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As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-36908
PROSPECTUS [UST LOGO]
UST INC.
EXCHANGE OFFER FOR
$300,000,000 8.80% SENIOR NOTES DUE MARCH 15, 2005
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THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JUNE 23, 2000, UNLESS EXTENDED.
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TERMS OF THE EXCHANGE OFFER:
- - We will exchange all outstanding notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- - You may withdraw tendered outstanding notes at any time prior to the
expiration of the exchange offer.
- - We believe that the exchange of outstanding notes will not be a taxable
exchange for United States federal income tax purposes, but you should see the
section entitled "Material Federal Income Tax Consequences" on page 30 for
more information.
- - The terms of the notes to be issued are substantially identical to the terms
of the outstanding notes, except for transfer restrictions and registration
rights relating to the outstanding notes.
- - We will not receive any proceeds from the exchange offer.
- - There is no existing market for the notes to be issued, and we do not intend
to apply for their listing on any securities exchange.
SEE THE SECTION ENTITLED "RISK FACTORS" THAT BEGINS ON PAGE 6 FOR A
DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER PRIOR TO TENDERING YOUR
OUTSTANDING NOTES FOR EXCHANGE.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AND
EXCHANGE COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is May 23, 2000.
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WHERE YOU CAN FIND MORE INFORMATION
UST is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). In accordance with the Exchange
Act, we file reports, proxy statements, and other information with the
Securities and Exchange Commission. Such reports, proxy statements, and other
information can be read and copies obtained at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information on
the Public Reference Room. The SEC maintains an internet site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC,
including us. In addition, our common stock is listed on the New York Stock
Exchange and copies of the materials mentioned can be obtained from them.
You may obtain a copy of any or all of the documents summarized in this
prospectus or incorporated by reference in this prospectus, without charge, by
request directed to UST Inc., 100 West Putnam Avenue, Greenwich, Connecticut
06830, Attention: Debra A. Baker, Senior Vice President and Secretary, telephone
(203) 661-1100.
UST has agreed that, if it is not subject to the informational requirements
of Sections 13 or 15(d) of the Exchange Act, it will furnish to holders and
beneficial owners of the notes and to prospective purchasers designated by such
holders the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act to permit compliance with Rule 144A in connection with
resales of the notes.
We have "incorporated by reference" certain documents that we file with the
SEC. This means that we are disclosing important information to you by referring
you to those documents. You should be aware that information in a document
incorporated by reference may have been modified or superseded by information
that is included in other documents that were filed at a later date and which
are also incorporated by reference or included in this prospectus.
We incorporate by reference the documents listed below that we have filed
with the SEC:
- Annual Report on Form 10-K for the year ended December 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000; and
- Current Report on Form 8-K on March 30, 2000.
All reports and other documents we subsequently file pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act shall be deemed to be
incorporated by reference into this prospectus and to be part of this prospectus
from the date we subsequently file such reports and documents.
FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors" and
elsewhere in this prospectus constitute forward-looking statements. All
statements, other than statements of historical facts, which address activities,
actions or new brand introductions that we expect or anticipate will or may
occur in the future, including such things as expansion and growth of our
operations and other such matters, are forward-looking statements. We are
identifying certain factors that would cause actual results to differ materially
from those expressed in any forward-looking statements.
Any one, or a combination, of these factors could materially affect the
results of our operations. These factors include:
- greater competition from entrants into the smokeless tobacco industry;
- greater competition from entrants into the wine industry;
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- changes in adult consumer preferences affecting demand for our products;
- regulatory changes affecting our business segments;
- potential liability from pending or threatened litigation;
- changes in the tax laws affecting our products;
- higher than anticipated capital expenditures or operating costs;
- higher raw materials costs; and
- general domestic and international economic and political conditions.
In some cases, you can identify forward-looking statements by terms such as
"may", "will", "should", "could", "expect", "plans", "anticipates", "believes",
"predicts", "potential" or "continue" or the negative of these or similar terms.
Forward-looking statements made by us are based on our knowledge of our
business and the environment in which we operate, but because of the factors
listed above, as well as other factors beyond our control, actual results may
differ from those in the forward-looking statements.
All forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by those cautionary statements.
We will not update these forward-looking statements even though our situation
will change in the future.
TRADEMARKS AND TRADE NAMES
We own or have rights to trademarks or trade names that we use in
conjunction with the operation of our business. Our proprietary trademarks
include COPENHAGEN, SKOAL LONG CUT, SKOAL, COPENHAGEN LONG CUT, SKOAL BANDITS,
RED SEAL, ROOSTER, BRUTON, C.C., DEVOE, CHATEAU STE. MICHELLE, COLUMBIA CREST,
VILLA MT. EDEN, DOMAINE STE. MICHELLE, COLOUR VOLANT, CONN CREEK, BERT GRANT'S
ALE, DON TOMAS, ASTRAL and HABANO PRIMERO. In addition, our logo and certain
brand names of our products mentioned in this prospectus are our service marks
or trademarks. Each trademark, trade name or service mark by any other company
appearing in this prospectus belongs to its holder.
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PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes the basic terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this prospectus in its entirety. References in this prospectus to "UST",
"we", "our", "ours" and "us" refer to UST Inc. and our subsidiaries.
ABOUT UST
Through our subsidiaries, we are the world's leading manufacturer and
marketer of smokeless tobacco. We also manufacture and market wine and premium
cigars. For the year ended December 31, 1999 and the three months ended March
31, 2000, our net sales were $1.512 billion and $368 million, respectively. Over
those same periods our earnings before interest, taxes, depreciation and
amortization were $813 million and $183 million, respectively. Over the
three-year period ending December 31, 1999 our pre-tax operating margins
averaged 51%.
UST was formed in 1986 to be a holding company and in 1987 United States
Tobacco Company, originally incorporated in 1911, became a wholly-owned
subsidiary. We currently have three additional wholly-owned subsidiaries:
International Wine & Spirits Ltd., UST Enterprises Inc. and UST International
Inc.
Our operating segments are tobacco and wine. For the three months ended
March 31, 2000, the tobacco segment had net sales of $324 million, an increase
of 4.2% from the corresponding period in 1999, and accounted for 88% of our
consolidated sales. For the three months ended March 31, 2000, wine segment
sales increased 15.5% to $37 million, while all other sales were $7 million.
Our executive offices are located at 100 West Putnam Avenue, Greenwich,
Connecticut 06830. Our telephone number is (203) 661-1100. UST is a Delaware
corporation.
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THE EXCHANGE OFFER
On March 6, 2000, we issued and sold $300 million aggregate principal
amount of 8.80% senior notes due 2005 in a transaction exempt from the
registration requirements of the Securities Act. Simultaneously with this
transaction, we entered into an exchange and registration rights agreement with
the initial purchasers of these original notes, in which we agreed to deliver
this prospectus to you and to commence this exchange offer. In this exchange
offer, you may exchange your outstanding notes for new notes which have
substantially the same terms. You should read the discussion under the headings
"The Exchange Offer" and "Description of Notes" for further information
regarding the notes to be issued in the exchange offer.
Securities Offered......... Up to $300 million in principal amount of new 8.80%
senior notes due March 15, 2005, registered under
the Securities Act of 1933. The terms of the notes
offered in the exchange offer are substantially
identical to those of the outstanding notes, except
that the transfer restrictions, registration rights
and liquidated damages provisions relating to the
outstanding notes do not apply to the new
registered notes.
The Exchange Offer......... We are offering registered notes in exchange for a
like principal amount of our outstanding
unregistered notes. We are offering these
registered notes to satisfy our obligations under
an exchange and registration rights agreement which
we entered into with the initial purchasers of the
outstanding notes. You may tender your outstanding
notes for exchange by following the procedures
described under the heading "The Exchange Offer."
Tenders; Expiration Date;
Withdrawal............... The exchange offer will expire at 5:00 p.m., New
York City time, on June 23, 2000, unless we extend
it. If you decide to exchange your outstanding
notes for new notes, you must acknowledge that you
are not engaging in, and do not intend to engage
in, a distribution of the new notes. You may
withdraw any notes that you tender for exchange at
any time prior to June 23, 2000. If we decide for
any reason not to accept any notes you have
tendered for exchange, those notes will be returned
to you without cost promptly after the expiration
or termination of the exchange offer. See "The
Exchange Offer -- Terms of the Exchange Offer" for
a more complete description of the tender and
withdrawal provisions.
United States Federal
Income Tax Consequences.... Your exchange of outstanding notes for registered
notes to be issued in the exchange offer will not
result in any gain or loss to you for United States
federal income tax purposes. See "Material Federal
Income Tax Consequences" for a summary of material
United States federal income tax consequences
associated with the exchange of outstanding notes
for the registered notes to be issued in the
exchange offer and the ownership and disposition of
those registered notes.
Use of Proceeds............ We will not receive any cash proceeds from the
exchange offer.
Exchange Agent............. State Street Bank and Trust Company.
Shelf Registration
Statement.................. Under certain circumstances, certain holders of
outstanding notes (including holders who are not
permitted to participate in the exchange offer or
who may not freely resell registered notes received
in the exchange offer) may, by giving UST written
notice, require UST to file, and cause to become
effective, a shelf registration
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statement under the Securities Act, which would
cover resales of outstanding notes by these
holders. See "Exchange Offer; Registration Rights."
Consequences of Failure to
Exchange................. Outstanding notes not exchanged in the exchange
offer, will continue to be subject to the
restrictions on transfer that are described in the
legend on the notes. In general, you may offer or
sell your outstanding notes only if they are
registered under, or offered or sold under an
exemption from, the Securities Act and applicable
state securities laws. We do not currently intend
to register the outstanding notes under the
Securities Act. If your notes are not tendered and
accepted in the exchange offer, it may become more
difficult for you to sell or transfer your
unexchanged notes.
Consequences of Exchanging
Your Outstanding Notes... Based on interpretations of the staff of the
Securities and Exchange Commission, we believe that
you may offer for resale, resell or otherwise
transfer the notes that we issue in the exchange
offer without complying with the registration and
prospectus delivery requirements of the Securities
Act if:
- you acquire the notes issued in the exchange
offer in the ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or
undertaking with anyone to participate, in the
distribution of the notes issued to you in the
exchange offer; and
- you are not an "affiliate" of UST Inc., as
defined in Rule 405 of the Securities Act.
If any of these conditions are not satisfied and
you transfer any notes issued to you in the
exchange offer without delivering a proper
prospectus or without qualifying for a registration
exemption, you may incur liability under the
Securities Act. We will not be responsible for, or
indemnify you against, any liability you may incur.
