United Airlines 2011 Annual Report Download - page 24

Table of Contents
involving the sale or issuance of UAL common stock, including the exercise of conversion options under the terms of the Company’s convertible debt,
repurchase of such debt with UAL common stock, issuance of UAL common stock for cash and the acquisition or disposition of such stock by a
stockholder owning 5% or more of UAL common stock, or a combination of such transactions, may increase the possibility that the Company will experience
a future ownership change under Section 382.
Under Section 382, a future ownership change would subject the Company to additional annual limitations that apply to the amount of pre-ownership change
NOLs that may be used to offset post-ownership change taxable income. This limitation is generally determined by multiplying the value of a corporation’s
stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be
carried over to later years, and the limitation may under certain circumstances be increased by built-in gains in the assets held by such corporation at the time
of the ownership change. This limitation could cause the Company’s U.S. federal income taxes to be greater, or to be paid earlier, than they otherwise would
be, and could cause all or a portion of the Company’s NOL carryforwards to expire unused. Similar rules and limitations may apply for state income tax
purposes. The Company’s ability to use its NOL carryforwards will also depend on the amount of taxable income it generates in future periods. Its NOL
carryforwards may expire before the Company can generate sufficient taxable income to use them in full.
UAL’s amended and restated certificate of incorporation limits certain transfers of its stock which could have an effect on the market price of UAL
common stock.
To reduce the risk of a potential adverse effect on the Company’s ability to use its NOL carryforwards for federal income tax purposes, UAL’s amended and
restated certificate of incorporation contains a 5% ownership limitation. This limitation generally remains effective until February 1, 2014, or until such later
date as may be approved by the UAL Board of Directors (the “Board of Directors”) in its sole discretion. The limitation prohibits (i) an acquisition by a single
stockholder of shares that results in that stockholder owning 5% or more of UAL common stock and (ii) any acquisition or disposition of common stock by
a stockholder that already owns 5% or more of UAL common stock, unless prior written approval is granted by the Board of Directors.
Any transfer of common stock in violation of these restrictions will be void and will be treated as if such transfer never occurred. This provision of UAL’s
amended and restated certificate of incorporation may impair or prevent a sale of common stock by a stockholder and adversely affect the price at which a
stockholder can sell UAL common stock. In addition, this limitation may have the effect of delaying or preventing a change in control of the Company,
creating a perception that a change in control cannot occur or otherwise discouraging takeover attempts that some stockholders may consider beneficial, which
could also adversely affect the market price of the UAL common stock. The Company cannot predict the effect that this provision in UAL’s amended and
restated certificate of incorporation may have on the market price of the UAL common stock. For additional information regarding the 5% ownership
limitation, please refer to UAL’s amended and restated certificate of incorporation available on the Company’s website.
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
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