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UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
(EFFECTIVE AS OF JULY 12, 1994)
TABLE OF CONTENTS
PAGE
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1 Definitions. . . . . . . . . . . . . . . . . . .
SECTION 2 Plan Participation . . . . . . . . . . . . . . .
SECTION 3 Contributions. . . . . . . . . . . . . . . . . .
SECTION 4 Investment of Trust Fund . . . . . . . . . . . .
SECTION 5 Plan Accounting. . . . . . . . . . . . . . . . .
SECTION 6 Vesting. . . . . . . . . . . . . . . . . . . . .
SECTION 7 Distributions. . . . . . . . . . . . . . . . . .
SECTION 8 Voting and Certain Dispositions of Company Stock.
SECTION 9 Rights, Restrictions and Options on Company Stock.
SECTION 10 Dividends . . . . . . . . . . . . . . . . . . . .
SECTION 11 Administration. . . . . . . . . . . . . . . . . .
SECTION 12 Claims Procedure. . . . . . . . . . . . . . . . .
SECTION 13 Amendment and Termination . . . . . . . . . . . .
SECTION 14 Top-Heavy Provisions. . . . . . . . . . . . . . .
SECTION 15 Miscellaneous . . . . . . . . . . . . . . . . . .
UAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
(EFFECTIVE AS OF JULY 12, 1994)
PREAMBLE
NATURE OF PLAN
The Plan has been established to enable Eligible
Employees of the Company and certain of its Affiliates to
acquire stock ownership interests in the Company. The Plan
is designed to invest exclusively in Company Stock (except
for de minimis investments of cash pending investment in
Company Stock or pending distribution to Participants) and,
to the extent it is an employee stock ownership plan,
primarily in "qualifying employer securities" (as defined in
Code section 4975(e)(8)).
Subject to Section 13, the Plan is intended to be
permanent and to benefit Eligible Employees of the Company
and its participating Affiliates on the Effective Date, as
well as the Eligible Employees entering employment
thereafter.
The Plan consists of an employee stock ownership plan
and a stock bonus plan. The employee stock ownership plan
("Part A" hereof) forms a part of the stock bonus plan,
includes a money purchase pension plan and is intended to be
qualified under Code sections 401(a) and 4975(e)(7). With
respect to the portion of this Plan that is an employee
stock ownership plan, as a single employee stock ownership
plan: (i) the Initial Acquisition Loan and the Additional
Acquisition Loans shall be a joint obligation of the
component plans, (ii) the Plan shall not maintain separate
Loan Suspense Accounts for the stock bonus and money
purchase pension components, (iii) dividends paid on Company
Stock in either such component plan shall be used to repay
the Initial Acquisition Loan and the Additional Acquisition
Loans to the extent provided in the Plan, and (iv) separate
Accounts shall not be maintained for Participants with
respect to such component plans. The Trust holding the
assets of the Trust Fund is intended to be exempt from
taxation under Code section 501(a).
The Plan consists of two portions, a "leveraged"
portion (Part A) that is intended to be an employee stock
ownership plan and an "unleveraged" portion (Part B). Part A
consists of both a stock bonus plan component and a money
purchase pension plan component and Part B consists solely
of a stock bonus plan component. Unless the context
otherwise requires or unless specifically provided, all
provisions of this Plan document shall apply to both Part A
and Part B.
TRANSACTION
The Plan is part of an overall program (which includes
the Supplemental Plan) resulting in the acquisition by
Eligible Employees of a majority ownership stake in the
Company as contemplated by the Agreement and Plan of
Recapitalization, among UAL Corporation and Air Line Pilots
Association, International and International Association of
Machinists and Aerospace Workers, as amended (the
"Recapitalization Agreement"). Specifically, on the
Effective Date, Eligible Employees will become entitled to
receive 55% of the equity and voting power of the Company
through the Trust and the Supplemental Trust. The overall
program will be accomplished by the allocation to individual
Participant accounts over the Wage Investment Period of
shares of Class 1 Non-Voting Preferred Stock, Class 2
Non-Voting Preferred Stock and Voting Preferred Stock under
the Trust and Supplemental Trust (or equivalent fictional
book-entry shares under the Supplemental Plan), which shares
shall, in the aggregate, be convertible into shares of
Common Stock in an amount that represents 55% of the
Company's equity and voting power measured as of the
Effective Date. In addition, as described under the
paragraph entitled "Additional Shares" below, depending on
the market price per share of the Common Stock during the
one-year period commencing on the Effective Date, up to an
additional 8% of the Company's equity and voting power may
be allocated to Participants' accounts under the Plan and
the Supplemental Plan, bringing the total up to 63% of the
equity and voting power of the Company.
Of the overall Employee stake, 46.23% of the underlying
shares, including the Additional Shares, if any, will be
reserved for allocation to the ALPA Employee Group, 37.13%
of the underlying shares will be reserved for allocation to
the IAM Employee Group and 16.64% of the underlying shares
will be reserved for allocation to the Management and
Salaried Employee Group.
If there were no Code limitations on compensation and
allocations, all shares to be acquired under the overall
program would be delivered solely under Part A and such
shares would be allocated to Participants of the respective
Employee Groups over the Wage Investment Period in
accordance with the percentages set forth in the preceding
paragraph. Because such Code limitations will, in fact,
operate to limit the annual benefits available under Part A,
only a portion (expected to be approximately 78.15% of the
underlying shares of Preferred Stock) will be acquired by
the Trust from time to time on and after the Effective Date
and allocated to Participants under Part A. To maximize
certain employee stock ownership plan-related tax benefits,
the Employee Groups may receive less than their overall
equity ownership interest under Part A, with the balance to
be received under Part B and the Supplemental Plan. Most of
the shares allocable under Part B and the Supplemental Plan
will be allocable to the ALPA Employee Group. (The preceding
does not refer to Voting Preferred Stock; it will be
contributed and allocated for all Employee Groups as
described below under the paragraph entitled "Part B: Voting
Preferred Stock.")
Shares not acquired under Part A will be allocated to
appropriate Participant Accounts under Part B, subject to
Code limitations, including Code sections 401(a)(4),
401(a)(17) and 415. To the extent that shares cannot be
allocated under Part B by reason of those Code limitations,
such shares will be allocated to accounts of appropriate
Participants in accordance with the provisions of the
Supplemental Plan.
The combined effect of the allocations under the
overall program (Part A, Part B and the Supplemental Plan)
will be to put each Participant, to the extent possible, in
the position such Participant would have been had all
shares, including the Additional Shares, if any, been
delivered to and allocated under Part A.
PART A
With respect to Part A, it is intended that, on the
Effective Date and from time to time thereafter, the Trustee
will enter into the Initial Acquisition Loan and Additional
Acquisition Loans on behalf of the Trust and use the
proceeds thereof to purchase shares of Preferred Stock,
representing approximately 42.9825% of the equity of the
Company (subject to increase due to any Additional Shares
issued). The Preferred Stock purchased will be Class 1
Non-Voting Preferred Stock. The shares of Class 1 Non-Voting
Preferred Stock will be allocated ratably, over the Wage
Investment Period, to the Employee Groups in accordance with
the following percentages:
ALPA Employee Group - 31.759437%
IAM Employee Group - 47.511196%
Management and Salaried Employee Group - 20.729367%
PART B: CLASS 2 NON-VOTING PREFERRED STOCK
With respect to Part B, it is intended that the Company
will contribute (or will cause the trustee of the
Supplemental Trust to transfer), during the Wage Investment
Period, shares of Class 2 Non-Voting Preferred Stock
(including Additional Shares, if any) to the Plan. Subject
to certain Code limitations, such shares will be allocated
to Participants who receive less than their full entitlement
under the overall program under Part A. In general, the
formula for determining the amount of allocations under Part
B to make up for the shortfall of Company Stock delivered
under Part A is set forth in Section 5.4(c).
PART B: VOTING PREFERRED STOCK
With respect to Part B, it is also intended that the
Company will contribute, during the Wage Investment Period,
shares of Voting Preferred Stock to the Plan. The Voting
Preferred Stock contributed will be comprised of three
classes. A separate class of Voting Preferred Stock,
representing 25.4265% of the voting power of the Company,
will be reserved for allocation to Participants who are
members of the ALPA Employee Group ("Class P"); a separate
class of Voting Preferred Stock, representing 20.4215% of
the voting power of the Company, will be reserved for
allocation to Participants who are members of the IAM
Employee Group ("Class M"); and a separate class of Voting
Preferred Stock, representing 9.152% of the voting power of
the Company, will be reserved for allocation to Participants
who are members of the Management and Salaried Employee
Group ("Class S"). (The shares reserved above include shares
reserved for allocation to the respective Employee Groups
under the Supplemental Plan and Supplemental Trust.) Such
percentages shall be appropriately adjusted in the event the
initial Employee ownership percentage is increased (up to
63% in the aggregate) as provided below. It is intended that
the number of shares of Voting Preferred Stock to be
allocated to each Participant's Account on each Valuation
Date will equal the number of shares of Preferred Stock
allocated to that Participant under Part A and Part B on
such Valuation Date (taking into account the special
Effective Date contribution and allocation described below).
The terms of each class of Voting Preferred Stock provide
that the shares outstanding at any particular time (in
combination with any shares of Common Stock held by the
Trustee or trustee under the Supplemental Trust allocable or
allocated to the relevant Employee Group) will command the
aggregate voting power reserved for such Employee Group.
Thus, for example, if there are 100 shares of Class P
outstanding, each such share will command 1% of the voting
power reserved for the ALPA Employee Group (25.4265%,
assuming 55% ownership by Employees). As additional shares
of Class P are issued, the per share voting power will
decrease proportionately.
As a special Employer Contribution, one share of each
of Class P, Class M and Class S will be contributed by the
Company to Part B on the Effective Date. These three shares
will be allocated, per capita, to the Accounts of the
appropriate Participants under Part B on the Effective Date.