Any broker-dealer that acquires notes in the
exchange offer for its own account in exchange for
outstanding notes, which it acquired through
market-making or other trading activities, must
acknowledge that it will deliver a prospectus when
it resells or transfers any notes issued in the
exchange offer. See "Plan of Distribution" for a
description of the prospectus delivery obligations
of broker-dealers in the exchange offer.
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THE EXCHANGE NOTES
The terms of the notes we are issuing in this exchange offer and the
outstanding notes are identical in all material respects, except:
- the notes issued in the exchange offer will have been registered under
the Securities Act;
- the notes issued in the exchange offer will not contain transfer
restrictions and registration rights that relate to the outstanding
notes; and
- the notes issued in the exchange offer will not contain provisions
relating to the payment of liquidated damages to be made to the holders
of the outstanding notes under circumstances related to the timing of the
exchange offer.
A brief description of the material terms of the exchanged notes follows:
Interest Payment Dates..... Interest on the new 8.80% senior notes will be
payable semi-annually on March 15 and September 15
of each year, beginning on September 15, 2000.
Maturity................... The maturity date for the new 8.80% senior notes is
March 15, 2005.
Ranking.................... These notes are senior debt. They are equal in
right of payment with any existing or future
unsecured indebtedness, including trade payables,
but will rank senior to any future indebtedness
that expressly provides that it is subordinate to
these notes.
Basic Covenants of
Indenture.................. We will issue the notes being offered in the
exchange offer under an indenture with State Street
Bank and Trust Company, as trustee. This is the
same indenture under which the outstanding notes
were issued. The indenture, contains certain
covenants that, among other things, limit our
ability and the ability of certain of our
subsidiaries to create liens; and enter into sale
and leaseback transactions.
See the section "Description of Notes" under the
heading "Covenants" for a more comprehensive
description of the covenants contained in the
indenture.
Registration Covenant;
Exchange Offer............. In connection with our agreement to register the
exchange notes under the Securities Act by filing
the registration statement of which this prospectus
forms a part, we have agreed to:
- cause the registration statement to become
effective on or before September 1, 2000; and
- consummate the exchange offer within 45 days
after the effective date of the registration
statement.
In addition, we have agreed, in certain
circumstances, to file a "shelf registration
statement" that would allow some or all of the
notes to be offered to the public.
If we fail to meet any or all the targets listed
above (a "registration default"), the annual
interest rates on the notes will increase by 0.25%
during the first 90-day period during which the
registration default continues, and will increase
by an additional 0.25% for each subsequent 90-day
period during which the registration default
continues, up to a maximum increase of 1.00% over
the interest rates that would otherwise apply to
the notes. As soon as we cure a registration
default, the interest rates on the notes will
revert to their original levels.
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Upon consummation of the exchange offer, holders of
notes will no longer have any rights under the
exchange and registration rights agreement, except
to the extent that we have continuing obligations
to file a shelf registration statement.
For additional information concerning the above,
see "Description of Notes -- Form, exchange and
transfer and Registration covenant and exchange
offer".
RISK FACTORS
See "Risk Factors" beginning on page 6 for a discussion of factors that
should be considered by holders of outstanding notes before tendering their
outstanding notes in the exchange offer. Most of these factors will apply to the
registered notes as well as the outstanding notes.
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RISK FACTORS
You should consider carefully the following risks and all of the
information set forth in this prospectus before tendering your notes for
exchange in the exchange offer. The risk factors set forth below, other than
those which discuss the consequences of failing to exchange your outstanding
notes in the exchange offer, are generally applicable to both the outstanding
notes and the notes issued in the exchange offer.
YOU MAY HAVE DIFFICULTY SELLING THE NOTES WHICH YOU DO NOT EXCHANGE
If you do not exchange your outstanding notes for the notes offered in this
exchange offer, you will continue to be subject to the restrictions on the
transfer of your notes. Those transfer restrictions are described in the
indenture and in the legend contained on the outstanding notes, and arose
because we originally issued the outstanding notes under exemptions from, and in
transactions not subject to, the registration requirements of the Securities Act
of 1933.
In general, you may offer or sell your outstanding notes only if they are
registered under the Securities Act and applicable state securities laws, or if
they are offered and sold under an exemption from those requirements. We do not
intend to register the outstanding notes under the Securities Act.
If a large number of outstanding notes are exchanged for notes issued in
the exchange offer, it may be more difficult for you to sell your unexchanged
notes. In addition, if you do not exchange your outstanding notes in the
exchange offer, you will no longer be entitled to have those notes registered
under the Securities Act.
See "The Exchange Offer -- Consequences of Failure to Exchange Outstanding
Notes" for a discussion of the possible consequences of failing to exchange your
notes.
ABSENCE OF A PUBLIC MARKET MAY MAKE IT DIFFICULT TO SELL THE REGISTERED NOTES
The outstanding notes were issued to, and we believe these securities are
currently owned by, a relatively small number of beneficial owners. The
outstanding notes have not been registered under the Securities Act and will
remain subject to restrictions on transferability if they are not exchanged for
the registered notes. Although the registered notes may be resold or otherwise
transferred by the holders (who are not our affiliates) without compliance with
the registration requirements under the Securities Act, they will constitute a
new issue of securities with no established trading market. There can be no
assurance that such a market will develop. In addition, the registered notes
will not be listed on any national securities exchange. The registered notes may
trade at a discount from the initial offering price of the outstanding notes,
depending upon prevailing interest rates, the market for similar securities, our
operating results and other factors. We have been advised by the initial
purchasers that they currently intend to make a market in the registered notes,
as permitted by applicable laws and regulations; however, the initial purchasers
are not obligated to do so, and any such market-making activities may be
discontinued at any time without notice. In addition, such market-making
activity may be limited during the exchange offer and the pendency of a shelf
registration. Therefore, there can be no assurance that an active market for any
of the registered notes will develop, either prior to or after our performance
of our obligations under the exchange and registration rights agreement. If an
active public market does not develop, the market price and liquidity of the
registered notes may be adversely affected.
If a public trading market develops for the registered notes, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, our financial condition, and the market for similar
securities. Depending on these and other factors, the registered notes may trade
at a discount.
Notwithstanding the registration of the registered notes in the exchange
offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of UST may publicly offer for sale or resale the registered notes only in
compliance with the provisions of Rule 144 under the Securities Act.
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Each broker-dealer that receives registered notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such registered notes. See "Plan of Distribution."
MARKETING AND ADVERTISING RESTRICTIONS MAY AFFECT DEMAND FOR OUR PRODUCTS
In 1986, federal legislation was enacted regulating smokeless products by,
among other things, requiring health warning notices on smokeless tobacco
packages and advertising and prohibiting the advertising of smokeless tobacco
products on media subject to the jurisdiction of the Federal Communications
Commission. Since 1986, other proposals have been made at both the federal and
state level for additional regulation of smokeless tobacco products and it is
likely that additional proposals will be made in future years. These proposals
have included the additional regulation by new or existing agencies, requirement
of additional warning notices, a ban or further restriction on virtually all
forms of tobacco advertising, ingredients and constituent disclosure, sampling
bans and restrictions, and the disallowance of advertising and promotion
expenses as deductions under federal tax law. These proposals, if implemented,
could have a material adverse effect on our smokeless tobacco business.
In addition to increased regulatory restrictions, we have been required to
adopt various marketing and advertising restrictions in connection with the
Smokeless Tobacco Master Settlement Agreement which we entered into in November
1998 with the attorneys general of various states and U.S. territories to
resolve the remaining health care cost reimbursement cases initiated against us.
We are not able to assess the future effect that these increased marketing and
advertising restrictions may have on our smokeless tobacco business.
POTENTIAL OVERSIGHT BY THE FDA OR OTHER REGULATORY AGENCIES COULD SIGNIFICANTLY
AFFECT THE MANUFACTURE AND DISTRIBUTION OF OUR PRODUCTS
In 1996, the Food and Drug Administration promulgated regulations asserting
jurisdiction over smokeless tobacco products. These regulations, among other
things, included severe restrictions on the manufacture, distribution and sale
of smokeless tobacco products and have required us to comply with a wide range
of labeling, reporting, recordkeeping, manufacturing and other requirements. On
March 21, 2000, the Supreme Court ruled that the FDA does not have the authority
to regulate tobacco products without more explicit direction from Congress. If
Congress enacts legislation granting such authority, the FDA's exercise of
jurisdiction could lead to more expansive FDA-imposed restrictions on smokeless
tobacco operations than those set forth in the regulations and could materially
and adversely affect our smokeless tobacco business.
INCREASED EXCISE TAXES MAY REDUCE OUR SALES
Smokeless tobacco products are subject to significant federal and state
excise taxes. A federal excise tax on smokeless tobacco products was imposed in
1986, which was increased in 1991, 1993, 1997 and 2000 and is scheduled to
increase in 2002. In general, excise taxes and other taxes on smokeless tobacco
products have been increasing. Congress has been considering significant
increases in the federal excise tax or other payments from tobacco
manufacturers, including proposals to equalize the federal excise tax on
smokeless tobacco products with the federal excise tax on cigarettes, resulting
in a $1.00 or more per can increase in the current tax. Increases in other
smokeless tobacco-related taxes have been proposed at the state and local
levels. We believe a recently enacted substantial increase in California's state
excise tax on smokeless tobacco products has significantly reduced the demand
for our premium smokeless tobacco products in that state. If proposals are
adopted by either the federal government or the various states which include
significant excise tax increases, our sales and consequently our cash flows
could be materially adversely affected.
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POTENTIAL ADVERSE OUTCOME OF LITIGATION
We have been named as a defendant in a number of legal proceedings,
including class action/health care cost reimbursement litigation and claims
brought by individual plaintiffs alleging tobacco related injuries. It is not
possible to predict with certainty the outcome of the litigation pending against
us. While the litigation environment is uncertain, we believe, and have been so
advised by counsel handling the respective cases, that we have a number of
meritorious defenses to all litigation pending against us. We believe, subject
to the uncertainties of litigation, that the outcome of all such pending
litigation will not have a material adverse effect on our consolidated financial
position, but may have a material impact on our consolidated financial results
for a particular reporting period in which any such litigation is resolved.
There can be no assurance, however, that we will be correct in our belief.
In addition, on March 28, 2000, a Kentucky jury rendered a verdict against
our subsidiary, United States Tobacco Company, awarding $350 million in damages
to Conwood Company, L.P., for its claims under federal antitrust laws that U.S.
