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1 Page AGREEMENT 2 BETWEEN 3 UNITED AIRLINES, INC. 4 And 5 THE AIRLINE TECHNICIANS 6 And 7 RELATED EMPLOYEES 8 IN THE SERVICE OF 9 UNITED AIRLINES, INC UAL MEDICAL GRIEVANCE CONTINUED REPORT OF PROCEEDINGS had at the 14 Arbitration of the above-entitled cause before 15 Arbitrator Carol Wittenberg, Board Member Clacy 16 Griswold and Board Member Greg Wu, commencing on the 17 15th day of October, A.D., 2014, at the Palmer House 18 Hilton, 17 East Monroe Street, Chicago, Illinois, at 19 the hour of 9:05 a.m

2 Page PRESENT: 2 3 THE PANEL: 4 MS. CAROL WITTENBERG, The Arbitrator 5 MR. CLACY GRISWOLD, Board Member 6 MR. GREG WU, Board Member 7 8 ON BEHALF OF THE UNION: 9 THE LAW OFFICE OF EDWARD GLEASON 10 BY: MR. EDWARD GLEASON th Street, NW, Suite Washington, D.C (202) egleason@gleasonlawdc.com ON BEHALF OF THE COMPANY: 17 O'MELVENY & MYERS LLP 18 BY: MS. APARNA B. JOSHI 19 MR. TRISTAN MORALES Eye Street, NW 21 Washington, D.C (202) ajoshi@omm.com 24 tmorales@omm.com 1 PRESENT (CONTINUED): 2 UNION APPEARANCES: 3 MR. ROBERT FISHER 4 MS. GAELLE GRAVOT 5 MR. RALPH SALZANO 6 MR. MARK GABRIEL 7 MR. LARRY CALHOUN 8 MR. DAVID SAUCEDO 9 10 COMPANY APPEARANCES: 11 MR. FELIX RAINIER VILLATUYA 12 MR. NATHANIEL D. KRAMER 13 MS. KELLEE ALLAIN 14 MR. MARCEL DELHOMMEAU 15 MR. LARRY CALHOUN Page 111 Page I N D E X 2 WITNESSES PAGE 3 PETER KAIN 4 DIRECT EXAMINATION BY MS. JOSHI 114 CROSS-EXAMINATION BY MR. GLEASON REDIRECT EXAMINATION BY MS. JOSHI LINCOLN LOUNSBURY 7 DIRECT EXAMINATION BY MS. JOSHI 183 CROSS-EXAMINATION BY MR. GLEASON COMPANY REST JERRY NELSON (REBUTTAL) 10 DIRECT EXAMINATION BY MR. GLEASON RICHARD BOURQUE (REBUTTAL) 12 DIRECT EXAMINATION BY MR. GLEASON CROSS-EXAMINATION BY MS. JOSHI KENNETH MEIDINGER (REBUTTAL) 15 DIRECT EXAMINATION BY MR. GLEASON UNION REST E X H I B I T S 18 UNION EXHIBITS MARKED: 19 Exhibit NO Exhibit NO Exhibit NO Exhibit NO Exhibit NO Exhibit NO Exhibit NO Exhibit NO ALL NEWLY MARKED AND PREVIOUS EXHIBITS ADMITTED INTO 24 EVIDENCE 1 ARBITRATOR WITTENBERG: On the record. 2 Day two of Teamsters versus United 3 Airlines, and at the end of day one the Union had 4 rested. 5 MS. JOSHI: The Company calls Pete Kain. Page ARBITRATOR WITTENBERG: Swear the witness. 7 (WHEREUPON, the witness was duly 8 sworn.) 9 PETER KAIN, 10 called as a witness herein, having been first duly 11 sworn, was examined and testified as follows: 12 DIRECT EXAMINATION 13 BY MS. JOSHI: 14 Q. Good morning. 15 Could you please state and spell your name 16 for the record. 17 A. Peter Kain, K-A-I N. 18 Q. And what is your current employment 19 status? 20 A. I'm retired from United Airlines. 21 Q. When were you first hired by United? 22 A Q. And when did you retire from United? 24 A. In (Pages )

3 1 Q. Do you remember when in 2008 you retired? 2 A. End of June, beginning of July. 3 Q. And what position did you hold at United 4 when you retired? 5 A. Vice president of labor relations. 6 Q. How long did you hold that position? 7 A. Seven years. 8 Q. Prior to your position as vice president 9 of labor relations, can you describe the positions 10 that you held during your employment at United and 11 roughly the dates that you held them? 12 A. Okay. I worked in 1963 in a temporary job 13 as a computer operator at headquarters. I worked, , as a ramp serviceman at O'Hare as a 15 kitchen helper in the Detroit flight kitchen. Then I 16 joined the Company on a permanent basis in 1975 as a 17 staff assistant in industrial relations. Worked next 18 as a ramp supervisor at O'Hare in Industrial 19 relations representative in New York from '78 to ' Assistant to senior vice president of personnel in 21 industrial relations for about nine months. Manager 22 of industrial relations for the Central Division for 23 two years. When that job was eliminated, I became 24 productivity administrator for about two years Page 114 Page I became I became manager of industrial 2 relations for In Flight. 1988, director of 3 industrial relations for ground employees. In about I went into another created job called director 5 of people services which was personnel and labor 6 relations for the company's North America Division. 7 Then in July of 2001 became vice president of labor 8 relations. 9 BY MS. JOSHI: 10 Q. And since your retirement from the 11 Company, have you been involved in labor relations 12 for United? 13 A. Occasionally consulting on various 14 grievance matters. 15 Q. Now, I'd like to talk about your 16 collective bargaining experience while you were at 17 United. 18 During your employment, did you 19 participate in collective bargaining negotiations on 20 behalf of the Company? 21 A. Yes, I did. 22 Q. And can you tell us when your first 23 negotiations was? 24 A. My first Negotiating Committee work was in Page I participated in my first negotiations for 2 the Mechanics Agreement in 1981 and was part of every 3 mechanic negotiations from then on through 2005 till 4 the time I retired in Q. And with respect to the mechanic group 6 negotiations that you just mentioned, did you, in 7 particular, participate in negotiations over the 8 benefit sections? 9 A. Yes. 10 Q. And, again, with respect to the mechanics' 11 work group, can you tell us which unions represented 12 the group in collective bargaining over the period in 13 which you were involved? 14 A. Yes, there were three. From the mid-1940s 15 the mechanics and related employees were represented 16 by the International Association of Machinists and 17 Aerospace Workers. In 2003 AMFA became the 18 representative of the mechanics and related 19 employees. Then in 2008 the Teamsters replaced AMFA. 20 Q. Let me have you take a look at the Company 21 binder in front of you -- It will say Company 22 exhibits on it -- and have you take a look at what's 23 been marked as Company Exhibit A. Okay. Page Q. Can you identify that document? 2 A. Yes, this is the cover and some selected 3 pages from the 1978-'81 Mechanics' Agreement between 4 United and IAM. 5 Q. And were you part of negotiations for this 6 agreement? 7 A. I was not. 8 Q. Now, directing your attention to the third 9 page of Exhibit 1. It should say Letter 69-2 in the 10 corner. 11 Can you explain what this -- what this 12 letter is? 13 A. This was a Letter of Agreement reached 14 between the Company and the Union back in October of confirming an understanding that the group 16 insurance accident and sickness benefits presently 17 provided to employees covered by the Mechanics' 18 Agreement will not be reduced by the Company without 19 Union approval except when a reduction is accompanied 20 by simultaneous improvement equal -- that results in 21 an equal or greater premium cost to the Company. 22 Q. And what was the group insurance accident 23 and sickness benefits, what did that refer to? 24 A. The employees would commonly refer to this 3 (Pages )

