Filed Pursuant to Rule 424(b)(5)
Registration No.333-08369-01
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 22, 2000
(UPS(R)LOGO)
(UNITED PARCEL SERVICE)
UNITED PARCEL SERVICE, INC.
$600,000,000
UPS NOTES
WITH MATURITIES OF 9 MONTHS OR MORE FROM DATE OF ISSUE
---------------------
We plan to offer and sell notes with various terms, which may include the
following:
- maturity of 9 months or more from the date of issue,
- interest at a fixed rate,
- interest payment dates at monthly, quarterly, semi-annual or annual
intervals,
- book-entry form (through The Depository Trust Company),
- redemption and/or repayment provisions, if applicable, whether mandatory,
at our option or the option of the holder, and
- minimum denominations of $1,000 or integral multiples of $1,000.
We will specify the final terms of each note, which may be different from
the terms described in this prospectus supplement, in the applicable pricing
supplement.
You must pay for the notes by delivering the purchase price to an agent,
unless you make other payment arrangements.
INVESTING IN THE NOTES INVOLVES A NUMBER OF RISKS. SEE "RISK FACTORS" ON
PAGE S-5.
---------------------
We may sell notes to the agents as principal for resale at varying or fixed
offering prices or through the agents as agent using their reasonable best
efforts on our behalf. If we sell all of the notes, we expect to receive
aggregate proceeds of between $570,000,000 and $596,400,000, after paying the
agents' discounts and commissions of between $3,600,000 and $30,000,000. The
agents' discounts and commissions may exceed these amounts with respect to sales
of notes with stated maturities in excess of 30 years. Under certain
circumstances, we may also sell notes directly on our own behalf without the
assistance of the agents.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved 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.
ABN AMRO FINANCIAL SERVICES, INC.
CHARLES SCHWAB & CO., INC.
EDWARD D. JONES & CO., L.P.
MERRILL LYNCH & CO.
MORGAN STANLEY
SALOMON SMITH BARNEY
UBS PAINEWEBBER INC.
LOOP CAPITAL MARKETS
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DECEMBER 20, 2001
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Summary of Prospectus Supplement............................ S-3
About This Prospectus Supplement And Pricing Supplements.... S-5
Risk Factors................................................ S-5
Ratio of Earnings to Fixed Charges.......................... S-6
Description of Notes........................................ S-6
General................................................... S-6
Payment of Principal and Interest......................... S-7
Redemption and Repurchase................................. S-9
Repayment at Option of Holder............................. S-9
Repayment Upon Death...................................... S-9
Book-Entry System......................................... S-12
Certain United States Federal Income Tax Consequences....... S-15
United States Holders..................................... S-15
Non-U.S. Holders.......................................... S-21
Information Reporting and Backup Withholding.............. S-22
Supplemental Plan of Distribution........................... S-23
Validity of Notes........................................... S-25
Annex A: Repayment Election Form............................ A-1
PROSPECTUS
Where You Can Find More Information......................... 2
The Company................................................. 3
Ratio of Earnings to Fixed Charges.......................... 4
Use of Proceeds............................................. 4
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 24
Validity of Offered Debt Securities......................... 25
Experts..................................................... 26
S-2
SUMMARY OF PROSPECTUS SUPPLEMENT
You should read the more detailed information appearing elsewhere in this
prospectus supplement, the accompanying prospectus and the applicable pricing
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.
Issuer........................ United Parcel Service, Inc.
Purchasing Agent.............. ABN AMRO Financial Services, Inc.
Title......................... UPS Notes, which we refer to as the notes.
Amount........................ Up to $600,000,000 aggregate principal amount.
Denomination.................. We will issue and sell notes in denominations of
$1,000 and any integral multiple of $1,000.
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.
Maturities.................... The notes will mature nine months or more from
the date of issue, as specified in the
applicable pricing supplement.
Interest...................... - Each note will bear interest from the issue
date at a fixed rate, which will be zero in
the case of a zero-coupon note.
- We will pay interest on each note, other than
a zero-coupon note, on either monthly,
quarterly, semi-annual or annual interest
payment dates and at maturity.
- Unless otherwise specified in the applicable
pricing supplement, interest on the notes will
be computed on the basis of a 360-day year of
twelve 30-day months.
Principal..................... The principal amount of the notes will be
payable on the maturity date of such notes at
the corporate trust office of the trustee.
Redemption and Repayment...... Unless otherwise provided in the applicable
pricing supplement:
- the notes may not be redeemed by us or repaid
at the option of the holder prior to maturity;
and
- the notes will not be subject to any sinking
fund.
S-3
The pricing supplement relating to any note will
indicate whether the holder of such note will
have the right to require us to repay a note
prior to maturity upon the death of the owner of
such note.
Form of Notes................. The notes will be represented by global
securities deposited with or on behalf of the
depositary, The Depository Trust Company, and
registered in the name of the depositary's
nominee. Global notes will be exchangeable for
definitive notes only in limited circumstances.
See "Description of Notes -- Book-Entry System."
Trustee....................... Citibank, N.A., Citibank Agency and Trust
Services, 111 Wall Street, 14th Floor, New York,
New York 10005, under an indenture dated as of
January 26, 1999, as supplemented by the First
Supplemental Indenture thereto, dated as of
March 27, 2000, the Second Supplemental
Indenture thereto, dated as of September 21,
2001, and as further supplemented from time to
time, which we refer to as the indenture.
Agents........................ ABN AMRO Financial Services, Inc., Charles
Schwab & Co., Inc., Edward D. Jones & Co., L.P.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated,
Salomon Smith Barney Inc., UBS PaineWebber Inc.
and Loop Capital Markets, as agents of UPS in
connection with the offering of the notes.
Selling Group Members......... Broker-dealers and other securities firms that
have executed dealer agreements with the
purchasing agent and have agreed to market and
sell the notes in accordance with the terms of
these agreements and all other applicable laws
and regulations. You may call 1-877-373-0322 for
a list of selling group members.
S-4
ABOUT THIS PROSPECTUS
SUPPLEMENT AND PRICING
SUPPLEMENTS
This prospectus supplement sets forth certain terms of the notes that we
may offer and supplements the prospectus that is attached to the back of this
prospectus supplement. This prospectus supplement supersedes the accompanying
prospectus to the extent it contains information that is different from the
information in the prospectus.
Each time we offer notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes we are offering and the terms of the offering. The
pricing supplement will supersede this prospectus supplement or the accompanying
prospectus to the extent it contains information that is different from the
information contained in this prospectus supplement or the accompanying
prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus and pricing
supplement in making your investment decision. You should also read and consider
the information contained in the documents identified in "Where You Can Find
More Information" in the accompanying prospectus.
RISK FACTORS
Your investment in the notes will involve a number of risks. You should
consider carefully the following risks before you decide that an investment in
the notes is suitable for you. You should consult your own financial and legal
advisors regarding the risks and suitability of an investment in the notes.
Redemption -- If your notes are redeemable, we may choose to redeem them when
prevailing interest rates are relatively low.
