SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
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For the Quarter Ended March 31, 1999
Commission file number 0-4714
United Parcel Service of America, Inc.
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(Exact name of registrant specified in its charter)
Delaware 95-1732075
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Glenlake Parkway, NE
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Atlanta, Georgia 30328
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404) 828-6000
Not Applicable
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Former name, address and fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Common Stock, par value $.10 per share
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(Title of Class)
564,746,283 shares
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Outstanding as of May 12, 1999
<PAGE>
PART I. ITEM 1- FINANCIAL INFORMATION
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1999 (unaudited) and December 31, 1998
(In millions except share amounts)
ASSETS 1999 1998
- ------ ------ -----
CURRENT ASSETS:
Cash and cash equivalents $ 2,795 $ 1,240
Marketable securities 480 389
Accounts receivable 2,677 2,713
Prepaid employee benefit costs 461 703
Materials, supplies and other prepaid expenses 417 380
------ ------
TOTAL CURRENT ASSETS 6,830 5,425
PROPERTY, PLANT AND EQUIPMENT (including aircraft
under capitalized lease obligations)- at
cost, net of accumulated depreciation and
amortization of $8,374 in 1999 and $8,170 in
1998 11,420 11,384
OTHER ASSETS 248 258
------ ------
$18,498 $17,067
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Commercial paper $ 781 $ -
Accounts payable 1,147 1,322
Accrued wages and withholdings 1,140 1,092
Dividends payable - 247
Deferred income taxes 107 114
Current maturities of long-term debt 376 410
Other current liabilities 877 532
------ ------
TOTAL CURRENT LIABILITIES 4,428 3,717
LONG-TERM DEBT (including capitalized lease
obligations) 2,142 2,191
------ ------
ACCUMULATED POSTRETIREMENT BENEFIT
OBLIGATION, NET 993 969
------ ------
DEFERRED TAXES, CREDITS AND OTHER LIABILITIES 3,089 3,017
------ ------
SHAREOWNERS' EQUITY:
Preferred stock, no par value,
Authorized 200,000,000 shares, none issued - -
Common stock, par value $.10 per share,
Authorized 900,000,000 shares, issued
559,000,000 56 56
Additional paid-in capital 168 325
Retained earnings 7,779 7,280
Accumulated other comprehensive income (125) (63)
------ -------
7,878 7,598
Treasury stock, at cost (745,911 and
11,605,952 shares in 1999 and 1998) (32) (425)
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7,846 7,173
$18,498 $17,067
See notes to consolidated financial statements.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1999 and 1998
(In millions except per share amounts)
(unaudited)
Three Months Ended
1999 1998
Revenue $ 6,331 $ 5,859
------ ------
Operating Expenses:
Compensation and benefits 3,652 3,471
Other 1,813 1,748
----- ------
5,465 5,219
Operating Profit 866 640
--- ------
Other income and (expense):
Investment income 31 14
Interest expense (49) (58)
Miscellaneous, net (16) 5
--- -----
(34) (39)
Income before income taxes 832 601
Income 333 249
--- ------
Net income $ 499 $ 352
====== ======
Basic Earnings Per Share $ 0.90 $ 0.64
====== ======
Diluted Earnings Per Share $ 0.88 $ 0.64
====== ======
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
Three Months Ended March 31, 1999
(In millions)
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Additional Other Total
Common Stock Paid-In Retained Comprehensive Treasury Stock, At Cost Shareowners'
Shares Amount Capital Earnings Income Shares Amount Equity
Balance, January 1, 1999 559 $56 $325 $7,280 $(63) (12) $(425) $7,173
Comprehensive income:
Net income - - - 499 - - - 499
Foreign currency
adjustments - - - - (65) - - (65)
Unrealized gain on
marketable - - - - 3 - - 3
------
securities
Comprehensive income $437
Gain on issuance of
treasury stock - - 31 - - - - 31
Stock award plans - - (188) - - 7 287 99
Treasury stock purchases - - - - - (5) (216) (216)
Treasury stock issuances - - - - - 9 322 322
--- --- --- --- --- - --- ---
Balance, March 31, 1999 559 $56 $168 $7,779 $(125) (1) $ (32) $7,846
=== === ==== ====== ===== === ===== ======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999 and 1998
(In millions)
(unaudited)
1999 1998
Cash flows from operating activities:
Net income $ 499 $ 352
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 283 265
Postretirement benefits 24 25
Deferred taxes, credits, and other 63 101
Stock award plans (188) -
Changes in assets and liabilities:
Accounts receivable 36 48
Prepaid employee benefit costs 242 (272)
Materials, supplies and other
prepaid expenses (37) (49)
Accounts payable (175) (85)
Accrued wages and withholdings 48 (94)
Dividends payable (247) (191)
Other current liabilities 345 179
----- -----
Net cash from operating activities 893 279
----- -----
Cash flows from investing activities:
Capital expenditures (214) (290)
Disposals of property, plant and equipment 12 90
Purchases of marketable securities (487) -
Sales and maturities of marketable securities 399 -
Construction funds in escrow (149) -
Other asset receipts 2 65
----- -----
Net cash (used in) investing activities (437) (135)
----- -----
Cash flows from financing activities:
Proceeds from borrowings 959 128
Repayments of borrowings (261) (67)
Purchases of treasury stock (216) (227)
Issuances of treasury stock pursuant to stock
awards and employee stock purchase plans 609 188
Other transactions 31 2
----- -----
Net cash from financing activities 1,122 24
----- -----
Effect of exchange rate changes on cash (23) (4)
----- -----
Net increase in cash and cash equivalents 1,555 164
Cash and cash equivalents:
Beginning of period 1,240 460
----- -----
End of period $2,795 $ 624
===== =====
Cash paid during the period for:
Interest (net of amount capitalized) $ 35 $ 40
===== =====
Income taxes $ 26 $ 132
===== =====
See notes to consolidated financial statements.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1999 and 1998
(unaudited)
1. For interim consolidated financial statement purposes, UPS computes its tax
provision on the basis of its estimated annual effective income tax rate, and
provides for accruals under its various employee benefit plans for each three
month period based on one quarter of the estimated annual expense.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which requires that certain costs to
develop or obtain computer software for internal use be capitalized. The Company
adopted the new standard on January 1, 1999. Prior to adoption of SOP 98-1, the
Company expensed all internal use software costs as incurred. The effect of
adopting the SOP was to increase net income for the quarter ended March 31, 1999
by $19 million or $.03 per share.
2. In the opinion of management, the accompanying interim, unaudited,
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position as of
March 31, 1999, the results of operations for the three months ended March 31,
1999 and 1998, and cash flows for the three months ended March 31, 1999 and
1998.
3. The following table sets forth the computation of basic and diluted earnings
per share (in millions except per share amounts):
1999 1998
Numerator:
Numerator for basic and diluted earnings per share -
net income $ 499 $ 352
======= ======
Denominator:
Weighted-average shares- denominator for
basic earnings per share 556 546
Effect of dilutive securities:
Additional contingent shares - Managers Incentive
Plan 4 3
Stock option plans 4 3
------- ------
Denominator for diluted earnings per share 564 552
======= ======
Basic earnings per share $0.90 $0.64
======= ======
Diluted earnings per share $0.88 $0.64
======= ======
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1999 and 1998
(unaudited)
4. During the second quarter of 1995, the Company received a Notice of
Deficiency from the United States Internal Revenue Service ("IRS") asserting
that it is liable for additional tax for the 1983 and 1984 tax years. The Notice
of Deficiency is based in large part on the theory that UPS is liable for tax on
income of Overseas Partners Ltd., a Bermuda company, which has reinsured excess
value package insurance purchased by UPS's customers from unrelated insurers.
The deficiency sought by the IRS relating to package insurance is based on a
number of theories, which the Company believes are inconsistent, and ranges from
$8 million to $35 million of tax, plus penalties and interest for 1984.
In August 1995, the Company filed a petition in the United States Tax
Court ("Tax Court") in opposition to the Notice of Deficiency related to the
1983 and 1984 tax years. The matter was tried before the Tax Court in late 1997.
Even though the Tax Court has no scheduled date for its opinion to be rendered,
the Company does not anticipate a decision before mid-1999.
