<PAGE>
424(b)(2)
File No. 33-65079
333-11468
PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 5, 1996)
February 11, 2000
- --------------------------------------------------------------------------------
[LOGO OF UNIVERSAL CORPORATION]
$120,000,000 8 1/2% Notes due 20
- --------------------------------------------------------------------------------
The notes will mature on February 28, 2003. Interest on the notes is payable
semiannually on February 28 and August 28 of each year, beginning August 28,
2000. The notes will not be listed on any national securities exchange or on
the Nasdaq Stock Market. Currently, there is no public market for the notes. We
may redeem some or all of the notes at any time. The redemption prices and
procedures are discussed under the heading "Description of the Notes."
Investing in the notes involves risks. See "Risk Factors" beginning on page
S-3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the attached prospectus.
Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Public Offering Underwriting Proceeds to
Price Discounts Universal
- --------------------------------------------------
<S> <C> <C> <C>
Per Note 99.763% 0.450% 99.313%
- --------------------------------------------------
Total $119,715,600 $540,000 $119,175,600
- --------------------------------------------------
</TABLE>
Interest on the notes will accrue from February 16, 2000 to the date of
delivery.
The underwriters are offering the notes subject to various conditions. The
underwriters expect to deliver the notes, in book-entry form only, to
purchasers through The Depository Trust Company on or about February 16, 2000.
------------
Warburg Dillon Read LLC First Union Securities, Inc
------------
SunTrust Equitable Securities Corporation
<PAGE>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
Forward-Looking Statements............................................ S-2
Risk Factors.......................................................... S-3
The Company........................................................... S-3
Use of Proceeds....................................................... S-4
Description of the Notes.............................................. S-4
United States Taxation................................................ S-8
Underwriting.......................................................... S-11
Where to Find More Information........................................ S-12
Validity of the Notes................................................. S-13
Experts............................................................... S-13
<CAPTION>
Prospectus
<S> <C>
Available Information................................................. 2
Incorporation of Certain Documents by Reference....................... 2
The Company........................................................... 3
Ratio of Earnings to Fixed Charges.................................... 3
Use of Proceeds....................................................... 3
Description of Debt Securities........................................ 4
Limitations on Issuance of Euro-Securities............................ 16
Foreign Currency Risks................................................ 17
United States Taxation................................................ 17
Plan of Distribution.................................................. 25
Validity of Debt Securities........................................... 26
Experts............................................................... 26
</TABLE>
This document is in two parts. The first part is the prospectus supplement,
which describes the specific terms of the notes we are offering and certain
other matters relating to us and our business. The second part, the attached
prospectus, gives more general information, some of which does not apply to
the notes we are offering. The attached prospectus is part of our Registration
Statement No. 33-65079, as amended, filed with the U.S. Securities and
Exchange Commission under the Securities Act of 1933. If information varies
between the prospectus supplement and the attached prospectus, you should rely
on the information in the prospectus supplement.
FORWARD-LOOKING STATEMENTS
- -------------------------------------------------------------------------------
Information about us that is contained in and incorporated by reference in
this prospectus supplement and the attached prospectus includes forward-
looking statements intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995. These
statements may be identified by our use of terms such as "expect",
"anticipate", "estimate", "intend" or "believe" or words of similar effect
that relate to anticipated financial performance, business prospects and
similar matters. The important factors listed under "Risk Factors" below,
among others, in some cases have affected, and in the future could affect, our
actual results of operations and could cause our actual results for the fiscal
year 2000 and any interim period to differ materially from those expressed or
implied in any forward-looking statements made by us or on our behalf. We
assume no duty to update any of the statements in this prospectus supplement,
the attached prospectus or any statement incorporated by reference in either
document.
S-2
<PAGE>
RISK FACTORS
- -------------------------------------------------------------------------------
Our financial results are affected by a number of risk factors that directly
or indirectly affect the tobacco and non-tobacco operations of our business.
Some of the factors that may affect our results of operations include:
Tobacco Business
General Governmental Factors Financial Factors
Government Efforts to Extensions of Credit
Competition; Reliance on Reduce Tobacco Fluctuations in
Significant Customers Consumption Foreign Currency
Market Balance Political Uncertainties in Exchange Rates
Methods of Purchasing Foreign Tobacco Interest Rates
Tobacco Operations
Timing of Customer United States Trade
Shipments Policies
Tax Matters
Health Issues; Public
Sentiment; Industry
Litigation
Non-tobacco Businesses
Lumber and Building Agri-Products
Products Crop Risks
Market Balance
Translation of Foreign Governmental Factors
Currencies
Weather and Other Seasonal
Factors
Local Economies
Prices of Lumber Products
and Other Industry
Factors
For a more complete description of these factors, you should refer to our
Annual Report on Form 10-K for the fiscal year ended June 30, 1999 under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Factors That May Affect Future Results," our Quarterly
Reports on Form 10-Q for the quarters ended September 30, 1999 and December
31, 1999 and our Current Reports on Form 8-K dated August 5, 1999, September
20, 1999, October 26, 1999, December 2, 1999 and February 3, 2000, which are
incorporated by reference into this prospectus supplement and the attached
prospectus.
THE COMPANY
- -------------------------------------------------------------------------------
The following summary of our business is qualified entirely by, and should
be read together with, the more detailed information and financial statements
incorporated by reference in this prospectus supplement and the attached
prospectus.
We are the world's largest independent leaf tobacco merchant as well as the
leading lumber and building products distributor in Holland. In addition, we
are engaged in a number of value-added agri-product enterprises. We operate in
over 33 countries and employ approximately 35,000 people. Our principal
executive offices are located at 1501 North Hamilton Street, Richmond,
Virginia 23230, telephone (804) 359-9311.
The following charts set forth the relative percentages of our revenues and
operating income for each of our business segments for the fiscal year that
ended on June 30, 1999:
Revenue by Business Segments
Fiscal Year 1999
[CHART]
Tobacco 74%
Lumber 13%
Agri-Products 13%
Operating Income by Business Segments
Fiscal Year 1999
[CHART]
Tobacco 85%
Lumber 9%
Agri-Products 6%
S-3
<PAGE>
Tobacco Business
Our tobacco operations have been our principal focus since our founding in
1918. As the world's largest independent leaf tobacco merchant, we act as an
intermediary, purchasing tobacco from farmers in over 30 tobacco growing
countries for the account of, or for processing and resale to, manufacturers
of cigarettes, cigars and other tobacco products throughout the world.
Processing tobacco involves grading in the factories, blending, separation of
leaf lamina from the stems, drying and packing to precise moisture targets for
proper aging.
We estimate that during our fiscal year ended June 30, 1999, we purchased or
processed in the aggregate over 40% of the flue-cured and burley tobacco
produced in the United States, Brazil, Zimbabwe and Malawi, which are the
principal export markets of such tobacco. In addition, we maintain a presence,
and in certain cases, a leading presence, in virtually all other tobacco
growing regions in the world. We also have a leading position in worldwide
dark tobacco markets. Dark tobaccos are typically used for cigars and
smokeless tobacco products.
Non-Tobacco Businesses
Our non-tobacco operations consist of our Dutch lumber and building products
business and our agri-products business.
We operate our Dutch lumber and building products business through three
divisions: regional sales, wholesale/do-it-yourself sales and industrial
sales. Our customers are the building and construction trade, lumber merchants
and do-it-yourself chains.
We provide various products to customers in the food industry and the rubber
and tire manufacturing industry. Many of the services we provide are similar
to those provided by our tobacco business. We source, process, pack and ship
or operate trading activities in such products as tea, sunflower seeds,
rubber, nuts, dried fruits and canned and frozen foods. The emphasis of our
agri-products business is on value-adding activities and trading of physical
products in markets where a service can be performed in the supply system from
the countries of origin to the consuming industries.
USE OF PROCEEDS
- -------------------------------------------------------------------------------
We estimate that we will receive net proceeds of approximately $118.9
million from the sale of the notes, after we deduct the underwriting discounts
and expenses of the offering. We plan to use the net proceeds from the sale of
the notes to repay a portion of our short-term bank debt and commercial paper,
which portion had a weighted average interest rate of 6.18% and a weighted
average maturity of 8.81 days as of February 11, 2000. We used this short-term
debt to finance some of our inventory and accounts receivable. Portions of the
short-term bank debt that we repay may have been borrowed from affiliates of
First Union Securities, Inc and SunTrust Equitable Securities Corporation. Our
relationship with these affiliates is described in this prospectus supplement
under the heading "Underwriting."
DESCRIPTION OF THE NOTES
- -------------------------------------------------------------------------------
The particular terms of the notes offered by this prospectus supplement are
described below. The description found below supplements the description of
the general terms of the debt securities, of which the notes offered by this
prospectus supplement are a part, set forth under "Description of Debt
Securities" in the attached prospectus. If anything described below is
inconsistent with the general terms
S-4
<PAGE>
described in the attached prospectus, you should consider the particular terms
described below to be the ones that prevail. You should read the attached
prospectus in conjunction with this prospectus supplement. Because this is a
summary, it does not contain all the information that may be important to you.
You should read the entire indenture, including the definitions of certain
terms, and this prospectus supplement before you make any investment decision.
General: The notes will be unsecured obligations of ours
issued under the indenture, dated as of February
1, 1991, between us, as issuer, and The Chase
Manhattan Bank (formerly known as Chemical Bank),
as trustee. The principal corporate trust office
of the trustee is located in New York, New York.
Paying Agent: The Chase Manhattan Bank
Title: 8 1/2% Notes due 2003
Total principal amount being issued:
$120,000,000
Due date for principal: February 28, 2003
Interest rate: 8 1/2% per annum
Date interest starts Date of issue, which is expected to be February
accruing: 16, 2000
Interest payment dates: Each February 28, and August 28
First interest payment August 28, 2000
date:
Regular record dates for February 15 and August 15
interest:
Redemption: We may redeem some or all of the notes at any
time--that is, we may repay them early. You have
no right to require us to redeem the notes.
Redemption Price: If we redeem the notes, we must pay you the
greater of
. 100% of the principal amount of the notes to
be redeemed or
. the sum of the present value of the remaining
scheduled payments of principal and interest
on the notes being redeemed, not including
interest accrued and paid as of the redemption
date, discounted to the redemption date on a
semi-annual basis, at the adjusted treasury
rate referred to below plus 25 basis points,
assuming a 360-day year comprised of twelve
30-day months.
If we redeem the notes, we will also pay you accrued interest if we have not
otherwise paid you interest through the redemption date. Interest payments
that are due on or before the redemption date will be made by us to the record
holders of the notes at the close of business on the regular record date for
interest payments.
"Adjusted treasury rate" means the rate per annum equal to the semi-annual
equivalent yield to maturity of the comparable treasury issue, assuming a
price equal to the comparable treasury price for the redemption date. The
semi-annual equivalent yield to maturity will be computed as of the third
business day immediately preceding the redemption date.
"Comparable treasury issue" means the U.S. treasury security that would be
used in accordance with customary financial practice in pricing new issues
of corporate debt securities that had a term
S-5
<PAGE>
comparable to the remaining term of the notes. The U.S. treasury security
shall be selected by the quotation agent.
"Comparable treasury price" for a redemption date means either (1) the
average of the reference treasury dealer quotations for the redemption
date, after excluding the highest and lowest quotations, or (2) if the
trustee obtains fewer than four reference treasury dealer quotations for
the redemption date, the average of the reference treasury dealer
quotations obtained, as determined by the quotation agent.
"Quotation agent" means the reference treasury dealer appointed by us.
"Reference treasury dealer" means
.Warburg Dillon Read LLC, First Union Securities, Inc and SunTrust
Equitable Securities Corporation or their successors; if they cease to
be primary U.S. government securities dealers in New York City, we will
substitute another primary U.S. government securities dealer in New
York City, and
.any other primary U.S. government securities dealer in New York City
selected by us.
"Reference treasury dealer quotations" means the average as determined by
the quotation agent of the bid and asked prices for the comparable treasury
issue, expressed in each case as a percentage of the principal amount,
quoted in writing to the trustee by the reference treasury dealer at 3:30
p.m. on the third business day preceding the redemption date.
Redemption Notices: We will give notice to The Depository Trust Company
("DTC") of any redemption we propose to make at least 30 days (but not more
than 60 days) before the redemption date. If we redeem only some of the notes,
DTC's practice is to determine by lot the amount of notes to be redeemed from
each of its participating institutions. Notice by DTC to these participants
and by participants to "street name" holders of indirect interests in the
notes will be made according to arrangements among them and may be subject to
statutory or regulatory requirements.
Sinking Fund: There is no sinking fund for the notes.
Ranking: The notes will rank equally with all of our other unsecured and
unsubordinated indebtedness.
Covenants: The notes will be subject to restrictive covenants as described
under "Description of Debt Securities" in the attached prospectus.
Defeasance: The notes will be subject to our right to choose "Full Defeasance"
and "Covenant Defeasance" as described under "Description of Debt Securities"
in the attached prospectus.
Restrictions on Consolidation, Merger, Sale and Lease of Assets: The notes
will be subject to restrictions on consolidation, merger, sale and lease of
assets as described under "Description of Debt Securities" in the attached
prospectus.
