and, as to other installments of interest, only upon
presentation of such Security for notation thereon of the payment of such
interest. If at the time a payment of principal of or interest, if any, on a
Bearer Security or coupon shall become due, the payment of the full amount so
payable at the office or offices of all the Paying Agents outside the United
States is illegal or effectively precluded because of the imposition of exchange
controls or other similar restrictions on the payment of such amount in Dollars,
then the Company may instruct the Trustee to make such payments at a Paying
Agent located in the United States, provided that provision for such payment in
the United States would not cause such Bearer Security to be treated as a
"registration-required obligation" under the United States law and regulations.
(b) Unless otherwise provided as contemplated by Section 3.1, any
interest on any Registered Security of any series which is payable, but is not
punctually paid or duly provided for, on any interest payment date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having
-38-
<PAGE>
been such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Registered Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause (1) provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder of Registered Securities of such series at
his address as it appears in the Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall
no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest to the
Persons in whose names the Registered Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a specified date in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause (2), such manner of payment shall be deemed practicable by
the Trustee.
-39-
<PAGE>
(c) Subject to the foregoing provisions of this Section and Section
3.5, each Security delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 3.8. Persons Deemed Owners. Prior to due presentment of any
Registered Security for registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the Person in whose name such
Registered Security is registered as the owner of such Registered Security for
the purpose of receiving payment of principal of, premium, if any, and (subject
to Section 3.7) interest on such Registered Security and for all other purposes
whatsoever, whether or not such Registered Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of any Bearer Security and the bearer of any coupon as the
absolute owner of such Bearer Security or coupon for the purpose of receiving
payment thereof or on account thereof and for all other purposes whatsoever,
whether or not such Bearer Security or coupon be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
None of the Company, the Trustee or any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of a
Security in global form, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. Notwithstanding the
foregoing, with respect to any Security in global form, nothing herein shall
prevent the Company or the Trustee, or any agent of the Company or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by any Depositary (or its nominee), as a Holder, with respect to such
Security in global form or impair, as between such Depositary and owners of
beneficial interests in such Security in global form, the operation of customary
practices governing the exercise of the rights of such Depositary (or its
nominee) as Holder of such Security in global form.
Section 3.9. Cancellation. The Company at any time may deliver
Securities and coupons to the Trustee for cancellation. The Registrar and any
Paying Agent shall forward to the Trustee any Securities and coupons surrendered
to them for replacement, for registration of transfer, or for exchange or
payment. The Trustee shall cancel all Securities and coupons
-40-
<PAGE>
surrendered for replacement, for registration of transfer, or for exchange,
payment, redemption or cancellation and may dispose of cancelled Securities and
coupons and issue a certificate of destruction to the Company. The Company may
not issue new Securities to replace Securities that it has paid or delivered to
the Trustee for cancellation, except as expressly permitted in the terms of
Securities for any particular series or as permitted pursuant to the terms of
this Indenture.
Section 3.10. Computation of Interest. Except as otherwise specified
as contemplated by Section 3.1, (i) interest on any Securities that bear
interest at a fixed rate shall be computed on the basis of a 360-day year of
twelve 30-day months and, for any period shorter than a full calendar month, on
the basis of the actual number of days elapsed in such period, and (ii) interest
on any Securities that bear interest at a variable rate shall be computed on the
basis of the actual number of days in an interest period divided by 360 or the
actual number of days in the year.
Section 3.11. Currency and Manner of Payment in Respect of
Securities. (a) Unless otherwise specified with respect to any Securities
pursuant to Section 3.1, with respect to Registered Securities of any series not
permitting the election provided for in paragraph (b) below or the Holders of
which have not made the election provided for in paragraph (b) below, and with
respect to Bearer Securities of any series, except as provided in paragraph (d)
below, payment of the principal of, premium, if any, and interest, if any, on
any Registered or Bearer Security of such series will be made in the currency or
currencies or currency unit or units in which such Registered Security or Bearer
Security, as the case may be, is payable. The provisions of this Section 3.11
may be modified or superseded pursuant to Section 3.1 with respect to any
Securities. For all purposes of this Indenture, currency units shall include
any composite currency.
(b) It may be provided pursuant to Section 3.1, with respect to
Registered Securities of any series, that Holders shall have the option, subject
to paragraphs (d) and (e) below, to receive payments of principal of, premium,
if any, or interest, if any, on such Registered Securities in any of the
currencies or currency units which may be designated for such election by
delivering to the Trustee (or the applicable Paying Agent) a written election
with signature guarantees and in the applicable form established pursuant to
Section 3.1, not later than the close of business on the Election Date
immediately preceding the applicable payment date. If a Holder so elects to
receive such payments in any such currency or currency unit, such election will
remain in effect for such Holder or any transferee of such Holder until changed
by such Holder or such transferee by
-41-
<PAGE>
written notice to the Trustee (or any applicable Paying Agent) for such series
of Registered Securities (but any such change must be made not later than the
close of business on the Election Date immediately preceding the next payment
date to be effective for the payment to be made on such payment date, and no
such change of election may be made with respect to payments to be made on any
Registered Security of such series with respect to which an Event of Default has
occurred or with respect to which the Company has deposited funds pursuant to
Article 4 or with respect to which a notice of redemption has been given by the
Company). Any Holder of any such Registered Security who shall not have
delivered any such election to the Trustee (or any applicable Paying Agent) not
later than the close of business on the applicable Election Date will be paid
the amount due on the applicable payment date in the relevant currency or
currency unit as provided in Section 3.11(a). The Trustee (or the applicable
Paying Agent) shall notify the Exchange Rate Agent as soon as practicable after
the Election Date of the aggregate principal amount of Registered Securities for
which Holders have made such written election.
(c) If the election referred to in paragraph (b) above has been
provided for with respect to any Registered Securities of a series pursuant to
Section 3.1, then, unless otherwise specified pursuant to Section 3.1 with
respect to any such Registered Securities, not later than the fourth Business
Day after the Election Date for each payment date for such Registered
Securities, the Exchange Rate Agent will deliver to the Company a written notice
specifying, in the currency or currencies or currency unit or units in which
Registered Securities of such series are payable, the respective aggregate
amounts of principal of, premium, if any, and interest, if any, on such
Registered Securities to be paid on such payment date, and specifying the
amounts in such currency or currencies or currency unit or units so payable in
respect of such Registered Securities as to which the Holders of Registered
Securities denominated in any currency or currencies or currency unit or units
shall have elected to be paid in another currency or currency unit as provided
in paragraph (b) above. If the election referred to in paragraph (b) above has
been provided for with respect to any Registered Securities of a series pursuant
to Section 3.1, and if at least one Holder has made such election, then, unless
otherwise specified pursuant to Section 3.1, on the second Business Day
preceding such payment date the Company will deliver to the Trustee (or the
applicable Paying Agent) an Exchange Rate Officers' Certificate in respect of
the Dollar, Foreign Currency or Currencies, ECU or other currency unit payments
to be made on such payment date. Unless otherwise specified pursuant to Section
3.1, the Dollar, Foreign Currency or Currencies, ECU or other currency unit
amount receivable by Holders of Registered Securities who have elected payment
in a currency or currency
-42-
<PAGE>
unit as provided in paragraph (b) above shall be determined by the Company on
the basis of the applicable Market Exchange Rate in effect on the second
Business Day (the "Valuation Date") immediately preceding each payment date, and
such determination shall be conclusive and binding for all purposes, absent
manifest error.
(d) If a Conversion Event occurs with respect to a Foreign Currency,
ECU or any other currency unit in which any of the Securities are denominated or
payable otherwise than pursuant to an election provided for pursuant to
paragraph (b) above, then, with respect to each date for the payment of
principal of, premium, if any, and interest, if any, on the applicable
Securities denominated or payable in such Foreign Currency, ECU or such other
currency unit occurring after the last date on which such Foreign Currency, ECU
or such other currency unit was used (the "Conversion Date"), the Dollar shall
be the currency of payment for use on each such payment date (but such Foreign
Currency, ECU or such other currency unit that was previously the currency of
payment shall, at the Company's election, resume being the currency of payment
on the first such payment date preceded by 15 Business Days during which the
circumstances which gave rise to the Dollar becoming such currency no longer
prevail). Unless otherwise specified pursuant to Section 3.1, the Dollar amount
to be paid by the Company to the Trustee or any applicable Paying Agent and by
the Trustee or any applicable Paying Agent to the Holders of such Securities
with respect to such payment date shall be, in the case of a Foreign Currency
other than a currency unit, the Dollar Equivalent of the Foreign Currency or, in
the case of a Foreign Currency that is a currency unit, the Dollar Equivalent of
the Currency Unit, in each case as determined by the Exchange Rate Agent in the
manner provided in paragraph (f) or (g) below.
(e) Unless otherwise specified pursuant to Section 3.1, if the Holder
of a Registered Security denominated in any currency or currency unit shall have
elected to be paid in another currency or currency unit or in other currencies
as provided in paragraph (b) above, and (i) a Conversion Event occurs with
respect to any such elected currency or currency unit, such Holder shall receive
payment in the currency or currency unit in which payment would have been made
in the absence of such election and (ii) if a Conversion Event occurs with
respect to the currency or currency unit in which payment would have been made
in the absence of such election, such Holder shall receive payment in Dollars as
provided in paragraph (d) of this Section 3.11 (but, subject to any contravening
valid election pursuant to paragraph (b) above, the elected payment currency or
currency unit, in the case of the circumstances described in clause (i) above,
or the payment currency or currency unit in the absence of such election, in the
case of the
-43-
<PAGE>
circumstances described in clause (ii) above, shall, at the Company's election,
as the case may be, resume being the currency or currency unit of payment with
respect to Holders who have so elected, but only with respect to payments on
payment dates preceded by 15 Business Days during which the circumstances which
gave rise to such currency or currency unit, in the case of the circumstances
described in clause (i) above, or the Dollar, in the case of the circumstances
described in clause (ii) above, becoming the currency or currency unit, as
applicable, of payment, no longer prevail).
(f) The "Dollar Equivalent of the Foreign Currency" shall be
determined by the Exchange Rate Agent and shall be obtained for each subsequent
payment date by the Exchange Rate Agent by converting the specified Foreign
Currency into Dollars at the Market Exchange Rate on the Conversion Date.
(g) The "Dollar Equivalent of the Currency Unit" shall be determined
by the Exchange Rate Agent and, subject to the provisions of paragraph (h)
below, shall be the sum of each amount obtained by converting the Specified
Amount of each Component Currency (as each such term is defined in paragraph (h)
below) into Dollars at the Market Exchange Rate for such Component Currency on
the Valuation Date with respect to each payment.
(h) For purposes of this Section 3.11 the following terms shall have
the following meanings:
A "Component Currency" shall mean any currency which, on the
Conversion Date, was a component currency of the relevant currency unit,
including, but not limited to, ECU.
"Election Date" shall mean the Regular Record Date for the applicable
series of Registered Securities as specified pursuant to Section 3.1 by which
the written election referred to in Section 3.11(b) may be made.
A "Specified Amount" of a Component Currency shall mean the number of
units of such Component Currency or fractions thereof which such Component
Currency represented in the relevant currency unit, including, but not limited
to, ECU, on the Conversion Date. If after the Conversion Date the official unit
of any Component Currency is altered by way of combination or subdivision, the
Specified Amount of such Component Currency shall be divided or multiplied in
the same proportion. If after the Conversion Date two or more Component
Currencies are consolidated into a single currency, the respective Specified
Amounts of such Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the respective Specified Amounts of such
consolidated Component Currencies
-44-
<PAGE>
expressed in such single currency, and such amount shall thereafter be a
Specified Amount and such single currency shall thereafter be a Component
Currency. If after the Conversion Date any Component Currency shall be divided
into two or more currencies, the Specified Amount of such Component Currency
shall be replaced by specified amounts of such two or more currencies, the sum
of which, at the Market Exchange Rate of such two or more currencies on the date
of such replacement, shall be equal to the Specified Amount of such former
Component Currency and such amounts shall thereafter be Specified Amounts and
such currencies shall thereafter be Component Currencies. If, after the
Conversion Date of the relevant currency unit, including, but not limited to,
ECU, a Conversion Event (other than any event referred to above in this
definition of "Specified Amount") occurs with respect to any Component Currency
of such currency unit and is continuing on the applicable Valuation Date, the
Specified Amount of such Component Currency shall, for purposes of calculating
the Dollar Equivalent of the Currency Unit, be converted into Dollars at the
Market Exchange Rate in effect on the Conversion Date of such Component
Currency.
