8-KMaterial Agreements

UNITED PARCEL SERVICE INC 8-K Report, Material Agreement (Jan 13, 2006)

Filed January 13, 2006For Securities:UPS

Summary

This 8-K filing by United Parcel Service Inc. (UPS) on January 13, 2006, details the approval of restricted stock units (RSUs) as part of the UPS 2006 Long-Term Incentive Performance Awards. These awards, expected to be granted around March 1, 2006, are designed to incentivize executive officers, officers, and key managers by tying a significant portion of their compensation to the company's future performance. The awards are structured over a three-year cycle (2006-2008) and will be based on specific performance and earnings criteria determined by the Compensation Committee, including consolidated operating return on invested capital and consolidated revenue growth. Investors should note that 90% of the RSU awards are linked to annual performance metrics, with the number of RSUs earned adjusted based on the achievement of these targets. The remaining 10% is tied to the company's overall adjusted earnings performance over the three-year cycle. The RSUs will vest on December 31, 2008, provided continuous employment is maintained, and will be settled in Class A common stock, with dividends reinvested quarterly. This initiative underscores UPS's commitment to aligning executive compensation with shareholder value creation through performance-based incentives.

Key Highlights

  • 1UPS Compensation Committee approved the grant of Restricted Stock Units (RSUs) under the 2006 Long-Term Incentive Performance Awards.
  • 2Awards are expected to be granted around March 1, 2006, to executive officers, officers, and eligible managers.
  • 3RSU awards will range from 50%-250% of annual salary, based on the closing price of UPS Class B common stock in late February 2006.
  • 490% of the target award is performance-based, linked to annual metrics like operating return on invested capital and revenue growth for 2006-2008.
  • 510% of the target award is based on achieving adjusted earnings over the three-year award cycle.
  • 6Awards vest on December 31, 2008, contingent on continuous employment, and will be paid in Class A common stock.
  • 7The Compensation Committee retains discretion to adjust results for certain transactions and accounting changes in performance calculations.

Frequently Asked Questions

Restricted Stock Units (RSUs) are a form of equity compensation. UPS is awarding RSUs as part of its 2006 Long-Term Incentive Performance Awards to align the interests of its executive officers, officers, and key managers with those of shareholders. By tying a significant portion of compensation to the company's performance and stock value, UPS aims to motivate and retain top talent while driving long-term value creation.

The size of the RSU award is based on a percentage of the recipient's annual salary, ranging from 50% to 250%. Ninety percent of the award is contingent on meeting specific annual performance criteria (e.g., operating return on invested capital and revenue growth) over the 2006-2008 period. The remaining 10% is tied to the company's overall adjusted earnings performance for the entire three-year cycle. The Compensation Committee has the discretion to adjust performance calculations.

The RSUs are expected to be granted around March 1, 2006. The awards will generally vest on December 31, 2008, provided the recipient remains continuously employed with UPS through that date. Special vesting provisions may apply in cases of death, disability, or retirement.

Once vested, the RSU awards will be paid out in the form of UPS Class A common stock on March 13, 2009. Any dividends paid on UPS Class A common stock during the award period will be reinvested into the participant's RSU account quarterly.