Book-Entry, Delivery and Form
The notes will be issued in the form of one or more definitive global
securities in registered form (each, a "Global Security"). The Global
Securities will be deposited with, or on behalf of, DTC and registered, at the
request of DTC, in the name of Cede & Co. Beneficial interests in the Global
Securities will be represented through book-entry accounts of financial
institutions acting on behalf of beneficial owners as direct and indirect
participants in DTC (the "DTC Participants"). Investors may elect to hold
their interests in the Global Securities through either DTC or Clearstream
Banking, societe anonyme, Luxembourg (formerly Cedelbank) ("Clearstream
Luxembourg"), or Morgan Guaranty Trust Company of New York, Brussels Office,
as operator of the Euroclear System ("Euroclear"), either directly if they
S-6
<PAGE>
are participants in such systems, or indirectly through organizations that are
participants in such systems. Clearstream Luxembourg and Euroclear will hold
interests on behalf of their participants through customers' securities
accounts in Clearstream Luxembourg's and Euroclear's names on the books of
their respective U.S. depositaries, which in turn will hold such interests in
customers' securities accounts in the U.S. depositaries' names on the books of
DTC. The Chase Manhattan Bank will act as U.S. depositary for Euroclear, and
Citibank, N.A. will act as U.S. depositary for Clearstream Luxembourg (in such
capacities, the "U.S. Depositaries"). Beneficial interests in the Global
Securities may be held in denominations of $1,000 and integral multiples of
$1,000. The Global Securities may be transferred, as a whole but not in part,
only to another nominee of DTC or to a successor of DTC or its nominee.
Additional information concerning DTC is included in the attached prospectus
under "Description of Debt Securities--Global Securities--Depositary Global
Securities."
Distributions with respect to notes held beneficially through Clearstream
Luxembourg will be credited to cash accounts of Clearstream Luxembourg
participating organizations in accordance with its rules and procedures, to
the extent received by the U.S. Depositary for Clearstream Luxembourg.
Distributions with respect to notes held beneficially through Euroclear will
be credited to the cash accounts of Euroclear participants in accordance with
the Terms and Conditions Governing Use of Euroclear and the related Operating
Procedures of the Euroclear System, and applicable Belgian law, to the extent
received by the U.S. Depositary for Euroclear.
The notes will not be issued in individual certificated form, except in very
limited circumstances as set forth under "Description of Debt Securities--
Global Securities--Depositary Global Securities" in the attached prospectus.
Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available
funds. Secondary market trading between DTC Participants will occur in the
ordinary way in accordance with DTC rules and will be settled in immediately
available funds using DTC's Same-Day Funds Settlement System. Secondary market
trading between Clearstream Luxembourg participating organizations and/or
Euroclear participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream Luxembourg and
Euroclear and will be settled using the procedures applicable to conventional
Eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through Clearstream
Luxembourg participating organizations or Euroclear participants, on the
other, will be effected in DTC in accordance with DTC's rules on behalf of the
relevant European international clearing system by its U.S. Depositary;
however, such cross-market transactions will require delivery of instructions
to the relevant European international clearing system by the counterparty in
such system in accordance with its rules and procedures and within its
established deadlines (European time). The relevant European international
clearing system will, if the transaction meets its settlement requirements,
deliver instructions to its U.S. Depositary to take action to effect final
settlement on its behalf by delivering or receiving notes in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Clearstream Luxembourg participating
organizations and Euroclear participants may not deliver instructions directly
to the U.S. Depositaries.
Because of time-zone differences, credits of notes received in Clearstream
Luxembourg or Euroclear as a result of a transaction with a DTC Participant
will be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
S-7
<PAGE>
transactions in such notes settled during such processing will be reported to
the relevant Euroclear participants or Clearstream Luxembourg participating
organizations on such business day. Cash received in Clearstream Luxembourg or
Euroclear as a result of sales of notes by or through a Clearstream Luxembourg
participating organization or a Euroclear participant to a DTC Participant
will be received with value on the DTC settlement date but will be available
in the relevant account only as of the business day following settlement in
DTC.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Clearstream Luxembourg and Euroclear, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time.
UNITED STATES TAXATION
- -------------------------------------------------------------------------------
This section describes the principal United States federal income tax
consequences of owning the notes. This discussion replaces in its entirety the
discussion set forth in the attached prospectus under the heading "United
States Taxation." This discussion applies to you only if you acquire notes in
the offering by us at the offering price and you own your notes as capital
assets for tax purposes. This discussion does not apply to you if you are a
member of a class of holders subject to special rules, such as:
. a dealer in securities or currencies;
. a trader in securities that elects to use a mark to market method of
accounting for securities holdings;
. a bank;
. a tax-exempt organization;
. a life insurance company;
. a person that holds notes that are a hedge or that are hedged against
interest rate or currency risks;
. a person that owns notes that are part of a straddle or conversion
transaction; or
. a person whose functional currency is not the U.S. dollar.
This discussion is based on the Internal Revenue Code of 1986, as amended,
its legislative history, existing and proposed regulations thereunder,
published rulings and court decisions, all as currently in effect. These laws
are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning
these notes in your particular circumstances under the Internal Revenue Code
and the laws of any other taxing jurisdiction.
United States Holders
This section describes the tax consequences to a United States holder. You
are a United States holder if you are a beneficial owner of a note and you
are:
. a citizen or resident of the United States;
. a domestic corporation;
. an estate the income of which is subject to United States federal income
tax without regard to its source; or
. a trust if a United States court is able to exercise primary supervision
over administration of the trust and one or more United States persons
have authority to control all substantial decisions of the trust.
S-8
<PAGE>
Payments of Interest
You will be taxed on any interest on your note as ordinary income at the
time you receive the interest or it accrues, depending on your method of
accounting for tax purposes.
If you purchase your note for an amount in excess of its principal amount,
you may elect to treat the excess as amortizable bond premium. If you make
this election, you will reduce the amount required to be included in your
income each year with respect to interest on your note by the amount of
amortizable bond premium allocable, based on your note's yield to maturity, to
that year. If you make an election to amortize bond premium it will apply to
all debt instruments (other than debt instruments the interest on which is
excludible from gross income) that you own at the beginning of the first
taxable year to which the election applies, and to all debt instruments that
you thereafter acquire, and you may not revoke it without the consent of the
Internal Revenue Service.
Purchase, Sale and Retirement of the Notes
Your tax basis in a note generally will be its cost, adjusted by subtracting
the amount of any amortizable bond premium applied to reduce interest on your
note. Upon the sale, exchange or retirement of a note, you will generally
recognize capital gain or loss equal to the difference between the amount
realized (not including any amounts attributable to accrued and unpaid
interest) and your tax basis in the note. Capital gain of a noncorporate
United States holder is generally taxed at a maximum rate of 20% for property
held more than one year.
United States Alien Holders
This section describes the tax consequences to a United States alien holder.
You are a United States alien holder if you are a beneficial owner of a note
and are, for United States federal income tax purposes:
.a nonresident alien individual;
.a foreign corporation;
.a foreign partnership; or
.an estate or trust
that, in each case, is not subject to United States federal income tax on a
net income basis on income or gain from a note. If you are a United States
holder, this section does not apply to you.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below, if you are a United States
alien holder of a note:
.the issuer and its paying agents will not be required to deduct United
States withholding tax from payments to you of principal, premium, if
any, and interest if, in the case of interest
--you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the issuer entitled to
vote;
--you are not a controlled foreign corporation that is related to the
issuer through stock ownership; and
--either (1) you certify to the withholding agent, under penalties of
perjury, that you are not a United States holder and provide your name
and address, or (2) a securities organization, bank or other financial
institution that holds customers' securities in the ordinary course of
its trade or business and holds the note certifies to the issuer or the
withholding agent under penalties of perjury that a similar statement
has been received from you by it or by a similar financial institution
between it and you and furnishes the payor with a copy thereof; and
S-9
<PAGE>
.no deduction for any United States federal withholding tax will be made
from any gain that you realize on a sale or exchange of your note.
Further, a note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's gross
estate for United States federal estate tax purposes if:
.the decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the issuer
entitled to vote at the time of death; and
.the income on the note would not have been effectively connected with a
United States trade or business of the decedent at such time.
If you receive a payment after December 31, 2000, recently finalized
Treasury regulations will apply. Under these regulations, after December 31,
2000, you may use an alternative method to satisfy the certification
requirement described above in connection with payments of interest.
Additionally, if you are a foreign partnership, after December 31, 2000,
both you and your partners must provide the certification described above, and
in addition you must provide certain information. The Internal Revenue Service
will apply a look-through rule in the case of tiered partnerships.
Backup Withholding and Information Reporting
Payments of Principal and Interest
In general, if you are a noncorporate United States holder, information
reporting requirements will apply to payments of principal and interest on
your note in the United States and "backup withholding" at a rate of 31% will
apply to such payments if you fail to provide an accurate taxpayer
indentification number or are notified by the Internal Revenue Service that
you have failed to report all interest and dividends required to be shown on
your federal income tax returns. If you are a United States alien holder you
are generally exempt from backup withholding and information reporting
requirements on Internal Revenue Form 1099 with respect to payments of
principal and interest (assuming the income is otherwise exempt from United
States federal income tax), provided that you comply with certain
certification and identification procedures in order to prove your exemption.
The issuer or a paying agent, however, may report (on Internal Revenue Service
Form 1042) payments of interest on notes held by United States alien holders.
Proceeds from the Sale of a Note
Payment of the proceeds from the sale of a note to or through the United
States office of a broker may be subject to information reporting and backup
withholding. If you are a United States alien holder, you will not be subject
to information reporting or backup withholding if you certify as to your non-
United States status or otherwise establish an exemption from information
reporting and backup withholding. Payment of the proceeds from the sale of a
note made to or through a foreign office of a broker generally will not be
subject to information reporting or backup withholding. If, however, the
broker is (1) a United States person, (2) a controlled foreign corporation for
United States tax purposes, (3) a foreign person 50% or more of whose gross
income is effectively connected with a United States trade or business for a
specified three-year period, or (4) with respect to payments made after
December 31, 2000, a foreign partnership if at any time during its tax year,
one or more of its partners are U.S. persons (as defined in U.S. Treasury
regulations) who in the aggregate hold more than 50% of the income or capital
interest in the partnerhip or if, at any time during its tax year, such
foreign partnership is engaged in a United States trade or business, then
information reporting (but not backup withholding) may apply to such payments.
S-10
<PAGE>
UNDERWRITING
- -------------------------------------------------------------------------------
Subject to the terms and conditions contained in an underwriting agreement
and the related terms agreement among us and the underwriters named below, we
have agreed to sell to the underwriters, and each of the underwriters has
severally agreed to purchase from us, the notes offered as set forth below:
<TABLE>
<CAPTION>
Principal
Underwriters Amount of Notes
------------ ---------------
<S> <C>
Warburg Dillon Read LLC..................................... $ 72,000,000
First Union Securities, Inc................................. 36,000,000
SunTrust Equitable Securities Corporation................... 12,000,000
------------
Total................................................... $120,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions, and that the underwriters are committed to
purchase all of the notes if any are purchased. The underwriters propose to
offer the notes to the public at the price set forth on the cover of this
prospectus supplement under "Public offering price" and to certain dealers at
that price less a concession not in excess of 0.250% of the principal amount.
The underwriters may allow, and the dealers may reallow, a concession not
exceeding 0.125% of the principal amount on sales to certain other dealers.
The underwriters reserve the right to reject any order for the purchase of
notes. The price to the public and other selling terms may be changed after
the initial offering to the public of the notes.
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on any securities exchange
or for quotation of the notes on any automated dealer quotation system. The
underwriters have advised us that they intend to make a market in the notes
after the offering, although they are under no obligation to do so. The
underwriters may discontinue any market-making activities at any time without
notice. We cannot assure you that there will be a liquid trading market for
the notes or that a public trading market for the notes will develop. If no
active public trading market develops, the market price and liquidity of the
notes may be adversely affected. If the notes are traded, they may trade at a
discount from their initial offering price, depending on factors such as
prevailing interest rates, the market for similar securities, the performance
of our company as well as other factors not listed here.
Other than in the United States, neither we nor the underwriters have taken
any action that would permit a public offering of the notes in any
jurisdiction where action for that purpose is required. The notes offered
hereby may not be offered or sold, directly or indirectly, nor may this
prospectus supplement, the attached prospectus or any other offering material
or advertisements in connection with the offer and sale of the notes be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction. Persons who possess this prospectus supplement and the attached
prospectus are advised to inform themselves about, and to observe any
restrictions relating to, the offering of the notes and the distribution of
this prospectus supplement and the attached prospectus. This prospectus
supplement and the attached prospectus do not constitute an offer to sell or a
solicitation of an offer to buy any of the notes offered hereby in any
jurisdiction in which such an offer or a solicitation is unlawful.
We have agreed to indemnify the underwriters against, or to contribute to
payments that the underwriters may be required to make with respect to,
certain liabilities, including liabilities under the Securities Act of 1933.