All decisions and determinations of the Exchange Rate Agent regarding
the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the
Currency Unit, the Market Exchange Rate and changes in the Specified Amounts as
specified above shall be in its sole discretion and shall, in the absence of
manifest error, be conclusive for all purposes and irrevocably binding upon the
Company, the Trustee (and any applicable Paying Agent) and all Holders of
Securities denominated or payable in the relevant currency, currencies or
currency units. The Exchange Rate Agent shall promptly give written notice to
the Company and the Trustee of any such decision or determination.
In the event that the Company determines in good faith that a
Conversion Event has occurred with respect to a Foreign Currency, the Company
will promptly give written notice thereof to the Trustee (or any applicable
Paying Agent) and to the Exchange Rate Agent (and the Trustee (or such Paying
Agent) will promptly thereafter give notice in the manner provided in Section
1.6 to the affected Holders) specifying the Conversion Date. In the event the
Company so determines that a Conversion Event has occurred with respect to ECU
or any other currency unit in which Securities are denominated or payable, the
Company will promptly give written notice thereof to the Trustee (or any
applicable Paying Agent) and to the Exchange Rate Agent (and the Trustee (or
such Paying Agent) will promptly thereafter give notice in the manner provided
in Section 1.6 to the affected Holders) specifying the Conversion Date and the
Specified Amount of each Component Currency on the Conversion Date. In the
event the Company determines in good faith that any subsequent change in any
Component Currency as set forth in the definition of
-45-
<PAGE>
Specified Amount above has occurred, the Company will similarly give written
notice to the Trustee (or any applicable Paying Agent) and to the Exchange Rate
Agent.
The Trustee of the appropriate series of Securities shall be fully
justified and protected in relying and acting upon information received by it
from the Company and the Exchange Rate Agent and shall not otherwise have any
duty or obligation to determine the accuracy or validity of such information
independent of the Company or the Exchange Rate Agent.
Section 3.12. Appointment and Resignation of Exchange Rate Agent.
(a) Unless otherwise specified pursuant to Section 3.1, if and so long as the
Securities of any series (i) are denominated in a currency other than Dollars or
(ii) may be payable in a currency other than Dollars, or so long as it is
required under any other provision of this Indenture, then the Company will
maintain with respect to each such series of Securities, or as so required, at
least one Exchange Rate Agent. The Company will cause the Exchange Rate Agent
to make the necessary foreign exchange determinations at the time and in the
manner specified pursuant to Section 3.11 for the purpose of determining the
applicable rate of exchange and, if applicable, for the purpose of converting
the issued currency or currencies or currency unit or units into the applicable
payment currency or currency unit for the payment of principal, premium, if any,
and interest, if any, pursuant to Section 3.11.
(b) No resignation of the Exchange Rate Agent and no appointment of a
successor Exchange Rate Agent pursuant to this Section shall become effective
until the acceptance of appointment by the successor Exchange Rate Agent as
evidenced by a written instrument delivered to the Company and the Trustee of
the appropriate series of Securities accepting such appointment executed by the
successor Exchange Rate Agent.
(c) If the Exchange Rate Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Exchange
Rate Agency for any cause, with respect to the Securities of one or more series,
the Company, by or pursuant to a Board Resolution, shall promptly appoint a
successor Exchange Rate Agent or Exchange Rate Agents with respect to the
Securities of that or those series (it being understood that any such successor
Exchange Rate Agent may be appointed with respect to the Securities of one or
more or all of such series and that, unless otherwise specified pursuant to
Section 3.1, at any time there shall only be one Exchange Rate Agent with
respect to the Securities of any particular series that are originally issued by
the Company on the same date and that are initially denominated and/or payable
in the same currency or currencies or currency unit or units).
-46-
<PAGE>
Section 3.13. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers (in addition to the other identification numbers
priced on the Securities) in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE 4
Satisfaction, Discharge and Defeasance
--------------------------------------
Section 4.1. Termination of Company's Obligations Under the
Indenture. Except as otherwise provided as contemplated by Section 3.1, this
Indenture shall upon Company Request cease to be of further effect with respect
to Securities of or within any series and any coupons appertaining thereto
(except as to any surviving rights of registration of transfer or exchange of
such Securities and replacement of such Securities which may have been lost,
stolen or mutilated as herein expressly provided for) and the Trustee, at the
expense of the Company shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to such Securities and
any coupons appertaining thereto when
(1) either
(A) all such Securities previously authenticated and delivered
and all coupons appertaining thereto (other than (i) such coupons
appertaining to Bearer Securities surrendered in exchange for
Registered Securities and maturing after such exchange, surrender of
which is not required or has been waived as provided in Section 3.5,
(ii) such Securities and coupons which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section
3.6, (iii) such coupons appertaining to Bearer Securities called for
redemption and maturing after the relevant Redemption Date, surrender
of which has been waived as provided in Section 10.6 and (iv) such
Securities and coupons for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 9.2) have been delivered to the Trustee for
cancellation; or
-47-
<PAGE>
(B) all Securities of such series and, in the case of (i) or (ii)
below, any coupons appertaining thereto not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount in the currency or
currencies or currency unit or units in which the Securities of such
series are payable, sufficient to pay and discharge the entire
indebtedness on such Securities and such coupons not theretofore
delivered to the Trustee for cancellation, for principal, premium, if
any, and interest, with respect thereto, to the date of such deposit
(in the case of Securities which have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture as to such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligation
of the Company to the Trustee and any predecessor Trustee under Section 6.9, the
obligations of the Company to any Authenticating Agent under Section 6.14 and,
if money shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 4.2 and
the last paragraph of Section 9.2 shall survive.
Section 4.2. Application of Trust Funds. Subject to the provisions
of the last paragraph of Section 9.2, all money deposited with the Trustee
pursuant to Section 4.1 shall be held
-48-
<PAGE>
in trust and applied by it, in accordance with the provisions of the Securities,
the coupons and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal,
premium, if any, and any interest for whose payment such money has been
deposited with or received by the Trustee, but such money need not be segregated
from other funds except to the extent required by law.
Section 4.3. Applicability of Defeasance Provisions; Company's Option
to Effect Defeasance or Covenant Defeasance. If pursuant to Section 3.1
provision is made for either or both of (i) defeasance of the Securities of or
within a series under Section 4.4 or (ii) covenant defeasance of the Securities
of or within a series under Section 4.5, then the provisions of such Section or
Sections, as the case may be, together with the provisions of Sections 4.6
through 4.9 inclusive, with such modifications thereto as may be specified
pursuant to Section 3.1 with respect to any Securities, shall be applicable to
such Securities and any coupons appertaining thereto, and the Company may at its
option by Board Resolution, at any time, with respect to such Securities and any
coupons appertaining thereto, elect to have Section 4.4 (if applicable) or
Section 4.5 (if applicable) be applied to such Outstanding Securities and any
coupons appertaining thereto upon compliance with the conditions set forth below
in this Article.
Section 4.4. Defeasance and Discharge. Upon the Company's exercise
of the option specified in Section 4.3 applicable to this Section with respect
to the Securities of or within a series, the Company shall be deemed to have
been discharged from its obligations with respect to such Securities and any
coupons appertaining thereto on the date the conditions set forth in Section 4.6
are satisfied (hereinafter "defeasance"). For this purpose, such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by such Securities and any coupons appertaining thereto
which shall thereafter be deemed to be "Outstanding" only for the purposes of
Section 4.7 and the other Sections of this Indenture referred to in clause (ii)
of this Section, and to have satisfied all its other obligations under such
Securities and any coupons appertaining thereto and this Indenture insofar as
such Securities and any coupons appertaining thereto are concerned (and the
Trustee, at the expense of the Company, shall on Company Order execute proper
instruments acknowledging the same), except the following which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of Holders of
such Securities and any coupons appertaining thereto to receive, solely from the
trust funds described in Section 4.6(a) and as more fully set forth in such
Section,
-49-
<PAGE>
payments in respect of the principal of, premium if any, and interest, if any,
on such Securities or any coupons appertaining thereto when such payments are
due; (ii) the Company's obligations with respect to such Securities under
Sections 3.5, 3.6, 9.1 and 9.2 and with respect to the payment of additional
amounts if any, payable with respect to such Securities as specified pursuant to
Section 3.l(b)(16); (iii) the rights, powers, trusts, duties and immunities of
the Trustee hereunder; and (iv) this Article 4. Subject to compliance with this
Article 4, the Company may exercise its option under this Section
notwithstanding the prior exercise of its option under Section 4.5 with respect
to such Securities and any coupons appertaining thereto. Following a
defeasance, payment of such Securities may not be accelerated because of an
Event of Default.
Section 4.5. Covenant Defeasance. Upon the Company's exercise of the
option specified in Section 4.3 applicable to this Section with respect to any
Securities of or within a series, the Company shall be released from its
obligations under Article 7 and Sections 9.3 and 9.4, and, if specified pursuant
to Section 3.1, its obligations under any other covenant, with respect to such
Securities and any coupons appertaining thereto on and after the date the
conditions set forth in Section 4.6 are satisfied (hereinafter, "covenant
defeasance"), and such Securities and any coupons appertaining thereto shall
thereafter be deemed to be not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with Article 7 and Sections 9.3 and 9.4, or such other
covenant, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to such Securities and any coupons appertaining thereto, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such Section or such other covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
Section or such other covenant or by reason of reference in any such Section or
such other covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 5.1(3) or 5.1(6) or otherwise, as the case may be, but, except as
specified above, the remainder of this Indenture and such Securities and any
coupons appertaining thereto shall be unaffected thereby.
Section 4.6. Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to application of Section 4.4 or Section 4.5
to any Securities of or within a series and any coupons appertaining thereto:
-50-
<PAGE>
(a) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee (or another trustee satisfying the
requirements of Section 6.11 who shall agree to comply with, and shall be
entitled to the benefits of, the provisions of Sections 4.3 through 4.9
inclusive and the last paragraph of Section 9.2 applicable to the Trustee,
for purposes of such Sections also a "Trustee") as trust funds in trust for
the purpose of making the payments referred to in clauses (x) and (y) of
this Section 4.6(a), specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Securities and any coupons
appertaining thereto, with instructions to the Trustee as to the
application thereof, (A) money in an amount (in such currency, currencies
or currency unit in which such Securities and any coupons appertaining
thereto are then specified as payable at Maturity), or (B) if Securities of
such series are not subject to repayment at the option of Holders,
Government Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment referred to in clause (x)
or (y) of this Section 4.6(a), money in an amount or (C) a combination
thereof in an amount, sufficient, in the opinion of a nationally recognized
firm of independent certified public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee to pay and discharge, (x) the
principal of, premium, if any, and interest, if any, on such Securities and
any coupons appertaining thereto on the Maturity of such principal or
installment of principal or interest and (y) any mandatory sinking fund
payments applicable to such Securities on the day on which such payments
are due and payable in accordance with the terms of this Indenture and such
Securities and any coupons appertaining thereto. Before such a deposit the
Company may make arrangements satisfactory to the Trustee for the
redemption of Securities at a future date or dates in accordance with
Article 10 which shall be given effect in applying the foregoing.
(b) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default or Event of Default under,
this Indenture or result in a breach or violation of, or constitute a
default under, any other material agreement or instrument to which the
Company is a party or by which it is bound.
(c) No Default or Event of Default under Section 5.1(5) or 5.1(6) with
respect to such Securities and any coupons appertaining thereto shall have
occurred and be continuing during the period commencing on the date of such
-51-
<PAGE>
deposit and ending on the 91st day after such date (it being understood
that this condition shall not be deemed satisfied until the expiration of
such period).
(d) In the case of an election under Section 4.4, the Company shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel to the effect that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or (ii) since the
date of execution of this Indenture, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and
based thereon such opinion shall confirm that, the Holders of such
Securities and any coupons appertaining thereto will not recognize income,
gain or loss for Federal income tax purposes as a result of such defeasance
and will be subject to Federal income tax on the same amount and in the
same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred.