If your notes are redeemable, we may choose to redeem your notes from time
to time. In the event that prevailing interest rates are relatively low when we
elect to redeem notes, you may not be able to reinvest the redemption proceeds
in a comparable security at an effective interest rate as high as the interest
rate on the notes being redeemed.
Uncertain Trading Market -- We cannot assure you that a trading market for your
notes will ever develop or be maintained.
We cannot assure you that a trading market for your notes will ever develop
or be maintained. Many factors independent of our creditworthiness affect the
trading market and market value of your notes. These factors include, among
others:
- the method of calculating the principal and interest for the notes;
- the time remaining to the maturity of the notes;
- the outstanding amount of the notes;
- the redemption features of the notes; and
- the level, direction and volatility of interest rates generally.
There may be a limited number of buyers when you decide to sell your notes,
which may affect the price you receive for your notes or your ability to sell
your notes at all.
S-5
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.
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- -------------
1996 1997 1998 1999 2000 2000 2001
---- ---- ---- ---- ---- ----- -----
Ratio of earnings
to fixed charges......... 8.2 4.9 8.9 6.7 15.3 15.4 12.4
For purposes of calculating the ratio of earnings to fixed charges,
earnings are 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.
DESCRIPTION OF NOTES
The notes we are offering by this prospectus supplement constitute a series
of debt securities for purposes of the indenture. The notes will rank equally in
all respects with all debt securities issued under the indenture. For a
description of the indenture and the rights of the holders of debt securities
under the indenture, including the notes, see "Description of Debt Securities"
in the accompanying prospectus.
The following description of the terms and conditions of the notes
supplements, and to the extent inconsistent with replaces, the description of
the general terms of the debt securities described in the accompanying
prospectus. The terms and conditions described in this section will apply to
each note unless the applicable pricing supplement states otherwise.
GENERAL
The notes will be senior notes, ranking equally with all of our other
unsecured, unsubordinated debt. We will issue the notes only in the form of one
or more global securities registered in the name of a nominee of The Depository
Trust Company, as depositary, except as specified in "Book-Entry System." For
more information on certificated and global securities, see "-- Book-Entry
System."
We may offer from time to time up to $600,000,000 aggregate principal
amount of notes on terms determined at the time of sale. The notes will mature
nine months or more from the date of issue, as determined by the initial
purchaser and agreed to by us.
The notes may be issued as original issue discount notes. An original issue
discount note is a note, including any zero-coupon note, that is issued at more
than a de minimis discount from the principal amount payable at maturity. Upon
redemption, repayment or acceleration of the maturity of an original issue
discount note, normally an amount less than its principal amount will be
payable. For additional information regarding payments upon acceleration of the
maturity of an original issue discount note and regarding the United States
federal income tax consequences of original issue discount notes, see
"-- Payment of Principal and Interest" and "Certain United States Federal Income
Tax Consequences -- United States Holders -- Original Issue Discount." Original
issue discount notes will be treated as original
S-6
issue discount securities for purposes of the indenture.
The notes may be registered for transfer or exchange at the principal
office of the Corporate Trust Department of Citibank, N.A., the trustee under
the indenture, in The City of New York. The transfer or exchange of global
securities will be effected as specified in "-- Book-Entry System."
Except as described in "Description of Debt
Securities -- Covenants -- Limitations on Secured Indebtedness" in the
accompanying prospectus, the indenture does not limit our ability to incur debt.
In addition, the indenture does not contain any provision that would protect
holders of the notes in the event of a highly leveraged or other transaction
that may adversely affect our creditworthiness.
As used in this prospectus supplement, business day means, with respect to
any note, any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which commercial banks are authorized or required by law,
regulation or executive order to close in The City of New York.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal and interest, if any, at maturity will be made in
immediately available funds, provided that the note is presented to the trustee
in time for the trustee to make the payments in immediately available funds in
accordance with its normal procedures. Payments of interest, other than interest
payable at maturity, with respect to global securities will be paid in
immediately available funds to the depositary or its nominee. See "-- Book-
Entry System." Payments of interest, if any, with respect to any certificated
note, other than amounts payable at maturity, will be paid by check mailed to
the address of the person entitled to the payments as it appears in the security
register.
Unless the applicable pricing supplement states otherwise, if we:
- redeem any original issue discount note as described under "Redemption
and Repurchase,"
- repay any original issue discount note at the option of the holder as
described under "Repayment at Option of Holder" and "Repayment Upon
Death," or
- if the principal of any original issue discount note is declared to be
due and payable immediately as described in the accompanying prospectus
under "Description of Debt Securities -- Events of Default,"
the amount of principal due and payable with respect to the original issue
discount note shall be limited to the sum of:
- the aggregate principal amount of such note multiplied by the issue
price, expressed as a percentage of the aggregate principal amount, plus
- the original issue discount accrued from the date of issue to the date of
redemption, repayment or declaration, as applicable.
This accrual will be calculated using the "interest method," computed in
accordance with generally accepted accounting principles in effect on the date
of redemption, repayment or declaration, as applicable.
S-7
Each note, other than a zero-coupon note, will bear interest from and
including the date of issue, or in the case of notes issued upon registration of
transfer or exchange from and including the most recent interest payment date to
which interest on such note has been paid or duly provided for. Interest will be
payable at the fixed rate per year stated in such note and in the applicable
pricing supplement until the principal of such note is paid or made available
for payment. Interest will be payable on each interest payment date and at
maturity. Interest will be payable to the person in whose name a note is
registered at the close of business on the regular record date next preceding
each interest payment date; provided, however, that interest payable at maturity
or upon redemption, repayment or declaration will be payable to the person to
whom principal is payable. The first payment of interest on any note originally
issued between a regular record date and an interest payment date will be made
on the interest payment date following the next succeeding regular record date
to the registered owner of such note on such next succeeding regular record
date. If the interest payment date or the maturity for any note falls on a day
that is not a business day, the payment of principal and interest may be made on
the next succeeding business day, and no interest on such payment shall accrue
for the period from such interest payment date or maturity, as the case may be.
Unless the applicable pricing supplement states otherwise, interest on the notes
will be computed on the basis of a 360-day year of twelve 30-day months.
The interest payment dates for a note, other than a zero-coupon note, will
be as follows:
Interest Payments Interest Payment Dates
Monthly............... Fifteenth day of each
calendar month, commencing
in the first succeeding
calendar month following the
month in which the note is
issued.
Quarterly............. Fifteenth day of every third
month, commencing in the
third succeeding calendar
month following the month in
which the note is issued.
Semi-annual........... Fifteenth day of every sixth
month, commencing in the
sixth succeeding calendar
month following the month in
which the note is issued.
Annual................ Fifteenth day of every
twelfth month, commencing in
the twelfth succeeding
calendar month following the
month in which the note is
issued.
The regular record date with respect to any interest payment date will be
the date 15 calendar days prior to such interest payment date, whether or not
such date is a business day.