4 Page as medical insurance. The terminology for medical 2 insurance evolved constantly through the years. But 3 at that time there was a -- there were group accident 4 and sickness benefit insurance provided to the 5 Company employees. 6 Q. I'd like to have you turn to the pages 7 that follow and have you just generally explain what 8 these Letters of Agreement provide? 9 A. Beginning in probably the early 1970s, the 10 IAM began to negotiate changes to the accident 11 sickness and dental plans that -- as they applied to 12 the employees that they represented, and in 1979 they 13 negotiated some specific improvements that are 14 delineated in this letter. You'll see in Letter very specific levels of benefit being increased on 16 certain days, the amount of money paid for this, that 17 and the other thing being increased, et cetera. 18 Q. And did any of the letters that we've 19 looked at here, including 69-2, at that time apply to 20 HMOs? 21 A. No. 22 Q. And to your knowledge were HMOs offered at 23 that time? 24 A. I don't think so. Page Q. Let me -- Have you -- Well, actually, 2 before I do that. 3 Following the 1978-'81 agreement, did the 4 Company and the IAM enter into negotiations for a new 5 Collective Bargaining Agreement? 6 A. Yes. 7 Q. When did that occur? 8 A. Those negotiations began in, I think, 9 September of Q. And did you participate in those 11 negotiations? 12 A. Yes, I did. 13 Q. What was your role in the negotiation for 14 the A. I was a member of the Company's 16 Negotiating Committee. 17 Q. Let me direct your attention to Company 18 Exhibit 2 and ask you to identify that document? 19 A. This is the cover page and a new article 20 called Insurance Benefits that we negotiated into 21 this agreement. 22 Q. Now, with respect to the Letters of 23 Agreement we just looked at, did the Company have any 24 particular goal with respect to those Letters of 1 Agreement as it applied in the negotiations for this 2 Letter of Agreement -- for this Collective Bargaining 3 Agreement? 4 A. Yes. The Company had a new director of 5 labor relations for ground employees named Dave 6 Pringle at that time, and he suggested that rather 7 than have medical benefits and insurance benefits 8 referenced in various Letters of Agreement, it would 9 be much simpler to incorporate those into an article 10 in the contract. So we worked at establishing an 11 insurance benefits article. As to the existing 12 Letters of Agreement that dealt with insurance 13 benefits, the Company said very specifically that the 14 Letters of Agreement that would be incorporated into 15 this new article were to be incorporated with no 16 change in intent, that any changes would be 17 specifically negotiated as to levels of benefit, et 18 cetera. I also see from looking at the second page 19 of this article that the Federal HMO Act was passed Page in So apparently HMOs did exist when the agreement was reached. 22 Q. Well, directing you then to page 2 of the 23 exhibit. 24 Can you explain how -- First to get us Page just oriented. Can you explain how we can identify 2 changes to the language? 3 A. Yes. So language from the prior agreement 4 has no underlining. New language is underlined. 5 Q. And directing your attention to paragraph 6 24.A.1, can you explain the underlining in that 7 paragraph? 8 A. Yes. So the article itself was new. It 9 didn't appear in the other agreement. The parts of 10 A.1 and A.3 that are not underlined is language that 11 came from the prior agreement in the various Letters 12 of Agreement that appeared in the back of the book, 13 so that the underlined language is new to this 14 article, and the language that's not underlined came 15 from some of the Letters of Agreement. 16 Q. And the language that's underlined there, 17 "The Company agrees that the following Company 18 insurance benefits," what is that referring to? 19 A. Okay. So the basis for 24.A.1 from the 20 prior agreement was Letter 69-2, and that had said 21 that The group insurance accident and sickness 22 benefits presently provided will not be reduced. We 23 changed that to "The Company agrees that the 24 following Company insurance benefits will not be 4 (Pages )

5 Page reduced." So that this -- this agreement that we 2 would not reduce the benefits was applied to more 3 than just the medical insurance. It was also applied 4 to the other benefits that followed below in 5 paragraphs B and C and D. 6 Q. And then turning to the next paragraph, 7 A.2. 8 Can you explain the underlining in this 9 paragraph which is entirely underlined? 10 A. Yeah, so this is -- This is new language. 11 It, to a certain extent, reflects a practice or a 12 policy that's been adopted. So at one time the 13 employees contributed, in effect, a premium. They 14 paid for having medical insurance and dental 15 insurance, et cetera. The Company adopted a policy 16 that -- Sometime in the '60s -- that said you no 17 longer have to -- Maybe the '70s -- that said you no 18 longer have to pay for the insurance. This codified 19 into the agreement that we were now bound by 20 agreement with the IAM that the Company medical, the 21 dental and the life insurance benefits would be 22 provided at no cost to employees in active service on 23 extended illness status including dependent coverage. 24 We also understood that the cost -- The employees had Page this option under the federal law referenced here to 2 join an HMO if they wanted to. This was a product 3 offered by outside companies that worked like medical 4 insurance, and employees might choose that rather 5 than or even in addition to the Company insurance 6 program. Should we establish that the Company would 7 contribute to the HMO if an employee elected to 8 purchase one, the same amount of money that we would 9 put forth into the Company medical plan. So we 10 incorporated, in this article, the agreement that any 11 cost of HMO membership selected by an employee which 12 exceeds the cost of the Company medical insurance 13 plan would be paid through payroll deductions. So we 14 established a process for employees who wanted to 15 join an HMO outside the Company to have the Company 16 contribute the same amount of money it would for the 17 Company medical plan to the HMO, and if the HMO 18 premium was greater than that amount, the greater 19 amount would be deducted from the employee's 20 paycheck. 