SUPPLEMENTAL PLAN AND SUPPLEMENTAL TRUST
To the extent that, in any Plan Year during the Wage
Investment Period, shares of Company Stock cannot be
allocated to a Participant's Account by reason of any Code
limitations, including Code section 401(a)(17), Code section
415 and Code section 401(a)(4), appropriate credits will be
made to the accounts of the affected Participants under the
Supplemental Plan (attached hereto as Exhibit A) in
accordance with the terms thereof and shares of Voting
Preferred Stock (and in certain circumstances, Class 2
Non-Voting Preferred Stock) used to satisfy the relevant
credits will be held in the Supplemental Trust (attached
hereto as Exhibit B) in accordance with the terms thereof
for the benefit of the affected Participants.
PART B: FLOWBACK
During and after the Wage Investment Period, to the
extent that the allocation of shares of Company Stock under
the Plan for any Participant was limited in a prior Plan
Year by reason of the limitations of Code section
401(a)(17), Code section 415 or Code section 401(a)(4) (with
the result that the Participant received corresponding
credits under the Supplemental Plan), it is intended that
the Company will contribute (or the Company will cause the
trustee of the Supplemental Trust to transfer) to such
Participant's Account shares of Class 2 Non-Voting Preferred
Stock and shares of Voting Preferred Stock, as the case may
be, in a subsequent Plan Year, and that such shares will be
allocated under this Plan to the Accounts of the affected
Participants in accordance with the terms hereof, subject to
any applicable Code limitations as applied to the subsequent
Plan Year (and corresponding debits will be made under the
Supplemental Plan).
ADDITIONAL SHARES:
Depending on the fair market value per share of the
Common Stock during the one-year period commencing on the
Effective Date, a number of additional shares determined in
accordance with Section 1.6 and Section 1.10 of the
Recapitalization Agreement will be allocated to
Participants' Accounts under the Plan and participants'
accounts under the Supplemental Plan over the remainder of
the Wage Investment Period. Such number of shares of Company
Stock will be allocated to the Employee Groups in accordance
with the percentages specified in the paragraph above
entitled "Transaction."
In general, 78.15% of the Additional Shares which are
Preferred Stock will be Class 1 Non-Voting Preferred Stock;
provided, however, that the portion of the Additional Shares
attributable to Preferred Stock allocated as of December 31,
1994 will be Class 2 Non-Voting Preferred Stock contributed
to Part B or allocated as credits under the Supplemental
Plan as of December 31, 1994. Except as described in the
foregoing proviso, it is intended that such Additional
Shares of Class 1 Non-Voting Preferred Stock will increase,
on a pro rata basis, the number of such shares acquired
pursuant to each Additional Acquisition Loan. Unless the
parties agree otherwise, these Class 1 shares will be
allocated over the remainder of the Wage Investment Period
in accordance with the percentages set forth under Part A
above.
Any Additional Shares not sold to the Trustee pursuant
to Part A will be contributed by the Company to Part B or
credited to the Supplemental Plan during the remainder of
the Wage Investment Period. Subject to certain Code
limitations, such shares will be allocated to Participants
who receive less than their full entitlement, giving effect
to the allocation of the Additional Shares, of shares of
Class 1 Non-Voting Preferred Stock under Part A. To the
extent possible, the formula in Section 5.4(c) will be
applied by assuming all Additional Shares (other than the
shares of Voting Preferred Stock) had been sold to the Trust
under Part A on the Effective Date and allocated ratably
over the following 69 months.
SECTION 1
DEFINITIONS
In this Plan (including the preamble), whenever the
context so indicates, the singular or plural number and the
masculine or feminine gender shall be deemed to include the
other, the terms "he," "his," and "him" shall refer to a
Participant or Beneficiary, as the case may be, and, except
as otherwise provided, or unless the context otherwise
requires, the capitalized terms shall have the following
meanings:
(a) "Account" or "Accounts" mean a Participant's
or Beneficiary's ESOP Stock Account and/or his ESOP
Cash Account, as the context so requires.
(b) "Acquisition Loan" means a loan (or other
extension of credit, including an installment
obligation to a party in interest (as defined in ERISA
section 3(14))) incurred by the Trustee in connection
with the purchase of Company Stock.
(c) "Additional Acquisition Loans" means the
Acquisition Loans entered into from time to time after
the Effective Date between the Trustee and the Company
as contemplated by Section 1.6 of the Recapitalization
Agreement.
(d) "Additional Shares" means the number of
additional shares, if any, of Company Stock to be
issued by the Company in accordance with Section 1.10
of the Recapitalization Agreement. Any reference herein
to additional shares shall only be applicable when, if
and to the extent that additional shares are determined
to be issuable in accordance with Section 1.10 of the
Recapitalization Agreement.
(e) "Affiliate" means any corporation, trade or
business, which, at the time of reference, is together
with the Company, a member of a controlled group of
corporations, a group of trades or businesses (whether
or not incorporated) under common control or an
affiliated service group, as described in Code sections
414(b), 414(c) and 414(m), respectively, or any other
organization treated as a single employer under Code
section 414(o); provided, however, that, where the
context so requires, the term "Affiliate" shall be
construed to give full effect to the provisions of Code
sections 409(l)(4) and 415(h).
(f) "ALPA" means the Air Line Pilots Association,
International.
(g) "ALPA Employee Group" means Eligible Employees
in classifications represented by ALPA under the
Railway Labor Act who are either listed on the Pilots'
System Seniority List or Second Officer Eligibility
Seniority List.
(h) "Beneficiary" means the person or persons to
whom a deceased Participant's benefits are payable
under the Plan all as provided in Section 7.9.
(i) "Board of Directors" means the board of
directors of the Company.
(j) "Class 1 Non-Voting Preferred Stock" means the
shares of Class 1 ESOP Convertible Preferred Stock
issued by the Company and allocated under Part A.
(k) "Class 2 Non-Voting Preferred Stock" means the
shares of Class 2 ESOP Convertible Preferred Stock
issued by the Company and allocated under Part B. Any
reference to such shares credited under the
Supplemental Plan shall be deemed to be a reference to
fictional book-entry shares of Class 2 Non-Voting
Preferred Stock credited under the Supplemental Plan.
(l) "Code" means the provisions of the Internal
Revenue Code of 1986, as amended, and all successor
laws thereto. Where the Plan refers to a particular
section of the Code, such reference shall also apply to
any successor to that section.
(m) "Common Stock" means common stock issued by
the Company that meets the requirements of Code section
409(l), which on the Effective Date includes the common
stock that may be received upon the conversion of the
Preferred Stock and Voting Preferred Stock.
(n) "Company" means UAL Corporation and any
successor corporation or entity to the Company by
merger, consolidation or otherwise.
(o) "Company Stock" means Voting Preferred Stock,
Common Stock and/or Preferred Stock, as the context so
requires.
(p) "Compensation" means (i) the total cash
compensation paid to the Participant, for services
while a Participant and an Eligible Employee, during
the Plan Year for services rendered to his Employer,
including bonuses and overtime pay, plus (ii) elective
deferrals under a plan meeting the requirements of Code
section 401(k) or Code section 125 for such Plan Year,
but excluding reimbursement of moving expenses,
relocation allowances, housing allowances,
reimbursement of membership costs and dues, other
expense reimbursement payments and allowances,
severance pay or other special payments relating to
termination of employment by retirement or otherwise
and cash payments in respect of stock appreciation
rights. With respect to the Management and Salaried
Employee Group only, Compensation shall not include pay
received for vacation time that was accrued but not
actually taken as vacation before termination of
employment by retirement or otherwise. A Participant's
Compensation shall not exceed $150,000 (as adjusted
pursuant to Code section 401(a)(17)); provided,
however, that with respect to Part A, Compensation of a
Participant who is a member of the ALPA Employee Group
shall be limited to an amount equal to four times the
dollar limitation under Code section 415(c)(1)(A) (as
adjusted pursuant to Code section 415). Compensation
for services performed prior to July 13, 1994 or after
the end of the Wage Investment Period shall not be
taken into account under the Plan, except for purposes
of applying any Code limitations.
(q) "Control Transaction" means (a) any tender
offer or exchange offer for Company Stock or any other
opportunity or series of opportunities for the Plan to
dispose of (or convert in connection with a sale,
exchange or disposition) at least 3% of its Company
Stock (other than conversions or dispositions to
effectuate distributions or diversification elections
under the Plan), and (b) any transaction or series of
related transactions pursuant to which any person or
group (as defined in Rule 13d-3 under the Exchange Act)
acquires or seeks to acquire, directly or indirectly,
"control" (as defined in the Exchange Act) of the
Company or of all or a substantial portion of the
tangible or intangible assets of the Company and its
subsidiaries, whether by merger, consolidation, share
exchange, tender offer, exchange offer, sale, lease,
exchange, conversion, voting trust, proxy or otherwise.
For purposes of Plan provisions relating to a "Control
Transaction," "person" means an individual,
corporation, association, partnership, joint venture,
limited liability company, trust, estate,
unincorporated organization, governmental authority,
judicial entity or other entity.
(r) "Effective Date" means July 12, 1994.
(s) "Eligible Employee" means any Employee of an
Employer (other than any employee who is not a member
of an Employee Group and any "leased employee" (as
defined in Code section 414(n))), subject to the
following:
(i) if an Employee is included in a unit of
Employees covered by a collective bargaining
agreement, he shall not be an Eligible Employee
unless the applicable collective bargaining
agreement expressly provides that he shall be
eligible to participate in this Plan. On the
Effective Date, members of the ALPA Employee
Group, the IAM Employee Group, and, if the
Transport Workers Union collective bargaining
agreement so provides, the meteorologist Employees
who are members of a group represented by the
Transport Workers Union (these meteorologists are
members of the Management and Salaried Employee
Group) are Eligible Employees;
(ii) an Employee shall not be an Eligible
Employee if he is a non-resident alien with no
earned income from U.S. sources;
(iii) an Employee shall not be an Eligible
Employee as of the date his Compensation no longer
reflects all of the wage concessions contemplated
as part of the recapitalization of UAL effective
July 12, 1994; and
(iv) with respect to an Employee who is a
member of the Management and Salaried Employee
Group, the Employer may provide in a resolution of
its board of directors, additional limitations for
participation with the consent of the Board of
Directors; provided, however, that any such
limitation shall not have the effect of reducing
the amount of Company Stock intended to be
allocated to the Management and Salaried Employee
Group under Part A or affect the method or pace of
allocations of Company Stock in a manner that
would adversely affect the Plan's projected
ability to meet the requirements of Code section
415(c)(6).