Tobacco had engaged in exclusionary and anticompetitive conduct in the marketing
and promotion of moist smokeless tobacco products. The verdict, when entered as
a judgment, was subject to trebling under federal antitrust laws. We have filed
motions with the court to overturn the verdict and, in the event the District
Court fails to enter judgment in our favor, we intend to appeal to the Court of
Appeals for the Sixth Circuit. As of the date of this filing, the court has not
ruled on any of our motions. We believe that the evidence presented at the trial
was insufficient to support the jury verdict and as a result, we believe that
the judgment should ultimately be reversed. There can be no assurance, however,
that we will be correct in our belief. We are also in the process of taking
steps to enable us to satisfy any requirements for bonding which may be imposed
in connection with staying the enforcement of the judgment pending completion of
the post-trial motions and the appeal process.
We have also been named in two purported class actions filed in state court
in Tennessee and New Mexico on behalf of putative class members who were
indirect purchasers of smokeless tobacco products manufactured by us during the
period April 1996 through March 28, 2000, alleging that we have violated the
antitrust laws, unfair or deceptive trade practices statutes and the common law
of certain states. These actions are derived directly from the Conwood
litigation. The plaintiffs seek to recover compensatory and statutory damages in
an amount not to exceed $74,000 after trebling per putative class member, and
certain other relief. The actions are similar in all material respects. These
actions are derived directly from the Conwood litigation and the plaintiffs will
have to overcome the same issues raised in the post-trial motions filed in the
Conwood litigation. Even if Conwood were ultimately to prevail on issues we are
currently challenging in post-trial motions or on appeal, the plaintiffs in
these two actions will still need to establish additional elements before
liability can be imposed upon us. We believe we have meritorious defenses in
this regard.
USE OF PROCEEDS
The net proceeds of the sale of the outstanding notes were approximately
$298 million, and were used to repay existing commercial paper obligations and
for general corporate purposes, including our stock repurchase program. These
commercial paper obligations had an average annual interest rate of 6.15%.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the years ended December
31, 1995 through 1999 was 148x, 103x, 81x, 134x and 50x, respectively. Our ratio
of earnings to fixed charges for the three months ended March 31, 2000 was 21x.
We compute these ratios by dividing our earnings by our fixed charges. For this
computation, earnings include net income before income taxes and fixed charges,
net of capitalized interest. Fixed charges include gross interest expense,
whether expensed or capitalized.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
When we sold the outstanding notes in March 2000, we entered into an
exchange and registration rights agreement with the initial purchasers of those
notes. Under the exchange and registration rights agreement, we agreed to file a
registration statement regarding the exchange of the outstanding notes for notes
which are registered under the Securities Act of 1933. We also agreed to use our
reasonable best efforts to cause the registration statement to become effective
with the Securities and Exchange Commission, and to conduct this exchange offer
after the registration statement is declared effective. We will use our best
efforts to keep this registration statement effective until the earlier of (1)
the 90th day after this exchange offer is completed or (2) the day on which no
outstanding notes are held by broker-dealers. The exchange and registration
rights agreement provides that we will be required to pay liquidated damages to
the holders of the outstanding notes if:
- the registration statement is not filed by June 2, 2000;
- the registration statement is not declared effective by September 1,
2000; or
- the exchange offer has not been completed within 45 days of the effective
date of this registration statement.
A copy of the exchange and registration rights agreement is filed as an
exhibit to the registration statement to which this prospectus is a part.
TERMS OF THE EXCHANGE OFFER
This prospectus and the accompanying letter of transmittal together
constitute the exchange offer. Upon the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal, we will accept for
exchange outstanding notes which are properly tendered on or before the
expiration date and are not withdrawn as permitted below. The expiration date
for this exchange offer is 5:00 p.m., New York City time, on June 23, 2000, or
such later date and time to which we, in our sole discretion, extend the
exchange offer.
The form and terms of the notes being issued in the exchange offer are the
same as the form and terms of the outstanding notes, except that:
- the notes being issued in the exchange offer will have been registered
under the Securities Act;
- the notes issued in the exchange offer will not bear the restrictive
legends restricting their transfer under the Securities Act; and
- the notes being issued in the exchange offer will not contain the
registration rights and liquidated damages provisions contained in the
outstanding notes.
Notes tendered in the exchange offer must be in denominations of the
principal amount of $1,000 and any integral multiple thereof.
We expressly reserve the right, in our sole discretion:
- to extend the expiration date;
- to delay accepting any outstanding notes;
- if any of the conditions set forth below under "-- Conditions to the
Exchange Offer" have not been satisfied, to terminate the exchange offer
and not accept any notes for exchange; or
- to amend the exchange offer in any manner.
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We will give oral or written notice of any extension, delay,
non-acceptance, termination or amendment as promptly as practicable by a public
announcement, and in the case of an extension, no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
During an extension, all outstanding notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. Any
outstanding notes not accepted for exchange for any reason will be returned
without cost to the holder that tendered them as promptly as practicable after
the expiration or termination of the exchange offer.
HOW TO TENDER NOTES FOR EXCHANGE
When the holder of outstanding notes tenders, and we accept, notes for
exchange, a binding agreement between us and the tendering holder is created,
subject to the terms and conditions set forth in this prospectus and the
accompanying letter of transmittal. Except as set forth below, a holder of
outstanding notes who wishes to tender notes for exchange must do so on or prior
to the expiration date:
- transmit a properly completed and duly executed letter of transmittal,
including all other documents required by such letter of transmittal, to
State Street Bank and Trust Company (the "exchange agent") at the address
set forth below under the heading "Exchange Agent"; or
- if notes are tendered pursuant to the book-entry procedures set forth
below, the tendering holder must transmit an agent's message to the
exchange agent at the address set forth below under the heading "Exchange
Agent."
In addition, either:
- the exchange agent must receive the certificates for the outstanding
notes and the letter of transmittal;
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of the book-entry transfer of the notes being tendered into
the exchange agent's account at the Depository Trust Company (the "DTC"),
along with the letter of transmittal or an agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
The term "agent's message" means a message, transmitted to the DTC and
received by the exchange agent and forming a part of a book-entry transfer (a
"book-entry confirmation"), which states that the DTC has received an express
acknowledgment that the tendering holder agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal against such
holder.
THE METHOD OF DELIVERY OF THE OUTSTANDING NOTES, THE LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF
SUCH DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR NOTES SHOULD BE SENT
DIRECTLY TO US.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the notes surrendered for exchange are
tendered:
- by a holder of outstanding notes who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
- for the account of an eligible institution.
An "eligible institution" is a firm which is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
If signatures on a letter of transmittal or notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible institution. If
notes are registered in the name of a person other than the
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<PAGE> 15
signer of the letter of transmittal, the notes surrendered for exchange must be
endorsed by, or accompanied by a written instrument or instruments of transfer
or exchange, in satisfactory form as determined by us in our sole discretion,
duly executed by the registered holder with the holder's signature guaranteed by
an eligible institution.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of notes tendered for exchange in our
sole discretion. Our determination will be final and binding. We reserve the
absolute right to:
- reject any and all tenders of any note improperly tendered;
- refuse to accept any note if, in our judgment or the judgment of our
counsel, acceptance of the note may be deemed unlawful; and
- waive any defects or irregularities or conditions of the exchange offer
as to any particular note either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks to
tender notes in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer as to
any particular notes either before or after the expiration date, including the
letter of transmittal and the instructions to it, will be final and binding on
all parties. Holders must cure any defects and irregularities in connection with
tenders of notes for exchange within such reasonable period of time as we will
determine, unless we waive such defects or irregularities. Neither we, the
exchange agent nor any other person shall be under any duty to give notification
of any defect or irregularity with respect to any tender of notes for exchange,
nor shall any of us incur any liability for failure to give such notification.
If a person or persons other than the registered holder or holders of the
outstanding notes tendered for exchange signs the letter of transmittal, the
tendered notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders that appear on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any notes or any power of attorney,
such persons should so indicate when signing, and you must submit proper
evidence satisfactory to us of such person's authority to so act unless we waive
this requirement.
By tendering, each holder will represent to us that, among other things,
that the person acquiring notes in the exchange offer is obtaining them in the
ordinary course of its business, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to participate in the distribution of the notes
issued in the exchange offer. If any holder or any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of UST, or is
engaged in or intends to engage in or has an arrangement or understanding with
any person to participate in a distribution of such notes to be acquired in the
exchange offer, such holder or any such other person:
- may not rely on the applicable interpretations of the staff of the SEC;
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer who acquired its outstanding notes as a result of
market-making activities or other trading activities, and thereafter receives
notes issued for its own account in the exchange offer, must acknowledge that it
will deliver a prospectus in connection with any resale of such notes issued in
the exchange offer. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution" for a discussion of the exchange and resale obligations of
broker-dealers in connection with the exchange offer.
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<PAGE> 16
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF NOTES ISSUED IN THE
EXCHANGE OFFER
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all outstanding notes
properly tendered and will issue notes registered under the Securities Act. For
purposes of the exchange offer, we shall be deemed to have accepted properly
tendered outstanding notes for exchange when, as and if we have given oral or
written notice to the exchange agent, with written confirmation of any oral
notice to be given promptly thereafter. See "-- Conditions to the Exchange
Offer" for a discussion of the conditions that must be satisfied before we
accept any notes for exchange.
For each outstanding note accepted for exchange, the holder will receive a
note registered under the Securities Act having a principal amount equal to that
of the surrendered outstanding note. Accordingly, registered holders of notes
issued in the exchange offer on the relevant record date for the first interest
payment date following the consummation of the exchange offer will receive
interest accruing from the most recent date to which interest has been paid or,
if no interest has been paid on the outstanding notes, from March 6, 2000.
Outstanding notes that we accept for exchange will cease to accrue interest from
and after the date of consummation of the exchange offer. Under the exchange and
registration rights agreement, we may be required to make additional payments in
the form of liquidated damages to the holders of the outstanding notes under
circumstances relating to the timing of the exchange offer.
In all cases, we will issue notes in the exchange offer for outstanding
notes that are accepted for exchange only after the exchange agent timely
receives:
- certificates for such outstanding notes or a timely book-entry
confirmation of such outstanding notes into the exchange agent's account
at the DTC;
- a properly completed and duly executed letter of transmittal or an
agent's message; and
- all other required documents.
If for any reason set forth in the terms and conditions of the exchange
offer we do not accept any tendered outstanding notes, or if a holder submits
outstanding notes for a greater principal amount than the holder desires to
exchange, we will return such unaccepted or non-exchanged notes without cost to
the tendering holder. In the case of notes tendered by book-entry transfer into
the exchange agent's account at the DTC, such non-exchanged notes will be
credited to an account maintained with the DTC. We will return the notes or have
them credited to the DTC account as promptly as practicable after the expiration
or termination of the exchange offer.