21 Q. So what did the reference that the 22 following Company medical, dental and life insurance 23 benefits would be provided at no cost, what was that 24 referring to in terms of what Company medical, dental Page and life insurance benefits are being provided at no 2 cost? 3 A. So we said that we have a Company medical 4 insurance plan, we have a Company dental insurance 5 plan, and we have a Company life insurance plan, and 6 those plans would be offered with no -- in effect, no 7 premium. Employees wouldn't have to pay any money to 8 become members of those plans. They might incur 9 costs as they processed claims, but they didn't have 10 to pay to be part of the plan. The Company offered 11 those to employees at no cost. 12 Q. And I see you're turning through the 13 document. 14 Are you referring then to Sections B, C 15 and D which are titled Medical Insurance Benefits, 16 Dental Insurance Benefits, and Life Insurance 17 Benefits? 18 A. Yes. 19 Q. And looking, for example, then at Medical 20 Insurance Benefits, Section B, did the parties 21 negotiate these specific benefits during the negotiations? 23 A. Yes. As I said, in the '60s or '70s, we 24 had begun negotiating with the Union for changes to Page what became known as the medical insurance benefits, 2 and in the negotiations leading to this agreement, 3 there were a number of changes made to those levels 4 of benefit. So under Medical Insurance Benefits, you 5 can see hospital room and board was increased, 6 intensive care payment was increased, surgical fees, 7 well baby care, a variety of things we specifically 8 negotiated with each other that we would make changes 9 to the medical plan that would apply to employees 10 covered by the agreement. We did the same thing with 11 regard to life insurance and dental benefits. 12 Q. And did the parties agree to specific HMO 13 benefits in Article XXIV? 14 A. No. 15 Q. And during the 1981 negotiations, did the 16 parties negotiate over specific HMO benefit levels? 17 A. No. 18 Q. And based on your discussions with the 19 Union, was an HMO considered to be part of the 20 Company medical plan? 21 A. No. As a matter of fact, in A.2 we said 22 employees will be offered HMO medical coverage as an 23 option to the Company medical insurance. There was a 24 federal law requiring that employers, under certain 5 (Pages )

6 1 conditions, make HMOs available to employees. 2 Apparently the government wanted to encourage the 3 establishment of HMOs, so employers had to allow 4 employees to join the HMOs if they wanted to, and we 5 negotiated that if the employees took that option 6 rather than the Company medical insurance plan, that 7 we set up this payroll deduction process for the 8 excess premiums. 9 Q. And at this time was it -- was it feasible 10 for the Company to guarantee a set level of benefits 11 for the HMOs? 12 A. Well, the HMOs didn't have a set level of 13 benefits. The HMOs were offered by outside 14 companies. They marketed these and attempted to get 15 people to join up and pay the premiums to them. They 16 varied from state to state. States had regulations 17 that said you have to do this, you can't do that, so 18 that the offerings that were brought to employees by 19 the HMO companies varied significantly from place to 20 place and time to time and even within the same 21 location from different companies. So there wasn't, 22 you know -- Whereas we had a Company medical 23 insurance plan and we negotiated the specifics of 24 that with the Union, there wasn't a -- an HMO level 1 of benefit. 2 Q. And was there any discussion or agreement 3 between the parties that HMO benefits were subject to 4 their -- What I'm just to call for short form -- 5 restriction on reduction in paragraph A.1 during 6 these negotiations? 7 A. No. That only applies to the Company 8 insurance benefits. 9 Q. And was there any discussion or agreement 10 between the parties that the HMO benefits were 11 subject to the no-cost provision in Section A.2 that 12 applied to the following Company medical, dental and 13 life insurance benefits? 14 A. No, just the opposite. We negotiated that 15 there could be a cost to the employee and it would be 16 deducted. 17 Q. Now, following this agreement, did the 18 parties negotiate further changes to the benefit 19 section? 20 A. Yes. 21 Q. And in any of those negotiations, did the 22 parties ever negotiate over HMO benefit levels? 23 A. No. 24 Q. And in any of those negotiations, did the Page 126 Page 127 Page parties ever agree or negotiate that the restriction 2 on reduction in A.1 applied to HMO benefits? 3 A. No. 4 Q. I'd like to have you turn to Company 5 Exhibit 3 and ask if you can identify that document? 6 A. This is the -- 7 Q. I'll just -- We added a cover to this one. 8 So we'll get that to you. 9 A. This is the cover page and the insurance 10 benefits article from the Agreement. 11 Q. And in this agreement, turning to the 12 second page, were any changes made to the benefits 13 language in this agreement? 14 A. No. I think there was a Letter of 15 Agreement that specifically identified a narrow 16 dental insurance plan benefit. But there were no 17 changes to Article XXIV. 18 Q. Let me direct your attention then to 19 Company Exhibit 4 and ask you to identify that 20 document? 21 A. This is the cover page and Article XXIV 22 from the Mechanics' Agreement. 23 Q. And, again, are changes reflected by 24 underlining? Page A. That's correct. 2 Q. And let me direct you to the third page of 3 the exhibit, Section B, Medical Benefits. 4 Were the changes reflected here -- And it 5 appears that the entirety of this section is 6 underlined. 7 Were the changes reflected here negotiated 8 with the Union? 9 A. Yeah, they were. Yeah, we made 10 significant changes to the medical benefit -- medical 11 insurance benefit section. 12 Q. And during these negotiations, did the 13 parties discuss benefit levels for the HMOs? 14 A. No. 15 Q. And did they -- Did the parties discuss 16 making HMOs subject to the restriction on reduction 17 in Section A.1? 18 A. No. 19 Q. Can you explain -- Turning back to Section 20 A -- And in paragraph A.2, can you explain the 21 changes, the underlining, in that paragraph? 22 A. Yes. This agreement was reached in 23 December of 1987, and the extensive changes to the 24 medical benefits and other provisions of this article 6 (Pages )