(t) "Employee" means any person, including an
officer or director, who is actually performing
services for the Company or any of its Affiliates in a
common-law, employer-employee relationship and treated
as an employee on the payroll records and any "leased
employee" (within the meaning of Code section 414(n)).
(u) "Employee Group" means each of the ALPA
Employee Group, the IAM Employee Group and the
Management and Salaried Employee Group.
(v) "Employer" means the Company or any of its
Affiliates (or a division or business unit thereof)
that has adopted the Plan with the consent of the Board
of Directors.
(w) "Employer Contribution" means the amount
contributed, whether in cash or in kind, by each
Employer pursuant to the provisions of Section 3.1.
(x) "Entry Date" means, with respect to each
Eligible Employee employed on the Effective Date, the
Effective Date, and with respect to each Eligible
Employee employed after the Effective Date, (i) in the
case of members of the ALPA Employee Group, the
employment commencement date (or reemployment
commencement date), (ii) in the case of members of the
IAM, the first day of the first payroll period
coincident with or next following the date the Eligible
Employee becomes a member of the IAM Employee Group,
and (iii) in the case of members of the Management and
Salaried Employee Group, the first day of the first
payroll period coincident with or next following the
anniversary date of the Eligible Employee's employment
commencement date (or reemployment commencement date);
provided, however, that if such Eligible Employee's
employment with the Employers terminates before he
becomes a Participant and such Eligible Employee
returns to the employ of an Employer within one year of
such termination, the Entry Date shall be the first day
of the first payroll period coincident with or next
following the later of (i) the reemployment
commencement date or (ii) the anniversary date of such
Eligible Employee's employment commencement date. Any
Participant whose employment with the Employers
terminates and who returns to the employ of an Employer
as an Eligible Employee shall become a Participant
immediately.
(y) "ERISA" means the provisions of the Employee
Retirement Income Security Act of 1974, as amended, and
all successor laws thereto. Where the Plan refers to a
particular section of ERISA, such reference shall also
apply to any successor to that section.
(z) "ESOP Cash Account" means the account
established and maintained in the name of each
Participant or Beneficiary to reflect his share of the
Trust Fund, other than Company Stock.
(aa) "ESOP Committee" means the committee
appointed to administer the Plan pursuant to Section
11.
(ab) "ESOP Stock Account" means the account
established and maintained in the name of each
Participant or Beneficiary to reflect his share of
Company Stock.
(ac) "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
(bb) "Financed Shares" means shares of Company
Stock acquired by the Trustee with the proceeds of an
Acquisition Loan, which shall constitute "qualifying
employer securities" under Code section 409(l) and any
shares of Company Stock received upon conversion or
exchange of such shares.
(cc) "IAM" means the International Association of
Machinists and Aerospace Workers.
(dd) "IAM Employee Group" means non-probationary
regular Employees (other than Employees employed on a
temporary basis) who are both (i) classified by the
Company as Mechanic and Related Employees, Ramp and
Stores Employees, Food Services Employees, Security
Officers, Dispatchers, or Communications Employees and
(ii) members of a group of employees represented by the
International Association of Machinists and Aerospace
Workers, AFL-CIO.
(ee) "Initial Acquisition Loan" means the
Acquisition Loan or Acquisition Loans entered into on
the Effective Date between the Trustee and the Company
pursuant to the Preferred Stock Purchase Agreement.
(ff) "Loan Suspense Account" means the suspense
account in the Trust to which Financed Shares are
initially credited prior to release for allocation to
Participants' ESOP Stock Accounts. Subaccounts shall be
maintained to reflect Financed Shares acquired with the
Initial Acquisition Loan and each applicable Additional
Acquisition Loan.
(gg) "Management and Salaried Employee Group"
means Eligible Employees who perform the functions
performed by the salaried and managerial Employees on
the Effective Date (including any functions that such
Employees will perform in the future). Furthermore,
Eligible Employees who are meteorologists represented
by the Transport Workers Union are members of the
Management and Salaried Employee Group.
(hh) "Normal Retirement Date" means (i) in the
case of a Participant who is a member of the ALPA
Employee Group, the date on which such Participant
attains age 60, and (ii) in the case of any other
Participant, the date on which such Participant attains
age 65.
(ii) "Part A" means the portion of the Plan under
which benefits are provided for Participants through
the purchase of shares of Class 1 Non- Voting Preferred
Stock acquired with the proceeds of the Initial
Acquisition Loan and Additional Acquisition Loans.
(jj) "Part B" means the portion of the Plan under
which benefits are provided for Participants through
the contribution of shares of Class 2 Non-Voting
Preferred Stock and Voting Preferred Stock by the
Company or through the transfer of any such shares from
the Supplemental Trust.
(kk) "Participant" means any Eligible Employee who
has become a Participant in accordance with Section 2
or any other person with an Account balance under the
Plan.
(ll) "Plan" means the UAL Corporation Employee
Stock Ownership Plan, consisting of Part A and Part B,
as amended from time to time. The Trust created in
connection with the Plan shall be incorporated in, and
form a part of, the Plan.
(mm) "Plan Year" means the calendar year;
provided, however, that the initial Plan Year shall
commence on the Effective Date and end on December 31,
1994.
(nn) "Preferred Stock" means the Class 1
Non-Voting Preferred Stock and the Class 2 Non-Voting
Preferred Stock.
(oo) "Preferred Stock Purchase Agreement" means
either (i) the stock purchase agreement, dated as of
March 25, 1994, as amended, effective July 12, 1994, by
and between the Company and the Trustee pursuant to
which shares of Class 1 Non-Voting Preferred Stock will
be purchased by the Trustee for allocation under Part A
and/or (ii) the stock purchase agreements by and
between the Company and the Trustee pursuant to which
Additional Shares of Class 1 Non-Voting Preferred Stock
will be purchased by the Trustee in connection with
Additional Acquisition Loans for allocation under Part
A, as the context so requires.
(pp) "Supplemental Plan" means the UAL Corporation
Supplemental ESOP, effective July 12, 1994.
(qq) "Supplemental Trust" means the UAL
Corporation Supplemental ESOP Trust, effective July 12,
1994.
(rr) "Total Disability" means that, in the opinion
of a physician selected by the ESOP Committee, the
Participant is permanently incapable of performing
services for his Employer or any of its Affiliates due
to a disability; provided, however, that for any member
of the ALPA Employee Group, "Total Disability" shall
have the meaning ascribed thereto in the United Air
Lines, Inc. Pilots' Fixed Benefit Retirement Income
Plan.
(ss) "Trust" means the UAL Corporation Employee
Stock Ownership Plan Trust created in connection with
the establishment of the Plan.
(tt) "Trust Agreement" means the trust agreement
establishing the Trust.
(uu) "Trust Fund" means the assets held in the
Trust for the benefit of the Participants and their
Beneficiaries.
(vv) "Trustee" means the trustee or trustees from
time to time in office under the Trust Agreement.
(ww) "Valuation Date" means the last day of each
Plan Year, April 12, 2000 (except for Participants in
the IAM Employee Group) and July 12, 2000 for
Participants in the IAM Employee Group and any other
date selected by the ESOP Committee as necessary for
the equitable operation of the Plan.
(xx) "Voting Preferred Stock" means the shares of
each class of ESOP Voting Junior Preferred Stock issued
by the Company. Such preferred stock consists of Class
P, Class M and Class S.
(yy) "Wage Investment" means, for a member of the
IAM Employee Group, the sum of:
(i) The product of (A) the number of hours
for which the Participant is compensated during a
Plan Year, multiplied by (B) the difference
between the "book rate of pay" as in effect
immediately prior to the Effective Date and the
"actual rate of pay" as in effect on the Effective
Date for services rendered during a Plan Year;
plus
(ii) the sum of the following: (A) the amount
determined under item (i) times 7.6% (which
represents the Employers' portion of the FICA
tax), (B) the amount determined under item (i)
times .46% (which represents the Employers'
portion of the FUTA tax), (C) the amount
determined under item (i) times .05% (which
represents the Employers' contribution for long
term disability coverage), and (D) the amount
determined under item (i) times .4% (which
represents the Employers' contribution for life
insurance coverage); provided, however, that in
the case of each of the items (A) through (D)
above, the members of the ESOP Committee appointed
by the IAM may require the substitution of an
alternative percentage which they deem appropriate
and which is uniformly applicable to each member
of the IAM Employee Group; plus
(iii) the book rate of pay as in effect
immediately prior to the Effective Date for each
hour, or fraction thereof, of lunch (or other
meal) periods multiplied by the number of days
services are rendered during a Plan Year.
For purposes hereof, "book rate of pay" means the
hourly rate of pay including increases due to overtime,
premium pay and shift differentials that would have been
paid to each IAM Employee Group member on the day
immediately preceding the Effective Date, and as adjusted
over the Wage Investment Period to account solely for
increments due based on changes in the scale or step for
each such member, and "actual rate of pay" means the hourly
rate of pay for each IAM Employee Group member on the
Effective Date, as adjusted over the Wage Investment Period
to account solely for increments based on changes in the
scale or step and not on account of negotiated changes
effective during the Wage Investment Period. If a member of
the IAM Employee Group changes job classifications (for
example, due to a promotion), then such member's book rate
of pay and actual rate of pay shall, following the change of
job classifications, be determined by reference to the
member's new job classification. The calculation of the Wage
Investment shall be made by using the information reasonably
available to the Employers under the Employers'
recordkeeping and payroll systems. The Wage Investment may
be calculated by using reasonable estimates, and the members
of the ESOP Committee appointed by the IAM shall adopt any
such reasonable estimates as are necessary for the Wage
Investment to be determined. Such members of the ESOP
Committee shall consult with the Employers to calculate the
Wage Investment. Pursuant to Section 11.4, the Employers
shall furnish the members of the ESOP Committee such data
and information as may be reasonably required to calculate
the Wage Investment and to formulate such reasonable
estimates. The determination of the Wage Investment based
upon such estimates shall be final and binding for all
purposes hereunder.
