Filed Pursuant to Rule 424B1
File No. 333-08369
PROSPECTUS SUPPLEMENT
(To prospectus dated March 22, 2000)
$300,000,000
[LOGO OF UNITED PARCEL SERVICE, INC.]
United Parcel Service, Inc.
1.75% Cash-Settled Convertible Senior Notes due September 27, 2007
----------------
The Notes and the Exchange Ratio: Payment Formulas:
. If we redeem the notes, for each
. The issue price for each note $1,000 principal amount of the
equals its principal amount, plus notes you own, we will pay you an
accrued interest, if any, from amount in cash equal to the
September 27, 2000. The minimum greater of:
initial purchase is $100,000. . the product of the exchange
ratio and the average market
. We will pay you interest on the price of our class B common
notes semi-annually at a rate of stock determined as described
1.75% per year. in this prospectus supplement,
which will not include any
. We may redeem all of the notes, at accrued but unpaid interest to
our option, on any business day on the redemption date, and
or after September 27, 2003 and
before their maturity for cash
based on the formula described in . $1,000 plus accrued but unpaid
this prospectus supplement. interest to but excluding the
redemption date.
. On or after October 27, 2000, you
may exchange your notes for cash. . If you exchange your notes, we
At any one time, you must exchange will pay you an amount in cash for
at least $100,000 principal amount each $1,000 principal amount of
of notes you own, or if you own notes equal to the product of the
less than $100,000 principal exchange ratio and the market
amount, all of your notes. If you price of our class B common stock
elect to exchange your notes, we determined as described in this
will pay you an amount in cash prospectus supplement, but
based on the formula described in excluding any accrued but unpaid
this prospectus supplement. interest to the exchange date.
. At maturity, if you have not
. The exchange ratio initially exchanged your notes, we will pay
equals 14.1483 for each $1,000 you the principal amount of each
principal amount of notes and is note plus any accrued but unpaid
subject to adjustment from time to interest to but excluding the
time as described in this maturity date.
prospectus supplement.
Investing in the notes involves risks. See "Risk Factors" beginning on
page S-5 of this prospectus supplement.
----------------
Per Note Total
-------- -----
Public offering price (1).......................... 100% $300,000,000
Underwriting discount.............................. 2% $6,000,000
Proceeds, before expenses, to United Parcel
Service, Inc...................................... 98% $294,000,000
(1) Plus accrued interest from September 27, 2000, if settlement occurs
after that date
Neither the Securities and Exchange Commission nor any state securities
commission has approved these securities or passed upon the adequacy or
accuracy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about September 27, 2000.
----------------
Merrill Lynch & Co.
----------------
The date of this prospectus supplement is September 21, 2000.
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Summary of Prospectus Supplement........................................... S-3
Risk Factors............................................................... S-5
The Company................................................................ S-8
Ratio of Earnings to Fixed Charges......................................... S-8
Description of Notes....................................................... S-9
Price Range of Common Stock and Dividend Policy............................ S-18
Use of Proceeds and Hedging................................................ S-18
United States Federal Income Taxation...................................... S-19
Book-Entry System.......................................................... S-21
Underwriting............................................................... S-24
United Kingdom Selling Restrictions........................................ S-25
Validity of the Notes...................................................... S-25
Prospectus
Page
----
Where You Can Find More Information........................................ 2
The Company................................................................ 4
Ratio of Earnings to Fixed Charges......................................... 4
Use of Proceeds............................................................ 4
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 19
Validity of Offered Debt Securities........................................ 21
Experts.................................................................... 21
S-2
SUMMARY OF PROSPECTUS SUPPLEMENT
Unless the context requires otherwise, references in the prospectus
supplement to "UPS," "we," "us" and "our" refer to United Parcel Service, Inc.
and its subsidiaries.
Notes................... 1.75% Cash-Settled Convertible Senior Notes due
September 27, 2007.
Aggregate principal
amount.................. $300,000,000.
Maturity date........... September 27, 2007.
Issue price............. 100% plus accrued interest from September 27, 2000,
if settlement occurs after that date.
Interest rate........... 1.75% per year. Interest on the notes will be
computed on the basis of a 360-day year of twelve 30-
day months.
Interest payment
dates................... September 27 and March 27, commencing March 27, 2001;
provided that if any such date is not a business day,
payment will be made on the first following business
day.
Regular record dates.... September 12 or March 12, as the case may be,
preceding each interest payment date, whether or not
that record date is a business day.
Original issue date..... September 27, 2000.
Form of notes........... Book-entry only held through The Depository Trust
Company.
Ranking................. The notes will be senior notes, ranking equally with
all of our other unsecured, unsubordinated debt. The
notes will not be secured by any collateral. The
notes are not subject to any mandatory redemption or
sinking fund.
Denominations........... We will issue and sell the notes in denominations of
$1,000 and integral multiples of $1,000 in excess
thereof.
Minimum Initial
Purchase................ The minimum initial purchase amount is $100,000
principal amount of notes.
Amount payable at
maturity................ At maturity, whether as a result of acceleration or
otherwise, if you have not exchanged your notes, we
will pay you the principal amount of each note plus
accrued but unpaid interest to but excluding the
maturity date.
Our redemption right.... We may redeem all, but not less than all, of the
notes at any time, on any business day on or after
September 27, 2003. If we redeem the notes, for each
$1,000 principal amount of notes you own, we will pay
you an amount equal to the greater of:
. the product of the exchange ratio and the
average market price of our class B common stock
("UPS Stock") over a ten-Trading-Day period from
and including the day we send our redemption
notice to you, subject to certain exceptions in
the event of market disruption
S-3
events, all as more fully described in
"Description of Notes--General"; if the amount you
receive is based on this formula, you will not
receive any accrued but unpaid interest; and
. $1,000 plus accrued but unpaid interest on your
notes to but excluding the redemption date.
Holder exchange right... On any Trading Day that falls during the period
commencing on October 27, 2000 and ending at 11:00
a.m., New York City time, on the earlier of:
. 15 scheduled Trading Days before the maturity
date or
. the redemption notice date,
you may exchange your notes for cash in an amount
equal to the Exchange Amount. At any one time, you
must exchange at least $100,000 principal amount of
your notes, or if you own less than $100,000
principal amount of notes, all of your notes.
Exchange Amount......... For each $1,000 principal amount of the notes you
exchange, the Exchange Amount will equal the exchange
ratio multiplied by the average market price of UPS
Stock over a three- or ten-Trading-Day period,
depending on when you exercise your exchange right,
from and including the day your notice is effective,
subject to certain exceptions in the event of market
disruption events. You will not receive accrued but
unpaid interest on the notes you elect to exchange.
Exchange ratio.......... The exchange ratio is equal to the product of 14.1483
and the share multiplier per $1,000 principal amount.
Share multiplier........ The share multiplier initially will be set at 1.0,
but will be subject to adjustment upon the occurrence
of certain corporate events described in the section
entitled "Description of Notes--Dilution and
Reorganization Adjustments" in this prospectus
supplement.
Trustee................. Citibank, N.A.
Calculation agent....... Merrill Lynch, Pierce, Fenner & Smith Incorporated
More Information on the
Notes................... These notes are debt securities issued by UPS. You
can find a general description of our debt securities
in the accompanying prospectus dated March 22, 2000.
Because this is a summary, it does not contain all of the information that
may be important to you, including the specific requirements for the exercise
of your right to exchange your notes and of our right to redeem the notes. You
should read the "Description of Notes" section in this prospectus supplement
for a more detailed description of the terms of the notes. You should also read
about the risks involved in investing in the notes in the section called "Risk
Factors" in this prospectus supplement. We urge you to consult with your
investment, legal, accounting and other advisors with regards to any investment
in the notes.
S-4
RISK FACTORS
Your investment in the notes will involve risks, including risks not
associated with similar investments in a conventional debt security. You should
consider carefully the following discussion of risks before you decide that an
investment in the notes is suitable for you.
Your yield may be lower than the yield on a standard debt security of
comparable maturity
The amount we pay you at maturity or upon redemption may be less than the
return you could earn on other investments. We will pay interest on the notes
at a rate equal to 1.75% per year. This interest rate is lower than the
interest rate we would pay on a non-exchangeable, non-callable debt security
issued at the same time as the notes. The amount payable upon your exchange of
the notes or upon our redemption of the notes in excess of the principal amount
will depend on the appreciation, if any, in the market price of UPS Stock
during the calculation period following the date on which you deliver your
exchange notice or we deliver our redemption notice. The yield on the notes may
be less than the yield you would earn if you bought a standard senior non-
exchangeable, non-callable debt security issued by us with the same issue date
and stated maturity date as the notes. Accordingly, your investment may not
reflect the full opportunity cost to you when you consider the effect of
factors that affect the time value of money.
The notes are subject to redemption before their maturity
We may elect to redeem all of the notes on any business day on or after
September 27, 2003, upon not more than 60 nor fewer than 30 calendar days
notice to you. If we redeem the notes, you may receive an amount that is less
than the amount you would have received had we not redeemed the notes, the
market price of UPS Stock increased after the redemption date and you had
elected to exchange your notes during a period of such appreciation.
There may be an uncertain trading market for the notes
We do not intend to list the notes on any securities exchange or quotation
system. There may be little or no secondary market for the notes. Even if there
is a secondary market, it may not provide enough liquidity to allow you to
trade or sell the notes easily. The development of a liquid trading market for
the notes will depend on our financial performance and other factors such as
the appreciation, if any, in the market price of UPS Stock. In addition, it is
unlikely that the secondary market price of the notes will correlate exactly
with the value of UPS Stock. Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as underwriter, which we refer to as Merrill Lynch, currently
intends to act as market maker for the notes, but is not required to do so.
If the trading market for the notes is limited, there may be a limited
number of buyers if you decide to sell your notes prior to the maturity date.
This may affect the price you receive. The spread between bid and asked prices
for the notes in any such market may be different from the spread between bid
and asked prices of UPS Stock.
Many factors, which interrelate in complex ways, affect the trading value of
the notes and could cause the trading value to decline
The trading value of the notes will be affected by many factors that
interrelate in complex ways. It is possible that the negative effect of one
factor may offset the positive effect of another factor and that the effect of
one factor may exacerbate the effect of another factor. Further, many of these
factors are beyond our control. These factors include, among others, the
following, any of which could affect the trading value of the notes:
. changes in the market price of UPS Stock;
. increases or decreases in the volatility of the market for UPS Stock;
. changes in interest rates;
. changes in the dividend yield of UPS Stock;
. a real or anticipated decline in our credit ratings; and
S-5
. the decrease in the time remaining to maturity (or the date on which you
can exercise your right to exchange your notes or we can otherwise
redeem the notes) and related decrease in the "time premium" associated
with the notes.
The market price and volatility of the UPS Stock will also depend on many
factors, many of which are also beyond our control, including:
. our operating results and prospects;
. announcements by us or others and developments affecting our business;
. regulatory developments; and
. other general industry, economic and political developments.
The future performance of UPS Stock can not be predicted based on its
historical performance.
You must timely deliver a notice of exchange in order to exchange your notes
In order to exchange your notes, you must deliver a notice of exchange to
the calculation agent and the trustee by no later than 11:00 a.m., New York
City time, on the 15th scheduled Trading Day prior to the maturity date. If you
fail to deliver an exchange notice to the calculation agent and the trustee
prior to that time, you will only be entitled to receive at maturity the
principal amount of your notes, plus any accrued but unpaid interest.
Additionally, if you give notice to exchange your notes on a day that is not
a Trading Day or after 11:00 a.m., New York City time, on a Trading Day, your
notice will not be effective until the next trading day, provided that the next
trading day is a Trading Day on which you may exercise your right to exchange
notes. Therefore, the amount of cash you will receive will be based on the
arithmetic mean of the market prices of UPS Stock at the close of the three or
ten Trading Days from and including the Trading Day after you gave notice
instead of the three or ten Trading Days beginning with the day you give
notice. As a result, you could receive less cash for your notes than you would
have received had your notice been given on a Trading Day prior to the 11:00
a.m. deadline.
The amount payable upon redemption or exchange is not subject to adjustment for
all corporate events
The amount payable upon redemption or exchange of the notes is subject to
adjustment for the specified corporate events affecting UPS Stock described in
the section entitled "Description of Notes--Dilution and Reorganization
Adjustments" in this prospectus supplement. However, these adjustments do not
cover all corporate events, such as offerings of UPS Stock for cash or in
acquisitions, that could affect the market price of UPS Stock. The occurrence
of any other event not described in the section entitled "Description of
Notes--Dilution and Reorganization Adjustments" may adversely affect the
trading value of the notes. We cannot assure you that we will not undertake
corporate events that adversely affect the trading price of the notes.
As a holder of the notes, you have no stockholder rights with respect to UPS
Stock
The notes do not entitle you to receive shares of UPS Stock. The notes are
payable and exchangeable only for cash. Furthermore, as a holder of notes, you
will not have the right to vote, to receive dividends or other distributions,
if any, to tender or exchange UPS Stock in any tender or exchange offer by UPS
or any third party, or any other rights with respect to UPS Stock. Your return
on the notes will not be the same as the return you could earn by owning UPS
Stock directly and receiving the dividends, if any, paid on that security. The
price of UPS Stock serves solely as an index to determine the amount of cash
you will receive upon exchange or redemption of your notes.
Amounts payable on the notes may be limited by state law
New York State law governs the indenture under which we will issue the
notes. New York has usury laws that limit the amount of interest that can be
charged and paid on loans, which includes the notes. Under present New York
law, the maximum rate of interest is 25% per annum on a simple interest basis.
This limit may not apply to notes in which $2,500,000 or more has been
invested.
