June 10, 1994
UAL Corporation
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, IL 60007
Re: (i) UAL Corporation Common Stock, par value $.01 per share, (ii)
UAL Corporation Series D Redeemable Preferred Stock, without par
value, (iii) UAL Corporation Depositary Shares, (iv) UAL
Corporation Series B Preferred Stock, without par value, (v)
United Air Lines, Inc. Series A Debentures due 2004 and (vi)
United Air Lines, Inc. Series B Debentures due 2014
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Ladies and Gentlemen:
We have acted as special counsel to UAL Corporation, a Delaware
corporation ("UAL"), and United Air Lines, Inc., a Delaware corporation
("United"), in connection with (i) the proposed recapitalization (the
"Recapitalization") of UAL pursuant to terms and conditions of the Amended and
Restated Agreement and Plan of Recapitalization, dated as of March 25, 1994,
as amended by the First Amendment to the Agreement and Plan of
Recapitalization, dated as of June 2, 1994 (as so amended, the "Plan of
Recapitalization"), among UAL, the Air Line Pilots Association, International
and the International Association of Machinists and Aerospace Workers, (ii)
the Registration Statement, as amended through the date hereof, on Form S-4
(the "Form S-4") (Registration No. 33-53107), filed by UAL and United with the
Securities and Exchange Commission (the "Commission") with respect to the
Recapitalization described more fully below, (iii)
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 2
the Registration Statement, as amended through the date hereof, on Form S-3
("UAL Form S-3") (Registration No. 33-53893), filed by UAL with the Commission
with respect to the sale of 30,600,000 Depositary Shares (the "Depositary
Shares"), each representing one one-thousandth of a share of Series B Preferred
Stock, without par value (the "Series B Preferred Stock"), of UAL (the "UAL
Preferred Offering") and (iv) the Registration Statement, as amended through
the date hereof, on Form S-3 ("United Form S-3") (Registration No. 33-53891),
filed by United with the Commission with respect to the sale of $382,500,000
principal amount of Series A Debentures due 2004 of United (the "Series A
Debentures") and $382,500,000 principal amount of Series B Debentures due 2014
of United (the "Series B Debentures" and, together with the Series A Debentures,
the "Debentures") (the "United Debenture Offering"). The Form S-4 relates,
among other things, to the Recapitalization, pursuant to which each share of
Common Stock, par value $5.00 per share, of UAL that is currently outstanding
will be reclassified into one half of a share of Common Stock, par value $.01
per share (the "New Shares"), of UAL and one one-thousandth of a share of
Series D Redeemable Preferred Stock, without par value (the "Series D
Redeemable Preferred Stock"), of UAL. Subject to the provisions described
below, immediately after issuance, each one-thousandth of a share of Series D
Redeemable Preferred Stock will be redeemed by UAL for (a) $25.80 in cash, (b)
depositary receipts (the "Depositary Receipts") evidencing 1.244 Depositary
Shares (representing an aggregate of $31.10 liquidation preference of Series B
Preferred Stock), (c) $15.55 principal amount of Series A Debentures and (d)
$15.55 principal amount of Series B Debentures.
UAL and United are registering, pursuant to the Form S-4 in connection
with the Recapitalization, an aggregate of 14,463,093 New Shares, 35,985 shares
of Series B Preferred Stock, 35,984,175 Depositary Shares, 28,927 shares of
Series D Redeemable Preferred Stock, $449,802,200 principal amount of the Series
A Debentures and $449,802,200 principal amount of the Series B Debentures.
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 3
If the Depositary Shares are sold pursuant to the UAL Preferred
Offering, the terms of the Series D Redeemable Preferred Stock will be adjusted
(i) to provide that the Depositary Shares will not be issued upon redemption of
the Series D Redeemable Preferred Stock and (ii) to increase the amount of cash
to be paid upon such redemption by an amount equal to the proceeds (without
deducting the underwriting discount or any other costs) from the sale by UAL of
such Depositary Shares pursuant to the UAL Preferred Offering.
If the Series A Debentures are sold pursuant to the United Debenture
Offering, the terms of the Series D Redeemable Preferred Stock will be adjusted
(i) to provide that the Series A Debentures will not be issued upon redemption
of the Series D Redeemable Preferred Stock and (ii) to increase the amount of
cash to be paid upon such redemption by an amount equal to the proceeds (without
deducting the underwriting discount or any other costs) from the sale by United
of such Series A Debentures pursuant to the United Debenture Offering.
If the Series B Debentures are sold pursuant to the United Debenture
Offering, the terms of the Series D Redeemable Preferred Stock will be adjusted
(i) to provide that the Series B Debentures will not be issued upon redemption
of the Series D Redeemable Preferred Stock and (ii) to increase the amount of
cash to be paid upon such redemption by an amount equal to the proceeds (without
deducting the underwriting discount or any other costs) from the sale by United
of such Series B Debentures pursuant to the United Debenture Offering.