(zz) "Wage Investment Period" means the period
commencing on July 13, 1994 and ending on April 12,
2000 (July 12, 2000, for members of the IAM Employee
Group).
SECTION 2
PLAN PARTICIPATION
2.1 Eligibility for Participation. Subject to the
conditions and limitations of the Plan, each Eligible
Employee of an Employer shall become a Participant on the
applicable Entry Date.
2.2 Participation Not Guarantee of Employment.
Participation in the Plan does not constitute a guarantee or
contract of employment and will not give any Employee the
right to be retained in the employ of his Employer or any of
its Affiliates nor any right or claim to any benefit under
the terms of the Plan unless such right or claim has
specifically accrued under the terms of the Plan.
2.3 Transferred Participants. If a Participant
transfers from one Employee Group to another Employee Group,
the ESOP Committee shall maintain separate Accounts for such
Participant, such Accounts reflecting such Participant's
participation in the Plan as a member of the respective
Employee Groups.
SECTION 3
CONTRIBUTIONS
3.1 Employer Contributions. Subject to the conditions
and limitations of the Plan, for each Plan Year, the
Employers shall contribute to the Trust cash equal to, or
Company Stock having an aggregate fair market value equal
to, such amount, if any, as the respective boards of
directors of the Employers shall determine by resolution;
provided, however, that:
(a) Part A.
(i) The Company shall contribute to Part A an
amount in cash equal to the amount required to
enable the Trustee (together with dividends used
to repay the Initial Acquisition Loan and the
Additional Acquisition Loans in accordance with
Section 10) to pay any principal and interest on
the Initial Acquisition Loan and the Additional
Acquisition Loans payable during the Plan Year. Of
the contribution amount required to enable the
Trustee to discharge the aggregate principal and
interest on such indebtedness, 60% shall be made
to the money purchase pension plan component of
Part A of the Plan. The balance of the required
contribution amount shall be made to the stock
bonus plan component of Part A of the Plan. The
Trustee shall apply such money purchase pension
plan component contributions to repay the
principal on each of the respective Acquisition
Loans in proportion to the excess of the principal
due on such Acquisition Loan for the Plan Year
over the dividends available to repay the
principal on such Acquisition Loan.
(ii) In lieu of the foregoing, the Company
may forgive an amount of indebtedness equal to the
required Employer Contribution (or any portion
thereof).
(iii) On the Effective Date, the Company
shall contribute an amount in cash equal to the
aggregate par value of the Company Stock to be
acquired under the Initial Acquisition Loan. In
addition, the Company shall contribute an amount
in cash equal to the aggregate par value of the
Company Stock, if any, to be acquired under each
Additional Acquisition Loan. Such contributions
shall first be divided, pro rata, among the
Employee Groups in accordance with Section
5.4(a)(i)(A), and then shall be allocated to the
ESOP Cash Accounts of Participants as follows: (A)
in the case of the ALPA Employee Group and the
Management and Salaried Employee Group, according
to the Compensation paid to such Participants in
such Employee Group for the Plan Year, and (B) in
the case of the IAM Employee Group, according to
Wage Investments of such Participants for the Plan
Year. Such contribution shall be used by the
Trustee as partial consideration for the purchase
of shares of Class 1 Non-Voting Preferred Stock
under the applicable Preferred Stock Purchase
Agreement, and the ESOP Cash Accounts of the
Participants shall be charged accordingly. Shares
of Class 1 Non-Voting Preferred Stock equal in
value (based on the prices per share paid by the
Trustee under the applicable Preferred Stock
Purchase Agreement) to the amount of such
contribution shall be allocated, as of the last
day of the applicable Plan Year, from the shares
purchased under the applicable Preferred Stock
Purchase Agreement to the ESOP Stock Accounts of
the Participants, pro rata, according to the
allocations of such contribution above.
(b) Part B.
(i) On the Effective Date, the Company shall
contribute to Part B, as a special Employer
Contribution, one share of each of Class P, Class
M and Class S.
(ii) As soon as practicable after the end of
each Plan Year, the Company shall contribute (or
shall cause the trustee of the Supplemental Trust
to transfer) to Part B shares of Class 2
Non-Voting Preferred Stock and shares of Voting
Preferred Stock in accordance with Section
5.4(c)(vii); provided, however, that any shares of
Company Stock transferred by the trustee of the
Supplemental Trust in respect of such obligation
shall satisfy, to the extent of such transfer, the
Company's obligation under this Section 3.1(b).
Such contributions may not be used to repay
Acquisition Loan indebtedness and shall be made to
the stock bonus plan component of the Plan.
(iii) If cash dividends have been paid to the
holders of Common Stock during any Plan Year and
if dividends are applied to repay the Initial
Acquisition Loan or any Additional Acquisition
Loan pursuant to Section 10 during that Plan Year,
the Company shall make an additional Employer
Contribution to Part B in the amount, if any, set
forth in the next sentence as soon as practicable
after the last day for that Plan Year (and for the
purpose of this clause (iii), "Plan Year" shall be
defined to include only the period from the
Effective Date to 12/31/94, the five 12-month
periods ending 12/31/95 through 12/31/99, and the
three-month period ending 3/31/2000). The amount
of such contribution shall equal the excess of A
plus B over C; where A equals the least of:
(I) the cash dividends (excluding
dividends that constitute Participating
Dividends and Extraordinary Distributions
with respect to the outstanding Class 1
Non-Voting Preferred Stock) that would have
been received by the Plan during that Plan
Year if the outstanding Class 1 Non- Voting
Preferred Stock had been converted into
Common Stock immediately prior to each
dividend record date, which amount shall be
reduced by the excess, if any, of the amount
described in clause (II) below over the
amount described in clause (III) below;
(II) the Fixed Dividends that have been
paid on the Class 1 Non-Voting Preferred
Stock during that Plan Year; and
(III) the amount of the cash dividends
used to repay the Initial Acquisition Loan
and the Additional Acquisition Loans pursuant
to Section 10.1(a) during such Plan Year;
B equals the cash dividends (excluding dividends
that constitute Extraordinary Distributions with
respect to the Class 1 Non-Voting Preferred Stock)
that would have been received by the Plan during
the Plan Year if the Class 1 Non-Voting Preferred
Stock contemplated for future sale to this Plan as
part of the future Additional Acquisition Loans
had been, immediately prior to each dividend
record date, sold to this Plan and converted into
Common Stock. The number of shares of Class 1
Non-Voting Preferred Stock contemplated for future
sale shall equal 13,813,282 (adjusted for the
issuance of Additional Shares of Class 1
Non-Voting Preferred Stock) reduced by the number
of shares of Class 1 Non-Voting Preferred Stock
sold to this Plan prior to the dividend record
date; and
C equals the amount of cash contributions
previously made pursuant to this clause (iii) with
respect to such Plan Year.
For the purposes of the Plan, "Participating Dividends",
"Extraordinary Distributions" and "Fixed Dividends" shall
have the meanings ascribed to such terms in the Certificate
of Incorporation of the Company, Article Fourth, Part II
relating to Class 1 Non-Voting Preferred Stock.
3.2 Limitation on Contributions. In no event may any
Employer Contributions under Section 3.1 for any Plan Year
exceed the maximum amount deductible as an expense for
federal income tax purposes under Code section 404;
provided, however, that if Employer Contributions are so
limited, appropriate arrangements will be made in accordance
with Section 1.6(l) of the Recapitalization Agreement to
protect the substantive rights of each Employee Group
(hereinafter "Appropriate Arrangements").
3.3 Timing of Contributions. For each Plan Year,
Employer Contributions shall be due no later than the time
prescribed for filing the Employer's federal income tax
return for that Plan Year, including any extensions of time;
provided, however, that Employer Contributions shall be made
at such times as to enable the Trustee to meet its repayment
obligations under the documents governing the Initial
Acquisition Loan, the Additional Acquisition Loans or as
otherwise required by the terms of the Plan.
3.4 Participant Contributions. Contributions by
Participants are neither required nor permitted.
SECTION 4
INVESTMENT OF TRUST FUND
4.1 Exclusive Benefit of Participants. All Employer
Contributions, Company Stock acquired with Employer
Contributions and with proceeds of Acquisition Loans, and
dividends and distributions thereon, shall become a part of
the Trust Fund and shall be held and disbursed by the
Trustee in accordance with the provisions of the Plan and
Trust Agreement. No person shall have any interest in or
right to assets held in the Trust Fund except as provided in
the Plan and Trust Agreement. The Trust Fund shall be held
for the exclusive benefit of the Participants and their
Beneficiaries, and shall be used solely to pay benefits to
such persons. The Trust Fund shall not revert to the benefit
of the Company or any of its Affiliates, except as provided
in Section 15.2.
4.2 Investment in Company Stock. The Trust Fund shall
be invested exclusively in shares of Company Stock, subject
to the Trustee's power to hold cash pending investment in
Company Stock or pending distribution to Participants, and,
accordingly, the Trustee may invest and hold up to 100% of
the Trust Fund in Company Stock.
4.3 Acquisition Loans. In respect of Part A, the
Trustee may incur the Initial Acquisition Loan and the
Additional Acquisition Loans. In addition, the Trustee, with
the consent of the Company, may incur other Acquisition
Loans from time to time to finance the acquisition of
Company Stock for the Trust or to repay a prior Acquisition
Loan. Each Acquisition Loan shall meet all applicable legal
requirements, including those set forth under Code section
4975 and ERISA section 408. Financed Shares shall initially
be credited to the Loan Suspense Account and shall be
released for allocation to the ESOP Stock Accounts of
Participants only as payments of principal and interest, or
principal, on the Acquisition Loan are made by the Trustee.
The number of Financed Shares to be released from the Loan
Suspense Account (or subaccount attributable to that
Acquisition Loan) for allocation to Participants' ESOP Stock
Accounts for each Plan Year shall be based upon either: (x)
the ratio that the payments of principal made on the
Acquisition Loan for that Plan Year bear to the sum of
principal payments during that Plan Year, plus the projected
payments of principal during the remainder of the
Acquisition Loan repayment period, provided that the special
conditions set forth under Treasury Regulation section
54.4975-7(b)(8)(ii) are satisfied, or (y) the ratio that the
payments of principal and interest on the Acquisition Loan
for that Plan Year, bear to the sum of principal and
interest payments during that Plan Year, plus the projected
payments of principal and interest during the remainder of
the Acquisition Loan repayment period. A separate ratio will
be calculated for each Acquisition Loan. The applicable loan
documents will specify whether clause (x) and/or clause (y)
shall apply. Shares released from the Loan Suspense Account
in connection with the Initial Acquisition Loan and the
Additional Acquisition Loans shall be released in accordance
with clause (x) above.