S-11
<PAGE>
The underwriters, as well as dealers and agents, may purchase and sell notes
in the open market. These transactions may include stabilizing transactions
and purchases to cover syndicate short positions created in connection with
the offering. Stabilizing transactions consist of bids and purchases made to
prevent or slow a decline in the market price of the notes. Syndicate short
positions arise when the underwriters or agents sell more notes than we are
required to sell to them in the offering. The underwriters may also impose
penalty bids whereby the underwriting syndicate may reclaim selling
concessions allowed either syndicate members or broker dealers who sell notes
in the offering for their own account if the syndicate repurchases the notes
in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the notes, which may be
higher as a result of these activities than it might otherwise be in the open
market. These activities, if commenced, may be discontinued at any time
without notice. We and the underwriters make 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, we and the underwriters
make no representation that the underwriters will engage in those types of
transactions or that those transactions, once commenced, will not be
discontinued without notice.
Some of the underwriters or their affiliates have provided, and may continue
to provide, investment banking, financial advisory, commercial banking or
other services to us and have received, and may continue to receive, customary
fees in connection with those services.
Under Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), special considerations apply to a
public offering of debt securities where more than 10% of the net proceeds
thereof will be paid to members of the NASD that are participating in the
offering, or persons affiliated or associated with such members. First Union
National Bank, an affiliate of First Union Securities, Inc, and SunTrust Bank,
Inc., an affiliate of SunTrust Equitable Securities Corporation, have lent
money to us under existing credit facilities. In the event that more than 10%
of the proceeds of the offering will be used to repay such money lent by First
Union National Bank or SunTrust Bank, Inc., the offering will be conducted in
conformity with Rule 2710(c)(8).
We estimate total expenses of the offering, excluding underwriting discounts
and commissions, will be approximately $300,000.
WHERE TO FIND MORE INFORMATION
- -------------------------------------------------------------------------------
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference rooms.
Reports, proxy statements and other information concerning us can also be
inspected and copied at the offices of the New York Stock Exchange at 20 Broad
Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information in documents
that we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus
supplement and the attached prospectus and should be read with the same care.
Later information that we file with the SEC will automatically update and
supersede that information.
The following documents are the only documents that currently are
incorporated in and made a part of this prospectus supplement and the attached
prospectus by reference in connection with the offering of the notes.
S-12
<PAGE>
. our Annual Report on Form 10-K for the fiscal year ended June 30, 1999.
. our Quarterly Reports on Form 10-Q for the quarters ended September 30,
1999 and December 31, 1999.
. our Current Reports on Form 8-K dated August 5, 1999, September 20,
1999, October 26, 1999, December 2, 1999 and February 3, 2000.
Any future documents that we file with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 prior to the completion of
the offering of the notes will also be incorporated by reference into this
prospectus supplement and the attached prospectus.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the attached prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the attached
prospectus, as well as information we previously filed or subsequently file
with the SEC that is incorporated by reference, is accurate as of its date
only. Our business, financial condition, results of operations and prospects
may have changed since that date.
We will provide without charge to each person (including any beneficial
owner) to whom this prospectus supplement and attached prospectus is
delivered, upon written or oral request, a copy of any documents incorporated
by reference in this prospectus supplement and the attached prospectus (other
than the exhibits to such documents unless those exhibits are specifically
incorporated by reference). You should direct your request to Karen M.L.
Whelan, Vice President and Treasurer, Universal Corporation, 1501 North
Hamilton Street, Richmond, Virginia 23230, telephone number (804) 254-1813, or
e-mail [email protected].
VALIDITY OF THE NOTES
- -------------------------------------------------------------------------------
The validity of the notes offered hereby will be passed upon for the Company
by Sullivan & Cromwell, Washington, D.C. Certain legal matters will be passed
upon for the underwriters by Cahill Gordon & Reindel, New York, New York.
Sullivan & Cromwell and Cahill Gordon & Reindel will rely as to matters
governed by Virginia law on the opinion of James M. White, III, Esq.,
Secretary and General Counsel, or George C. Freeman, III, Esq., Assistant
Secretary, of the Company.
EXPERTS
- -------------------------------------------------------------------------------
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended June 30, 1999, as set forth in their report, which is incorporated by
reference in this prospectus supplement and elsewhere in the registration
statement. Our financial statements are incorporated by reference in reliance
on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
S-13
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
$200,000,000
[LOGO OF UNIVERSAL CORPORATION]
DEBT SECURITIES
Universal Corporation (the "Company") may offer, from time to time, its debt
securities consisting of debentures, notes and/or other evidences of
indebtedness (the "Debt Securities"), at an aggregate issue price not to
exceed $200,000,000 (or the equivalent in foreign denominated currencies or
units of two or more currencies, based on the applicable exchange rate at the
time of offering, as shall be designated by the Company at the time of
offering). The Debt Securities may be offered as separate series, and may be
offered in amounts, at prices and on terms to be determined at the time of the
offering. Each issue of Debt Securities may vary, where applicable, as to
aggregate principal amount, maturity date, public offering or purchase price,
interest rate or rates and timing of payments thereof, provision for
redemption or sinking fund requirements, if any, currencies of denomination or
currencies otherwise applicable thereto and any other variable terms and
methods of distribution. The specific terms with regard to the Debt Securities
in respect of which this Prospectus is being delivered are set forth in one or
more accompanying Prospectus Supplements (each a "Prospectus Supplement").
The Debt Securities will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company.
The Debt Securities may be issued in registered form ("Registered
Securities") or bearer form with coupons attached ("Bearer Securities"), or
both. In addition, all or a portion of the Debt Securities of a series may be
issuable in temporary or permanent global form. Bearer Debt Securities, Debt
Securities represented by a permanent global Debt Security exchangeable for
Bearer Debt Securities and Debt Securities initially represented by a
temporary global Debt Security described under "Description of Debt
Securities--Temporary Global Securities" (collectively, "Euro-Securities") are
offered only to Non-United States persons and to offices of certain United
States financial institutions located outside the United States and its
possessions. See "Limitations on Issuance of Euro-Securities." For a
discussion of certain United States federal income tax consequences to Holders
of Debt Securities, see "United States Taxation."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Debt Securities may be sold directly by the Company, or indirectly
through agents designated from time to time or through underwriters or
dealers, or through a combination of such methods. See "Plan of Distribution."
If any agents of the Company or any underwriters or dealers are involved in
the sale of the Debt Securities, the names of such agents, underwriters or
dealers and any applicable commissions or discounts will also be set forth in
the Prospectus Supplement. The net proceeds to the Company from such sale will
be set forth in the Prospectus Supplement.
The date of this Prospectus is February 5, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference room of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: Seven World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is listed on the New York Stock Exchange, and such
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
This Prospectus does not contain all the information set forth in the
registration statement to which this Prospectus relates (the "Registration
Statement") and the exhibits thereto which the Company has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"), and to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-652) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995;
2. The Company's Quarterly Report on Form 10-Q (as amended by Form 10-
Q/A) for the quarter ended September 30, 1995; and
3. The Company's Current Report on Form 8-K bearing a cover date of July
11, 1995.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Debt Securities shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained herein or in a document all or any portion of which
is incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than certain exhibits to such documents). Requests for such copies
should be directed to Karen M. L. Whelan, Vice President and Treasurer,
Universal Corporation, 1501 North Hamilton Street, Richmond, Virginia 23230,
telephone number (804) 359-9311.
2
<PAGE>
THE COMPANY
The Company, through its subsidiaries, is the world's largest independent
leaf tobacco merchant and has additional operations in agri-products and
lumber and building products. The Company's tobacco operations have been the
principal focus of the Company since its founding in 1918, and for the fiscal
year ended June 30, 1995, such operations accounted for 70% of revenues and
75% of operating profits. The Company's agri-products and lumber and building
products operations accounted for 14% and 16% of revenues and 9% and 16% of
operating profits, respectively, during the same period.
The Company was incorporated under the laws of the Commonwealth of Virginia
in 1918. The Company's principal executive offices are located at 1501 North
Hamilton Street, Richmond, Virginia 23230, telephone (804) 359-9311.
RATIO OF EARNINGS TO FIXED CHARGES
The table below sets forth the ratio of earnings to fixed charges for the
periods indicated. For purposes of calculating the ratio, earnings consist of
the sum of (i) pretax income from continuing consolidated operations and
unconsolidated affiliates, excluding the effects of discontinued operations,
extraordinary items and the cumulative effect of accounting changes and (ii)
fixed charges. Fixed charges consist of interest costs for the Company and its
unconsolidated affiliates and the amortization of debt discounts.
<TABLE>
<CAPTION>
Three Months
ended Year ended
September 30, June 30,
-------------- -------------------
1995 1994 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.......... 2.0x 1.4x 1.8x 1.9x 3.1x 2.8x 2.4x
</TABLE>
USE OF PROCEEDS
Except as may be set forth in a Prospectus Supplement, the Company intends
to use the net proceeds from the sale of the Debt Securities for general
corporate purposes, which may include repayment of indebtedness, capital
expenditures, possible acquisitions and working capital. Pending such use, the
net proceeds may be temporarily invested or applied to the reduction of
indebtedness.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture dated as of February
1, 1991 (the "Indenture") between the Company and Chemical Bank, as Trustee
(the "Trustee"). A copy of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The statements
under this caption, as modified or superseded by the applicable Prospectus
Supplement, are brief summaries of certain provisions of the Indenture, do not
purport to be complete, and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Indenture. Wherever
particular Sections or defined terms of the Indenture are referred to, such
Sections or defined terms are incorporated herein by reference.
The term "Securities," as used in this Prospectus, refers to all Securities
issued under the Indenture and includes the Debt Securities. Unless otherwise
indicated, currency amounts in this Prospectus and any Prospectus Supplement
are stated in United States dollars ("$" or "dollars").
The Securities may be issued from time to time in one or more series. The
particular terms of each series of Securities offered by a Prospectus
Supplement or Prospectus Supplements will be described in such Prospectus
Supplement or Prospectus Supplements relating to such series.
The Indenture limits the ability of the Company to incur certain secured
indebtedness and to engage in certain sale and leaseback transactions. See
"Restrictions on Liens" and "Restrictions on Sale and Leaseback Transactions"
below. There is no restriction in the Securities or the Indenture against the
incurring of indebtedness by the Company or any subsidiary of the Company. The
Debt Securities will be obligations exclusively of the Company. The Company is
a holding company, substantially all of whose consolidated assets are held by
its subsidiaries. Accordingly, the cash flow of the Company and the consequent
ability to service its debt, including the Debt Securities, are largely
dependent upon the cash flow and earnings of such subsidiaries.
General
The Indenture will provide that, in addition to Securities previously issued
thereunder, additional Securities may be issued in separate series thereunder
without limitation as to aggregate principal amount. The terms of each series
of Securities will be established by or pursuant to a resolution of the Board
of Directors of the Company and set forth or determined in the manner provided
in an Officers' Certificate or by a supplemental indenture. (Section 301)
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Securities of each series: (1) the title of the
Securities; (2) any limit on the aggregate principal amount of the Securities;
(3) whether the Securities are to be issuable as Registered Securities or
Bearer Securities or both, whether any of the Securities are to be issuable
initially in temporary global form and whether any of the Securities are to be
issuable in permanent global form; (4) the price or prices (expressed as a
percentage of the aggregate principal amount thereof) at which the Securities
will be issued; (5) the date or dates on which the Securities will mature; (6)
the rate or rates per annum at which the Securities will bear interest, if
any, or the formula pursuant to which such rate or rates will be determined,
and the date or dates from which any such interest will accrue; (7) the
Interest Payment Dates on which any such interest on the Securities will be
payable and the Regular Record Date for any interest payable on any Registered
Securities on any Interest Payment Date; (8) the Person to whom any Registered
Securities of such series will be payable, if other than the Person in whose
name that Security (or one or more Predecessor Securities) is registered at
the close of business on the Regular Record Date for such interest, the manner
in which, or the Person to whom, any interest on any Bearer Security of such
series will be payable, if otherwise than upon presentation and surrender of
the coupons appertaining thereto, and the extent to which, or the manner in
which, any interest payable on a temporary global Security on an Interest
Payment Date will be paid if other than in the manner described under "Global
Securities--Temporary Global Securities" below and the extent to which, or the
manner in which, any interest payable on a permanent global Security on an
Interest Payment Date will be paid; (9) each office or agency where, subject
to the terms of the Indenture as described below under "Payment and Paying
Agents," the principal of and any
4
<PAGE>
premium and interest on the Securities will be payable and each office or
agency where, subject to the terms of the Indenture as described below under
"Form, Exchange, Registration and Transfer," the Securities may be presented
for registration of transfer or exchange; (10) the period or periods within
which and the price or prices at which the Securities may, pursuant to any
optional redemption provisions, be redeemed, in whole or in part, and the
other detailed terms and provisions of any such optional redemption
provisions; (11) the obligation, if any, of the Company to redeem or purchase
the Securities pursuant to any sinking fund or analogous provisions or at the
option of the Holder thereof and the period or periods within which and the
price or prices at which the Securities will be redeemed or purchased, in
whole or in part, pursuant to such obligation, and the other detailed terms
and provisions of such obligation; (12) the denominations in which any
Registered Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof, and the denomination or denominations in
which Bearer Securities will be issuable, if other than denominations of
$5,000; (13) the currency or currency units of payment of principal of and any
premium and interest on the Securities; (14) any index used to determine the
amount of payments of principal of and any premium and interest on the
Securities; (15) any limitation on the application of the terms of the
Indenture described below under "Defeasance and Covenant Defeasance;" and (16)
any other terms of the Securities not inconsistent with the provisions of the
Indenture. (Section 301) Any such Prospectus Supplement or Prospectus
Supplements will also describe any special provisions for the payment of
additional amounts relating to specified taxes, assessments or other
governmental charges in respect of the Securities of such series and whether
the Company has the option to redeem the affected Securities rather than pay
such additional amounts.