S-6
While we believe that New York law would be given effect by a state or
federal court sitting outside of New York, many other states also have laws
that regulate the amount of interest that may be charged to and paid by a
borrower. We will promise, for your benefit, to the extent permitted by law,
not to voluntarily claim the benefits of any laws concerning usurious rates of
interest.
Hedging transaction and other transactions may affect the value of the notes
We have entered into an arrangement with Merrill Lynch International
("MLI"), an affiliate of Merrill Lynch, to hedge the market risks associated
with our obligation to pay the amounts due under the notes. In connection with
these hedging arrangements, MLI has taken positions in UPS Stock and possibly
other instruments on behalf of Merrill Lynch in secondary market transactions
at or before the time Merrill Lynch agreed to purchase the notes from us. Such
hedging arrangements could have increased the price of UPS Stock, and therefore
effectively have increased the level to which UPS Stock must rise before you
would receive an amount of cash greater than the principal amount of your
notes. MLI is likely to modify its hedge position from time to time prior to
redemption or maturity of the notes by purchasing and selling shares of UPS
Stock, other UPS securities, listed or over-the-counter options on UPS Stock,
or other instruments it may wish to use in connection with such hedging. MLI is
also likely to sell shares of UPS Stock, such other securities, options or
instruments, or liquidate any related hedge positions during any period for
which the calculation agent is calculating or determining the price of UPS
Stock, whether upon redemption or exchange. We cannot assure you that such
activity will not affect the market price of UPS Stock.
Furthermore, as in the past, we intend to continue our practice of acquiring
UPS Stock to satisfy our obligations under various employee benefit plans and
for other corporate purposes. Therefore, we expect to acquire shares of UPS
Stock and enter into other transactions related to UPS Stock during the term of
the notes. To the extent that we have a position in UPS Stock or transactions
related to UPS Stock or we continue our past practice of acquiring UPS Stock,
we may acquire UPS Stock during any period for which the calculation agent is
calculating or determining the price of UPS Stock. Depending on, among other
things, future market conditions, the aggregate amount and the composition of
such positions, the aggregate amount of any such acquisitions are likely to
vary over time.
In addition, during the life of the notes, Merrill Lynch and its affiliates
may engage in trading in UPS Stock for their proprietary accounts, for other
accounts under their management and to facilitate transactions (including block
transactions) on behalf of customers. Such trading, issuance or underwriting
could affect the market price of UPS Stock and the notes. Merrill Lynch also
acts from time to time as an underwriter or initial purchaser of securities
issued by us.
The effect, if any, of any of these transactions and activities on the
market price of UPS Stock or the notes will depend in part upon market
conditions and cannot be ascertained at this time, but any of these activities
could materially and adversely affect the value of UPS Stock, the value of the
notes and, as a result, the amount of cash you will receive upon redemption or
exchange.
Potential conflicts of interest among you, us, the calculation agent and our
subsidiaries
As calculation agent, Merrill Lynch will calculate how much cash you will
receive upon redemption or exchange and what adjustments should be made to the
exchange ratio to reflect some types of corporate events.
In addition, UPS and Merrill Lynch, directly or through their affiliates,
will carry out hedging activities related to the notes and may also enter into
other transactions and arrangements relating to UPS Stock or such other
securities, options or instruments as described above.
Any of these activities could influence the calculations and determinations
of Merrill Lynch as calculation agent, and, accordingly, the amount of cash
that you will receive if you exchange your notes or if we redeem the notes. In
addition, these activities could potentially affect the value of UPS Stock, the
value of the notes and, as a result, the amount of cash you will receive if you
exchange your notes or if we redeem the notes.
S-7
THE COMPANY
We are the world's largest express carrier, the world's largest package
delivery company and a leading global provider of specialized transportation
and logistics services. We deliver packages each business day for 1.7 million
shipping customers to six million consignees. In 1999, we delivered an average
of more than 12.92 million pieces per day worldwide, generating revenues of
over $27 billion. During the six months ended June 30, 2000, we delivered an
average of 13.17 million pieces per day worldwide, generating revenues of over
$14 billion.
Our primary business is the delivery of packages and documents throughout
the United States and in over 200 other countries and territories. In addition,
we provide logistics services, including comprehensive management of supply
chains, for major companies worldwide. We are the industry leader in the
delivery of goods purchased over the Internet. We seek to position ourselves as
an indispensable branded component of e-commerce and to focus on the movement
of goods, information and funds.
The address and telephone number of our principal executive offices are 55
Glenlake Parkway, N.E., Atlanta, Georgia 30328, (404) 828-6000.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
our company, including our subsidiaries, on a consolidated basis.
Six
Months
Ended
Year Ended December 31, June 30,
------------------------ ---------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges (1)...... 7.6 8.2 4.9 8.9 6.7 1.1 15.0
- --------
(1) For purposes of calculating the ratio of earnings to fixed charges,
earnings is defined as income before income taxes and fixed charges
(excluding capitalized interest). Fixed charges include interest (whether
capitalized or expensed), amortization of debt expense and any discount or
premium relating to any indebtedness (whether capitalized or expensed) and
the portion of rent expense considered to represent interest.
S-8
DESCRIPTION OF NOTES
The following discussion of the terms of the notes supplements the general
terms and provisions of the debt securities in the accompanying prospectus.
General
Notes.................... 1.75% Cash-Settled Convertible Senior Notes due
September 27, 2007.
Aggregate principal
amount................... $300,000,000.
Maturity date............ September 27, 2007.
Issue price.............. 100% plus accrued interest from September 27, 2000,
if settlement occurs after that date.
Interest rate............ 1.75% per year. Interest on the notes will be
computed on the basis of a 360-day year of twelve
30-day months.
Interest payment dates... September 27 and March 27, commencing March 27,
2001; provided that if any such date is not a
business day, payment will be made on the first
following business day.
Regular record dates..... September 12 or March 12, as the case may be,
preceding each interest payment date, whether or
not that record date is a business day.
Original issue date...... September 27, 2000.
Form of notes............ Book-entry only held through The Depository Trust
Company.
Ranking.................. The notes will be senior notes, ranking equally
with all of our other unsecured, unsubordinated
debt. The notes will not be secured by any
collateral. The notes are not subject to any
mandatory redemption or sinking fund.
Denominations............ We will issue and sell the notes in denominations
of $1,000 and integral multiples of $1,000 in
excess thereof.
Minimum Initial
Purchase................. The minimum initial purchase amount is $100,000
principal amount of notes.
Trading Day.............. A day on which the New York Stock Exchange, or
NYSE, the American Stock Exchange and the Nasdaq
Stock Market are open for trading as determined by
the calculation agent.
Market Disruption
Event.................... See the section entitled "--Market Disruption
Event".
Amount payable at
maturity................. At maturity, whether as a result of acceleration or
otherwise, if you have not exchanged your notes, we
will pay you the principal amount of each note plus
accrued but unpaid interest to but excluding the
maturity date.
Our redemption right..... We may redeem all, but not less than all, of the
notes at any time, on any business day on or after
September 27, 2003. We will deliver notice of any
redemption to you at least 30 but not more than 60
days prior to the
S-9
redemption date, which date we refer to as the
redemption notice date. The redemption date will be
the scheduled Trading Day specified in our notice
of redemption.
If we redeem the notes, for each $1,000 principal
amount of notes you own, we will pay you an amount
equal to the greater of:
(1) the product of the exchange ratio and the
average market price of UPS Stock during the
first ten scheduled Trading Days following
the redemption notice date; provided,
however:
. that if a Market Disruption Event occurs on
any one of the ten scheduled Trading Days
following the redemption notice date, then
the amount payable upon redemption will be
calculated using the arithmetic mean of the
market prices of UPS Stock on the Trading
Days on which a Market Disruption Event has
not occurred, and if there is only one such
Trading Day, then the amount payable upon
redemption will be calculated using the
market price of UPS Stock on such Trading
Day;
. that if there is a Market Disruption Event
on each of the ten Trading Days following
the redemption notice date, then the amount
payable upon redemption will be calculated
using the market price of UPS Stock on the
immediately succeeding Trading Day on which
a Market Disruption Event does not occur,
but not extending beyond the third
scheduled Trading Day prior to the maturity
date; and
. that if the last possible date to calculate
the amount payable upon redemption is the
third scheduled Trading Day prior to the
maturity date, then such amount will be
calculated using the market price of UPS
Stock on the third scheduled Trading Day
prior to the maturity date, regardless of
the occurrence of a Market Disruption Event
on that date; and
. that if the amount you receive is based on
this formula, you will not be entitled to
receive any accrued but unpaid interest;
and
(2) $1,000 plus accrued but unpaid interest on
your notes to but excluding the redemption
date.
Once we have given notice that we are going to
redeem the notes, you may not exercise your holder
exchange right.
Holder exchange right.... On any Trading Day that falls during the period
commencing onOctober 27, 2000 and ending at 11:00
a.m., New York City time, on the earlier of:
. 15 scheduled Trading Days before the maturity
date or
. the redemption notice date,
you may exchange your notes for cash in an amount
equal to the Exchange Amount, as described below.
At any one time, you must exchange at least
$100,000 principal amount of your notes, or if you
own less than $100,000 principal amount of notes,
all of your notes.
To exercise your right to exchange your notes, you
must give written notice to the calculation agent
and the trustee. We refer to any date on
S-10
which you give this notice as the exchange notice
date. If the calculation agent receives your notice
after 11:00 a.m., New York City time, on any
Trading Day, the calculation agent will consider
your notice as received on the immediately
following Trading Day. We refer to the date the
calculation agent is deemed to have received your
notice as the exchange receipt date.
If you choose to exercise your right to exchange
your notes, you will receive the Exchange Amount
and we may no longer redeem your notes as of the
applicable exchange notice date.
Exchange Amount.......... For each $1,000 principal amount of the notes you
exchange, the Exchange Amount will equal the
exchange ratio multiplied by the average market
price of UPS Stock during the first three scheduled
Trading Days from and including the exchange
receipt date. However, if you exercise your
exchange right during the period between, and
inclusive of, the 30th scheduled Trading Day before
the maturity date and the 15th scheduled Trading
Day before the maturity date, the calculation
period for determining the average market price of
UPS Stock will be the first ten scheduled Trading
Days from and including the exchange receipt date;
provided, however:
. that if a Market Disruption Event occurs on
any one of the three or ten scheduled Trading
Days, as applicable, from and including the
exchange receipt date, then the Exchange
Amount will be calculated using the arithmetic
mean of the market prices of UPS Stock on the
Trading Days on which a Market Disruption
Event has not occurred, and if there is only
one such Trading Day, then the Exchange Amount
will be calculated using the market price of
UPS Stock on such Trading Day;
. that if a Market Disruption Event occurs on
each of the three or ten Trading Days, as
applicable, from and including the exchange
receipt date, then the Exchange Amount will be
calculated using the market price of UPS Stock
on the immediately succeeding Trading Day on
which a Market Disruption Event does not
occur, but not extending beyond the third
scheduled Trading Day prior to the maturity
date; and
. that if the last possible date to calculate
the Exchange Amount is the third scheduled
Trading Day prior to the maturity date, then
the Exchange Amount will be calculated using
the market price of UPS Stock on the third
scheduled Trading Day prior to the maturity
date, regardless of the occurrence of a Market
Disruption Event on that date.
You will not receive accrued but unpaid interest on
the notes you elect to exchange. We will pay you
the Exchange Amount in cash three business days
after the Exchange Amount has been finally
determined; provided, however, that if you exercise
your exchange right on the 15th scheduled Trading
Day prior to the maturity date, we will pay you the
Exchange Amount on the maturity date. If you elect
to exchange notes, the Exchange Amount you receive
will be deemed first a payment of any accrued and
unpaid interest and second a payment in
satisfaction of your holder exchange right.
S-11
Exchange ratio........... The exchange ratio is equal to the product of
14.1483 and the share multiplier per $1,000
principal amount.
Share multiplier......... The share multiplier initially will be set at 1.0,
but is subject to adjustment upon the occurrence of
certain corporate events described in the section
entitled "--Dilution and Reorganization
Adjustments" below.
Market price............. If the UPS Stock (or any other security for which a
market price must be determined for purposes of the
notes) is listed on a national securities exchange
in the United States, is a Nasdaq NMS security or
is included in the OTC Bulletin Board Service
operated by the NASD, then the market price for any
date of determination on any Trading Day means for
one share of UPS Stock (or any other security for
which a market price must be determined for
purposes of the notes):
(1) the last reported sale price, regular way, on
that day on the principal United States
securities exchange registered under the
Securities Exchange Act of 1934 on which that
security is listed or admitted to trading
(without taking into account any extended or
after-hours trading session), or
(2) if not listed or admitted to trading on any
such securities exchange or if the last
reported sale price is not obtainable, the
last reported sale price on the over-the-
counter market as reported on the Nasdaq
Stock Market or OTC Bulletin Board on that
day (without taking into account any
extended or after-hours trading session), or
(3) if the last reported sale price is not
available for any reason, including, without
limitation, the occurrence of a Market
Disruption Event, pursuant to (1) and (2)
above, the mean of the last reported bid and
offer price of the principal trading session
on the over-the-counter market as reported on
the Nasdaq Stock Market or OTC Bulletin Board
on that day as determined by the calculation
agent or from as many dealers in such
security, but not exceeding three, as have
made the bid prices available to the
calculation agent after 3:00 p.m., local time
in the principal market, on that date
(without taking into account any extended or
after-hours trading session).
In the event of certain reorganization events, the
market price of the shares of UPS Stock may be
adjusted to include certain cash and/or securities
in addition to, or in lieu of, the value of the
shares of UPS Stock.