4.4 Fiduciary Concerns. With respect to the exercise
of any fiduciary responsibility with respect to the Plan or
Trust, including, without limitation, the voting, sale,
exchange, other disposition or conversion of Company Stock,
the relevant fiduciary may, to the extent permitted by law,
take into consideration any relevant economic factors
affecting the interests of current and future Participants
(and Beneficiaries), including, but not limited to, the
prospect for continued Employee enfranchisement through the
voting power of Company Stock held in the Plan, the prospect
for future benefits under the Plan as a result of the
prospective release and allocation of Company Stock held in
the Loan Suspense Account and the prospect for future
employment with the Company and its Affiliates.
SECTION 5
PLAN ACCOUNTING
5.1 Accounting for Allocations. The ESOP Committee
shall establish the Accounts (and sub-accounts, if deemed
necessary) for each Participant, and the accounting
procedures for the purpose of making the allocations to the
Participants' Accounts provided for in this Section 5. The
ESOP Committee shall maintain adequate records of the cost
basis of shares of Company Stock allocated to each
Participant's ESOP Stock Account. The ESOP Committee also
shall keep separate records of Financed Shares attributable
to each Acquisition Loan and of Employer Contributions (and
of any earnings thereon) made for the purpose of enabling
the Trust to repay any Acquisition Loan. From time to time,
the ESOP Committee may modify its accounting procedures for
the purposes of achieving equitable and nondiscriminatory
allocations among the Accounts of Participants, in
accordance with the provisions of this Section 5 and the
applicable requirements of the Code and ERISA. In accordance
with Section 11, the ESOP Committee may delegate the
responsibility for maintaining Accounts and records.
5.2 Allocation and Crediting of Participants' ESOP
Stock Accounts. As of each Valuation Date, the ESOP
Committee shall:
(a) First, charge to each Participant's ESOP Stock
Account all distributions and payments made to him
since the last preceding Valuation Date that have not
been previously charged;
(b) Next, credit to each Participant's ESOP Stock
Account the shares of Company Stock, if any, that have
been purchased with amounts from his ESOP Cash Account
since the last preceding Valuation Date, and adjust
such ESOP Cash Account in accordance with the
provisions of Section 5.3; and
(c) Finally, allocate and credit to each
Participant's ESOP Stock Account the shares of Company
Stock representing Employer Contributions made in the
form of Company Stock and the number of Financed Shares
released under Section 4.3 that are to be allocated and
credited as of that date in accordance with the
provisions of Section 5.4.
5.3 Allocation and Crediting of Participants' ESOP
Cash Accounts. As of each Valuation Date, the ESOP Committee
shall adjust the ESOP Cash Accounts to reflect activity
since the last preceding Valuation Date as follows:
(a) First, charge to each Participant's ESOP Cash
Account all distributions and payments made to him that
have not been previously charged;
(b) Next, if Company Stock is purchased with
assets from a Participant's ESOP Cash Account, such
shares shall be credited to the ESOP Stock Account of
such Participant, and the Participant's ESOP Cash
Account shall be charged accordingly;
(c) Next, subject to the dividend provisions of
Section 10, the ESOP Committee shall also credit to the
ESOP Cash Account of each Participant any cash
dividends paid to the Trustee on shares of Company
Stock held in that Participant's ESOP Stock Account (as
of the record date for such cash dividends) and
dividends paid on shares of Company Stock held in the
Loan Suspense Account that have not been used to repay
any Acquisition Loan. Cash dividends and any earnings
that have not been used to repay any Acquisition Loan
and have been credited to a Participant's ESOP Cash
Account shall be applied by the Trustee to the purchase
of shares of Common Stock, which shares shall then be
credited to the ESOP Stock Account of such Participant.
The Participant's ESOP Cash Account shall then be
charged by the amount of cash used to purchase such
Common Stock or used to repay any Acquisition Loan. In
addition, any earnings (i) on ESOP Cash Accounts will
be allocated to Participants' ESOP Cash Accounts, pro
rata, based on such ESOP Cash Account balances and (ii)
on the Loan Suspense Account, other than dividends used
to repay the Acquisition Loan, will be allocated to
Participants' Accounts, pro rata, based on their
Account balances in Part A;
(d) Next, allocate and credit the Employer
Contributions made for the purpose of repaying any
Acquisition Loan in accordance with Section 5.4. Such
amount shall then be used to repay any Acquisition Loan
and such Participant's ESOP Cash Account shall be
charged accordingly; and
(e) Finally, allocate and credit the Employer
Contributions (other than amounts contributed to repay
an Acquisition Loan) that are made in cash for the Plan
Year to the ESOP Cash Account of each Participant
(including Participants whose employment with the
Company and its Affiliates terminated for any reason
during the Plan Year) in accordance with Section
5.4(b).
5.4 Allocation and Crediting of Employer
Contributions. As of the Valuation Date for each Plan Year,
all cash contributions and shares of Company Stock
transferred by each Employer to the Trustee for that Plan
Year under Section 3.1 and the number of Financed Shares
released from the Loan Suspense Account for allocation to
Participants' ESOP Stock Accounts under Section 4.3 (except
as provided under Section 10.3) during the Plan Year shall
be allocated among and credited to the Accounts of
Participants (including Participants whose employment with
the Company and its Affiliates terminated for any reason
during the Plan Year) as follows:
(a) Part A. On each Valuation Date, the cash
contributions used to repay the Acquisition Loan
indebtedness and the shares of Class 1 Non- Voting
Preferred Stock released for that Plan Year shall be
allocated and credited to each Participant's Account as
follows:
(i) First, the Employer Contributions made in
cash used to repay each Acquisition Loan (or
treated as cash due to forgiveness of such
Acquisition Loan indebtedness) shall be allocated
among the Employee Groups as follows:
(A) The allocation percentage for the
Class 1 Non-Voting Preferred Stock released
for that Plan Year shall be as follows: ALPA
Employee Group--31.759437%; IAM Employee
Group--47.511196%; and Management and
Salaried Employee Group--20.729367%. All such
shares released for such Plan Year shall be
allocated to the Employee Groups in
accordance with such allocation percentages.
(B) There shall be calculated for each
Participant an allocation of shares of Class
1 Non-Voting Preferred Stock on account of
dividends paid during the Plan Year on such
Preferred Stock previously allocated to such
Participant's ESOP Stock Account and applied
in accordance with Sections 10.1(a) and 10.3.
The foregoing allocations for each
Participant shall be made out of the Class 1
Non-Voting Preferred Stock allocated to that
Participant's Employee Group under subclause
(A) above.
(C) Employer Contributions to be
allocated in accordance with this clause
(i)(C) shall be allocated to each Employee
Group in the proportion that (x) shares of
Class 1 Non-Voting Preferred Stock allocated
to that respective Employee Group pursuant to
subclause (A) reduced by the shares allocated
to members of that Employee Group pursuant to
subclause (B), bears to (y) all shares of
Class 1 Non-Voting Preferred Stock released
for the Plan Year reduced by all shares
allocated pursuant to subclause (B).
(ii) Second, the allocations of Employer
Contributions under clause (i)(C) shall be reduced
by all of the interest on the Initial Acquisition
Loan and the Additional Acquisition Loans paid
during that period. Such reduction shall be made
in proportion to the allocations made under clause
(i)(C).
(iii) Third, there shall be tentatively
allocated to the Accounts of each Participant in
each Employee Group that portion of the resulting
Employer Contributions which such Participant's
Compensation (or, in the case of the IAM Employee
Group, such Participant's Wage Investments) for
the Plan Year bears to the aggregate Compensation
(or, in the case of the IAM Employee Group, Wage
Investments) for all such Participants for such
Plan Year; provided that such Employer
Contributions shall not be allocated to any
Participant's Account to such extent the
allocation would exceed the limitation of Code
section 415(c). The amount, if any, by which the
allocation to any such Participant's Account shall
be reduced under the foregoing proviso shall be,
subject to the Code section 415(c) limitation,
tentatively allocated (and, if necessary,
reallocated) to the Accounts of all other
Participants in his Employee Group (x) for the
Management and Salaried Employee Group, in
proportion to their Compensation, (y) in the case
of the IAM Employee Group, Wage Investments, and
(z) in the case of the ALPA Employee Group, first
in proportion to (but not more than) the amount of
Class 2 Non-Voting Preferred Stock otherwise
scheduled for contribution and allocation to each
Participant's Account under Part B for the current
Plan Year (absent this clause (iii)) and otherwise
in proportion to Compensation.
(iv) Fourth, if the total Employer
Contributions tentatively allocated to "highly
compensated employees" (as defined in Code section
414(q)) under clause (iii) do not exceed one-third
of the total Employer Contributions tentatively
allocated to the Accounts of all Participants
under clause (iii), the tentative allocations of
Employer Contributions to Participants shall
become final. The foregoing limitation shall be
applied by aggregating all Participants in all
Employee Groups.
(v) Fifth, if the one-third limitation
described in clause (iv) is exceeded, the amount
of Employer Contributions allocated to Accounts of
Participants in the ALPA Employee Group who are
highly compensated employees shall be reduced, pro
rata, based on Compensation and reallocated to
Participants in the ALPA Employee Group who are
not highly compensated employees, to the extent
necessary to meet the one-third limitation
described in clause (iv), subject, however, to
Code section 415(c). The foregoing reallocations
to each non-highly compensated employee shall be
allocated in proportion to (but not more than) the
number of shares of Class 2 Non-Voting Preferred
Stock otherwise scheduled for contribution and
allocation to his Account under Part B for the
current Plan Year (absent this clause (v)). If and
to the extent appropriate arrangements are made
between the Company and ALPA to protect the
interests of the ALPA Employee Group (which
arrangements shall be consistent with Section 13.1
and which the Company agrees to do upon reasonable
request and which shall not require IAM consent),
contributions for the highly compensated ALPA
Employee Group members may be reduced, pro rata,
to meet the one-third limitation described in
clause (iv).