The interest rates on the notes may differ depending upon, among other
things, prevailing market conditions at the time of issuance as well as the
aggregate principal amount of notes issued in any single transaction. Although
we may change the interest rates and other variable terms of the notes from time
to time, no change will affect any note already issued or as to which we have
accepted an offer to purchase.
S-8
REDEMPTION AND REPURCHASE
Unless the applicable pricing supplement states otherwise, we may not
redeem the notes prior to maturity. The notes will not be subject to any sinking
fund. If, however, the applicable pricing supplement provides that we may redeem
the notes prior to maturity, it will also specify the redemption dates and
prices. If applicable, notes may be redeemed in whole or in part from time to
time only upon not less than 30 nor more than 60 days' notice.
We may at any time purchase notes at any price in the open market or
otherwise. Notes we purchase in this manner may, at our discretion, be held,
resold or surrendered to the trustee for cancellation.
REPAYMENT AT OPTION OF HOLDER
Unless the applicable pricing supplement states otherwise, notes will not
be repayable at the option of the holder. If the applicable pricing supplement
provides that the notes will be repayable at the option of the holder, it will
also specify the repayment dates and prices.
In order for a note to be repaid, the trustee must receive, at the
principal office of the Corporate Trust Department of the trustee in The City of
New York, at least 30 but not more than 45 days' notice of the holder's exercise
of its repayment option. Once this notice is delivered, the holder may not
revoke its exercise of the repayment option. A holder may exercise the repayment
option for less than the entire principal amount of the note provided that the
principal amount of the note remaining outstanding after repayment is an
authorized denomination.
The depositary or its nominee will be the holder of global securities and
therefore will be the only entity that can exercise a right to repayment, if
any. In order to ensure that the depositary or its nominee will timely exercise
such right to repayment, the beneficial owner of the note must instruct the
broker or other direct or indirect participant through which it holds an
interest in such global security to notify the depositary of its desire to
exercise the right to repayment. Different firms have different cut-off times
for accepting instructions from their customers. Accordingly, each beneficial
owner should consult the broker or other direct or indirect participant through
which it holds an interest in a global security in order to ascertain the
cut-off time by which such an instruction must be given in order for timely
notice to be delivered to the depositary.
REPAYMENT UPON DEATH
If the pricing supplement relating to a note so states, the holder of the
note will have the right to require us to repay a note prior to its maturity
date upon the death of the beneficial owner of the note as described below. We
call this right the "survivor's option."
Upon exercise of the survivor's option, we will, at our option, either
repay or purchase any note properly delivered for repayment by or on behalf of
the person that has authority to act on behalf of the deceased beneficial owner
of the note at a price equal to the sum of:
- 100% of the principal amount of such note (or, for zero-coupon notes, the
amortized face amount for zero-coupon notes on the date of such
repayment), and
S-9
- accrued and unpaid interest, if any, to the date of such repayment,
subject to the following limitations.
The survivor's option may not be exercised until at least 12 months
following the date of original issue of the applicable notes. In addition, we
may limit the aggregate principal amount of notes as to which the survivor's
option may be exercised as follows:
- In any calendar year, we may limit the aggregate principal amount to the
greater of 1% of the outstanding aggregate principal amount of the notes
as of December 31 of the most recently completed year or $1,000,000. We
call this limitation the "annual put limitation."
- For any individual deceased beneficial owner of notes, we may limit the
aggregate principal amount to $200,000 for any calendar year. We call
this limitation the "individual put limitation."
We will not make principal repayments pursuant to the exercise of the
survivor's option in amounts that are less than $1,000. If the limitations
described above would result in the partial repayment of any note, the principal
amount of the note remaining outstanding after repayment must be at least
$1,000.
Each note delivered pursuant to a valid exercise of the survivor's option
will be accepted promptly in the order all such notes are delivered, unless the
acceptance of that note would contravene the annual put limitation or the
individual put limitation. If, as of the end of any calendar year, the aggregate
principal amount of notes that have been accepted pursuant to exercise of the
survivor's option during that year has not exceeded the annual put limitation
for that year, any notes not accepted during that calendar year because of the
individual put limitation will be accepted in the order all such notes were
delivered, to the extent that any such acceptance would not trigger the annual
put limitation for such calendar year.
Any note accepted for repayment pursuant to exercise of the survivor's
option will be repaid no later than the first January 15 or June 15 to occur at
least 20 calendar days after the date of acceptance. If that date is not a
business day, payment will be made on the next succeeding business day. For
example, if the acceptance date for notes delivered pursuant to the survivor's
option was April 1, 2002, we would be obligated to repay those notes by June 15,
2002. Each note delivered for repayment that is not accepted in any calendar
year due to the application of the annual put limitation will be deemed to be
delivered in the following calendar year in the order in which all such notes
were originally delivered, unless any such note is withdrawn by the
representative for the deceased beneficial owner prior to its repayment. Other
than as described in the immediately preceding sentence, notes delivered upon
exercise of the survivor's option may not be withdrawn. In the event that a note
delivered for repayment pursuant to valid exercise of the survivor's option is
not accepted, the trustee will deliver a notice by first-class mail to the
registered holder that states the reason that the note has not been accepted for
repayment. Following receipt of such notice from the trustee, the representative
for the deceased beneficial owner may withdraw any such note and the exercise of
the survivor's option.
S-10
Subject to the foregoing, in order to validly exercise a survivor's option,
the trustee must receive from the representative of the deceased beneficial
owner:
- a written request for repayment signed by the representative, with the
signature guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc.
("NASD") or a commercial bank or trust company having an office or
correspondent in the United States;
- delivery of the note to be repaid;
- appropriate evidence satisfactory to the trustee that the representative
has authority to act on behalf of the deceased beneficial owner, the
death of such beneficial owner has occurred and the deceased was the
beneficial owner of the note at the time of death;
- if applicable, a properly executed assignment or endorsement; and
- if the beneficial interest in the note is held by a nominee of the
deceased beneficial owner, a certificate satisfactory to the trustee from
such nominee attesting to the deceased's ownership of a beneficial
interest in the note.
Subject to the annual put limitation and the individual put limitation, all
questions as to the eligibility or validity of any exercise of the survivor's
option will be determined by the trustee in its sole discretion. The trustee's
determination will be final and binding on all parties.
The death of a person owning a note in joint tenancy or tenancy by the
entirety will be deemed the death of the beneficial owner of the note, and the
entire principal amount of the note so held will be subject to the survivor's
option. The death of a person owning a note by tenancy in common will be deemed
the death of the beneficial owner of a note only with respect to the deceased
holder's interest in the note so held by tenancy in common. However, if a note
is held by husband and wife as tenants in common, the death of either will be
deemed the death of the beneficial owner of the note, and the entire principal
amount of the note so held will be subject to the survivor's option. The death
of a person who, during his or her lifetime, was entitled to substantially all
of the beneficial interests of ownership of a note will be deemed the death of
the beneficial owner for purposes of the survivor's option, regardless of the
registered holder, if such beneficial interest can be established to the
satisfaction of the trustee. Such beneficial interest will be deemed to exist in
typical cases of nominee ownership, ownership under the Uniform Gifts to Minors
Act, community property or other joint ownership arrangements between a husband
and wife and trust arrangements where one person has substantially all of the
beneficial ownership interest in the note during his or her lifetime.