(e) In the case of an election under Section 4.5, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of such Securities and any coupons appertaining thereto will not
recognize income, gain or loss for Federal income tax purposes as a result
of such covenant defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred.
(f) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance under Section 4.4 or the covenant defeasance
under Section 4.5 (as the case may be) have been complied with and an
Opinion of Counsel to the effect that either (i) as a result of a deposit
pursuant to subsection (a) above and the, related exercise of the Company's
option under Section 4.4 or Section 4.5 (as the case may be), registration
is not required under the Investment Company Act of 1940, as amended, by
the Company, with respect to the trust funds representing such deposit or
by the trustee for such trust funds or (ii) all necessary registrations
under said act have been effected.
(g) Such defeasance or covenant defeasance shall be effected in
compliance with any additional or substitute terms, conditions or
limitations which may be imposed on the Company in connection therewith as
contemplated by Section 3.1.
-52-
<PAGE>
Section 4.7. Deposited Money and Government Obligations to Be Held in
Trust. Subject to the provisions of the last paragraph of Section 9.2, all
money and Government Obligations (or other property as may be provided pursuant
to Section 3.1) (including the proceeds thereof) deposited with the Trustee
pursuant to Section 4.6 in respect of any Securities of any series and any
coupons appertaining thereto shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and any coupons
appertaining thereto and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying Agent)
as the Trustee may determine, to the Holders of such Securities and any coupons
appertaining thereto of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, if any, but such money need not be
segregated from other funds except to the extent required by law.
Unless otherwise specified with respect to any Security pursuant to
Section 3.1, if, after a deposit referred to in Section 4.6(a) has been made,
(i) the Holder of a Security in respect of which such deposit was made is
entitled to, and does, elect pursuant to Section 3.11(b) or the terms of such
Security to receive payment in a currency or currency unit other than that in
which the deposit pursuant to Section 4.6(a) has been made in respect of such
Security, or (ii) a Conversion Event occurs as contemplated in Section 3.11(d)
or 3.11(e) or by the terms of any Security in respect of which the deposit
pursuant to Section 4.6(a) has been made, the indebtedness represented by such
Security and any coupons appertaining thereto shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of,
premium, if any, and interest, if any, on such Security as the same becomes due
out of the proceeds yielded by converting (from time to time as specified below
in the case of any such election) the amount or other property deposited in
respect of such Security into the currency or currency unit in which such
Security becomes payable as a result of such election or Conversion Event based
on the applicable Market Exchange Rate for such currency or currency unit in
effect on the second Business Day prior to each payment date, except in the case
of a Conversion Event with respect to such currency or currency unit which is in
effect (as nearly as feasible) at the time of the Conversion Event.
Section 4.8. Transfers and Distribution at Company Request. To the
extent permitted by the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 76, as amended or interpreted by the
Financial Accounting Standards Board from time to time, or any successor thereto
("Standard No. 76"), or to the extent permitted by the Commission, the Trustee
shall, from time to time, take one or more of the following actions as specified
in a Company Request:
-53-
<PAGE>
(a) Retransfer, reassign and deliver to the Company any securities
deposited with the Trustee pursuant to Section 4.6(a), provided that the
Company shall in substitution therefor, simultaneously transfer, assign and
deliver to the Trustee other Government Obligations appropriate to satisfy
the Company's obligations in respect of the relevant Securities; and
(b) The Trustee (and any Paying Agent) shall promptly pay to the
Company upon Company Request, any excess money or securities held by them
at any time, including, without limitation, any assets deposited with the
Trustee pursuant to Section 4.6(a) exceeding those necessary for the
purposes of Section 4.6(a).
The Trustee shall not take the actions described in subsections (a) and (b) of
this Section 4.8 unless it shall have first received a written report of Arthur
Andersen LLP, or another nationally recognized independent public accounting
firm, (i) expressing their opinion that the contemplated action is permitted by
Standard No. 76 or the Commission, for transactions accounted for as
extinguishment of debt under the circumstances described in paragraph 3.c of
Standard No. 76 or any successor provision, and (ii) verifying the accuracy,
after giving effect to such action or actions, of the computations which
demonstrate that the amounts remaining to be earned on the Government
Obligations deposited with the Trustee pursuant to Section 4.6(a) will be
sufficient for purposes of Section 4.6(a).
ARTICLE 5
Defaults and Remedies
---------------------
Section 5.1. Events of Default. An "Event of Default" occurs with
respect to the Securities of any series if (whatever the reason for such Event
of Default and whether it shall be occasioned by the provisions of Article 12 or
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(1) the Company defaults in the payment of interest on any Security of
that series or any coupon appertaining thereto or any additional amount
payable with respect to any Security of that series as specified pursuant
to Section 3.1(b)(16) when the same becomes due and payable and such
default continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of or any
premium on any Security of that series
-54-
<PAGE>
when the same becomes due and payable at its Maturity or on redemption or
otherwise, or in the payment of a mandatory sinking fund payment when and
as due by the terms of the Securities of that series, and in each case such
default continues for a period of ten days;
(3) the Company defaults in the performance of, or breaches, any
covenant or warranty of the Company in this Indenture, with respect to any
Security of that series (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with), and such default or breach continues for a period of 60 days
after there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least
25% in principal amount of the Outstanding Securities of that series, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
(4) the Company defaults during an Extension Period under the terms of
any agreement or instrument evidencing or under which the Company has at
the date of this Indenture or hereafter outstanding any indebtedness for
borrowed money and such indebtedness shall be accelerated so that the same
shall be or become due and payable prior to the date on which the same
would otherwise become due and payable and the aggregate principal amount
thereof so accelerated exceeds $150,000,000 and such acceleration is not
rescinded or annulled within ten days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities of that series a written
notice specifying such default and stating that such notice is a "Notice of
Default" hereunder; (it being understood however, that, subject to the
provisions of Section 6.1, the Trustee shall not be deemed to have
knowledge of such default under such agreement or instrument unless either
(A) a Responsible Officer of the Trustee shall have actual knowledge of
such default or (B) a Responsible Officer of the Trustee shall have
received written notice thereof from the Company, from any Holder, from the
holder of any such indebtedness or from the trustee under any such
agreement or other instrument); provided, however, that if such default
under such agreement or instrument is remedied or cured by the Company or
waived by the holders of such indebtedness, then the Event of Default
hereunder by reason thereof shall be deemed likewise to have been thereupon
remedied, cured or waived without further action upon the part of either
the Trustee or any of such Holders;
-55-
<PAGE>
(5) the Company pursuant to or within the meaning of any Bankruptcy
Law (A) commences a voluntary case, (B) consents to the entry of an order
for relief against it in an involuntary case, (C) consents to the
appointment of a Custodian of it or for all or substantially all of its
property, or (D) makes a general assignment for the benefit of its
creditors;
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that (A) is for relief against the Company in an
involuntary case, (B) appoints a Custodian of the Company for all or
substantially all of its property, or (C) orders the liquidation of the
Company; and the order or decree remains unstayed and in effect for 90
days; or
(7) any other Event of Default provided as contemplated by Section 3.1
with respect to Securities of that series.
The term "Bankruptcy Law" means Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Section 5.2. Acceleration; Rescission and Annulment. If an Event of
Default with respect to the Securities of any series at the time Outstanding
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of all of the outstanding Securities of that series,
by written notice to the Company (and, if given by the Holders, to the Trustee),
may declare the principal (or, if the Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Securities of
that series to be due and payable and upon any such declaration such principal
(or, in the case of original Issue Discount Securities or Indexed Securities,
such specified amount) shall be immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
outstanding Securities of that series, by written notice to the Trustee, may
rescind and annul such declaration and its consequences if all existing Defaults
and Events of Default with respect to Securities of that series, other than the
non-payment of the principal of Securities of that series which have become due
solely by such declaration of acceleration, have been cured
-56-
<PAGE>
or waived as provided in Section 5.7. No such rescission shall affect any
subsequent default or impair any right consequent thereon.
Section 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if
(1) default is made in the payment of any interest on any Security or
coupon, if any, when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof and such default continues
for a period of 10 days,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities or coupons, if any, the whole amount then due and
payable on such Securities for principal, premium, if any, and interest and, to
the extent that payment of such interest shall be legally enforceable, interest
on any overdue principal, premium, if any, and on any overdue interest, at the
rate or rates prescribed therefor in such Securities or coupons, if any, and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 5.4. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Holders of
Securities allowed in any judicial proceedings relating to the Company, its
creditors or property.
Section 5.5. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto.
-57-
<PAGE>
Section 5.6. Delay or Omission Not Waiver. No delay or omission by
the Trustee or any Holder of any Securities to exercise any right or remedy
accruing upon an Event of Default shall impair any such right or remedy or
constitute a waiver of or acquiescence in any such Event of Default.
Section 5.7. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of Outstanding Securities of any series by notice to
the Trustee may waive on behalf of the Holders of all Securities of such series
a past Default or Event of Default with respect to that series and its
consequences except (i) a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on any Security of such series or any
coupon appertaining thereto or (ii) in respect of a covenant or provision hereof
which pursuant to Section 8.2 cannot be amended or modified without the consent
of the Holder of each outstanding Security of such series adversely affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture.
Section 5.8. Control by Majority. The Holders of a majority in
aggregate principal amount of the Outstanding Securities of each series affected
(with each such series voting as a class) shall have the right to 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 it with respect to
Securities of that series; provided, however, that (i) the Trustee may refuse to
follow any direction that conflicts with law or this Indenture, (ii) the Trustee
may refuse to follow any direction that is unduly prejudicial to the rights of
the Holders of Securities of such series not consenting, or that would in the
good faith judgment of the Trustee have a substantial likelihood of involving
the Trustee in personal liability and (iii) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
Section 5.9. Limitation on Suits by Holders. No Holder of any
Security of any series or any related coupons shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(1) the Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
-58-
<PAGE>
(2) the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of that series have made a written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense to be,
or which may be, incurred by the Trustee in pursuing the remedy;
(4) the Trustee for 60 days after its receipt of such notice, request
and the offer of indemnity has failed to institute any such proceedings;
and
(5) during such 60-day period, the Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series has not given
to the Trustee a direction inconsistent with such written request.
No one or more Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all of such Holders.
Section 5.10. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, but subject to Section 9.1, the right of
any Holder of a Security or coupon to receive payment of principal of, premium,
if any, and, subject to Sections 3.5 and 3.7, interest on the Security, on or
after the respective due dates expressed in the Security (or, in case of
redemption, on the redemption dates) and the right of any Holder of a coupon to
receive payment of interest due as provided in such coupon, or, subject to
Section 5.9, to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
Section 5.11. Application of Money Collected. Subject to Article 12,
if the Trustee collects any money pursuant to this Article, it shall pay out the
money in the following order, at the date or dates fixed by the Trustee and, in
case of the distribution of such money on account of principal, premium, if any,
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
-59-
<PAGE>
First: to the Trustee for amounts due under Section 6.9;
Second: to Holders of Securities and coupons in respect of which or
for the benefit of which such money has been collected for amounts due and
unpaid on such Securities for principal of, premium, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any,
and interest, respectively; and
Third: to the Person or Persons entitled thereto.
Section 5.12. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
Section 5.13. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 3.6, no right or
remedy herein conferred upon or reserved to the Trustee or the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
ARTICLE 6
The Trustee
-----------
Section 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this
-60-
<PAGE>
Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing with
respect to the Securities of any series, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture with respect to the Securities
of such series, 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 own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the 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 of a majority in principal amount of the Outstanding
Securities of any series relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of
-61-
<PAGE>
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 6.2. Rights of Trustee. Subject to the provisions of the
Trust Indenture Act:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties.
(b) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order (other than
delivery of any Security and any coupons appertaining thereto, to the
Trustee for authentication and delivery pursuant to Section 3.3, which
shall be sufficiently evidenced as provided therein), and any resolution of
the Board of Directors may be sufficiently evidenced by a Board Resolution.
(c) Whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate.
(d) The Trustee may consult with counsel of its selection and the
written advice of such counsel or any Opinion of Counsel 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.
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction.
-62-
<PAGE>
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney.
(g) The Trustee may act through agents or attorneys and shall not be
responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(h) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers.