(vi) Sixth, if, after the reallocation of
Employer Contributions described in clause (v),
the one-third limitation described in clause (iv)
is still exceeded, then the computations described
in foregoing clauses (i) through (v) shall be
disregarded. In lieu thereof the allocation shall
be made in accordance with clauses (i) through
(iii), but clause (ii) shall be disregarded. If
such allocations do not result in a violation of
Code section 415(c) for all members of any
Employee Group, the tentative allocations shall
become final.
(vii) Seventh, if the allocation of Employer
Contributions described in clause (vi) results in
a violation of Code section 415(c) for all members
of any Employee Group (after reallocating any
excess allocations only to members of such
Employee Group), then clause (vi) shall be
disregarded. The computations described in
foregoing clauses (i) through (v) (including
clause (ii)) shall be repeated, but, after
applying clause (v), the amount of Employer
Contributions allocated to Accounts of
Participants who are members of the Management and
Salaried Employee Group who are highly compensated
employees shall be reduced, pro rata, based on
Compensation, and reallocated to Participants in
the Management and Salaried Employee Group who are
not highly compensated employees, pro rata, based
on Compensation, to the extent necessary to meet
the one- third limitation described in clause
(iv), subject, however, to Code section 415(c). In
making the foregoing reallocations, no non-highly
compensated employee shall be allocated more
shares under this clause (vii) than the number of
shares of Class 2 Non-Voting Preferred Stock
otherwise scheduled for contribution and
allocation to his Account under Part B for the
current Plan Year (absent this clause (vii)). If
and to the extent appropriate arrangements are
made by the Company to protect the interests of
the Management and Salaried Employee Group (which
arrangements shall be consistent with Section 13.1
and which shall not require IAM consent, but which
shall require ALPA consent, which consent shall
not be unreasonably withheld), contributions for
the highly compensated Management and Salaried
Employee Group members may be reduced, pro rata,
to meet the one-third limitation described in
clause (iv).
(viii) Eighth, all shares of Class 1
Non-Voting Preferred Stock released from the Loan
Suspense Account as of the Valuation Date shall be
allocated first in respect of dividends paid on
previously allocated shares of Class 1 Non-Voting
Stock in accordance with Sections 10.1(a)(i) and
10.3 and then allocated in proportion to the
percentage of the Employer Contributions allocated
to each Participant's Account under clauses (i)
through (vii) above.
(b) Special Contributions to Part B.
(i) The special Employer Contribution made by
the Company on the Effective Date pursuant to
Section 3.1(b)(i) shall be allocated, per capita,
to the appropriate Participants' ESOP Stock
Accounts under Part B on the Effective Date.
(ii) Employer Contributions made in cash for
the Plan Year under Section 3.1(b)(iii) shall be
allocated under Part B and credited to the ESOP
Cash Accounts of the appropriate Participants to
which those cash contributions relate, as follows:
to the extent that the calculation of the amount
of such contributions refers to shares of Class 1
Non-Voting Preferred Stock held in the Loan
Suspense Account or Class 1 Non-Voting Preferred
Stock contemplated for further sale, divide such
cash contributions among the Employee Groups in
accordance with Section 5.4(a)(i)(A); to the
extent it refers to shares of Class 1 Non-Voting
Preferred Stock allocated to the Participants'
ESOP Stock Accounts, apportion those contributions
to the relevant Employee Group; then, allocate to
the appropriate Participants' Accounts, pro rata,
in the case of (i) the ALPA Employee Group and the
Management and Salaried Employee Group, according
to the Compensation paid to such Participants for
the Plan Year, and (ii) the IAM Employee Group,
according to Wage Investments made by such
Participants for the Plan Year; subject, however,
in all cases to Code section 415(c).
(c) Regular Contributions to Part B. Shares of
Class 2 Non-Voting Preferred Stock and Voting Preferred
Stock contributed to the Plan pursuant to Section
3.1(b) shall be allocated among and credited to the
ESOP Stock Accounts of Participants for that Plan Year
as set forth below, provided, however, that no
allocations (other than allocations under clauses (i)
and (viii) below) shall be made to Accounts of
Participants who are members of the IAM Employee Group:
(i) First, subject to the applicable Code
limitations, one share of Voting Preferred Stock
shall be allocated to the Participant's Account
for each share of Class 1 Non-Voting Preferred
Stock allocated to that Participant under Part A
on that Valuation Date. The shares of Voting
Preferred Stock shall be allocated under Part B
and shall be of the appropriate class for each
such Participant. The special allocation under
Section 5.4(b)(i) shall be credited against the
allocation required pursuant to this clause (i) on
the first Valuation Date.
(ii) Second, for each Participant, a
"hypothetical share number" shall be calculated
for the Valuation Date. Such number shall equal
the number of shares that would have been
allocated to the Participant under Part A on such
Valuation Date if (A) all the shares of Class 1
and Class 2 Non-Voting Preferred Stock to be
issued pursuant to the Recapitalization Agreement
(including, with respect to Valuation Dates
occurring on or after December 31, 1995 and after
the allocation in subsection (viii) below, any
Additional Shares issued or to be issued) had been
(I) purchased by the Trust under a single loan on
the Effective Date and held under the Loan
Suspense Account pursuant to Part A, and (II) in
the case of such Class 2 shares, considered Class
1 Non-Voting Preferred Stock under Part A having
the same fair market value as the Class 1
Non-Voting Preferred Stock; provided, however,
that such Class 2 shares shall not, except as
provided in subclause (E), bear any dividend; (B)
the shares of Class 1 and Class 2 Non-Voting
Preferred Stock were released under Part A ratably
over the 69 months starting on the Effective Date;
(C) Section 5.4(a)(i)(A) were applied by
allocating the Class 1 Non-Voting Preferred Stock
and the Class 2 Non-Voting Preferred Stock among
the Employee Groups as follows: ALPA Employee
Group - 46.23%; IAM Employee Group - 37.13%; and
Management and Salaried Employee Group - 16.64%;
(D) allocations under Part A were made as if: (I)
the limitations of Code sections 401(a)(4),
401(a)(17) and 415 did not apply; (II)
Compensation was based on "compensation" as
defined in the Supplemental Plan and (III) clauses
(ii), (iv), (v), (vi) and (vii) of Section 5.4(a)
did not apply; and (E) each share of Class 2
Non-Voting Preferred Stock that was in fact
allocated on a prior Valuation Date to a
Participant's account under the Supplemental Plan
or under Part B shall, after the date of such
allocation, be considered Class 1 Non- Voting
Preferred Stock held by Part A (bearing the same
Fixed Dividend as the Class 1 Non-Voting Preferred
Stock that was allocated under Part A (but not
bearing any other dividend)). By way of
illustration, assume a member of the ALPA Employee
Group has a total of 130 shares of Class 2
Non-Voting Preferred Stock allocated to his
account under the Supplemental Plan and 70 shares
of Class 2 Non-Voting Preferred Stock allocated to
his Account under Part B. Assume further that each
share of Class 1 Non-Voting Preferred Stock under
Part A has a value of $100, pays an $8 Fixed
Dividend, no dividends are paid on Common Stock
and that each share of Class 2 Non-Voting
Preferred Stock has a $75 value. For purposes of
making the allocations under this subclause (E),
such individual shall be treated as having
received a dividend of $1600 with respect to the
shares of Class 2 Non-Voting Preferred Stock
allocated under the Supplemental Plan and under
Part B. For purposes of calculating the
hypothetical share number, that individual shall
receive an allocation of 16 shares of Class 2
Non-Voting Preferred Stock to make up for such
dividend, notwithstanding the fact that the value
of the shares of Class 2 Non-Voting Preferred
Stock is $75 per share.
(iii) Third, for each ESOP Participant, the
"actual share number" for a Valuation Date shall
be the actual number of shares of Class 1
Non-Voting Preferred Stock that are allocated to
such Participant under Part A on that Valuation
Date.
(iv) Fourth, for each ESOP Participant, the
excess of the hypothetical share number over the
actual share number shall be referred to herein as
the respective "tentative allocation." If the sum
of the tentative allocations (ignoring negative
tentative allocations) for all Participants in an
Employee Group exceeds the number of shares of
Class 2 Non-Voting Preferred Stock released from
the "phantom suspense account" to all such
Participants' accounts for that Employee Group
under Section 2.2 of the Supplemental Plan, each
such tentative allocation for Participants of that
Employee Group shall be proportionately reduced.
(v) Fifth, on each Valuation Date, the number
of shares of each of the Class 2 Non-Voting
Preferred Stock and Voting Preferred Stock, if
any, to be allocated to a Participant under Part B
(excluding Voting Preferred Stock described in
Section 5.4(c)(i) and 5.4(c)(vi)) shall be the
same and shall equal the least of the following
numbers: (A) the maximum number of shares of each
of the Class 2 Non-Voting Preferred Stock and the
Voting Preferred Stock that can be allocated to
the Participant for the Valuation Date under Part
B without violating Code section 415 or Code
section 401(a)(4) (if applicable), (B) the
tentative allocation and (C) the excess of the
hypothetical share number (calculated for this
purpose only by applying the Code section
401(a)(17) limitation) over the actual share
number. The hypothetical share number described in
this subclause (C) shall be determined by
recalculating the allocations made on the current
and all prior Valuation Dates by assuming the
Participant's Compensation for each Plan Year had
been limited to the amount then allowed under Code
section 401(a)(17). Accordingly, for purposes of
calculating the hypothetical share number under
this subclause (C), the Participants' Compensation
in the current Plan Year shall be limited to the
amount provided by Code section 401(a)(17) and the
amount of dividends allocated to each
Participant's Account during the Plan Year shall
be calculated by assuming the allocations of
shares made on earlier Valuation Dates were also
based on Compensation, as limited by Code section
401(a)(17) limitation then in effect. The excess
of the tentative allocations over the amount
allocated under clause (v) shall not be allocated
under Part B, but shall be allocated in accordance
with the terms of the Supplemental Plan.