In the case of repayment pursuant to the exercise of the survivor's option,
for notes represented by a global security, the depositary or its nominee will
be the holder of such note and therefore will be the only entity that can
exercise the survivor's option for such note. To obtain repayment pursuant to
exercise of the survivor's option with respect to a note represented by a global
security, the representative
S-11
must provide to the broker or other entity through which the beneficial interest
in the note is held by the deceased owner:
- a written request for repayment signed by the representative, with the
signature guaranteed by a member firm of a registered national securities
exchange or of the NASD or a commercial bank or trust company having an
office or correspondent in the United States;
- appropriate evidence satisfactory to the trustee that the representative
has authority to act on behalf of the deceased beneficial owner, the
death of the beneficial owner has occurred and the deceased was the owner
of a beneficial interest in the note at the time of death; and
- instructions to the broker or other entity to notify the depositary of
its desire to obtain repayment pursuant to exercise of the survivor's
option.
The broker or other entity will provide to the trustee:
- a written request for repayment signed by the representative, with the
signature guaranteed by a member firm of a registered national securities
exchange or of the NASD or a commercial bank or trust company having an
office or correspondent in the United States;
- appropriate evidence satisfactory to the trustee that the representative
has authority to act on behalf of the deceased beneficial owner, the
death of the beneficial owner has occurred and the deceased was the owner
of a beneficial interest in the note at the time of death; and
- a certificate satisfactory to the trustee from the broker or other entity
stating that it represents the deceased beneficial owner.
The broker or other entity will be responsible for disbursing any payments
it receives pursuant to exercise of the survivor's option to the appropriate
representative. See "-- Book-Entry System."
We have attached as Annex A to this prospectus supplement the forms to be
used by a representative to exercise the survivor's option on behalf of a
deceased beneficial owner of a note. In addition, a representative may obtain
these forms from Citibank, N.A., the trustee, at 111 Wall Street, 14th Floor,
New York, New York 10005, or call the Corporate Trust Department at (212)
657-7403, during normal business hours.
BOOK-ENTRY SYSTEM
Upon issuance, all notes having the same original issuance date, interest
rate and stated maturity and other terms, if any, will be represented by a
single global security. Each global security will be deposited with or on behalf
of the depositary, The Depository Trust Company, New York, New York, and
registered in the name of the depositary's nominee. Except as described below,
global securities may be transferred, in whole and not in part, only by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary. So long as the depositary
or its nominee is the registered owner of any global security, the depositary or
its nominee will be
S-12
considered the sole owner or holder of the note for all purposes under the
indenture.
The depositary has advised the agents and us as follows: the depositary is
a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. The depositary holds securities that its participants deposit with the
depositary. The depositary also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
eliminating the need for physical movement of securities certificates. "Direct
participants" include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. The depositary is owned
by a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the NASD. Access to the depositary's
system is also available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a direct participant, either directly or indirectly, which we refer to as
"indirect participants."
Purchases of interests in the global securities under the depositary's
system must be made by or through direct participants, which will receive a
credit for such interests on the depositary's records. The ownership interest of
each beneficial owner is in turn to be recorded on the direct and indirect
participants' records. Beneficial owners will not receive written confirmation
from the depositary 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 direct or indirect participant
through which the beneficial owner entered into the transaction. Transfers of
ownership interests in the global securities are to be accomplished by entries
made on the books of participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their ownership
interests in the global securities, except as described below.
To facilitate subsequent transfers, all global securities deposited by
participants with the depositary are registered in the name of the depositary's
partnership nominee, Cede & Co. The deposit of global securities with the
depositary and their registration in the name of Cede & Co. effect no change in
beneficial ownership. The depositary has no knowledge of the actual beneficial
owners of the interests in the global securities; the depositary's records
reflect only the identity of the direct participants to whose accounts interests
in the global securities 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 the depositary 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.
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Redemption notices will be sent to Cede & Co. If less than all of the
interests in a global security are being redeemed, the depositary's practice is
to determine by lot the amount of the interest of each direct participant in
such global security to be redeemed.
Neither the depositary nor Cede & Co. will consent or vote with respect to
the global securities. Under its usual procedures, the depositary mails an
omnibus proxy to the issuer as soon as possible after the record date. The
omnibus proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts interests in the global securities are credited
on the record date (identified in a listing attached to the omnibus proxy).
Principal and interest payments on the global securities will be made to
the depositary. The depositary will then credit direct participants' accounts on
the payment date in accordance with their respective holdings shown on the
depositary's records unless the depositary has reason to believe that it will
not receive payment on the payment date. Payments by participants to beneficial
owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such participant
and not of the depositary, the trustee or us, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to the depositary is the responsibility of us or the
trustee. Disbursement of such payments to direct participants is the
responsibility of the depositary. Disbursement of such payments to the
beneficial owners is the responsibility of direct and indirect participants.
The notes represented by one or more global securities are exchangeable for
certificated notes of like tenor as such notes if:
- the depositary for the global securities notifies us that it is unwilling
or unable to continue as depositary for the global securities or if at
any time the depositary ceases to be a clearing agency registered under
the Securities Exchange Act of 1934,
- we in our discretion at any time determine not to have all of the notes
of the series represented by one or more global security or notes and
notify the trustee of this determination, or
- an event of default, as described in the accompanying prospectus, has
occurred and is continuing with respect to the notes of a series.
Any note that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated notes issuable in authorized denominations and
registered in the names as the depositary holding such global securities
directs. The authorized denominations of the notes will be $1,000 or any greater
amount that is an integral multiple of $1,000. Subject to the foregoing, a
global security is not exchangeable, except for a global security or global
securities of the same aggregate denominations to be registered in the name of
the depositary or its nominee.
The information in this section concerning the depositary and the
depositary's book-entry system has been obtained from sources that we believe to
be reliable, but we take no responsibility for its accuracy.
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CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
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 or
differing interpretations. It 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 who elect to use a
mark-to-market method of accounting for their securities holdings, persons
holding notes as a hedge against currency risks or as a position in a "straddle"
for tax purposes, or persons whose functional currency is not the United States
dollar. It also does not deal with holders other than original purchasers
(except where otherwise specifically noted). Persons considering the purchase of
the notes should consult their own tax advisors concerning the application of
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 taxing jurisdiction.
BECAUSE THE EXACT PRICING AND OTHER TERMS OF THE NOTES WILL VARY, NO
ASSURANCE CAN BE GIVEN THAT THE CONSIDERATIONS DESCRIBED BELOW WILL APPLY TO A
PARTICULAR ISSUANCE OF THE NOTES.
As used herein, the term "U.S. Holder" means a beneficial owner of a note
that is for United States federal income tax purposes:
- a citizen or resident of the United States,
- a corporation or partnership, including an entity treated as a
corporation or partnership for United State 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),
- an estate whose income is subject to United States federal income tax
regardless of its source, or
- 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.