7 Page we negotiated what the effective date would be for 2 implementing those changes, and for the vast majority 3 of them, as it says here in the underlining language 4 in the middle of A.2, would be January 1, 1988, which 5 is really only about three weeks away from the time 6 the agreement was signed. There were couple of 7 things, like pre-certification, et cetera, that were 8 going to take effect in July of Also, 9 because -- As to the underlining part of the end of 10 A.2, because it was estimated that the changes to the 11 medical insurance benefits would result in a 12 reduction in cost to the Company, the parties looked 13 at how that might impact payroll deductions for HMOs. 14 Because what you would charge for an HMO was what the 15 HMO cost was minus the Company cost of the Company 16 medical insurance plan. This was likely going to 17 reduce the cost of the Company medical insurance plan 18 that would in effect increase the charges, the 19 payroll deductions for employees who had chosen an 20 HMO instead of the Company plan. The parties agreed 21 that rather than go through that -- And frankly we 22 were late enough in the year, it would have been 23 extremely difficult to do that for 1988, we said for 24 purposes of calculating those HMO payroll deductions, Page the cost of the plan by that time -- I think we were 2 in -- probably in 1991 by the time we reached this 3 agreement, the cost of the Company medical insurance 4 plan had exceeded the 1987 rate by that time. 5 Q. And turning to Section B, for example. 6 Did the parties negotiate specific changes 7 to benefit levels for the Company medical plan? 8 A. Yes, there were -- There were minor 9 changes that we negotiated that you see underlined in 10 B.1 and some further back in B Q. Did the parties negotiate or discuss any 12 changes or discuss benefit levels for the HMOs? 13 A. No. 14 Q. Directing your attention to Company 15 Exhibit Can you identify that document? 17 A. This is the cover page and Article XXIV 18 from the Mechanics' Agreement sometimes 19 referred to as the ESOP Mechanics' Agreement. 20 Q. Did the parties negotiate changes to 21 Article XXIV in this agreement? 22 A. No, there were no changes to Article XXIV 23 in this agreement. 24 Q. Directing your attention then to Company Page the medical rates in effect, that is the cost of the 2 Company medical insurance plan, will continue to be 3 used for the purpose of determining the HMO payroll 4 deductions until such time as the cost of the plan is 5 greater than it was at the end of Q. And did the parties -- In adding this 7 language, did the parties discuss or agree now that 8 the HMOs would be subject to the restriction on 9 reduction in A.1? 10 A. No. 11 Q. Directing your attention to Company 12 Exhibit Can you identify that document? 14 A. The cover page and the Article XXIV from 15 the Agreement. 16 Q. Now, directing your attention to -- Let's 17 start with paragraph A.2. I don't see any 18 underlining there. 19 But did the parties make changes to that 20 paragraph in this agreement? 21 A. Yes. The underlined sections of A.2 from 22 a prior exhibit were removed, so there -- We no 23 longer needed to refer to when things from the last 24 agreement will be implemented, and my recollection 1 Exhibit 7. 2 Can you identify that document? 3 A. This is the cover page and the Article 4 XXIV from the Mechanics' Agreement. 5 Q. And directing your attention to paragraph 6 A.2 which runs from page 92 to Did the parties negotiate changes to that 8 provision? 9 A. Yes. If you look on page 93. The end of 10 A.2, you'll see that we added a new statement that 11 "Eligible Dependent will include an employee's 12 Qualified Domestic Partner." It goes on to legislate 13 on that. Then back on the third line of A.2 we 14 changed what used to read, I think, "including 15 dependents" to "including coverage for Eligible 16 Dependents" which was this new term that we defined 17 on the next page. 18 Q. And then directing you to Section B. 19 Did the parties make changes or negotiate 20 changes to the Company medical plan? 21 A. Yes, we negotiated some specific changes 22 in paragraph 1 and paragraph 3 and extensive changes 23 to the additional coverage expenses of all the 24 underlining provisions there that run on to about Page (Pages )

8 Page four or five pages. 2 Q. And did the parties negotiate over benefit 3 levels for the HMOs in connection with this 4 agreement? 5 A. No. 6 Q. During these negotiations did the parties 7 discuss making HMO benefits subject to the 8 restriction on reduction in A.1? 9 A. No. 10 Q. Let me direct your attention to Company 11 Exhibit 8 and ask you to identify this document? 12 A. So this is the cover page and Article XXIV 13 from the Mechanics' Agreement between 14 United and the IAM. This agreement was negotiated 15 under Bankruptcy Code. United had entered bankruptcy 16 in December of Q. What was your position at the Company at 18 this point? 19 A. Vice president of labor relations. 20 Q. And can you give us some context of the 21 negotiations for this agreement given that you all 22 were in bankruptcy at that point? 23 A. So in order to successfully reorganize and 24 get out of bankruptcy, the Company identified a need Page to remain in or join the Company medical insurance 2 plan. 3 Q. Let me direct you to paragraph A.2. I 4 don't see any underlining there. But were changes 5 made to the language in A.2 in these negotiations? 6 A. Let me compare. So we removed the 7 underlining from what had been new language. No, I 8 don't think there were any other changes. 