(vi) Sixth, on the last Valuation Date of
each Plan Year, in addition to the shares of Class
2 Non-Voting Preferred Stock and Voting Preferred
Stock transferred to Part B under clause (v)
above, shares credited under the Supplemental
Plan, in a prior Plan Year, due to the limitations
under Code section 401(a)(4), 401(a)(17) or Code
section 415, shall be allocated to Participants'
Accounts under Part B, subject to applicable Code
limitations in accordance with the following
priorities:
(A) first, by a number of shares, if
any, of Voting Preferred Stock equal to the
excess of the number of shares of Class 1 and
Class 2 Non-Voting Preferred Stock allocated
to his Account over the number of shares of
Voting Preferred Stock allocated to his
Account, to the extent such number may be
contributed by the Company or transferred
from the Supplemental Trust to Part B without
disqualifying the Plan or any other qualified
plan; provided, however, that the number of
shares transferred may include any shares
that were not previously contributed or
transferred to Part B because of the
limitations of Code section 401(a)(17);
(B) second, by the maximum number of
shares of Class 2 Non-Voting Preferred Stock
and Voting Preferred Stock (such numbers to
be the same) that may be contributed by the
Company (or transferred from the Supplemental
Trust) to Part B without disqualifying the
Plan or any other qualified plan; provided,
however, that the number of shares
transferred may include any shares that were
not previously contributed or transferred to
Part B because of the limitations of Code
section 401(a)(17); and
(C) third, by the maximum number of
shares of Common Stock that may be
transferred from the Supplemental Trust to
Part B without disqualifying the Plan or any
other qualified plan; provided, however, that
the number of shares may include any shares
that were not previously contributed or
transferred to Part B because of the
limitations of Code section 401(a)(17).
The reductions described in subclauses (A) through
(C) shall not include any Voting Preferred Stock,
Class 2 Non-Voting Preferred Stock or Common Stock
allocated during the current Plan Year.
(vii) Seventh, the Company shall contribute
(or, to the extent applicable, the Company shall
direct the trustee of the Supplemental Trust to
transfer) a number of shares of Voting Preferred
Stock and Class 2 Non-Voting Preferred Stock and
Common Stock equal to the sum of the number of
such respective shares calculated for each
Participant under clauses (i), (v) and (vi) above
to Part B. Such shares shall be transferred as
soon as practicable after the applicable Valuation
Date.
(viii) Eighth, Prior to the December 31, 1995
Valuation Date, the aggregate hypothetical share
numbers for all Participants for the 1994 Plan
Year shall be retroactively increased by an
additional number equal to X multiplied by Y;
where X is the total number of shares of Preferred
Stock to be issued as Additional Shares and Y is
the release fraction (as defined in the
Supplemental Plan) for December 31, 1994. Such
shares shall be divided among the Employee Groups
(including the IAM Employee Group) in accordance
with Section 5.4(c)(ii)(C) and allocated to
Participants based upon 1994 data (that is, 1994
Compensation and Wage Investments, as applicable.)
The excess of such new hypothetical share number
(including such numbers for the IAM Employee
Group) for the 1994 Plan Year over the
hypothetical share number previously determined
for 1994 shall be allocated hereunder or credited
under the Supplemental Plan in accordance with
clause (v) above, provided that the number in
(v)(A) shall be calculated and credited as if the
contributions were attributable to 1995, rather
than 1994, unless the additional shares calculated
in clause (v) to be contributed to ESOP (Part B)
are in fact contributed to the ESOP no later than
September 15, 1995. The calculations required by
this clause (viii) shall be performed prior to
calculating the regular allocations for the 1995
year. The additional shares of Class 2 Non- Voting
Preferred Stock credited pursuant to this clause
(viii) shall, for all purposes, including Section
5.4(c)(ii)(E), be allocated as of December 31,
1994.
(d) Purpose. The purpose of the foregoing
contribution and allocation provisions is to place each
Participant, to the extent possible, in the same
position such Participant would have been if (i) Code
sections 401(a)(4), 401(a)(17) and 415 did not apply,
(ii) all of the shares of Preferred Stock to be sold to
Part A during the Wage Investment Period had instead
been sold on the Effective Date, (iii) all of the
shares (excluding shares of the Voting Preferred Stock)
contributed to Part B or credited under the
Supplemental Plan during the Wage Investment Period had
instead been purchased by the Trust on the Effective
Date pursuant to Part A as Class 1 Non-Voting Preferred
Stock and (iv) the Preferred Stock and Voting Preferred
Stock had been allocated ratably (over the 69 months
beginning at the Effective Date) to Participants in
their respective Employee Groups in accordance with the
overall program ownership percentages, that is, the
ALPA Employee Group - 46.23%, the IAM Employee Group -
37.13% and the Management and Salaried Employee Group -
16.64%. To the extent any interpretative issues arise
in calculating contributions and allocations, such
issues shall be resolved, if possible, by effectuating
such purpose. To the extent that any shares of Company
Stock are converted into shares of Common Stock prior
to the end of the Wage Investment Period, an
appropriate number of shares of Common Stock will be
contributed (if applicable) and allocated hereunder in
lieu of the shares of the Company Stock that would have
been contributed and/or allocated hereunder and, if
appropriate, the number of Class 1 and/or Class 2
Non-Voting Preferred Stock shares set forth in various
places in this Plan shall be revised; provided, except
to the extent the shares of Voting Preferred Stock are
converted into shares of Common Stock, the calculation
of the number of shares of Voting Preferred Stock to be
contributed and allocated shall continue as if no
shares of Company Stock had been converted.
(e) Special Allocation Provision. For purposes of
making allocations under Section 5.4, the period from
January 1, 2000 through April 12, 2000 shall be treated
as a Plan Year (for the ALPA Employee Group and the
Management and Salaried Employee Group) and the period
from January 1, 2000 through July 12, 2000 shall be
treated as a Plan Year (for the IAM Employee Group).
5.5 LIMITATION ON ALLOCATIONS TO PARTICIPANTS.
(a) General. Subject to the provisions of this Section
5.5, Code section 415, including the effect of any
transitional rule, shall be incorporated by reference into
the terms of the Plan. No allocation shall be made under
Section 5.4 that would result in a violation of Code section
415.
(b) Code Section 415 Compensation. For purposes of this
Section 5.5, Compensation shall be adjusted to reflect the
general rule of Treasury Regulation section 1.415-2(d).
(c) Limitation Year. The "limitation year" (within the
meaning of Code section 415) shall be the calendar year.
(d) Multiple Defined Contribution Plans. In any case
where a Participant also participates in another defined
contribution plan of the Company or its Affiliates, the
appropriate committee of such other plan shall first reduce
the after-tax contributions under any such plan, shall then
reduce any elective deferrals under any such plan subject to
Code section 401(k), shall then reduce all other
contributions under any other such plan and, if necessary,
shall then reduce contributions under this Plan (Part B to
be reduced before Part A); provided, however, in the case of
any Participant who is a member of the ALPA Employee Group,
contributions (excluding after-tax contributions and
elective deferrals) under the United Air Lines, Inc. Pilots'
Directed Account Retirement Income Plan shall be reduced
last.
(e) Combined Plan Limitations. To the extent necessary
to comply with the requirements of Code section 415(e), the
appropriate committee shall first reduce the annual benefit
payable under any defined benefit plan in which the
Participant participates and, if necessary, the ESOP
Committee shall thereafter reduce the contributions under
the defined contribution plans in which such Participant
participates in accordance with Section 5.5(d).
(f) Excess Allocations. If, after applying the
allocation provisions under Section 5.4, allocations under
Section 5.4 would otherwise result in a violation of Code
section 415, the ESOP Committee shall reduce Employer
Contributions for the next limitation year for the affected
Participant or shall hold excess amounts in a suspense
account for allocation in a subsequent Plan Year in
accordance with Reg. section 1.415-6(b)(6)(ii). Such
suspense account, if permitted, will be created before any
reallocation of contributions for the affected individual.
If the limits of Code section 415 would cause total
allocations to each Participant in an Employee Group to
exceed the permitted amount, appropriate arrangements will
be made to protect the interests of that Employee Group,
consistent with the principles of Section 3.2.
5.6 Valuations. All valuations of shares of Company
Stock that are not readily tradeable on an established
securities market shall be valued by an "independent
appraiser" (within the meaning of Code section 170(a)(1)).
SECTION 6
VESTING
A Participant's Account shall be fully vested
(nonforfeitable) at all times, and will be distributed to
him or, in the event of his death, to his Beneficiary, in
accordance with the applicable provisions of Section 7.
SECTION 7
DISTRIBUTIONS
7.1 Pre-Retirement Diversification Rights.
(a) General. Any Participant who has attained age
55 and has 10 years of participation under the Plan
("Qualified Participant") may elect to diversify the
investment of a portion of his Account under this
Section 7.1. During the six-Plan Year period beginning
with the Plan Year in which such Qualified Participant
attains age 55 and has 10 years of participation under
the Plan, such Qualified Participant shall be entitled
to request, within 90 days after the close of each Plan
Year in such period (each such period referred to as an
"Election Period"), the diversification of up to 25% of
the balance of his Account, to the extent such amount
exceeds the amount to which any prior election under
this Section 7.1 applies. During the last Election
Period, the preceding sentence shall be applied by
substituting "50%" for "25%".
(b) Amount. In the case of a Qualified Participant
who has made one or more elections during the period,
the extent to which a subsequent election exceeds the
amount to which any prior election applies shall be (i)
in the case of the Qualified Participant's ESOP Cash
Account, (A) 25% or 50%, as the case may be, of the sum
of the balance of such Account as of the Valuation Date
of the Plan Year with respect to which the subsequent
election is made and the amounts diversified pursuant
to prior elections, less (B) the amounts diversified
pursuant to prior elections; and (ii) in the case of
the Qualified Participant's ESOP Stock Account, (A) 25%
or 50%, as the case may be, of the sum of the number of
shares of Company Stock in the Qualified Participant's
ESOP Stock Account as of the Valuation Date of the Plan
Year with respect to which the subsequent election is
made and the number of shares of Company Stock
diversified pursuant to prior elections, less (B) the
number of shares of Company Stock diversified pursuant
to prior elections. For the purposes of this Section 7,
fractional shares for which a Qualified Participant
might be entitled to receive shall be rounded down to
the nearest whole share. The diversification of a
Participant's Account under this Section 7.1 shall only
be effected within 90 days following the 90-day period
in which the Qualified Participant makes his request.