During the first quarter of 1999, the IRS issued two Notices of Deficiency
asserting that UPS is liable for additional tax for the 1985 through 1987 tax
years, and the 1988 through 1990 tax years. In all cases, the primary assertions
by the IRS relate to the reinsurance of excess value package insurance, the
issue raised for the 1983 through 1984 tax years. The additional tax sought by
the IRS relating to package insurance for these periods ranges, based on
alternative theories, from $115 million to $121 million for the 1985 through
1987 tax years, and from $131 million to $138 million for the 1988 through 1990
tax years, plus penalties and interest. The IRS has based their assertions on
the same theories included in the 1983-1984 Notice of Deficiency.
In addition to package insurance, the IRS has raised a number of other
issues relating to the timing of deductions; the characterization of expenses as
capital rather than ordinary; and UPS's entitlement to the Investment Tax Credit
and the Research Tax Credit in the 1985 through 1990 tax years. These issues
total $12 million in tax for the 1983 and 1984 tax years, $88 million in tax for
the 1985 through 1987 tax years, and $245 million in tax for the 1988 through
1990 tax years. Penalties and interest are in addition to these amounts. The
majority of these adjustments would reverse in future years. The Company has
filed a petition with the Tax Court for the 1985 through 1987 tax years and is
currently in the process of preparing a petition to the Tax Court for the 1988
through 1990 tax years. The IRS may take positions similar to those described
above for periods subsequent to 1990. Management believes the eventual
resolution of the matters raised by the IRS will not result in a material
adverse effect upon the financial condition of the Company.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1999 and 1998
(unaudited)
The Company is a defendant in various employment-related lawsuits. In one
of these actions, which alleges employment discrimination by the Company, class
action status has been granted, and the United States Equal Employment
Opportunity Commission has been granted the right to intervene. UPS is also a
defendant in various other lawsuits that arose in the normal course of business.
In the opinion of management, none of these cases is expected to have a material
adverse effect upon the financial condition of the Company.
5. Segment information for the three months ended March 31, is as follows (in
millions):
1999 1998
--------- --------
U.S. Domestic Package:
Revenue $5,231 $4,892
Operating profit $765 $594
International Package:
Revenue $839 $761
Operating profit $44 $11
Non-Package:
Revenue $261 $206
Operating profit $25 $35
Consolidated:
Revenue $6,331 $5,859
Operating profit $866 $640
Non-package operating profit included $27 and $24 million for the three
months ended March 31, 1999 and 1998, respectively, of intersegment profit with
a corresponding amount of operating expense included in the U.S. domestic
package segment. Consolidated operating profit for the three months ended March
31, 1999 included $32 million of capitalized software costs that were not
allocated to individual segments.
6. Certain prior period amounts have been reclassified to conform to the current
period presentation.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 and 1998
For the three months ended March 31, 1999, revenue increased by $472
million, or 8.1%, in comparison with the three months ended March 31, 1998. U.S.
domestic package revenue totaled $5.231 billion, an increase of $339 million, or
6.9%; international package revenue totaled $839 million, an increase of $78
million, or 10.2%; and non-package revenue totaled $261 million, an increase of
$55 million, or 26.7%.
U.S. domestic package revenue increased primarily due to a 2.7% volume increase,
improved product mix and higher yields. Volume for the Company's higher yielding
express packages was up 6.4% for the quarter.
During the first quarter of 1999, rates for standard ground shipments were
increased an average of 2.5% for commercial deliveries. The ground residential
charge continues to be $1.00 over the commercial ground rate, with an additional
delivery area surcharge added to certain less accessible areas. In addition,
rates for UPS Next Day Air, UPS Next Day Air Saver and UPS 2nd Day Air increased
an average of 2.5%, while the rate for UPS 2nd Day Air A.M. decreased 2.2%. The
rate for UPS Next Day Air Early A.M. did not change. Rates for international
shipments originating in the United States did not increase for UPS Worldwide
Express, Worldwide Express Plus, UPS Worldwide Expedited and UPS International
Standard service. Rate changes for shipments originating outside the United
States have been made throughout the past year and vary by geographic market.
The 10.2% increase in international package revenue was primarily
attributable to volume growth for express and pan-European products and overall
improvement in product mix. Although overall volume growth was relatively flat
for international operations, all international operations posted volume
increases for express products with an 18.9% increase in express volume in the
Asia Pacific operation and a 19.4% increase in express and pan-European volume
in the European operation.
Operating expenses increased by $246 million, or 4.7%, while the operating
ratio improved from 89.1 during 1998 to 86.3 during 1999. This improvement
resulted primarily from containment of operating expense growth through better
utilization of existing capacity and from continued corporate-wide cost
containment efforts. Fuel costs during the first quarter of 1999 were also
slightly lower in comparison with the prior year.
Operating profit for the period increased $226 million, or 35.3%. U.S.
domestic package operations accounted for $171 million of this increase. This
was the result of revenues growing faster than associated operating costs due to
the reasons discussed above. International package operating profit amounted to
$44 million, an improvement of $33 million over the corresponding period of the
prior year. A substantial portion of the improvement was due to the volume
growth experienced in the Asia Pacific and European operations and containment
of operating expense growth as discussed above.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Income before income taxes increased $231 million to $832 million
primarily as a result of higher operating profit discussed above. Net income
increased $147 million, or 41.8%, over the corresponding quarter of the prior
year.
The results of operations for the three months ended March 31, 1999, are
not necessarily indicative of the results to be expected for the full year.
Liquidity and Capital Resources
UPS maintains a commercial paper program under which it is authorized to
borrow up to $2.0 billion. As of March 31, 1999, UPS had an $881 million
commercial paper balance outstanding. Since UPS does not have the intent to
refinance the full commercial paper balance outstanding at March 31, 1999, $781
million has been classified as a current liability.
In April 1999, UPS renegotiated and extended a credit agreement with a
consortium of banks. This agreement provides a revolving credit facility of
$1.25 billion which expires April 28, 2000. UPS also maintains an additional
$1.25 billion revolving credit facility with a consortium of banks which expires
April 30, 2003. There are currently no outstanding borrowings under either of
these facilities.
UPS has a European medium-term note program with a borrowing capacity of
$1.0 billion. Under this program, UPS may, from time to time, issue notes
denominated in a variety of currencies. There is currently $500 million
available under this program.
In January 1999, UPS filed a shelf registration with the SEC, under which
UPS may issue debt in the U.S. marketplace of up to $2.0 billion. There is
currently no debt issued under this shelf registration.
In March 1999, the Regional Airport Authority of Louisville and Jefferson
County, Kentucky, issued, on behalf of UPS, $149 million of Special Facilities
Revenue Bonds due January 1, 2029. The proceeds from these bonds, which are held
in escrow, will be used to finance a portion of the construction of a new
automated sorting facility, "Hub 2000," in Louisville, Kentucky.
During 1995, the Company received a Notice of Deficiency from the United
States Internal Revenue Service ("IRS") asserting that it is liable for
additional tax for the 1983 and 1984 tax years. During the first quarter of
1999, the IRS issued two Notices of Deficiency asserting that UPS is liable for
additional tax for the 1985 through 1987 tax years, and the 1988 through 1990
tax years. The Company is also a defendant in various employment-related
lawsuits. Reference is made here to Note 4 to the accompanying unaudited
consolidated financial statements for more information.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Impact of the Year 2000 Issue
Introduction
The term "year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from dates in the "1900's". These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field.
State of Readiness
In 1995, UPS created a Year 2000 Committee tasked with evaluating the year 2000
issue and taking appropriate action to address the implications of the year 2000
issue for UPS. The Year 2000 Committee has developed and is implementing a
comprehensive initiative (the "Initiative") to make its business critical
information technology assets ("IT assets") (including embedded microprocessor
systems incorporated into computer hardware and related software) and business
critical non-IT assets (e.g., vehicles, facilities, equipment and their embedded
microprocessor systems) year 2000 ready. The Initiative covers the following
eight phases: (i) inventory of IT and non-IT assets, (ii) assessment of repair
requirements, (iii) repair of IT and non-IT assets, (iv) unit and system
integration testing of individual IT and non-IT assets to determine correct
manipulation of dates and date-related data, (v) certification by users that IT
and non-IT assets correctly handle dates and date-related data, (vi) selected
verification by UPS internal auditors that phases (i) through (v) were properly
completed for IT and non-IT assets, (vii) "end-to-end" testing of selected IT
and non-IT assets, both internally developed and vendor-provided, to determine
correct manipulation of dates and date-related data, and (viii) creation of
contingency plans in the event of year 2000 failures.
