United Airlines 2007 Annual Report Download - page 23

The issuance of additional shares of UAL's common stock, including upon conversion of its convertible preferred stock and its convertible notes, could cause
dilution to the interests of its existing stockholders.
In connection with the Company's emergence from Chapter 11 bankruptcy protection, UAL issued 5,000,000 shares of 2% convertible preferred stock.
Effective February 1, 2008, this preferred stock may be converted into shares of UAL's common stock. Further, the preferred stock is mandatorily convertible
15 years from the issuance date. UAL also issued approximately $150 million in convertible 5% notes shortly after the Effective Date, and subsequently issued
approximately $726 million in convertible 4.5% notes on July 25, 2006. Holders of these securities may convert them into shares of UAL's common stock
according to their terms. In February 2008, 1.0 million shares of 2% convertible preferred stock were converted into approximately 2.2 million shares of UAL
common stock resulting in dilution to common stockholders. If the holders of the remaining 4.0 million shares of convertible preferred stock or the holders of the
convertible notes were to exercise their rights to convert their securities into common stock, it could cause substantial dilution to existing stockholders. In
January 2008, as a result of UAL's $2.15 per common share special distribution, UAL modified the conversion prices of the 5% and 4.5% notes in accordance
with the terms of their indentures. The lower conversion prices increase the potential dilution to existing UAL stockholders. UAL may undertake future actions
that may result in additional modifications to the conversion prices of these instruments and increase their likelihood of conversion. For further information, see
Note 12, "Debt Obligations" and Note 13, "UAL Preferred Stock," in the Combined Notes to Consolidated Financial Statements.
UAL's certificate of incorporation authorizes up to one billion shares of common stock. In certain circumstances, UAL can issue shares of common stock
without stockholder approval. In addition, the board of directors is authorized to issue up to 250 million shares of preferred stock without any action on the part
of UAL's stockholders. The UAL Board of Directors also has the power, without stockholder approval, to set the terms of any series of shares of preferred stock
that may be issued, including voting rights, conversion rights, dividend rights, preferences over UAL's common stock with respect to dividends or if UAL
liquidates, dissolves or winds up its business and other terms. If UAL issues preferred stock in the future that has a preference over its common stock with respect
to the payment of dividends or upon its liquidation, dissolution or winding up, or if UAL issues preferred stock with voting rights that dilute the voting power of
its common stock, the rights of holders of its common stock or the market price of its common stock could be adversely affected. UAL is also authorized to issue,
without stockholder approval, other securities convertible into either preferred stock or, in certain circumstances, common stock. In the future UAL may decide
to raise capital through offerings of its common stock, securities convertible into its common stock, or rights to acquire these securities or its common stock. The
issuance of additional shares of common stock or securities convertible into common stock could result in dilution of existing stockholders' equity interests in
UAL. Issuances of substantial amounts of its common stock, or the perception that such issuances could occur, may adversely affect prevailing market prices for
UAL's common stock and UAL cannot predict the effect this dilution may have on the price of its common stock.
UAL's certificate of incorporation limits voting rights of certain foreign persons.
UAL's restated certificate of incorporation limits the voting rights of persons holding any of UAL's equity securities who are not "citizens of the United
States," as defined in Section 40102(a)(15) of Title 49 United States Code, to 24.9% of the aggregate votes of all equity securities outstanding. This restriction is
applied pro rata among all holders of equity securities who fail to qualify as "citizens of the United States," based on the number of votes the underlying
securities are entitled to.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008