IAM: ESOP Shares sold

[DB Cooper]

October 25, 2002
TO: THE UNITED AIRLINES MEMBERSHIP AFFILIATED WITH DISTRICT 141-M
Dear Sisters and Brothers;
There have been no meetings with representatives of United Airlines and your Committee this past week, although discussions have taken place via telephone. We still have issues to resolve and have not reached agreement as to our level of participation in the UAL Recovery.
Meanwhile the news does not get any better. A 900 million dollar third quarter loss, with a prediction that fourth quarter losses, could be even greater; announcements of more furloughs and closing of reservation centers.
Also, by now you are aware of the announcement that State Street Bank and Trust has began selling some of IAM and ALPA’s ESOP shares. Many questions are being generated and the ESOP Committee is developing answers to those many questions. I have been advised by the ESOP attorneys that this action was taken to protect us in the event of a UAL bankruptcy, and was a fiduciary responsibility of State Street and legal in every way.
We have agreed to participate in a joint effort with all United employees and the UAL Labor Coalition to encourage the Air Transportation Stabilization Board (ATSB) to approve the loan guarantee application and avoid a bankruptcy filing by UAL. Information is provided and each of you is asked to participate in this very urgent matter.
We will keep you advised to any developments.
Fraternally,
Scotty Ford
President and General Chairman

 

[flythewing]

Thanks for the $2 per share. If the stock goes quickly back to ten, is there a fiduciary responsibility to get me the difference back? And, how much stock needs to be sold for employees to lose a board seat?

 

[DB Cooper]

Dear ESOP Participant:
10/25/2002 - Union Representative



Dear ESOP Participant:

We are writing to advise you about an important decision made by the ESOP Committee Committee for the UAL Corporation Employee Stock Ownership Plan. The Committee consists of six members appointed by ALPA, the IAM and the Company. Following the announcement on August 14, 2002 that UAL was considering a bankruptcy filing, the Committee reviewed whether it should delegate the duty to manage the ESOPs investments to an independent expert to ensure that all decisions involving the management of the ESOPs assets remain above reproach. Acting solely in the best interests of ESOP participants and beneficiaries, the Committee unanimously decided to appoint State Street Bank and Trust State Street as investment manager of the ESOP's assets. In addition to serving as investment manager for the ESOP, State Street will continue to serve as Trustee for the ESOP, as it has done since the ESOP inception in 1994.

State Street is an industry leader in providing independent fiduciary services to employee retirement plans. State Street is familiar with the UAL ESOP, and has significant experience in managing, servicing and overseeing retirement plan investments. The Committee is confident State Street will act solely in the best interests of ESOP participants and beneficiaries.

As investment manager, State Street has the responsibility to determine whether the ESOP's continued investment in UAL stock is consistent with the law governing retirement plans, the Employee Retirement Income Security Act of 1974 (ERISA). Following a thorough investigation, State Street determined that the ESOP's continued investment solely in UAL stock was inconsistent with ERISA and that it was in the best interests of participants and beneficiaries to commence sales of UAL stock held by the ESOP. In order to begin sales, State Street was required to file a form with the Securities and Exchange Commission. On September 27, 2002 State Street filed this form, allowing it to sell up to approximately 11 million shares of UAL stock on behalf of the ESOP within the next three months.

You should know that when State Street sells any shares of UAL stock in the ESOP, the shares are sold, pro rata, from all ESOP participants accounts. State Street is currently investing the proceeds from sales of UAL stock in the ESOP in a short-term investment fund. The proceeds and any investment earnings will be credited, pro rata, to all ESOP participants accounts.

In continuing to fulfill its investment management responsibilities under the ESOP, State Street must carefully analyze the prudence of UAL stock as an investment on an ongoing basis. Thus, although State Street decided September 27 that selling UAL stock was appropriate, it could decide at any time to stop selling UAL stock, buy back UAL stock, or take other actions it determines are appropriate.

You should also know that the delegation of investment management authority to State Street applies only to the tax-qualified ESOP; it does not apply to the Supplemental ESOP (also known as ESOP 3). No sales will be made with respect to the credits for stock that you may have in an account under ESOP 3. ESOP 3 will continue to operate without change.

Following the delegation to State Street, the Committee continues to have administrative responsibility for the ESOP, including an obligation to monitor State Street activities as investment manager. The Committee has and will continue to meet with State Street on a regular basis.

We recognize that this decision may generate questions, and we will work with all parties to provide additional information when appropriate.


Sincerely,

ESOP Committee


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[atabuy]

[blockquote]
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On 10/25/2002 8:12:59 PM DB Cooper wrote:

October 25, 2002

TO: THE UNITED AIRLINES MEMBERSHIP AFFILIATED WITH DISTRICT 141-M

Dear Sisters and Brothers;


Also, by now you are aware of the announcement that State Street Bank and Trust has began selling some of IAM and ALPA’s ESOP shares. Many questions are being generated and the ESOP Committee is developing answers to those many questions. I have been advised by the ESOP attorneys that this action was taken to protect us in the event of a UAL bankruptcy, and was a fiduciary responsibility of State Street and legal in every way.


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[/blockquote]
From my own point of view, selling shares now has more of a chance of hurting us then giving us any protection.
It seems like a double edged sword here, and it is hitting us from both sides.
Could this affect our sunset provision?

 

[mancityfan]

Jim,

It will only effect the sunset provision in the respect that it will bring the 20% employee ownership trigger closer to the present. I doubt we will be selling enough shares to actually make sunset happen with ythe currently approved transactions, but with large retirements coming, and possible further reductions in employees and ESOP shares, it could well bring the sunset into the foreseeable future. Certainly, the sunset will NOT be the 2017 date it WAS before this occured. However, whether it will be 2010 or 2005, is not yet known.

mancityfan

 

[crossfeed]

State Street Bank and Trust selling our esop stock sounds a lot like when USAir had their stock sold prior to bankruptcy. You would assume State Street would have more insight to whether UA was going bankrupt, or not. I would look at this as not a positive thing. It would be interesting to see the effects of this on Monday morning's stock, but I imagine all the big players have already bailed.

 

[Busdrvr]

[blockquote]
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On 10/27/2002 10:52:48 AM crossfeed wrote:

State Street Bank and Trust selling our esop stock sounds a lot like when USAir had their stock sold prior to bankruptcy. You would assume State Street would have more insight to whether UA was going bankrupt, or not. I would look at this as not a positive thing. It would be interesting to see the effects of this on Monday morning's stock, but I imagine all the big players have already bailed.
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[/blockquote]

State Street Bank filled to do this a month ago, and it has been discussed for some time now on the ALPA web site. there is nothing new hear for Wall street. If there was to be a sell off based on this info, it's already happened (prob at the 52 week low).

 

[shipwrecked]

You would assume State Street would have more insight to whether UA was going bankrupt, or not.

crossfeed.....Would that not have the faint smell of State Street trading on inside information? Your choice of the word insight is interesting. lol