9 Q. Actually, maybe I'll direct you then to 10 the first clause where it had previously said that 11 this included the phrase at no cost. 12 A. Oh. 13 Q. Did the parties agree to remove that? 14 A. As I testified, we had agreed that there 15 would be a cost, and so whereas the prior agreement 16 had said Company medical, dental and life insurance 17 benefits at no cost to employees in active service, 18 we changed that to will provide the following Company 19 medical, dental and life insurance benefits to 20 employees in active services or on extended illness 21 status. So we removed the at no cost. 22 Q. Was there any discussion associated with 23 the deletion of the at no cost phrase that the HMOs 24 would now be subject to the restriction under -- on 1 to reduce cost across the board. There were a number 2 of areas of costs that were larger than others, but 3 pretty much every cost came under review in the area 4 of employee costs. We approached all six of the 5 labor unions as required by the Bankruptcy Code if 6 you want to change an existing labor agreement, and 7 sought to negotiate changes that would give a 8 significant reduction in employee costs. Each of 9 those negotiations was eventually successful and we Page established new Collective Bargaining Agreements that 11 reduced the Company's employee costs. 12 Q. And were changes made to the benefits 13 language in the Mechanics' CVA to reflect those 14 cost-saving goals? 15 A. Yes. Definitely. There were a variety of 16 changes that we negotiated with the IAM and frankly 17 with other unions that were targeted at reducing the 18 cost of providing Company insurance benefits, and 19 very significantly in the area of medical benefits, 20 we got away from the idea that there would be no, 21 quote, premium, unquote, costs for an employee to 22 participate in the Company medical benefit plan, and 23 we established a scale of charges through payroll 24 deduction that an employee would pay if they elected Page reduction under A.1? 2 A. No. 3 Q. Did the parties discuss that the Company 4 would now be limited in its abilities to make changes 5 to the HMOs? 6 A. No. 7 Q. And during these negotiations -- turning 8 to Section B, it appears there were extensive 9 changes. 10 During these negotiations, did the parties 11 ever discuss benefit levels for the HMOs? 12 A. No. 13 Q. Now, I'd like to direct your attention to 14 B.2 at the bottom of page 92 and extending to page The last sentence there begins -- The last line 16 of B.2 says, "The employee may elect to be covered 17 for medical benefits under either the Medical PPO or 18 an applicable HMO, or he may elect not to be covered 19 for medical benefits." 20 Did the parties discuss the reason for 21 including this language? 22 A. Yes. 23 Q. And can you explain? 24 A. Yes. So the -- This all relates to the 8 (Pages )

9 Page fact that employees would now be charged to be 2 covered by the Company medical plan and the Company 3 dental plan. But as to the Company medical plan, you 4 see the table of monthly cost of coverage. So 5 because now for the first time in a long time 6 employees would be charged to be covered by the plan, 7 we had to set up a process for employees to say I 8 want to be in the plan or I don't want to be in the 9 plan because now we're going to start charging you if 10 you are in the plan. Related to that was the fact 11 that we had payroll deduction process set up for 12 HMOs, and that process was going to continue. But 13 that would be greatly impacted because the fact that 14 the benefit levels of the Company medical plan were 15 reduced and the fact that employees were paying for 16 coverage reduced the cost of the Company medical plan 17 thereby increasing the difference between what an HMO 18 charged and what the Company was paying for the 19 Company medical plan. So employees who either for 20 the first time or wanted to continue to go out and 21 join an HMO would continue to be covered by the 22 payroll deduction process, but they would -- they 23 would see a significant increase in what their 24 payroll deduction was. Then we also needed to, as I Page said, establish a process for employees to opt in or 2 out of the Company medical plan. Some employees 3 determined that they had coverage through another 4 family member that was adequate so that they didn't 5 want to pay for the Company medical plan, and so they 6 elected no coverage at all, through the Company at 7 least, and they didn't happen to be in an HMO for 8 whatever reason. So it now became the Company's 9 choice as to whether they wanted to be in, and so we 10 set up this open enrollment process for this and also 11 set up the terms for defaults if an employee fails to 12 respond to the open enrollment process. So a number 13 of administrative details about how to convert from 14 the no charge to the -- for the Company plan to 15 charge for coverage under the Company plan. 16 Q. And you mentioned defaults in the middle 17 of that paragraph where it says, "If such HMO is not 18 available, coverage will be defaulted to the medical 19 PPO." 20 Is that what you were referring to? 21 A. Yes. 22 Q. Now, in the context of the parties' 23 agreement to add this language, did the parties 24 discuss that HMOs would now be covered under Page Section A.1? 2 A. No. 3 Q. Was there any discussion that by adding 4 this that the parties were altering the separation 5 that had existed between the HMOs and the Company 6 medical plan? 7 A. No. 8 Q. Now, while the Company was in bankruptcy, 9 did the parties again enter into negotiations for a 10 new Collective Bargaining Agreement? 11 A. Yes. With all the unions there was a 12 second round of negotiations for changes to the 13 Collective Bargaining Agreements. All of them 14 ultimately resulted in new agreements. By that time, 15 which is late 2004, the mechanics were represented by 16 AMFA. 17 Q. Directing your attention then to Company 18 Exhibit Can you identify this document? 20 A. That's the cover letter and Article XXIV 21 of the Mechanics' Agreement now between 22 United and AMFA. 23 Q. And were changes negotiated into the 24 medical -- to the health and welfare section in this Page agreement? 2 A. No. 3 Q. And was this the last mechanics' 4 negotiations in which you participated? 5 A. Yes. 6 Q. And during these negotiations, was there 7 any discussion that the HMOs were now subject to the 8 restriction on reduction under A.1? 9 A. No. 10 MS. JOSHI: I have no further questions. 11 MR. GLEASON: One minute for a restroom break. 12 ARBITRATOR WITTENBERG: Sure. 13 (WHEREUPON, we were off the 14 record.) 15 CROSS-EXAMINATION 16 BY MR. GLEASON: 17 Q. Morning, Mr. Kain. I'm going to try and 18 talk a little louder just because there's an air 19 conditioning unit right above my head here. 20 Could you please turn back to Company 21 Exhibit No. 1, and in particular to the LOA 69-2, 22 Letter of Agreement A. Yes. 24 Q. I just want to make sure I understood your 9 (Pages )