(i) The Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
Section 6.3. Trustee May Hold Securities. The Trustee, any Paying
Agent, any Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and coupons and,
subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise
deal with the Company, an Affiliate or Subsidiary with the same rights it would
have if it were not Trustee, Paying Agent, Registrar or such other agent.
Section 6.4. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
Section 6.5. Trustee's Disclaimer. The recitals contained herein and
in the Securities, except the Trustee's certificate of authentication, shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representation as to
the validity or adequacy of this Indenture, the Securities or any coupon. The
Trustee shall not be accountable for the Company's
-63-
<PAGE>
use of the proceeds from the Securities or for monies paid over to the Company
pursuant to the Indenture.
Section 6.6. Notice of Defaults. If a Default occurs and is
continuing with respect to the Securities of any series and if it is known to
the Trustee, the Trustee shall, within 90 days after it occurs, transmit, in the
manner and to the extent provided in Section 313(c) of the Trust Indenture Act,
notice of all uncured Defaults known to it; provided, however, that, in the case
of a Default in payment on the Securities of any series, the Trustee may
withhold the notice if and so long as the board of directors, the executive
committee or a committee of its Responsible Officers in good faith determines
that withholding such notice is in the interests of Holders of Securities of
that series; provided, further, that, in the case of any default or breach of
the character specified in Section 5.1(3) with respect to the Securities and
coupons of such series, no such notice to Holders shall be given until at least
60 days after the occurrence thereof.
Section 6.7. Reports by Trustee to Holders. Within 60 days after
each May 15 of each year commencing with the first May 15 after the first
issuance of Securities pursuant to this Indenture, the Trustee shall transmit by
mail to all Holders of Securities as provided in Section 313(c) of the Trust
Indenture Act a brief report dated as of such May 15 if required by Section
313(a) of the Trust Indenture Act. The Trustee also shall comply with Section
313(b) and (d) of the Trust Indenture Act.
Section 6.8. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders of Securities of each series. If the
Trustee is not the Registrar, the Company shall furnish to the Trustee
semiannually on or before the last day of June and December in each year, and at
such other times as the Trustee may request in writing, a list, in such form and
as of such date as the Trustee may reasonably require, containing all the
information in the possession of the Registrar, the Company or any of its Paying
Agents other than the Trustee as to the names and addresses of Holders of
Securities of each such series. If there are Bearer Securities of any series
outstanding, even if the Trustee is the Registrar, the Company shall furnish to
the Trustee such a list containing such information with respect to Holders of
such Bearer Securities only.
Section 6.9. Compensation and Indemnity. (a) The Company shall pay
to the Trustee from time to time such compensation as shall be agreed between
the Company and the Trustee for all services rendered by it hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
-64-
<PAGE>
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred by it in connection
with the performance of its duties under this Indenture, except any such expense
as may be attributable to its negligence or bad faith.
(b) The Company shall indemnify the Trustee for, and hold it harmless
against, any loss, liability or expense incurred by it without negligence or bad
faith on its part arising out of or in connection with its acceptance or
administration of the trust or trusts hereunder. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent.
(c) The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee through negligence or bad faith.
(d) To secure the payment obligations of the Company pursuant to this
Section, the Trustee shall have a lien prior to the Securities of any series on
all money or property held or collected by the Trustee, except that held in
trust to pay principal, premium, if any, and interest on particular Securities.
(e) When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(5) or Section 5.1(6), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
(f) The provisions of this Section shall survive the termination of
this Indenture.
Section 6.10. Replacement of Trustee. (a) The resignation or
removal of the Trustee and the appointment of a successor Trustee shall become
effective only upon the successor Trustee's acceptance of appointment as
provided in Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities
of any series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.11 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
-65-
<PAGE>
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(c) The Holders of a majority in aggregate principal amount of the
Outstanding Securities of any series may remove the Trustee with respect to that
series by so notifying the Trustee and the Company and may appoint a successor
Trustee for such series with the Company's consent.
(d) If at any time:
(1) the Trustee fails to comply with Section 310(b) of the Trust
Indenture Act after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 310(a) of the
Trust Indenture Act and shall fail to resign after written request therefor
by the Company or by any Holder of a Security who has been a bona fide
Holder of a Security for at least six months; or
(3) the Trustee becomes incapable of acting, is adjudged a bankrupt or
an insolvent or a receiver or public officer takes charge of the Trustee or
its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then, in any such case, (i) the Company by or pursuant to a
Board Resolution may remove the Trustee with respect to all Securities, or
(ii) subject to Section 315(e) of the Trust Indenture Act, any Holder who
has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all other similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, with respect to Securities of one or more
series, the Company, by or pursuant to Board Resolution, shall promptly appoint
a successor Trustee with respect to the Securities of that or those series (it
being understood that any such successor Trustee may be appointed with respect
to the Securities of one or more or all of such series and that at any time
there shall be only one Trustee with respect to the Securities of any particular
series) and shall comply with the applicable requirements of Section 6.11. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities of such series delivered to the
-66-
<PAGE>
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance with the
applicable requirements of Section 6.11, become the successor Trustee with
respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with
respect to the Securities of any series shall have been so appointed by the
Company or the Holders and accepted appointment in the manner required by
Section 6.11, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
Section 6.11. Acceptance of Appointment by Successor. (a) In case
of the appointment hereunder of a successor Trustee with respect to all
Securities, every such successor Trustee shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment. Thereupon, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee, without further act, deed or
conveyance, shall become vested with all the rights, powers and duties of the
retiring Trustee; but, on the request of the Company or the successor Trustee,
such retiring Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and such successor Trustee shall execute and deliver an
indenture supplemental hereto wherein such successor Trustee shall accept such
appointment and which (i) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, such successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
successor Trustee relates, (ii) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (iii) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood
-67-
<PAGE>
that nothing herein or in such supplemental indenture shall constitute such
Trustees co-trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other such Trustee and upon the execution
and delivery of such supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under the Trust Indenture Act.
(e) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series in the
manner provided for notices to the Holders of Securities in Section 1.6. Each
notice shall include the name of the successor Trustee with respect to the
securities of such series and the address of its Corporate Trust office.
Section 6.12. Eligibility; Disqualification. There shall at all
times be a Trustee hereunder which shall be eligible to act as Trustee under
Section 310(a)(1) of the Trust Indenture Act and shall have a combined capital
and surplus of at least $75,000,000. If such corporation publishes reports of
condition at least annually, pursuant to law or the requirements of Federal,
State, Territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of such
corporation 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 Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
-68-
<PAGE>
Section 6.13. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 6.14. Appointment of Authenticating Agent. The Trustee may
appoint an Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue exchange,
registration of transfer or partial redemption thereof, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Any such appointment shall be evidenced by an instrument in writing
signed by a Responsible Officer of the Trustee, a copy of which instrument shall
be promptly furnished to the Company. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and, except as may otherwise be provided pursuant to
Section 3.1, shall at all times be a bank or trust company or corporation
organized and doing business and in good standing under the laws of the United
States of America or of any State or the District of Columbia, authorized under
such laws to act as Authenticating Agent, having a combined capital and surplus
of not less than $1,500,000 and subject to supervision or examination by Federal
or State authorities. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time an Authenticating Agent
shall cease to be eligible in accordance
-69-
<PAGE>
with the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or further act
on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent for any series of Securities may at any time
resign by giving written notice of resignation to the Trustee for such series
and to the Company. The Trustee for any series of Securities may at any time
terminate the agency of an Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee for such series may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve in the manner set forth in
Section 1.6. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent herein. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation including reimbursement of its reasonable expenses
for its services under this Section.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
This is one of the Securities of a series issued under the within-mentioned
Indenture.
-70-
<PAGE>
______________________,
as Trustee
By________________________
as Authenticating Agent
By________________________
Authorized Signatory
Sections 6.2, 6.3, 6.5 and 6.9 shall be applicable to any Authenticating Agent.
Section 6.15. Trustee's Application for Instructions from the
Company. Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
fifteen Business Days after the date any officer of the Company actually
receives such application, unless any such officer shall have consented in
writing to any earlier date) unless prior to taking any such action (or the
effective date in the case of an omission), the Trustee shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
ARTICLE 7
Consolidation, Merger or Sale by the Company
--------------------------------------------
The Company 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 (i)(A) in
the case of a merger or consolidation, the Company is the surviving corporation
or (B) in the case of a merger or consolidation where the Company is not the
surviving corporation and in the case of any such sale, conveyance or other
disposition, the successor or acquiring corporation is a corporation organized
and existing under the laws of the United States or a State thereof and such
corporation expressly assumes by supplemental indenture all the obligations of
the Company under the Securities and any coupons appertaining thereto and under
this Indenture, (ii) immediately thereafter, giving effect to such merger or
consolidation, or such sale, conveyance, transfer or other disposition, no
Default or Event of Default
-71-
<PAGE>
shall have occurred and be continuing, and (iii) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel each stating that
such merger or consolidation, or such sale, conveyance, transfer or other
disposition complies with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with. In the event
of the assumption by a successor corporation of the obligations of the Company
as provided in clause (i)(B) of the immediately preceding sentence, such
successor corporation shall succeed to and be substituted for the Company
hereunder and under the Securities and any coupons appertaining thereto and all
such obligations of the Company shall terminate.
ARTICLE 8
Supplemental Indentures
-----------------------
Section 8.1. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
indentures supplemental hereto, in form reasonably satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default with respect to all or any
series of Securities; or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to facilitate the issuance of Bearer
Securities (including, without limitation, to provide that Bearer
Securities may be registrable as to principal only) or to facilitate the
issuance of Securities in global form; or
(5) to add to, change or eliminate any of the provisions of this
Indenture, provided that any such addition, change or elimination shall
become effective only when there is no Security Outstanding of any series
created
-72-
<PAGE>
prior to the execution of such supplemental indenture which is entitled to
the benefit of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 and 3.1; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 6.10; or
(9) if allowed without penalty under applicable laws and regulations,
to permit payment in the United States (including any of the states and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction of principal, premium, if any, or interest, if
any, on Bearer Securities or coupons, if any;
(10) to correct or supplement any provision herein which may be
inconsistent with any other provision herein or to make any other
provisions with respect to matters or questions arising under this
Indenture, provided such action shall not adversely affect the interests of
the Holders of Securities of any series, or to cure any ambiguity or
correct any mistake;
(11) to comply with any requirement of the Commission in connection
with the qualification of this Indenture under the Trust Indenture Act; or
(12) to cure any ambiguity or correct any mistake.
Section 8.2. Supplemental Indentures With Consent of Holders. With
the written consent of the Holders of a majority of the aggregate principal
amount of the Outstanding Securities of each series adversely affected by such
supplemental indenture, the Company and the Trustee may enter into an indenture
or indentures supplemental hereto to add any provisions to or to change or
eliminate any provisions of this Indenture or of any other indenture
supplemental hereto or to modify the rights of the Holders of Securities of each
such series; provided, however, that without the consent of the Holder of each
Outstanding Security affected thereby, an amendment under this Section may not:
-73-
<PAGE>
(1) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
5.2, or change the coin or currency in which, any Securities or any premium
or the interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date),
or modify the provisions of this indenture with respect to the
subordination of the Securities, or adversely affect the right to convert
any Security as may be provided pursuant to Section 3.1 herein;
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture;
(3) change any obligation of the Company to maintain an office or
agency in the places and for the purposes specified in Section 9.1;
(4) adversely affect the right to convert the Securities of any series
as provided in Article 12 hereof; or
(5) make any change in Section 5.7 or this 8.2(a) except to increase
any percentage or to provide that certain other provisions of this
Indenture cannot be modified or waived with the consent of the Holders of
each Outstanding Security affected thereby.
For the purposes of this Section 8.2, if the Securities of any series
are issuable upon the exercise of warrants, any holder of an unexercised and
unexpired warrant with respect to such series shall not be deemed to be a Holder
of Outstanding Securities of such series in the amount issuable upon the
exercise of such warrants.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture, which has expressly been included solely for
the benefit of one or more particular series of Securities, or that modifies the
rights of
-74-
<PAGE>
the Holders of Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities of any other series.
It is not necessary under this Section 8.2 for the Holders to consent
to the particular form of any proposed supplemental indenture, but it is
sufficient if they consent to the substance thereof.