For any cash received in a Reorganization Event,
which is defined in the section entitled "--
Dilution and Reorganization Adjustments--
Reorganization Events" below, any amount payable
will include an amount equal to the amount of cash
received per share of UPS Stock multiplied by the
exchange ratio in effect on the date all holders of
UPS Stock irrevocably receive such cash or
securities.
For any property other than cash or securities
received in a Reorganization Event, any amount
payable upon maturity will include an amount equal
to the market value, as determined by the
calculation
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agent, of the property received per share of UPS
Stock multiplied by the exchange ratio in effect on
the date all holders of UPS Stock irrevocably
receive such property.
Business Day............. Any day other than a Saturday or Sunday that is
neither a legal holiday nor a day on which banking
institutions are authorized or required by law or
regulation to close in The City of New York.
Trustee.................. Citibank, N.A.
Calculation agent........ Merrill Lynch, Pierce, Fenner & Smith Incorporated
The calculation agent will calculate the amount of
cash you are entitled to receive upon redemption or
exchange. The calculation agent will also adjust
the exchange ratio for certain types of corporate
events that could have a dilutive or concentrative
effect on the market price of UPS Stock.
All determinations made by the calculation agent
will be made in good faith pursuant to a
calculation agency agreement and, absent manifest
error, will be conclusive for all purposes and
binding on UPS and beneficial owners of the notes.
All percentages resulting from any calculation on
the notes will be rounded to the nearest one
hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded
upwards, e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from this calculation
will be rounded to the nearest cent, with one-half
cent rounded upwards.
Dilution and Reorganization Adjustments
The share multiplier used to calculate the exchange ratio is subject to
adjustment by the calculation agent as a result of the dilution and
reorganization adjustments described in this section.
Stock splits and reverse stock splits
If UPS Stock is subject to a stock split or reverse stock split, then once
any split has become effective, the share multiplier relating to UPS Stock will
be adjusted to equal the product of the prior share multiplier and the number
of shares which a holder of one share of UPS Stock would have owned or been
entitled to receive immediately following the effective date of such stock
split or reverse stock split.
Stock dividends
If UPS Stock is subject to a stock dividend, i.e., issuance of additional
shares of UPS Stock, that is given ratably to all holders of shares of UPS
Stock, then once the shares are trading ex-dividend, the share multiplier will
be adjusted so that the new share multiplier will equal the prior share
multiplier plus the product of:
. the number of shares of UPS Stock issued with respect to one share of
UPS Stock, multiplied by
. the prior share multiplier.
Extraordinary Dividends
There will be no adjustments to the share multiplier to reflect cash
dividends or distributions paid, if any, with respect to UPS Stock other than
distributions described under clause (5) of the first paragraph of the section
entitled "--Reorganization Events" below and Extraordinary Dividends as defined
below.
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An "Extraordinary Dividend" means, with respect to a cash dividend or other
distribution with respect to UPS Stock, the extent to which a dividend or other
distribution exceeds the immediately preceding non-Extraordinary Dividend for
UPS Stock (as adjusted for any subsequent corporate event requiring an
adjustment hereunder, such as a stock split or reverse stock split) by an
amount equal to at least 10% of the market price of UPS Stock on the Trading
Day preceding the ex-dividend date with respect to the Extraordinary Dividend
(the "ex-dividend date"). If an Extraordinary Dividend occurs with respect to
UPS Stock, the share multiplier will be adjusted on the ex-dividend date with
respect to such Extraordinary Dividend so that the new share multiplier will
equal the product of:
. the then-current share multiplier, and
. a fraction, the numerator of which is the market price per share of UPS
Stock on the Trading Day preceding the ex-dividend date, and the
denominator of which is the amount by which the market price on the
Trading Day preceding the ex-dividend date exceeds the Extraordinary
Dividend Amount.
The "Extraordinary Dividend Amount" with respect to an Extraordinary
Dividend for UPS Stock will equal:
. in the case of cash dividends or other distributions that constitute
quarterly dividends, the amount per share of that Extraordinary Dividend
minus the amount per share of the immediately preceding non-
Extraordinary Dividend, or
. in the case of cash dividends or other distributions that do not
constitute quarterly dividends, the amount per share of that
Extraordinary Dividend.
To the extent an Extraordinary Dividend is not paid in cash, the value of
the non-cash component will be determined in good faith by the calculation
agent, whose determination will be conclusive absent manifest error. A
distribution on UPS Stock described in clause (5) of the first paragraph of the
section entitled "--Reorganization Events" below that also constitutes an
Extraordinary Dividend shall cause an adjustment to the share multiplier
pursuant only to clause (5) of the first paragraph of the section entitled "--
Reorganization Events".
Issuance of transferable rights or warrants
If we issue transferable rights or warrants to all holders of UPS Stock to
subscribe for or purchase UPS Stock, including new or existing rights to
purchase UPS Stock pursuant to a shareholder's rights plan or arrangement, once
a triggering event shall have occurred thereunder, at an exercise price per
share less than the closing price of one share of UPS Stock on:
. the date the exercise price of those rights or warrants is determined,
and
. the expiration date of those rights or warrants,
then, in each case, if the expiration date of those rights or warrants precedes
the maturity date, then the share multiplier will be adjusted to equal the
product of:
. the prior share multiplier, and
. a fraction, the numerator of which will be the number of shares of UPS
Stock outstanding immediately prior to the issuance plus the number of
additional shares of UPS Stock offered for subscription or purchase
pursuant to those rights or warrants and the denominator of which shall
be the number of shares of UPS Stock outstanding immediately prior to
the issuance plus the number of additional shares of UPS Stock which the
aggregate offering price of the total number of shares of UPS Stock so
offered for subscription or purchase pursuant to those rights or
warrants would
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purchase at the closing price of one share of UPS Stock on the
expiration date of those rights or warrants, which shall be determined
by multiplying the total number of shares offered by the exercise price
of those rights or warrants and dividing the product so obtained by the
market price.
Reorganization Events
If before the maturity date of the notes,
(1) there occurs any reclassification or change of UPS Stock,
(2) we, or any surviving entity of ours, which we refer to as a successor
entity, have been subject to a merger, combination or consolidation
and we or our successor entity is not the surviving entity,
(3) any statutory exchange of our or our successor entity's securities
with another corporation occurs, other than pursuant to clause (2)
above,
(4) our company is liquidated,
(5) we issue to all of our shareholders equity securities of one of our
subsidiaries, other than in a transaction described in clauses (2),
(3) or (4) above, which we refer to as a Spin-off Event, or
(6) a tender or exchange offer is consummated for all of our outstanding
shares,
then the market price shall be adjusted to include the Reorganization Event
Amount. We refer to each of the events described in (1) through (6) above as a
Reorganization Event.
The "Reorganization Event Amount" shall be determined by the calculation
agent and will, for each $1,000 principal amount of notes, be equal to the sum
of the following:
. for any cash received in a Reorganization Event, an amount equal to the
amount of cash received per share of UPS Stock multiplied by the share
multiplier in effect on the date all of the holders of shares of UPS
Stock irrevocably receive such cash,
. for any property other than cash or securities received in a
Reorganization Event, the market value, as determined by the calculation
agent, of the property received for each share of UPS Stock at the date
of the receipt of the property multiplied by the then current share
multiplier and payable in cash,
. for any security received in a Reorganization Event, an amount equal to
the product of:
(x) the average market price for such security calculated in the same
manner as the average market price of UPS Stock is calculated, and
(y) the number of units of such security received for each share of
UPS Stock multiplied by the then current share multiplier, and
. for any security received in the case of a Spin-off Event, in addition
to the value of the shares of UPS Stock, an amount equal to the product
of:
(x) the average market price for such security calculated in the same
manner as the average market price of UPS Stock is calculated, and
(y) the number of units of such security received for each share of
UPS Stock multiplied by the then current share multiplier.
If a security is received in a Reorganization Event, it will be included in
determining any amounts due pursuant to the notes in the same manner as shares
of UPS Stock. The share multiplier with respect to these securities will equal
the product of the share multiplier in effect for UPS Stock at the time of the
issuance of these securities multiplied by the number of shares of these
securities issued with respect to one share of UPS Stock. The share multiplier
of these securities will be subject to the same adjustments as that of the
share multiplier of
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UPS Stock. The amount payable shall be calculated so as to include the value of
any securities received in the Spin-off Event in addition to the shares of UPS
Stock already included in the amount due upon redemption or exchange.
If we or our successor entity have been subject to a merger, combination or
consolidation and is not the surviving entity, or a tender or exchange offer is
consummated for all the outstanding shares of UPS, then the amount payable will
be calculated to include securities, if any, received in that event instead of
UPS Stock. The share multiplier for these securities shall equal the product of
the share multiplier in effect for UPS Stock at the time of the issuance of the
securities multiplied by the number of shares of the securities issued with
respect to one share of UPS Stock. The respective share multiplier for each of
these securities will be subject to the same adjustments as that of the share
multiplier of UPS Stock.
Adjustments to the share multiplier
No adjustments to the share multiplier will be required unless the share
multiplier adjustment would require a change of at least 0.1% in the share
multiplier then in effect. The share multiplier resulting from any of the
adjustments specified above will be rounded to the nearest one thousandth with
five ten-thousandths rounded upward.
No adjustments to the share multiplier will be required other than those
specified above. However, we may, in our sole discretion, cause the calculation
agent to make additional adjustments to the share multiplier to reflect changes
occurring in relation to the UPS Stock or any other security received in a
Reorganization Event in other circumstances where we determine that it is
appropriate to reflect those changes. The required adjustments specified above
do not cover all events that could affect the market price of UPS Stock,
including a partial tender or exchange offer for UPS Stock.
Merrill Lynch, as calculation agent, will be solely responsible for the
determination and calculation of any adjustments to the share multiplier and of
any related determinations and calculations with respect to any distributions
of stock, other securities or other property or assets, including cash, in
connection with any corporate event described above, and its determinations and
calculations will be made in good faith and will be conclusive absent manifest
error.
No adjustments will be made for certain other events, such as offerings of
common stock by UPS for cash or in acquisitions or consummation of a partial
tender or exchange offer for the common stock of UPS by UPS or any third party.
We will, within ten business days following the occurrence of an event that
requires an adjustment to the share multiplier, or if we are not aware of this
occurrence, as soon as practicable after becoming so aware, provide written
notice to the trustee, which will provide notice to the holders of the notes of
the occurrence of this event and, if applicable, a statement in reasonable
detail setting forth the adjusted share multiplier.
Market Disruption Event
"Market Disruption Event" means, with respect to the UPS Stock, the
occurrence or existence of the following, as determined in good faith by the
calculation agent:
(1) a suspension, absence, including the absence of an official closing
price, or material limitation of trading of UPS Stock on the NYSE for
more than two hours of trading or during the one-half hour period
preceding or at the close of trading;
(2) the suspension or material limitation on the primary market for
trading in options contracts related to UPS Stock, if available,
during the one-half hour period preceding or at the close of trading
in the applicable market; and
S-16
(3) that the events described in clauses (1) and (2) above materially
interfered with our ability or the ability of any of our affiliates or
Merrill Lynch or any of its affiliates to unwind all or a material
portion of the hedge with respect to the notes.
For purposes of determining whether a Market Disruption Event has occurred:
. a limitation on the hours or number of days of trading will not
constitute a Market Disruption Event if it results from an announced
change in the regular business hours of the relevant exchange;
. a decision to permanently discontinue trading in the relevant options
contract will not constitute a Market Disruption Event;
. limitations pursuant to any rule or regulation enacted or promulgated by
the NYSE or other regulatory organization with jurisdiction over the
NYSE on trading during significant market fluctuations will constitute a
suspension or material limitation of trading in UPS Stock;
. a suspension of trading in options contracts related to UPS Stock by the
primary securities market trading in the options, if available, by
reason of:
. a price change exceeding limits set by the securities exchange or
market,
. an imbalance of orders relating to the contracts, or
. a disparity in bid and ask quotes relating to the contracts
will constitute a suspension or material limitation of trading in
options contracts related to UPS Stock;
. a suspension, absence or material limitation of trading on the primary
securities market on which options contracts related to UPS Stock are
traded will not include any time when that securities market is itself
closed for trading under ordinary circumstances; and
. any after-hours or extended trading session will be disregarded.
If the Reorganization Event Amount includes securities other than UPS Stock,
then the above definition will be deemed to be revised to include each such
security in the same manner as UPS Stock is considered in determining whether a
Market Disruption Event exists.
Events of Default and Acceleration
In case an Event of Default with respect to any note has occurred and is
continuing, the amount payable to a beneficial owner of a note upon any
acceleration permitted by the notes will be determined by the calculation agent
as if the date of early repayment were the maturity date. If a bankruptcy
proceeding is commenced in respect of our company, the claim of the beneficial
owner of a note may be limited, under Section 502(b)(2) of Title 11 of the
United States Code, to the principal amount of the note plus an additional
amount of contingent interest calculated as though the date of the commencement
of the proceeding were the maturity date of the notes.
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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The UPS Stock began trading on the NYSE under the symbol "UPS" on November
10, 1999. The following table sets forth for the periods indicated the range of
high and low sale prices for UPS Stock on the NYSE. On September 21, 2000, the
reported last sale price for UPS Stock was $55.94 per share.
Common Stock Price
-------------------
High Low
--------- ---------
Year ended December 31, 1999
Fourth quarter (from November 10).................. $ 76.94 $ 61.00
Year ending December 31, 2000
First quarter...................................... 69.75 49.50
Second quarter..................................... 66.94 55.00
Third quarter (through September 21)............... 61.50 51.88
The historical prices of our class B common stock should not be taken as an
indication of future performance, and no assurance can be given that the price
of our class B common stock will not decrease. In addition, no assurance can be
given that the price of our class B common stock will increase above the issue
price so that upon redemption or exchange the beneficial owners of the notes
will receive cash in an amount in excess of the principal amount of the notes.