Securities may be issued as Original Issue Discount Securities. An Original
Issue Discount Security is a Security, including any zero-coupon Security,
which is issued at a price lower than the amount payable upon the Stated
Maturity thereof, and which provides that, upon redemption or acceleration of
the Maturity thereof, an amount less than the amount payable upon the Stated
Maturity thereof and determined in accordance with the terms of such Security
shall become due and payable. Special United States federal income tax
considerations applicable to Securities issued at an original issue discount,
including Original Issue Discount Securities, and special United States tax
considerations applicable to any Securities which are denominated in a
currency or currency unit other than United States dollars are described below
under "United States Taxation--United States Holders--Original Issue
Discount."
The Securities of each series will be unsecured and will rank pari passu
with all other unsecured and unsubordinated indebtedness of the Company.
The Indenture does not contain any provisions which may afford the Holders
of Securities of any series protection in the event of a highly leveraged
transaction or other transaction which may occur in connection with a takeover
attempt resulting in a decline in the credit rating of the Securities. Any
such provisions, if applicable to the Securities of any series, will be
described in the Prospectus Supplement or Prospectus Supplements relating
thereto.
Form, Exchange, Registration and Transfer
Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in an applicable
Prospectus Supplement or Prospectus Supplements, Bearer Securities in
definitive form will have interest coupons attached. The Indenture also will
provide that Securities of a series may be issuable in temporary or permanent
global form. (Section 201) See "Global Securities--Temporary Global
Securities" and "Global Securities--Permanent Global Securities."
In connection with its sale during the Restricted Period (as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations), no
Euro-Security shall be delivered to any location in the United States or its
possessions. Except as may otherwise be provided in the applicable Prospectus
Supplement, a Euro-Security (not including a Security in temporary global
form) may be delivered in connection with its sale during the Restricted
Period only if the person entitled to physical delivery of such Euro-Security
furnishes written
5
<PAGE>
certification, in the form required by the Indenture, to the effect that (i)
such Euro-Security is not owned or being acquired by or on behalf of a United
States person (as defined under "Limitations on Issuance of Euro-Securities"),
(ii) such Euro-Security is owned or being acquired by or on behalf of (A) a
United States person that is a financial institution within the meaning of
Section 1.165-12(c)(1)(v) of the United States Treasury Regulations (a
"Financial Institution") purchasing for its own account or for resale or (B) a
United States person who acquired such Euro-Security through the foreign
branch of a United States Financial Institution and who holds such Euro-
Security through such Financial Institution on the date of such written
certification (and, in either case (A) or (B), the Financial Institution has
agreed to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Internal Revenue Code of 1986, as from time to time amended, and the
regulations thereunder), or (iii) such Euro-Security is owned or is being
acquired by a Financial Institution for the purpose of resale during the
Restricted Period. A Financial Institution described in clause (iii) above,
whether or not also described in clause (i) or (ii) above, must certify that
it has not acquired the Euro-Security for purposes of resale directly or
indirectly to a United States person or to a person within the United States
or its possessions. In the case of a Euro-Security in permanent global form,
such certification must be given in connection with the notation of a
beneficial owner's interest therein upon original issuance of such Security or
upon exchange of a portion of a temporary global Security. (Section 303) See
"Global Securities--Temporary Global Securities" and "Limitations on Issuance
of Euro-Securities."
At the option of the Holder, subject to the terms of the Indenture,
Registered Securities of any series will be exchangeable for other Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. In addition, if Securities of any series
are issuable as both Registered Securities and Bearer Securities, at the
option of the Holder, subject to the terms of the Indenture, Bearer Securities
(with all unmatured coupons, except as provided below, and with all matured
coupons in default) of such series will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Bearer Securities surrendered in
exchange for Registered Securities between a Regular Record Date or a Special
Record Date and the relevant date for payment of interest shall be surrendered
without the coupon relating to such date for payment of interest and interest
will not be payable in respect of the Registered Security issued in exchange
for such Bearer Security, but will be payable only to the Holder of such
coupon when due in accordance with the terms of the Indenture. Registered
Securities, including Registered Securities received in exchange for Bearer
Securities, may not be exchanged for Bearer Securities. (Section 305) Each
Bearer Security and coupon will bear a legend to the following effect: "Any
United States person who holds this obligation will be subject to limitations
under the United States income tax laws, including the limitations provided in
Sections 165(j) and 1287(a) of the Internal Revenue Code." (Section 201)
Securities may be presented for exchange as provided above, and Registered
Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed), at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Securities and referred to in an
applicable Prospectus Supplement or Prospectus Supplements, without a service
charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Such transfer or exchange will be effected upon
the Security Registrar or such transfer agent, as the case may be, being
satisfied with the documents of title and identity of the person making the
request. The Company has appointed the Trustee as Security Registrar. (Section
305) If a Prospectus Supplement or Prospectus Supplements refer to any
transfer agents (in addition to the Security Registrar) initially designated
by the Company with respect to any series of Securities, the Company may at
any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent acts, except
that, if Securities of a series are issuable solely as Registered Securities,
the Company will be required to maintain a transfer agent in each Place of
Payment for such series and, if Securities of a series are issuable as Bearer
Securities, the Company will be required to maintain (in addition to the
Security Registrar) a transfer agent in a Place of Payment for such series
located outside the United States and its possessions. The Company may at any
time designate additional transfer agents with respect to any series of
Securities. (Section 1002)
6
<PAGE>
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange any Security during a period
beginning at the opening of business 15 days before any selection for
redemption of Securities of like tenor and of the series of which such
Security is a part, and ending at the close of business on the earliest date
on which the relevant notice of redemption is deemed to have been given to all
Holders of Securities of like tenor and of such series to be redeemed; (ii)
register the transfer of or exchange any Registered Security so selected for
redemption, in whole or in part, except the unredeemed portion of any Security
being redeemed in part; or (iii) exchange any Bearer Security so selected for
redemption, except to exchange such Bearer Security for a Registered Security
of that series and like tenor which is immediately surrendered for redemption.
(Section 305)
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, principal of and any premium and interest on Bearer
Securities will be payable, subject to any applicable laws and regulations, at
the offices of such Paying Agents outside the United States and its
possessions as the Company may designate from time to time or, at the option
of the Holder, by check or by transfer to an account maintained by the payee
with a financial institution located outside the United States and its
possessions. Unless otherwise indicated in an applicable Prospectus Supplement
or Prospectus Supplements, payment of interest on a Bearer Security on any
Interest Payment Date will be made only against surrender to the Paying Agent
of the coupon relating to such Interest Payment Date. (Section 1001) No
payment with respect to any Bearer Security will be made at any office or
agency of the Company in the United States or its possessions or by check
mailed to any address in the United States or its possessions or by transfer
to any account maintained with a financial institution located in the United
States or its possessions. Notwithstanding the foregoing, payments of
principal of and any premium and interest on Bearer Securities denominated and
payable in U.S. dollars will be made at the office of the Paying Agent in the
Borough of Manhattan, The City of New York, if (but only if) payment of the
full amount thereof in U.S. dollars at all offices or agencies outside the
United States and its possessions is illegal or effectively precluded by
exchange controls or other similar restrictions. (Section 1002)
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, principal of and any premium and interest on
Registered Securities will be payable, subject to any applicable laws and
regulations, at the office of such Paying Agent or Paying Agents as the
Company may designate from time to time, except that at the option of the
Company payment of any interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register. Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, payment of interest on a Registered Security on any
Interest Payment Date will be made to the Person in whose name such Registered
Security (or Predecessor Security) is registered at the close of business on
the Regular Record Date for such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement or
Prospectus Supplements, the Corporate Trust Office of the Trustee in The City
of New York will be designated as a Paying Agent for the Company for payments
with respect to Securities of each series which are issuable solely as
Registered Securities and as a Paying Agent for payments with respect to
Securities of each series (subject to the limitations described above in the
case of Bearer Securities) which are issuable solely as Bearer Securities or
as both Registered Securities and Bearer Securities. Any Paying Agents outside
the United States and its possessions and any other Paying Agents in the
United States or its possessions initially designated by the Company for the
Securities of each series will be named in an applicable Prospectus Supplement
or Prospectus Supplements. The Company 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 if
Securities of a series are issuable solely as Registered Securities, the
Company will be required to maintain a Paying Agent in each Place of Payment
for such series and, if Securities of a series are issuable as Bearer
Securities, the Company will be required to maintain (i) a Paying Agent in the
Borough of Manhattan, The City of New York for payments with respect to any
Registered Securities of the series (and for payments with respect to Bearer
Securities of the series in the
7
<PAGE>
circumstances described above, but not otherwise), and (ii) a Paying Agent in
a Place of Payment located outside the United States and its possessions where
Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment; provided, however, that if the
Securities of such series are listed on The International Stock Exchange of
the United Kingdom and the Republic of Ireland, Limited (the "London Stock
Exchange"), the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and its possessions and such stock exchange shall so
require, the Company will maintain a Paying Agent in London, Luxembourg or any
other required city located outside the United States and its possessions, as
the case may be, for the Securities of such series. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of the
principal of and any premium or interest on any Security of any series which
remain unclaimed at the end of two years after such principal, premium or
interest shall have become due and payable will be repaid to the Company and
the Holder of such Security or any coupon appertaining thereto will thereafter
look only to the Company for payment thereof. (Section 1003)
Global Securities
Depositary Global Securities
If so specified in an applicable Prospectus Supplement or Prospectus
Supplements, the Debt Securities of a series will be issued in book-entry form
and will be evidenced by a single permanent global Security (the "Depositary
Global Security") which will be deposited with, or on behalf of, the
Depository Trust Company, as Depositary (the "Depositary"), located in the
Borough of Manhattan, The City of New York, and will be registered in the name
of the Depositary or a nominee of the Depositary.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities evidenced by a Depositary Global Security will be described in
the Prospectus Supplement relating to such series. Unless otherwise specified
in the applicable Prospectus Supplement, the Company anticipates that the
following provisions will apply to depositary arrangements.
Ownership of beneficial interests in a Depositary Global Security will be
limited to institutions that have accounts with the Depositary
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests in Depositary Global Securities by
persons that hold through participants will only be evidenced by, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the
ability to transfer beneficial interests in a Depositary Global Security.
Upon the issuance of a series of Debt Securities evidenced by a Depositary
Global Security, and the deposit of such Depositary Global Security with the
Depositary, the Depositary will immediately credit, on its book-entry
registration and transfer system, the respective principal amounts of the Debt
Securities evidenced by such Depositary Global Security to the accounts of
participants. The initial accounts to be credited shall be designated by the
Underwriters of such series of Debt Securities.
Payments of principal of and interest on a series of Debt Securities
evidenced by a Depositary Global Security will be made by the Company through
Chemical Bank, as Paying Agent or such other paying agent named in the
Prospectus Supplement, to the Depositary or its nominee, as the case may be,
as the registered owner and the Holder of the Depositary Global Security. None
of the Company, the Trustee or any agent of the Company or the Trustee will
have any responsibility or liability for any aspect of the Depositary's
records or any participant's records relating to or payments made on account
of Depositary Global Securities or for maintaining, supervising or reviewing
any of the Depositary's records or any participant's records relating to such
Depositary Global Securities.
8
<PAGE>
The Company expects that the Depositary for a series of Debt Securities
evidenced by a Depositary Global Security or its nominee, upon receipt of any
payment of principal of or interest in respect of any such Depositary Global
Security, will immediately credit, on its book-entry registration and transfer
system, accounts of participants with payment in amounts proportionate to
their respective beneficial interests in the principal amount of such
Depositary Global Security as shown on the records of the Depositary. Payments
by participants to owners of beneficial interests in such Depositary Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the
responsibility of such participants.
The Depositary Global Security evidencing a series of Debt Securities may
not be transferred except as a whole by the Depositary for such Depositary
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of the Depositary or a nominee
of such successor.
Unless otherwise specified in the applicable Prospectus Supplement, a
Depositary Global Security evidencing a series of Debt Securities will be
exchangeable for definitive Securities in registered form, of like tenor and
of an equal aggregate principal amount, only if (x) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for such
Depositary Global Security or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act, (y) the Company in its sole
discretion determines that the Depositary Global Securities shall be
exchangeable for definitive Securities in registered form or (z) any event
shall have happened and be continuing which, after notice or lapse of time, or
both, would become an Event of Default with respect to the Debt Securities of
a series evidenced by a Depositary Global Security. In the event that the
Depositary Global Security evidencing a series of Debt Securities is
exchangeable pursuant to the preceding sentence, it shall be exchangeable in
whole for definitive Securities in registered form, of like tenor and of an
equal aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Securities shall be registered in the name
or names of such person or persons as the Depositary shall instruct the
Security Registrar. It is expected that such instructions may be based upon
directions received by the Depositary from its participants with respect to
ownership of beneficial interests in the Depositary Global Securities.