Notwithstanding the last bullet above, to the extent provided in
regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date that elect to continue to be so treated
also shall be considered U.S. Holders.
As used herein, the term "non-U.S. Holder" means a beneficial owner of a
note that is not a U.S. Holder.
UNITED STATES HOLDERS
Payments of Interest
Payments of interest on a note, other than interest on an "Original Issue
Discount note" that is not "qualified stated interest," each as defined below,
generally will be taxable to a U.S. Holder as ordinary interest income at the
time such payments are accrued or are re-
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ceived, in accordance with the U.S. Holder's regular method of tax accounting.
Original Issue Discount
The following summary is a general discussion of the United States federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of notes issued with original issue discount ("Original Issue
Discount notes"). The following summary is based upon final Treasury regulations
(the "OID Regulations") released by the Internal Revenue Service ("IRS") under
the original issue discount provisions of the Internal Revenue Code of 1986, as
amended (the "Code").
For United States federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a note over its issue
price, if such excess equals or exceeds a de minimis amount. This amount is
generally 1/4 of 1% of the note's stated redemption price at maturity multiplied
by the number of complete years to its maturity from its issue date or, in the
case of a note providing for the payment of any amount other than qualified
stated interest, as defined below, prior to maturity, multiplied by the weighted
average maturity of such note. The issue price of each note in an issue of notes
equals the first price at which a substantial amount of such notes has been
sold, ignoring sales to bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers. The
stated redemption price at maturity of a note is the sum of all payments
provided by the note other than "qualified stated interest" payments. The term
"qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property, other than debt instruments of the
issuer, at least annually at a single fixed rate or in certain cases, one or
more floating rates that appropriately take into account the length of the
interval between stated interest payments. In addition, under the OID
Regulations, if a note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such note (e.g., notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such note or any "true" discount on such note (i.e., the
excess of the note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the note would be treated as having
original issue discount, and the stated interest would not be treated as
qualified stated interest.
Payments of qualified stated interest on a note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received, in accordance with the U.S. Holder's regular method of tax accounting.
A U.S. Holder of an Original Issue Discount note having a maturity of more than
one year from its date of issue must include original issue discount in income
as ordinary interest income for United States federal income tax purposes as it
accrues under a constant yield method in advance of receipt of the cash payments
attributable to such income, regardless of such U.S. Holder's regular method of
tax accounting. In general, the amount of original issue discount included in
income by the initial U.S. Holder of an Original Issue Discount note is the sum
of the daily portions of original issue discount with respect to such Original
Issue Discount note for each day during the taxable year (or portion of the
taxable year) on which such U.S. Holder
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held such Original Issue Discount note. The "daily portion" of original issue
discount on any Original Issue Discount note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Original Issue
Discount note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. The OID
Regulations contain certain rules that generally allow any reasonable method to
be used in determining the amount of original issue discount allocable to a
short initial accrual period (if all other accrual periods are of equal length)
and require that the amount of original issue discount allocable to the final
accrual period equal the excess of the amount payable at the maturity of the
Original Issue Discount note (other than any payment of qualified stated
interest) over the Original Issue Discount note's adjusted issue price as of the
beginning of such final accrual period. The amount of original issue discount
allocable to each accrual period is generally equal to the difference between:
- the product of the Original Issue Discount note's adjusted issue price at
the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and
- the amount of any qualified stated interest payments allocable to such
accrual period.
The "adjusted issue price" of an Original Issue Discount note at the
beginning of any accrual period is the sum of the issue price of the Original
Issue Discount note plus the amount of original issue discount allocable to all
prior accrual periods minus the amount of any prior payments on the Original
Issue Discount note that were not qualified stated interest payments. Under
these rules, U.S. Holders generally will have to include in income increasingly
greater amounts of original issue discount in successive accrual periods.
If (1) a portion of the initial purchase price of a note is attributable to
interest that accrued prior to the note's issue date ("pre-issuance accrued
interest"), (2) the first stated interest payment on the note is to be made
within one year of the note's issue date and (3) such payment will equal or
exceed the amount of pre-issuance accrued interest, then the U.S. Holder may
elect to decrease the issue price of the note by the amount of pre-issuance
accrued interest, in which case a portion of the first stated interest payment
will be treated as a return of the excluded pre-issuance accrued interest and
not as an amount payable on the note.
Acquisition Premium
A U.S. Holder who purchases an Original Issue Discount note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
note after the purchase date, other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount
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which such U.S. Holder must include in its gross income with respect to such
Original Issue Discount note for any taxable year or portion thereof in which
the U.S. Holder holds the Original Issue Discount note, will be reduced, but not
below zero, by the portion of the acquisition premium properly allocable to the
period.
Optional Redemption
In the case of certain notes, we may have a "call option" to redeem the
notes prior to their stated maturity, or the holders of the notes may have a
"put option" to receive repayment prior to maturity. Notes containing such
features may be subject to rules that differ from the general rules discussed
above. For purposes of accruing original issue discount, a call option
exercisable by us or a put option exercisable by a holder will be presumed to be
exercised if, by utilizing any date on which the note may be redeemed or repaid
as its maturity date and the amount payable on that date in accordance with the
terms of the note (the "redemption price") as its stated redemption price at
maturity, the yield on the note is:
- in the case of a call option exercisable by us, lower than its yield to
maturity, or
- in the case of a put option exercisable by a holder, greater than its
yield to maturity.
If such an option is not in fact exercised when presumed to be, the note
will be treated, solely for purposes of accruing original issue discount, as if
it were redeemed, and a new note issued, on the presumed exercise date for an
amount equal to its adjusted issue price on that date. Investors intending to
purchase notes with such features should consult their own tax advisors, since
the original issue discount consequences will depend, in part, on the particular
terms and features of the purchased notes.
Election to Treat All Interest as Original Issue Discount
U.S. Holders may generally, upon election, include in income all interest,
including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium (discussed
below) or acquisition premium, that accrues on a debt instrument by using the
constant yield method applicable to original issue discount, subject to certain
limitations and exceptions. This election applies only to the note for which it
is made and cannot be revoked without the consent of the IRS. A U.S. Holder
considering such an election should consult a tax advisor.
Information Reporting
Because the notes will constitute "publicly offered debt instruments" as
defined by the OID Regulations, we are required to report to the IRS on Form
8281, within 30 days after the issue date, certain information relating to
original issue discount with respect to each such issue. We will report annually
to the IRS and to each holder of record the amount of original issue discount
includable in the gross income of a Holder of notes for each calendar year
determined without regard to any acquisition premium paid by any holder, except
certain exempt holders, including corporations.
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Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term notes")
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is made, it will apply to all short-term obligations acquired by the
U.S. Holder on or after the first day of the first taxable year in which the
election is made, and such election may be revoked only with the consent of the
IRS. If such an election is not made, any gain recognized by the U.S. Holder on
the sale, exchange or maturity of the Short-Term note will be ordinary income to
the extent of the original issue discount accrued on a straight-line basis, or
upon election, under the constant yield method based on daily compounding,
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method, based on daily
compounding.