Since UPS believes that the majority of its business critical IT assets
are controlled by UPS's Information Services Group ("IS Group"), UPS began the
implementation of the Initiative with these assets. Generally, an IT asset is
considered to be business critical by UPS if its failure would have a material
adverse effect on package movement, customer relations or UPS's financial
condition, liquidity or results of operations, or if other factors (including
regulatory requirements) require the characterization of the IT asset as
business critical. This group includes, for example, but is not limited to,
package tracking, billing, customer telephone service centers and UPS OnLine(R)
automation systems.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of April 30, 1999, (1) the first six phases of the Initiative had been
completed for substantially all of the IT assets which are controlled by the IS
Group; (2) the first five phases of the Initiative had been completed for
approximately eighty-nine percent (89%) of the other assets covered by the
Initiative (i.e., non-IT assets and IT assets controlled by all business
functions other than the IS Group); and (3) the sixth phase of the Initiative is
scheduled to be completed for a substantial majority of such other assets by the
end of the second quarter of 1999.
UPS has also contacted suppliers who provide both critical IT assets and
other critical goods and services such as vehicles, fuel, packaging materials,
and forms to (1) evaluate their year 2000 compliance plans and state of
readiness and (2) determine whether year 2000-related events will impede the
ability of such suppliers to continue to provide such goods and services. UPS
has received assurances from substantially all suppliers of business critical IT
assets controlled by the IS Group that these assets will correctly manipulate
dates and date-related data as the year 2000 is approached and reached. UPS has
reviewed the responses received from these vendors to evaluate the accuracy and
adequacy of the disclosures made by the vendors as to their Year 2000 compliance
status. Moreover the majority of these assets are subject to evaluation under
applicable phases of the Initiative as described above.
In addition, UPS has sent letters to the vast majority of its suppliers of
non-IT assets and IT assets controlled by business functions other than the IS
Group. UPS is reviewing these responses to evaluate the assertions from the
vendors as to their year 2000 compliance status and has elected to seek
additional information from certain vendors. UPS is conducting interface testing
between itself and vendors who transfer data directly with UPS.
UPS intends to develop appropriate contingency plans for any material
supplier that does not timely provide an adequate response to UPS. As a general
matter, UPS is vulnerable to the inability of significant suppliers' to remedy
their own year 2000 issues.
UPS also relies, both domestically and internationally, upon government
agencies, utility companies, telecommunication service companies and other
service providers outside of UPS's control. As part of the Initiative, UPS is
involved with several national and international associations to pursue common
Year 2000 objectives. For example, UPS has been and remains involved, through
its participation in the International Air Transport Association (IATA) and the
Air Transport Association of America (ATA), in a global and industry-wide effort
to understand the year 2000 compliance status of airports, air traffic systems,
customs clearance and other U.S. and international government agencies, and
common vendors and suppliers. In addition, UPS continues to monitor publicly
available information describing the year 2000 compliance plans and status of
UPS vendors. However, there is no assurance that suppliers, governmental
agencies, or other third parties will not suffer a year 2000 business
disruption. Such failures could have a material adverse affect on UPS's
financial condition, liquidity or results of operations.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
UPS is aware that the media and other third parties have reported that
Year 2000 compliance activity is generally considered to be further ahead in the
United States than in other countries. UPS continues to monitor these reports
and to evaluate the possible impact of Year 2000 events outside of the United
States on UPS operations. Additionally, UPS has included contingency planning
for international operations in its overall contingency planning process.
UPS has also retained an independent consultant ("Consultant") to assess
(1) whether the Initiative, if appropriately implemented, can result in year
2000 readiness for UPS, and (2) whether UPS is progressing at an appropriate
rate in its implementation of the Initiative. If the Consultant determines that
the Initiative will not adequately lead to year 2000 readiness, the Consultant
will provide recommendations for appropriately adjusting the Initiative. The
Consultant continues its periodic review of UPS's progress.
Testing
As part of the Initiative, UPS maintains a testing program to determine whether
its business critical IT and non-IT assets are year 2000 ready. UPS's testing
program is conducted in three stages. The initial stage ("unit testing")
consists of testing individual systems (units) for year 2000 readiness. Unit
testing includes, for example, testing a particular application to ensure that
it correctly manipulates dates and date-related data and properly operates in a
year 2000 ready environment. Following successful completion of unit testing, a
system will move into stage two ("integration testing"). This stage includes
testing between systems units to ensure that this interface will correctly send
and receive date-related data. Stages one and two are included in phase four of
the overall Initiative. All business critical IT and non-IT assets are subject
to the first two testing stages. After successful completion of phases four and
five of the Initiative, certain tested assets are subject to independent review
and verification by UPS internal auditors in phase six of the Initiative.
Certain business critical IT and non-IT assets are also subject to the third
stage of UPS's testing program ("end-to-end testing"). UPS is well into its
end-to-end testing program for such assets and plans to complete substantially
all such testing for business critical IT assets by the end of the second
quarter of 1999 and for other assets by the end of the third quarter of 1999.
UPS maintains a change management process to ensure that remediation efforts
have not adversely affected functionality and to retest units or systems after
changes where appropriate.
UPS is presently deploying IT and non-IT assets that have completed at
least the fifth phase of the Initiative and will continue that process
throughout all of 1999. UPS has not deferred any major information technology
project as a result of the implementation of the Initiative, although UPS may
have incurred an opportunity cost in dedicating resources to Year 2000
compliance activity rather than other endeavors. UPS has elected to limit the
deployment of new releases, upgrades or implementation of information technology
assets from October 1, 1999 through January 31, 2000, to facilitate its ability
to manage year 2000 related concerns.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Costs to Address the Year 2000 Issue
As of March 31, 1999, UPS estimates that it has spent approximately $66 million
on implementation of the Initiative with the majority of the work being
performed by UPS employees. A majority of these costs have been incurred in
repairing software components. UPS expects to spend an estimated additional $40
million to complete the Initiative.
These costs do not yet include all of the costs of preparing or
implementing Year 2000 contingency plans currently under development. Presently,
UPS estimates that it will incur approximately $3 million to $5 million in
out-of-pocket costs in connection with its contingency planning efforts.
Additionally, a portion of the salary and benefits payable to UPS employees
assigned to contingency planning activities will be allocated to Year 2000
costs. UPS currently expects that its Year 2000 contingency plans will call for
UPS employees to be involved in such contingency planning activities as command
center staffing, plan implementation at operating locations and the additional
testing of IT and non-IT assets before and during the millenium weekend.
UPS is also incurring costs in connection with the assessment and
remediation of IT assets and non-IT assets which are not business critical.
Management believes that the costs associated with such activities are
significantly less than the costs of the Initiative.
The cost information provided above represents management's best estimates
and may be revised as additional information becomes available. UPS intends to
fund all costs associated with its year 2000 efforts from operations.
Risks Presented by the Year 2000 Issue
The failure by UPS to appropriately address a material year 2000 issue, or the
failure by any third parties who provide goods or services that are critical to
UPS's business activities to appropriately address their year 2000 issues, could
have a material adverse effect on UPS's financial condition, liquidity or
results of operations. To date, UPS has not identified any material IT or non-IT
assets critical to UPS operations that present a material risk of not being year
2000 ready or that cannot be replaced with a suitable alternative. However, as
the Initiative proceeds, it is possible that UPS may identify assets or third
party providers that do present a risk of a year 2000-related disruption.
Although there is inherent uncertainty in the year 2000 problem, UPS expects
that the Initiative will significantly reduce UPS's level of uncertainty about
its year 2000 issues. At this point, UPS believes that its most reasonably
likely worst case scenario will result from challenges presented by year 2000
disruptions experienced by third parties, such as suppliers, customers or
government agencies. UPS is particularly focused on possible concerns with the
Year 2000 compliance status of third parties located outside of the United
States, such as air traffic control systems, customs brokerages, international
airports, utility service providers, governmental support structure and the
like. A significant disruption in services provided by such a third party could
have a material adverse impact on UPS's financial condition, liquidity or
results of operations.