This opinion is delivered in accordance with the requirements of Items
601(b)(5) and (7) of Regulation S-K under the Securities Act of 1933 (the "1933
Act").
In connection with this opinion, we have examined and are familiar
with originals or copies, certified or otherwise identified to our satisfaction,
of (i) the Restated Certificate of Incorporation of UAL as certified by the
Secretary of State of the State of Delaware and
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 4
the Bylaws of UAL as currently in effect, (ii) the proposed Amended and
Restated Certificate of Incorporation of UAL (the "Proposed Amended and Restated
Certificate") and the proposed Restated Bylaws (the "Proposed Restated Bylaws")
of UAL, (iii) the Plan of Recapitalization, (iv) the Restated Certificate of
Incorporation of United as certified by the Secretary of State of the State of
Delaware (the "United Restated Certificate") and the Bylaws of United as
currently in effect, (v) the proposed amendment to the United Restated
Certificate, (the "Proposed Amendment to the United Restated Certificate"),
(vi) the Indenture, dated as of July 1, 1991, between United, as issuer, and The
Bank of New York, as Trustee (the "Indenture"), pursuant to which the Debentures
will be issued and the United Officers' Certificate (the "Officers'
Certificate"), to be delivered to the Trustee pursuant to the Indenture, that
defines the terms of the Debentures, (vii) the forms of the Debentures, (viii)
resolutions adopted to date by the Board of Directors of United relating to the
authorization, execution and delivery of the Indenture, (ix) resolutions adopted
to date by the Board of Directors of UAL and the Board of Directors of United
relating to the Recapitalization and related transactions, (x) the Form S-4,
(xi) the form of the deposit agreement (the "Deposit Agreement") to be entered
into among UAL, a depositary to be appointed by UAL (the "Depositary") and the
holders from time to time of Depositary Receipts issued thereunder to evidence
Depositary Shares, including the form of Depositary Receipt included as Annex
A to the Deposit Agreement, and (xii) such other documents as we have deemed
necessary or appropriate as the basis for this opinion.
In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies, and
the authenticity of the originals of such copies. We have further assumed that
both UAL and United have been duly organized and are validly existing and in
good standing under the laws of
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 5
the State of Delaware. As to any facts material to this opinion which we did
not independently establish or verify, we have relied upon statements or
representations of officers and other representatives of UAL, United and others.
Members of our firm are admitted to the Bar in the States of Delaware
and New York and we express no opinion as to the laws of any other jurisdiction
except the laws of the United States of America to the extent specifically
referred to herein.
We express no opinion herein as to whether the securities that are
subject to this opinion or the Indenture, any of the transactions contemplated
thereby or by the Recapitalization or the financing of the Recapitalization, or
the use of proceeds from the sale of the securities that are subject to this
opinion may constitute a fraudulent conveyance or what effect a finding to that
effect would have on the validity or enforceability of the securities that are
the subject of this opinion or the Indenture.
This opinion is being furnished in connection with the Form S-4 and
assumes that the Debentures, the Depositary Shares and the Series B Preferred
Stock will be issued upon the redemption of the Series D Redeemable Preferred
Stock and not pursuant to the United Debentures Offering and the UAL Preferred
Offering, respectively.