Except as provided above or in the applicable Prospectus Supplement, owners
of beneficial interests in Depositary Global Securities will not be entitled
to receive physical delivery of Securities in definitive form and will not be
considered the Holders thereof for any purpose under such Securities or the
Indenture, and the Depositary Global Security evidencing a series of Debt
Securities will not be exchangeable, except for another Depositary Global
Security of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each person owning a beneficial
interest in a Depositary Global Security must rely on the procedures of the
Depositary for such Depositary Global Security and, if such person is not a
participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a Holder under such Securities or
the Indenture. The Indenture allows the Depositary, as a Holder, to appoint
agents and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
which a Holder is entitled to give or take under the Indenture. The Company
understands that under existing industry practices, in the event that the
Company requests any action of Holders or an owner of a beneficial interest in
a Depositary Global Security desires to give or take any action a Holder is
entitled to give or take under such Securities or the Indenture, the
Depositary would authorize the participants owning beneficial interests in the
relevant Depositary Global Security to give or take such action, and such
participants would authorize beneficial owners owning through such
participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary is a limited-
purpose trust company organized under the laws of the State of New York, 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 under the Exchange Act. The Depositary was created to hold
securities of its participants and to facilitate the clearance
9
<PAGE>
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations, and certain other organizations, some of whom (and/or their
representatives) own interests in the Depositary. Access to the Depositary's
book-entry 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.
Temporary Global Securities
If so specified in an applicable Prospectus Supplement or Prospectus
Supplements, all or any portion of the Securities of a series issuable as
Bearer Securities will initially be represented by one or more temporary
global Securities, without interest coupons, to be deposited with Morgan
Guaranty Trust Company of New York, Brussels Office, as the operator of the
Euroclear System (the "Euroclear Operator") and CEDEL S.A. ("CEDEL") for
credit to the designated accounts. On and after the date determined as
provided in any such temporary global Security and described in an applicable
Prospectus Supplement or Prospectus Supplements (the "Exchange Date"), each
such temporary global Security will be exchanged for definitive Bearer
Securities, definitive Registered Securities or all or a portion of a
permanent global Security, or any combination thereof, as specified in an
applicable Prospectus Supplement or Prospectus Supplements, but, unless
otherwise specified in an applicable Prospectus Supplement or Prospectus
Supplements, only upon receipt by the Company of written certification in the
form and to the effect described above under "Form, Exchange, Registration and
Transfer." No Security delivered in exchange for any portion of a temporary
global Security shall be delivered to any location in the United States or its
possessions in connection with such exchange. (Section 304)
Unless otherwise specified in an applicable Prospectus Supplement or
Prospectus Supplements, interest in respect of any portion of a temporary
global Security payable in respect of an Interest Payment Date occurring prior
to the issuance of definitive Securities (including a permanent global
Security) will be paid to each of the Euroclear Operator and CEDEL with
respect to the portion of the temporary global Security held for its account
for which it provides certification in the form described in the Indenture.
Each of the Euroclear Operator and CEDEL will undertake in such circumstances
to credit such interest received by it in respect of a temporary global
Security to the respective accounts for which it holds such temporary global
Security, and for which it has received written certification that, as of the
relevant Interest Payment Date, is in the form and to the effect described
above under "Form, Exchange, Registration and Transfer." Receipt of such
certification shall be deemed to be a request for an interest in a permanent
global Security (unless the account holder requests that such portion be
exchanged for a definitive Registered Security or Securities or a definitive
Bearer Security or Securities). If an Interest Payment Date occurs prior to
the issuance of definitive Securities (including a permanent global Security)
but on or after the Exchange Date, written certification in the form and to
the effect described above under "Form, Exchange, Registration and Transfer"
will also be required to obtain an interest payment, and upon receipt of such
certificate the Euroclear Operator or CEDEL, as the case may be, will exchange
the portion of the temporary global Security relating to such certification
for an interest in a permanent global Security (unless the account holder
requests that such portion be exchanged for a definitive Registered Security
or Securities or a definitive Bearer Security or Securities).
Permanent Global Securities
If any Securities of a series are issuable in permanent global form, the
applicable Prospectus Supplement or Prospectus Supplements will describe the
circumstances, if any, under which beneficial owners of interests in any such
permanent global Security may exchange such interests for Securities of such
series and of like tenor and principal amount in any authorized form and
denomination. No Bearer Security delivered in exchange for any portion of a
permanent global Security shall be delivered to any location in the United
States or its possessions in connection with such exchange. (Section 305)
Principal of and any premium and interest on any permanent global Security
will be payable in the manner described in the applicable Prospectus
Supplement or Prospectus Supplements.
10
<PAGE>
Certain Definitions
For purposes of the Indenture covenants described below:
"Consolidated Net Tangible Assets" means shareholders' equity as set forth
on the most recent consolidated balance sheet of Universal Leaf and its
subsidiaries as prepared in accordance with generally accepted accounting
principles less all intangible amounts representing goodwill, trade names,
trademarks and patents.
"Debt" means all indebtedness for money borrowed and capitalized leases and
any guarantee of such obligations.
"Funded Debt" means all Debt maturing more than one year after the date of
determination and all Debt, regardless of term, renewable by the obligor for
more than one year after the date of its creation which would, in accordance
with generally accepted accounting principles, be classified as long-term
debt.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind (other than purchase options, rights of first refusal
and other arrangements pursuant to which capital stock or property may be
sold).
"Principal Property" means, with respect to any Person, (i) any capital
stock of a subsidiary of Universal Leaf owned by such Person and (ii) any
manufacturing, packing or processing plant or facility of any character or any
warehouse or any other storage facility of any character owned or leased under
a capitalized lease by such Person and all land and fixtures related thereto,
the gross book value (without deduction of any depreciation reserves) of which
capital stock, plant, facility or warehouse on the date as of which the
determination is being made exceeds 1% of Consolidated Net Tangible Assets,
other than any such capital stock, plant, facility or warehouse or portion
thereof which, in the opinion of the Boards of Directors of the Company and of
Universal Leaf, is not of material importance to the total business conducted
by the Restricted Subsidiaries taken together with all other capital stock,
plants, facilities and warehouses previously so declared.
"Restricted Subsidiaries" means Universal Leaf Tobacco Company,
Incorporated, Universal Leaf Tobacco Company, Incorporated's subsidiaries and
their respective successors, including, without limitation, transferees of
their Principal Property which are Affiliates of the Company and/or Universal
Leaf, but excluding any subsidiaries organized under any jurisdiction other
than the United States of America (including the States and the District of
Columbia) or Brazil of which less than 66 2/3% of the Voting Stock is owned,
directly or indirectly, by Universal Leaf, and "Restricted Subsidiary" means
any one of the Restricted Subsidiaries.
"Subsidiary" means a corporation or business trust, a majority of the Voting
Stock of which is owned by the Company and/or its subsidiaries.
"Universal Leaf" means Universal Leaf Tobacco Company, Incorporated, a
Virginia corporation, and any Affiliate of the Company and/or Universal Leaf
with which it shall consolidate or into which it shall merge or to which it
shall transfer 40% or more of its consolidated assets. (Section 101)
Restrictions on Liens
The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, create, or suffer to exist, any Lien upon any
Principal Property of any Restricted Subsidiary or upon any capital stock of
Universal Leaf, whether owned on the date of the Indenture or thereafter
acquired, without making effective, concurrent provision whereby all
Outstanding Securities shall be directly secured, equally and ratably with the
indebtedness or other claims or obligations (the "Indebtedness") secured by
one or more Liens; provided, however, that this restriction will not apply,
among other things, to: (i) Liens existing on the date of the Indenture; (ii)
Liens securing Indebtedness owing by any Restricted Subsidiary to another
Restricted Subsidiary; (iii) Liens existing on any asset or shares of capital
stock of any corporation at the time such corporation becomes a subsidiary of
any Restricted Subsidiary or is merged into or consolidated with any
11
<PAGE>
Restricted Subsidiary; (iv) Liens on any asset securing Indebtedness incurred
or assumed or guaranteed for the purpose of financing all or any part of the
cost of acquiring, constructing, improving or repairing such asset (including,
without limitation, Liens incurred in connection with pollution control bonds,
industrial revenue bonds or similar financings), provided that such Liens
attach within 120 days of the completion of the acquisition, construction,
improvement or repair thereof (or in the case of real property, completion of
such improvement or construction or commencement of full operation of such
property, whichever is later); (v) Liens existing on any asset prior to the
acquisition thereof by any Restricted Subsidiary; (vi) Liens on any assets in
favor of the United States of America (including the States and the District
of Columbia) or any other country (or any department, agency, instrumentality
or political subdivision thereof) and created to secure any payments pursuant
to any contract or statute, provided that payment thereof is not at the time
required by the Indenture; (vii) Liens arising pursuant to any statute or
order of attachment, distraint or similar legal process arising in connection
with court proceedings so long as the execution or other enforcement thereof
is effectively stayed and the claims secured thereby are being contested in
good faith by appropriate proceedings; (viii) Liens securing taxes,
assessments or governmental charges not yet delinquent or being contested in
good faith by appropriate proceedings; (ix) Liens securing obligations owing
to landlords, mechanics, materialmen, suppliers, carriers and other like
Persons incurred in the ordinary course of business for sums not yet due or
being contested in good faith by appropriate proceedings; and (x) Liens
arising out of the refinancing, extension, renewal or refunding of any
Indebtedness secured by any Lien permitted by the foregoing clauses, provided
that such Indebtedness is not increased and is not secured by any additional
assets. Notwithstanding the foregoing, Liens on Principal Property of the
Restricted Subsidiaries are permitted, without complying with the foregoing
restrictions, in an aggregate amount (including the value of any sale and
leaseback transaction permitted by clause (i) of the next paragraph by virtue
of this sentence, but excluding the value of (i) sale and leaseback
transactions otherwise permitted by the next paragraph and (ii) Liens
permitted by clauses (i) through (x) of the preceding sentence of this
paragraph) not at the time exceeding 10% of Consolidated Net Tangible Assets.
(Section 1008) At September 30, 1995, Consolidated Net Tangible Assets were
approximately $197 million. The Indenture will not prohibit the sale by the
Company of any stock or indebtedness of the Restricted Subsidiaries.
Restrictions on Sale and Leaseback Transactions
The Indenture will also provide that the Company will not, and will not
permit any Restricted Subsidiary to, enter into any arrangement, directly or
indirectly, with any Person whereby such Restricted Subsidiary shall sell or
transfer any Principal Property of such Restricted Subsidiary, whether owned
on the date of the Indenture or thereafter acquired, more than 120 days after
the completion of construction and commencement of full operation thereof, and
then or thereafter rent or lease as lessee for a term of more than three years
such property or any part thereof or any other property which such Restricted
Subsidiary intends to use for substantially the same purpose or purposes as
the Principal Property being sold or transferred, unless (i) a Lien would be
permitted (without securing all Outstanding Securities) under the provisions
of the immediately preceding paragraph in an amount equal to the value of such
sale and leaseback transaction; (ii) the sale and leaseback transaction is
between such Restricted Subsidiary and the Company or another Subsidiary; or
(iii) within 180 days of such sale and leaseback transaction, the Company or
such Restricted Subsidiary applies an amount equal to the greater of (a) the
fair value of such property as determined in good faith by the Boards of
Directors of Universal Leaf and of the Company, or (b) the proceeds from the
sale of such property, to (x) the purchase or acquisition (or, in the case of
real property, the construction) of assets by any Restricted Subsidiary or (y)
to the voluntary retirement of Funded Debt of the Company or any Restricted
Subsidiary (which may include the Securities), other than Funded Debt that is
subordinated in right of payment to the Securities. For purposes of clause (i)
of the preceding sentence and for purposes of the preceding paragraph, the
value of any sale and leaseback transaction shall be an amount equal to the
greater of the amounts specified in clauses (iii) (a) and (iii) (b) of the
preceding sentence, in either case first divided by the number of years in the
original lease term and then multiplied by the number of years of such term
remaining at the time of determination. (Section 1009)
Consolidation, Merger, Sale and Lease of Assets
The Company may, without the consent of the Holders of any of the
Outstanding Securities of a series, consolidate with, merge into or transfer
or lease its assets substantially as an entirety to any corporation organized
12
<PAGE>
under the laws of any domestic jurisdiction, provided that (i) the successor
corporation assumes the Company's obligations on the Securities of each series
and under the Indenture, (ii) after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time, would become an
Event of Default shall have occurred and be continuing, and (iii) certain
other conditions are met. (Sections 801, 802)
Events of Default
The following are Events of Default under the Indenture with respect to
Securities of any series: (a) failure to pay principal of or any premium on
any of the Securities of that series when due; (b) failure to pay any interest
on any Security of that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment, if applicable, when due, in respect of any
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series of Securities other than that series)
continued for 60 days after written notice as provided in the Indenture; (e)
certain events of bankruptcy, insolvency or reorganization of the Company; and
(f) any other Event of Default provided with respect to Securities of that
series. (Section 501) Subject to the provisions of the Indenture, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of Securities of
any series or any related coupons unless such Holders shall have offered to
the Trustee reasonable indemnity. (Sections 601, 603) 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
shall 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 Securities of that series.