<PAGE>
UNITED PARCEL SERVICE OF AMERICA, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Contingency Plans
UPS has established a Contingency Plan Committee to monitor and address the
development of contingency plans for UPS's at risk business functions. The
Initiative calls for UPS to conduct risk assessment reviews to determine whether
a contingency plan should be developed. Under this process, a contingency plan
may be required for reasons other than an expectation of failure, such as, for
example, the importance of a business process. Certain business units have
completed various risk assessment reviews and are in the process of developing
year 2000 contingency plans required by such reviews. In addition, UPS maintains
and deploys contingency plans designed to address various other potential
business interruptions as a normal course of business. These plans may be
applicable to address the interruption of support provided by third parties
resulting from their failure to be year 2000 ready.
UPS has also elected to establish Command and Control Centers at key UPS
operational locations and at other regional centers of operations, to facilitate
management of year 2000 events.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and Liquidity and Capital Resources, and other parts of
this Report, contain "forward-looking" statements about matters that are
inherently difficult to predict. Those statements include statements regarding
the intent, belief or current expectations of UPS and its management. Some of
the important factors that affect these statements have been described above as
each subject is discussed. Such forward-looking statements involve risks and
uncertainties that may affect future developments such as, for example, the
ability to deal with the year 2000 issue, including UPS's ability to discover
and correct potential year 2000 issues and the ability of third parties to
appropriately address their year 2000 issues. If the modifications and
conversions required to make UPS year 2000 ready are not made or are not
completed on a timely basis, the resulting problems could have a material
adverse effect on the Company's financial condition, liquidity or results of
operations.
<PAGE>
PART II
Item 6 - Exhibits and Reports on Form 8-K
A) Exhibits:
(10) Material Contracts
(a) Credit Agreement (364-Day Facility) dated April 29, 1999 among
United Parcel Service of America, Inc., the initial lenders
named therein, Salomon Smith Barney Inc. as Co-Arranger and
NationsBanc Montgomery Securities, LLC, as Co-Arranger and
Bank of America NT & SA as Agent and Citibank, N.A. as Agent.
(b) UPS Deferred Compensation Plan.
B) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter.
<PAGE>
EXHIBIT INDEX
(10) Material Contracts
(a) Credit Agreement (364-Day Facility) dated April 29, 1999 among
United Parcel Service of America, Inc., the initial lenders
named therein, Salomon Smith Barney Inc. as Co-Arranger and
NationsBanc Montgomery Securities, LLC, as Co-Arranger and
Bank of America NT & SA as Agent and Citibank, N.A. as Agent.
(b) UPS Deferred Compensation Plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED PARCEL SERVICE OF AMERICA, INC.
(Registrant)
By:
Robert J. Clanin
Senior Vice President,
Treasurer and
Chief Financial Officer
Date: May 13, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED PARCEL SERVICE OF AMERICA, INC.
(Registrant)
By: /S/ Robert J. Clanin
Robert J. Clanin
Senior Vice President,
Treasurer and
Chief Financial Officer
Date: May 13, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000809697
<NAME> United Parcel Service of America, Inc.
<MULTIPLIER> 1,000,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 2,795
<SECURITIES> 480
<RECEIVABLES> 2,677
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,830
<PP&E> 19,794
<DEPRECIATION> 8,374
<TOTAL-ASSETS> 18,498
<CURRENT-LIABILITIES> 4,428
<BONDS> 2,142
0
0
<COMMON> 56
<OTHER-SE> 7,790
<TOTAL-LIABILITY-AND-EQUITY> 18,498
<SALES> 6,331
<TOTAL-REVENUES> 6,331
<CGS> 0
<TOTAL-COSTS> 5,465
<OTHER-EXPENSES> 16
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> 832
<INCOME-TAX> 333
<INCOME-CONTINUING> 499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 499
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.88
</TABLE>
2
1
NYDOCS03/460843
NYDOCS03/460843
1
NYDOCS03/460843
EXECUTION COPY
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 29, 1999
UNITED PARCEL SERVICE OF AMERICA, INC., a Delaware corporation (the
"Borrower"), the banks, financial institutions and other institutional lenders
(collectively, the "Initial Lenders") party hereto, Citibank, N.A., as
administrative agent (together with any successor thereto appointed pursuant to
Article VII of the Existing Credit Agreement referred to below, in such
capacity, the "Administrative Agent") and as syndication agent (in such
capacity, the "Syndication Agent") for the Lenders (as defined in the Existing
Credit Agreement referred to below), and Salomon Smith Barney Inc. and
NationsBanc Montgomery Securities, LLC, as co-arrangers (in such capacity, the
"Co-Arrangers") under the Loan Documents (as defined in the Existing Credit
Agreement described below), hereby agree as follows:
PRELIMINARY STATEMENTS
(1) The Borrower is party to a Second Amended and Restated Credit
Agreement (364- Day Facility) dated as of April 30, 1998 (as amended,
supplemented or otherwise modified from time to time to (but not including) the
date of this Amendment and Restatement, the "Existing Credit Agreement" with the
banks, financial institutions and other institutional lenders party thereto (the
"Existing Lenders") and Citibank, N.A., as Administrative Agent for the Existing
Lenders (as defined therein), Bank of America NT & SA, as Documentation Agent
for the Existing Lenders, and Citicorp Securities, Inc. and BancAmerica
Robertson Stephens, as Co-Arrangers for the Existing Lenders. Capitalized terms
not otherwise defined in this Amendment and Restatement shall have the same
meanings as specified in the Existing Credit Agreement.
(2) The parties to this Amendment and Restatement desire to amend
the Existing Credit Agreement as set forth herein and to restate the Existing
Credit Agreement in its entirety to read as set forth in the Existing Credit
Agreement with the following amendments.
(3) The Borrower has requested that the Lenders agree to extend
credit to it from time to time in an aggregate principal amount of up to $
1,250,000,000 for general corporate purposes of the Borrower and its
Subsidiaries not otherwise prohibited under the terms of this Agreement. The
Lenders have indicated their willingness to agree to extend credit to the
Borrower from time to time in such amount on the terms and conditions of this
Amendment and Restatement.
SECTION 1. Amendments to the Existing Credit Agreement. (a) Section
1.01 of the Existing Credit Agreement is, effective as of the date of this
Amendment and Restatement and subject to the satisfaction of the conditions
precedent set forth in Section 2, hereby amended by deleting the definition of
"Termination Date" set forth therein and replacing it with the following new
definition thereof:
"Termination Date" means the earlier of (i) April 28, 2000 or, if extended
pursuant to Section 2.16(a), the date that is 364 days after the
Termination Date then in effect, and (ii) the date of termination in whole
of the Commitments pursuant to Section 2.05 or 6.01.
<PAGE>
28
29
NYDOCS03/460843
NYDOCS03/460843
(b) Section 2.01 of the Existing Credit Agreement is, effective as
of the date of this Amendment and Restatement and subject to the satisfaction of
the conditions precedent set forth in Section 2, amended by replacing the words
"the signature pages hereof" contained in the fifth line thereof with the words
"Schedule I hereto".
(c) Section 4.01(e) of the Existing Credit Agreement, is effective
as of the date of this Amendment and Restatement and subject to the satisfaction
of the conditions precedent set forth in Section 2, amended by replacing the
words "December 31, 1997" contained in the second and fifth lines thereof,
respectively, with the words "December 31, 1998."
(d) Section 4.01(f) of the Existing Credit Agreement is, effective
as of the date of this Amendment and Restatement and subject to the satisfaction
of the conditions precedent set forth in Section 2, amended by replacing the
words "December 31, 1997." with the words "December 31, 1998."
(e) Section 4.01 of the Existing Credit Agreement is, effective as
of the date of this Amendment and Restatement and subject to the satisfaction of
the conditions precedent set forth in Section 2, amended by adding a new Section
4.01(q) immediately after Section 4.01(p) to read as follows:
"Section 4.01(q) The Borrower has (i) initiated a review and
assessment of all mission critical computer applications within its
and each of its Subsidiaries' business and operations (including
those affected by mission critical suppliers and vendors) that could
be adversely affected by the risk that such computer applications
used by the Borrower or any of its Subsidiaries (or mission critical
suppliers and vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to
any date after December 31, 1999 (the "Year 2000 Problem"), (ii)
inquired of each of its mission critical vendors the status of its
Year 2000 Problem, and of the products and services it provides to
Borrowers (iii) developed a plan and timetable for addressing the
Year 2000 Problem on a timely basis and (iv) to date, implemented
that plan in accordance with such timetable. Based on the foregoing,
the Borrower has no reason to believe that its mission critical
computer applications that are material to its or any of its
Subsidiaries' business and operations will not be able, on a timely
basis, to perform properly date-sensitive functions for all dates
before and after January 1, 2000 ("Year 2000 Compliant"), except to
the extent that a failure to do so could not reasonably be expected
to have a Material Adverse Effect. For purposes of this Section
4.01(q), "mission critical computer application" means a computer
application whose failure would have a material adverse effect on
daily operations, package/shipment movement, customer relations or
employees of Borrower, or the Borrower's financial condition,
liquidity or results of operations. For purposes of this Section
4.01(q), "mission critical supplier or vendor" means a supplier or
vendor whose failure to operate or to provide the Borrower goods and
services would have a material adverse effect on daily operations,
package/shipment movement, customer relations or employees of
Borrower, or the Borrower's financial condition, liquidity or
results of operations."
