Retiree Medical Agreement

Determination of Allocated Funds

The assets in the DAF, which funds the United Retiree Life benefit, will be allocated into two amounts.  The allocation will be based on the retiree life benefit Expected Postretirement Benefit Obligation (“EPBO”) for two populations. The EPBO will be determined using the same actuarial assumptions with the exception of the discount rate, as those used in United’s post retirement benefit plans December 31, 2003 year-end disclosures. The discount rate used in this calculation will be the expected rate of return on assets shown in these same year-end disclosures. The first population will be the Retiree Coalition Current Retirees who are Participants. The second population will include retirees who retired on or after July 1, 2003, other current retirees who are not included in the first population, and all active employees. The allocation of the DAF for Participants will be the EPBO of the first population (assuming their life benefits were not terminated on January 1, 2005) divided by the total EPBO (for both the first and second population) multiplied by the market value of the assets of the DAF (the “Preliminary Allocated Funds”). Both the EPBO and the DAF will be measured as of July 1, 2004. The Preliminary Allocated Funds will be reduced by any adjustment required by CIGNA (CIGNA Adjustment) for withdrawing these funds from the DAF (“Allocated Funds”). If the IRS or other governmental agency requires that more than the market value of the DAF minus the Preliminary Allocated Funds (i.e., before the CIGNA Adjustment) be retained in the DAF, the Allocated Funds will equal the market value of DAF minus the amount required to be retained in the DAF minus the CIGNA Adjustment.

Approval Process and Review Process

(i) Approval Procedure

United will promptly use its best efforts to secure approval of the use of the Allocated Funds to provide retiree medical benefits, and, if necessary, to modify the DAF so that the Allocated Funds may be so used. Upon entry of the Section 1114 Order modifying retiree benefits, United and the Retiree Coalition Representative, identified in paragraph 5.b.(iii) below, will meet and confer regarding the most appropriate method to secure approval to modify the DAF expeditiously and economically. United, will jointly file with the Retiree Coalition, by August 6, 2004, a motion or other pleadings seeking approval to use the monies in the DAF which is brought under 11 U.S.C. §§ 505 or 1114 or other applicable sections of the Bankruptcy Code and will schedule the hearing on such motion no later than the August omnibus hearing date, or by August 6, 2004, United will file a request for a Private Letter Ruling from the Internal Revenue Service (“IRS”). United will consult with the Retiree Coalition Representative in connection with the preparation and submission of the request for a private letter ruling, if such request is made.

(ii) Negotiations with CIGNA

United will use its best efforts to: (i) commence negotiations with CIGNA (the holder of the DAF) as soon as possible, but no later than the August 6, 2004 motion filing date; (ii) to include the Retiree Coalition Representative, as hereinafter defined, in such negotiations; and (iii) to use its best efforts to conduct negotiations to maximize the Allocated Funds.

(iii) Review Process

The Retiree Coalition shall select a designee as the Retiree Coalition Representative to review and verify United’s determination as to the amount of the Allocated Funds. The Retiree Coalition Representative shall be allowed to use the services of a professional(s). United and the Retiree Coalition Representative will mutually agree on the reasonable fees and expenses of the Retiree Coalition Representative and such professional(s), which shall be reimbursed by United subject to United’s billing guidelines for professional fees. United and the Retiree Coalition Representative and such professional(s) agree to cooperate throughout the process. United agrees that if the Final Approval Date has not occurred prior to the effective date of any plan of reorganization for United, then such plan of reorganization and any confirmation order shall provide that the Retiree Coalition Representative and any professionals shall continue to exist for the purposes of performing such duties under this Agreement. United shall report its determination of the amount of the Allocated Funds to the Retiree Coalition Representative as soon as such determination is made. The Retiree Coalition Representative shall notify United of the election set forth in paragraph 5(d) within ten (10) business days after he or she is told the amount of the Allocated Funds (the “Allocated Funds Determination Date”).