Based upon the foregoing and subject to the qualifications set forth
below, we are of the opinion that:
1. With respect to the Series A Debentures and the Series B
Debentures, when (i) the Form S-4, as finally amended (including all necessary
post-effective amendments), has become effective, (ii) the Board of Directors of
United, including any appropriate committee appointed thereby, and appropriate
officers of United have taken all necessary corporate action to approve the Plan
of Recapitalization and all the transactions contem-
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 6
plated thereby including the issuance and terms of the Debentures and related
matters, (iii) the Indenture has been qualified under the Trust Indenture Act of
1939, as amended, (iv) the Officers' Certificate has been duly authorized,
executed and delivered by United to the Trustee, (v) the shareholders of UAL
have approved the Recapitalization and related matters and the other conditions
of the Plan of Recapitalization are satisfied or waived, (vi) the terms of the
Debentures and their issuance have been duly established in conformity with the
Plan of Recapitalization, the Proposed Amended and Restated Certificate, the
Indenture and the Officers' Certificate so as not to violate any applicable
law, the United Restated Certificate, the Proposed Amendment to the United
Restated Certificate or the Bylaws of United or result in a default under or
breach of any agreement or instrument binding upon United and so as to comply
with any requirement or restriction imposed by any court or governmental body
having jurisdiction over United and (vii) the Debentures have been duly executed
and authenticated in accordance with the provisions of the Indenture and the
Officers' Certificate and duly delivered in the manner provided in the Indenture
and the Officers' Certificate, the Form S-4, the Plan of Recapitalization and
the Proposed Amended and Restated Certificate, the Debentures will be, valid and
binding obligations of United enforceable against United in accordance with
their respective terms, except to the extent that enforcement may be limited by
(1) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
2. With respect to the New Shares, when (i) the Form S-4, as finally
amended (including all necessary post-effective amendments), has become
effective, (ii) the filing of the Proposed Amended and Restated Certificate
with Secretary of State of the State of Delaware has duly occurred, (iii) the
Board of Directors of UAL, including any appropriate committee appointed
thereby,
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 7
and appropriate officers of UAL have taken all necessary corporate action to
approve the Plan of Recapitalization and all the transactions contemplated
thereby including the issuance of the New Shares and related matters, (iv) the
shareholders of UAL have approved the Recapitalization and related matters and
the other conditions of the Plan of Recapitalization are satisfied or waived,
(v) the New Shares have been duly issued in conformity with the Plan of
Recapitalization, the Proposed Amended and Restated Certificate and Proposed
Restated Bylaws so as not to violate any applicable law, the Proposed Amended
and Restated Certificate and the Proposed Restated Bylaws or result in a default
under or breach of any agreement or instrument binding upon UAL and so as to
comply with any restriction imposed by any court or governmental body having
jurisdiction over UAL and (vi) certificates representing the New Shares in
accordance with the applicable provision of the Delaware General Corporation
Law, 8 Del.C. (S) 158 and Article 6, Section 6.1 of the Proposed Restated
Bylaws are approved by the Board of Directors of UAL and are duly executed,
countersigned, registered and delivered in the manner provided in the Form S-
4, the Plan of Recapitalization and the Proposed Amended and Restated
Certificate, the New Shares will be duly authorized and, upon issuance, will
be validly issued, fully paid and non-assessable.
3. With respect to the Series D Redeemable Preferred Stock, when (i)
the Form S-4, as finally amended (including all necessary post-effective
amendments), has become effective, (ii) the filing of the Proposed Amended and
Restated Certificate with the Secretary of State of the State of Delaware has
duly occurred, (iii) the Board of Directors of UAL, including any appropriate
committee appointed thereby, and appropriate officers of UAL have taken all
necessary corporate action to approve the Plan of Recapitalization and all the
transactions contemplated thereby including the issuance and terms of the Series
D Redeemable Preferred Stock and related matters, (iv) the shareholders of UAL
have approved the Recapitalization and related matters and the other conditions
to the Plan of Recapitalization are satisfied or
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 8
waived, (v) the terms of Series D Redeemable Preferred Stock and its issuance
have been duly established in conformity with the Plan of Recapitalization, the
Proposed Amended and Restated Certificate and Proposed Restated Bylaws so as not
to violate any applicable law, the Proposed Amended and Restated Certificate and
the Proposed Restated Bylaws or result in a default under or breach of any
agreement or instrument binding upon UAL and so as to comply with any
restriction imposed by any court or governmental body having jurisdiction over
UAL and (vi) certificates representing the Series D Redeemable Preferred Stock
in accordance with the applicable provisions of the Delaware General
Corporation Law, 8 Del.C. (S) 158 and Article 6, Section 6.1 of the Proposed
Restated Bylaws are approved by the Board of Directors of UAL and are duly
executed, countersigned and registered in accordance with the terms of the
Form S-4, the Plan of Recapitalization and the Proposed Amended and Restated
Certificate, the Series D Redeemable Preferred Stock will be duly authorized
and, upon issuance, will be validly issued, fully paid and non-assessable.
4. With respect to the Series B Preferred Stock, when (i) the Form
S-4, as finally amended (including all necessary post-effective amendments),
has become effective, (ii) the filing of the Proposed Amended and Restated
Certificate with the Secretary of State of the State of Delaware has duly
occurred, (iii) the Board of Directors of UAL, including any appropriate
committee appointed thereby, and appropriate officers of UAL have taken all
necessary corporate action to approve the Plan of Recapitalization and all the
transactions contemplated thereby including issuance and terms of the Series B
Preferred Stock and related matters, (iv) the shareholders of UAL have approved
the Recapitalization and related matters and the other conditions to the Plan of
Recapitalization are satisfied or waived, (v) the terms of the Series B
Preferred Stock and its issuance have been duly established in conformity with
the Plan of Recapitalization, the Proposed Amended and Restated Certificate and
Proposed Restated Bylaws so as not to violate any applicable law, the Proposed
Amended and Restated Certificate
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 9
and the Proposed Restated Bylaws or result in a default under or breach of any
agreement or instrument binding upon UAL and so as to comply with any
restriction imposed by any court or governmental body having jurisdiction over
UAL and (vi) certificates representing the Series B Preferred Stock in
accordance with the applicable provisions of the Delaware General Corporation
Law, 8 Del.C. (S) 158 and Article 6, Section 6.1 of the Proposed Restated
Bylaws are approved by the Board of Directors of UAL and are duly executed,
countersigned, registered and delivered to the Depositary against delivery of
Depositary Shares in the manner provided in the Form S-4, the Plan of
Recapitalization and the Proposed Amended and Restated Certificate, the Series
B Preferred Stock will be duly authorized and, upon issuance, will be validly
issued, fully paid and non-assessable.