(f) Section 8.04(a) of the Existing Credit Agreement is, effective
as of the date of this Amendment and Restatement and subject to the satisfaction
of the conditions precedent set forth in Section 2, amended by replacing the
words "Citicorp Securities" contained in the second line thereof by the words
"Salomon Smith Barney Inc."
(g) Schedule I to the Existing Credit Agreement is, effective as of
the date of this Amendment and Restatement and subject to the satisfaction of
the conditions precedent set forth in Section 2, deleted in its entirety and
replaced with Schedule I to this Amendment and Restatement.
SECTION 2. Conditions of Effectiveness of this Amendment and
Restatement. This Amendment and Restatement shall become effective as of the
date first above written (the "Restatement Effective Date") when and only if:
(a) The Administrative Agent shall have received counterparts of
this Amendment and Restatement executed by the Borrower and all of the
Initial Lenders or, as to any of the Initial Lenders, advice satisfactory
to the Administrative Agent that such Initial Lender has executed this
Amendment and Restatement.
(b) The Administrative Agent shall have received on or before the
Restatement Effective Date the following, each dated such date and (unless
otherwise specified below) in form and substance satisfactory to the
Administrative Agent and in sufficient copies for each Initial Lender:
(i) The Revolving Credit Notes payable to the order of each of
the Lenders, respectively.
(ii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying (A) that there are no amendments to the
charter of the Borrower since the Effective Date of the Existing
Credit Agreement and (B) the names and true signatures of the
officers of the Borrower authorized to sign this Amendment and
Restatement and the Notes, if any, and the other documents to be
delivered hereunder by the Borrower.
(iii) A favorable opinion of the McGuire, Woods, Battle &
Boothe LLP, counsel for the Borrower, in substantially the form of
Exhibit G to the Existing Credit Agreement but with such
modifications as are required to address the Existing Credit
Agreement, as amended by this Amendment and Restatement, in each
such case in form and substance reasonably satisfactory to the
Initial Lenders.
(iv) A favorable opinion of Shearman & Sterling, counsel for
the Administrative Agent, in form and substance reasonably
satisfactory to the Administrative Agent.
(c) The representations and warranties contained in Section 4.01 of
the Existing Credit Agreement shall be correct on and as of the
Restatement Effective Date, before and after giving effect to the
Restatement Effective Date, as though made on and as of such date.
(d) No event shall have occurred and be continuing, or shall occur
as a result of the occurrence of the Restatement Effective Date, that
constitutes a Default.
SECTION 3. Reference to and Effect on the Existing Credit Agreement
and the Notes. (a) On and after the effectiveness of this Amendment and
Restatement, each reference in the Existing Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import referring to the
Existing Credit Agreement, and each reference in the Notes to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Existing Credit Agreement, shall mean and be a reference to the Existing Credit
Agreement, as amended by this Amendment and Restatement.
(b) The Existing Credit Agreement and the Notes, as specifically
amended by this Amendment and Restatement, are and shall continue to be in full
force and effect and are hereby in all respects ratified and confirmed.
(c) Without limiting any of the other provisions of the Existing
Credit Agreement, as amended by this Amendment and Restatement, any references
in the Existing Credit Agreement to the phrases "on the date hereof", "on the
date of this Agreement" or words of similar import shall mean and be a reference
to the date of the Existing Credit Agreement (which is April 30, 1998).
SECTION 4. Costs and Expenses. The Borrower agrees to pay on demand
all reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the preparation, execution, delivery and administration,
modification and amendment of this Amendment and Restatement, the Notes and the
other documents to be delivered hereunder (including, without limitation, the
reasonable and documented fees and expenses of counsel for the Administrative
Agent with respect hereto and thereto) in accordance with the terms of Section
8.04 of the Existing Credit Agreement.
SECTION 5. Execution in Counterparts. This Amendment and Restatement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment and Restatement by telecopier shall be effective as delivery of a
manually executed counterpart of this Amendment and Restatement.
SECTION 6. Governing Law. This Amendment and Restatement shall be
governed by, and construed in accordance with, the laws of the State of New York
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
and Restatement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWER
UNITED PARCEL SERVICE OF AMERICA, INC.,
as Borrower
By
Name:
Title:
THE AGENTS
CITIBANK, N.A.,
as Administrative Agent
By
Name:
Title:
SALOMON SMITH BARNEY INC.,
as Co-Arranger
By
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES, LLC,
as Co-Arranger
By
Name:
Title:
<PAGE>
BANK OF AMERICA NT & SA,
as Documentation Agent
By
Name:
Title:
FIRST UNION NATIONAL BANK
as Co-Agent
By
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
as Co-Agent
By
Name:
Title:
ROYAL BANK OF CANADA
as Co-Agent
By
Name:
Title:
THE CHASE MANHATTAN BANK
as Co-Agent
By
Name:
Title:
<PAGE>
THE INITIAL LENDERS
CITIBANK, N.A.
By
Name:
Title:
<PAGE>
BANK OF AMERICA NT& SA
By
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By
Name:
Title:
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By
Name:
Title:
<PAGE>
ROYAL BANK OF CANADA
By
Name:
Title:
<PAGE>
THE CHASE MANHATTAN BANK
By
Name:
Title:
<PAGE>
CREDIT SUISSE FIRST BOSTON
By
Name:
Title:
By
Name:
Title:
<PAGE>
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By
Name:
Title:
By
Name:
Title:
<PAGE>
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By
Name:
Title:
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
Name:
Title:
<PAGE>
WELLS FARGO BANK, N.A.
By
Name:
Title:
<PAGE>
WACHOVIA BANK, N.A.
By
Name:
Title:
<PAGE>
ABN AMRO BANK N.V.
By
Name:
Title:
By
Name:
Title:
<PAGE>
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By
Name:
Title:
By
Name:
Title:
<PAGE>
BANK OF MONTREAL
By
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY
By
Name:
Title:
<PAGE>
BARCLAYS BANK PLC
By
Name:
Title:
<PAGE>
THE FUJI BANK, LTD -- NEW YORK BRANCH
By
Name:
Title:
<PAGE>
STATE STREET BANK AND TRUST COMPANY
By
Name:
Title:
<PAGE>
SUNTRUST BANK, ATLANTA
By
Name:
Title:
<PAGE>
30
29
NYDOCS03/460843
NYDOCS03/460843
SCHEDULE I TO THE AMENDMENT AND RESTATEMENT
COMMITMENTS AND APPLICABLE LENDING OFFICES
<PAGE>
32
33
NYDOCS03/460843
NYDOCS03/460843
- ------------------ -------------- ----------------------- ----------------------
Name of Lender Commitment Domestic Lending Eurodollar Lending
Office Office
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Citibank, N.A. $ 212,500,000 Citibank, N.A. Citibank, N.A.
2 Penns Way Suite 200 2 Penns Way Suite 200
New Castle, DE 19720 New Castle, DE 19720
Attn: Jennifer Attn: Jennifer
Klemaszewski Klemaszewski
T: (302) 894-6031 T: (302) 894-6031
F: (302) 894-6121 F: (302) 894-6121
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Bank of America $ 187,500,000 Bank of America Bank of America
NT & SA 231 S. La Salle Street 231 S. La Salle Street
Chicago, IL 60697 Chicago, IL 60697
Attn: Ingrid M. Attn: Ingrid M.