(Section 512)
If an Event of Default with respect to Securities of any series at the time
Outstanding shall occur and be continuing, either the Trustee or the Holders
of at least 25% in aggregate principal amount of the Outstanding Securities of
that series may declare the principal of all such Outstanding Securities, or,
if any such Securities are Original Issue Discount Securities, such lesser
amount as may be described in an applicable Prospectus Supplement or
Prospectus Supplements, of all the Securities of that series to be due and
payable immediately. At any time after a declaration of acceleration with
respect to Securities of any series has been made but before a judgment or
decree for payment of money due has been obtained by the Trustee, the Holders
of a majority in aggregate principal amount of Outstanding Securities of that
series may rescind any declaration of acceleration and its consequences, if
all payments due (other than those due as a result of acceleration) have been
made and all Events of Default have been cured or waived. (Section 502)
No Holder of any Securities of any series or any related coupons shall have
any right to institute any proceeding with respect to the Indenture or for any
remedy thereunder, unless such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default with respect to
Securities of that series, the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities of that series shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a Holder of an Outstanding
Security of that series for enforcement of payment of the principal of, or any
premium or interest on, such Security on or after the respective due dates
expressed in such Security. (Sections 507, 508)
The Company is required to furnish to the Trustee annually a statement as to
performance or fulfillment of covenants, agreements or conditions in the
Indenture and as to the absence of default. (Section 1004)
Meetings, Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or
13
<PAGE>
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on any Security, (b) reduce the
principal amount of, or premium or interest on, any Security, (c) change any
obligation of the Company to pay additional amounts, (d) reduce the amount of
principal of an Original Issue Discount Security payable upon acceleration of
the Maturity thereof, (e) change the coin or currency in which any Security or
any premium or interest thereon is payable, (f) impair the right to institute
suit for the enforcement of any payment on or with respect to any Security,
(g) reduce the percentage in principal amount of Outstanding 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, (h) reduce the requirements
contained in the Indenture for quorum or voting, (i) change any obligation of
the Company to maintain an office or agency in the places and for the purposes
required by the Indenture, or (j) modify any of the above provisions. (Section
902)
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities of a series may, on behalf of all Holders of Securities
of that series and any coupons appertaining thereto, waive any past default
under the Indenture with respect to Securities of that series, except a
default (a) in the payment of principal of or any premium or interest on any
Security of such series or (b) in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected. (Section 513)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
thereunder or are present at a meeting of Holders of Securities for quorum
purposes, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof, and (ii) the principal amount of a
Security denominated in a foreign currency or currency unit shall be the U.S.
dollar equivalent, determined on the date of original issuance of such
Security, of the principal amount of such Security or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent, determined on
the date of original issuance of such Security, of the amount determined as
provided in (i) above. (Section 101)
The Indenture contains provisions for convening meetings of the Holders of
Securities of any or all series. (Article Thirteen) A meeting may be called at
any time by the Trustee, and also, upon request, by the Company or the Holders
of at least 10% in aggregate principal amount of the Outstanding Securities of
such series, in any such case upon notice given in accordance with "Notices"
below. (Section 1302) Except for any consent which must be given by the Holder
of each Outstanding Security affected thereby, as described above, any
resolution presented at a meeting at which a quorum is present may be adopted
by the affirmative vote of the Holders of a majority in principal amount of
the Outstanding Securities of that series; PROVIDED, HOWEVER, that, except for
any consent which must be given by the Holder of each Outstanding Security
affected thereby, as described above, any resolution with respect to any
consent, waiver, request, demand, notice, authorization, direction or other
action which may be given by the Holders of not less than a specified
percentage in principal amount of the Outstanding Securities of a series may
be adopted at a meeting at which a quorum is present only by the affirmative
vote of the Holders of not less than such specified percentage in principal
amount of the Outstanding Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Securities of any series duly held
in accordance with the Indenture will be binding on all Holders of Securities
of that series and the related coupons. The quorum at any meeting called to
adopt a resolution will be Persons holding or representing a majority in
principal amount of the Outstanding Securities of a series; PROVIDED, HOWEVER,
that if any action is to be taken at such meeting with respect to a consent,
waiver, request, demand, notice, authorization, direction or other action
which may be given by the Holders of not less than a specified percentage in
principal amount of the Outstanding Securities of a series, the Persons
holding or representing such specified percentage in principal amount of the
Outstanding Securities of such series will constitute a quorum for that
purpose. (Section 1304)
14
<PAGE>
Notices
Except as otherwise provided in the Indenture, notices to Holders of Bearer
Securities will be given by publication at least twice in a daily newspaper of
general circulation in The City of New York and in such other city or cities
as may be specified in such Securities. Notices to Holders of Registered
Securities will be given by mail to the addresses of such Holders as they
appear in the Security Register. (Sections 101, 106)
Title
Title to any Bearer Securities (including Bearer Securities in temporary
global form and in permanent global form) and any coupons appertaining thereto
will pass by delivery. The Company, the Trustee and any agent of the Company
or the Trustee may treat the bearer of any Bearer Security and the bearer of
any coupon and the registered owner of any Registered Security as the absolute
owner thereof (whether or not such Security or coupon shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. (Section 308)
Replacement of Securities and Coupons
Any mutilated Security or a Security with a mutilated coupon appertaining
thereto will be replaced by the Company at the expense of the Holder upon
surrender of such Security to the Trustee. Securities or coupons that become
destroyed, lost or stolen will be replaced by the Company at the expense of
the Holder upon delivery to the Trustee of evidence of the destruction, loss
or theft thereof satisfactory to the Company and the Trustee; in the case of
any coupon which becomes destroyed, lost or stolen, such coupon will be
replaced by issuance of a new Security in exchange for the Security to which
such coupon appertains. In the case of a destroyed, lost or stolen Security or
coupon, an indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Security or coupon before a
replacement Security will be issued. (Section 306)
Defeasance and Covenant Defeasance
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may elect either (i) to defease and be discharged from any and all
obligations with respect to the Securities of any series (except as otherwise
provided in the Indenture) ("defeasance") or (ii) to be released from its
obligations with respect to certain covenants applicable to such Securities,
including its obligations described above under "Certain Covenants" ("covenant
defeasance"), upon the deposit with the Trustee (or other qualifying trustee),
in trust for such purpose, of money and/or U.S. Government Obligations which
through the payment of principal and interest in accordance with their terms
will provide money in an amount sufficient, without reinvestment, to pay the
principal of and any premium or interest on such Securities to Maturity or
redemption, as the case may be, and any mandatory sinking fund or analogous
payments thereon. As a condition to defeasance or covenant defeasance, the
Company must deliver to the Trustee an Opinion of Counsel to the effect that
the Holders of such Securities will not recognize income, gain or loss for
United States federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to United States federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. Such
Opinion of Counsel, in the case of defeasance under clause (i) above, must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable United States federal income tax law occurring after the
date of the Indenture. (Article Fourteen)
The Company may exercise its defeasance option with respect to such
Securities notwithstanding its prior exercise of its covenant defeasance
option. If the Company exercises its defeasance option, payment of such
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of such Securities
may not be accelerated by reference to the covenant noted under clause (ii)
above. However, if such acceleration were to occur, the realizable value at
the acceleration date of the money and U.S. Government Obligations in the
defeasance trust could be less than the principal and interest then due on
such Securities, in that the required deposit in the defeasance trust is based
upon scheduled cash flows rather than market value, which will vary depending
upon interest rates and other factors.
15
<PAGE>
Governing Law
The Indenture, the Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 113)
Concerning the Trustee
The Company and certain of its subsidiaries may from time to time maintain
lines of credit, and have other customary banking relationships, with Chemical
Bank, the Trustee under the Indenture.
LIMITATIONS ON ISSUANCE OF EURO-SECURITIES
United States tax laws and regulations impose certain restrictions on the
issuance of any securities in bearer form. Except as may otherwise be provided
in the Prospectus Supplement applicable thereto, in accordance with the
federal tax laws and regulations of the United States, Euro-Securities may
not, in connection with their offer or sale during the Restricted Period (as
defined above under "Description of Debt Securities--Form, Exchange,
Registration and Transfer"), be offered or sold, directly or indirectly, (i)
to any person in the United States or its possessions (as defined below), or
(ii) to any United States person (as defined below) other than (x) an office
located outside the United States or its possessions of a Financial
Institution (as defined above under "Description of Debt Securities--Form,
Exchange, Registration and Transfer") purchasing for its own account or for
the account of a customer, provided that such Financial Institution agrees in
writing to comply with the requirements of Section 165(j)(3)(A), (B), or (C)
of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder or (y) otherwise as permitted by United States Treasury Regulation
Section 1.163-5(c)(2)(i)(D). Any underwriters, agents and dealers
participating in the offering of Debt Securities must covenant that they will
not offer or sell during the Restricted Period any Euro-Securities to any
person in the United States or its possessions or to any United States person
(other than (x) an office located outside the United States and its
possessions of a Financial Institution or (y) otherwise as permitted by United
States Treasury Regulation Section 1.163-5(c)(2)(i)(D)), and that they will
not deliver Euro-Securities within the United States or its possessions.
In addition, any such underwriters, agents and dealers must covenant that
they have in effect procedures reasonably designed to ensure that their
employees or agents who are directly engaged in selling Euro-Securities are
aware of the above restrictions on the offer or sale of Euro-Securities.
Moreover, Bearer Securities (including a permanent global Debt Security) and
any coupons appertaining thereto will not be delivered in definitive form or,
if prior to delivery in definitive form, interest will not be paid on any
Euro-Securities, unless the Company has received a signed certificate in
writing (or an electronic certificate described in United States Treasury
Regulation Section 1.163-5(c)(2)(i)(D)(3)(ii)) in the form and to the effect
described above under "Description of Debt Securities--Form, Exchange,
Registration and Transfer." Bearer Securities (including a permanent global
Debt Security) and coupons will bear a legend to the following effect: "Any
United States person who holds this obligation will be subject to limitations
under the United States income tax laws, including the limitations provided in
Section 165(j) and 1287(a) of the Internal Revenue Code." The sections
referred to in such legend provide that a United States person (other than a
Financial Institution or a United States person holding through a Financial
Institution) who holds a Bearer Security or coupon will not be allowed to
deduct any loss realized on the sale, exchange or redemption of such Bearer
Security or coupon and any gain (which might otherwise be characterized as
capital gain) recognized on such sale, exchange or redemption will be treated
as ordinary income.
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. "United States" means the United States of America (including the
States and the District of Columbia) and "possessions" of the United States
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and Northern Mariana Islands.
16
<PAGE>
FOREIGN CURRENCY RISKS
Debt Securities denominated or payable in foreign currencies may entail
significant risks. These risks include, without limitation, the possibility of
significant fluctuations in the foreign currency markets. These risks will
vary depending upon the currency or currencies involved and will be more fully
described in the Prospectus Supplement relating thereto.
UNITED STATES TAXATION
The following is a summary of the principal United States federal income tax
consequences of ownership of Debt Securities. The summary represents the
opinion of McGuire, Woods, Battle & Boothe, L.L.P., special tax counsel to the
Company, insofar as the statements contained therein are or refer to
statements of United States law or legal conclusions relating thereto. It
deals only with Debt Securities held as capital assets, and not with special
classes of holders, such as dealers in securities or currencies, banks, tax-
exempt organizations, life insurance companies, persons that hold Debt
Securities that are part of a hedge or that are hedged against currency risks
or that are part of a straddle or conversion transaction, or persons whose
functional currency is not the U.S. dollar. It also does not deal with Holders
other than original purchasers. Moreover, the summary deals only with Debt
Securities that are due to mature 30 years or less from the date on which they
are issued. The United States federal income tax consequences of ownership of
Debt Securities that are due to mature more than 30 years from their date of
issue will be discussed in an applicable Prospectus Supplement. The summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), its
legislative history, existing and proposed regulations thereunder, judicial
decisions, and published rulings and other administrative guidance issued by
the Internal Revenue Service (the "Service"), as currently in effect, all of
which are subject to change at any time, possibly with retroactive effect.
Prospective purchasers of Debt Securities should consult their own tax
advisors concerning the consequences of ownership of Debt Securities, in their
particular circumstances, under the Code and the laws of State, local or
foreign taxing jurisdiction.
United States Holders
Payments of Interest
Except as provided below under "--Original Issue Discount," interest on a
Debt Security (including "qualified stated interest" on a "Discount Debt
Security," as defined below) will be taxable to a United States Holder as
ordinary income at the time it is received or accrued, depending on the
holder's method of accounting for tax purposes. A United States Holder is a
beneficial owner who or that is (i) a citizen or resident of the United
States, (ii) a domestic corporation or (iii) otherwise subject to United
States federal income taxation on a net income basis in respect of the Debt
Security.
If an interest payment is denominated in, or determined by reference to, a
currency, composite currency or basket of currencies other than the U.S.
dollars (a "foreign currency"), the amount of income recognized by a cash
basis United States Holder will be the U.S. dollar value of the interest
payment, based on the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined
by reference to, a foreign currency in accordance with either of two methods.