The following table sets forth the dividends declared on our common stock
for the periods indicated. Prior to our initial public offering in November
1999, there were no distinctions between classes of our common stock, and all
shareholders held common stock. The table below reflects dividends paid on our
common stock prior to our initial public offering and dividends paid on our
class A and class B common stock, which have been identical, since that time.
Six
Months
Ended
Year Ended December 31, June 30,
------------------------ ---------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
Dividends per share.................... $.32 $.34 $.35 $.43 $.58 $.28 $.34
Our board of directors' policy is to declare dividends each year out of
current earnings. The declaration of future dividends is subject to the
discretion of our board of directors in light of all relevant factors,
including earnings, general business conditions and working capital
requirements. Therefore, we cannot make any representation as to the amount of
dividends, if any, that we will pay in the future. Holders of the notes will
not be entitled to receive dividends, if any, that may be payable on UPS Stock.
USE OF PROCEEDS AND HEDGING
We intend to use the net proceeds from the sale of the notes for general
corporate purposes. See also "Use of Proceeds" in the accompanying prospectus.
In connection with our obligations under the notes, we have entered into
hedging arrangements related to UPS Stock with MLI, an affiliate of Merrill
Lynch. MLI has purchased shares of UPS Stock in secondary market transactions
at or before the time of the pricing of the notes, and we may from time to time
buy or sell UPS Stock for our own account, for business reasons or in
connection with hedging our obligations under the notes. These transactions
could affect the market price of UPS Stock.
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UNITED STATES FEDERAL INCOME TAXATION
Set forth below is the opinion of King & Spalding, counsel to UPS, as to
certain United States federal income tax consequences of the purchase,
ownership and disposition of the notes. This opinion is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including retroactive changes in effective dates) or possible differing
interpretations. The discussion below deals only with notes held as capital
assets and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, regulated investment
companies, dealers in securities or currencies, traders in securities that
elect to mark to market, tax-exempt entities, and persons holding notes in a
tax deferred or tax-advantaged "straddle" or as part of a "hedging" or
"conversion" transaction for tax purposes. It also does not deal with holders
other than original purchasers (except where otherwise specifically noted in
this prospectus supplement). The following discussion also assumes that the
issue price of the notes, as determined for United States federal income tax
purposes, equals the principal amount thereof. Persons considering the purchase
of the notes should consult their own tax advisors concerning the application
of the United States federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
notes arising under the laws of any other tax jurisdiction.
As used in this prospectus supplement, the term "U.S. Holder" means a
beneficial owner of a note that is for United States federal income tax
purposes (a) a citizen or resident of the United States, (b) a corporation,
partnership or other entity treated as a corporation or a partnership for
United States federal income tax purposes created or organized in or under the
laws of the United States, any state thereof or the District of Columbia (other
than a partnership that is not treated as a United States person under any
applicable Treasury regulations), (c) an estate the income of which is subject
to United States federal income taxation regardless of its source, (d) a trust
if a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more United States persons have
the authority to control all substantial decisions of the trust, or (e) any
other person whose income or gain in respect of a note is effectively connected
with the conduct of a United States trade or business. Notwithstanding clause
(d) of the preceding sentence, to the extent provided in Treasury regulations,
certain trusts in existence on August 20, 1996, and treated as United States
persons prior to that date that elect to continue to be treated as United
States persons also will be a U.S. Holder. As used herein, the term "non-U.S.
Holder" means a beneficial owner of a Note that is not a U.S. Holder.
Characterization of the Notes
The notes will be characterized and treated as indebtedness of UPS for
United States federal income tax purposes.
U.S. Holders
Interest on the Notes. Although the amounts to be received under the notes
are contingent upon the value of UPS Stock, you will not be subject to the
special tax rules governing contingent payment debt obligations
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because those rules do not apply to debt instruments like the notes that
provide for an option to convert the debt instrument into cash in an amount
equal to the approximate value of the stock of the issuer. Accordingly, a U.S.
Holder will include the stated interest on the notes in income in accordance
with the U.S. Holder's method of accounting for U.S. federal income tax
purposes.
Sale, Exchange or Retirement of the Notes. Upon a sale, exchange or
retirement of a note (including a redemption), a U.S. Holder would recognize
taxable gain or loss equal to the difference between the amount realized on
such sale, exchange or retirement and such U.S. Holder's tax basis in such
note. Any such gain or loss would generally be long-term or short-term capital
gain or loss (depending on the U.S. Holder's holding period for the notes). For
these purposes, the amount realized does not include any amount attributable to
accrued or stated interest on the notes, which would be taxed as described
under "U.S. Holders--Interest on the Notes" above.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States federal income tax on
payments of principal or interest on a note (the "portfolio interest
exemption"), unless such non-U.S. Holder is a direct or indirect holder of 10%
or more of the voting shares of UPS, a controlled foreign corporation related
to UPS, or a bank receiving interest described in section 881(c)(3)(A) of the
Internal Revenue Code of 1986, as amended. However, income allocable to non-
U.S. Holders will generally be subject to annual tax reporting on IRS Form
1042-S. For a non-U.S. Holder to qualify for the portfolio interest exemption,
the last United States payor in the chain of payment prior to payment to a non-
U.S. Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (a) is signed by the beneficial owner of the
note under penalties of perjury, (b) certifies that such owner is not a U.S.
Holder and (c) provides the name and address of the beneficial owner. The
statement may be made on the applicable IRS Form W-8, Form W-8BEN or a
substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the
applicable IRS Form W-8, Form W-8BEN or the substitute form provided by the
beneficial owner to the organization or institution.
Under current law, a note will not be includible in the estate of a non-U.S.
Holder unless the individual is a direct or indirect holder of 10% or more of
the voting shares of UPS or, at the time of such individual's death, payments
in respect of such note would have been effectively connected with the conduct
by such individual of a trade or business in the United States.
Backup withholding
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the note to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the note to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (a) the broker
determines that the seller is a corporation or other exempt recipient or (b)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must
S-20
also be reported by the broker to the IRS, unless either (a) the broker
determines that the seller is an exempt recipient or (b) the seller certifies
its non-U.S. status (and certain other conditions are met). Certification of
the registered owner's non-U.S. status would be made normally on an IRS Form W-
8 or W-8BEN under penalties of perjury, although in certain cases it may be
possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
New withholding regulations
On October 6, 1997, the Treasury Department issued new regulations that make
certain modifications to the backup withholding and information reporting rules
described above. The new regulations have also modified the rules governing
when a non-U.S. Holder must provide a Form W-8BEN to the Withholding Agent in
order to qualify for the portfolio interest exemption. The new regulations will
generally be effective for payments made after December 31, 2000, subject to
certain transition rules. Prospective investors are urged to consult their own
tax advisors regarding the new regulations.
BOOK-ENTRY SYSTEM
We have obtained the information in this section concerning DTC and its
book-entry system and procedures from sources that we believe to be reliable,
but we take no responsibility for the accuracy of this information.
The notes initially will be represented by one or more fully registered
global notes. Each global note will be deposited with, or on behalf of, The
Depository Trust Company or any successor thereto and registered in the name of
Cede & Co. (DTC's nominee).
You may hold your interests in the global notes in the United States through
DTC, either as a participant in such system or indirectly through organizations
which are participants in such system. So long as DTC or its nominee is the
registered owner of the global securities representing the notes, DTC or such
nominee will be considered the sole owner and holder of the notes for all
purposes of the notes and the indenture. Except as provided below, owners of
beneficial interests in the notes will not be entitled to have the notes
registered in their names, will not receive or be entitled to receive physical
delivery of the notes in definitive form and will not be considered the owners
or holders of the notes under the indenture, including for purposes of
receiving any reports that we or the trustee deliver pursuant to the indenture.
Accordingly, each person owning a beneficial interest in a note must rely on
the procedures of DTC or its nominee and, if such person is not a participant,
on the procedures of the participant through which such person owns its
interest, in order to exercise any rights of a holder of notes.
Unless and until we issue the notes in fully certificated form under the
limited circumstances described below under the heading "--Certificated Notes":
. you will not be entitled to receive physical delivery of a certificate
representing your interest in the notes;
. all references in this prospectus supplement or in the accompanying
prospectus to actions by holders will refer to actions taken by DTC upon
instructions from its direct participants; and
. all references in this prospectus supplement or the accompanying
prospectus to payments and notices to holders will refer to payments and
notices to DTC or Cede & Co., as the registered holder of the notes, for
distribution to you in accordance with DTC procedures.
S-21
The Depository Trust Company
DTC will act as securities depositary for the notes. The notes will be
issued as fully registered notes registered in the name of Cede & Co. DTC is:
. a limited-purpose trust company organized under the New York Banking
Law;
. a "banking organization" under the New York Banking Law;
. a member of the Federal Reserve System;
. a "clearing corporation" under the New York Uniform Commercial Code; and
. a "clearing agency" registered under the provision of Section 17A of the
Securities Exchange Act.
DTC holds securities that its direct participants deposit with DTC. DTC also
facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants of DTC include securities brokers and dealers (including
underwriters), banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its direct participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Indirect participants of DTC,
such as securities brokers and dealers, banks and trust companies, can also
access the DTC system if they maintain a custodial relationship with a direct
participant.
If you are not a direct participant or an indirect participant and you wish
to purchase, sell or otherwise transfer ownership of, or other interests in,
notes, you must do so through a direct participant or an indirect participant.
DTC agrees with and represents to DTC participants that it will administer its
book-entry system in accordance with its rules and by-laws and requirements of
law. The Securities and Exchange Commission has on file a set of the rules
applicable to DTC and its direct participants.
Purchases of notes under DTC's system must be made by or through direct
participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each beneficial owner is in turn to be recorded on the
records of direct participants and indirect participants. Beneficial owners
will not receive written confirmation from DTC of their purchase, but
beneficial owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the participants or indirect participants through which such beneficial
owners entered into the transaction. Transfers of ownership interests in the
notes are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive
physical delivery of certificates representing their ownership interests in
notes, except as provided below in "--Certificated Notes."
To facilitate subsequent transfers, all notes deposited with DTC are
registered in the name of DTC's nominee, Cede & Co. The deposit of notes with
DTC and their registration in the name of Cede & Co. has no effect on
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the notes. DTC's records reflect only the identity of the direct participants
to whose accounts such notes are credited, which may or may not be the
beneficial owners. The participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
S-22
Book-Entry Format
Under the book-entry format, the trustee will pay interest or principal
payments to Cede & Co., as nominee of DTC. DTC will forward the payment to the
direct participants, who will then forward the payment to the indirect
participants or to you as the beneficial owner. You may experience some delay
in receiving your payments under this system.
DTC is required to make book-entry transfers on behalf of its direct
participants and is required to receive and transmit payments of principal,
premium, if any, and interest on the notes. Any direct participant or indirect
participant with which you have an account is similarly required to make book-
entry transfers and to receive and transmit payments with respect to notes on
your behalf. We and the trustee have no responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the notes or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The trustee will not recognize you as a holder under the indenture, and you
can only exercise the rights of a holder indirectly through DTC and its direct
participants. DTC has advised us that it will only take action regarding a note
if one or more of the direct participants to whom the note is credited direct
DTC to take such action. DTC can only act on behalf of its direct participants.
Your ability to pledge notes to nondirect participants, and to take other
actions, may be limited because you will not possess a physical certificate
that represents your notes.
Certificated Notes
Unless and until they are exchanged, in whole or in part, for notes in
definitive form in accordance with the terms of the notes, the notes may not be
transferred except as a whole by DTC to a nominee of DTC; as a whole by a
nominee of DTC to DTC or another nominee of DTC; or as a whole by DTC or
nominee of DTC to a successor of DTC or a nominee of such successor.
We will issue notes to you or your nominees, in fully certificated
registered form, rather than to DTC or its nominees, only if:
. we advise the trustee in writing that DTC is no longer willing or able
to discharge its responsibilities properly or that DTC is no longer a
registered clearing agency under the Securities Exchange Act, and the
trustee or we are unable to locate a qualified successor within 90 days;
. an event of default has occurred and is continuing under the indenture;
or
. we, at our option, elect to terminate use of the book-entry system
through DTC.
If any of the three above events occurs, DTC is required to notify all
direct participants that notes in fully certificated registered form are
available through DTC. DTC will then surrender the global Note representing the
notes along with instructions for re-registration. The trustee will re-issue
the notes in fully certificated registered form and will recognize the
registered holders of the certificated notes as holders under the indenture.
S-23
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as underwriter, has
agreed, subject to the terms and conditions of the underwriting agreement and a
terms agreement, to purchase from us $300,000,000 principal amount of notes.
The underwriting agreement provides that the obligations of Merrill Lynch are
subject to certain conditions and that Merrill Lynch will be obligated to
purchase all of the notes if any are purchased.
Merrill Lynch has advised us that it proposes initially to offer all or part
of the notes directly to the public at the offering price set forth on the
cover page of this prospectus supplement. After the initial public offering,
the public offering price may be changed. Merrill Lynch is offering the notes
subject to receipt and acceptance and subject to its right to reject any order
in whole or in part. The proceeds we will receive will be net of the
underwriting discount and expenses payable by us.
The underwriter is permitted to engage in certain transactions that
stabilize the price of the notes. These transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
notes.