Market Discount
If a U.S. Holder purchases a note, other than an Original Issue Discount
note, at original issue for an amount that is less than its issue price or, in
the case of a subsequent purchaser, its stated redemption price at maturity or,
in the case of an Original Issue Discount note, for an amount that is less than
its adjusted issue price as of the purchase date, such U.S. Holder will be
treated as having purchased such note at a "market discount," unless such market
discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment or, in the case of an Original Issue Discount
note, any payment that does not constitute qualified stated interest on, or any
gain realized on the sale, exchange, retirement or other disposition of, a note
as ordinary income to the extent of the lesser of:
- the amount of such payment or realized gain or
- the market discount which has not previously been included in income and
which is treated as having accrued on such note at the time of such
payment or disposition.
Market discount will be considered to accrue ratably during the period from the
date of acquisition to the maturity date of the note, unless the U.S. Holder
elects (as described below) to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to
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include market discount in income currently as it accrues on either a ratable or
constant yield basis, in which case the rules described above regarding the
treatment as ordinary income of gain realized upon the disposition of the note
and upon the receipt of certain cash payments and regarding the deferral of
interest deductions will not apply. Generally, such currently included market
discount is treated as ordinary interest for United States federal income tax
purposes. Such an election will apply to all debt instruments acquired by the
U.S. Holder on or after the first day of the first taxable year to which such
election applies and may be revoked only with the consent of the IRS.
Premium
If a U.S. Holder purchases a note for an amount that is greater than the
sum of all amounts payable on the note after the purchase date, other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the note with "amortizable bond premium" equal in amount to such
excess. In the case of a note that may be optionally redeemed prior to maturity,
however, the amount of amortizable bond premium is determined by substituting
the first date on which the debt instrument may be redeemed (the "redemption
date") for the maturity date and the applicable redemption price on the
redemption date for the amount payable at maturity if the result would increase
the holder's yield to maturity (i.e., result in a smaller amount of amortizable
bond premium properly allocable to the period before the redemption date). If
the issuer does not in fact exercise its right to redeem the note on the
applicable redemption date, the note will be treated (for purposes of the
amortizable bond premium rules) as having matured and then as having been
reissued for the holder's "adjusted acquisition price," which is an amount equal
to the holder's basis in the debt instrument (as determined under Treasury
regulations governing amortizable bond premium), less the sum of:
- any amortizable bond premium allocable to prior accrual periods and
- any payments previously made on the note other than payments of qualified
stated interest.
The note deemed to have been reissued will again be subject to the
amortizable bond premium rules with respect to the remaining dates on which it
is redeemable.
A U.S. Holder must make an election to amortize bond premium on a debt
instrument. Once made, the election applies to all taxable debt instruments then
owned and thereafter acquired by the U.S. Holder on or after the first day of
the taxable year to which such election applies, and may be revoked only with
the consent of the IRS. In general, a holder amortizes bond premium by
offsetting the qualified stated interest allocable to an accrual period with the
bond premium allocable to the accrual period, which is determined under a
constant yield method. If the bond premium allocable to an accrual period
exceeds the qualified stated interest allocable to such period, the excess is
treated by the holder as a bond premium deduction. The bond premium deduction
for each accrual period is limited to the amount by which the holder's total
interest inclusions on the debt instrument in prior accrual periods exceed the
total amount treated by such holder as a bond premium deduction on the debt
instrument in prior accrual periods.
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Any amounts not deductible in an accrual period may be carried forward to the
next accrual period and treated as bond premium allocable to that period.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement,
other than amounts representing accrued and unpaid interest, and such U.S.
Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax basis in a
note generally will equal such U.S. Holder's initial investment in the note
increased by any original issue discount included in income and accrued market
discount, if any, if the U.S. Holder has included such market discount in income
and decreased by the amount of any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect to
such note. Such gain or loss generally will be long-term capital gain or loss if
the note is held for more than one year. Non-corporate taxpayers are subject to
reduced maximum rates on long-term capital gains and are generally subject to
tax at ordinary income rates on short-term capital gains. The deductibility of
capital losses is subject to certain limitations. Prospective investors should
consult their own tax advisors concerning these tax law provisions.
Integration of Notes with Hedges
The OID Regulations generally provide that, if a Holder of a note hedges
the note with a financial instrument and the combined cash flows under the note
and the financial instrument are substantially equivalent to the cash flows on a
fixed or variable rate debt instrument, the note and the financial instrument
may be taxed as an integrated transaction by treating the positions as a
synthetic debt instrument. Such treatment applies if the taxpayer identifies the
positions as part of an integrated transaction on its books and records and
certain other requirements are satisfied. In addition, the IRS can require the
positions to be taxed as an integrated transaction under certain circumstances.
U.S. Holders should consult their tax advisors regarding the possible
application of these rules to the notes.
NON-U.S. HOLDERS
A non-U.S. Holder generally will not be subject to United States federal
income taxes on payments of principal, premium, if any, or interest, including
original issue discount, if any, on a note, unless such non-U.S. Holder actually
or constructively owns 10% or more of the total combined voting power of all
classes of our stock entitled to vote, is a controlled foreign corporation
related to us through stock ownership or is a bank receiving interest described
in section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the non-U.S. Holder must provide a statement that:
- is signed by the beneficial owner of the note under penalties of perjury,
- certifies that such owner is not a U.S. Holder, and
- provides the name and address of the beneficial owner.
The statement may be made on an IRS Form W-8BEN or a substantially similar
form, and the beneficial owner must inform the withholding agent of any change
in the infor-
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mation 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 IRS Form W-8BEN or the substitute form provided by the beneficial owner
to the organization or institution.
Notwithstanding the foregoing, a non-U.S. Holder generally will be taxed in
the same manner as a U.S. Holder with respect to interest income that is
effectively connected with a U.S. trade or business of the non-U.S. Holder,
except to the extent that an applicable tax treaty provides otherwise. Under
certain circumstances, effectively connected interest income of a corporate
non-U.S. Holder may be subject to an additional "branch profits" tax at a 30%
rate (or, if applicable, a lower treaty rate). Even though effectively connected
interest income is subject to U.S. federal income tax, and may be subject to the
branch profits tax, it is not subject to withholding tax if the non-U.S. Holder
properly delivers IRS Form W-8ECI to the payor.
Generally, a non-U.S. Holder will not be subject to United States federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a note, provided (i) the gain is not effectively connected with
the conduct of a trade or business in the United States by the non-U.S. Holder
and (ii) the non-U.S. Holder is not an individual who is present in the United
States for 183 days or more in the taxable year of such retirement or
disposition, and certain other conditions are met. Certain other exceptions may
be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
The notes will not be includable in the estate of a non-U.S. Holder unless
at the time of death such individual actually or constructively owned 10% or
more of the total combined voting power of all classes of our stock entitled to
vote, or payments in respect of the notes would have been effectively connected
with the conduct by such individual of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting and backup withholding of United States federal
income tax at a rate of 30.5% for payments made in 2002 may apply to payments
made in respect of the notes 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. The
rate of backup withholding is scheduled to be reduced periodically to 28% in
2006. Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in respect
of the notes 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 backup
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withhold on the entire purchase price, unless either:
- the broker determines that the seller is a corporation or other exempt
recipient or
- 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 also be reported by the broker to the IRS, unless either:
- the broker determines that the seller is an exempt recipient or
- 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-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.