Section 8.3. Compliance with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall comply with the requirements
of the Trust Indenture Act as then in effect.
Section 8.4. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modification thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 8.5. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder and of any
coupon appertaining thereto shall be bound thereby.
Section 8.6. Reference in Securities to Supplemental Indentures.
Securities, including any coupons, of any series authenticated and delivered
after the execution of any supplemental indenture pursuant to this Article may,
and shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities including any coupons of any series
so modified as to conform, in the opinion of the Trustee and the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities including any coupons of such series.
-75-
<PAGE>
ARTICLE 9
Covenants
---------
Section 9.1. Maintenance of Office or Agency. If Securities of a
series are issued as Registered Securities, the Company will maintain in each
Place of Payment for any series of Securities an office or agency where
Securities of that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration of transfer or
exchange, where Securities may be surrendered for conversion and where notices
and demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served. If Securities of a series are issuable as
Bearer Securities, the Company will maintain, (i) subject to any laws or
regulations applicable thereto, an office or agency in a Place of Payment for
that series which is located outside the United States, where Securities of that
series and related coupons may be presented and surrendered for payment;
provided, however, that if the Securities of that series are listed on The
International Stock Exchange of the United Kingdom and the Republic of Ireland
Limited, the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and such stock exchange shall so require, the Company
will maintain a Paying Agent for the Securities of that series in London,
Luxembourg or any other required city located outside the United States, as the
case may be, so long as the Securities of that series are listed on such
exchange, and (ii) subject to any laws or regulations applicable thereto, in a
Place of Payment for that series located outside the United States, where
Securities of that series may be surrendered for exchange and where notices and
demands to or upon the Company in respect of the Securities of that series and
this Indenture may be served. The Company will give prompt written notice to
the Trustee of the location, and any change in the location, of any such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
Unless otherwise specified as contemplated by Section 3.1, no payment
of principal, premium or interest on Bearer Securities shall be made at any
office or agency of the Company in the United States, by check mailed to any
address in the United States, by transfer to an account located in the United
States or upon presentation or surrender in the United States of a Bearer
Security or coupon for payment, even if the payment would be credited to an
account located outside the United States; provided, however, that, if the
Securities of a series
-76-
<PAGE>
are denominated and payable in Dollars, payment of principal of and any premium
or interest on any such Bearer Security shall be made at the office of the
Company's Paying Agent in the Borough of Manhattan, The City of New York, if
(but only if) payment in Dollars of the full amount of such principal, premium
or interest, as the case may be, at all offices or agencies outside the United
States maintained for the purpose by the Company in accordance with this
Indenture is illegal or effectively precluded by exchange controls or other
similar restrictions.
The Company may also from time to time designate one or more other
offices or agencies where the Securities (including any coupons, if any) of one
or more series may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for
Securities (including any coupons, if any) of any series for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
Unless otherwise specified as contemplated by Section 3.1, the Trustee
shall initially serve as Paying Agent.
Section 9.2. Money for Securities to Be Held in Trust; Unclaimed
Money. If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of, premium, if any, or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such persons or otherwise disposed
of as herein provided and will promptly notify the Trustee in writing of its
action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that
-77-
<PAGE>
series) in the making of any payment of principal, premium, if any, or
interest on the Securities; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of any principal, premium or interest
on any Security of any series and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on Company Request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security and coupon, if any,
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, or cause to be mailed to such Holder,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
Section 9.3. Corporate Existence. Subject to Article 7, the Company
will at all times do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence; provided that nothing in
this Section 9.3 shall prevent the abandonment or termination of any right or
franchise of the Company, if, in the opinion of the Company such abandonment or
termination is in the best interests of the Company and does not materially
adversely affect the ability of the Company to operate its business or to
fulfill its obligations hereunder.
-78-
<PAGE>
Section 9.4. Insurance. The Company covenants and agrees that it
will maintain, and cause each of its Subsidiaries to maintain, insurance with
responsible and reputable insurance companies or associations or through a
program of self-insurance in such amounts and covering such risks as are
consistent with sound business practice for corporations engaged in the same or
a similar business similarly situated.
Section 9.5. Reports by the Company. The Company covenants:
(a) to file with the Trustee, within 30 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which it may be required to file with the
Commission pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934, as amended; or, if it is not required to file
information, documents or reports pursuant to either of such sections, then
to file with the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to section 13 of the Securities Exchange Act of 1934, as
amended, in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules
and regulations;
(b) to file with the Trustee and the Commission, in accordance with
the rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by it with the conditions and covenants provided for in this
Indenture, as may be required from time to time by such rules and
regulations; and
(c) to transmit to all Holders of Securities, within 30 days after the
filing thereof with the Trustee, in the manner and to the extent provided
in section 313(c) of the Trust Indenture Act, such summaries of any
information, documents and reports required to be filed by it pursuant to
subsections (a) and (b) of this Section 9.5, as may be required by rules
and regulations prescribed from time to time by the Commission.
Section 9.6. Annual Review Certificate. The Company covenants and
agrees to deliver to the Trustee, within 120 days after the end of each fiscal
year of the Company, a brief certificate from the principal executive officer,
principal
-79-
<PAGE>
financial officer, or principal accounting officer as to his or her knowledge of
the Company's compliance with all conditions and covenants under this Indenture.
For purposes of this Section 9.6, such compliance shall be determined without
regard to any period of grace or requirement of notice provided under this
Indenture.
Section 9.7. Limitation on Dividends and Capital Stock Acquisitions.
The Company covenants and agrees that, if at any time it has failed to make any
payment of interest, principal or premium on the Debentures when due (after
giving effect to any grace period for payment thereof as provided in Section
5.1), or the Company has exercised its right to extend the interest payment
period for an Extension Period as provided in Section 3.1(e), the Company will
not, until all defaulted interest on the Debentures and all principal and
premium, if any, then due and payable on the Debentures shall have been paid in
full or such Extension Period has terminated, (i) declare set aside or pay any
dividend or distribution on any capital stock of the Company (except for
dividends or distributions in shares of its capital stock or rights to acquire
shares of its capital stock), or (ii) repurchase, redeem or otherwise acquire,
or make any sinking fund payment for the purchase or redemption of, any shares
of its capital stock (except by conversion into or exchange for shares of its
capital stock and except for a redemption, purchase or other acquisition of
shares of its capital stock made for the purpose of an employee incentive plan
or benefit plan of the Company or any of its subsidiaries); provided, however,
that any moneys theretofore deposited in any sinking fund with respect to any
preferred stock of the Company in compliance with this Section 9.7 and the
provisions of such sinking fund may thereafter be applied to the purchase or
redemption of such preferred stock in accordance with the terms of such sinking
fund without regard to the restrictions in this Section 9.7.
ARTICLE 10
Redemption
----------
Section 10.1. Applicability of Article. Securities (including
coupons, if any) of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 3.1 for Securities of any series) in
accordance with this Article.
Section 10.2. Election to Redeem; Notice to Trustee. The election of
the Company to redeem any Securities, including coupons, if any, shall be
evidenced by or pursuant to a Board Resolution or an Officers' Certificate. In
the case of any redemption at the election of the Company of less than all the
-80-
<PAGE>
Securities or coupons, if any, of any series, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date, of the principal amount of Securities of such series to be redeemed and,
if applicable, of the tenor of the Securities to be redeemed. In the case of
any redemption of Securities (i) prior to the expiration of any restriction on
such redemption provided in the terms of such Securities or elsewhere in this
Indenture or (ii) pursuant to an election of the Company which is subject to a
condition specified in the terms of such Securities, the Company shall furnish
the Trustee with an Officers' Certificate evidencing compliance with such
restriction or condition.
Section 10.3. Selection of Securities to Be Redeemed. Unless
otherwise specified as contemplated by Section 3.1, if less than all the
Securities (including coupons, if any) of a series with the same original issue
date, interest rate and Stated Maturity are to be redeemed, the Trustee, not
more than 45 days prior to the redemption date, shall select the Securities of
the series to be redeemed in such manner as the Trustee shall deem fair and
appropriate. The Trustee shall make the selection from Securities of the series
that are Outstanding and that have not previously been called for redemption and
may provide for the selection for redemption of portions (equal to the minimum
authorized denomination for Securities, including coupons, if any, of that
series or any integral multiple thereof) of the principal amount of Securities,
including coupons, if any, of such series of a denomination larger than the
minimum authorized denomination for Securities of that series. The Trustee
shall promptly notify the Company in writing of the Securities selected by the
Trustee for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities (including coupons, if
any) shall relate, in the case of any Securities (including coupons, if any)
redeemed or to be redeemed only in part, to the portion of the principal amount
of such Securities (including coupons, if any) which has been or is to be
redeemed.
Section 10.4. Notice of Redemption. Unless otherwise specified as
contemplated by Section 3.1, notice of redemption shall be given in the manner
provided in Section 1.6 not less than 30 days nor more than 60 days prior to the
Redemption Date to the Holders of the Securities to be redeemed.
All notices of redemption shall state:
-81-
<PAGE>
(1) the Redemption Date;
(2) the Redemption Price;
(3) if fewer than all the Outstanding Securities of a series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Security or Securities to be redeemed;
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the Redemption
Date, upon surrender of such Security, the holder will receive, without a
charge; a new Security or Securities of authorized denominations for the
principal amount thereof remaining unredeemed;
(5) the Place or Places of Payment where such Securities, together in
the case of Bearer Securities with all coupons appertaining thereto, if
any, maturing after the Redemption Date, are to be surrendered for payment
for the Redemption Price;
(6) that Securities of the series called for redemption and all
unmatured coupons, if any, appertaining thereto must be surrendered to the
Paying Agent to collect the redemption price;
(7) that, on the Redemption Date, the Redemption Price will become due
and payable upon each such Security, or the portion thereof, to be redeemed
and, if applicable, that interest thereon will cease to accrue on and after
said date;
(8) that the redemption is for a sinking fund, if such is the case;
(9) that, unless otherwise specified in such notice, Bearer Securities
of any series, if any, surrendered for redemption must be accompanied by
all coupons maturing subsequent to the Redemption Date or the amount of any
such missing coupon or coupons will be deducted from the Redemption Price,
unless security or indemnity satisfactory to the Company, the Trustee and
any Paying Agent is furnished; and
(10) CUSIP number.
Notice of redemption of Securities to be redeemed shall be given by
the Company or, at the Company s request, by the Trustee in the name and at the
expense of the Company.
-82-
<PAGE>
Section 10.5. Deposit of Redemption Price. On or prior to 12:00 noon
New York City time on any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 9.2) an amount of
money in the currency or currencies (including currency units or composite
currencies) in which the Securities of such series are payable (except as
otherwise specified pursuant to Section 3.1 for the Securities of such series)
sufficient to pay on the Redemption Date the Redemption Price of, and (unless
the Redemption Date shall be an Interest Payment Date) interest accrued to the
Redemption Date on, all Securities or portions thereof which are to be redeemed
on that date.
Unless any Security by its terms prohibits any sinking fund payment
obligation from being satisfied by delivering and crediting Securities
(including Securities redeemed otherwise than through a sinking fund), the
Company may deliver such Securities to the Trustee for crediting against such
payment obligation in accordance with the terms of such Securities and this
Indenture.
Section 10.6. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest and the coupons for any such interest
appertaining to any Bearer Security so to be redeemed, except to the extent
provided below, shall be void. Except as provided in the next succeeding
paragraph, upon surrender of any such Security, including coupons, if any, for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that installments of interest on Bearer
Securities whose Stated Maturity is prior to the Redemption Date shall be
payable only at an office or agency located outside the United States and its
possessions (except as otherwise provided in Section 9.1) and, unless otherwise
specified as contemplated by Section 3.1, only upon presentation and surrender
of coupons for such interest; and provided further that, unless otherwise
specified as contemplated by Section 3.1, installments of interest on Registered
Securities whose Stated Maturity is prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.