BOOK-ENTRY TRANSFERS
The exchange agent will make a request to establish an account with respect
to the outstanding notes at the DTC for purposes of the exchange offer within 2
business days after the date of this prospectus. Any financial institution that
is a participant in the DTC's systems must make book-entry delivery of
outstanding notes by causing the DTC to transfer such outstanding notes into the
exchange agent's account at the DTC in accordance with the DTC's procedures for
transfer. Such participant should transmit its acceptance to the DTC on or prior
to the expiration date or comply with the guaranteed delivery procedures
described below. DTC will verify such acceptance, execute a book-entry transfer
of the tendered outstanding notes into the exchange agent's account at DTC and
then send to the exchange agent confirmation of such book-entry transfer. The
confirmation of such book-entry transfer will include an agent's message
confirming that DTC has received an express acknowledgment from such participant
that such participant has received and agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal against such
participant. Delivery of notes issued in the exchange offer may be effected
through book-entry transfer at DTC. However, the letter of transmittal or
facsimile thereof or an agent's message, with any required signature guarantees
and any other required documents, must:
- be transmitted to and received by the exchange agent at the address set
forth below under "-- Exchange Agent" on or prior to the expiration date;
or
- comply with the guaranteed delivery procedures described below.
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<PAGE> 17
GUARANTEED DELIVERY PROCEDURES
If a holder of outstanding notes desires to tender such notes and the
holder's notes are not immediately available, or time will not permit such
holder's notes or other required documents to reach the exchange agent before
the expiration date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
- the holder tenders the notes through an eligible institution;
- prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form we have provided, by
telegram, telex, facsimile transmission, mail or hand delivery, setting
forth the name and address of the holder of the notes being tendered and
the amount of the notes being tendered. The notice of guaranteed delivery
shall state that the tender is being made and guarantee that within 3 New
York Stock Exchange trading days after the date of execution of the
notice of guaranteed delivery, the certificates for all physically
tendered notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed letter of transmittal or agent's message with any required
signature guarantees and any other documents required by the letter of
transmittal will be deposited by the eligible institution with the
Exchange Agent; and
- the exchange agent receives the certificates for all physically tendered
outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed letter of transmittal or agent's message with any required
signature guarantees and any other documents required by the letter of
transmittal, within 3 New York Stock Exchange trading days after the date
of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of your outstanding notes at any time prior to
5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the exchange agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must:
- specify the name of the person having tendered the outstanding notes to
be withdrawn;
- identify the outstanding notes to be withdrawn, including the principal
amount of such outstanding notes; and
- where certificates for outstanding notes are transmitted, specify the
name in which outstanding notes are registered, if different from that of
the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution. If notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the DTC to be credited with the withdrawn
notes and otherwise comply with the procedures of such facility. We will
determine all questions as to the validity, form and eligibility (including time
of receipt) of such notices and our determination will be final and binding on
all parties. Any tendered notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange offer. Any notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder. In the case
of notes tendered by book-entry transfer into the exchange agent's account at
the DTC, the notes withdrawn will be credited to an account maintained with the
DTC for the outstanding notes. The notes will be returned or credited to the DTC
account as soon as practicable after withdrawal, rejection of tender or
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<PAGE> 18
termination of the exchange offer. Properly withdrawn notes may be re-tendered
by following one of the procedures described under "-- How to Tender Notes for
Exchange" above at anytime on or prior to 5:00 p.m., New York City time, on the
expiration date.
CONDITIONS TO THE EXCHANGE OFFER
We are not required to accept for exchange, or to issue notes in the
exchange offer for any outstanding notes. We may terminate or amend the exchange
offer, if at any time before the acceptance of such outstanding notes for
exchange:
- any federal law, statute, rule or regulation shall have been adopted or
enacted which, in our judgment, would reasonably be expected to impair
our ability to proceed with the exchange offer;
- any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939, as
amended; or
- there shall occur a change in the current interpretation by staff of the
Securities and Exchange Commission which permits the notes issued in the
exchange offer in exchange for the outstanding notes to be offered for
resale, resold and otherwise transferred by such holders, other than
broker-dealers and any such holder which is an "affiliate" of UST within
the meaning of Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the Securities
Act, provided that such notes acquired in the exchange offer are acquired
in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the
distribution of such notes issued in the exchange offer.
The preceding conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any such condition. We may waive
the preceding conditions in whole or in part at any time and from time to time
in our sole discretion. Our failure at any time to exercise the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which we may assert at any time and from time to time.
THE EXCHANGE AGENT
State Street Bank and Trust Company, National Association has been
appointed as our exchange agent for the exchange offer. All executed letters of
transmittal should be directed to our exchange agent at the address set forth
below. Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the exchange agent addressed as
follows:
Main Delivery To:
STATE STREET BANK AND TRUST COMPANY, AS EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By mail: By hand or overnight courier By Facsimile
to: (for eligible institutions
State Street Bank and only):
Trust Company State Street Bank and
Corporate Trust Division Trust Company (617) 662-1452
P.O. Box 778 Corporate Trust Division
Boston, MA 02102-0778 2 Avenue de Lafayette-LCC5 Confirm by telephone:
Attn: Susan Lavey, LCC5 Boston, MA 02111-1724
Attn: Susan Lavey (617) 662-1544
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
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<PAGE> 19
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptance of the exchange offer except for reimbursement of mailing expenses.
The cash expenses to be incurred in connection with the exchange offer will
be paid by us and are estimated in the aggregate to be approximately $250,000.
TRANSFER TAXES
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, notes issued in the exchange offer are to be delivered to, or are to be
issued in the name of, any person other than the holder of the notes tendered,
or if a transfer tax is imposed for any reason other than the exchange of
outstanding notes in connection with the exchange offer, then the holder must
pay any such transfer taxes, whether imposed on the registered holder or on any
other person. If satisfactory evidence of payment of, or exemption from, such
taxes is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING NOTES
Holders who desire to tender their outstanding notes in exchange for notes
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the exchange agent nor UST is under any duty to give
notification of defects or irregularities with respect to the tenders of notes
for exchange.
Outstanding notes that are not tendered or are tendered but not accepted
will, following the consummation of the exchange offer, continue to be subject
to the provisions in the indenture regarding the transfer and exchange of the
outstanding notes and the existing restrictions on transfer set forth in the
legend on the outstanding notes and in the offering circular dated March 1,
2000, relating to the outstanding notes. Except in limited circumstances with
respect to specific types of holders of outstanding notes, we will have no
further obligation to provide for the registration under the Securities Act of
such outstanding notes. In general, outstanding notes, unless registered under
the Securities Act, may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. We do not currently anticipate that we will take any
action to register the outstanding notes under the Securities Act or under any
state securities laws.
Upon completion of the exchange offer, holders of the outstanding notes
will not be entitled to any further registration rights under the exchange and
registration rights agreement, except under limited circumstances.
Holders of the notes issued in the exchange offer and any outstanding notes
which remain outstanding after consummation of the exchange offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of the class have taken certain actions or exercised
certain rights under the indenture.
CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Based on interpretations of the staff of the SEC, as set forth in no-action
letters to third parties, we believe that the notes issued in the exchange offer
may be offered for resale, resold or otherwise transferred by holders of such
notes, other than by any holder which is an "affiliate" of UST within the
meaning of Rule 405 under the Securities Act. Such notes may be offered for
resale, resold or otherwise transferred without compliance with the registration
and prospectus delivery provisions of the Securities Act, if:
- such notes issued in the exchange offer are acquired in the ordinary
course of such holder's business; and
- such holder, other than broker-dealers, has no arrangement or
understanding with any person to participate in the distribution of such
notes issued in the exchange offer.
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<PAGE> 20
However, the SEC has not considered the exchange offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to the exchange offer as in such other
circumstances.
Each holder, other than a broker-dealer, must furnish a written
representation, at our request, that:
- it is not an affiliate of UST;
- it is not engaged in, and does not intend to engage in, a distribution of
the notes issued in the exchange offer and has no arrangement or
understanding to participate in a distribution of notes issued in the
exchange offer; and
- it is acquiring the notes issued in the exchange offer in the ordinary
course of its business.
Each broker-dealer that receives notes issued in the exchange offer for its
own account in exchange for outstanding notes must acknowledge that such
outstanding notes were acquired by such broker-dealer as a result of
market-making or other trading activities and that it will deliver a prospectus
in connection with any resale of such notes issued in the exchange offer. See
"Plan of Distribution" for a discussion of the exchange and resale obligations
of broker-dealers in connection with the exchange offer.
In addition, to comply with state securities laws of certain jurisdictions,
the notes issued in the exchange offer may not be offered or sold in any state
unless they have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and complied with by
the holders selling the notes. We have agreed in the exchange and registration
rights agreement that, prior to any public offering of transfer restricted
securities, we will register or qualify the transfer restricted securities for
offer or sale under the securities laws of any jurisdiction requested by a
holder. Unless a holder requests, we currently do not intend to register or
qualify the sale of the notes issued in the exchange offer in any state where an
exemption from registration or qualification is required and not available.
"Transfer restricted securities" means each note until:
- the date on which such note has been exchanged by a person other than a
broker-dealer for a note in the exchange offer;
- following the exchange by a broker-dealer in the exchange offer of a note
for a note issued in the exchange offer, the date on which the note
issued in the exchange offer is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of this
prospectus;
- the date on which such note has been effectively registered under the
Securities Act and disposed of in accordance with a shelf registration
statement that we file in accordance with the exchange and registration
rights agreement; or
- the date on which such note is distributed to the public in a transaction
under Rule 144 of the Securities Act.
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<PAGE> 21
DESCRIPTION OF NOTES
The terms of the notes to be issued in the exchange offer are identical in
all material respects to the terms of the outstanding notes, except for the
transfer restrictions relating to the outstanding notes. Any outstanding notes
that remain outstanding after the exchange offer, together with notes issued in
the exchange offer, will be treated as a single class of securities under the
indenture for voting purposes. When we refer to the term "note" or "notes", we
are referring to both the outstanding notes and the notes to be issued in the
exchange offer. When we refer to "holders" of the notes, we are referring to
those persons who are the registered holders of notes on the books of the
registrar appointed under the indenture.
The notes are governed by a document called an "indenture". The indenture
is a contract between us and State Street Bank and Trust Company, which acts as
trustee. The trustee has two main roles. First, the trustee can enforce your
rights against us if we default. There are some limitations on the extent to
which the trustee acts on your behalf, described under "Remedies If An Event Of
Default Occurs". Second, the trustee performs administrative duties for us, such
as sending you interest payments, transferring your notes to a new buyer if you
sell and sending you notices. The indenture and its associated documents contain
the full legal text of the matters described in this section. The indenture and
the notes are governed by New York law. See "Where You Can Find More
Information" on page i for information on how to obtain a copy of the indenture.
