United Airlines 2010 Annual Report Download - page 30

The issuance of additional shares of UAL’s capital stock, including the issuance of common stock upon
conversion of convertible notes and upon a noteholder’s exercise of its option to require UAL to repurchase
convertible notes, could cause dilution to the interests of its existing stockholders.
UAL’s amended and restated 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 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. As of December 31, 2010, UAL had $1.7 billion of
convertible debt outstanding. Holders of these securities may convert them into shares of UAL common stock
according to their terms. In addition, certain of UAL’s notes include noteholder early redemption options. If a
noteholder exercises such option, UAL may elect to pay the repurchase price in cash, shares of its common stock
or a combination thereof. If UAL elects to pay the repurchase price in shares of its common stock, UAL is
obligated to deliver a number of shares of common stock equal to the repurchase price divided by an average
price of UAL common stock for a 20-consecutive trading day period. See Note 14 to the financial statements
included in Item 8 of this report for additional information related to these convertible notes. The number of
shares issued could be significant and such an issuance could cause significant dilution to the interests of its
existing stockholders. In addition, if UAL elects to pay the repurchase price in cash, its liquidity could be
adversely affected.
In the future, UAL may decide to raise additional capital through offerings of UAL common stock,
securities convertible into UAL common stock, or exercise rights to acquire these securities or its common stock.
The issuance of additional shares of common stock, including upon the conversion or repurchase of convertible
debt, could result in significant 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 amended and restated certificate of incorporation limits voting rights of certain foreign persons.
UAL’s amended and restated certificate of incorporation limits the total number of shares of equity
securities held by persons who fail to qualify as a “citizen of the United States,” as defined in
Section 40102(a)(15) of Title 49 of the United States Code, to no more than 24.9% of the aggregate votes of all
outstanding equity securities of UAL. 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 to which the underlying
securities are entitled.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
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