Eaton-Byias Eaton-Byias
T: (925) 675-7156 T: (925) 675-7156
F: (925) 675-7531 F: (925) 675-7531
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Barclays Bank PLC $25,000,000 Barclays Bank PLC Barclays Bank PLC
222 Broadway 222 Broadway
New York, NY 10038 New York, NY 10038
Attn: Charmaine Tenn Attn: Charmaine Tenn
Sing Que Sing Que
T: (212) 412-3728 T: (212) 412-3728
F: (212) 412-3306, F: (212) 412-3306,
07, 08 07, 08
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Banca $25,000,000 Banca Commerciale Banca Commerciale
Commerciale Italiana - NY Branch Italiana - New York
Italiana - NY One William Street Branch
Branch New York, NY 10004 One William Street
Attn: Tom McCullough New York, NY 10004
T: (212) 607-3886 Attn: Tom McCullough
F: (212) 809-2124 T: (212) 607-3886
F: (212) 809-2124
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Bankers Trust $25,000,000 Bankers Trust Company Bankers Trust Company
Company 130 Liberty Street 130 Liberty Street
New York, NY 10006 New York, NY 10006
Attn: Anita Mangliani Attn: Anita Mangliani
T: (212) 250-7674 T: (212) 250-7674
F: (212) 250-7351 F: (212) 250-7351
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Bank of Montreal $25,000,000 Bank of Montreal Bank of Montreal
115 S. LaSalle Street 115 S. LaSalle Street
12th Floor 12th Floor
Chicago, IL 60603 Chicago, IL 60603
Attn: Leon Sinclair Attn: Leon Sinclair
T: (312) 750-4371 T: (312) 750-4371
F: (312) 750-6057 F: (312) 750-6057
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
The Chase $87,500,000 The Chase Manhattan The Chase Manhattan
Manhattan Bank Bank Bank
1 Chase Manhattan 1 Chase ManhattanPlaza
Plaza 8th Floor
8th Floor New York, NY 10081
New York, NY 10081 Attn: May Fong
Attn: May Fong T: (212) 552-7314
T: (212) 552-7314 F: (212) 552-5650
F: (212) 552-5650
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Credit Suisse $50,000,000 Credit Suisse First Credit Suisse First
First Boston Boston Boston
11 Madison Aveune 11 Madison Aveune
New York, NY New York, NY
10010-3629 10010-3629
Attn: Robert Finney Attn: Robert Finney
T: (212) 325-9038 T: (212) 325-9038
F: (212) 325-8319 F: (212) 325-8319
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
PNC Bank, N.A. $87,500,000 PNC Bank, N.A. PNC Bank, N.A.
249 Fifth Avenue 249 Fifth Avenue
Pittsburgh, PA 15222 Pittsburgh, PA 15222
Attn: Mark Kennedy Attn: Mark Kennedy
T: (412) 762-6547 T: (412) 762-6547
F: (412) 762-6484 F: (412) 762-6484
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Canada One Liberty Plaza, One Liberty Plaza, 5th
5th Floor Floor
New York, NY 10006 New York, NY 10006
Attn: D. Craven Attn: D. Craven
T: (212) 428-6493 T: (212) 428-6493
F: (212) 428-6459 F: (212) 428-6459
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Deutsche Bank AG $50,000,000 Deutsche Bank AG Deutsche Bank AG
New York and/or New York Branch Cayman Islands Branch
Cayman Islands 31 West 52nd Street c/o Deutsche Bank AG
Branches New York, NY 10019 New York Branch
Attn: Joel Makowsky 31 West 52nd Street
T: (212) 469-7896 New York, NY 10019
F: (212) 469-8212 Attn: Joel Makowsky
T: (212) 469-7896
F: (212) 469-8212
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
First Union $87,500,000 First Union National First Union National
National Bank Bank Bank
214 Hogan Street 214 Hogan Street
Attn: PTC FL0070 Attn: PTC FL0070
Jacksonville, FL Jacksonville, FL
32231-4142 32231-4142
Attn: Cindy Petry Attn: Cindy Petry
T: (904) 489-6095 T: (904) 489-6095
F: (904) 489-1010 F: (904) 489-1010
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
The Fuji Bank, $25,000,000 The Fuji Bank, Ltd. - The Fuji Bank, Ltd. -
Ltd. - New York New York Branch New York Branch
Branch Two World Trade Center Two World Trade Center
New York, NY New York, NY10048-0042
10048-0042 Attn: Felix
Attn: Felix Amerasinghe
Amerasinghe T: (212) 898-2597
T: (212) 898-2597 F: (212) 821-9407
F: (212) 821-9407
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
State Street $25,000,000 State Street Bank and State Street Bank and
Bank and Trust Trust Company Trust Company
Company 225 Franklin Street, 225 Franklin Street,
MAO 2 MAO 2
Boston, MA 02110 Boston, MA 02110
Attn: Ms. C. Attn: Ms. C. Jaynelle
Jaynelle Landy, T: Landy,
(617) 664-4072 T: (617) 664-4072
F: (617) 664-6527 F: (617) 664-6527
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Morgan Guaranty $50,000,000 Morgan Guaranty Trust Morgan Guaranty Trust
Trust Company of Company of New York Company of New York
New York 60 Wall Street 60 Wall Street
New York, NY New York, NY10260-0060
10260-0060
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
ABN AMRO Bank, $25,000,000 ABN AMRO Bank N.V. ABN AMRO Bank N.V.
N.V. 135 South LaSalle 135 South LaSalle St.,
St., Suite 625 Suite 625
Chicago, IL 60603 Chicago, IL 60603
Attn: Loan Attn: Loan
Administration Administration
T: (312) 904-8865 T: (312) 904-8865
F: (312) 904-6893 F: (312) 904-6893
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Dresdner Bank $50,000,000 Dresdner Bank Dresdner Bank
AG, New York and 75 Wall Street 75 Wall Street
Grand Cayman New York, NY 10005 New York, NY 10005
Branches Credit Matters: Ken Credit Matters: Ken
Hamilton Hamilton
T: (212) 429-3201 T: (212) 429-3201
F: (212) 429-2524 F: (212) 429-2524
Funding Matters: Mona Funding Matters: Mona
Karout Karout
T: (212) 429-2287 T: (212) 429-2287
F: (212) 429-2130 F: (212) 429-2130
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Wachovia Bank, $50,000,000 Wachovia Bank, N.A. Wachovia Bank, N.A.
N.A. 191 Peachtree Street, 191 Peachtree Street,
N.E. N.E.
Atlanta, GA 30303-1757 Atlanta, GA 30303-1757
Attn: Wayne Attn: Wayne
Morgan/Theresa St. Morgan/Theresa St.Luce
Luce T: (404) 332-6084/4061
T: (404) 332-6084/4061 F: (404) 332-5016
F: (404) 332-5016
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
SunTrust Bank, $25,000,000 SunTrust Bank, Atlanta SunTrust Bank, Atlanta
Atlanta 303 Peachtree St. NE, 303 Peachtree St. NE,
2nd Fl. 2nd Fl.