The following description of the provisions of the indenture is a summary
only. More specific terms as well as the definitions of relevant terms can be
found in the indenture and the Trust Indenture Act of 1939, which is applicable
to the indenture. We have also included references in parentheses to certain
sections of the indenture. Because this section is a summary, it does not
describe every aspect of the notes. This summary is subject to and qualified in
its entirety by reference to all the provisions of the indenture, including
definitions of certain terms used in the indenture.
PRINCIPAL, MATURITY AND INTEREST
The notes are general unsecured obligations of UST. The 8.80% notes are
limited to $300,000,000 aggregate principal amount. The notes are not entitled
to any sinking fund.
The notes will mature on March 15, 2005 and will bear interest at the
yearly rate of 8.80% from March 6, 2000, payable semi-annually on March 15, and
September 15, of each year, commencing September 15, 2000.
Principal, any premium and interest on the notes will be payable, and the
notes may be presented for registration of transfer and exchange, at the
corporate trust office or the trustee of another office or agency of UST as
determined by us. At our option, payment of interest may be made by check mailed
to the holders at the addresses appearing in the registry books maintained by
the trustee, who will initially act as registrar for the notes.
LEGAL OWNERSHIP
"STREET NAME" AND OTHER INDIRECT HOLDERS. Investors who hold notes in
accounts at banks or brokers will generally not be recognized by us as legal
holders of notes. This is called holding in "street name". Instead, we would
recognize only the bank or broker, or the financial institution the bank or
broker uses to hold its notes. These intermediary banks, brokers and other
financial institutions pass along principal, interest and other payments on the
notes, either because they agree to do so in their customer agreements or
because they are legally required. If you hold notes in "street name", you
should check with your own institution to find out:
- How it handles note payments and notices.
- Whether it imposes fees or charges.
- How it would handle voting if ever required.
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<PAGE> 22
- Whether and how you can instruct it to send you notes registered in your
own name so you can be a direct holder as described below.
- How it would pursue rights under the notes if there were a default or
other event triggering the need for holders to act to protect their
interests.
DIRECT HOLDERS. Our obligations, as well as the obligations of the trustee
and those of any third parties employed by us or the trustee, run only to
persons who are registered as holders of notes. As noted above, we do not have
obligations to you if you hold in "street name" or other indirect means, either
because you choose to hold notes in that manner or because the notes are issued
in the form of global notes as described below. For example, once we make
payment to the registered holder, we have no further responsibility for the
payment even if that holder is legally required to pass the payment along to you
as a "street name" customer but does not do so.
GLOBAL NOTES. What is a global note? A global note is a special type of
indirectly held security, as described above under " 'Street Name' and Other
Indirect Holders". For global notes, the ultimate beneficial owners can only be
indirect holders. We do this by requiring that the global note be registered in
the name of a financial institution we select and by requiring that the notes
included in the global note not be transferred to the name of any other direct
holder unless the special circumstances described below occur. The financial
institution that acts as the sole direct holder of the global note is called the
"depositary". Any person wishing to own a note must do so indirectly by virtue
of an account with a broker, bank or other financial institution that in turn
has an account with the depositary.
Special investor considerations for global notes. As an indirect holder, an
investor's rights relating to a global note will be governed by the account
rules of the investor's financial institution and of the depositary, as well as
general laws relating to notes transfers. We do not recognize this type of
investor as a holder of notes and instead deal only with the depositary that
holds the global note.
An investor should be aware that for the notes issued only in the form of
global notes:
- The investor cannot get notes registered in his or her own name.
- The investor cannot receive physical certificates for his or her interest
in the notes.
- The investor will be a "street name" holder and must look to his or her
own bank or broker for payments on the notes and protection of his or her
legal rights relating to the notes. See " 'Street Name' and Other
Indirect Holders".
- The investor may not be able to sell interests in the notes to some
insurance companies and other institutions that are required by law to
own their notes in the form of physical certificates.
- The depositary's policies will govern payments, transfers, exchanges and
other matters relating to the investor's interest in the global note. We
and the trustee have no responsibility for any aspect of the depositary's
actions or for its records of ownership interests in the global note. We
and the trustee also do not supervise the depositary in any way.
- Payment for purchases and sales in the market for corporate bonds and
notes is generally made in next-day funds. In contrast, the depositary
will usually require that interests in a global note be purchased or sold
within its system using same-day funds. This difference could have some
effect on how global note interests trade, but we do not know what that
effect will be.
Special situations when global notes will be terminated. In a few special
situations described later, the global note will terminate and interests in it
will be exchanged for physical certificates representing notes. After that
exchange, the choice of whether to hold notes directly or in "street name" will
be up to the investor. Investors must consult their own bank or brokers to find
out how to have their interests in notes transferred to their own name, so that
they will be direct holders. The rights of "street name" investors and direct
holders in the notes have been previously described in the subsections entitled
" 'Street Name' and Other Indirect Holders" and "Direct Holders".
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<PAGE> 23
The special situations for termination of a global note are:
- when the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary;
- when we notify the trustee that we wish to terminate the global note; or
- when an event of default on the notes has occurred and has not been
cured. (Defaults are discussed later under "Events of Default".)
When a global note terminates, the depositary (and not UST or the trustee)
is responsible for deciding the names of the institutions that will be the
initial direct holders. (Sections 204 and 305 of the Indenture)
IN THE REMAINDER OF THIS DESCRIPTION "YOU" MEANS DIRECT HOLDERS AND NOT
"STREET NAME" OR OTHER INDIRECT HOLDERS OF NOTES. INDIRECT HOLDERS SHOULD READ
THE SUBSECTION ENTITLED "'STREET NAME' AND OTHER INDIRECT HOLDERS".
OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- ADDITIONAL MECHANICS relevant to the notes under normal circumstances,
such as how you transfer ownership and where we make payments;
- Your rights to exchange the notes for registered exchange securities
under the terms and conditions provided in the "REGISTRATION COVENANT AND
EXCHANGE OFFER";
- Your rights under several SPECIAL SITUATIONS, such as if we merge with
another company, or if we want to change a term of the notes;
- Promises we make to you about how we will run our business, or business
actions we promise not to take (known as "RESTRICTIVE COVENANTS"); and
- Your rights if we DEFAULT or experience other financial difficulties.
ADDITIONAL MECHANICS
FORM, EXCHANGE AND TRANSFER
The notes will be issued:
- only in unregistered form;
- without interest coupons; and
- in denominations that are even multiples of $1,000. (Section 302 of the
Indenture)
You may exchange or transfer notes at the office of the trustee. The
trustee acts as our agent for registering notes in the names of holders and
transferring notes. We may change this appointment to another entity or perform
it ourselves. The entity performing the role of maintaining the list of
registered holders is called the "security registrar". It will also perform
transfers. (Section 305 of the Indenture)
You will not be required to pay a service charge to transfer or exchange
notes, but you may be required to pay for any tax or other governmental charge
associated with the exchange or transfer. The transfer or exchange will only be
made if the security registrar is satisfied with your proof of ownership.
We may cancel the designation of any particular transfer agent. We may also
approve a change in the office through which any transfer agent acts. (Section
1002 of the Indenture)
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PAYMENT AND PAYING AGENTS
We will pay interest to you if you are a direct holder listed in the
trustee's records of the notes semi-annually at the close of business on March 1
and September 1, or, prior to the payment date, even if you no longer own the
notes on the interest due date. This date is called the "regular record date".
(Section 307 of the Indenture)
Holders buying and selling notes must work out between them how to
compensate for the fact that we will pay all the interest for an interest period
to the one who is the registered holder on the regular record date. The most
common manner is to adjust the sales price of the notes to pro-rate interest
fairly between buyer and seller. This pro-rated interest amount is called
"accrued interest".
We will pay interest, principal and any other money due on the notes at the
corporate trust office of the trustee in Boston. That office is currently
located at 2 Avenue de Lafayette-LCC5, P.O. Box 778, Boston, MA 02102-0778. You
must make arrangements to have your payments picked up at, or wired from, that
office. We may also choose to pay interest by mailing checks.
"STREET NAME" AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR
BROKERS FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS.
We may also arrange for additional payment offices, and may cancel or
change these offices, including our use of the trustee's corporate trust office.
These offices are called "paying agents". We may also choose to act as our own
paying agent. We must notify you of changes in the paying agents for any
particular series of notes. (Section 1002 of the Indenture)
NOTICES
We and the trustee will send notices regarding the notes only to direct
holders, using their addresses as listed in the trustee's records. (Sections 101
and 106 of the Indenture)
Regardless of who acts as paying agent, all money paid by us to a paying
agent that remains unclaimed at the end of two years after the amount is due to
direct holders will be repaid to us. After that two-year period, you may look
only to us for payment and not to the trustee, any other paying agent or anyone
else. (Section 1003 of the Indenture)
SPECIAL SITUATIONS
MERGERS AND SIMILAR EVENTS. We are generally permitted to consolidate or
merge with another company or firm. We are also permitted to sell substantially
all of our assets to another firm, or to buy substantially all of the assets of
another firm. We may not, however, take any of these actions unless all of the
following conditions are met:
- Where we merge out of existence or sell our assets, the other firm may
not be organized under a foreign country's laws (that is, it must be a
corporation, partnership or trust organized under the laws of a State of
the United States or the District of Columbia or under federal United
States law), and it must agree to be legally responsible for the notes.
- The merger, sale of assets or other similar transaction must not cause a
default on the notes, and we must not already be in default (unless the
merger or other similar transaction would cure the default). For purposes
of this no-default test, a default would include an event of default that
has occurred and not been cured, as described later under "What Is An
Event Of Default?". A default for this purpose would also include any
event that would be an event of default if the requirements for giving us
default notice or for our default having to exist for a specific period
of time were disregarded.
- It is possible that the merger, sale of assets or other similar
transaction would cause some of our property to become subject to a
mortgage or other legal mechanism giving lenders preferential rights in
that property over other lenders or over our general creditors if we fail
to pay them back.