-83-
<PAGE>
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Bearer Security may be paid after deducting from the Redemption Price an amount
equal to the face amount of all such missing coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
be furnished to them such security or indemnity as they may require to save each
of them and any Paying Agent harmless. If thereafter the Holder of such Bearer
Security shall surrender to the Trustee or any Paying Agent any such missing
coupon in respect of which a deduction shall have been made from the Redemption
Price, such Holder shall be entitled to receive the amount so deducted;
provided, however, that interest represented by coupons shall be payable only at
an office or agency located outside of the United States (except as otherwise
provided pursuant to Section 9.1) and, unless otherwise specified as
contemplated by Section 3.1, only upon presentation and surrender of those
coupons.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
Section 10.7. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part at any Place of Payment therefor (with, if the
Company or the Trustee so require, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
that Security, without service charge, a new Security or Securities of the same
series, the same form and the same Maturity in any authorized denomination equal
in aggregate principal amount to the unredeemed portion of the principal of the
Security surrendered.
ARTICLE 11
Sinking Funds
-------------
Section 11.1. Applicability of Article. The provisions of this
Article shall be applicable to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 3.1 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in
-84-
<PAGE>
excess of such minimum amount provided for by the terms of Securities of any
series is herein referred to as an "optional sinking fund payment." If provided
for by the terms of Securities of any series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 11.2. Each
sinking fund payment shall be applied to the redemption of Securities of any
series as provided for by the terms of Securities of such series.
Section 11.2. Satisfaction of Sinking Fund Payments with Securities.
The Company (i) may deliver Outstanding Securities of a series (other than any
previously called for redemption) together, in the case of Bearer Securities of
such series, with all unmatured coupons appertaining thereto and (ii) may apply
as a credit Securities of a series which have been redeemed either at the
election of the Company pursuant to the terms of such Securities or through the
application of permitted optional sinking fund payments pursuant to the terms of
such Securities, in each case in satisfaction of all or any part of any sinking
fund payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited.
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
Section 11.3. Redemption of Securities for Sinking Fund. Not less
than 60 days prior to each sinking fund payment date for any series of
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 11.2 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 30 days before each such sinking fund payment date,
the Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 10.3 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 10.4. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 10.6 and 10.7.
ARTICLE 12
Subordination of Securities
---------------------------
-85-
<PAGE>
SECTION 12.1. Securities Subordinated to Senior Indebtedness. (a)
The Company agrees, and each Holder of the Securities by acceptance thereof
likewise agrees, that the payment of the principal of, premium, if any, and
interest on the Securities is subordinated, to the extent and in the manner
provided in this Article 12, to the prior payment in full of all Senior
Indebtedness of the Company.
(b) All provisions of this Article 12 shall be subject to Section
12.14.
SECTION 12.2. Company Not to Make Payments with Respect to Securities
in Certain Circumstances; Limitations on Acceleration of Securities. (a) Upon
the maturity of any Senior Indebtedness of the Company 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, premium, if any, or interest on the
Securities or to redeem, retire, purchase, deposit moneys for the defeasance of
or acquire any of the Securities.
(b) Upon the happening of (i) any default in payment of any Senior
Indebtedness of the Company or (ii) any other default on Senior Indebtedness of
the Company and the maturity of such Senior Indebtedness is accelerated in
accordance with its terms, then, unless (w) such default relates to Senior
Indebtedness of the Company 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
Securities from funds previously deposited in accordance with Section 4.1 at any
time such deposit was not prohibited by this Indenture), shall be made or agreed
to be made by the Company on account of the principal of or premium, if any, or
interest on the Securities, or in respect of any redemption, retirement,
purchase, deposit of moneys for the defeasance or other acquisition of any of
the Securities in the case of such a default in Senior Indebtedness of the
Company, the Company shall not deposit money for any such payment or
distribution with the Trustee or any Paying Agent nor shall the Company (if the
Company is acting as its own Paying Agent) segregate and hold in trust money for
any such payment or distribution.
(c) Upon the happening of an event of default (other than under
circumstances when the terms of paragraph (b) of this Section 12.2 are
applicable) with respect to any Senior
-86-
<PAGE>
Indebtedness of the Company 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 the Company and the
Trustee by the trustee for or other representative of the holders of at least
[$25 million] of Senior Indebtedness of the Company (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 Securities from funds
previously deposited in accordance with Section 4.1 at any time such deposit was
not prohibited by this Indenture), shall be made or agreed to be made by the
Company on account of the principal of or premium, if any, or interest on the
Securities, or in respect of any redemption, retirement, purchase, deposit of
moneys for the defeasance or other acquisition of any of the Securities, and the
Company shall not deposit money for any such payment or distribution with the
Trustee or any Paying Agent nor shall the Company or a Subsidiary (if the
Company 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 Section 12.2(c) 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 the provisions of this Section 12.2(c) shall be returned to
the Company.
(d) In the event that, notwithstanding the provisions of Section
12.2(a) or 12.2(b), the Trustee or the Holder of any Security shall have
received any payment on account of the principal of or premium, if any, or
interest on the Securities in contravention of Section 12.2(a) or 12.2(b) or
after the happening of a default in payment of any Senior Indebtedness of the
Company, or any acceleration of the maturity of any Senior Indebtedness of the
Company, then, in either such case, except in the case of any such default which
shall have been cured or
-87-
<PAGE>
waived or shall have ceased to exist, such payment (subject to the provisions of
Sections 12.6 and 12.7) shall be held for the benefit of, and shall be paid over
and delivered to, the holders of such Senior Indebtedness of the Company (pro
rata as to each of such holders on the basis of the respective amounts of Senior
Indebtedness of the Company held by them) or their representative or the trustee
under the indenture or other agreement (if any) pursuant to which Senior
Indebtedness of the Company may have been issued, as their respective interests
may appear, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid to the extent necessary to pay all Senior Indebtedness
of the Company in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness
of the Company.
(e)(1) Upon the occurrence of an Event of Default under Section
5.1(1) through (4) and (7), the Trustee or holders of 25% of the outstanding
principal amount of the Securities of any series must give notice of such Event
of Default and the intention to accelerate to the Company and any holders of
Senior Indebtedness which have theretofore requested of the Trustee such notice,
and no acceleration of the Securities of any series shall be effective unless
and until such Event of Default is continuing on the sixtieth day after the date
of delivery of such notice. The Company may pay the holders of the Securities
of any series any defaulted payment and all other amounts due following any such
acceleration of the maturity of the Securities if this Section 12.2(a) would not
prohibit such payment to be made at that time.
(2) Nothing in this Article 12 shall prevent or delay the Trustee or
the holders of the Securities from taking any action in connection with the
acceleration of the maturity of the Securities pursuant to Section 5.2 upon the
occurrence of an Event of Default under either of Section 5.1(5) or 5.1(6).
(3) Except as provided in Section 12.2(e)(1), a failure to make any
payment with respect to the Securities as a result of the rights of holders of
Senior Indebtedness of the Company described in Section 12.2(b) or 12.2(c) will
not have any effect on the right of holders of the Securities to accelerate the
maturities thereof as a result of such payment default. The Company shall give
prompt written notice to the Trustee of any default in the payment of principal
of or interest on any Senior Indebtedness of the Company, and in the event of
any such default, shall provide to the Trustee, in the form of an Officers'
Certificate, the names, addresses and respective amounts due holders of such
Senior Indebtedness or the name and address of the trustee acting on their
behalf, if any. The
-88-
<PAGE>
Trustee shall be entitled to rely conclusively on such Officers' Certificate
without independent verification.
SECTION 12.3. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of the Company. Upon
the distribution of assets of the Company in any Dissolution, winding up,
liquidation (total or partial) or similar proceeding relating to the Company
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise):
(1) the holders of all Senior Indebtedness of the Company shall first
be entitled to receive payment in full of all Senior Indebtedness (or to
have such payment duly provided for in a manner satisfactory to them) in
cash or in a manner satisfactory to the holders of Senior Indebtedness of
the Company before the Holders of the Securities, in the case of Senior
Indebtedness of the Company, are entitled to receive any payment on account
of the principal of, premium, if any, or interest on the Securities;
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or securities of the
Company or any other company, trust or corporation provided for by a plan
of reorganization or readjustment, the payment of which is junior or
otherwise subordinate, at least to the extent provided in this Article 12
with respect to the Securities to the payment of all Senior Indebtedness of
the Company at the time outstanding and to the payment of all securities
issued in exchange therefor to the holders of the Senior Indebtedness of
the Company at the time outstanding), to which the Holders of the
Securities or the Trustee on behalf of the Holders of the Securities would
be entitled except for the provisions of this Article 12, shall be paid by
the liquidating trustee or agent or other person making such payment or
distribution directly to the holders of the Senior Indebtedness of the
Company or their representatives or to the trustee under any indenture
under which such Senior Indebtedness may have been issued (pro rata) as to
each such holder, representative or trustee on the basis of respective
amounts of unpaid Senior Indebtedness held or represented by each), to the
extent necessary to make payment in full of all Senior Indebtedness of the
Company remaining unpaid, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such Senior
Indebtedness; and
(3) in the event that notwithstanding the foregoing provisions of this
Section 12.3, any payment or distribution
-89-
<PAGE>
of assets of the Company of any kind or character, whether in cash,
property or securities (other than securities of the Company as reorganized
or readjusted or securities of the Company or any other company, trust or
corporation provided for by a plan of reorganization or readjustment, the
payment of which is junior or otherwise subordinate, at least to the extent
provided in this Article 12 with respect to the Securities, to the payment
of all Senior Indebtedness of the Company at the time outstanding and to
the payment of all securities issued in exchange therefor to the holders of
the Senior Indebtedness of the Company at the time outstanding), shall be
received by the Trustee or the Holders of the Securities on account of
principal of, premium, if any, or interest on the Securities before all
Senior Indebtedness of the Company is paid in full in cash or in a manner
satisfactory to the holders of such Senior Indebtedness in accordance with
its terms, or effective provision made for its payment, such payment or
distribution (subject to the provisions of Sections 12.6 and 12.7) shall be
received and held for the benefit of and paid over to the holders of the
Senior Indebtedness of the Company remaining unpaid or unprovided for or
their representative, or to the trustee under any indenture under which
such Senior Indebtedness of the Company may have been issued (pro rata as
provided in paragraph (2) above), for application to the payment of such
Senior Indebtedness of the Company to the extent necessary to pay all such
Senior Indebtedness of the Company in full in cash or in a manner
satisfactory to the holders of Senior Indebtedness of the Company, in
accordance with its terms, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such Senior
Indebtedness of the Company.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company or any
assignment for the benefit of the Company's creditors tending toward the
liquidation of the business and assets of the Company.
SECTION 12.4. Holders to Be Subrogated to Rights of Holders of Senior
Indebtedness. Upon the payment in full of all Senior Indebtedness of the
Company in cash or in a manner satisfactory to the holders of such Senior
Indebtedness, the Holders of the Securities shall be subrogated equally and
ratably to the rights of the holders of Senior Indebtedness of the Company to
receive payments or distributions of assets of the Company applicable to the
Senior Indebtedness of the Company until all amounts owing on the Securities
shall be paid in full, and for the purpose of such subrogation no payments or
distributions to the holders of Senior Indebtedness of the Company by or on
behalf of the Company or by or on behalf of
-90-
<PAGE>
Holders of the Securities by virtue of this Article 12 which otherwise would
have been made to the Holders of the Securities shall, as between the Company
and the Holders of the Securities, be deemed to be payment by the Company to or
on account of Senior Indebtedness of the Company, it being understood that the
provisions of this Article 12 are intended solely for the purpose of defining
the relative rights of the Holders of the Securities, on the one hand, and the
holders of Senior Indebtedness of the Company, on the other hand.
SECTION 12.5. Obligation of the Company Unconditional. Nothing
contained in this Article 12 or elsewhere in this Indenture or in any Security
is intended to or shall impair, as between the Company and the Holders of the
Securities the obligations of the Company which are absolute and unconditional,
to pay to the Holders of the Securities the principal of (premium, if any) and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness of the Company, nor, except as expressly
provided in this Article 12, shall anything herein or in the Securities prevent
the Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article 12 of the holders of Senior Indebtedness of
the Company in respect of cash, property or securities of the Company upon the
exercise of any such remedy. Upon any distribution of assets of the Company
referred to in this Article 12, the Trustee, subject to the provisions of
Section 6.1, and the Holders of the Securities shall be entitled to rely upon
any order or decree by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or the Holders of the securities, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of Senior Indebtedness of the Company and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 12.