Atlanta, GA 30308 Atlanta, GA 30308
Attn: Chris Deisley Attn: Chris Deisley
T: (404) 588-8684 T: (404) 588-8684
F: (404) 588-8833 F: (404) 588-8833
- ------------------ -------------- ----------------------- ----------------------
- ------------------ -------------- ----------------------- ----------------------
Wells Fargo $50,000,000 Wells Fargo Bank, Wells Fargo Bank,
Bank, National National Association National Association
Association 1445 Ross Avenue, 4th 1445 Ross Avenue, 4th
Floor Floor
Dallas, TX 75202 Dallas, TX 75202
Attn: Scott D. Bjelde Attn: Scott D. Bjelde
T: (512) 336-9153 T: (512) 336-9153
F: (512) 336-9154 F: (512) 336-9154
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TOTAL OF $1,250,000,000
COMMITMENTS
UPS
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS..............................................1
Section 1.1 Account................................................1
Section 1.2 Base Monthly Salary....................................1
Section 1.3 Beneficiary............................................1
Section 1.4 Committee..............................................1
Section 1.5 Disability.............................................1
Section 1.6 Employer Company.......................................1
Section 1.7 ERISA..................................................1
Section 1.8 Eligible Manager.......................................2
Section 1.9 Half-Month Bonus.......................................2
Section 1.10 1934 Act..............................................2
Section 1.11 Plan..................................................2
Section 1.12 UPS...................................................2
ARTICLE II - PARTICIPATION...........................................2
Section 2.1 April 1, 1999..........................................2
Section 2.2 Other..................................................2
ARTICLE III - DEFERRAL ELECTIONS.....................................2
Section 3.1 Start-Up Deferral Elections............................2
(a) April 1, 1999 Elections.....................................3
(b) Other Elections.............................................3
Section 3.2 Annual Deferral Elections..............................3
ARTICLE IV - ACCOUNT ADJUSTMENTS.....................................4
Section 4.1 General................................................4
Section 4.2 Deferrals..............................................4
Section 4.3 Phantom Investments....................................4
Section 4.4 Phantom Investment Election............................4
Section 4.5 Phantom Investment Adjustments.........................6
ARTICLE V - DISTRIBUTIONS............................................6
Section 5.1 General................................................6
Section 5.2 Distribution Forms.....................................6
Section 5.3 Elections..............................................7
Section 5.4 Beneficiary............................................7
(a) Designation.................................................7
(b) Distribution Form...........................................8
Section 5.5 Early Withdrawal Right and Penalty.....................8
Section 5.6 Hardship Withdrawals...................................8
ARTICLE VI - NO FUNDING OBLIGATION...................................9
ARTICLE VII - MISCELLANEOUS.........................................10
Section 7.1 Making and Revoking Elections and Designations........10
Section 7.2 Statements............................................10
Section 7.3 Claims Procedure......................................10
Section 7.4 Liability.............................................10
Section 7.5 Nonalienation of Benefits.............................10
Section 7.6 Plan Administration...................................10
Section 7.7 Construction..........................................11
Section 7.8 No Contract of Employment.............................11
Section 7.9 ERISA.................................................11
Section 7.10 1934 Act.............................................12
Section 7.11 Amendment and Termination............................13
UPS
DEFERRED COMPENSATION PLAN
The primary purpose of this Plan is to allow an Eligible Manager to
elect to defer the payment of a portion of his or her Base Monthly
Salary and Half-Month Bonus that is otherwise payable to him or her and
to pay the amounts deferred as adjusted for phantom investment
performance results upon the occurrence of a distribution event.
ARTICLE I - DEFINITIONS
Section 1.1. Account -- means the bookkeeping account
maintained by or at the direction of the Committee to show as of any
date the benefit of each Eligible Manager.
Section 1.2. Base Monthly Salary - means an Eligible Manager's
base monthly salary.
Section 1.3. Beneficiary - means the person or persons
designated as such in accordance with Section 5.4.
Section 1.4. Committee - means a committee consisting of not
less than three (3) members, who shall be appointed by the Board of
Directors of UPS to manage and administer this Plan.
Section 1.5. Disability - means "disability" as defined in the
UPS Retirement Plan.
Section 1.6. Employer Company - means an Employer Company for
purposes of the UPS Savings Plan, as in effect from time to time.
Section 1.7. ERISA - means the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.8. Eligible Manager - means an employee of an
Employer Company who (a) is in a job classification of Region Department
Manager or above, (b) is eligible to participate in the UPS Savings
Plan, as in effect from time to time, and (c) is not domiciled in Puerto
Rico.
Section 1.9. Half-Month Bonus - means an Eligible Manager's
half-month bonus.
Section 1.10. 1934 Act - means the Securities Exchange Act of
1934, as amended.
Section 1.11. Plan - means this UPS Deferred Compensation Plan.
Section 1.12. UPS - means United Parcel Service of America, Inc.
and any successor to United Parcel Service of America, Inc.
ARTICLE II - PARTICIPATION
Section 2.1. April 1, 1999. Each person who qualifies as an
Eligible Manager on April 1, 1999 shall be eligible to participate in
this Plan on April 1, 1999.
Section 2.2. Other. Each person who qualifies as an Eligible
Manager after April 1, 1999 shall be eligible to participate in this
Plan sixty (60) days after the date he or she first qualifies as an
Eligible Manager.
ARTICLE III - DEFERRAL ELECTIONS
Section 3.1. Start-Up Deferral Elections.
(a) April 1, 1999 Elections. An Eligible Manager who will be
eligible to participate in this Plan on April 1, 1999 shall have the
right from March 1, 1999 to March 31, 1999 to elect on the form provided
for this purpose to defer up to seventeen percent (17%) of his or her
Base Monthly Salary less the amount of his or her pre-tax deferrals
under the UPS Savings Plan; and up to one hundred percent (100%) of his
or her Half-Month Bonus that is otherwise payable on or after April 1,
1999, and any such election shall be irrevocable for the remainder of
1999.
(b) Other Elections. An Eligible Manager who is eligible to
participate in this Plan under Section 2.2 shall have the right prior to
the end of the sixty (60) day period starting on the date he or she
becomes an Eligible Manager to elect on the form provided for this
purpose to defer up to seventeen percent (17%) of his or her Base
Monthly Salary less the amount of his or her pre-tax deferrals under the
UPS Savings Plan; and up to one hundred percent (100%) of his or her
Half-Month Bonus that is otherwise payable after the date he or she
first becomes eligible to participate in the Plan as described in
Section 2.2, and any such election shall be irrevocable for the
remainder of the calendar year in which it is made.
Section 3.2. Annual Deferral Elections. An Eligible Manager
who is eligible to participate in this Plan shall have the right before
the beginning of any calendar year to elect during the enrollment period
established by the Committee on the form provided for this purpose to
defer up to seventeen percent (17%) of his or her Base Monthly Salary
less the amount of his or her pre-tax deferrals under the UPS Savings
Plan; and up to one hundred percent (100%) of his or her Half-Month
Bonus that is otherwise payable during such calendar year. Any such
election which is not revoked before January 1 of such calendar year
shall become irrevocable on January 1 of such calendar year and shall
remain irrevocable through December 31 of such calendar year.
ARTICLE IV - ACCOUNT ADJUSTMENTS
Section 4.1. General. An Eligible Manager's benefit under this
Plan shall be based entirely on the dollar value credited to his or her
Account at any time, which will depend on the amount deferred under
Article III and the phantom investment adjustments made in accordance
with this Article IV.
Section 4.2. Deferrals. The Base Monthly Salary and Half-Month
Bonus deferred by an Eligible Manager shall be credited to his or to her
Account as soon as practicable after the date that such Base Monthly
Salary and Half-Month Bonus otherwise would have been payable to the
Eligible Manager if no election had been made under Article III.
Section 4.3. Phantom Investments. The Committee from time to
time shall select one or more investment funds, including a hypothetical
fund based on the value of the common stock of UPS, that will serve as
hypothetical investment options for the deferrals credited to an Account
("phantom investment funds"). The Committee may establish limits on the
portion of an Account that may be hypothetically invested in any phantom
investment fund or in any combination of phantom investment funds.
Section 4.4. Phantom Investment Election. Each Eligible
Manager shall elect pursuant to procedures established by the Committee
to treat the deferrals credited to his or her Account as if they were
invested in one or more phantom investment funds (a "phantom investment
election"). An Eligible Manager may change his or her phantom
investment election at any time. Any phantom investment election shall
be effective only if made in accordance with the Committee's procedures.
Section 4.5. Phantom Investment Adjustments. The Committee
shall cause the Eligible Manager's Account to be adjusted for any
earnings and losses as if it were invested in accordance with the
Eligible Manager's phantom investment election in accordance with
procedures established by the Committee. Such adjustments shall be made
until his or her Account is distributed in full under Article V.
ARTICLE V - DISTRIBUTIONS
Section 5.1. General. The balance credited to an Eligible
Manager's Account shall (subject to Section 5.5 and Section 5.6) first
become distributable upon his or her death, Disability or termination of
employment with UPS and all of its affiliates, whichever comes first
("distribution event"). The distribution shall be made (or shall begin)
to the Eligible Manager or in the event of the Eligible Manager's death,
to the Eligible Manager's Beneficiary in the form elected by the
Eligible Manager as soon as practicable after a distribution event. All
distributions under this Plan shall be made in cash.
Section 5.2. Distribution Forms. Distribution shall be made in
the following form as elected by the Eligible Manager:
(a) a lump sum,
(b) 60 monthly installments or
(c) 120 monthly installments.
Notwithstanding the foregoing, monthly installments are only available
if the value of the Eligible Manager's Account when distributions
commence is at least $20,000. The amount of any monthly installment
distributable under this Plan shall be computed by multiplying the
Eligible Manager's Account by a fraction, the numerator of which shall
be one and the denominator of which shall be the number of installments
remaining after such installment has been paid plus one.