In connection with the offering, Merrill Lynch may make short sales of the
notes and may purchase the notes on the open market to cover positions created
by short sales. Similar to other purchase transactions, Merrill Lynch's
purchases to cover a short position may have the effect of raising or
maintaining the market price of the security or preventing or retarding a
decline in the market price of the security. "Naked" short sales are sales in
excess of the underwriter's overallotment option. Because Merrill Lynch has no
overallotment option with respect to the notes, it would be required to close
out a short position in the notes by purchasing notes in the open market.
Neither UPS nor Merrill Lynch makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the notes. In addition, neither UPS nor Merrill Lynch
makes any representation that Merrill Lynch will engage in these transactions
or that these transactions, once commenced, will not be discontinued without
notice.
Merrill Lynch may use this prospectus supplement and the accompanying
prospectus for offers and sales related to market-making transactions in the
notes. Merrill Lynch may act as principal or agent in these transactions, and
the sales will be made at prices related to prevailing market prices at the
time of sale.
The underwriter has advised us that it proposes initially to offer the notes
to the public at the public offering price on the cover page of this prospectus
supplement, and to dealers at that price less a concession not in excess of
1.2% of the principal amount of the notes. After the initial public offering,
the public offering price and concession may be changed.
In addition to the underwriting discount set forth on the cover page of this
prospectus supplement, we estimate that we will spend approximately $150,000
for expenses in connection with this offering.
We have agreed to indemnify Merrill Lynch against certain liabilities,
including liabilities under the Securities Act of 1933.
Merrill Lynch and its affiliates have in the past and may in the future
provide financial advisory and other services to UPS. MLI, an affiliate of
Merrill Lynch, is entering into the hedging transactions with UPS described
above under "Use of Proceeds and Hedging." In addition, during the life of the
notes, Merrill Lynch and its affiliates may engage in trading in UPS Stock for
their proprietary accounts, for other accounts under their management and to
facilitate transactions (including block transactions) on behalf of customers.
Merrill Lynch is also the calculation agent under the notes.
S-24
UNITED KINGDOM SELLING RESTRICTIONS
With respect to any sales in the United Kingdom:
(1) No offer to public: Notes may not be offered or sold to persons in the
United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise
in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;
(2) General compliance: each holder of the notes agrees to comply with and
will comply with all applicable provisions of the Financial Services
Act 1986 with respect to anything done by it in relation to the notes
in, from or otherwise involving the United Kingdom; and
(3) Investment advertisements: each holder of the notes agrees that it has
only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
notes to a person who is of a kind described in article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully
be issued or passed on.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for us by King & Spalding, New
York, New York, and for the underwriter by Gibson, Dunn & Crutcher LLP, New
York, New York.
S-25
PROSPECTUS
[LOGO OF UNITED PARCEL SERVICE, INC.]
- --------------------------------------------------------------------------------
UNITED PARCEL SERVICE, INC.
$2,000,000,000
DEBT SECURITIES
----------------
This prospectus relates to the issuance of senior unsecured debt securities
by United Parcel Service, Inc. pursuant to our debt shelf registration
statement. Under this shelf registration statement, we may issue debt
securities from time to time as described in this prospectus.
Issuance of debt securities:
. may be offered from time to time;
. may be denominated in U.S. dollars or other currencies or currency units;
. prices and terms will be determined at the time of sale; and
. the total aggregate principal amount (or, in the case of debt securities
issued at a discount, the initial offering price) will not exceed US
$2,000,000,000 (or the equivalent in foreign currencies or currency units).
Forms that debt securities may take:
. registered form; or
. global form.
This prospectus is accompanied by a prospectus supplement that includes
additional information regarding an issuance of our debt securities. Sales of
our debt securities may not be consummated without both this prospectus and a
prospectus supplement.
The prospectus supplement relating to any issuance of debt securities will
describe the terms of the securities being issued, typically including the
following:
. aggregate principal amount of the . any listing on a national
series of debt securities; securities exchange;
. denominations; . initial public offering price;
. maturity; . names of any underwriters or
agents;
. interest rate;
. terms of any underwriting
arrangements;
. time of interest payments;
. any terms for redemption; . amounts to be purchased by
underwriters or agents; and
. any terms for sinking fund payments;
. commissions or discounts of or to
underwriters or agents.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these debt securities or determined
if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The date of this prospectus is March 22, 2000.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this prospectus or
any prospectus supplement and, if given or made, such information or
representation must not be relied upon as having been authorized by us or any
underwriter or agent. This prospectus and any prospectus supplement do not
constitute an offer to sell or a solicitation of any offer to buy any of the
securities offered hereby and thereby in any jurisdiction to any person to whom
it is unlawful to make such offer in such jurisdiction. Neither the delivery of
this prospectus or any prospectus supplement nor any sale made hereunder and
thereunder shall, under any circumstances, create any implication that the
information herein or therein is correct as of any time subsequent to their
respective dates.
----------------
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy materials that we have filed
with the SEC, including the registration statement of which this prospectus is
a part, at the following SEC reference rooms:
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, DC 20549 New York, New York 10048 Chicago, Illinois 60661
Please telephone the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. The SEC also maintains an internet site at
http://www.sec.gov that contains reports, proxy statements and other
information regarding issuers that file electronically with the SEC. You may
find our reports, proxy statements and other information at this SEC website.
In addition, you can obtain our reports and proxy statements and other
information about us at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" into this document the
information that we file with it. This means that we can disclose important
information by referring you to those documents. The information incorporated
by reference is an important part of this prospectus and the accompanying
prospectus supplement, and information in documents that we file after the date
of this prospectus and before the termination of the offering will
automatically update information in this prospectus and the accompanying
prospectus supplement. We succeeded to UPS of America following a statutory
merger that became effective on November 15, 1999.
We incorporate by reference into this prospectus:
. our current report on Form 8-K filed with the SEC on February 23, 2000;
and
. any future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, until we sell all of
the securities offered by this prospectus and the accompanying
prospectus supplement.
We also incorporate by reference into this prospectus and adopt as our own
the following:
. UPS of America's annual report on Form 10-K for the year ended December
31, 1998; and
. UPS of America's quarterly reports on Form 10-Q for the fiscal quarters
ended March 31, 1999, June 30, 1999 and September 30, 1999.
We will provide, without charge, to each person to whom a copy of this
prospectus is delivered, upon written or oral request, a copy of any and all of
the documents incorporated by reference in this prospectus, other than the
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into
2
the documents that this prospectus incorporates. Requests for copies of such
documents should be directed to United Parcel Service, Inc., 55 Glenlake
Parkway, N.E., Atlanta, Georgia, 30328, attn: Corporate Secretary, telephone
number (404) 828-6000.
----------------
Unless otherwise indicated, currency amounts in this prospectus and any
prospectus supplement are stated in United States dollars ("$," "dollars,"
"U.S. dollars," or "U.S. $1").
----------------
3
THE COMPANY
We are the world's largest express carrier, the world's largest package
delivery company and a leading global provider of specialized transportation
and logistics services. We deliver packages each business day for 1.7 million
shipping customers to six million consignees. In 1999, we delivered an average
of more than 12.92 million pieces per day worldwide, generating revenues of
over $27 billion.
Our primary business is the delivery of packages and documents throughout
the United States and in over 200 other countries and territories. In addition,
we provide logistics services, including comprehensive management of supply
chains, for major companies worldwide. We are the industry leader in the
delivery of goods purchased over the Internet. We seek to position ourselves as
an indispensable branded component of e-commerce and to focus on the movement
of goods, information and funds.
We consummated an initial public offering of our class B common stock in
November 1999. Immediately before the consummation of the initial public
offering, we consummated a merger whereby UPS of America became our direct
wholly owned subsidiary. The issuance of these debt securities is being made
utilizing a shelf registration statement originally filed with the Securities
and Exchange Commission by UPS of America. We have assumed and adopted that
registration statement and will be the issuer of any debt securities offered
pursuant to the shelf registration statement. Our class B common stock is
listed on the New York Stock Exchange.
When used in this prospectus, unless the context requires otherwise, the
terms "United Parcel Service, Inc.", "UPS", "we", "us", and "our" refer to
United Parcel Service, Inc., a Delaware corporation, and "United Parcel Service
of America, Inc." and "UPS of America" refer to United Parcel Service of
America, Inc., a Delaware corporation and direct wholly owned subsidiary of
United Parcel Service, Inc.
The address and telephone number of our principal executive offices are 55
Glenlake Parkway, N.E., Atlanta, Georgia 30328, (404) 828-6000.
RATIO OF EARNINGS TO FIXED CHARGES
Nine Months
Ended
Year Ended December 31, September 30,
------------------------ -------------
1995 1996 1997 1998 1999 1998 1999
---- ---- ---- ---- ---- ------ ------
Ratio of Earnings to
Fixed Charges (1)....................... 7.6 8.2 4.9 8.9 6.7 8.7 4.7
- --------
(1) For purposes of calculating the ratio of earnings to fixed charges,
earnings is defined as income before income taxes and fixed charges
(excluding capitalized interest). Fixed charges include interest (whether
capitalized or expensed), amortization of debt expense and any discount or
premium relating to any indebtedness (whether capitalized or expensed) and
the portion of rent expense considered to represent interest.
USE OF PROCEEDS
Unless otherwise stated in a prospectus supplement, the net proceeds from
the sale of the debt securities offered under this prospectus and a related
prospectus supplement will be used for general corporate purposes, including
UPS's working capital needs, the funding of investments in, or extensions of
credit to, our operating subsidiaries, possible acquisitions and investments in
joint ventures and the possible reduction of outstanding indebtedness. Pending
any of these uses, we may temporarily invest the net proceeds in investment
grade securities.
4
DESCRIPTION OF DEBT SECURITIES
The debt securities are to be issued under an indenture dated as of January
26, 1999, between UPS of America and Citibank, N.A., which acts as trustee,
which indenture we assumed pursuant to a supplemental indenture. In this
prospectus "indenture" will refer to the indenture and the supplemental
indenture. A copy of the indenture is filed as an exhibit to the registration
statement of which this prospectus is a part. The indenture and its associated
documents contain the full legal text of the matters described in this section.
The indenture and the debt securities are governed by New York law. A copy of
the indenture may be obtained from us as described under "Where You Can Find
More Information" on page 2.
This section summarizes the material terms of the debt securities that may
be issued under this debt program. Because this section is a summary, it does
not describe every aspect of the debt securities. This summary is subject to
and qualified in its entirety by reference to all the provisions of the
indenture, including definitions of terms used in the indenture. In this
summary, we describe the meaning for only the more important terms. We also
include references in parentheses to sections of the indenture. Whenever we
refer to particular sections or defined terms of the indenture in this
prospectus or in a prospectus supplement, the sections or defined terms are
incorporated by reference in this prospectus or in the prospectus supplement.
You must look to the indenture for the most complete description of what we
describe in summary form in this prospectus.
This summary also is subject to and qualified by reference to the
description of the particular terms of the debt securities described in the
prospectus supplement. The prospectus supplement relating to each series of
debt securities will be attached to the front of this prospectus. There also
may be a further prospectus supplement, know as a pricing supplement, which
contains the precise terms of debt securities you are offered.
The term "Securities," as used under this caption, refers to all Securities
issued under the indenture, including the debt securities.
General
The indenture provides that Securities in separate series may be issued from
time to time, without limitation as to aggregate principal amount. We may
specify a maximum aggregate principal amount for the Securities of any series.
(Section 3.01) The Securities are to have terms and provisions that are not
inconsistent with the indenture, including terms as to maturity, principal and
interest as we may determine. The Securities will be unsecured obligations and
will rank on a parity with all of our other unsecured and unsubordinated
indebtedness. The provisions of the indenture described below provide us with
the ability, in addition to the ability to issue Securities with terms
different from those of Securities previously issued, to "reopen" a previous
issue of a series of Securities and issue additional Securities of that series.
