United Airlines 2010 Annual Report Download - page 29

Certain provisions of UAL’s Governance Documents could discourage or delay changes of control or changes
to the Board of Directors.
Certain provisions of UAL’s amended and restated certificate of incorporation and amended and restated
bylaws (together, the “Governance Documents”) may make it difficult for stockholders to change the
composition of the Board of Directors and may discourage takeover attempts that some of its stockholders may
consider beneficial.
Certain provisions of the Governance Documents may have the effect of delaying or preventing changes in
control if the Board of Directors determines that such changes in control are not in the best interests of UAL and
its stockholders. These provisions of the Governance Documents are not intended to prevent a takeover, but are
intended to protect and maximize the value of UAL’s stockholders’ interests. While these provisions have the
effect of encouraging persons seeking to acquire control of UAL to negotiate with the Board of Directors, they
could enable the Board of Directors to prevent a transaction that some, or a majority, of its stockholders might
believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace
incumbent directors.
The issuance of UAL’s 8% Contingent Senior Notes could materially and adversely impact the Company’s
results of operations, liquidity and financial position.
UAL would be obligated under an indenture to issue to the Pension Benefit Guarantee Corporation (“PBGC”)
up to $500 million aggregate principal amount of 8% Contingent Senior Notes (the “8% Notes”) if certain financial
triggering events occur. The 8% Notes would be issued in up to eight equal tranches of $62.5 million (with each
tranche issued no later than 45 days following the end of any applicable fiscal year). A triggering event occurs when
UAL’s EBITDAR (as defined in the PBGC indenture) exceeds $3.5 billion over the prior twelve months ending
June 30 or December 31 of any applicable fiscal year. The twelve-month measurement periods began with the fiscal
year ended December 31, 2009 and will end with the fiscal year ending December 31, 2017. However, if the
issuance of a tranche would cause a default under any other securities then existing, UAL may satisfy its obligations
with respect to such tranche by issuing UAL common stock having a market value equal to $62.5 million. Each
issued tranche will mature 15 years from its respective triggering event date, with interest payable in cash in semi-
annual installments, and will be callable, at UAL’s option, at any time at par, plus accrued and unpaid interest.
Because Continental’s EBITDAR will be included in the calculation for periods subsequent to the closing of the
Merger, the Merger increases the likelihood that all or a portion of the 8% Notes will be issued, as well as the
likelihood that the timing of any such issuances would be accelerated. However, because the issuance of the 8%
Notes is based upon future operating results, we cannot predict the exact number and timing of any such issuances
by the Company. The issuance of the 8% Notes could adversely impact the Company’s results of operations
because of increased charges to earnings for the principal amount of the notes issued and increased interest expense
related to the notes. Issuance of such notes could also materially and adversely impact the Company’s liquidity due
to increased cash required to meet interest and principal payments.
Delays in scheduled aircraft deliveries may adversely affect the Company’s ability to expand its capacity.
The Company from time to time acquires additional aircraft to increase its domestic and international
capacity when the level of demand for air travel supports such growth. The Company has contractual
commitments to purchase aircraft that it currently believes is necessary for its capacity growth. Delays in aircraft
deliveries under those contractual commitments may occur and the Company has been, and may in the future be,
adversely impacted by those delays. If significant additional delays in the deliveries of new aircraft occur, the
Company may be able to accomplish capacity increases only by making alternative arrangements to acquire the
necessary aircraft, if available and possibly on less financially favorable terms, including higher ownership and
operating costs.
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