United Airlines 2012 Annual Report Download - page 24

Table of Contents
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 or, they could prevent or discourage attempts to remove and replace incumbent directors.
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
par value, 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.
The Company 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, 2012, UAL had $1 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. 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.
 
None.
23