The applicable prospectus supplement will set forth the price or prices at
which the Securities to be offered will be issued and will describe the
following terms, as applicable, of the Securities:
(a) the title of the Securities of the series;
(b) any limit upon the aggregate principal amount of the Securities of
the series that may be authenticated and delivered under the indenture;
(c) the person or entity to whom any interest on the Securities of the
series will be payable;
5
(d) the date or dates on which the principal, premium, if any, or other
form or type of consideration to be paid upon maturity on any Securities of
the series will be payable;
(e) the rate or rates at which any Securities of the series will bear
interest, if any, or any method by which the rate or rates will be
determined, the date or dates from which any interest will accrue, the
interest payment dates on which any interest will be payable and the record
date for any interest payable on any interest payment date;
(f) the place or places where the principal, premium, if any, interest
or other form or type of consideration to be paid upon maturity on any
Securities of the series will be payable;
(g) the period or periods within which, the price or prices at which and
the terms and conditions upon which any Securities of the series may be
redeemed, in whole or in part, at our option and, if other than by a
resolution by our Board of Directors or its Executive Committee, the manner
in which any election by us to redeem the Securities will be evidenced;
(h) our obligation, if any, to redeem or purchase any Securities of the
series pursuant to any sinking fund or analogous provisions or at the
option of the Holder of the Securities, and the period or periods within
which, the price or prices at which and the terms and conditions upon which
any Securities of the series will be redeemed or purchased, in whole or in
part, pursuant to any obligation and any provisions for the remarketing of
any Securities;
(i) if other than denominations of $1,000 and any integral multiple of
$1,000, the denominations in which any Securities of the series will be
issuable;
(j) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index,
formula or other method, the manner in which these amounts will be
determined;
(k) if other than the currency of the United States of America, the
currency, currencies or composite currencies in which the principal of or
any premium or interest on any Securities of the series will be payable and
the manner of determining the equivalent in the currency of the United
States of America for any purpose;
(l) if the principal of or any premium or interest on any Securities of
the series is to be payable, at our election or the election of the Holder
of the Securities, in one or more currencies or composite currencies other
than that or those in which Securities are stated to be payable, the
currency, currencies or composite currencies in which the principal of or
interest on Securities as to which an election is made will be payable, the
periods within which and the terms and conditions upon which an election is
to be made and the amount so payable, or the manner in which the amount
will be determined;
(m) if other than the entire principal amount of any Securities, the
portion of the principal amount of the Securities of the series that will
be payable upon declaration of acceleration of the maturity of the
Securities;
(n) if the principal amount payable at the stated maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the stated maturity, the amount that will be deemed to be
the principal amount of the Securities as of any such date for any purpose
under the Securities or under this prospectus, including the principal
amount of the Securities that will be due and payable upon any maturity
other than the stated maturity or that will be deemed to be outstanding as
of any date prior to the stated maturity;
(o) if applicable, that the Securities of the series, in whole or any
specified part, will be defeasible and that some of our covenants will be
defeasible and, if other than by a resolution of our Board of Directors or
Executive Committee, the manner in which any election by us to defease any
Securities or covenants will be evidenced;
(p) if applicable, that any Securities of the series will be issuable in
whole or in part in the form of one or more global securities and, in that
case, the respective depositories for the global securities, the form of
any legend or legends that will be borne by any global security and any
circumstances in which
6
any global security may be exchanged in whole or in part for Securities
registered, and any transfer of a global security in whole or in part may
be registered, in the name or names of persons or entities other than a
depository for a global security;
(q) whether, and the terms and conditions relating to when, we may
satisfy some of our obligations with respect to the Securities with regard
to payment upon maturity, or any redemption or required repurchase or in
connection with any exchange provisions by delivering to the holders
principal, premium, if any, interest or other form or type of consideration
to be paid upon maturity on any Securities;
(r) any addition to or change in the events of default that apply to any
Securities of the series and any change in the right of the trustee or the
requisite holders of the Securities to declare the principal amount due and
payable;
(s) any addition to or change in the covenants that apply to Securities
of the series;
(t) the terms and conditions pursuant to which the Securities may be
converted into or exchanged for other of our debt securities;
(u) terms with respect to book-entry procedures; and
(v) any other terms of the Securities of the series, which terms will
not otherwise be inconsistent with the indenture and as authorized and
approved by us.
Securities, including original issue discount securities, may be sold at a
substantial discount below their principal amount. We may describe special
United States federal income tax considerations, if any, applicable to
Securities sold at an original issue discount in the applicable prospectus
supplement. In addition, we may describe special United States federal income
tax or other considerations, if any, applicable to any Securities that are
denominated in a currency or currency unit other than United States dollars in
the applicable prospectus supplement.
Form, Exchange and Transfer
The Securities of each series will be issuable only in registered form,
without coupons and, unless we specify otherwise in the applicable prospectus
supplement, only in denominations of $1,000 and integral multiples of $1,000.
(Section 3.02)
At the option of the Holder, subject to the terms of the indenture and the
limitations applicable to Global Securities, Securities of each series will be
exchangeable for other Securities of the same series of any authorized
denomination and of a like tenor and aggregate principal amount. (Section 3.05)
Subject to the terms of the indenture and the limitations applicable to
Global Securities, Securities may be presented for exchange as provided above
or for registration of transfer (duly endorsed or with the form of transfer
endorsed thereon duly executed) at the office of the Security Registrar or at
the office of any transfer agent we designate for such purpose. No service
charge will be made for any registration of transfer or exchange of Securities,
but we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Transfer or exchange will
be effected by the Security Registrar or the transfer agent, as the case may
be, being satisfied with the documents of title and identity of the person
making the request. We have appointed the trustee as Security Registrar.
(Section 3.05) We may at any time designate additional transfer agents or
rescind the designation of any transfer agent or approve a change in the office
through which any transfer agent acts, except that we will be required to
maintain a transfer agent in each Place of Payment for the Securities of each
series. (Section 10.02)
If the Securities of any series (or of any series and specified tenor) are
to be redeemed in part, we will not be required to:
. issue, register the transfer of or exchange any Security of that series
(or of that series and specified tenor, as the case may be) during a
period beginning at the opening of business 15 days before the
7
day of mailing of a notice of redemption of any Security that may be
selected for redemption and ending at the close of business on the day
of such mailing or
. register the transfer of or exchange any Security so selected for
redemption, in whole or in part, except the unredeemed portion of any
Security being redeemed in part. (Section 3.05)
Global Securities
Some or all of the Securities of any series may be represented, in whole or
in part, by one or more Global Securities that have an aggregate principal
amount equal to that of the Securities represented thereby. Each Global
Security will be registered in the name of The Depository Trust Company, New
York, New York or its nominee identified in the applicable prospectus
supplement, will be deposited with DTC or its nominee or a custodian and will
bear a legend regarding the restrictions on exchanges and registration of
transfer thereof referred to below and any other matters as may be provided for
pursuant to the indenture. Unless otherwise described in the prospectus
supplement relating to each series, the Securities of each series offered, sold
or delivered in the United States will be issued in the form of one or more
fully registered global notes that will be deposited with, or on behalf of, DTC
and registered in the name of the DTC nominee.
DTC has advised us as follows:
. it is a limited-purpose trust company which was created to hold
securities for its participating organizations and to facilitate the
clearance and settlement of securities transactions between
DTC participants in securities through electronic book-entry changes in
accounts of DTC participants;
. DTC participants include securities brokers and dealers (including the
underwriters for the Securities), banks and trust companies, clearing
corporations and certain other organizations;
. access to DTC's system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants"); and
. persons who are not DTC participants may beneficially own securities
held by DTC only through DTC participants or indirect participants.
Unless otherwise provided in the applicable prospectus supplement, payments
of principal, any premium or interest on or related to the Securities of each
series registered in the name of DTC's nominee will be made by the trustee to
DTC's nominee as the registered owner of the Global Security. Under the terms
of the indenture, UPS and the trustee will treat the persons in whose names the
Securities of each series are registered as the owners of the Securities for
the purpose of receiving payment of principal, any premium or interest on the
Securities and for all other purposes. Therefore, neither we, the trustee nor
the Paying Agent has any direct responsibility or liability for the payment of
the principal, any premium or interest on the Securities to owners of
beneficial interests in a Global Security. DTC has advised us and the trustee
that its present practice is, upon receipt of any payment of principal, any
premium, or interest, to immediately credit the accounts of the
DTC participants with the payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in such Global Security as
shown on DTC's records.
Notwithstanding any provision of the indenture or any Security described in
this prospectus, no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than DTC or any nominee of
DTC unless:
. DTC has notified us that it is unwilling or unable to continue as
depositary for a Global Security or has ceased to be qualified to act as
depositary as required by the indenture;
. there shall have occurred and be continuing an Event of Default with
respect to the Securities represented by a Global Security; or
. there shall exist circumstances, if any, in addition to or in lieu of
those described above as may be described in the applicable prospectus
supplement.
All securities issued in exchange for a Global Security or any portion of a
Global Security will be registered in the names as DTC may direct. (Sections
2.04 and 3.05)
8
As long as DTC, or its nominee, is the registered Holder of a Global
Security, DTC or its nominee, as the case may be, will be considered the sole
owner and Holder of the Global Security and the Securities represented thereby
for all purposes under the Securities and the indenture. Except in the limited
circumstances referred to above, owners of beneficial interests in a Global
Security will not be entitled to have such Global Security or any Securities
represented thereby registered in their names, will not receive or be entitled
to receive physical delivery of certificated Securities in exchange therefor
and will not be considered to be the owners or Holders of such Global Security
or any Securities represented thereby for any purpose under the Securities or
the indenture. All payments and deliveries of principal of and any premium,
Maturity Consideration and interest on a Global Security will be made to DTC or
its nominee, as the case may be, as the Holder thereof. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. These laws may impair the
ability to transfer beneficial interests in a Global Security.
Ownership of beneficial interests in a Global Security will be limited to
DTC participants and to persons that may hold beneficial interests through
DTC participants. In connection with the issuance of any Global Security, DTC
will credit, on its book entry registration and transfer system, the respective
principal amounts of Securities represented by the Global Security to the
accounts of its DTC participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by DTC, with respect to
DTC participants' interests, or any DTC participant, with respect to interests
of persons held by DTC participants on their behalf. Payments, transfers,
exchanges and other matters relating to beneficial interests in a Global
Security may be subject to various policies and procedures adopted by DTC from
time to time. None of us, the trustee or any agent of us or the trustee will
have any responsibility or liability for any aspect of DTC's or any
DTC participant's records relating to, or for payments made on account of,
beneficial interests in a Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, beneficial interests
in a Global Security will trade in DTC's same-day funds settlement system, in
which secondary market trading activity in those beneficial interests would be
required by DTC to settle in immediately available funds. There is no assurance
as to the effect, if any, that settlement in immediately available funds would
have on trading activity in such beneficial interests. Also, settlement for
purchases of beneficial interests in a Global Security upon the original
issuance thereof may be required to be made in immediately available funds.
Payment and Paying Agents
Unless otherwise indicated in the applicable prospectus supplement, payment
of interest on a Security on any Interest Payment Date will be made to the
Person in whose name the Security, or one or more Predecessor Securities, is
registered at the close of business on the Regular Record Date for payment of
interest. (Section 3.07)
9
Unless otherwise indicated in the applicable prospectus supplement,
principal of and any premium, Maturity Consideration and interest on the
Securities of a particular series (other than a Global Security) will be
payable or deliverable at the office of the Paying Agent or Paying Agents as we
may designate for that purpose from time to time, except that at our option
payment of any interest may be made by check mailed to the address of the
Person entitled to the payment as that address appears in the Security
Register. Unless otherwise indicated in the applicable prospectus supplement,
the corporate trust office of the trustee in The City of New York will be
designated as our sole Paying Agent for payments and deliveries with respect to
Securities of each series. Any other Paying Agents initially designated for the
Securities of a particular series will be named in the applicable prospectus
supplement. We may at any time designate additional Paying Agents or rescind
the designation of any Paying Agent or approve a change in the office through
which any Paying Agent acts, except that we will be required to maintain a
Paying Agent in each Place of Payment for the Securities of a particular
series. (Section 10.02)
All consideration paid or delivered to a Paying Agent for the payment or
delivery of the principal of or any premium, Maturity Consideration or interest
on any Security that remain unclaimed at the end of two years after such
principal, premium, Maturity Consideration or interest has become due and
payable or deliverable will be repaid to us, and the Holder of the Security
thereafter, as an unsecured general creditor, may look only to us for payment
or delivery thereof. (Section 10.03)
Covenants
Limitation on Secured Indebtedness
We will not create, assume, incur or guarantee, and will not permit any
Restricted Subsidiary to create, assume, incur or guarantee, any Secured
Indebtedness without making provision whereby all the Securities shall be
secured equally and ratably with, or prior to, any Secured Indebtedness,
together with, if we shall so determine, any other Indebtedness of us or any
Restricted Subsidiary then existing or thereafter created that is not
subordinate to the Securities, so long as the Secured Indebtedness shall be
outstanding unless the Secured Indebtedness, when added to:
. the aggregate amount of all Secured Indebtedness then outstanding (not
including in this computation Secured Indebtedness if the Securities are
secured equally and ratably with (or prior to) any Secured Indebtedness
and further not including in this computation any Secured Indebtedness
that is concurrently being retired) and
. the aggregate amount of all Attributable Debt then outstanding pursuant
to Sale and Leaseback Transactions entered into by us after January 26,
1999, or entered into by a Restricted Subsidiary after January 26, 1999
or, if later, the date on which it became a Restricted Subsidiary (not
including in this computation any Attributable Debt that is concurrently
being retired)
would not exceed 10% of Consolidated Net Tangible Assets. (Section 10.06)
Limitation on Sale and Lease Back Transactions
We will not, and will not permit any Restricted Subsidiary to, enter into
any Sale and Leaseback Transaction unless the sum of:
. the Attributable Debt to be outstanding pursuant to any Sale and
Leaseback Transaction;
. all Attributable Debt then outstanding pursuant to all other Sale and
Leaseback Transactions entered into by us after January 26, 1999, or
entered into by a Restricted Subsidiary after January 26, 1999 or, if
later, the date on which it became a Restricted Subsidiary; and
. the aggregate of all Secured Indebtedness then outstanding (not
including in this computation Secured Indebtedness if the Securities are
secured equally and ratably with (or prior to) such Secured
Indebtedness)
would not exceed 10% of Consolidated Net Tangible Assets, or
10
an amount equal to the greater of:
. the net proceeds to us or the Restricted Subsidiary of the sale of the
Principal Property sold and leased back pursuant to any Sale and
Leaseback Transaction; and
. the amount of Attributable Debt to be outstanding pursuant to any Sale
and Leaseback Transaction
is applied to the retirement of Funded Debt of us or any Restricted
Subsidiaries (other than Funded Debt that is subordinate to the Securities or
is owing to us or any Restricted Subsidiaries) within 180 days after the
consummation of any Sale and Leaseback Transaction. (Section 10.07)
Consolidation, Merger and Sale of Assets
We may not consolidate with or merge with or into any other Person or
convey, transfer or lease all or substantially all of our properties and assets
substantially as an entirety to any Person unless:
(a) either we are the continuing corporation or the Person, if other
than us, formed by any consolidation or into which we are merged or the
Person that acquires by conveyance, transfer, or lease, the properties and
assets of us substantially as an entirety shall be a corporation,
partnership or trust, shall be organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, in form satisfactory to the trustee,
the due and punctual payment or delivery of the Maturity Consideration and
interest on all the Securities and the performance of every covenant in the
indenture on the part of us to be performed or observed;
(b) immediately after giving effect to such transaction, and treating
any Indebtedness that becomes an obligation of us or any Subsidiary in
connection with or as a result of such transaction as having been incurred
at the time of such transaction, no Event of Default, and no event that,
after notice or lapse of time or both, would become an Event of Default,
shall have occurred and be continuing; and
(c) we or such Person has delivered to the trustee an Officer's
Certificate and an opinion of counsel, as to which opinion, counsel may
rely on the Officer's Certificate as to factual matters, each stating that
such consolidation, merger, conveyance, transfer or lease comply with the
foregoing and that all conditions precedent provided for in the indenture
or relating to the transaction have been complied with.