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We have promised to limit these preferential rights in our property,
called "liens", as discussed later under "Covenants -- Restrictions on
Liens". If a merger or other similar transaction would create any liens
on our property, we must comply with that restrictive covenant. We would
do this either by deciding that the liens were permitted, or by following
the requirements of the restrictive covenant to grant an equivalent or
higher-ranking lien on the same property to you and the other direct
holders of the notes. (Section 801 of the Indenture)
MODIFICATION AND WAIVER
There are three types of changes we can make to the indenture and the
notes:
- CHANGES REQUIRING YOUR APPROVAL. First, the following is a list of the
types of changes that cannot be made to the notes without your approval:
- change the stated maturity of the principal or interest on a private
note;
- reduce any amounts due on a private note;
- reduce the amount of principal payable upon acceleration of the maturity
of a private note following a default;
- change the place or currency of payment on a private note;
- impair your right to sue for payment;
- reduce the percentage of holders of notes whose consent is needed to
modify or amend the indenture;
- reduce the percentage of holders of notes whose consent is needed to
waive compliance with certain provisions of the indenture or to waive
certain defaults; and
- modify any other aspect of the provisions dealing with modification and
waiver of the indenture. (Section 902 of the Indenture)
- CHANGES REQUIRING A MAJORITY VOTE. The second type of change to the
indenture and the notes is the kind that requires a vote in favor by
holders of notes owning a majority of the principal amount of the
particular series affected. Most changes fall into this category, except
for clarifying changes and certain other changes that would not adversely
affect holders of the notes. The same vote would be required for us to
obtain a waiver of all or part of the restrictive covenants described
later on this page, or a waiver of a past default. However, we cannot
obtain a waiver of a payment default or any other aspect of the indenture
or the notes listed in the first category described previously above
under "Changes Requiring Your Approval" unless we obtain your individual
consent to the waiver. (Section 513 of the Indenture)
- CHANGES NOT REQUIRING APPROVAL. The third type of change does not require
any vote by holders of notes. This type is limited to clarifications and
certain other changes that would not adversely affect holders of the
notes.
Notes will not be considered outstanding, and therefore will not be
eligible to vote, if we have deposited or set aside in trust for you money for
their payment or redemption. Notes will also not be eligible to vote if they
have been fully defeased as described under "Full Defeasance". (Section 101 of
the Indenture)
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding securities that are entitled
to vote or take other action under the indenture. In certain limited
circumstances, the trustee will be entitled to set a record date for action by
holders. If we or the trustee set a record date for a vote or other action to be
taken by holders of a particular series, that vote or action may be taken only
by persons who are holders of outstanding securities of that series on the
record date and must be taken within 180 days following the record date or a
shorter period that we may specify (or as the trustee may specify, if it set the
record date). We may shorten or lengthen (but not beyond 180 days) this period
from time to time. (Section 104 of the Indenture)
"STREET NAME" AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR
BROKERS FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO
CHANGE THE INDENTURE OR THE NOTES OR REQUEST A WAIVER.
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COVENANTS
In the indenture, we agree to restrictions that limit our own as well as
our subsidiaries' ability to create liens or enter into sale and leaseback
transactions.
RESTRICTIONS ON LIENS. Some of our property or assets may be subject to a
mortgage or other legal mechanism that gives our lenders preferential rights in
that property or assets over other lenders (including you and the other direct
holders of the notes) or over our general creditors if we fail to pay them back.
These preferential rights are called "liens". We promise that we will not become
obligated on any new debt that is secured by a lien on any of our real
properties or material manufacturing facilities located in the United States,
referred to below as our "principal properties," or on any shares of stock or
debt of any of our domestic subsidiaries, unless we grant an equivalent or
higher-ranking lien on the same principal properties to you and the other direct
holders of the notes.
We do not need to comply with this restriction if the amount of all debt
that would be secured by liens on principal properties (including the new debt,
the notes which we would so secure as described in the previous sentence, and
all "attributable debt", as described under "Restriction on Sales and
Leasebacks" below, that results from a sale and leaseback transaction involving
our property or assets) is less than 10% of our consolidated net tangible
assets.
This restriction on liens does not apply to debt secured by certain types
of liens, and we can disregard this debt when we calculate the limits imposed by
this restriction. These types of liens are liens on the principal properties of
any of our domestic subsidiaries, or on their shares of stock or debt, if those
liens existed at the time the corporation became our domestic subsidiary, liens
in favor of us or our domestic subsidiaries, liens in favor of U.S. Governmental
bodies that we granted in order to assure our payments to such bodies that we
owe by law or because of a contract we entered into, and liens on property that
existed at the time we acquired the property (including property we may acquire
through a merger or similar transaction) or that we granted in order to purchase
the property (sometimes called "purchase money mortgages"). We can also
disregard debt secured by liens that extend, renew or replace any of these types
of liens.
We and our subsidiaries are permitted to have as much unsecured debt as we
may choose.
RESTRICTIONS ON SALES AND LEASEBACKS. We promise that neither we nor any of
our domestic subsidiaries will enter into any sale and leaseback transaction
involving our principal properties, unless we comply with this restrictive
covenant. A "sale and leaseback transaction" generally is an arrangement between
us or a domestic subsidiary and a bank, insurance company or other lender or
investor where we or the domestic subsidiary lease a property which was or will
be sold by us or the domestic subsidiary to that lender or investor more than
120 days after the completion of construction and the beginning of its full
operation.
We can comply with this restrictive covenant in either of two different
ways. First, we will be in compliance if we or our domestic subsidiary could
grant a lien on the property in an amount equal to the attributable debt for the
sale and leaseback transaction without being required to grant an equivalent or
higher-ranking lien to you and the other direct holders of the notes under the
restriction on liens described above. Second, we can comply if we retire an
amount of funded debt, within 120 days of the transaction, equal to at least the
net proceeds of the sale of the principal property that we lease in the
transaction or the fair value of that principal property (subject to credits for
certain voluntary retirements of notes and funded debt we may make), whichever
is greater.
This restriction on sales and leasebacks does not apply to any sale and
leaseback transaction that is between us and one of our domestic subsidiaries or
between domestic subsidiaries, or that involves a lease for a period of three
years or less.
CERTAIN DEFINITIONS RELATING TO OUR RESTRICTIVE COVENANTS. Following are
the meanings of the terms that are important in understanding the restrictive
covenants previously described.
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"Attributable debt" means the total net amount of rent (discounted at 10%
per annum compounded annually) that is required to be paid during the remaining
term of any lease.
"Consolidated net tangible assets" is the total amount of assets (less
reserves and certain other permitted deductible items), after subtracting all
current liabilities and all goodwill, trade names, trademarks, patents,
unamortized debt discounts and expenses and similar intangible assets, as such
amounts appear on our most recent consolidated balance sheet and computed in
accordance with generally accepted accounting principles.
A "domestic subsidiary" means any of our subsidiaries except one which does
not transact a substantial portion of its business in the United States or does
not regularly keep a substantial portion of its assets (other than intangible
assets) in the United States, or one that is used primarily to finance our
operations outside of the United States. A "subsidiary" is a corporation in
which we and/or one or more of our other subsidiaries owns at least 50% of the
voting stock, which is a kind of stock that ordinarily permits its owners to
vote for the election of directors.
"Funded debt" means all debt for borrowed money that either has a maturity
of 12 months or more from the date on which the calculation of funded debt is
made or has a maturity of less than 12 months from that date but is by its terms
renewable or extendible beyond 12 months from that date at the option of the
borrower.
CHANGE OF CONTROL. We have also agreed that within 30 days of the
occurrence of a change of control triggering event, UST will be required to make
an offer to purchase all outstanding notes at a purchase price equal to 101% of
their principal amount plus accrued interest to the date of purchase.
A "change of control triggering event" will be deemed to have occurred if
both a change of control and a rating decline occur.
A "change of control" will be deemed to have occurred at such time as
either (a) any person or any persons acting together that would constitute a
"group" for purposes of Section 13(d) of the Exchange Act, or any successor
provision thereto, together with any affiliate or related persons thereof, shall
beneficially own (within the meaning of Rule 13d-3 under the Exchange Act, or
any successor provision thereto) more than 50% of the aggregate voting power of
all voting stock of UST; of (b) any person or group, together with any
affiliates or related persons thereof, shall succeed in having a sufficient
number of its nominees elected to the board of directors of UST such that those
nominees, when added to any existing director remaining on the board of
directors of UST after such election who was a nominee of or is an affiliate or
related person of such person or group, will constitute a majority of the board
of directors of UST.
A "rating decline" will be deemed to have occurred if at any time within 90
days (which period shall be extended so long as the rating of the notes is under
publicly announced consideration for a possible downgrade by any rating agency)
after the date of public notice of a change of control, or the intention of UST
or any person to effect a change of control, the rating of the notes, UST's
7.25% Senior Notes due June 1, 2009 or UST's Floating Rate Senior Notes due June
1, 2009, is decreased by S&P or Moody's by three or more gradations. In the
event that none of the notes, UST's 7.25% Senior Notes due June 1, 2009 or UST's
Floating Rate Senior Notes due June 1, 2009 are rated by S&P or Moody's, and a
change of control shall have occurred, UST will obtain from S&P or Moody's pro
forma ratings on the notes both prior to and within 90 days after the date of
public notice of the change of control, or the intention of UST or any person to
effect a change of control. A rating decline will be deemed to have occurred in
such circumstances if such latter pro forma rating reflects a decrease from the
former pro forma rating by S&P or Moody's of three or more gradations.
If an offer to purchase is made, there can be no assurance that UST will
have funds sufficient to pay the purchase price and accrued interest described
above for all of the notes that might be tendered by holders seeking to accept
the offer to purchase. The failure of UST to make the offer to purchase and the
failure of UST to pay the purchase price and accrued interest described above
will result in an event of default.
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In the event that UST makes an offer to purchase the notes, UST intends to
comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act.
A "gradation" means a gradation within a rating category or a change to
another rating category, which shall include (1) "+" and "-", in the case of
S&P's current rating categories (for example, a decline from BB+ to BB would
constitute a decrease of one gradation); (2) "1", "2" and "3", in the case of
Moody's current rating categories (for example, a decline of B1 to B2 would
constitute a decrease of one gradation); or (3) the equivalent in respect of
successor rating categories of S&P and Moody's.
The "offer to purchase" means a written offer sent by UST to each holder
offering to purchase notes at the specified purchase price. Unless otherwise
required by applicable law, the offer shall specify an expiration date of the
offer to purchase which shall be, subject to any contrary requirements of
applicable law, between 30 and 60 days after the date of such offer and a
settlement date (which we refer to as the "purchase date") for purchase of notes
within five business days after the expiration date. UST shall notify the
trustee, at least 15 business days (or such shorter period as is acceptable to
the trustee) prior to the mailing of the offer of UST's obligation to make an
offer to purchase. The offer shall contain information concerning the business
of UST and its subsidiaries which UST in good faith believes will enable such
holders to make an informed decision with respect to the offer to purchase. The
offer shall contain all instructions and materials necessary to enable such
holders to tender notes pursuant to the offer to purchase.