10 Page definition of what group insurance accident and 2 sickness benefits is. 3 What was your definition of that? 4 A. What companies -- I wasn't working for the 5 Company in But my understanding of that 6 terminology was that it referred to the medical plan. 7 Q. Do you know whether the medical plan at 8 that time was self-insured? 9 A. I do not know. 10 Q. You know at some point, though, that the 11 Company maintained a medical program where a part of 12 it was indeed self-insured, correct? 13 A. I do know that, yes. 14 Q. Not all of it, but some of it, right? 15 A. I don't know that detail. 16 Q. Flip also please to Company Exhibit This is the an excerpt from the Collective Agreement, and in particular we're looking 19 at Article XXIV which I understand now from your 20 testimony that was a new article in the Collective 21 Agreement? 22 A. That's correct. 23 Q. So it was first included in the agreement 24 here in 1981? Page A. That's correct. 2 Q. And in 1981 that was the first time that 3 the Company offered HMO coverage to its employees 4 too, isn't that correct? 5 A. That's not the terminology I ever used. 6 The HMOs offered their coverage to the employees, but 7 I don't know what the first time is that HMOs were 8 made available to Company employees. 9 Q. Well, let's get right to it then. 10 What does -- Under that article -- Look at 11 Company Exhibit 2, please. 12 A. Okay. 13 Q. Under A, the caption Insurance Benefits, 14 what does insurance benefits mean there in A? 15 A. So in A it says "The Company agrees that 16 the following Company insurance benefits will not be 17 reduced." And in A.2, "The Company will provide the 18 following Company Medical, Dental and Life Insurance 19 benefits." So we delineate in this article what the 20 Company insurance benefits are. B, medical 21 insurance; C, dental insurance; D, life insurance; E, 22 retiree insurance. 23 Q. At this time in 1981 was the Company's any part of the Company's medical plan self-funded or Page self-insured? 2 A. I don't know. 3 Q. Are you familiar with the Health 4 Maintenance Organization Act of 1973? 5 A. Only very generally. 6 Q. Had you ever heard of the term "dual 7 coverage"? 8 A. Yes. 9 Q. What does it mean? 10 A. I don't know. 11 Q. Had you ever heard that dual coverage 12 meant that by law if an employer employed more than employees and the HMOs requested it that the 14 companies had to offer HMO coverage to its employees? 15 A. I didn't know that level of detail. I 16 knew that under certain circumstances companies were 17 required to offer HMOs. 18 Q. Does that help refresh your recollection 19 as to whether or not United was required to offer 20 HMOs at this point? 21 A. I've told you how much I know. I don't 22 know anything more from that discussion. 23 Q. Of course it had more than 20 employees at 24 this time? Page A. That's correct. 2 Q. I hoped it did. Okay. 3 In terms of the incorporation of language 4 from Letter 69-2, which is on Company Exhibit 1, I 5 understood your testimony that, you know, in doing 6 that the Company intended that its scope or its 7 breadth not be expanded? 8 Is that a fair characterization of your 9 testimony? 10 A. In negotiations we specifically said that 11 incorporating letters was done without change to the 12 intent of those letters. 13 Q. And so where does it say that HMOs are not 14 protected? 15 A. It doesn't say -- It does not attempt to 16 enumerate the things that are not covered. It 17 enumerates the things that are covered. 18 Q. And so, of course, there's nothing in here 19 that says that HMOs can be reduced without Union 20 approval, isn't that correct? There's nothing in 21 here -- You never discussed with the Union during 22 negotiations that the Company retained the right to 23 make reductions in HMO coverage or benefits without 24 the Union's approval? 10 (Pages )

11 Page A. We didn't discuss HMO levels of benefits. 2 The HMOs determined what their level of benefits were 3 and they offered them. 4 Q. And so when we talk again about the 5 Company's medical plan or sometimes, I guess, its 6 Company's insurance benefits, medical insurance, I 7 just want to make sure -- I've heard a lot of 8 discussion and testimony about the separateness of 9 the HMOs and the Company's insurance or medical, 10 okay. 11 So is it your testimony that HMOs are not 12 part of the Company's medical plan? 13 A. As defined in the Collective Bargaining 14 Agreement, absolutely correct. 15 Q. And is it your testimony also that it's 16 not at all offered by the Company, instead offered by 17 the HMOs, these HMOs? 18 A. This is my -- I told you I was not 19 familiar with the details of that law. I don't know 20 what the law states about what the Company's 21 obligations are. I know that the HMOs -- Having 22 joined an HMO once, I know that HMOs described what 23 they had to offer, invited me to join, and I could do 24 so through the Company's enrollment process. Page A. I don't know to what extent it was 2 self-insured and when that began. 3 Q. Was the traditional plan considered part 4 of the Company's medical plan? 5 A. Best of my recollection, the traditional 6 plan was the Company medical plan. 7 Q. And had you ever heard of the term 8 comprehensive medical plan or medical program? 9 A. The terminology surrounding insurance 10 evolves over time and changes. I have heard the 11 Company medical plan referred to as a comprehensive 12 medical plan beginning sometime in the 1980s. Later 13 I heard the terminology was Preferred Provider 14 Organization, PPO, which is a different form of the 15 Company medical plan that was negotiated. 16 Q. And that PPO that you just mentioned, 17 Mr. Kain, that happened sometime after 1981, correct? 18 A. Yes. 19 Q. And so the PPO was not in existence at the 20 time the Collective Agreement was entered into in , correct? 22 A. I think that's correct. 