Upon any consolidation or merger or any conveyance, transfer or lease of the
properties and assets of us substantially as an entirety, the successor Person
formed by a consolidation, or into which we are merged or the successor Person
to which any conveyance, transfer or lease is made, shall succeed to, and be
substituted for, and may exercise every right and power of us under the
Securities and the indenture with the same effect as if that successor had been
named as us therein; and thereafter, except in the case of a lease, we shall be
discharged from all obligations and covenants under the indenture and the
Securities. (Sections 8.01 and 8.02)
Definitions
"Attributable Debt" means, as of the date of its determination, the present
value (discounted semiannually at an interest rate of 7.0% per annum) of the
obligation of a lessee for rental payments pursuant to any Sale and Leaseback
Transaction (reduced by the amount of the rental obligations of any sublessee
of all or part of the same property) during the remaining term of such Sale and
Leaseback Transaction (including any period for which the lease relating
thereto has been extended), such rental payments not to include amounts payable
by the lessee for maintenance and repairs, insurance, taxes, assessments and
similar charges and for contingent rents (such as those based on sales). In the
case of any Sale and Leaseback Transaction in which the lease is terminable by
the lessee upon the payment of a penalty, the rental payments shall be
considered for purposes of this definition to be the lesser of:
(1) the rental payments to be paid under such Sale and Leaseback
Transaction until the first date (after the date of such determination)
upon which it may be so terminated plus the then applicable penalty upon
such termination and
11
(2) the rental payments required to be paid during the remaining term
of any Sale and Leaseback Transaction (assuming such termination provision
is not exercised).
"Board of Directors" means either our board of directors or a committee of
that board duly authorized to act for it in respect of the indenture.
"Board Resolution" means a copy of a resolution certified by our Secretary
or an Assistant Secretary to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of the certification.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) real
or personal property that is required to be classified and accounted for as a
capital lease obligation under generally accepted accounting principles, and,
for the purposes of the indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at the applicable date, determined in
accordance with such principles.
"Consolidated Net Tangible Assets" means at any date, the total assets
appearing on the most recently prepared consolidated balance sheet of us and
the Subsidiaries as of the end of our fiscal quarter, prepared in accordance
with generally accepted accounting principles, less all current liabilities as
shown on the balance sheet and Intangible Assets.
"Funded Debt" means any indebtedness maturing by its terms more than one
year from its date of issue, including any indebtedness renewable or extendable
at the option of the obligor to a date later than one year from its original
date of issue.
"Indebtedness" means
(a) any liability of any Person:
(1) for borrowed money, or under any reimbursement obligation relating
to a letter of credit; or
(2) evidenced by a bond, note, debenture or similar instrument,
including a purchase money obligation, given in connection with the
acquisition of any businesses, properties or assets of any kind or with
services incurred in connection with capital expenditures, other than a
trade payable or a current liability arising in the ordinary course of
business; or
(3) for the payment of money relating to a Capitalized Lease
Obligation; or
(4) for Interest Rate Protection Obligations;
(b) any liability of others described in the preceding clause (a) that the
Person has guaranteed or that is otherwise its legal liability; and
(c) any amendment, supplement, modification, deferral, renewal, extension
or refunding of any liability of the types referred to in clauses (a) and (b)
above.
12
"Intangible Assets" means at any date the value (net of any applicable
reserves), as shown on or reflected in our most recently prepared consolidated
balance sheet, prepared in accordance with generally accepted accounting
principles, of:
(1) all trade names, trademarks, licenses, patents, copyrights and
goodwill;
(2) organizational and development costs;
(3) deferred charges (other than prepaid items such as insurance,
taxes, interest, commissions, rents and similar items and tangible assets
being amortized); and
(4) unamortized debt discount and expense, less unamortized premium.
"Interest Rate Protection Obligations" of any Person means the obligations
of that Person pursuant to any arrangement with any other Person whereby,
directly or indirectly, that Person is entitled to receive from time to time
periodic payments calculated by applying a fixed rate of interest on a stated
notional amount in exchange for periodic payments made by such Person
calculated by applying a floating rate of interest on the same notional
amount.
"Liens" means any mortgage, lien, pledge, security interest, charge or
encumbrance.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof or any other entity.
"Principal Property" means any land, land improvements, buildings and
associated factory, distribution, laboratory and office equipment (excluding
any products marketed by us or any Subsidiary) constituting a distribution
facility, operating facility, manufacturing facility, development facility,
warehouse facility, service facility or office facility (including any portion
thereof), which facility
(a) is owned by or leased to us or any Restricted Subsidiary,
(b) is located within the United States and
(c) has an acquisition cost plus capitalized improvements in excess of
0.50% of Consolidated Net Tangible Assets as of the date of that
determination, other than:
(1) any facility, or portion thereof, which has been financed by
obligations issued by or on behalf of a State, a Territory or a possession
of the United States, or any political subdivision of any of the foregoing,
or the District of Columbia, the interest on which is excludable from gross
income of the holders thereof (other than a "substantial user" of the
related facility or a "related Person" as those terms are used in Section
103 of the Internal Revenue Code pursuant to the provisions of Section 103
of the Internal Revenue Code (or any similar provision hereafter enacted)
as in effect at the time of issuance of the obligations;
(2) any facility that the Board of Directors may by Board Resolution
declare is not of material importance to us and the Restricted Subsidiaries
taken as a whole; and
(3) any facility, or portion thereof, owned or leased jointly or in
common with one or more Persons other than us and any Subsidiary and in
which the interest of us and all Subsidiaries does not exceed 50%.
"Restricted Securities" means any shares of the capital stock or
Indebtedness of any Restricted Subsidiary.
"Restricted Subsidiary" means (a) any Subsidiary:
(1) which has substantially all its property within the United States
of America;
(2) which owns or is a lessee of any Principal Property; and
(3) in which the investment of us and all other Subsidiaries exceeds
0.50% of Consolidated Net Tangible Assets as of the date of the
determination; provided, however, that the term "Restricted Subsidiary"
shall not include:
(A) any Subsidiary (x) primarily engaged in the business of
purchasing, holding, collecting, servicing or otherwise dealing in and
with installment sales contracts, leases, trust receipts, mortgages,
commercial paper or other financing instruments, and any collateral or
agreements relating
13
thereto, including in the business, individually or through
partnerships, of financing, whether through long- or short-term
borrowings, pledges, discounts or otherwise, the sales, leasing or other
operations of us and the Subsidiaries or any of them, or (y) engaged in
the business of financing the assets and operations of third parties,
and (z) in any case, not, except as incidental to such financing
business, engaged in owning, leasing or operating any property which,
but for this proviso, would qualify as Principal Property; or
(B) any Subsidiary acquired or organized after January 26, 1999, for
the purpose of acquiring the stock or business or assets of any Person
other than us or any Restricted Subsidiary, whether by merger,
consolidation, acquisition of stock or assets or similar transaction
analogous in purpose or effect, so long as such Subsidiary does not
acquire by merger, consolidation, acquisition of stock or assets or
similar transaction analogous in purpose or effect all or any
substantial part of the business or assets of us or any Restricted
Subsidiary; and
(b) any other Subsidiary that is hereafter designated by the Board of
Directors as a Restricted Subsidiary.
"Sale and Leaseback Transaction" means any arrangement with any Person
providing for the leasing by UPS or any Restricted Subsidiary of any Principal
Property (whether the Principal Property is now owned or hereafter acquired)
that has been or is to be sold or transferred by us or a Restricted Subsidiary
to any Person, other than
(a) temporary leases for a term, including renewals at the option of
the lessee, of not more than three years;
(b) leases between us and a Restricted Subsidiary or between Restricted
Subsidiaries; and
(c) leases of Principal Property executed by the time of, or within 180
days after the latest of, the acquisition, the completion of construction
or improvement (including any improvements on property that will result in
the property becoming Principal Property), or the commencement of
commercial operation of the Principal Property.
"Secured Indebtedness" means Indebtedness of us or a Restricted Subsidiary
that is secured by any Lien upon any Principal Property or Restricted
Securities, and Indebtedness of us or a Restricted Subsidiary in respect of any
conditional sale or other title retention agreement covering Principal Property
or Restricted Securities; but "Secured Indebtedness" shall not include any of
the following:
(1) Indebtedness of us and the Restricted Subsidiaries outstanding on
January 26, 1999, secured by then-existing Liens upon, or incurred in
connection with conditional sales agreements or other title retention
agreements with respect to Principal Property or Restricted Securities;
(2) Indebtedness that is secured by:
(A) purchase money Liens upon Principal Property acquired after
January 26, 1999 or
(B) Liens placed on Principal Property after January 26, 1999, during
construction or improvement thereof (including any improvements on
property which will result in the property becoming Principal Property)
or placed thereon within 180 days after the later of acquisition,
completion of construction or improvement or the commencement of
commercial operation of the Principal Property or improvement, or placed
on Restricted Securities acquired after January 26, 1999, or
(C) conditional sale agreements or other title retention agreements
with respect to any Principal Property or Restricted Securities acquired
after January 26, 1999, if (in each case referred to in this
subparagraph (2)) (x) the related Lien or agreement secures all or any
part of the Indebtedness incurred for the purpose of financing all or
any part of the purchase price or cost of construction of the Principal
Property or improvement or Restricted Securities and (y) the related
Lien or agreement does not extend to any Principal Property or
Restricted Securities other than the Principal Property so acquired or
the Principal Property, or portion thereof, on which the property so
constructed or any improvement is located; provided, however, that the
amount by which the aggregate principal amount
14
of Indebtedness secured by any Lien or agreement exceeds the cost to us
or the Restricted Subsidiary of the related acquisition, construction
or improvement will be considered to be "Secured Indebtedness;"
(3) Indebtedness that is secured by Liens on Principal Property or
Restricted Securities, which Liens exist at the time of acquisition (by any
manner whatsoever) of the Principal Property or Restricted Securities by
UPS or a Restricted Subsidiary;
(4) Indebtedness of Restricted Subsidiaries owing to us or any other
Restricted Subsidiary and Indebtedness of us owing to any Restricted
Subsidiary;
(5) In the case of any corporation that becomes (by any manner
whatsoever) a Restricted Subsidiary after January 26, 1999, Indebtedness
that is secured by Liens upon, or conditional sale agreements or other
title retention agreements with respect to, its property that constitutes
Principal Property or Restricted Securities, which Liens exist at the time
the related corporation becomes a Restricted Subsidiary;
(6) Guarantees by us of Secured Indebtedness and Attributable Debt of
any Restricted Subsidiaries and guarantees by a Restricted Subsidiary of
Secured Indebtedness and Attributable Debt of us and any other Restricted
Subsidiaries;
(7) Indebtedness arising from any Sale and Leaseback Transaction;
(8) Indebtedness secured by Liens on property of us or a Restricted
Subsidiary in favor of the United States of America, any State, Territory
or possession thereof, or the District of Columbia, or any department,
agency or instrumentality or political subdivision of the United States of
America or any State, Territory or possession thereof, or the District of
Columbia, or in favor of any other country or any political subdivision
thereof, if the related Indebtedness was incurred for the purpose of
financing all or any part of the purchase price or the cost of construction
of the property subject to the Lien; provided, however, that the amount by
which the aggregate principal amount of Indebtedness secured by any Lien
exceeds the cost to UPS or the Restricted Subsidiary of the related
acquisition or construction will be considered to be "Secured
Indebtedness";
(9) Indebtedness secured by Liens on aircraft, airframes or aircraft
engines, aeronautic equipment or computers and electronic data processing
equipment; and
(10) The replacement, extension or renewal, or successive replacements,
extensions or renewals, of any Indebtedness, in whole or in part, excluded
from the definition of "Secured Indebtedness" by subparagraphs (1) through
(9) above; provided, however, that no Lien securing, or conditional sale or
title retention agreement with respect to, the Indebtedness will extend to
or cover any Principal Property or any Restricted Securities, other than
the property that secured the Indebtedness so replaced, extended or
renewed, plus improvements on or to any such Principal Property, provided
further, however, that to the extent that replacement, extension or renewal
increases the principal amount of Indebtedness secured by the Lien or is in
a principal amount in excess of the principal amount of Indebtedness
excluded from the definition of "Secured Indebtedness" by subparagraphs (1)
through (9) above, the amount of the increase or excess will be considered
to be "Secured Indebtedness."
In no event shall the foregoing provisions be interpreted to mean or their
operation to cause the same Indebtedness to be included more than once in the
calculation of "Secured Indebtedness" as that term is used in the indenture.
"Subsidiary" means any corporation of which, at the time of determination,
we and/or one or more Subsidiaries owns or controls directly or indirectly more
than 50% of the shares of voting stock.
"Wholly owned," when used with reference to a Subsidiary, means a Subsidiary
of which all of the outstanding capital stock is owned by us or by one or more
wholly owned Subsidiaries.
"Voting Stock," when used with reference to a Subsidiary, means stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors,
15
managers or trustees of the Subsidiary provided that, for the purposes of the
indenture, stock that carries only the right to vote conditionally on the
happening of an event shall not be considered voting stock whether or not such
event shall have happened.