5. With respect to the Depositary Shares, when (i) the Form S-4, as
finally amended (including all necessary post-effective amendments), has become
effective, (ii) the filing of the Proposed Amended and Restated Certificate
with the Secretary of State of the State of Delaware has duly occurred, (iii)
the shareholders of UAL have approved the Recapitalization and related matters
and the other conditions of the Plan of Recapitalization are satisfied or
waived, (iv) the Board of Directors of UAL, including any appropriate committee
appointed thereby, and appropriate officers of UAL have taken all necessary
corporate action to approve the Plan of Recapitalization and all the
transactions contemplated thereby including the issuance and terms of the
Depositary Shares and related matters, including the Deposit Agreement, (v) the
Deposit Agreement has been duly executed and delivered, (vi) the terms of the
Depositary Shares and their issuance have been duly established in conformity
with the Plan of Recapitalization, the Proposed Amended and Restated
Certificate and the Deposit Agreement so as not to violate any applicable law,
the Proposed Amended and Restated Certificate and the Proposed Restated Bylaws
or result in a default under or breach of any agreement or instrument binding
upon UAL and so as to comply with any restriction imposed by any
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 10
court or governmental body having jurisdiction over UAL and (vii) the shares of
Series B Preferred Stock that are to be represented by Depositary Shares have
been duly authorized, validly issued and duly delivered to the Depositary for
deposit pursuant to the Deposit Agreement and (viii) the Depositary Receipts are
duly executed, countersigned and delivered against the deposit of the Series B
Preferred Stock in accordance with the Deposit Agreement in the manner provided
in the Form S-4, the Plan of Recapitalization and the Proposed Amended and
Restated Certificate, such Depositary Shares represented by the Depositary
Receipts will be validly issued and will entitle the holders thereof to the
rights specified therein and in the Deposit Agreement.
6. The Proposed Amended and Restated Certificate provides that in
the event of a liquidation, dissolution or winding up of the affairs of UAL,
whether voluntary or involuntary, each holder of Series B Preferred Stock shall
be entitled to receive out of the net assets of UAL available for distribution
to its stockholders an amount equal to $25,000 per share before any
distribution shall be made to the holders of the UAL's New Shares or any other
class of stock or series thereof ranking junior to the Series B Preferred Stock
with respect to the distribution of assets.
7. There is no provision in the Proposed Amended and Restated
Certificate which purports to restrict the surplus of UAL by reason of the
excess of the liquidation preference of the Series B Preferred Stock over its
par value. The applicable provisions of the Delaware General Corporation Law, 8
Del.C. (S)(S) 154 and 170(a), which define capital and surplus of a Delaware
corporation available for the payment of dividends, do not purport to restrict
such surplus by reason of any such excess. Moreover, we are not aware of any
applicable provisions of the Constitution of the State of Delaware nor any
controlling Delaware case law which would suggest that surplus would be
restricted by the excess of the liquidation preference over the par value of the
Series B Preferred Stock.
UAL Corporation
United Air Lines, Inc.
June 10, 1994
Page 11
Accordingly, while there are no authorities specifically addressing
this issue, we are of the opinion (i) that there should be no restriction upon
the surplus of UAL available for the payment of dividends on any outstanding
capital stock of UAL solely by reason of the fact that the liquidation
preference of the Series B Preferred Stock exceeds the par value of such shares
and (ii) that no remedy should be available to the holders of the Series B
Preferred Stock before or after payment of any dividend solely because such
dividend would reduce the surplus of UAL to an amount less than the amount of
such excess, assuming that the payment of such dividend is in accordance with
the provisions of the Delaware General Corporation Law and the Proposed Amended
and Restated Certificate.
We hereby consent to the use of this opinion as an exhibit to the Form
S-4 and to the reference to our firm under the heading "Legal Opinion" in the
Form S-4. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the 1933 Act.
Very truly yours,
Skadden, Arps, Slate
Meagher & Flom