Nothing contained in this Article 12 or elsewhere in this Indenture or
in any Security is intended to or shall affect the obligations of the Company to
make, or prevent the Company from making, at any time except during the pendency
of any dissolution, winding up, liquidation (total or partial) or similar
proceeding, and except during the continuance of any event specified in Section
12.2 (not cured or waived), payments
-91-
<PAGE>
at any time of the principal of (or premium, if any) or interest on the
Securities.
SECTION 12.6. Knowledge of Trustee. Notwithstanding any provision of
this Indenture, the Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment of
monies to or by the Trustee until three Business Days after a Responsible
Officer of the Trustee on behalf of the Trustee shall have received at the
Corporate Trust Office of the Trustee written notice thereof from the Company,
any Holder, or the holder or representative of any class of Senior Indebtedness
of the Company identifying the specific sections of this Indenture involved and
describing in detail the facts that would obligate the Trustee to withhold
payments to Holders of Securities, and prior to such time, the Trustee, subject
to the provisions of Section 6.1, shall be entitled in all respects conclusively
to assume that no such facts exist. The Trustee shall be entitled to rely on
the delivery to it of a written notice by an individual representing himself to
be a holder of Senior Indebtedness of the Company (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of any
such Senior Indebtedness or a trustee on behalf of any such holder.
In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Indebtedness of the Company to participate in any payment or distribution
pursuant to this Article, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness of the Company held by such person, the extent to which such
person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
SECTION 12.7. Application by Trustee of Moneys Deposited with It. If
two Business Days prior to the date on which by the terms of this Indenture any
moneys deposited with the Trustee or any Paying Agent (other than the Company or
a Subsidiary) may become payable for any purpose (including, without limitation,
the payment of the principal of, premium, if any, or interest on any Security)
the Trustee shall not have received with respect to such moneys the notice
provided for in Section 12.6, then the Trustee shall have full power and
authority to receive such monies and to apply the same to the purpose for which
they were received and shall not be affected by any notice to the contrary which
may be received by it on or after such date. This Section 12.7 shall be
construed solely for
-92-
<PAGE>
the benefit of the Trustee and Paying Agent and shall not otherwise affect the
rights of holders of such Senior Indebtedness.
SECTION 12.8. Subordination Rights Not Impaired by Acts or Omissions
of Company or Holders of Senior Indebtedness. No right of any present or future
holders of any Senior Indebtedness of the Company to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to act
by any such holder, or by any noncompliance by the Company with the terms of
this Indenture, regardless of any knowledge thereof which any such holder may
have or be otherwise charged with.
SECTION 12.9. Holders Authorize Trustee to Effectuate Subordination
of Securities. Each Holder of the Securities by his acceptance thereof
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 provided in this Article 12 and appoints the
Trustee his attorney in-fact for such purpose, including, without limitation, in
the event of any dissolution, winding up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency or receivership proceedings or upon
an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the timely filing of a
claim for the unpaid balance of its or his Securities in the form required in
said proceedings. If the Trustee does not file a proper claim or proof of debt
in the form required in such proceedings before the expiration of the time to
file such claim or claims, then the holders of Senior Indebtedness of the
Company are hereby authorized to have the right to file and are hereby
authorized to file an appropriate claim for and on behalf of the Holders of said
Securities.
SECTION 12.10. Right of Trustee to Hold Senior Indebtedness. The
Trustee shall be entitled to all of the rights set forth in this Article 12 in
respect of any Senior Indebtedness of the Company at any time held by it to the
same extent as any other holder of such Senior Indebtedness of the Company, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder. With respect to the holders of Senior Indebtedness
of the Company, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article 12, and
no implied covenants or obligations with respect to the holders of Senior
Indebtedness of the Company shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Company, and the Trustee shall not be
liable
-93-
<PAGE>
to any holder of Senior Indebtedness of the Company if it shall mistakenly pay
over or deliver to Holders of Securities, the Company or any other Person moneys
or assets to which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article 12 or otherwise.
SECTION 12.11. Article 12 Not to Prevent Events of Default. The
failure to make a payment on account of principal or interest by reason of any
provision in this Article 12 shall not be construed as preventing the occurrence
of an Event of Default under Section 5.1.
SECTION 12.12. Paying Agents Other Than the Trustee. In case at any
time any Paying Agent (including, without limitation, the Company or any
Subsidiary) other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article 12 shall in
such case (unless the context shall otherwise require) be construed as extending
to and including such Paying Agent (except the Company and its subsidiaries in
the case of Sections 12.6 and 12.7) within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article 12 in addition
to or in place of the Trustee.
SECTION 12.13. Trustee's Compensation Not Prejudiced. Nothing in
this Article 12 shall apply to amounts due to the Trustee pursuant to Section
6.9.
SECTION 12.14. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money held in trust
under Article 4 by the Trustee for the payment of principal of, premiums if any,
and interest on the Securities shall not be subordinated to the prior payment of
any Senior Indebtedness of the Company or subject to the restrictions set forth
in this Article 12 and none of the Holders shall be obligated to pay over any
such amount to the Company or any holder of Senior Indebtedness of the Company
or any other creditor of the Company.
_______________________
-94-
<PAGE>
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
UAL CORPORATION
By:______________________
Title:
[Seal]
Attest:
___________________________
Title:
________________________,
TRUSTEE
By:______________________
Title:
[Seal]
Attest:
______________________________
Title:
-95-
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 23,
1994 included in UAL Corporation's Form 10-K for the year ended December 31,
1993 and to all references to our Firm included in this registration statement.
Arthur Andersen LLP
Chicago, Illinois
February 3, 1995
<PAGE>
LETTER OF TRANSMITTAL
FOR
SERIES A CONVERTIBLE PREFERRED STOCK
OF
UAL CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _______ __, 1995 (THE "EXPIRATION DATE") UNLESS EXTENDED
BY UAL CORPORATION
Exchange Agent:
[_________________________]
By Hand or Overnight Courier: By Mail:
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated _____ __, 1995
(the "Prospectus") of UAL Corporation (the "Company") which, together with this
Letter of Transmittal (the "Letter of Transmittal"), describes the Company's
offer (the "Exchange Offer") to exchange up to $600,000,000 of its ____%
Convertible Subordinated Debentures due __________, 2025 (the "Debentures") for
shares of its Series A Convertible Preferred Stock (the "Series A Preferred
Stock") with a like aggregate liquidation preference. Exchanges will be made on
a basis of $1,000 principal amount of Debentures (the minimum permitted
denomination) for every ten shares of Series A Preferred Stock (liquidation
preference $100 per share) validly tendered and accepted for exchange in the
Exchange Offer. The Company will pay amounts of less than $1,000 due to any
exchanging shareholder in cash, in lieu of issuing Debentures with a principal
amount of less than $1,000.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND
THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW.
<PAGE>
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Series A Preferred Stock to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate Numbers and
Numbers of Shares should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF SERIES A PREFERRED STOCK TENDERED HEREWITH
================================================================================
Number of
Names(s) and Address(es) of Shares Number of
Registered Holder(s) Certificate Represented by Shares
(Please fill in) Number(s)/*/ Certificate(s)/*/ Tendered/**/
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
================================================================================
/*/ Need not be completed by book-entry holders.
/**/ Unless otherwise indicated, the holder will be deemed to have tendered the
full number of shares of Series A Preferred Stock represented by the
tendered certificates. See Instruction 2.
This Letter of Transmittal is to be used either if certificates for Series
A Preferred Stock are to be forwarded herewith or if delivery of Series A
Preferred Stock is to be made by book-entry transfer to an account maintained by
the Exchange Agent at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in "The Exchange Offer--Procedures for Tendering" in the
Prospectus. If delivery of Series A Preferred Stock is to be made through book-
entry transfer into the Exchange Agent's account at DTC, this Letter of
Transmittal need not be delivered; provided, however that tenders of Series A
Preferred Stock must be effected in accordance with DTC's Automated Tender Offer
Program ("ATOP") procedures and the procedures set forth in the Prospectus under
the caption "The Exchange Offer--Procedures for Tendering--Book Entry Transfer."
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person in whose name Series A Preferred
Stock is registered on the books of the Company or any other person who has
obtained a properly completed stock power from the registered holder or any
person whose Series A Preferred Stock is held of record by DTC who desires to
deliver such Series A Preferred Stock by book-entry transfer at DTC.
-2-
<PAGE>
Holders whose Series A Preferred Stock is not immediately available or who
cannot deliver their Series A Preferred Stock and all other documents required
hereby to the Exchange Agent prior to the Expiration Date may tender their
Series A Preferred Stock according to the guaranteed delivery procedure set
forth in the Prospectus under the caption "The Exchange Offer--Procedures for
Tendering--Guaranteed Delivery."
[_] CHECK HERE IF TENDERED SERIES A PREFERRED STOCK IS BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering
Institution:_____________________________________________________________
The Depository Trust Company
Account Number:_____________ Transaction Code Number:____________________
[_] CHECK HERE IF TENDERED SERIES A PREFERRED STOCK IS BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered
Holder(s):_______________________________________________________________
Name of Eligible Institution
that Guaranteed Delivery:_______________________________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER:
Account Number:_________________________
-3-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described Series A Preferred
Stock. Subject to, and effective upon, the acceptance for exchange of the
Series A Preferred Stock tendered herewith, the undersigned hereby exchanges,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Series A Preferred Stock. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the undersigned in connection with the
Exchange Offer) to cause the Series A Preferred Stock to be assigned,
transferred and exchanged. The undersigned represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Series A
Preferred Stock and to acquire Debentures issuable upon the exchange of such
tendered Series A Preferred Stock, and that, when the same are accepted for
exchange, the Company will acquire good and unencumbered title to the tendered
Series A Preferred Stock, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Series A
Preferred Stock or transfer ownership of such Series A Preferred Stock on the
account books maintained by DTC. All authority herein conferred or agreed to be
conferred shall survive the death, bankruptcy or incapacity of the undersigned
and every obligation of the undersigned hereunder shall be binding upon the
heirs, personal representatives, successors and assigns of the undersigned.
The Company has expressly reserved the right to amend or modify the terms
of the Exchange Offer in any manner, or to withdraw or terminate the Exchange
Offer, at any time for any reason. The undersigned recognizes that as a result
of the foregoing, the Company may not be required to exchange any of the Series
A Preferred Stock tendered hereby and, in such event, the Series A Preferred
Stock not exchanged will be returned to the undersigned at the address shown
below the signature of the undersigned. Tendered Series A Preferred Stock may
be withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after 40 business days
after the date of the Prospectus.
Certificates for all Debentures delivered in exchange for tendered Series A
Preferred Stock and any Series A Preferred Stock delivered herewith but not
exchanged, in each case registered in the name of the undersigned, shall be
delivered to the undersigned at the address shown below the signature of the
undersigned.
-4-
<PAGE>
==============================================================================
TENDERING HOLDER(S) SIGN HERE
(Complete Accompanying Substitute Form W-9)
_____________________________________________________________________________
_____________________________________________________________________________
Signature of Holder(s)
Dated:_________________, 1995
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Series A Preferred Stock or by any person(s) authorized to
become registered holder(s) by endorsements and documents transmitted herewith
or, if the Series A Preferred Stock is held of record by DTC, the person in
whose name such Series A Preferred Stock is registered on the books of DTC. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, please set forth the full title of such person.) See Instruction 3.
Name(s):______________________________________________________________________
____________________________________________________________________________
(Please Print)
Capacity (full title): _______________________________________________________
Address: _____________________________________________________________________
_____________________________________________________________________
(Including Zip Code)
Area Code and Telephone No. _________________________________
Taxpayer Identification No.__________________________________
GUARANTEE OF SIGNATURES(S)
(If Required--See Instruction 3)
Authorized Signature:_________________________________________________________
Name:_________________________________________________________________________
Title:________________________________________________________________________
Address:______________________________________________________________________
Name of Firm:_________________________________________________________________
Area Code and Telephone No:___________________________________________________
Date:_________________________________________________________________________
==============================================================================
-5-
<PAGE>
==============================================================================
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 3, 4 and 11)
To be completed ONLY if the Debentures for the certificates of Series A
Preferred Shares are to be issued in the name of someone other than the
tendering holder.