Under the first method, the amount of income accrued will be based on the
average exchange rate in effect during the interest accrual period (or, with
respect to an accrual period that spans two taxable years, the part of the
period within the taxable year).
Under the second method, the United States Holder may elect to determine the
amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual
17
<PAGE>
period that spans two taxable years, the exchange rate in effect on the last
day of the part of the period within the taxable year. Additionally, if a
payment of interest is actually received within five business days of the last
day of the accrual period or taxable year, an electing accrual basis United
States Holder may instead translate such accrued interest into U.S. dollars at
the exchange rate in effect on the day of actual receipt. Any such election
will apply to all debt instruments held by the United States Holder at the
beginning of the first taxable year to which the election applies or
thereafter acquired by the United States Holder, and will be irrevocable
without the consent of the Service.
Upon receipt of the interest payment (including a payment attributable to
accrued but unpaid interest upon the sale or retirement of a Debt Security)
denominated in, or determined by reference to, a foreign currency, the United
States Holder will recognize ordinary income or loss measured by the
difference between (x) the average exchange rate used to accrue interest
income, or the exchange rate as determined under the second method described
above if the United States Holder elects that method, and (y) the exchange
rate in effect on the date of receipt, regardless of whether the payment is in
fact converted into U.S. dollars.
Original Issue Discount
General. A Debt Security with a maturity of more than one year from the date
of issue will be treated as issued at an original issue discount (a "Discount
Debt Security") if the excess of its "stated redemption price at maturity"
over its issue price is more than a "de minimis amount" (as defined below).
Generally, the issue price of a Debt Security will be the first price at which
a substantial amount of Debt Securities included in the issue of which the
Debt Security is a part is sold to other than 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 Debt
Security is the total of all payments provided by the Debt Security that are
not payments of "qualified stated interest." A qualified stated interest
payment generally is any one of a series of stated interest payments on a Debt
Security that are unconditionally payable at least annually at a single fixed
rate (with certain exceptions for lower rates paid during some periods)
applied to the outstanding principal amount of the Debt Security. Special
rules for determining qualified stated interest payable on certain Debt
Securities bearing interest at a variable rate are described below under "--
Variable Rate Debt Securities."
In general, if the excess of a Debt Security's stated redemption price at
maturity over its issue price is less than 1/4 of 1 percent of the Debt
Security's stated redemption price at maturity multiplied by the number of
complete years to its maturity (the "de minimis amount"), then such excess, if
any, constitutes "de minimis original issue discount" and the Debt Security is
not a Discount Debt Security. Unless the election described below under
"Election to Treat All Interest as Original Issue Discount" is made, a United
States Holder of a Debt Security with de minimis original issue discount must
include such de minimis original issue discount in income as stated principal
payments on the Debt Security are made. The includible amount with respect to
each such payment will equal the product of the total amount of the Debt
Security's de minimis original issue discount and a fraction, the numerator of
which is the amount of the principal payment made and the denominator of which
is the stated principal amount of the Debt Security.
United States Holders of Discount Debt Securities having a maturity of more
than one year from their date of issue must, generally, include original issue
discount ("OID") in income calculated on a constant-yield method before the
receipt of cash attributable to such income, and generally will have to
include in income increasingly greater amounts of OID over the life of the
Debt Security. The amount of OID includible in income by a United States
Holder of a Discount Debt Security is the sum of the daily portions of OID
with respect to the Discount Debt Security for each day during the taxable
year or portion of the taxable year on which the United States Holder holds
such Discount Debt Security ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata portion of the
OID allocable to that accrual period. Accrual periods with respect to a Debt
Security may be of any length selected by the United States Holder and may
vary in length over the term of the Debt Security as long as (i) no accrual
period is longer than one year and (ii) each scheduled payment of interest or
principal on the Debt Security occurs on either the final or first
18
<PAGE>
day of an accrual period. The amount of OID allocable to an accrual period
equals the excess of (a) the product of the Discount Debt Security's adjusted
issue price at the beginning of the accrual period and such Debt Security's
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period)
over (b) the sum of the payments of qualified stated interest on the Debt
Security allocable to the accrual period. The "adjusted issue price" of a
Discount Debt Security at the beginning of any accrual period is the issue
price of the Debt Security increased by (x) the amount of accrued OID for each
prior accrual period and decreased by (y) the amount of any payments
previously made on the Debt Security that were not qualified stated interest
payments. For purposes of determining the amount of OID allocable to an
accrual period, if an interval between payments of qualified stated interest
on the Debt Security contains more than one accrual period, the amount of
qualified stated interest payable at the end of the interval (including any
qualified stated interest that is payable on the first day of the accrual
period immediately following the interval) is allocated pro rata on the basis
of relative lengths of each accrual period in the interval, and the adjusted
issue price at the beginning of each accrual period in the interval must be
increased by the amount of any qualified stated interest that has accrued
prior to the first day of the accrual period but that is not payable until the
end of the interval. The amount of OID allocable to an initial short accrual
period may be computed using any reasonable method if all other accrual
periods other than a final short accrual period are of equal length. The
amount of OID allocable to the final accrual period is the difference between
(x) the amount payable at the maturity of the Debt Security (other than any
payment of qualified stated interest) and (y) the Debt Security's adjusted
issue price as of the beginning of the final accrual period.
Acquisition Premium. A United States Holder that purchases a Debt Security
for an amount less than or equal to the sum of all amounts payable on the Debt
Security after the purchase date (other than payments of qualified stated
interest) but in excess of its adjusted issue price (any such excess being
"acquisition premium") and that does not make the election described below
under "Election to Treat All Interest as Original Issue Discount" is permitted
to reduce the daily portions of OID by a fraction, the numerator of which is
the excess of the United States Holder's adjusted basis in the Debt Security
immediately after its purchase over the adjusted issue price of the Debt
Security, and the denominator of which is the excess of the sum of all amounts
payable on the Debt Security after the purchase date, other than payments of
qualified stated interest, over the Debt Security's adjusted issue price.
Market Discount. A Debt Security, other than a short-term Debt Security,
will be treated as purchased at a market discount (a "Market Discount Debt
Security") if (i) the amount for which a United States Holder purchased the
Debt Security is less than the Debt Security's issue price (as determined
above under "--General") and (ii) the Debt Security's stated redemption price
at maturity or, in the case of a Discount Debt Security, the Debt Security's
"revised issue price," exceeds the amount for which the United States Holder
purchased the Debt Security by at least one quarter of one percent of such
Debt Security's stated redemption price at maturity or revised issue price,
respectively, multiplied by the number of complete years to the Debt
Security's maturity. If such excess is not sufficient to cause the Debt
Security to be a Market Discount Debt Security, then such excess constitutes
"de minimis market discount." The Code provides that, for these purposes, the
"revised issue price" of a Debt Security generally equals its issue price,
increased by the amount of any OID that has accrued on the Debt Security.
Any gain recognized on the maturity or disposition of a Market Discount Debt
Security will be treated as ordinary income to the extent that such gain does
not exceed the accrued market discount on such Debt Security. Alternatively, a
United States Holder of a Market Discount Debt Security may elect to include
market discount in income currently over the life of the Debt Security. Such
an election shall apply to all debt instruments with market discount acquired
by the electing United States Holder on or after the first day of the first
taxable year to which the election applies. This election may not be revoked
without the consent of the Service.
Market discount on a Market Discount Debt Security will accrue on a
straight-line basis unless the United States Holder elects to accrue such
market discount on a constant-yield method. Such an election shall apply only
to the Debt Security with respect to which it is made and may not be revoked.
A United States Holder of a
19
<PAGE>
Market Discount Debt Security that does not elect to include market discount
in income currently generally will be required to defer deductions for
interest on borrowings allocable to such Debt Security in an amount not
exceeding the accrued market discount on such Debt Security until the maturity
or disposition of such Debt Security.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase
price of a Debt Security is attributable to pre-issuance accrued interest,
(ii) the first stated interest payment on the Debt Security is to be made
within one year of the Debt Security's issue date and (iii) the payment will
equal or exceed the amount of pre-issuance accrued interest, then the United
States Holder may elect to decrease the issue price of the Debt Security by
the amount of pre-issuance accrued interest. In that event, 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 Debt Security.
Debt Securities Subject to Contingencies Including Optional Redemption. In
general, if a Debt Security provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or contingencies and
the timing and amounts of the payments that comprise each payment schedule are
known as of the issue date, the yield and maturity of the Debt Security are
determined by assuming that the payments will be made according to the Debt
Security's stated payment schedule. If, however, based on all the facts and
circumstances as of the issue date, it is more likely than not that the Debt
Security's stated payment schedule will not occur, then, in general, the yield
and maturity of the Debt Security are computed based on the payment schedule
most likely to occur.
Notwithstanding the general rules for determining yield and maturity in the
case of Debt Securities subject to contingencies, if the Company or the Holder
has an unconditional option or options that, if exercised, would require
payments to be made on the Debt Security under an alternative payment schedule
or schedules, then (i) in the case of an option or options of the Company, the
Company will be deemed to exercise or not exercise an option or combination of
options in the manner that minimizes the yield on the Debt Security and (ii)
in the case of an option or options of the Holder, the Holder will be deemed
to exercise or not exercise an option or combination of options in the manner
that maximizes the yield on the Debt Security. For purposes of those
calculations, the yield on the Debt Security is determined by using any date
on which the Debt Security may be redeemed or repurchased as the maturity date
and the amount payable on such date in accordance with the terms of the Debt
Security as the principal amount payable at maturity.
If a contingency (including the exercise of an option) fails to occur or
actually occurs in a manner inconsistent with the assumption made according to
the above rules (a "change in circumstances") then, except to the extent that
a portion of the Debt Security is repaid as a result of the change in
circumstances and solely for purposes of the accrual of OID, the yield and
maturity of the Debt Security are redetermined by treating the Debt Security
as reissued on the date of the change in circumstances for an amount equal to
the Debt Security's adjusted issue price on that date.
Election to Treat All Interest as Original Issue Discount. A United States
Holder may elect to include in gross income all interest that accrues on a
Debt Security using the constant-yield method described above under the
heading "--General," with the modifications described below. For purposes of
this election, interest includes stated interest, OID, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium (described below under
"--Debt Securities Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Debt Security with respect to
which this election has been made, the issue price of the Debt Security will
equal the electing United States Holder's adjusted basis in the Debt Security
immediately after its acquisition, the issue date of the Debt Security will be
the date of its acquisition by the electing United States Holder, and no
payments on the Debt Security will be treated as payments of qualified stated
interest. This election will generally apply only to the Debt Security with
respect to which it is made and may not be revoked without the consent of the
Service. If this election is made with respect to a Debt Security with
amortizable bond premium, then the electing United States Holder will be
deemed to have elected
20
<PAGE>
to apply amortizable bond premium against interest with respect to all debt
instruments with amortizable bond premium (other than debt instruments the
interest on which is excludible from gross income) held by the electing United
States Holder as of the beginning of the taxable year in which the Debt
Security with respect to which the election is made is acquired or thereafter
acquired. The deemed election with respect to amortizable bond premium may not
be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a Debt
Security is made with respect to a Market Discount Debt Security, the electing
United States Holder will be treated as having made the election discussed
above under "--Market Discount" to include market discount in income currently
over the life of all debt instruments held or thereafter acquired by such
United States Holder.
Variable Rate Debt Securities. A "Variable Rate Debt Security" is a Debt
Security that: (i) has an issue price that does not exceed the total
noncontingent principal payments by more than the lesser of (1) .015
multiplied by the product of (x) the total noncontingent principal payments
and (y) the number of complete years to maturity from the issue date, or (2)
15 percent of the total noncontingent principal payments; (ii) provides for
stated interest compounded or paid at least annually at (1) one or more
"qualified floating rates," (2) a single fixed rate and one or more qualified
floating rates, (3) a single "objective rate" or (4) a single fixed rate and a
single objective rate that is a "qualified inverse floating rate"; and (iii)
provides that a qualified floating rate or objective rate in effect at any
time during the term of the instrument must be set at a "current value" of
that rate (i.e., the value of the rate on any day that is no earlier than
three months prior to the first day on which that value is in effect and no
later than one year following that first day).
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Debt Security is denominated or (ii) it is equal to the product of such a rate
and either (a) a fixed multiple that is greater than zero but not more than
1.35, or (b) a fixed multiple greater than zero but not more than 1.35,
increased or decreased by a fixed rate. A rate is not a qualified floating
rate, however, if the rate is subject to certain restrictions (including caps,
floors, governors or other similar restrictions) unless such restrictions are
fixed throughout the term of the Debt Security or are not reasonably expected
to significantly affect the yield on the Debt Security.
An "objective rate" is a rate, other than a qualified floating rate, that is
determined using a single, fixed formula and that is based on (i) one or more
qualified floating rates, (ii) one or more rates each of which would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the debt instrument is denominated, (iii) the yield
or changes in the price of one or more actively traded items of personal
property other than stock or debt of the issuer or a related party or (iv) a
combination of objective rates. A variable rate is not an objective rate,
however, if it is reasonably expected that the average value of the rate
during the first half of the Debt Security's term will be either significantly
less than or significantly greater than the average value of the rate during
the final half of the Debt Security's term. An objective rate is a "qualified
inverse floating rate" if (i) the rate is equal to a fixed rate minus a
qualified floating rate, and (ii) the variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the cost of newly
borrowed funds. Under these rules, Commercial Paper Rate Debt securities,
Prime Rate Debt securities, LIBOR Debt Securities, Treasury Rate Debt
Securities, CD Rate Debt Securities, and Federal Funds Rate Debt Securities
will generally be treated as Variable Rate Debt Securities.