The offer shall also state:
- the expiration date and the purchase date;
- the aggregate principal amount of the outstanding notes;
- the purchase price to be paid by UST for each US$1,000 aggregate
principal amount of notes accepted for payment;
- that the holder may tender all or any portion of the notes registered in
the name of such holder and that any portion of a note tendered must be
tendered in an integral multiple of US$1,000 principal amount;
- the place or places where notes are to be surrendered for tender pursuant
to the offer to purchase;
- that interest on any note not tendered pursuant to the offer to purchase
will continue to accrue;
- that on the purchase date the purchase price will become due and payable
upon each note being accepted for payment pursuant to the offer to
purchase and that interest thereon shall cease to accrue on and after the
purchase date;
- that each holder electing to tender a note pursuant to the offer to
purchase will be required to surrender such note at the place or places
specified in the offer prior to the close of business on the expiration
date; and
- that holders will be entitled to withdraw all or any portion of notes
tendered if UST receives, not later than the close of business on the
expiration date, a telegram telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the note
the holder tendered, the certificate number of the note the holder
tendered and a statement that such holder is withdrawing all or a portion
of his tender.
Any offer to purchase shall be governed by and effected in accordance with
the offer for such offer to purchase.
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DEFEASANCE
FULL DEFEASANCE. If there is a change in federal tax law, as described
below, we can legally release ourselves from any payment or other obligations on
the notes (called "full defeasance") if we put in place the following other
arrangements for you to be repaid:
- We must deposit in trust for your benefit and the benefit of all other
direct holders of the notes a combination of money and U.S. government or
U.S. government agency notes or bonds that will generate enough cash to
make interest, principal and any other payments on the notes on their
various due dates.
- There must be a change in current federal tax law or an IRS ruling that
lets us make the above deposit without causing you to be taxed on the
notes any differently than if we did not make the deposit and just repaid
the notes ourselves. (Under current federal tax law, the deposit and our
legal release from the notes would be treated as though we took back your
notes and gave you your share of the cash and notes or bonds deposited in
trust. In that event, you could recognize gain or loss on the notes you
give back to us.)
- We must deliver to the trustee a legal opinion of our counsel confirming
the tax law change described above. (Sections 1302 and 1304 of the
Indenture)
- If we ever did accomplish full defeasance, as described above, you would
have to rely solely on the trust deposit for repayment on the notes. You
could not look to us for repayment in the unlikely event of any
shortfall. Conversely, the trust deposit would most likely be protected
from claims of our lenders and other creditors if we ever become bankrupt
or insolvent.
COVENANT DEFEASANCE. Under current federal tax law, we can make the same
type of deposit described above and be released from some of the restrictive
covenants in the notes. This is called "covenant defeasance". In that event, you
would lose the protection of those restrictive covenants but would gain the
protection of having money and notes set aside in trust to repay the notes. In
order to achieve covenant defeasance, we must do the following:
- We must deposit in trust for your benefit and the benefit of all other
direct holders of the notes a combination of money and U.S. government or
U.S. government agency notes or bonds that will generate enough cash to
make interest, principal and any other payments on the notes on their
various due dates.
- We must deliver to the trustee a legal opinion of our counsel confirming
that under current federal income tax law we may make the above deposit
without causing you to be taxed on the notes any differently than if we
did not make the deposit and just repaid the notes ourselves.
If we accomplish covenant defeasance, the following provisions of the
indenture and the notes would no longer apply:
- Our promises regarding conduct of our business previously described under
"Covenants," and any other covenants applicable to the series of notes
and described in this prospectus.
- The condition regarding the treatment of liens when we merge or engage in
similar transactions, as previously described under "Mergers and Similar
Events".
- The events of default relating to breach of covenants and acceleration of
the maturity of other debt, described under "What Is An Event Of
Default?".
If we accomplish covenant defeasance, you can still look to us for
repayment of the notes if there were a shortfall in the trust deposit. In fact,
if one of the remaining events of default occurred (such as our bankruptcy) and
the notes become immediately due and payable, there may be such a shortfall.
Depending on the event causing the default, you may not be able to obtain
payment of the shortfall. (Sections 1303 and 1304 of the Indenture)
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DEFAULT AND RELATED MATTERS
RANKING
The notes are not secured by any of our property or assets. Accordingly,
your ownership of notes means you are one of UST's unsecured creditors. The
notes are not subordinated to any of UST's other debt obligations and therefore
they rank equally with all of UST's other unsecured and unsubordinated
indebtedness.
EVENTS OF DEFAULT
You will have special rights if an event of default occurs and is not
cured, as described later in this subsection.
WHAT IS AN EVENT OF DEFAULT? The term "event of default" means any of the
following:
- we do not pay the principal or any premium on a note on its due date;
- we do not pay interest on a note within 30 days of its due date;
- we do not deposit any sinking fund payment on its due date;
- we remain in breach of a restrictive covenant or any other term of the
indenture for 60 days after we receive a notice of default stating we are
in breach. The notice must be sent by either the trustee or holders of
10% of the principal amount of notes of the affected series;
- other debt of ours totaling $10,000,000 or more defaults, our obligation
to repay it is accelerated by our lenders, and this repayment obligation
remains accelerated for 10 days after we receive a notice of default as
described in the previous paragraph;
- we file for bankruptcy or certain other events in bankruptcy, insolvency
or reorganization occur; or
- we do not make the offer to purchase or pay the purchase price for the
notes as described under "Covenants."
REMEDIES IF AN EVENT OF DEFAULT OCCURS. If an event of default has occurred
and has not been cured, the trustee or the holders of 25% in principal amount of
the notes of the affected series may declare the entire principal amount of all
the notes of that series to be due and immediately payable. This is called a
declaration of acceleration of maturity. If an event of default occurs because
of certain events in bankruptcy, insolvency or reorganization, the principal
amount of all notes of that series will be automatically accelerated, without
any action by the trustee or any holder. A declaration of acceleration of
maturity may be canceled by the holders of at least a majority in principal
amount of the notes of the affected series. (Section 402 of the Indenture)
Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the indenture at the request of
any holders unless the holders offer the trustee reasonable protection from
expenses and liability (called an "indemnity"). (Section 603 of the Indenture).
If reasonable indemnity is provided, the holders of a majority in principal
amount of the outstanding notes of the relevant series may direct the time,
method and place of conducting any lawsuit or other formal legal action seeking
any remedy available to the trustee. These majority holders may also direct the
trustee in performing any other action under the indenture. (Section 512 of the
Indenture).
Before you bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to the notes, the following must occur:
- you must give the trustee written notice that an event of default has
occurred and remains uncured;
- the holders of 25% in principal amount of all outstanding securities of
the relevant series must make a written request that the trustee take
action because of the default, and must offer reasonable indemnity to the
trustee against the cost and other liabilities of taking that action; and
- the trustee must have not taken action for 60 days after receipt of the
above notice and offer of indemnity. (Section 507 of the Indenture)
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You are, however, entitled at any time to bring a lawsuit for the payment
of money due on your notes on or after its due date. (Section 508 of the
Indenture)
"STREET NAME" AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR
BROKERS FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION TO, OR MAKE A REQUEST
OF, THE TRUSTEE AND TO MAKE OR CANCEL A DECLARATION OF ACCELERATION.
We will furnish to the trustee every year a written statement of certain of
our officers certifying that to their knowledge we are in compliance with the
indenture and the notes, or else specifying any default. (Section 1004 of the
Indenture)
REGARDING THE TRUSTEE
The trustee's current address is State Street Bank and Trust Company,
Corporate Trust Division, 2 Avenue de Lafayette -- LCC6, P.O. Box 778, Boston,
MA 02102-0778.
The indenture provides that, except during the continuance of an event of
default, the trustee will perform only such duties as are specifically set forth
in the indenture. During the existence of an event of default, the trustee will
exercise such rights and powers vested in its exercise as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
(Section 601 of the Indenture)
The indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the trustee, should it
become a creditor of the company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The trustee is permitted to engage in other transactions
with the company or any affiliate. If it acquires any conflicting interest (as
defined in the Indenture or in the Trust Indenture Act), it must eliminate such
conflict or resign. (Sections 608 and 613 of the Indenture)
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the exchange notes will be issued in fully
registered form. Except as described below, the exchange notes initially will be
represented by one or more global notes, in definitive, fully registered form
without interest coupons. The global notes will be deposited with the trustee as
custodian for DTC and registered in the name of Cede & Co. or another nominee as
DTC may designate.
DTC has advised us as follows:
- DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provision of Section 17A of
the Exchange Act.
- DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and other organizations.
Indirect access to the DTC system is available to others, including
banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
- Upon the issuance of the global notes, DTC or its custodian will credit,
on its internal system, the respective principal amounts of the exchange
notes represented by the global notes to the accounts of persons who have
accounts with DTC. Ownership of beneficial interests in the global notes
will be limited to persons who have accounts with DTC or persons who hold
interests through the persons who have accounts with DTC. Persons who
have accounts with DTC are referred to as
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<PAGE> 32
"participants." Ownership of beneficial interests in the global notes
will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee, with respect to
interests of participants, and the records of participants, with respect
to interests of persons other than participants.
So long as DTC or its nominee is the registered owner or holder of the
global notes, DTC or the nominee, as the case may be, will be considered the
sole record owner or holder of the exchange notes represented by the global
notes for all purposes under the indenture and the exchange notes. No beneficial
owners of an interest in the global notes will be able to transfer that interest
except according to DTC's applicable procedures, in addition to those provided
for under the indenture. Owners of beneficial interests in the global notes will
not:
- be entitled to have the exchange notes represented by the global notes
registered in their names,
- receive or be entitled to receive physical delivery of certificated notes
in definitive form, and
- be considered to be the owners or holders of any exchange notes under the
global notes.
Accordingly, each person owning a beneficial interest in the global notes must
rely on the procedures of DTC and, if a person is not a participant, on the
procedures of the participant through which that person owns its interests, to
exercise any right of a holder of exchange notes under the global notes. We
understand that under existing industry practice, in the event an owner of a
beneficial interest in the global notes desires to take any action that DTC, as
the holder of the global notes, is entitled to take, DTC would authorize the
participants to take that action, and that the participants would authorize
beneficial owners owning through the participants to take that action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payments of the principal of, premium, if any, and interest on the exchange
notes represented by the global notes will be made to DTC or its nominee, as the
case may be, as the registered owner of the global notes. Neither we, the
trustee, nor any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global notes or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the global notes will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
ownership interests in the principal amount of the global notes, as shown on the
records of DTC or its nominee. We also expect that payments by participants to
owners of beneficial interests in the global notes held through these
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 the names of nominees for these customers. These payments will be the
responsibility of these participants.