Issue the Debentures to:
Name(s)_______________________________________________________________________
(Please Print)
Address: ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(Including Zip Code)
Taxpayer Identification No.:___________________________________________________
===============================================================================
-6-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates
for all physically delivered Series A Preferred Stock, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, or
confirmation of any book-entry transfer to the Exchange Agent's account at DTC
of Series A Preferred Stock tendered by book-entry transfer, must be received by
the Exchange Agent at either of its addresses set forth herein prior to the
Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE SERIES A
PREFERRED STOCK AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY
MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, BE USED.
Holders whose Series A Preferred Stock is not immediately available or who
cannot deliver their Series A Preferred Stock and all other required documents
to the Exchange Agent prior to the Expiration Date or comply with book-entry
transfer procedures on a timely basis may tender their Series A Preferred Stock
pursuant to the guaranteed delivery procedure set forth in the Prospectus under
"The Exchange Offer--Procedures for Tendering--Guaranteed Delivery."
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution (as defined in Instruction 3); (ii) on or prior to the
Expiration Date the Exchange Agent must have received from such Eligible
Institution a letter, telegram or facsimile transmission setting forth the name
and address of the tendering holder, the names in which such Series A Preferred
Stock is registered, and, if possible, the certificate numbers of the Series A
Preferred Stock to be tendered; and (iii) all tendered Series A Preferred Stock
as well as this Letter of Transmittal and all other documents required by this
Letter of Transmittal, or a confirmation of any book-entry transfer of such
Series A Preferred Stock into the Exchange Agent's account at DTC, must be
received by the Exchange Agent within five New York Stock Exchange trading days
after the date of execution of such letter, telegram or facsimile transmission,
all as provided in the Prospectus under the caption "The Exchange Offer--
Procedures for Tendering--Guaranteed Delivery."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Series A Preferred Stock for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire number of
shares of Series A Preferred Stock evidenced by a submitted certificate is
tendered, the tendering holder must fill in the number of shares of Series A
Preferred Stock tendered in the box entitled "Number of Shares Tendered." A
newly issued certificate for Series A Preferred Stock submitted but not tendered
will be sent to such holder as soon as practicable after the Expiration Date.
All Series A Preferred Stock delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
Tenders of Series A Preferred Stock pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after 40 business days
after the date of the Prospectus. To be effective, a written notice of
withdrawal delivered by hand, mail delivery or facsimile transmission must be
timely received by the Exchange Agent. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered Series
A Preferred Stock to be withdrawn, the certificate numbers of the Series A
Preferred Stock to be withdrawn, the number of shares of Series A Preferred
Stock delivered for exchange, a statement that such a holder is withdrawing its
election to
-7-
<PAGE>
have such Series A Preferred Stock exchanged, and the name of the registered
holder of such Series A Preferred Stock, and must be signed by the holder in the
same manner as the original signature on this Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the Series A Preferred Stock being withdrawn. The
Exchange Agent will return properly withdrawn Series A Preferred Stock promptly
following receipt of notice of withdrawal. All questions as to the validity of
notice of withdrawal, including time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
Withdrawals of tenders of Series A Preferred Stock may not be rescinded and any
Series A Preferred Stock withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. Properly withdrawn Series A
Preferred Stock, however, may be retendered by following the procedures therefor
at any time prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Series A Preferred Stock tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificates for Series A Preferred Stock, without alteration, enlargement or
any change whatsoever.
If any of the Series A Preferred Stock tendered hereby is owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If a number of shares of Series A Preferred Stock registered in different
names is tendered, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of Series A Preferred Stock.
When this Letter of Transmittal is signed by the registered holder or
holders of Series A Preferred Stock listed and tendered hereby, no endorsements
of certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Series A Preferred Stock listed, such Series
A Preferred Stock must be endorsed or accompanied by separate written
instruments of transfer or exchange in form satisfactory to the Company and duly
executed by the registered holder, in either case signed exactly as the name or
names of the registered holder or holders appear(s) on the Series A Preferred
Stock.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by a
financial institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or The New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (any of the foregoing
hereinafter referred to as an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Series A Preferred Stock is tendered: (i) by
a registered holder of such Series A Preferred Stock; or (ii) for the account of
an Eligible Institution.
4. TRANSFER TAXES. Holders of the Series A Preferred Stock accepted in
the Exchange Offer are responsible for paying any transfer taxes in connection
with such exchange. If satisfactory evidence of payment
-8-
<PAGE>
of such taxes or exemption therefrom is not submitted herewith, the amount of
such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the certificates for Series A Preferred
Stock listed in this Letter of Transmittal.
5. EXTENSIONS, AMENDMENTS AND TERMINATION. The Company expressly
reserves the right to extend, amend or modify the terms of the Exchange Offer in
any manner and withdraw or terminate the Exchange Offer and not accept for
exchange any Series A Preferred Stock, at any time for any reason, including
(without limitation) if fewer than __________ shares of Series A Preferred Stock
are tendered (which condition may be waived by the Company).
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any holder whose Series A
Preferred Stock has been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated below for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the addresses and telephone number set forth above.
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or Series
A Preferred Stock will be resolved by the Company, and such determination will
be final and binding on all parties. The Company reserves the absolute right to
reject any or all Letters of Transmittal or tenders that are not in proper form
or the acceptance of which would, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to the particular Series A Preferred Stock covered by
any Letter of Transmittal or tendered pursuant to such letter. None of the
Company, the Exchange 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. The Company's interpretation of the
terms and conditions of the Exchange Offer shall be final and binding on all
parties.
9. SUBSTITUTE FORM W-9. Except as described below under "Important Tax
Information," Federal income tax laws require each tendering holder to provide
the Company with a correct taxpayer identification number ("TIN") on the
Substitute Form W-9 which is provided below, and to indicate whether or not the
holder is not subject to backup withholding by crossing out Part 2 on the
Substitute Form W-9 if the holder is currently subject to backup withholding.
Failure to provide the information on the Form or to cross out Part 2 of the
Form (if applicable) may subject the tendering holder to 31% federal income tax
withholding on payments made to the holder. The box in Part 3 of the Form may
be checked if the tendering holder has not been issued a TIN and has applied for
a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is
checked and the holder is not provided with a TIN within sixty (60) days, the
Company will withhold 31% on all such payments thereafter until a TIN is
provided to the Company.
10. WITHHOLDING ON FOREIGN HOLDERS IN CONNECTION WITH THE EXCHANGE OFFER.
United States Federal income tax generally will be withheld from the gross
proceeds payable to a holder that is a non-United States person (a "foreign
holder") (including Debentures that such foreign holder would otherwise be
entitled to receive) unless such foreign holder provides the Exchange Agent with
a Foreign Holder Certification, in form and substance satisfactory to the
Company, in which such holder certifies that such holder's exchange of Series A
Preferred Stock for Debentures pursuant to the Exchange Offer qualifies as a
sale or exchange, rather than as a dividend, for Federal income tax purposes (as
described in "Certain Federal Tax Considerations for Foreign Holders--Exchange
of Series A Preferred Stock for Debentures" in the Prospectus) and such holder
agrees that it will provide additional information to the Company if necessary
to demonstrate such qualification and that it will
-9-
<PAGE>
reimburse the Company if it is determined that Federal withholding tax was due.
The withholding rate is ordinarily 30% unless the foreign holder is eligible for
a reduced tax treaty rate with respect to dividend income, in which case
withholding will be made at the reduced treaty rate, or the foreign holder
otherwise establishes to the satisfaction of the withholding agent that such
holder is exempt from tax on such exchange (e.g., by certifying to the
withholding agent on IRS Form 8709 as to such holder's status as a foreign
government). For this purpose, a non-United States person is any person that is
not (i) an individual citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof or (iii) any
estate or trust the income of which is subject to United States Federal income
taxation regardless of the source of such income. Copies of the Foreign Holder
Certification are available from the Exchange Agent. A shareholder's status as
a foreign holder and eligibility for a tax treaty reduced rate of withholding
will be determined by reference to the shareholder's address and to any
outstanding certificates (i.e., Form W-8 or substitute) or statements concerning
eligibility for a reduced rate of withholding, unless facts and circumstances
indicate that reliance is not warranted. EACH FOREIGN HOLDER SHOULD CONSULT
WITH ITS TAX ADVISOR REGARDING THE FOREGOING.
A holder that exchanges Series A Preferred Stock for Debentures on behalf
of a beneficial owner that is a non-United States person will be responsible for
determining whether and what rate of withholding is required on such exchange
and for obtaining any required forms or certifications from such beneficial
owner.
A foreign holder may be eligible to obtain from the U.S. Internal Revenue
Service a refund of any tax withheld if such shareholder meets one of the three
tests for sale or exchange treatment described in "Certain Federal Tax
Considerations for Foreign Holders--Exchange of Series A Preferred Stock for
Debentures" in the Prospectus or otherwise is able to establish that no tax (or
a reduced amount of tax) was due.
11. SPECIAL ISSUANCE INSTRUCTIONS. If the Debentures for the certificates
of Series A Preferred Shares are to be issued in the name of someone other than
the tendering holder, the tendering holder must fill in the information in the
box entitled "Special Issuance Instructions."
12. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH CERTIFICATES FOR SERIES A PREFERRED STOCK AND ALL OTHER REQUIRED DOCUMENTS)
OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR A NOTICE OF GUARANTEED DELIVERY MUST
BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Series A Preferred
Stock is accepted for exchange is required to provide the Company with such
holder's correct taxpayer identification number ("TIN") on Substitute Form W-9.
If a holder is an individual, the TIN is the holder's social security number.
If the Company is not provided with the correct TIN, the holder may be subject
to a penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such holder with respect to Debentures acquired pursuant to the
Exchange Offer may be subject to backup withholding.
If backup withholding applies, the Company is required to withhold 31% of
all payments made to the holder. Backup withholding is not an additional tax.
Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
-10-
<PAGE>
To prevent backup withholding on payments that are made to a holder with
respect to Debentures, the holder is required to notify the Company of his or
its correct TIN by completing the Form below, certifying that the TIN provided
on Substitute Form W-9 is correct (or that such holder is awaiting a TIN) and
whether or not (i) the holder has not been notified by the Internal Revenue
Service that the holder is subject to backup withholding as a result of a
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that the holder is no longer subject to backup
withholding.
Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
A corporation must, however, complete the Substitute Form W-9, including
providing its TIN (unless it is a foreign corporation that does not have a TIN)
and indicating that it is exempt from backup withholding, in order to establish
its exemption from backup withholding. A foreign corporation or individual, or
other foreign person, must submit a statement (i.e., Form W-8 or substitute),
signed under penalties of perjury, attesting to such person's status as a non-
United States person. Such statements can be obtained from the Exchange Agent.
See the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional instructions.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: [ _______________________________ ]
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PART 1 -- PLEASE PROVIDE YOUR TIN SOCIAL SECURITY NUMBER
IN THE BOX AT RIGHT AND CERTIFY OR _______________________________
BY SIGNING AND DATING BELOW EMPLOYER IDENTIFICATION NUMBER
-----------------------------------------------------------------------------------------------------
SUBSTITUTE PART 2 -- I am not subject to backup withholding because (i) I am FOR PAYEES EXEMPT FROM
FORM W-9 exempt from backup withholding, or (ii) I have not been notified by BACKUP WITHHOLDING
DEPARTMENT OF THE TREASURY the IRS that I am subject to backup withholding as a result of a
INTERNAL REVENUE SERVICE failure to report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup withholding. Write "EXEMPT" if you
(YOU MUST CROSS OUT THIS PART 2 IF YOU ARE CURRENTLY SUBJECT TO are exempt from backup
BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING OF INTEREST OR withholding.
DIVIDENDS ON YOUR TAX RETURN.)
-----------------------------------------------------------------------------------------------------
PAYER'S REQUEST FOR CERTIFICATION -- UNDER PENALTIES OF PERJURY, I PART 3 --
TAXPAYER IDENTIFICATION CERTIFY THAT THE INFORMATION PROVIDED ON THIS
NUMBER (TIN) FORM IS TRUE, CORRECT AND COMPLETE.
SIGNATURE __________________________ DATE ____________ Awaiting TIN [_]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-11-
<PAGE>
- ------------------------------------------------------------------------------
CERTIFICATE OF TAXPAYER AWAITING TIN
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
60 days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
- ------------------------------------- ---------------------
Signature Date
- ------------------------------------------------------------------------------
-12-