23 Q. And so the PPO would not also -- Is it 24 your testimony then that the PPO also would not be 1 Q. And so the Company -- Tell me about the 2 Company enrollment process? What is that? 3 A. That varied from time to time, but every 4 year -- I don't remember when this process began. We 5 now call it open enrollment. -- employees tell the 6 Company what they want to do in terms of selecting 7 Company benefits. Part of that process is that if an 8 employee doesn't want to be covered by the Company 9 insurance but wants to join an HMO, they do that in 10 the Company's open enrollment process. 11 Q. So they actually receive forms from the 12 Company during the enrollment process? 13 A. Yes, they do. 14 Q. And those forms give the employees the 15 choice to determine whether to select what had been 16 called a traditional plan or an HMO, correct? 17 A. That's correct. 18 Q. And at times while you just used the term 19 traditional plan, the traditional plan was again Does that help refresh your recollection as to 21 whether that was deemed to be self-insured? 22 A. It does not help. 23 Q. What was your understanding of what the 24 traditional medical plan was? Page 147 Page subject to the restrictions in paragraph A.1? 2 A. No, we negotiated changes to the 3 Collective Bargaining Agreement to the Company 4 medical insurance plan to incorporate the PPO 5 approach. 6 Q. Let's just flip to Company Exhibit 8. 7 This is the 2003 bankruptcy contract, the first one 8 of them. 9 Do you have that? 10 A. Yes. 11 Q. At this point this is when the HMOs -- I'm 12 sorry -- the PPO is established? Do you recall? 13 A. That's correct. 14 Q. And in A.2 it doesn't reference PPOs 15 either, does it? 16 A. In A.2? 17 Q. Yes. 18 A. No, it references the Company medical 19 insurance benefits. 20 Q. And it's not covered in A.1 either, is it? 21 A. There's no reference to PPO. It's 22 covered, in my opinion, but there's no reference to 23 that terminology. 24 Q. Understood. Hold on one second, Mr. Kain. 11 (Pages )

12 Page Stick with that exhibit, please, Mr. Kain, Company 2 Exhibit 8. 3 Do you have that in front of you? 4 A. Eight, okay. 5 Q. I see here in the caption -- Section B, 6 Medical benefits -- it previously said Medical 7 Insurance Benefits, now it doesn't. 8 What's the significance of that? 9 A. Evolving terminology. 10 Q. Flip to -- Remember you talked about the 11 provision that starts on the bottom of page 92 and 12 carries over to the following page 93? 13 A. In 24.B.2, yes. 14 Q. That's right. The part where it says, "an 15 employee can elect to be covered for medical benefits 16 under either the medical PPO or an applicable health 17 maintenance organization, or may elect not to be 18 covered for medical benefits." That last clause, "or 19 elect not to be covered for medical benefits," that 20 is the part that memorializes the fact that an 21 employee can choose to be covered by his spouse or 22 someone other than through the Company's medical 23 program, correct? 24 A. No. That -- That was always an option so 1 just so I understand, it's your position and 2 testimony that they -- an employee who is then 3 covered by that HMO is not protected by the 4 no-reduction provisions in A.1 of that article? 5 A. That's correct. 6 Q. And so did the Company encourage its 7 employees to participate in HMOs? Page A. The Company certainly made employees aware 9 of HMOs. The employees, depending on their personal 10 and their family circumstances, could find an HMO to 11 be a better way for them to go. So the Company The Company put HMOs -- described to employees in the 13 open enrollment process that you can do this or you 14 can do that, look carefully at this, weigh it, look 15 at how it affects you, and determine what you think 16 you want to do. 17 Q. And so the way that would have worked 18 then, it would appear that if the Company -- if the 19 employees -- It was in the Company's interest, was it 20 not, to encourage employees to take HMO so that then 21 they could do whatever -- the Company could absolve 22 itself of the no-restriction provisions in A.1 and 23 A.2, correct? 24 A. I never heard the Company express that Page an employee was never obligated to accept the 2 Company's free medical insurance. There's little 3 reason for an employee not to. But this was 4 establishing, administratively, that we're going to 5 take money out of your paycheck if you join this 6 plan, tell us if you want us to do that. 7 Q. And so it is your testimony that this 8 includes HMOs too. So I'm trying to understand why 9 this clause exists for the first time in the contract 10 when they always had the chance to also opt to the 11 HMOs? 12 A. So this -- In my opinion, this paragraph 2 13 exists to deal administratively and procedurally with 14 a significant change to how the Company medical plan 15 affects the employees. They have to pay for it. So 16 we needed to quickly establish a process for 17 employees to say they wanted to be in or not be in, 18 say they wanted to join an HMO or not join an HMO, to 19 continue or to begin and set up a process for 20 annually determining whether the employer was still 21 authorizing us to make payroll deductions because 22 they wanted to remain covered by this plan or they 23 wanted to elect a different way to go. 24 Q. And if they elected not to be in the HMOs, Page point of view. 2 Q. That would be the logical extension of 3 your point, wouldn't it be? 4 A. I'm sure I fell off your train of thought 5 somewhere back at a prior station. 6 Q. Well, if an HMO is not protected under A.1 7 or A.2, wouldn't it make sense that the Company would 8 try to encourage and drive people to the HMOs and not 9 to the Company's insurance? 10 A. I do not follow that connection at all, 11 no. 12 Q. So you disagree with me? 13 A. I don't know. I don't understand what 14 you're saying. 15 Q. You've heard the term "managed care," have 16 you not? 17 A. Yes. 18 Q. Managed care includes PPOs? 19 A. You're outside my area of expertise. I'm 20 not sure whether that comes under the definition of 21 PPO or not. I didn't think that they were dependent 22 on one another. 23 Q. What's your definition of managed care, 24 Mr. Kain? 12 (Pages )