Section 5.3. Elections. An Eligible Manager shall elect at the
same time he or she makes an election under Article III that his or her
Account be distributed in one of the distribution forms described in
Section 5.2 ("Initial Distribution Form Election"). An Eligible Manager
may revise his or her Initial Distribution Form Election at any time;
provided, however, that any such revision shall be effective only if it
is made at least one full year before the Eligible Manager's Account
first becomes distributable. If an Eligible Manager fails to make an
Initial Distribution Election, the distribution shall be made in 120
monthly installments or, if the value of the Eligible Manager's Account
when distributions commence is less than $20,000, the distribution shall
be made in a lump sum. If a revised election is ineffective for any
reason, for example, because it was made less than one year before the
distribution event, the Eligible Manager's most recent distribution form
election that has been in effect for at least one year shall govern the
distribution.
Section 5.4 Beneficiary.
(a) Designation. An Eligible Manager shall designate (on a
form provided for this purpose) a person, or more than one person, as
his or her Beneficiary to receive the balance credited to his or her
Account in the event of his or her death. An Eligible Manager may
change his or her Beneficiary designation at any time. If no
Beneficiary designation is in effect on the date an Eligible Manager
dies or if no designated Beneficiary survives the Eligible Manager, the
Eligible Manager's estate automatically shall be treated as his or her
Beneficiary under this Plan.
(b) Distribution Form. The Eligible Manager's Account shall be
distributed in accordance with the distribution election in effect for
the Eligible Manager on the date of his or her death.
Section 5.5. Early Withdrawal Right and Penalty. An Eligible
Manager may elect to receive the balance credited to his or her Account
in a lump sum at any time; provided, however, that the Eligible Manager
shall forfeit the right to receive an amount equal to ten percent (10%)
of the balance credited to his or her Account as of such date. The lump
sum distribution of the balance credited to an Eligible Manager's
Account shall be made as soon as practicable after an election is made
under this Section 5.5.
Section 5.6. Hardship Withdrawals. An Eligible Manager shall
have the right to request that the Committee distribute all, or a part
of, his or her Account to him or to her in a lump sum in the event that
he or she experiences severe financial hardship resulting from a sudden
and unexpected illness or accident of the Eligible Manager or of a
dependent (as defined in Section 152(a) of the Internal Revenue Code of
1986, as amended) of the Eligible Manager, loss of the Eligible
Manager's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Eligible Manager (an "unforeseeable emergency"). The
Committee shall have the sole discretion to determine whether to grant
an Eligible Manager's withdrawal request under this Section 5.6, the
amount to distribute to the Eligible Manager, and the date as of which
any such distribution shall be made to the Eligible Manager; provided,
however, that no distribution shall be made to Eligible Manager under
this Section 5.6 to the extent that such hardship is or may be relieved
(a) through reimbursement or compensation by insurance or otherwise, (b)
by liquidation of the Eligible Manager's assets, to the extent the
liquidation of the Eligible Manager's assets would not itself cause
severe financial hardship, or (c) by cessation of deferral elections
under this Plan. The amount of any distributions from an Eligible
Manager's Account pursuant to this Section 5.6 shall be limited to the
amount necessary to meet the unforeseeable emergency.
ARTICLE VI - NO FUNDING OBLIGATION
The obligation of UPS to make any distributions under this Plan shall
be unfunded and unsecured; all distributions to, or on behalf of, an
Eligible Manager under this Plan shall be made from the general assets
of UPS, and any claim by an Eligible Manager or Beneficiary against UPS
for any distribution under this Plan shall be treated the same as a
claim of any general and unsecured creditor of UPS. Notwithstanding the
foregoing, UPS may, in its discretion, establish an irrevocable grantor
trust for the purpose of funding all or part of its obligations under
this Plan; provided, however, that the terms of such trust require that
the assets thereof remain subject to the claims of UPS's judgment
creditors and are non-assignable and non-alienable by any Eligible
Manager or Beneficiary prior to distribution thereof.
ARTICLE VII - MISCELLANEOUS
Section 7.1. Making and Revoking Elections and Designations.
Any election or designation or revised election or designation under
this Plan shall be effective only when the properly completed election
or designation form is received by the Committee or its delegate before
the Eligible Manager's death, subject to the rules set forth in Articles
III, IV and V.
Section 7.2. Statements. UPS or its agent shall provide
periodic statements to the Eligible Manager to show his or her Account
balance.
Section 7.3. Claims Procedure. Any claim for a benefit under
this Plan shall be filed and resolved in accordance with the claims
procedure provided under the UPS Savings Plan which is hereby
incorporated in this Plan by reference, except that the Committee of
this Plan shall be the entity with whom a claim for review should be
filed under this Plan, and the Committee has absolute discretion to
resolve any claims under this Plan.
Section 7.4. No Liability. No Eligible Manager and no
Beneficiary of an Eligible Manager shall have the right to look to, or
have any claim whatsoever against, any officers, director, employee or
agent of UPS or an Employer Company in his or her individual capacity
for the distribution of any Account.
Section 7.5. Nonalienation of Benefits. No benefit or payment
under this Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or
charge, and any attempt so to anticipate, alienate, sell, transfer,
assign, pledge, encumber, levy upon or charge the same shall be void.
Notwithstanding this statement, if the Eligible Manager is indebted to
UPS at any time when payments are required to be made under the
provisions of this Plan, UPS shall have the right to reduce the amount
of payments remaining to be made to the Eligible Manager or his or her
Beneficiary under the Plan to the extent of such indebtedness. An
election by UPS not to reduce such payment shall not constitute a waiver
of its claim for such indebtedness.
Section 7.6. Plan Administration. The Committee shall be the
administrator of this Plan, and the Committee has the exclusive
responsibility and complete discretionary authority to control the
operation, management and administration of this Plan, with all powers
necessary to enable it properly to carry out those responsibilities,
including (but not limited to) the power to construe this Plan, to
determine eligibility for benefits, to settle disputed claims and to
resolve all administrative, interpretive, operational, equitable and
other questions that arise under this Plan. The decisions of the
Committee on all matters within the scope of its authority shall be
final and binding. To the extent a discretionary power or
responsibility under this Plan is expressly assigned to a person by the
Committee, that person will have complete discretionary authority to
carry out that power or responsibility and that person's decisions on
all matters within the scope of that person's authority will be final
and binding.
Section 7.7. Construction. This Plan shall be construed in
accordance with the laws of the State of Georgia. Headings and
subheadings have been added only for convenience of reference and shall
have no substantive effect whatsoever. All references to the singular
shall include the plural and all references to the plural shall include
the singular.
Section 7.8. No Contract of Employment. Nothing contained in
this Plan shall be construed as a contract of employment between the
Employer Company and the Eligible Manager, as a right of any Eligible
Manager to be continued in the employment of the Employer Company, or as
a limitation of the right of the Employer Company to discharge the
Eligible Manager with or without cause.
Section 7.9. ERISA. UPS intends that this Plan come within the
various exceptions and exemptions to ERISA for a plan maintained for a
"select group of management or highly compensated employees" as described
in Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. Any ambiguities
in this Plan shall be construed to effect the intent as described in
this Section 7.9.
Section 7.10. 1934 Act. With respect to persons subject to Section
16 of the 1934 Act, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act and any regulations promulgated thereunder. To the extent any
transaction could, in the absolute discretion of the Committee, cause a
participant to be subject to liability under Section 16 of the Act, the
Committee may refuse to permit such transaction. In addition, the
Committee may establish procedures to ensure that transactions under
this Plan will be executed in accordance with the requirements of
Section 16(b) of the 1934 Act and any regulations promulgated thereunder.
Section 7.11. Amendment and Termination. UPS shall have the right
to amend this Plan from time to time and to terminate this Plan at any
time; provided, however, the balance credited to each Account
immediately after any such amendment or termination shall be no less
than the balance credited to such Account immediately before such
amendment or termination and no amendment or termination shall adversely
affect an Eligible Manager's right to the distribution of his or her
Account or his or her Beneficiary's right to the distribution of such
Account.
IN WITNESS WHEREOF, United Parcel Service of America, Inc., based
upon action by its Board of Directors, has caused this Plan Document to
be executed this day of March, 1999.
ATTEST: UNITED PARCEL SERVICE OF
AMERICA, INC.
Joseph R. Moderow James P. Kelly
Secretary Chairman