Transfer between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a holder requires physical delivery of notes in
certificated form for any reason, including to sell notes to persons in states
which require the delivery of the notes or to pledge the notes, a holder must
transfer its interest in the global notes in accordance with the normal
procedures of DTC and the procedures set forth in the indenture.
Unless and until they are exchanged in whole or in part for certificated
exchange notes in definitive form, the global notes may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC.
Beneficial owners of exchange notes registered in the name of DTC or its
nominee will be entitled to be issued, upon request, exchange notes in
definitive certificated form.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in the global notes are credited. Further, DTC will take any
action permitted to be taken by a holder of notes only in respect of that
portion of the aggregate principal amount of notes as to which the participant
or participants has or have given that direction.
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<PAGE> 33
Although DTC has agreed to these procedures in order to facilitate
transfers of interests in the global notes among participants of DTC, it is
under no obligation to perform these procedures, and may discontinue them at any
time. Neither we nor the trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Subject to specified conditions, any person having a beneficial interest in
the global notes may, upon request to the trustee, exchange the beneficial
interest for exchange notes in the form of certificated notes. Upon any issuance
of certificated notes, the trustee is required to register the certificated
notes in the name of, and cause the same to be delivered to, the person or
persons, or the nominee of these persons. In addition, if DTC is at any time
unwilling or unable to continue as a depositary for the global notes, and a
successor depositary is not appointed by us within 90 days, we will issue
certificated notes in exchange for the global notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives notes for its own account in the exchange
offer must acknowledge that it will deliver a prospectus in connection with any
resale of those notes. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
notes received in the exchange offer where the outstanding notes were acquired
as a result of market-making activities or other trading activities. We have
agreed that, for a period of 180 days after the consummation of the exchange
offer, we will make this prospectus, as amended and supplemented, available to
any broker-dealer for use in connection with any such resale. In addition, until
August 21, 2000, all dealers effecting transactions in the notes issued in the
exchange offer may be required to deliver a prospectus.
We will not receive any proceeds from any sale of notes by broker-dealers.
Notes received by broker-dealers for their own account in the exchange offer may
be sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such notes. Any broker-dealer that resells notes that were received by it for
its own account in the exchange offer and any broker or dealer that participates
in a distribution of such notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and profit on any such resale of notes issued in
the exchange and any commission or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The letter
of transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after this registration statement is declared
effective, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offer, including the expenses of one counsel for the
holders of the notes, other than the commissions or concessions of any
broker-dealers and will indemnify the holders of the notes, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act. We note, however, that, in the opinion of the SEC,
indemnification against liabilities arising under federal securities laws is
against public policy and may be unenforceable.
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<PAGE> 34
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of material United States federal income tax
consequences associated with the exchange of outstanding notes for new notes to
be issued in the exchange offer and the ownership, and disposition of those new
notes applicable to you if you acquired the outstanding notes in the initial
offering and, for United States federal income tax purposes, you are not a
"United States person" as defined below (a "Non-U.S. Holder"). This summary is
based upon current United States federal income tax laws, regulations, rulings,
and judicial decisions, all of which are subject to change, possibly with
retroactive effect. This summary does not discuss all aspects of United States
federal income taxation which may be important to you in light of your
individual investment circumstances if, for example, you are an investor subject
to special tax rules (e.g., banks, thrifts, real estate investment trusts,
regulated investment companies, insurance companies, dealers in securities or
currencies, traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings, expatriates and tax-exempt investors)
or if you will hold notes as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. In addition, this summary does not
address any aspect of state, local, or foreign taxation.
The exchange of outstanding notes for the notes issued in the exchange
offer will not be treated as an "exchange" for United States federal income tax
purposes because the notes issued in the exchange offer will not differ
materially in kind or extent from the outstanding notes. Rather, the notes
received by a holder in the exchange offer will be treated as a continuation of
the outstanding notes in the hands of the exchanging holder. As a result, there
will be no United States federal income tax consequences to holders exchanging
their outstanding notes for notes issued in the exchange offer. In addition, any
exchanging holder of outstanding notes will have the same adjusted tax basis and
holding period in the notes issued in the exchange offer as such holder in the
outstanding notes immediately prior to the exchange.
YOU ARE ADVISED TO CONSULT WITH YOUR OWN TAX ADVISOR REGARDING THE
PARTICULAR TAX CONSEQUENCES TO YOU OF THE ACQUISITION, OWNERSHIP, SALE OR OTHER
DISPOSITION OF NOTES IN LIGHT OF YOUR PARTICULAR TAX AND INVESTMENT SITUATION
AND THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS APPLICABLE TO YOU.
For purposes of this summary, a "United States person" means a beneficial
owner of a note that is for United States federal income tax purposes:
- an individual, who is a citizen or resident of the United States for
United States federal income tax purposes;
- a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or any state,
including the District of Columbia;
- an estate, the income of which is includable in gross income for United
States federal income tax purposes regardless of its source; or
- a trust, if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United
States persons have the authority to control all substantial decisions of
such trust.
The following summary applies to you only if you are a Non-U.S. Holder.
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<PAGE> 35
PAYMENTS OF INTEREST
Subject to the discussion of backup withholding below, payments of interest
on a note to you generally will not be subject to United States federal income
or withholding tax, provided that
(1) you
- do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of UST entitled to
vote, and
- are not a controlled foreign corporation that is related to UST
actually or constructively through stock ownership for United
States federal income tax purposes;
(2) such interest payments are not effectively connected with the
conduct by you of a trade or business within the United States; and
(3) we or our paying agent receives
- from you, a properly completed Form W-8 (or substitute Form W-8)
signed under penalties of perjury which provides your name and
address and certifies that you are a Non-U.S. Holder, or
- from a security clearing organization, bank or other financial
institution that holds the notes in the ordinary course of its
trade or business (a "financial institution") on behalf of you,
certification under penalties of perjury that such Form W-8 (or
substitute Form W-8) has been received by it, or by another such
financial institution, from you, and a copy of the Form W-8 (or
substitute Form W-8) is furnished to us or our paying agent.
If you do not qualify for an exemption from withholding under the preceding
paragraph, you generally will be subject to withholding of United States federal
income tax at the rate of 30% (or a lower rate if a treaty applies) when you
receive payments of interest on the notes.
If you are engaged in a trade or business in the United States and interest
on the notes is effectively connected with the conduct of such trade or
business, you will not be subject to a withholding tax (assuming proper
certification is provided) but will be subject to United States federal income
tax on such interest on a net income basis in the same manner as if you were a
United States person. In addition, if you are a foreign corporation, you may be
subject to a branch profits tax at a 30% rate (or, if applicable, a lower rate
specified by a treaty).
SALE, EXCHANGE OR RETIREMENT OF NOTES
Subject to the discussion concerning backup withholding, any gain realized
by you on the sale, exchange, retirement or other disposition of a note
generally will not be subject to a United States federal income tax, unless (1)
such gain is effectively connected with the conduct by you of a trade of
business within the United States, or (2) you are an individual who is present
in the United States for 183 days or more in the taxable year of the disposition
and certain other conditions are satisfied. Any such gain that is effectively
connected with the conduct of a United States trade or business by you will be
subject to United States federal income tax on a net income basis in the same
manner as if you were a United States person and, if you are a corporation, such
gain may also be subject to the 30% United States branch profits tax.
FEDERAL ESTATE TAXES
If you are an individual who at the time of death is not a citizen or
resident of the United States, the note held by you at the time of your death
will not be subject to United States federal estate tax, provided that (1) you
do not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of UST entitled to vote and (2) the interest
accrued on the note was not effectively connected with your conduct of a United
States trade or business.
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<PAGE> 36
BACKUP WITHHOLDING
Backup withholding and information reporting generally will not apply to
payments made to you if you provide the certification described above or
otherwise establish an exemption from backup withholding. Payments by a United
States office of a broker of the proceeds of a disposition of the notes
generally will be subject to backup withholding at a rate of 31% unless you
certify that you are a Non-U.S. Holder under penalties of perjury or otherwise
establish an exemption. Payments of the proceeds of a disposition of the notes
by or through a foreign office of a United States broker or foreign broker with
certain relationships to the United States generally will be subject to
information reporting, but not backup withholding.
Any amount withheld from a payment to you under the backup withholding
rules is allowable as a credit against your United States federal income tax
liability, or if withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service. Certain holders (including, among others, corporations and
foreign individuals who comply with certain certification requirements) are not
subject to backup withholding.
NEW WITHHOLDING REGULATIONS
The United States Treasury Department issued final Treasury regulations
("New Withholding Regulations") governing information reporting and the
certification procedures regarding withholding and backup withholding on certain
amounts paid to Non-U.S. Holders after December 31, 2000. The New Withholding
Regulations generally will not alter the treatment of Non-U.S. Holders described
above. The New Withholding Regulations will alter the procedures for claiming
the benefits of an income tax treaty and may change the certification procedures
relating to the receipt by intermediaries of payments on behalf of a beneficial
owner of a note. You should consult your tax advisor concerning the effect, if
any, of such New Withholding Regulations on an investment in the notes.
LEGAL MATTERS
The validity of the notes being offered hereby will be passed upon for UST
by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements of UST Inc. incorporated by reference
in UST Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1999,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon incorporated by reference therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance on such report given upon the authority of such firm as
experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS
DOES NOT OFFER TO SELL OR ASK FOR OFFERS TO BUY ANY SECURITIES OTHER THAN THOSE
TO WHICH THIS PROSPECTUS RELATES AND IT DOES NOT CONSTITUTE AN OFFER TO SELL OR
ASK FOR OFFERS TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION WHERE IT IS
UNLAWFUL, WHERE THE PERSON MAKING THE OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON WHO CANNOT LEGALLY BE OFFERED THE SECURITIES. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
UNTIL AUGUST 21, 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED
TO DELIVER A PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information.... i
Forward-looking Statements............. i
Trademarks and Trade Names............. ii
Prospectus Summary..................... 1
Risk Factors........................... 6
Use of Proceeds........................ 8
Ratio of Earnings to Fixed Charges..... 8
The Exchange Offer..................... 9
Description of Notes................... 17
Book-Entry; Delivery and Form.......... 27
Plan of Distribution................... 29
Material Federal Income Tax
Consequences......................... 30
Legal Matters.......................... 32
Experts................................ 32
</TABLE>
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$300,000,000
[UST LOGO]
OFFER FOR ALL OUTSTANDING
8.80% SENIOR NOTES DUE 2005
IN EXCHANGE FOR
8.80% SENIOR NOTES DUE 2005
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED
---------------------
PROSPECTUS
---------------------
May 23, 2000
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