Events of Default
The indenture defines an Event of Default with respect to any series of
Securities as being any one of the following events:
(a) default in the payment of any interest on the Securities of that
series when due, and the continuance of that default for a period of 30
days;
(b) default in the delivery or payment of the Maturity Consideration on
the Securities of that series at the date on which the principal becomes
due and payable as provided in the Security or in the indenture, whether at
the Stated Maturity or by declaration of acceleration, call for redemption
or otherwise;
(c) default in the deposit of any sinking fund payment, when and as due
on the Securities of that series;
(d) default in the performance or breach of any of our covenants or
warranties under the indenture (other than a covenant or warranty a default
in performance or breach of which is specifically dealt with in the
indenture) and the continuance of the default or breach for a period of 60
days after written notice as provided in the indenture; or
(e) certain events involving our bankruptcy, insolvency or
reorganization. (Section 5.01)
The indenture provides that if an Event of Default specified therein shall
occur and be continuing with respect to the Securities of any series, other
than an Event of Default involving bankruptcy, insolvency or reorganization,
either the trustee or the Holders of 25% in principal amount, or if the
Securities are not payable at Maturity for a fixed principal amount, 25% of the
aggregate issue price, of the Outstanding Securities of that series, each
series acting as a separate class, may declare the principal of the Securities
of that series, or an other amount or property, as may be provided for in the
Securities of that series, to be due and payable. If an Event of Default
described in clause (e) above with respect to the Securities of any series at
the time outstanding shall occur, the principal amount of all the Securities of
that series, or such other amount or property, as may be provided for in the
Securities of that series, (or, in the case of any Original Issue Discount
Security, such specified amount) will automatically, and without any action by
the trustee or any Holder, become immediately due and payable. (Section 5.02).
The Holders of not less than a majority in aggregate principal amount of the
Securities of a series may, on behalf of all Holders of Securities of the
series, waive any past default under the indenture with respect to the
Securities of the series, except a default in the delivery or payment of the
Maturity Consideration or interest on any Security of the series, and default
in respect of a covenant or provision of the indenture that cannot be modified
or amended without the consent of the Holder of each Outstanding Security of
the affected series. (Section 5.13)
Subject to the provisions of the indenture relating to the duties of the
trustee in case an Event of Default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or discretion of any of the Holders, unless the
Holders shall have offered to the trustee reasonable indemnity. (Section 6.03)
Subject to such provisions for the indemnification of the trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Securities of
any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee, with respect to the
Securities of that series. (Section 5.12)
16
No Holder of a Security of any series will have any right to institute any
proceeding with respect to the indenture, or for the appointment of a receiver
or a trustee, or for any other remedy under the indenture, unless
(1) the Holder has previously given to the trustee written notice of a
continuing Event of Default with respect to the Securities of that series,
(2) the Holders of at least 25% in aggregate principal amount, or if
the Securities are not payable at Maturity for a fixed principal amount,
the aggregate issue price of the Outstanding Securities of that series,
have made written request to the trustee to institute a proceeding as
trustee,
(3) the Holder or Holders have offered to the trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request, and
(4) the trustee has failed to institute such proceeding, and has not
received from the Holders of a majority in aggregate principal amount or,
if the Securities are not payable at Maturity for a fixed principal amount,
the aggregate issue price of the Outstanding Securities of that series, a
direction inconsistent with the request, within 60 days after the notice,
request and offer. (Section 5.07) However, these limitations do not apply
to a suit instituted by a Holder of a Security for the enforcement of
delivery or payment of the Maturity Consideration relating to, or interest
on, the Security on or after the applicable due date specified in the
Security. (Section 5.08)
We will be required to furnish to the trustee annually a statement by
certain of our officers as to whether or not we, to our knowledge, are in
default in the performance or observance of any of the terms, provisions and
conditions of the indenture and, if so, specifying all known defaults. (Section
10.04)
Defeasance and Covenant Defeasance
If and to the extent indicated in the applicable prospectus supplement, we
may elect, at our option at any time, to have the provisions of Section 13.02
of the indenture, relating to defeasance and discharge of indebtedness, or
Section 13.03 of the indenture, relating to defeasance of certain restrictive
covenants in the indenture, applied to the Securities of any series, or to any
specified part of a series. (Section 13.01)
Defeasance and Discharge
The indenture provides that, upon our exercise of our option to have Section
13.02 of the indenture apply to any Securities, UPS will be deemed to have been
discharged from all obligations with respect to the Securities (except for
certain obligations to exchange or register the transfer of Securities, to
replace stolen, lost or mutilated Securities, to maintain paying agencies and
to hold moneys for payment in trust) upon the deposit in trust for the benefit
of the Holders of the Securities of money or U.S. Government Obligations, or
both, which, through the payment of principal and interest in respect thereof
in accordance with their terms, will provide money in an amount sufficient to
pay the principal of and any premium and interest on the Securities on the
respective Stated Maturities in accordance with the terms of the indenture and
the Securities. Defeasance or discharge may occur only if, among other things,
we have delivered to the trustee an Opinion of Counsel to the effect that, we
have received from, or there has been published by, the United States Internal
Revenue Service a ruling, or there has been a change in tax law, in any case to
the effect that Holders of the Securities will not recognize gain or loss for
federal income tax purposes as a result of the deposit, defeasance and
discharge and will be subject to federal income tax on the same amount, in the
same manner and at the same times as would have been the case if the deposit,
defeasance and discharge were not to occur. (Sections 13.02 and 13.04)
Defeasance of Covenants
The indenture provides that, upon our exercise of our option to have Section
13.03 of the indenture apply to any Securities, we may omit to comply with
certain restrictive covenants, including those described under "Covenants," any
that may be described in the applicable prospectus supplement, and the
occurrence of certain Events of Default, which are described above in clause
(d) (with respect to restrictive covenants) and
17
under "Events of Default" and any that may be described in the applicable
prospectus supplement, will be deemed not to be or result in an Event of
Default, in each case with respect to the Securities. In order to exercise its
option, we will be required to deposit, in trust for the benefit of the Holders
of the Securities, money or U.S. Government Obligations, or both, which,
through the payment of principal and interest in respect thereof in accordance
with their terms, will provide money in an amount sufficient to pay the
principal of and any premium and interest on the Securities on the respective
Stated Maturities in accordance with the terms of the indenture and the
Securities. We will also be required, among other things, to deliver to the
trustee an Opinion of Counsel to the effect that Holders of the Securities will
not recognize gain or loss for federal income tax purposes as a result of
deposit and defeasance of certain obligations and will be subject to federal
income tax on the same amount, in the same manner and at the same times as
would have been the case if the deposit and defeasance were not to occur. In
the event we exercised this option with respect to any Securities and the
Securities were declared due and payable because of the occurrence of any Event
of Default, the amount of money and U.S. Government Obligations so deposited in
trust would be sufficient to pay amounts due on the Securities at the time of
their respective Stated Maturities but may not be sufficient to pay amounts due
on the Securities upon any acceleration resulting from the Event of Default. In
that case, we would remain liable for the payments. (Sections 13.03 and 13.04)
Modification of the Indenture
The indenture provides that we and the trustee may, without the consent of
any Holders of Securities, enter into supplemental indentures for the purposes,
among other things, of adding to our covenants, adding additional Events of
Default, establishing the form or terms of Securities or curing ambiguities or
inconsistencies in the indenture or making other provisions, provided that any
action to cure ambiguities or inconsistencies shall not adversely affect the
interests of the Holders of any Outstanding series of Securities in any
material respect. (Section 9.01)
Modifications and amendments of the indenture may be made by us and the
trustee with the consent of the Holders of a majority in aggregate principal
amount or, if the Securities are not payable at Maturity for a fixed principal
amount, the aggregate issue price, of the Outstanding Securities of each series
affected thereby, except that no modification or amendment may, without the
consent of the Holder of each Outstanding Security affected thereby,
(a) change the Stated Maturity of the Maturity Consideration or any
installment of Maturity Consideration or interest on, any Security,
(b) reduce the principal amount of or reduce the amount or change the
type of Maturity Consideration or reduce the rate of interest on, or any
premium payable upon the redemption of, or the amount of Maturity
Consideration of an Original Issue Discount Security or any other Security
that would be due and deliverable or payable upon a declaration of
acceleration of the Maturity thereof upon the occurrence of an Event of
Default, of any Security,
(c) change the Place of Payment where, or the coin or currency in which,
any Maturity Consideration or interest on any Security are deliverable or
payable,
(d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security,
(e) reduce the percentage in principal amount or aggregate issue price,
as the case may be, of Securities of any series, the consent of whose
Holders is required for modification or amendment of the indenture or for
waiver of compliance with certain provisions of the indenture or for waiver
of certain defaults, or
18
(f) modify the requirements contained in the indenture for consent to or
approval of certain matters except to increase any percentage for a consent
or approval or to provide that certain other provisions cannot be modified
or waived without the consent of the Holder of each Security affected
thereby. (Section 9.02)
A supplemental indenture that changes or eliminates any covenant or other
provision of the indenture which has been expressly included solely for the
benefit of one or more particular series of Securities, or that modifies the
rights of the holders of Securities of the series with respect to the covenant
or other provision, shall be deemed not to affect the rights under the
indenture of the Holders of Securities of any other series. (Section 9.02)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of a series may, on behalf of the Holders of all the Securities of
the series, waive compliance by us with certain restrictive provisions of the
indenture. (Section 10.08)
Notices
Notices to Holders of Securities will be given by mail to the addresses of
the Holders as they may appear in the Security Register. (Section 1.06)
Title
We the trustee and any agent of us or the trustee may treat the Person in
whose name a Security is registered as the absolute owner of a Security for the
purpose of making payment and for all other purposes. (Section 3.08)
Governing Law
The indenture and the Securities will be governed by, and construed in
accordance with, the law of the State of New York. (Section 1.12)
Regarding the Trustee
Citibank, N.A. is the trustee under the indenture. We have other customary
banking relationships with Citibank, N.A. in the ordinary course of business.
PLAN OF DISTRIBUTION
We may sell debt securities to one or more underwriters for public offering
and sale by them or may sell debt securities to investors directly or through
agents. Any underwriter or agent involved in the offer and sale of the debt
securities (the "offered debt securities") will be named in an applicable
prospectus supplement.
Underwriters may offer and sell the offered debt securities at a fixed price
or prices that may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to prevailing market prices or at
negotiated prices. We also may offer and sell the offered debt securities in
exchange for one or more of our outstanding issues of debt securities. We also
may, from time to time, authorize underwriters acting as our agents to offer
and sell the offered debt securities upon the terms and conditions as shall be
set forth in any prospectus supplement. In connection with the sale of offered
debt securities, underwriters may be deemed to have received compensation from
us in the form of underwriting discounts or commissions and may also receive
commissions from purchasers of offered debt securities for whom they may act as
agent. Underwriters may sell offered debt securities to or through dealers, and
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions, which may be changed from
time to time, from the purchasers for whom they may act as agent.
19
Any underwriting compensation paid by us to underwriters or agents in
connection with the offering of offered debt securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable prospectus supplement. Underwriters,
dealers and agents participating in the distribution of the offered debt
securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the offered debt
securities may be deemed to be underwriting discounts and commissions, under
the Securities Act. Underwriters, dealers and agents may be entitled, under
agreements with us, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act, and to
reimbursement by us for certain expenses.
If so indicated in an applicable prospectus supplement, we will authorize
dealers acting as our agents to solicit offers by certain institutions to
purchase offered debt securities from us at the public offering price set
forth in the prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on the date or dates stated in the
prospectus supplement. Each contract will be for an amount not less than, and
the aggregate principal amount of offered debt securities sold pursuant to
contracts shall be not less nor more than, the respective amounts stated in
the prospectus supplement. Institutions with whom contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to our approval. Contracts will
not be subject to any conditions except
(1) the purchase by an institution of the offered debt securities
covered by its contracts shall not at the time of delivery be prohibited
under the laws of any jurisdiction in the United States to which the
institution is subject, and
(2) if the offered debt securities are being sold to underwriters, we
shall have sold to the underwriters the total principal amount of the
offered debt securities less the principal amount thereof covered by
contracts.
Agents and underwriters will have no responsibility in respect of the
delivery or performance of contracts.
All offered debt securities will be a new issue of securities with no
established trading market. Any underwriters to whom offered debt securities
are sold by us for public offering and sale may make a market in such offered
debt securities, but the underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of or the trading markets for any offered debt
securities.
Any underwriter may engage in over-allotment, stabilizing transactions,
short covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves sales in excess of the
offering size, which creates a short position. Stabilizing transactions permit
bids to purchase the underlying security so long as the stabilizing bids do
not exceed a specified maximum. Short covering transactions involve purchases
of the offered debt securities in the open market after the distribution is
completed to cover short positions. Penalty bids permit the underwriters to
reclaim a selling concession from a dealer when the offered debt securities
originally sold by the dealer are purchased in a covering transaction to cover
short positions. Those activities may cause the price of the offered debt
securities to be higher than it would otherwise be. If commenced, the
underwriters may discontinue those activities at any time.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for us in the ordinary
course of business.
20
VALIDITY OF OFFERED DEBT SECURITIES
The validity of the debt securities will be passed upon for UPS by Hunton &
Williams, New York, New York. Certain legal matters in connection with the debt
securities will be passed upon for the underwriters by Brown & Wood LLP, New
York, New York.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from United Parcel Service of America, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
21
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$300,000,000
[Logo of United Parcel Service]
United Parcel Service, Inc.
1.75% Cash-Settled Convertible Senior Notes
due September 27, 2007
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PROSPECTUS SUPPLEMENT
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Merrill Lynch & Co.
September 21, 2000
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