United Airlines 2011 Annual Report Download - page 107

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2011 and 2010, respectively. Continental Successor recorded $26 million and $54 million of compensation cost related to UAL’s share-based plans during 2011 and 2010, respectively. These amounts included
$10 million and $46 million that were classified as integration and Merger-related expense during 2011 and 2010, respectively. All UAL share-based compensation expense in 2009 was recorded by United.
(c) As described below, in connection with the Merger, certain awards were converted into fixed cash equivalents.
The table below summarizes UAL’s unearned compensation and weighted-average remaining period to recognize costs for all outstanding share-based awards
for the year ended December 31, 2011 (in millions, except as noted):





Share-based awards converted to cash awards $ 8 1.0
Restricted stock units 24 1.8
Restricted stock 9 1.3
Stock options 2 1.8
Total $43
(a) Compensation cost attributable to future service related to unvested awards remaining to be recognized by United and Continental consists of $25 million and $18 million, respectively.
Merger Impacts—Continental Predecessor Share-Based Awards. Prior to completion of the Merger, Continental had outstanding stock options, non-employee
director restricted stock awards and performance compensation awards (profit based RSUs) that were issued pursuant to its incentive compensation plans.
Under the terms of Continental’s incentive plans, substantially all of the outstanding equity awards fully vested as a result of the Merger. The equity awards
were assumed and issued by UAL using a 1.05 conversion rate and had a fair value of approximately $78 million at the Merger closing date which was
included in the acquisition cost. In addition, as a result of the Merger, the performance criteria related to the profit based RSUs (“PBRSUs”) was deemed to be
achieved for each open performance period (the three-year periods beginning January 1, 2008, 2009 and 2010) at a payment percentage of 150% and the
minimum cash balance requirement was deemed satisfied. Following the Merger closing date, with limited exceptions as described below, payments under all
outstanding PBRSUs remain subject to continued employment by the participant and will continue to be paid on their normal payment date over a three-year
period. The PBRSUs were converted into a fixed cash equivalent based on a stock price of $23.48, the average closing price per share of Continental common
stock for the 20 trading days preceding the completion of the Merger.
Merger Impacts—United Share-Based Awards. In May 2010, the UAL Board of Directors made a determination that the Merger should be considered a change
of control for purposes of all outstanding awards. Accordingly, upon the completion of the Merger on October 1, 2010, eligible outstanding equity-based
awards immediately vested except for certain officer awards that are subject to separate agreements, as discussed below. In September 2010, the Human
Resources Subcommittee of the UAL Board of Directors elected to settle all eligible RSUs in cash. As a result, participants received $23.66 in exchange for
each share unit, based on the closing price of UAL stock on the day prior to the Merger closing. The cash payment to settle these awards was $18 million and
was paid during the fourth quarter of 2010.
Certain officers entered into separate agreements with the Company pursuant to which they agreed to waive the provisions providing for accelerated vesting
upon the change of control. As part of the agreements, the outstanding restricted stock awards and RSUs were converted into fixed cash equivalents based on a
stock price of $22.33 per share, UAL’s average closing share price for the preceding 20 days prior to the closing of the Merger. Following the Merger, with
limited exceptions as described below, the payment of these awards remains subject to continued employment by the participant and will be paid on the
original vesting dates. Upon
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