13 Page A. That the provider of a benefit works with 2 the covered person to make sure that the care that is 3 being offered is appropriate. 4 Q. And the Company supports the concepts of 5 managed care, does it not? 6 A. Yes. 7 Q. It has for many, many years, right? 8 A. Yes. 9 Q. And including during your tenure as Vice 10 president of labor relations? 11 A. Yes. 12 Q. And you're again -- For what period of 13 time were you in the negotiations as a negotiator 14 were you responsible for the benefits provision in 15 the contract? 16 A. So your question, I think, assumes some 17 kind of an organization didn't exist within our team. 18 Q. I'm sorry. Just to cut through it. I'm 19 not trying to put words in your mouth. 20 A. We're not syncing up. There wasn't one 21 person who was responsible for the benefits sections. 22 As vice president of labor relations, I was 23 responsible for all the sections of all the 24 agreement. Page A. I'm familiar with them. I never 2 considered myself as expert of the terms with a 3 Summary Plan Description. 4 Q. And, of course, when you received the 5 enrollment packages or papers from the Company, you 6 reviewed those as well, did you not? 7 A. I did. 8 Q. You reviewed those both as an employee, 9 correct? 10 A. I did. 11 Q. And you reviewed them as a manager, 12 correct? 13 A. Correct. 14 Q. And did you review them prior to them 15 going out as a manager -- prior to those packages 16 going to the employees? 17 A. I don't recall doing that, no. 18 Q. Did the Company make a practice of 19 reviewing those before they went out to the 20 employees, the enrollment packages? 21 A. Did the Company make a practice of 22 reviewing them? 23 Q. Before they were submitted and sent out to 24 the employees. 1 Q. Were you considered the subject matter 2 expert for your negotiating team for medical 3 benefits? 4 A. No. 5 Q. At no point during any of these 6 negotiations? 7 A. That's correct. 8 Q. And was there any one person who was 9 deemed to be the subject matter expert for A. Most often we would rely on someone from 11 the Benefits Department to come to the table and 12 share his subject matter expert opinion. 13 Q. Let's talk about those open enrollments. 14 You received open enrollment papers as Page well, did you not, from the Company when you worked 16 there? 17 A. I did. 18 Q. Had you also received copies of Summary 19 Plan Descriptions concerning the Company's medical 20 program? 21 A. Yes. 22 Q. You were familiar with the terms of 23 Summary Plan Description, were you not, as part of 24 your job at United? Page A. The open enrollment packages? 2 Q. Yes. 3 A. My understanding is the Company produced 4 the open enrollment packages. 5 Q. So they produced it. And did they -- Did 6 you understand that the Company would ensure that 7 they were accurate and that they accurately described 8 the medical program before they sent them to the 9 employees? 10 A. I'm sure they tried to do that, yes. 11 Q. So let's see if you're familiar with 12 these. 13 Mr. Kain, I'm going to hand you I believe, Madam Arbitrator, we're up to 15 Union Exhibit 11? 16 ARBITRATOR WITTENBERG: Yes. 17 MR. GLEASON: This is not marked. I'm going to 18 have to share this with the witness, and I'll get the 19 originals to you later. 20 BY MR. GLEASON: 21 Q. I'm handing you what will be marked as If you'll hand that back to me, I'll just put a 23 notation on it. I just marked on that first page 24 Union Exhibit (Pages )

14 Page Do you have that in front of you, 2 Mr. Kain? 3 A. I do. 4 Q. Do you recognize this document as a 5 Summary Plan Description for IAM Covered Employees 6 produced and submitted by United Airlines? 7 A. It appears to be that, and it's dated June 8 of Q. Of course, on the top of that first page, 10 that's the United Airlines logo at the time? 11 A. Yes, it is 12 Q. And the date says June of 1990, correct? 13 A. Correct. 14 Q. And could you please turn your attention 15 to numbered page 3 which is, I think, the third page 16 from the back. 17 A. I'm there. 18 Q. And that's -- Just so you and I are on the 19 same page literally. It should be the page that says 20 Your United Air Lines, Inc. Employee Welfare Benefit 21 Plan. 22 Is that the caption at the very top of 23 that page? 24 A. Yes. Page Q. And do you see the second paragraph, if 2 you will, that's captioned Plan Number? 3 A. Yes. 4 Q. And then it starts off that The United Air 5 Lines, Inc. Employee Welfare Benefit Plan is 6 identified by a Plan Number assigned by United, as 7 follows: Then it says, Welfare Benefit Plan, and 8 then a number Do you see that? 10 A. Yes. 11 Q. And do you see that that includes the 12 HMO's benefits for all those employees as well? 13 A. Yes, I see that. 14 Q. And, of course, that same Welfare Benefit 15 Plan includes the Company's medical -- what you would 16 characterize as the Company's medical insurance plan 17 too, does it not? 18 A. Yes. 19 Q. I would like next to -- I'm handing 20 Mr. Kain, the witness, what's been marked as Union 21 Exhibit No. 12. I'm sorry for my really, really bad 22 handwriting. 23 A. Yes. 24 Q. Mr. Kain, do you recognize this document Page Q. And do you see underneath that a caption 2 that says Basic Benefit Information for IAM 3 Employees? 4 A. Yes. 5 Q. And do you see the sentence that says, 6 Your compensation at United includes more than a 7 paycheck. It includes a comprehensive Welfare 8 Benefit Program to help in providing you with 9 financial security during your working years and 10 after retirement? 11 A. Yes. 12 Q. And do you see underneath that a 13 description for what the benefits are? 14 A. Yes. 15 Q. And do you see underneath that caption 16 Health Care that includes both medical and HMOs, if 17 applicable? 18 A. I see that. 19 Q. If you could turn, please, to the numbered 20 page 5. At the top again to make sure you and I are 21 on the same page, the very top should say Plan 22 Administration. 23 Do you see that? 24 A. Yes. Page also as a United Airlines Summary Plan Description 2 for IAM Represented Employees? 3 A. Yes. 4 Q. And you recognize this as it says revised 5 July of '93? 6 A. Yes. 7 Q. You're familiar with this, the logo that 8 was United Airlines' logo at the time? 9 A. The tulip, yeah. 10 Q. Tulip, okay. 11 I'd like to turn your attention to 12 what's -- to numbered page A. Okay. 14 Q. And, again, to the portion that says Basic 15 Benefit Information for IAM Represented Employees. 16 Do you see that? 17 A. Yes. 18 Q. And do you see the sentence that says, 19 "Your compensation at United includes more than a 20 paycheck," and then it continues, "It includes a 21 comprehensive Welfare Benefit Program to help in 22 providing you with financial security during your 23 working years and after retirement"? Do you see 24 that? 14 (Pages )