SUPPLEMENTAL PLAN OF
DISTRIBUTION
Under the terms of the Selling Agent Agreement, dated as of December 20,
2001, the notes are offered from time to time by us through ABN AMRO Financial
Services, Inc., Charles Schwab & Co., Inc., Edward D. Jones & Co., L.P., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated,
Salomon Smith Barney Inc., UBS PaineWebber Inc. and Loop Capital Markets, as
agents under the Selling Agent Agreement. The agents have agreed to use their
reasonable best efforts to solicit purchases of the notes. We may appoint
additional agents to solicit offers to purchase notes on terms substantially
identical to those contained in the Selling Agent Agreement. In addition, under
certain circumstances we may sell notes directly on our own behalf to investors
without the assistance of agents. The agents will not be entitled to any
discounts or commissions for sales we make directly to investors without their
assistance.
We will pay the agents, through ABN AMRO Financial Services, Inc., the
purchasing agent, a commission to be divided among the agents as they shall
agree for notes sold through the agents on an agency basis. The commission will
range from .60% to 5.00% of the principal amount for each note sold, depending
upon the maturity. Commissions with respect to notes with maturities in excess
of 30 years will be negotiated between us and the purchasing agent at the time
of sale. We will have the sole right to accept offers to purchase notes and may
reject any proposed purchase of notes in whole or in part. Each agent will have
the right, in its discretion reasonably exercised, to reject any proposed
purchase of notes in whole or in part received by it on an agency basis. We
reserve the right to withdraw, cancel or modify the offer without notice.
Following the solicitation of orders, the agents, severally and not
jointly, may purchase notes from us through the purchasing agent as principal
for their own accounts. Unless otherwise set forth in the applicable pricing
supplement, any note sold to an agent as principal
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will be purchased by the purchasing agent from us at a discount to the principal
amount not to exceed the concession applicable to an agency sale of a note of
identical maturity. Unless otherwise set forth in the applicable pricing
supplement, such notes will be resold to one or more investors and other
purchasers at a fixed public offering price.
In addition, the purchasing agent may, and with our consent the other
agents may, offer the notes they have purchased as principal to other dealers
that are part of the selling group. The purchasing agent may sell notes to other
dealers at a discount not in excess of the discount it receives when purchasing
such notes from us. And, if with our consent the other agents sell notes to
dealers, unless otherwise specified in the applicable pricing supplement, the
discount allowed to any dealer will not, during the distribution of the notes,
exceed the discount received by such agent from the purchasing agent. After the
initial public offering of notes to be resold by an agent to investors, the
public offering price (in the case of notes to be resold at a fixed public
offering price), concession and discount may be changed.
Each agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933. We have agreed to indemnify the agents against certain
liabilities, including liabilities under the Securities Act of 1933.
No note will have an established trading market when issued. We do not
intend to apply for the listing of the notes on any securities exchange, but we
have been advised by the agents that the agents intend to make a market in the
notes as permitted by applicable laws and regulations. The agents are not
obligated to do so, however, and the agents may discontinue making a market at
any time without notice. No assurance can be given as to the liquidity of any
trading market for any notes. All secondary trading in the notes will settle in
immediately available funds. See "Description of Notes -- Book-Entry System" in
this prospectus supplement.
In connection with an offering of the notes, the rules of the SEC permit
the purchasing agent to engage in certain transactions that stabilize the price
of the notes. Such transactions may consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the notes. If the purchasing
agent creates a short position in the notes in connection with an offering of
the notes (i.e., if it sells a larger principal amount of the notes than is set
forth on the cover page of the applicable pricing supplement), the purchasing
agent may reduce that short position by purchasing notes in the open market. In
general, purchases of a security for the purpose of stabilization or to reduce a
syndicate short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases. The purchasing agent
makes no 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, the purchasing agent makes no representation that, once commenced,
such transactions will not be discontinued without notice.
Other selling group members include broker-dealers and other securities
firms that have executed dealer agreements with the purchasing agent. In the
dealer agreements, the selling group members have agreed to market
S-24
and sell notes in accordance with the terms of those agreements and all
applicable laws and regulations. You may call 1-877-373-0322 for a list of
selling group members.
The agents and their affiliates may engage in various general financing and
banking transactions with us and our affiliates in the ordinary course of
business.
VALIDITY OF NOTES
The validity of the notes will be passed upon for us by King & Spalding,
New York, New York, and for the agents by Gibson, Dunn & Crutcher LLP, New York,
New York.
S-25
ANNEX A
REPAYMENT ELECTION FORM
UNITED PARCEL SERVICE, INC.
UPS NOTES
CUSIP NUMBER ____________
To: United Parcel Service, Inc.
The undersigned financial institution (the "FINANCIAL INSTITUTION")
represents the following:
- The Financial Institution has received a request for repayment from the
executor or other authorized representative (the "AUTHORIZED
REPRESENTATIVE") of the deceased beneficial owner listed below (the
"DECEASED BENEFICIAL OWNER") of ____________ UPS Notes (CUSIP No.
____________ ________) (the "NOTES").
- At the time of his or her death, the Deceased Beneficial Owner owned
Notes in the principal amount listed below, and the Financial Institution
currently holds such Notes as a direct or indirect participant in The
Depository Trust Company (the "DEPOSITARY").
The Financial Institution agrees to the following terms:
- The Financial Institution shall follow the instructions (the
"INSTRUCTIONS") accompanying this Repayment Election Form (the "FORM").
- The Financial Institution shall make all records specified in the
Instructions supporting the above representations available to United
Parcel Service, Inc. ("UPS") for inspection and review within five
Business Days of UPS's request.
- If the Financial Institution or UPS, in either's reasonable discretion,
deems any of the records specified in the Instructions supporting the
above representations unsatisfactory to substantiate a claim for
repayment, the Financial Institution shall not be obligated to submit
this Form, and UPS may deny repayment. If the Financial Institution
cannot substantiate a claim for repayment, it shall notify UPS
immediately.
- Other than as described in the Prospectus Supplement in the limited
situation involving tenders of notes that are not accepted during one
calendar year as a result of the "annual put limitation," repayment
elections may not be withdrawn.
- The Financial Institution agrees to indemnify and hold harmless UPS
against and from any and all claims, liabilities, costs, losses,
expenses, suits and damages resulting from the Financial Institution's
above representations and request for repayment on behalf of the
Authorized Representative.