Supplemental Surcharge

(i) Allocated Funds Below $60 Million

In the event that the Allocated Funds as determined in paragraphs 5(a) and (b) are less than $60.0 million (the “Shortfall”), the Retiree Coalition Current Retirees and each surviving spouse enrolled in the United Retiree Medical Plan shall pay an additional surcharge amount (the “Supplemental Surcharge”). The Supplemental Surcharge shall be subject to a two person maximum per family and will be applied to coverage for the retiree, spouse, domestic partner, and surviving spouse, but not dependent children. The amount of the monthly Supplemental Surcharge for 2006 shall be determined by dividing one-half (1/2) of the total Shortfall by the total number of Participants projected to be enrolled in the United Retiree Medical Plan based on enrollment data from the open enrollment period immediately preceding January 1, 2006 and dividing the result by twelve (12). The Supplemental Surcharge for 2007 will be calculated in the same manner using the remaining Shortfall and the enrollment data from the open enrollment period immediately preceding January 1, 2007. In the event that the Supplemental Surcharge is projected to be less than $10.00 per month in either 2006 or 2007, then the Supplemental Surcharge will equal $10.00 per month until the Shortfall is recovered.

(ii) Allocated Funds Above $60 Million

In the event that the Allocated Funds as determined in paragraphs 5(a) and (b) exceeds $60.0 million, the amount of Allocated Funds that exceeds $60 million (the “Excess”) shall be rebated to the Participants as soon as administratively feasible. The Excess shall be returned to the Retiree Coalition Current Retirees by rebating the Surcharges previously paid beginning with the Surcharges in September 2004 and for each succeeding month thereafter until the Excess is exhausted.

(iii) Delayed Receipt of Allocated Funds

In the event that the Final Approval Date has not occurred by January 1, 2006, then the Supplemental Surcharge shall be determined by substituting $30.0 million for the Shortfall. Such Supplemental Surcharge shall continue to be paid each month until the Allocated Funds have been received by United. Upon receipt of the Allocated Funds, United shall rebate to Participants an amount equal to the sum of the Supplemental Surcharges collected from Participants plus the Allocated Funds less $60 million (the “Delayed Funds Rebate”). The Delayed Funds Rebate shall be rebated to Retiree Coalition Current Retirees or their surviving spouses as soon as administratively practical in accordance with the procedure set forth in paragraph 5(c)(ii). In the event that the sum of the Supplemental Surcharges and the Allocated Funds is less than $60 million, then United shall continue the assessment of Supplemental Surcharges pursuant to the procedure set forth in paragraph 5(c)(i) until the amount of Supplemental Surcharges collected plus the Allocated Funds is equal to $60 million.

Election To Reinstate Life Insurance Benefit or Failure to Obtain Approval

On the Allocated Funds Determination Date, the Retiree Coalition may elect to reinstate effective as of January 1, 2005 the life insurance benefit for Participants by serving written notice upon United. In the event that the Retiree Coalition makes the decision to reinstate the life insurance benefit for Participants, then the Retiree Coalition Current Retirees shall reimburse United for its actual fees and expenses incurred through the date such determination is made that have been incurred in performing United’s obligations under this paragraph 5 subject to a cap of One Million ($1,000,000) Dollars (the “Reimbursed Fees”). United shall collect the Reimbursed Fees through the imposition of a Supplemental Surcharge calculated consistent with the methodology set forth in paragraph 5(c) and paid to United over the first twelve (12) month period Supplemental Surcharges are applied. If any of the Termination Conditions are not satisfied, then the life insurance benefit shall not be terminated and shall be reinstated effective as of January 1, 2005. In the event that the Retiree Coalition elects to reinstate the life insurance benefits, the Supplemental Surcharge provision of paragraph 5(c)(i) shall be in the total amount of $60 million. Such Supplemental Surcharge shall become effective as soon as administratively feasible following receipt by United of written notification from the Retiree Coalition Representative that they have elected to reinstate the life insurance benefit and continuing for a period of thirty (30) months. In the event the Termination Conditions are not satisfied (other than paragraph 5(iv)), the Supplemental Surcharge provision of paragraph 5(c)(i) shall be in the total amount of $60 million and shall be paid $30 million per year in 2006 and 2007.