Notwithstanding the foregoing, if the fair market value
of the Company Stock allocated to the ESOP Stock
Accounts of a Qualified Participant is $500 or less as
of the Valuation Date immediately preceding the first
day of an Election Period, such Qualified Participant
shall not be entitled to an election under this Section
7.1 for that Election Period.
(c) Method. A Participant's diversification
election pursuant to this Section 7.1 shall only be
effected by having the ESOP Committee cause the Trustee
to transfer the portion of the Account to be
diversified to the Company's Code section 401(k) plan
applicable to such Participant. An equal number of
shares of Voting Preferred Stock and Preferred Stock
shall be diversified.
7.2 Distributions on Account of Termination of
Employment. Subject to the following provisions of this
Section 7, a Participant (or, in the case of a Participant's
death, his Beneficiary) shall become eligible (but shall not
be required) to receive a distribution of the balance of his
Account, as of the Valuation Date coincident with or next
following the date the Participant's employment with the
Company and its Affiliates terminates for any reason;
provided, however, that, except as provided in Section 7.4,
no distributions shall be made prior to July 13, 1995.
7.3 Manner and Form of Distributions.
(a) Manner. A Participant may elect to receive a
distribution of his Account balance in either of the
following methods:
(i) By payment in a lump sum; or
(ii) By payment in a series of five
substantially equal annual installments (to
consist of equal numbers of Voting Preferred Stock
and Preferred Stock).
If a Participant so desires he may direct how his
benefits are to be paid to his Beneficiary. If a
deceased Participant did not file a direction with the
ESOP Committee, the Beneficiary may elect to receive a
distribution of the Account in accordance with this
Section 7.3.
(b) Form. At the Participant's election, the ESOP
Committee shall direct the Trustee to make
distribution of a Participant's Account in (i)
cash, (ii) Company Stock or (iii) in cash equal to
the amount held in such Participant's ESOP Cash
Account and in shares of Company Stock with
respect to such Participant's ESOP Stock Account;
provided, however, that Company Stock (if
convertible) shall only be distributed in the form
of Common Stock received in the conversion of the
Preferred Stock held in his Account and any
fractional share shall be paid in cash. If a
Participant elects to receive a distribution of
his ESOP Stock Account in cash, the Trustee shall
be directed to convert (if convertible) the
Company Stock in his ESOP Stock Account into
Common Stock and to sell the Common Stock and any
Company Stock that is not convertible; the amount
of cash so distributed shall equal the net
proceeds received from the sale of such shares of
Common Stock. If a Participant elects to receive a
distribution of his ESOP Cash Account in Common
Stock, the Trustee will be directed to purchase
Common Stock in the open market and the number of
shares of Common Stock so distributed shall equal
the number of whole shares purchased with such
Participants' Account balance, with any excess
cash distributed to the Participant.
7.4 Special Distribution Rules. Notwithstanding any
provision herein to the contrary:
(a) Required Distributions.
(i) a Participant whose employment with the
Company and its Affiliates terminates by reason of
attainment of his Normal Retirement Date, death or
Total Disability must be eligible to receive a
distribution of his Account balance no later than
the end of the Plan Year following the Plan Year
in which such termination occurs; provided,
however, that this provision shall not apply to
the shares of Company Stock held in the
Participant's Account acquired with the proceeds
of an Acquisition Loan until the close of the Plan
Year in which such Acquisition Loan has been
repaid in full;
(ii) unless a Participant otherwise elects
under Section 7.4(b), a Participant whose
employment with the Company and its Affiliates
terminates must commence to receive a distribution
of his Account no later than 60 days following the
close of the Plan Year in which the latest of the
following occurs: (A) a Participant reaches his
Normal Retirement Date, (B) the Participant's
employment with the Company and its Affiliates
terminates and (C) the 10th anniversary of the
year in which the Participant commenced
participation in the Plan;
(iii) a Participant's Account balance must
commence to be distributed no later than the April
1 of the calendar year next following the calendar
year in which such Participant attains age 70-
1/2. Any amount distributed pursuant to this
clause (iii) shall, in the case of a Participant
who is an Employee, be and be limited to the
minimum amount required to be distributed pursuant
to Code section 401(a)(9);
(iv) If a Participant's employment with the
Company and its Affiliates terminates by reason of
death, or if a Participant dies after his
employment terminates but before a distribution
commences from the Plan, then, unless the
Participant's spouse is the Beneficiary, all of
the Participant's interest in the Plan must be
completely distributed within five years after the
date of his death unless distributions begin
within one year after the Participant's death; and
(v) to the extent permitted by law, Code
section 401(a)(9) and any related transitional
rule are incorporated by reference into the terms
of the Plan.
(b) Deferred Distributions. A Participant (or a
spousal Beneficiary) may elect to defer the
commencement of his distribution to any date on or
prior to the April 1 of the calendar year next
following the calendar year in which such Participant
attains age 70-1/2.
7.5 Direct Rollover. To the extent required by Code
section 401(a)(31), the Participant (or a spousal
Beneficiary) shall have the right to elect to have any
distribution that constitutes an "eligible rollover
distribution" (as defined in Code section 401(a)(31)(C))
paid directly to an "eligible retirement plan" (as defined
in Code section 401(a)(31)(D)) specified by such Participant
(or a spousal Beneficiary). If a Participant (or a spousal
Beneficiary) fails to make the foregoing election he shall
be deemed to have not made such election. The provisions of
this Section 7.5 shall be administered in accordance with,
and subject to, such rules as the ESOP Committee may
prescribe, which rules may include any limitations permitted
under Code section 401(a)(31).
7.6 Facility of Payment.
(a) General. Subject to Section 7.6(b), if, in the
opinion of the ESOP Committee, a Participant or
Beneficiary is under a legal disability or is in any
way incapacitated so as to be unable to manage his
financial affairs, the ESOP Committee may (but shall
not be required to), until claim is made by a
conservator or other person legally charged with the
care of his person or of his estate, direct the Trustee
to make payment to a relative or friend of such person
for his benefit. Thereafter, any benefits under the
Plan to which such Participant or Beneficiary is
entitled shall be paid to such conservator or other
person legally charged with the care of his person or
his estate.
(b) Minors. In the event any amount is payable
under the Plan to a minor, payment shall not be made to
the minor, but instead shall be paid (i) to that
person's then living parent(s) to act as custodian,
(ii) if that person's parents are then divorced, and
one parent is the sole custodial parent, to such
custodial parent, or (iii) if no parent of that person
is then living, to a custodian selected by the ESOP
Committee to hold the funds for the minor under the
Uniform Transfers or Gifts to Minors Act in effect in
the jurisdiction in which the minor resides. If no
parent is living and the ESOP Committee decides not to
select another custodian to hold the funds for the
minor, payment shall be made to the duly appointed and
currently acting guardian of the estate for the minor
or, if no guardian of the estate for the minor is duly
appointed and currently acting within 60 days after the
date the amount becomes payable, payment shall be
deposited with the court having jurisdiction over the
estate of the minor.
(c) Discharge. Any payment made under this Section
7.6 shall fully discharge, to such extent, the
obligation of the Trustee to pay benefits under the
Plan with respect to such Participant, Beneficiary or
minor.
7.7 Interests Not Transferable. The interests of
Participants and their Beneficiaries under the Plan are not
subject to the claims of their creditors and may not be
voluntarily or involuntarily assigned, alienated or
encumbered, except as otherwise provided in Section 7.11.
7.8 Absence of Guaranty. The Trustee, the ESOP
Committee and the Employers in no way guarantee the Trust
Fund from loss or depreciation. Moreover, the Employers do
not guarantee any payment to any person. The liability of
the Trust to make any payment is limited to the available
Trust Fund.
7.9 Designation of Beneficiary. In the event of the
death of a married Participant, the Participant's Account
balance will be paid to his surviving spouse, except as
otherwise provided below. Each Participant from time to
time, by signing a form furnished by the ESOP Committee, may
designate any legal or natural person or persons (who may be
designated contingently or successively) to whom his
benefits are to be paid if he dies before he receives all of
his benefits; provided, however, that if a married
Participant designates a Beneficiary other than his spouse,
his spouse must consent in writing to such designation and
acknowledge in writing the effect of such designation, and
such consent and acknowledgement must be witnessed by a
notary public. Any designation by an unmarried Participant
shall be rendered ineffective by any subsequent marriage and
any consent of a spouse shall be effective only as to that
spouse.
A Beneficiary designation form will be effective only
when the signed form is filed with the ESOP Committee while
the Participant is alive and will cancel all Beneficiary
designation forms signed earlier. If a deceased Participant
fails to designate a Beneficiary as provided above (or if
the designated Beneficiary dies before the Participant or
before receiving complete payment of the Participant's
benefits), the ESOP Committee shall direct the Trustee to
pay the Participant's benefits as follows:
(a) first, to the surviving spouse of the
Participant, if any;
(b) second, to the children (including any adopted
children) of the Participant, per stirpes; and
(c) third, if the Participant leaves no surviving
spouse or has no descendants pursuant to paragraph (b)
above, to the estate of the last to die of the
Participant or his designated Beneficiary.
Upon the dissolution of marriage of a Participant, any
designation of the Participant's former spouse as a
Beneficiary shall be treated as though the Participant's
former spouse had predeceased the Participant, unless (i)
the Participant executes another Beneficiary designation
that complies with this Section 7.9 and that clearly names
such former spouse as a Beneficiary, or (ii) a court order
presented to the ESOP Committee prior to distribution on
behalf of the Participant explicitly requires the
Participant to continue to maintain the former spouse as the
Beneficiary. In any case in which the Participant's former
spouse is treated under the Participant's Beneficiary
designation as having predeceased the Participant, no heirs
or other beneficiaries of the former spouse shall receive
benefits from the Plan as a Benefic