In general, if a Variable Rate Debt Security provides for stated interest at
a single qualified floating rate or objective rate, all stated interest on the
Debt Security is qualified stated interest and the amount of OID, if any, is
determined by using, in the case of a qualified floating rate or qualified
inverse floating rate, a fixed rate equal to the value as of the issue date of
the qualified floating rate or qualified inverse floating rate, or, in the
case of any other objective rate, a fixed rate that reflects the yield
reasonably expected for the Debt Security.
If a Variable Rate Debt Security does not provide for stated interest at a
single qualified floating rate or objective rate, the amount of interest and
OID accruals on the Debt Security are generally determined by (i)
21
<PAGE>
determining a fixed rate substitute for each variable rate provided under the
Variable Rate Debt Security, (ii) constructing the equivalent fixed rate debt
instrument (using the fixed rate substitute described above), (iii)
determining the amount of qualified stated interest and OID with respect to
the equivalent fixed rate debt instrument, and (iv) making the appropriate
adjustments for actual variable rates during the applicable accrual period.
If a Variable Rate Debt Security provides for stated interest either at one
or more qualified floating rates or at a qualified inverse floating rate, and
in addition provides for stated interest at a single fixed rate (other than at
a single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Debt Security is treated, for purposes of
the first three steps of the determination, as if it provided for a qualified
floating rate (or a qualified inverse floating rate, as the case may be)
rather than the fixed rate. The qualified floating rate (or qualified inverse
floating rate) replacing the fixed rate must be such that the fair market
value of the Variable Rate Debt Security as of the issue date would be
approximately the same as the fair market value of an otherwise identical debt
instrument that provides for the qualified floating rate (or qualified inverse
floating rate) rather than the fixed rate.
Short-Term Debt Securities. In general, an individual or other cash basis
United States Holder of a Debt Security with a term of one year or less (a
"short-term Debt Security") is not required to accrue OID (as specially
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis
United States Holders and certain other United States Holders, including
banks, regulated investment companies, dealers in securities, common trust
funds, United States Holders who hold Debt Securities as part of certain
identified hedging transactions, certain pass-through entities and cash basis
United States Holders who so elect, are required to accrue OID on short-term
Debt Securities on either a straight-line basis or under the constant-yield
method (based on daily compounding), at the election of the United States
Holder.
In the case of a United States Holder not required and not electing to
include OID in income currently, any gain realized on the sale or retirement
of the short-term Debt Security will be ordinary income to the extent of the
OID accrued on a straight-line basis (unless an election is made to accrue the
OID under the constant-yield method) through the date of sale or retirement.
United States Holders who are not required and do not elect to accrue OID on
short-term Debt Securities will be required to defer deductions for interest
on borrowings allocable to short-term Debt Securities in an amount not
exceeding the deferred income until the deferred income is realized.
For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Debt Security, including stated interest,
are included in the short-term Debt Security's stated redemption price at
maturity.
Foreign Currency Discount Debt Securities. OID for any accrual period on a
Discount Debt Security that is denominated in, or determined by reference to,
a foreign currency will be determined in the foreign currency and then
translated into U.S. dollars in the same manner as stated interest accrued by
an accrual basis United States Holder, as described under "Payments of
Interest." Upon receipt of an amount attributable to OID (whether in
connection with a payment of interest or the sale or retirement of a Debt
Security), a United States Holder may recognize ordinary income or loss.
Debt Securities Purchased at a Premium
A United States Holder that purchases a Debt Security for an amount in
excess of its principal amount may elect to treat such excess as "amortizable
bond premium", in which case the amount required to be included in the United
States Holder's income each year with respect to interest on the Debt Security
will be reduced by the amount of amortizable bond premium allocable (based on
the Debt Security's yield to maturity) to such year. In the case of a Debt
Security that is denominated in, or determined by reference to, a foreign
currency, bond
22
<PAGE>
premium will be computed in units of foreign currency, and amortizable bond
premium will reduce interest income in units of the foreign currency. At the
time amortized bond premium offsets interest income, exchange gain or loss
(taxable as ordinary income or loss) is realized measured by the difference
between exchange rates at that time and at the time of the acquisition of the
Debt Securities. Any election to amortize bond premium shall apply to all
bonds (other than bonds the interest on which is excludible from gross income)
held by the United States Holder at the beginning of the first taxable year to
which the election applies or thereafter acquired by the United States Holder,
and is irrevocable without the consent of the Service. See also "Original
Issue Discount--Election to Treat All Interest as Original Issue Discount".
Purchase, Sale and Retirement of the Debt Securities
A United States Holder's tax basis in a Debt Security will generally be its
U.S. dollar cost (as defined below), increased by the amount of any OID or
market discount included in the United States Holder's income with respect to
the Debt Security and the amount, if any, of income attributable to de minimis
original issue discount and de minimis market discount included in the United
States Holder's income with respect to the Debt Security, and reduced by (i)
the amount of any payments that are not qualified stated interest payments,
and (ii) the amount of any amortizable bond premium applied to reduce interest
on the Debt Security. The U.S. dollar cost of a Debt Security purchased with a
foreign currency will generally be the U.S. dollar value of the purchase price
on the date of purchase or, in the case of Debt Securities traded on an
established securities market, as defined in the applicable Treasury
Regulations, that are purchased by a cash basis United States Holder (or an
accrual basis United States Holder that so elects), on the settlement date for
the purchase.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Debt Security equal to the difference between the amount
realized on the sale or retirement and its tax basis in the Debt Security. The
amount realized on a sale or retirement for an amount in foreign currency will
be the U.S. dollar value of such amount on (i) the date payment is received in
the case of a cash basis United States Holder, (ii) the date of disposition in
the case of an accrual basis United States Holder or (iii) in the case of Debt
Securities traded on an established securities market, as defined in the
applicable Treasury Regulations, sold by a cash basis United States Holder (or
an accrual basis United States Holder that so elects), on the settlement date
for the sale. Except to the extent described above under "Original Issue
Discount--Short-Term Debt Securities" or described in the next succeeding
paragraph or attributable to accrued but unpaid interest, gain or loss
recognized on the sale or retirement of a Debt Security will be capital gain
or loss and will be long-term capital gain or loss if the Debt Security was
held for more than one year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Debt Security that is attributable to changes in exchange rates will be
treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
Exchange of Amounts in Other than U.S. Dollars
Foreign currency received as interest on a Debt Security or on the sale or
retirement of a Debt Security will have a tax basis equal to its U.S. dollar
value at the time such interest is received or at the time of such sale or
retirement. Foreign currency that is purchased will generally have a tax basis
equal to the U.S. dollar value of the foreign currency on the date of
purchase. Any gain or loss recognized on a sale or other disposition of a
foreign currency (including its use to purchase Debt Securities or upon
exchange for U.S. dollars) will be ordinary income or loss.
Indexed Debt Securities
The applicable Prospectus Supplement will contain a discussion of any
special United States federal income tax rules with respect to Debt Securities
(other than Debt Securities subject to the rules governing Variable Rate Debt
Securities), payments on which are determined by reference to any index.
23
<PAGE>
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
holder of a Debt Security who is (i) a nonresident alien individual or (ii) a
foreign corporation, partnership or estate or trust which is not subject to
United States federal income tax on a net income basis in respect of income or
gain from a Debt Security. This discussion assumes that the Debt Security is
not subject to the rules of Section 871(h)(4)(A) of the Code (relating to
interest payments that are determined by reference to the income, profits,
changes in the value of property or other attributes of the debtor or a
related party). In addition, solely with respect to United States federal
estate tax, the discussion assumes that the Debt Security had a maturity date,
when issued, that was not less than 184 days from the date of issuance.
Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below:
(1) payments of principal, premium (if any) and interest, including OID,
by the Company or any of its paying agents to any holder of a Debt Security
that is a United States Alien Holder will not be subject to United States
federal withholding tax if, in the case of interest or OID, (i) the
beneficial owner of the Debt Security does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote, (ii) the beneficial owner of the Debt
Security is not a controlled foreign corporation that is related to the
Company through stock ownership, and (iii) if the Debt Security is a
Registered Security, either (a) the beneficial owner of the Debt Security
certifies to the Company or its agent, under penalties of perjury, that it
is not a United States Holder and provides its name and address or (b) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Debt Security on behalf of a
beneficial owner certifies to the Company or its agent, under penalties of
perjury, that such statement has been received from the beneficial owner by
it or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof;
(2) a United States Alien Holder of a Debt Security will not be subject
to United States federal withholding tax on any gain realized on the sale
or exchange of a Debt Security; and
(3) a Debt Security held by an individual who at death is not a citizen
or resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and (b) the income on the
Debt Security would not have been effectively connected with a United
States trade or business of the individual at the individual's death.
Bearer Debt Securities
The applicable Prospectus Supplement will contain a discussion of any
special United States federal income tax rules with respect to Debt Securities
that are issued as Bearer Securities (including Debt Securities in permanent
global form).
Backup Withholding and Information Reporting
United States Holders
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Debt Security and the proceeds of the
sale of a Debt Security before maturity within the United States to, and to
the accrual of OID on a Discount Debt Security with respect to, non-corporate
United States Holders, and "backup withholding" at a rate of 31% will apply to
such payments and to payments of OID if the United States Holder fails to
provide an accurate taxpayer identification number or to report all interest
and dividends required to be shown on its federal income tax returns.
24
<PAGE>
United States Alien Holders
Information reporting and backup withholding will not apply to payments of
principal, premium (if any) and interest (including OID) made by the Company
or a paying agent to a United States Alien Holder on a Registered Security if
either of the certifications described in clause (1)(iii) under "United States
Alien Holders" above is received, provided that the payor does not have actual
knowledge that the holder is a United States person.
Payments of the proceeds from the sale by a United States Alien Holder of a
Debt Security made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that if the
broker is a United States person, a controlled foreign corporation for United
States tax purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payments
of the proceeds from the sale of a Debt Security to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-
United States status or otherwise establishes an exemption from information
reporting and backup withholding.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities (i) to or through underwriters or
dealers, (ii) through agents, (iii) directly to purchasers, or (iv) through a
combination of any of the foregoing. Any such underwriter, dealer or agent may
be deemed to be an underwriter within the meaning of the Securities Act. Any
Prospectus Supplement relating to Debt Securities will set forth their
offering terms, including the name or names of any underwriters, the purchase
price of the Debt Securities and the proceeds to the Company from such sale,
any underwriting discounts, commissions and other items constituting
underwriters' compensation, any initial public offering price, any discounts
or concessions allowed or reallowed or paid to dealers, and any securities
exchanges on which the Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, at a fixed price or prices, which may be changed,
or at market prices prevailing at the time of sale, or at prices related to
such prevailing market prices, or at negotiated prices. The Debt Securities
may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more of
such firms. Unless otherwise set forth in the Prospectus Supplement, the
obligations of the underwriters to purchase the Debt Securities will be
subject to certain conditions precedent and the underwriters will be obligated
to purchase all the Debt Securities if any are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid
to dealers may be changed from time to time. Under agreements which may be
entered into by the Company, underwriters, dealers and agents who participate
in the distribution of Debt Securities may be entitled to indemnification or
contribution by the Company against certain liabilities, including liabilities
under the Securities Act.
The specific terms and manner of sale of Debt Securities will be set forth
or summarized in the Prospectus Supplement relating thereto.
If so indicated in a Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Debt Securities from the Company pursuant
to contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases will be subject to
acceptance by the Company. The obligations of any purchaser under any such
contracts will be subject to the conditions that the purchase of Debt
Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other persons will not have any responsibility in respect of the validity or
performance of such contracts.
25
<PAGE>
Each underwriter and agent participating in the distribution of any Debt
Securities which are issuable in bearer form will agree that it will not
offer, sell or deliver, directly or indirectly, Debt Securities in bearer form
in the United States or to United States persons (other than qualifying
financial institutions) in connection with the original issuance of Debt
Securities.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities offered hereby will be passed upon for
the Company by McGuire, Woods, Battle & Boothe, L.L.P., One James Center,
Richmond, Virginia 23219, and for the Underwriters by Sullivan & Cromwell,
1701 Pennsylvania Avenue, N.W., Washington, D.C. 20006. Sullivan & Cromwell
will rely as to all matters governed by Virginia law on the opinion of
McGuire, Woods, Battle & Boothe, L.L.P.
EXPERTS
The consolidated financial statements of Universal Corporation and
Subsidiaries included in Universal Corporation's Annual Report on Form 10-K
for the year ended June 30, 1995 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
26
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$120,000,000
[Universal Corporation Logo]
8 1/2% Notes due 2003
------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------
----------------
Warburg Dillon Read LLC First Union Securities, Inc
----------------
SunTrust Equitable Securities Corporation
----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