Paul R. Lovejoy
Senior Vice President
General Counsel and Secretary
Dated this 9th day of June 2004

Sara A. Fields
Senior Vice President
People
Dated this 9th day of June 2004

Gregory Davidowitch
Association of Flight Attendants – CWA, AFL-CIO,
Dated this 9th day of June 2004

S. R. Canale
International Association of Machinists and Aerospace Workers, AFL-CIO
Dated this 9th day of June 2004

Marlayne Morgan
International Federation of Professional and Technical Engineers Dated this 9th day of June 2004

L. P. Briggs, Jr.
Professional Airline Flight Control Association
Dated this 9th day of June 2004

Roger D. Hall, Sr.
Pilot Retirees
Dated this 9th day of June 2004

Charles F. McErlean, Jr.
Salaried and Management Retirees
Dated this 9th day of June 2004

David Durkin
Transport Workers Union of America, AFL-CIO,
Dated this 9th day of June 2004

Pre Medicare Retired Employees

Medical
Preferred Provider Option (PPO)

$250 single/$500 family deductible

80/20 co-insurance

$1,500 single/$3,000 family out-of-pocket limit, including deductibles

Out patient mental health and substance abuse treatment payable at 80% after the deductible and the employee share does not apply to out-of-pocket limits.

Unlimited lifetime maximum

Deductibles and out of pocket limits are the same as In-Network amounts

60/40 co-insurance. Retired employees or their dependents who receive pre-approved covered treatment will receive in-network benefits for those expenses if within 30 miles of where they seek care there is no in-network specialist or in-network primary care physician as applicable to the treatment in question. A 6 month transition plan will be provided for those individuals who as of the Effective Date are receiving treatment from an out-of-network provider for scheduled surgery, inpatient treatment in a hospital, dialysis, chemotherapy, treatment as a follow-up to an accident or injury occurring before the Effective Date, terminal illness, or as a follow-up to a surgery performed before the Effective Date.

All covered expenses limited to Reasonable and Customary as currently defined in the Medical Plan

Inpatient mental health and substance abuse treatment limited to 30 days per calendar year per person, out patient payable at 50% after the deductible and the employee share is not applied to the out-of-pocket limit.

$500,000 lifetime maximum for expenses incurred on or after the Effective Date.

• Covered expenses would include medically necessary care and treatment of illness, injury, and pregnancy as well as expenses for certain preventive care, e.g., pap smears, PSA tests and certain routine physicals.
• Expenses incurred in October, November or December will no longer "carry-over" to satisfy the following year's deductible.
• Expenses for in-network home health care, extended care facilities, hospice care, pap smears, PSA tests and pre-admission tests and second surgical opinions will be covered at 80% after the deductible has been met.
• Claims must be submitted within 12 months of the date of service.
• The PPO Incentive check will be discontinued.

Prescription drugs at retail subject to deductible and co-insurance as described above for in-network. Mandatory use of mail after 3 fills at retail. Mail order prescription drug retiree co-payment $16 for generic medication for up to 90 day supply and $48 for brand medication for up to a 90 day supply. These co-payments are fixed and will not increase. Strong management to ensure consistency with medical necessity and generally accepted practice.

Maintenance of Benefits for employees with other group coverage or Medicare rather than Coordination of Benefits.

Full right of reimbursement.

Offer HMO options as appropriate. Retired employee contribution will be the cost of the HMO option less the Company contribution to the cost of the PPO option.

Post-Medicare Retired Employees

Retired employees who are (i) currently covered by the post-Medicare retiree medical coverage or (ii) who satisfy the current eligibility requirements for post-Medicare retiree medical coverage and who later become Medicare eligible will be offered one or more supplemental plans to Medicare. Currently, continuation of the pre-Medicare PPO will be provided except that the co-payments for prescription drugs purchased through the home delivery service are fixed and will not increase and a prescription drug only option will be provided, except the prescription drug only option will not be offered to those Retiree Coalition Current Retirees who have a $6, $12, $35, or $40 fixed base monthly contribution rate.

The prescription drug only option provides coverage for prescriptions purchased through the home delivery service or at retail pharmacies. Prescription medication continues to be available through the home delivery service on the same basis as for active employees. Mail order prescription drug retiree co-payment will be $16 for generic medication for up to a 90-day supply and $48 for brand medication for up to a 90-day supply. These co-payments are fixed and will not increase. For medications purchased at retail pharmacies, retirees pay 10% (minimum $5) of the cost of generic medications and 30% (minimum $10) of the cost of brand name medications. No out-of-pocket limit or deductible will apply. There is a $150,000 maximum lifetime benefit per person under the prescription drug only option. The utilization management program applies to drugs purchased through the home delivery service and through retail pharmacies. The retired employee’s contribution will be the cost of the drug only option less the Company contribution to the cost of the PPO option.

The Company will offer HMO options as appropriate. The retired employee’s contribution will be the cost of the HMO option less the Company contribution to the cost of the PPO option.