A-1
REPAYMENT ELECTION FORM
(1)
--------------------------------------------------------------------------------
Name of Deceased Beneficial Owner
(2)
--------------------------------------------------------------------------------
Date of Death
(3)
--------------------------------------------------------------------------------
Name of Authorized Representative Requesting Repayment
(4)
--------------------------------------------------------------------------------
Name of Financial Institution Requesting Repayment
(5)
--------------------------------------------------------------------------------
Signature of Representative of Financial Institution Requesting Repayment
(6)
--------------------------------------------------------------------------------
Principal Amount of Requested Repayment
(7)
--------------------------------------------------------------------------------
Date of Election
(8)
--------------------------------------------------------------------------------
Date Requested for Repayment
(9) Financial Institution Representative: (10) Wire instructions for payment:
Name: Bank Name:
Phone Number: ABA Number:
Fax Number: Account Name:
Mailing Address (no P.O. Boxes): Account Number:
Reference (optional):
TO BE COMPLETED BY UPS:
(A) Election Number*:
(B) Delivery and Payment Date:
(C) Principal Amount:
(D) Accrued Interest:
(E) Date of Receipt of Form by UPS:
(F) Date of Acknowledgment by UPS:
---------------------
* To be assigned by UPS upon receipt of this Form. An acknowledgement, in the
form of a copy of this document with the assigned Election Number, will be
returned to the party and location designated on line (9) above.
A-2
INSTRUCTIONS FOR COMPLETING REPAYMENT ELECTION FORM
AND EXERCISING REPAYMENT OPTION
Capitalized terms used and not defined herein have the meanings defined in
the accompanying Repayment Election Form.
1. Collect and retain for a period of at least three years (1)
satisfactory evidence of the authority of the Authorized
Representative, (2) satisfactory evidence of death of the Deceased
Beneficial Owner, (3) satisfactory evidence that the Deceased
Beneficial Owner beneficially owned, at the time of his or her death,
the Notes being submitted for repayment, and (4) any necessary tax
waivers. For purposes of determining whether UPS will deem Notes
beneficially owned by an individual at the time of death, the following
rules shall apply:
- Notes beneficially owned by tenants by the entirety or joint tenants
will be regarded as beneficially owned by a single owner. The death
of a tenant by the entirety or joint tenant will be deemed the death
of the beneficial owner, and the Notes beneficially owned will become
eligible for repayment. The death of a person beneficially owning a
Note by tenancy in common will be deemed the death of a holder of a
Note only with respect to the deceased holder's interest in the Note
so held by tenancy in common, unless a husband and wife are the
tenants in common, in which case the death of either will be deemed
the death of the holder of the Note, and the entire principal amount
of the Note so held will be eligible for repayment.
- Notes beneficially owned by a trust will be regarded as beneficially
owned by each beneficiary of the trust to the extent of that
beneficiary's interest in the trust (however, a trust's beneficiaries
collectively cannot be beneficial owners of more Notes than are owned
by the trust). The death of a beneficiary of a trust will be deemed
the death of the beneficial owner of the Notes beneficially owned by
the trust to the extent of that beneficiary's interest in the trust.
The death of an individual who was a tenant by the entirety or joint
tenant in a tenancy which is the beneficiary of a trust will be
deemed the death of the beneficiary of the trust. The death of an
individual who was a tenant in common in a tenancy which is the
beneficiary of a trust will be deemed the death of the beneficiary of
the trust only with respect to the deceased holder's beneficial
interest in the Note, unless a husband and wife are the tenants in
common, in which case the death of either will be deemed the death of
the beneficiary of the trust.
- The death of a person who, during his or her lifetime, was entitled
to substantially all of the beneficial interest in a Note will be
deemed the death of the beneficial owner of that Note, regardless of
the registration of ownership, if such beneficial interest can be
established to the satisfaction of the Trustee. Such beneficial
interest will exist in many cases of street name or nominee
ownership, ownership by a trustee, ownership under the Uniform Gift
to Minors Act and community property or other joint ownership
A-3
arrangements between spouses. Beneficial interest will be evidenced
by such factors as the power to sell or otherwise dispose of a Note,
the right to receive the proceeds of sale or disposition and the
right to receive interest and principal payments on a Note.
2. Indicate the name of the Deceased Beneficial Owner on line (1).
3. Indicate the date of death of the Deceased Beneficial Owner on line
(2).
4. Indicate the name of the Authorized Representative requesting repayment
on line (3).
5. Indicate the name of the Financial Institution requesting repayment on
line (4).
6. Affix the authorized signature of the Financial Institution's
representative on line (5). THE SIGNATURE MUST BE MEDALLION SIGNATURE
GUARANTEED.
7. Indicate the principal amount of Notes to be repaid on line (6).
8. Indicate the date this Form was completed on line (7).
9. Indicate the date of requested repayment on line (8). The date of
requested repayment may not be earlier than the first January 15 or
June 15 to occur at least 20 calendar days after the date of UPS's
acceptance of the Notes for repayment, unless such date is not a
business day, in which case the date of requested payment may be no
earlier than the next succeeding business day. For example, if the
acceptance date for Notes tendered were April 1, 2002, the earliest
repayment date you could elect would be June 15, 2002.
10. Indicate the name, mailing address (no P.O. boxes, please), telephone
number and facsimile-transmission number of the party to whom the
acknowledgment of this election may be sent on line (9).
11. Indicate the wire instruction for payment on line (10).
12. Leave lines (A), (B), (C), (D), (E) and (F) blank.
13. Mail or otherwise deliver an original copy of the completed Form to:
Citibank, N.A.
Attn: Sam Bly
111 Wall Street, 15th Floor
New York, New York 10005
A-4
FACSIMILE TRANSMISSIONS OF THE REPAYMENT ELECTION FORM
WILL NOT BE ACCEPTED.
14. If the acknowledgement of UPS's receipt of this Form, including the
assigned Election Number, is not received within 10 days of the date
such information is sent to the Trustee, contact UPS Investor Relations
at (404) 828-6059.
For assistance with the Form or any questions relating thereto, please
contact UPS Investor Relations at (404) 828-6059.
A-5
PROSPECTUS
(UPS(R) LOGO)
(United Parcel Service)
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 series of debt securities;
- denominations;
- maturity;
- interest rate;
- time of interest payments;
- any terms for redemption;
- any terms for sinking fund payments;
- any listing on a national securities exchange;
- initial public offering price;
- names of any underwriters or agents;
- terms of any underwriting arrangements;
- amounts to be purchased by underwriters or agents; and
- 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, 7 World Trade Center 500 West Madison Street
N.W.
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.
2
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 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").
---------------------
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.
3
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.
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.
4
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;
(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;
5
(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
6
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 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.
7
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 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
8
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;
9
- 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)
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
10
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)
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
11
(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 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
12
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
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(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.
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"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
15
(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 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;
16
(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 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;
17
(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.
18
"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, 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
19
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)
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
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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 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
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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 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, expect 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,
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(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
(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.
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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.
Any underwriting compensation paid by us to underwriters or agents in
connection with the offering of offered debt securities, and any discounts, or
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 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
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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.
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.
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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.
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